hr peter

Toronto

Fourth

Canadian

Edition

Management of Human Resources: The Essentials

Gary Dessler Florida International University

Nita Chhinzer University of Guelph

Nina D. Cole Ryerson University

Managing Editor: Claudine O’Donnell Director of Marketing: Leigh-Anne Graham Developmental Editor: Charlotte Morrison-Reed Media Editor: Imee Salumbides Media Producer: Olga Avdyeyeva Program Manager: Karen Townsend Project Manager: Jessica Hellen Production Services: GEX Publishing Services Photo Permissions Research: Q2a/Bill Smith/ Rebecca O’Malley Text Permissions Research: Samantha Bingenheimer, Electronic

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Original edition, entitled Human Resource Management, published by Pearson Education, Inc., Upper Saddle River, New Jersey, USA. Copyright © 2013, 2011, 2008, 2005, 2003 by Pearson Education, Inc. This edition is authorized for sale only in Canada.

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Copyright © 2015, 2011, 2007, 2004 Pearson Canada Inc. All rights reserved. Manufactured in the United States of America. This publication is protected by copyright and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Canada Inc., Permissions Department, 26 Prince Andrew Place, Don Mills, Ontario, M3C 2T8, or fax your request to 416-447-3126, or submit a request to Permissions Requests at www.pearsoncanada.ca.

10 9 8 7 6 5 4 3 2 1 [WC]

Library and Archives Canada Cataloguing in Publication

Dessler, Gary, 1942-, author Management of human resources: the essentials / Gary Dessler,  Florida International University, Nita Chhinzer, University of Guelph,  Nina D. Cole, Ryerson University. -- Fourth Canadian edition.

Revision of: Management of human resources / Gary Dessler, Carolin  Rekar Munro, Nina D. Cole. -- 3rd Canadian ed. -- Toronto:  Pearson Prentice Hall, 2010.

Includes bibliographical references and index. ISBN 978-0-13-211490-5 (pbk.)

1. Personnel management--Textbooks. 2. Personnel management-- Canada--Textbooks. I. Cole, Nina D. (Nina Dawn), author II. Chhinzer, Nita, author  III. Title.

HF5549.M3132 2014 658.3 C2013-908455-X

ISBN 978-0-13-211490-5

Dedication To my mother

—G.D.

I would like to dedicate this book to those students who consistently demonstrate the ability to integrate,

analyse and transfer knowledge, both within the classroom and outside of it.

Your excellence keeps me inspired. —N .C.

To Peggy Martin —N.D.C.

iii

Preface ix

Part 1 Human Resources Management in Perspective 1 Chapter 1 The Strategic Role of Human Resources Management 1

Chapter 2 The Changing Legal Emphasis: Compliance and Impact on Canadian Workplaces 23

Part 2 Meeting Human Resources Requirements 48 Chapter 3 Designing and Analyzing Jobs 48

Chapter 4 Human Resources Planning and Recruitment 75

Chapter 5 Selection 114

Part 3 Developing Effective Human Resources 144 Chapter 6 Orientation and Training 144

Chapter 7 Performance Management 171

Part 4 Total Rewards 198 Chapter 8 Strategic Pay Plans 198

Chapter 9 Employee Benefits and Services 231

Part 5 Building Effective Employee–Employer Relationships 257 Chapter 10 Occupational Health and Safety 257

Chapter 11 Managing Employee Separations: Foundations of Employee Engagement, Communication, and Turnover Management 285

Chapter 12 Labour Relations 303

Part 6 Global Issues in Human Resources Management 327 Chapter 13 Managing Human Resources in a Global Business 327

Notes 347

Glossary 367

Name and Organization Index 377

Subject Index 379

Brief Contents

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Preface ix

PART ONE Human Resources Management in Perspective 1

Chapter 1 The Strategic Role of Human Resources Management 1 The Strategic Role of Human Resources Management 2

A Brief History of HRM 3

Strategic HR The HR Role Continues to Evolve 8

Growing Professionalism in HRM 9

Environmental Influences on HRM 12

Chapter 2 The Changing Legal Emphasis: Compliance and Impact on Canadian Workplaces 23 The Legal Framework for Employment Law in Canada 24

Legislation Protecting the General Population 27

Global HRM UK Court Awards $1.7 Million to Bullied Employee 34

Legislation Specific to the Workplace 39

PART TWO Meeting Human Resources Requirements 48

Chapter 3 Designing and Analyzing Jobs 48 Fundamentals of Job Analysis 49

Step 1: Review Relevant Organizational Information 51

Step 2: Select Jobs to Be Analyzed 54

Step 3: Collecting Job Analysis Information 59

Step 4: Verifying Information 64

Step 5: Writing Job Descriptions and Job Specifications 65

Entrepreneurs and HR A Practical Approach to Job Analysis and Job Descriptions 67

Step 6: Communication and Preparations for Revisions 71

Chapter 4 Human Resources Planning and Recruitment 75 The Strategic Importance of Human Resources Planning 76

Forecasting the Availability of Candidates (Supply) 79

Entrepreneurs and HR Succession Planning and Family Businesses 82

Strategic HR Pumping Up People Supply 83

Forecasting Future Human Resources Needs (Demand) 84

Planning and Implementing HR Programs to Balance Supply and Demand 88

Recruitment 93

The Recruitment Process 94

Developing and Using Application Forms 95

Recruiting from within the Organization 96

Recruiting from Outside the Organization 98

Table of Contents

v

vi Contents

Recruiting a More Diverse Workforce 107

Strategic HR Attracting the Younger Generation 108

Workforce Diversity The Disconnect in Recruiting People with Disabilities 109

Chapter 5 Selection 114 The Strategic Importance of Employee Selection 115

Workforce Diversity Principles for Assessment Accommodations 119

Step 1: Preliminary Applicant Screening 119

Step 2: Selection Testing 120

Step 3: The Selection Interview 128

Step 4: Background Investigation/Reference Checking 134

Step 5: Supervisory Interview and Realistic Job Preview 136

Step 6: Hiring Decision and Candidate Notification 137

Appendix 5.1 A Guide to Screening and Selection in Employment 141

PART THREE Developing Effective Human Resources 144

Chapter 6 Orientation and Training 144 Become a Learning Organization 145

Orienting Employees 146

Strategic HR Onboarding: The First Step in Motivation and Retention 147

The Training Process 152

The Five-Step Training Process 154

Career Planning and Development 161

Workforce Diversity Career Development for Older Workers 162

Managing Internal Employee Movement 166

Chapter 7 Performance Management 171 The Strategic Importance of Performance Management 172

The Performance Management Process 172

Step 1: Defining Performance Expectations 173

Global HRM Performance Appraisal Criteria in China 174

Step 2: Providing Ongoing Coaching and Feedback 175

Step 3: Performance Appraisal and Evaluation Discussion 175

Step 4: Determine Performance Rewards/Consequences 180

Step 5: Career Development Discussion 181

Performance Appraisal Problems and Solutions 181

Workforce Diversity Watch for Cultural Biases in Assessing Employees 184

Strategic HR Jaguar Land Rover Formal Appraisal Discussion Training 191

Legal and Ethical Issues in Performance Management 193

The Future of Performance Management 194

viiContents

PART FOUR Total Rewards 198

Chapter 8 Strategic Pay Plans 198 The Strategic Importance of Total Employment Rewards 199

Strategic HR Rewards Program Effectiveness at the World’s Most Admired Companies 200

Basic Considerations in Determining Pay Rates 201

Pay Equity 202

Establishing Pay Rates 203

Pay for Knowledge 212

Developing Effective Incentive Plans 213

Money and Motivation 215

Types of Incentive Plans 216

Strategic HR Rewards That Work 217

Organization-Wide Incentive Plans 225

Chapter 9 Employee Benefits and Services 231 The Strategic Role of Employee Benefits 232

Government-Mandated Benefits 233

Voluntary Employer-Sponsored Benefits 238

Global HRM Defined Benefit Pension Problems and Solutions around the World 246

Employee Services 248

Flexible Benefits Programs 252

Benefits Administration 253

PART FIVE Building Effective Employee–Employer Relationships 257

Chapter 10 Occupational Health and Safety 257 Strategic Importance of Occupational Health and Safety 258

Basic Facts about Occupational Health and Safety Legislation 258

What Causes Accidents? 262

Workforce Diversity Guiding Young Workers in Health and Safety 267

How to Prevent Accidents 267

Strategic HR Top Management Commitment to Safety at Steelcase Canada Pays Off 269

Entrepreneurs and HR Small Business Safety Calculator 270

Occupational Health and Safety Challenges in Canada 271

Employee Wellness Programs 281

viii

Chapter 11 Managing Employee Separations: Foundations of Employee Engagement, Communication, and Turnover Management 285 The Importance of Managing Employee Separations 286

Managing Turnover 286

Employee Engagement and Fairness in Employee Separations 296

Chapter 12 Labour Relations 303 Introduction to Labour Relations 304

Workforce Diversity Collective Agreement Puts Aboriginals First 306

Strategic HR UFCW Forms a “Super Local” 307

The Labour Relations Process 308

Strategic HR NHL Lockout Timeline (2012–2013 season) 319

The Impact of Unionization on HRM 324

PART SIX Global Issues in Human Resources Management 327

Chapter 13 Managing Human Resources in a Global Business 327 The Globalization of Business and Strategic HR 328

How Intercountry Differences Affect HRM 328

Workforce Diversity Mummy Crew in Monster Trucks 329

Global Relocation 331

Considerations in Global HRM 334

Repatriation 338

Managing Global Workers within Canada 339

Global HRM Successful Integration of Immigrants in Canada 343

Notes 347

Glossary 367

Name and Organization Index 377

Subject Index 379

Contents

ix

Management of Human Resources: The Essentials, Fourth Canadian Edition, brings both human resources and non–human resources students into the cur- rent and comprehensive discussion on the ways in which human resources are among the most important assets in organizations today. Human resources refers to the employees in a company, more specifically, the knowledge, skills, assets, and competencies they bring to work to help the organization achieve its objec- tives. These resources continue to provide a source of competitive advantage for organizations in a hyper-competitive, global environment.

The strategic importance of human resources management (HRM) activities is emphasized throughout the book, using recent examples from the Canadian employment landscape. Knowledge of HRM is important for supervisors and managers in every field and for employees at every level—not just those working in HR departments or aspiring to do so in the future.

The Canadian fourth edition provides extensive coverage of all HRM topics, such as job analysis, HR planning, recruitment, selection, orientation and train- ing, career development, compensation and benefits, performance appraisal, health and safety, and labour relations. Practical applications are highlighted with Tips for the Front Line and Hints to Ensure Legal Compliance icons in the margins. Research Insights are also highlighted, and Ethical Dilemmas are presented for discussion.

Preface

KEY FEATURES OF THE CANADIAN FOURTH  EDITION

Comprehensive Introductory Chapter. The first chapter provides a comprehensive overview of the strategic importance of HR, highlighting the evolution of HR over the years, the advances in measuring HRM’s contribution to the bottom line, and HRM’s critical role in strategy implementation.

Legal Emphasis. Chapter 2 provides a clear understanding of the often overlap- ping areas of legislation that affect the employment relationship. This includes a discussion of key legal cases, potential outcomes and remedies to violations, as well as a discussion about employer rights related to employment.

Significant Discussion of Managing Decline. Chapter 11 focuses on the impact and management of turnover (quits, layoffs, termination, etc.). This includes a focus on legal, psychological, and communication issues.

More Coverage on the Impact of Globalization on HR. Further discussion on the impact of globalization on HR was added throughout with a focus on both Canadian organizations’ interactions on a global scale and the impact of immigrants on the Canadian labour force. Specific sections, such as perfor- mance management (in addition to performance appraisal), the impact of immigration on the labour force, and employability skills, are introduced.

Integrated Chapters. Rather than approaching topics as isolated silos, the book highlights areas of overlap in order to present HRM as an integrated set of topics.

x Preface

HR by the Numbers. This new element added in multiple places throughout each chapter focuses on the impact of HR practices and policies. The format of these sections is more magazine style and visually enticing for the students.

Required Professional Capabilities (RPCs). The required professional capabilities to be discussed are listed at the beginning of each chapter and indicated in the mar- gins throughout the text. These RPCs are set out by the Canadian Council of Human Resources Associations for students preparing to write the National Knowledge Exam.

119Chapter 5 Selection

Initial applicant screening is generally performed by members of the HR department. Application forms and résumés are reviewed, and those can- didates not meeting the essential selection criteria are eliminated first. Then, the remaining applica- tions are examined and those candidates who most closely match the remaining job specifications are identified and given further consideration.

The use of technology is becoming increasingly popular to help HR professionals improve the ini- tial screening process. Almost all large firms or firms with high turnover use technological appli- cations to help screen large numbers of candidates and generate short lists of individuals who will move on to the next step in the selection process.

Principles for Assessment Accommodations When assessing persons with disabilities, those respon- sible for assessment should be guided by four princi- ples to determine accommodations: Principle 1: Provide all applicants with an equal opportu- nity to fully demonstrate their qualifications.

A disability may hinder a person from fully dem- onstrating his or her qualifications using a particular assessment instrument. Therefore, adjustments need to be made to either the administration procedures or the assessment instrument itself, so that the person is in a position to fully demonstrate his or her qualifications. Principle 2: Determine assessment accommodations on a case-by-case basis.

Three key elements must be considered when deter- mining appropriate accommodations: the nature and the extent of the individual’s functional limitation, the type of assessment instrument being used, and the nature and level of the qualification being assessed.

Principle 3: Do not alter the nature or level of the qualifica- tion being assessed.

For example, although providing additional time to complete a test could be appropriate when the qualifi- cation “knowledge of the organization’s mandate and its business” is assessed, providing additional time could be inappropriate for a test assessing the quali- fication “verify information rapidly and accurately.” In the latter case, the obtained result may not be representative of the applicant’s true ability to do the task rapidly. Principle 4: Base assessment accommodations on complete information.

To make appropriate decisions when determining assessment accommodations, there is a need to rely on complete information on the three elements mentioned earlier, justifying the case-by-case approach.

Source: Reproduced with the permission of the Public Service Commission of Canada.

WORKFORCE DIVERSITY

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More and more HR professionals are improving the initial screening process with the use of technology.

STEP 1: PRELIMINARY APPLICANT SCREENING

Highlighted Themes • Workforce Diversity. The Workforce Diversity boxes describe some of the issues and challenges involved in managing the diverse workforce found in Canadian organizations. The broad range of types of diversity addressed include generational/ age, ethnic, gender, racial, and religious.

• Strategic HR. These boxes provide examples that illustrate the ways in which organizations are using effective HRM poli- cies and practices to achieve their strategic goals.

147Chapter 6 Orientation and Training

can lead to reductions in turnover, increased morale, fewer instances of corrective discipline, and fewer employee grievances. It can also reduce the number of work- place injuries, particularly for young workers. 4 The bottom-line implications of successful orientation can be dramatic, as described in the Strategic HR box.

Purpose of Orientation Programs Employee orientation (onboarding) provides new employees with basic back- ground information about the employer and specific information that they need to perform their jobs satisfactorily. At the Law Society of Upper Canada, any

employee orientation (onboarding) A procedure for providing new employees with basic background information about the firm and the job.

Onboarding: The First Step in Motivation and Retention

Professor Jerry Newman is one of the authors of a best- selling book on compensation. He worked undercover as a crew member in seven fast-food restaurants during a 14-month period to research total rewards. One of his findings was that the onboarding (also known as employee orientation) process played a significant role in long-term perceptions of management’s leadership abilities and the quality of non-monetary rewards.

In the best restaurant he worked for, he walked in and asked a counter worker for an application. She handed

it to him, suggested that he fill out the application in the lobby, and in one simple gesture, created a posi- tive first impression by asking, “Would you like a soda?” Although it may seem trivial, it was one of the few times anyone went to any lengths, however minor, to satisfy the needs of a future employee.

The first days and weeks of employment are crucial in the turnover reduction process as reality begins to converge with or diverge from an employee’s needs and aspirations. Making good first impressions goes a long way toward shaping a future view of non-monetary rewards.

In recent years, the fast-food industry has made concerted efforts to reduce turnover. Many chains have cut turnover in half during the past five years. Why? Because when they start to analyze costs, the results of successful onboarding are dramatic.

Assume a typical store does $1 million in sales and profits are 10 percent ($100 000). A typical turnover, according to most brands, costs between $1 500 and $2 000. If turnover is 150 percent and the typical store has 40 employees, then 60 employees turn over dur- ing the course of the year. Taking the midpoint of the replacement cost, 60 employees at $1 750 each equals $105 000. With profits at $100 000, the turnover costs eat up a store’s profitability. This is why fast food has made reducing turnover a high priority. And the cost of turnover in, say, high-tech industries is much higher than $1 500 or $2 000. It quickly becomes apparent that reducing turnover, partially accomplished through a positive and successful onboarding experience, can have very positive payoffs.

Source: Onboarding: The First Step in Motivation and Retention. Contents © 2007. WorldatWork.

STRATEGIC HR

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Part 4 Total Rewards202

their employees. Further, these laws are constantly changing and require continual monitoring to ensure compliance. Employment Standards Acts and Human Rights Acts must also be taken into consideration , as discussed in Chapter 2 . Pay equity is a major compensation issue and stems from the per- ceptions of equity discussion above. In addition, workers’ compensation laws also apply.

PAY EQUITY The purpose of pay equity legislation is to redress systemic gender discrimination in compensation for work performed by employees in female-dominated job classes. Pay equity requires that equal wages be paid for jobs of equal value or “worth” to the employer, as determined by gender-neutral (i.e., free of any bias

based on gender) job evaluation techniques. Although such factors as differences in hours worked, experience levels, education levels, and level of unionization contrib- ute to the wage gap, systemic discrimination is also pres- ent. 8 The HR by the Numbers box highlights the impact of using different perspectives to identify how meaning- ful differences in pay can be overall.

Instances of pay inequity continue to occur, even in large, structured organizations. Several internal assess- ments of pay equity at the University of British Columbia established that on average, compensation of full-time female professors was $14 000 less than that of their male counterparts. After adjusting for confounding fac- tors (such as specialization, tenure, etc.), a $3 000 gap in pay still existed. As a result, in 2013, the university gave all 880 tenure-tracked and tenured female faculty members a 2 percent increase in base salary in order to achieve pay equity. The increase was made retroactive to January 1, 2010 at a cost of $2 million to the univer- sity. A similar situation occurred at Western University in 2006, resulting in individual adjustments to female faculty members’ salaries to compensate for the $2 200 post-confounding factor difference in pay between men and women. These cases highlight how the struggle for income parity between genders is far from over, and a challenge in even the most structured organizations. 9

In addition, each jurisdiction has its own workers’ compensation laws . The objective of these laws is to pro- vide a prompt, sure, and reasonable income to victims of work-related accidents and illnesses. The Employment Insurance Act is aimed at protecting Canadian work- ers from total economic destitution in the event of employment termination that is beyond their control. Employers and employees both contribute to the benefits

provided by this act. This act also provides up to 45 weeks of compensation for workers unemployed through no fault of their

pay equity Providing equal pay to male-dominated job classes and female-dominated job classes of equal value to the employer.

Estimated per-woman lifetime-difference

financial loss (depending on education) due to pay inequities

71 percent of the way through the calendar year,

marking the day women in Canada start working for free, according to the Equal Pay Coalition

Canada’s rank among Organization for Economic Co-operation and

Development (OECD) countries

Amount young women graduating from university earn less than male

graduates

Cents women earn for each dollar a man earns in Ontario

Amount young women graduating from high school earn less than

male high school graduates

Have We Achieved Pay ◀ Equity Yet?

$0.7–2 m

16%

17th

71

27%

Sept. 17

H R

by the N um

bers

Source: Based on “Women Work for Free as of Sept.  17,” Canadian HR Reporter (September 18, 2008); and M.  Cornish, “Much Work to Be Done on Pay Equity,” Canadian HR Reporter (February 28, 2008).

xiPreface

• Entrepreneurs and HR. Suggestions, examples, and practi- cal hints are provided to assist those in smaller businesses who have limited time and resources to implement effective HRM policies and procedures.

• Global HRM. In recognition of the increasing impact of globalization, topics highlighted in the Global HRM boxes include cultural issues in retirement plans, employment con- tracts in Europe, and the importance of personal relationships for business success in China.

Part 3 Developing Effective Human Resources174

performance. Contextual performance reflects an individual’s indirect contribu- tion to the organization in terms of improving the organizational, social, and psychological behaviours that contribute to organizational effectiveness, beyond those specified for the job. This includes extra-role behaviours and contextual factors like “demonstrates a positive attitude” and “pitches in to help others when needed,” which have surfaced as contextual performance expectations. 9 These goals may be informally known, but not formally defined, which can become problematic in performance management. For the legitimacy of the performance management system to be maintained, employees also need to be aware of which behaviours are expected and which are discretionary.

Ultimately, the performance management process cannot be separated from performance measurement. Performance expectations need to be developed in a legally defensible (correlated with job activities), clear, and measurable way. In addition, they must be com- municated and supported as such by the organization. Aligned with the sales associate example, a “personal selling” activity can be measured in terms of how many dollars of sales the associate is to generate personally. “Keeping customers away from executives” can be mea- sured with a standard of no more than 10 customer

complaints per year being the sales associate’s target. In general, employees should always know ahead of time how and on what basis they will be appraised. It is important to note that expectations cannot discriminate directly or indirectly against anyone on protected grounds (gender, age, disability, and so on).

In global companies, performance appraisal criteria may need to be modi- fied to be consistent with cultural norms and values. An interesting study found that some criteria are acceptable in many cultures, as discussed in the Global HRM box .

contextual performance An individual’s indirect contribution to the organization in terms of improving the organizational, social, and psychological behaviours that contribute to  organizational effectiveness, beyond those specified for the job.

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Hints TO ENSURE LEGAL COMPLIANCE

Performance Appraisal Criteria in China In the West, where individuals have an inalienable right to choose their own lifestyles and moralities, performance criteria cannot be based on personal character, but instead need to focus on more objective criteria, such as job com- petence, abilities, and achievements. In China, however, the attitudes and moral character of a person are regarded as highly relevant to performance. Chinese culture tends to ascribe achievement more to effort (that is, diligence, which reflects one’s morality) than to ability (which, con- ceived as an inborn trait, requires no moral effort). These deeply rooted Confucian values in China thus lead to an emphasis on appraisals that are based upon personal attitudes and moral characteristics that appear to reflect traditional Chinese values, such as hard work, and loyalty and respect toward senior staff. Some specific examples are accepting overtime work; being punctual, careful, helpful, loyal, and respectful toward senior staff; as well as being persistent, adaptable, dedicated, and hard working.

Research found three performance appraisal factors that were very acceptable to Chinese employees: work dedication, work efficiency, and teamwork. Work dedi- cation behaviours, such as punctuality, loyalty, working hard, and dedication toward one’s work, exist in both Eastern and Western cultures. Employee efficiency has long been considered important to good job per- formance, as it is considered to be a means to achieve organizational goals. Chinese employees appear to rec- ognize this managerial objective since they were willing to be evaluated on criteria that assess the efficiency of their work. Teamwork is a behavioural manifestation of the group orientation in Eastern cultures.

Source: Robert J. Taormina and Jennifer H. Gao (2009). Identifying Acceptable Performance Appraisal Criteria: An International Perspective. Asia Pacific Journal of Human Resources 47 (1), pp. 102–125. Copyright © 2009, Australian Human Resources Institute.

GLOBAL HRM

Part 2 Meeting Human Resources Requirements82

and leaving the organization. These proportions (probabilities) are used to forecast human resources supply.

Succession Planning and Family Businesses In the second quarter of 2010, small businesses cre- ated 35 549 jobs, while large firms created only 728 jobs. During that period, small businesses in the construction sector alone accounted for 23 014 new jobs, while those in the healthcare and social assis- tance sectors introduced 9 755 new jobs.

Multigenerational family-controlled businesses often struggle with succession planning. Only one-third of family-owned businesses survive the transition to the second generation. And of these, only one-third survive the transition to the third generation. 5

There are many reasons for these failures.

1. Determining who will inherit the business and how ownership will be determined among children can

be a source of immense stress for family business owners. Therefore, many choose to ignore the issue of succession planning altogether.

2. Second, a family business is a great source of pride for the business owner and is often their single largest asset. The concept of retirement or walking away can be incomprehensible to those who built the business.

3. There may not be a qualified or interested successor within the family.

While these are difficult issues to deal with, family businesses must begin to take an informed and strate- gic approach to these issues.

ENTREPRENEURS and HR

In the example provided, there were 35 employees in the foreperson occupa- tion in 2013. Out of these, 82 percent (28 employees) are expected to remain in that position next year (based on past levels of activity). The organization can anticipate that 8 percent of the foreperson population (which would be 3 out of the 35 employees in 2013) would be promotable to the role of plant manager. In addition, the past trends show that 10 percent of employees at this level are lost to turnover (representing 4 employees who are expected to leave the orga- nization before the start of next year). In addition, out of the 110 team leaders (the level below), 11 percent (12 employees) would be eligible for promotion to a foreperson position. Therefore, next year’s projected supply of forepersons would be the 28 from this year who are projected to stay in that role plus the 12 team leaders who are projected to be eligible for promotion over the year, for a total supply of 40 forepersons.

To complement such quantitative data, the skills and capabilities of current employees must be assessed and skills inventories prepared. From this informa- tion, replacement charts or summaries and succession plans can be developed.

Forecasting the Supply of External Candidates Some jobs cannot be filled with internal candidates because no current employ- ees are qualified (such as those holding entry-level jobs) or they are jobs that experience significant growth. In these situations, the firm looks for external candidates. Employer growth is primarily responsible for the number of entry- level openings. A key factor in determining the number of positions that must be filled externally is the effectiveness of the organization’s training, development,

Additional Features Learning Outcomes. Specific learning goals are defined on each chapter-

opening page. Key Terms. Key terms appear in boldface within the text, are defined in the

margins, and are listed at the end of each chapter. Current Examples. Numerous real-world examples of HRM policies, p rocedures,

and practices at a wide variety of organizations, ranging from small service providers to huge global corporations, can be found throughout the text.

Full-Colour Figures, Tables, and Photographs. Throughout each chapter, key con- cepts and applications are illustrated with strong, full-colour v isual  materials.

Web Links. Helpful Internet sites are provided throughout the text and are featured in the margins.

End-of-Chapter Summaries. At the end of each chapter, the summary reviews key points related to each of the learning outcomes.

End-of-Chapter Review and Discussion Questions. Each chapter contains a set of review and discussion questions.

Critical Thinking Questions. Each chapter contains end-of-chapter questions designed to provoke critical thinking and stimulate discussion.

Experiential Exercises. Each chapter includes a number of individual and group- based experiential exercises that provide learners with the opportunity to apply the text material and develop some hands-on skills.

xii Preface

Student Supplements CourseSmart for Students. CourseSmart goes beyond traditional expectations— providing instant, online access to the textbooks and course materials students need at an average savings of 60 percent. With instant access from any computer and the ability to search the text, students will find the content they need quickly, no matter where they are. And with online tools like highlighting and note- taking, students can save time and study efficiently. See all the benefits at www. coursesmart.com/students.

MyManagementLab (www.mymanagementlab.com) delivers proven results in helping individual students succeed. It provides engaging experiences that personalize, stimulate, and measure learning for each student. Students and instructors can make use of the following online resources:

• Study Plan: MyManagementLab offers chapter pre-tests that generate personalized Study Plans showing students exactly which topics require additional practice. The Study Plan links to multiple learning aids, such as student PowerPoint slides, the eText, and glossary flashcards. After students work through the learning aids, they can take a post-test to measure their improvement and demonstrate their mastery of the topics.

• Audio Glossary Flashcards: This study tool provides a targeted review of the Key Terms in each chapter. The Audio Glossary Flashcards allow learners to select and listen to the specific terms and chapters that they would like to study. The cards can also be sorted by Key Term or by definition to give students greater flexibility when studying.

• Pearson eText: MyManagementLab also includes an eText version of Management of Human Resources: The Essentials, including a complete Glossary and Index. This dynamic, online version of the text is integrated throughout MyManagementLab to create an enriched, interactive learning experience for students. Users can create notes, highlight text in different colours, create bookmarks, zoom, and click hyperlinked words and phrases to view definitions and go directly to weblinks. The Pearson eText allows for quick navigation to key parts of the eText using a table of contents and provides full-text search.

Instructors and students can also access Chapter Quizzes, Case Assessments, and many additional study tools designed to engage learners and improve student understanding.

MyManagementLab

xiiiPreface

Instructor Supplements The following instructor supplements are available for download from a password- protected section of Pearson Canada’s online catalogue (vig. pearsoned.ca). Navigate to your book’s catalogue page to view a list of the supplements that are available. See your local sales representative for details and access.

• Instructor’s Manual with CBC Video Guide. This comprehensive guide contains a detailed lecture outline of each chapter, descriptions of the discussion boxes, answers to review and critical-thinking questions, answers to the case ques- tions, hints regarding the experiential exercises, and helpful video case notes.

• Running Case. The running case has been moved out of the print edition of each chapter and added to the instructor’s manual. This running case illustrates the types of HRM challenges confronted by small-business owners and front-line supervisors. It is accompanied by critical-thinking questions, which provide an opportunity to discuss and apply the text material. This provides an ongoing case to integrate ideas in chapters effectively.

• Case Incidents. Case incidents have also been moved from the print edition and now can be found in the instructor’s manual for each chapter. These cases present current HRM issues in a real-life setting and are followed by questions designed to encourage discussion and promote the use of problem- solving skills.

• Test Item File. This comprehensive test bank contains more than 1500  multiple-choice, true-or-false, and short-essay questions in Microsoft Word® format.

• PowerPoint® Lecture Slides. This practical set of PowerPoint lecture slides outlines key concepts discussed in the text, and includes selected tables and figures from the text.

• Clicker PowerPoint® Slides. This set of Clicker-ready slides is suitable for use with any Personal Response System.

Pearson Canada/CBC Video Library. Pearson Canada and the CBC have worked together to provide six video segments from the CBC series The National. Designed specifically to complement the text, this case collection is an excellent tool for bringing students in contact with the world outside the classroom. These programs have extremely high production quality and have been chosen to relate directly to chapter content.

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xiv Preface

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Other Resources HRManagement Simulation. A great online simulation is available for students. Access code cards can be packaged with the text for an additional charge. Please see www.interpretive.com/rd6/index.php?pg=hrm&sid=1 and contact your Pearson representative for more details.

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ACKNOWLEDGMENTS The manuscript was reviewed at various stages of its development by a number of peers across Canada, and we want to thank those who shared their insights and constructive criticism.

Anna Bortolon, Conestoga College

Jason Foster, Athabasca University

Richard McFadden, Georgian College

Kate Rowbotham, Queen’s School of Business

Spring Tompkins, St. Lawrence College

Amy Lynn Tucker, Thompson Rivers University

At Pearson Canada, we are very grateful to Deana Sigut, Acquisitions Editor; Leigh-Anne Graham, Senior Marketing Manager; Charlotte Morrison-Reed, Developmental Editor; Jessica Hellen, Project Manager; and all the other people behind the scenes who have helped make this edition possible.

A special note of thanks is extended to research assistants Mark Berger and Kayla Dynan.

Gary Dessler Florida International University

Nita N. Chhinzer University of Guelph

Nina D. Cole Ryerson University

Preface

xvi

Dr. Nita N. Chhinzer Dr. Nita N. Chhinzer is an Assistant Professor of Human Resources at the Department of Business, University of Guelph. Her research is concentrated on Strategic Human Resources Management, with a strong focus on downsizing practices, procedures, and ethics. Her program of research includes s ecuring a stronger understanding of downsizing activity in the Canadian context, with an aim to affect public policy and legislation regarding layoffs. She has gained international recognition with conference participation including Athens, Greece; Paris, France; Dubai, UAE; and many North American speaking engagements. From May 2012–2017, Dr. Chhinzer is the recipient of the presti- gious Fellowship in Leadership, HRM and Work.

Dr. Nina D. Cole Dr. Nina Cole has over 30 years of experience in human resources management as a practitioner, consultant, researcher, and professor. She worked in busi- ness for 12 years as an HR management consultant and an HR manager with federal industries. Since 1990, she has worked as an academic, teaching and c onducting research in human resources management and organizational behaviour. Dr. Cole is currently an Associate Professor at the Ted Rogers School of Management at Ryerson University in Toronto. She has been an active member of the Administrative Sciences Association of Canada, the Human Resources Professionals Association, and numerous other academic, industry, and community groups for many years.

About the Canadian Authors

The Strategic Role of Human Resources Management

CHAPTER

REQUIRED PROFESSIONAL CAPABILITIES (RPC)

• Monitors expenditures and timelines

• Provides support and expertise to managers and supervisors with respect to managing people

• Stays current with professional knowledge

• Fosters and promotes the advancement of the profession

• Understands and adheres to the Canadian Council of Human Resources Association’s code of ethics and applicable provincial/ territorial associa- tions’ codes

• Keeps current with emerging HR trends

• Advises on the status of dependent and independent contractors and determinants of employee status

• Contributes to improvements in the organization’s structures and work processes

• Gathers, analyzes, and reports relevant business and industry information (including global trends) to influence the development of strategic business HR plans

LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

DEFINE human resources management and ANALYZE the strategic significance of human resources management. DESCRIBE the four phases in the evolution of HRM, and EXPLAIN how HRM has changed over recent years to include a higher-level advisory role. EXPLAIN how HRM has taken on the character- istics of a profession. DISCUSS the internal and external environmental factors affecting human resources management policies and practices and EXPLAIN their impact.

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PART ONE Human Resources Management in Perspective

Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

Part 1 Human Resources Management in Perspective2

THE STRATEGIC ROLE OF HUMAN RESOURCES MANAGEMENT

Human resources management (HRM) refers to the management of people in organizations. Human resources professionals are responsible for ensuring that the organization attracts, retains, and engages the diverse talent required to meet operational and performance commitments made to customers and share- holders. Their job is to ensure that the organization finds and hires the best individuals available, develops their talent, creates a productive work environ- ment, and continually builds and monitors these human assets. They have the primary responsibility for managing the workforce that drives organizational performance and achieves the organization’s strategic goals.1

More specifically, HRM involves formulating and implementing HRM systems (such as recruitment, performance appraisal, and compensation) that are aligned with the organization’s strategy to ensure that the workforce has the competencies and behaviours required to achieve the organization’s strategic objectives. It is crucial that the HR strategy be aligned with the company’s stra- tegic plan (see Figure 1.1).

Just as important as the financial capital that is required for an organiza- tion to operate, the knowledge, education, training, skills, and expertise of a firm’s workers represent its increasingly valuable human capital. More and more organizations are awakening to the importance of human capital as the next competitive advantage.2

Research studies over the past two decades have confirmed that effective HR practices are related to better organizational performance.3 Organizational benefits range from employee empowerment to extensive training that affects the productivity of employees.4 The resource-based view of the firm suggests that human resource practices contribute to the development of embedded knowl- edge of a firm’s culture, history, processes, and context, which are non-imitable.5

human resources management (HRM) The management of people in organizations to drive successful organizational performance and achievement of the organization’s strategic goals.

human capital The knowledge, education, training, skills, and expertise of an organization’s workforce.

Company’s competitive environment

Company’s strategic situation

Company’s internal strengths and weaknesses

Organizational performance

Economic, political, demographic, competitive, and technological trends

Company’s HR (and other functional) strategies

What are the basic courses of action HR will pursue to ensure that the recruiting, selecting, training, appraising, and compensation systems support the company’s strategic plan?

Company’s strategic plan For example • Should we expand geographically? • Cut costs? • Diversify?

FIGURE 1.1 Linking Company-Wide and HR Strategies

Source: © Gary Dessler, Ph.D., 2007.

3Chapter 1 The Strategic Role of Human Resources Management

More specifically, three HR practices (profit sharing, results- oriented performance appraisal, and employment security) are strongly related to important accounting measures of performance (return on assets and return on equity).6 High-performance HR practices (comprehensive employee recruitment and selection procedures, incen- tive compensation and performance management systems, and extensive employee involvement and training) have a positive relationship with turnover, productivity, and corporate financial performance (gross rate of return on capital).7

A BRIEF HISTORY OF HRM HRM has changed dramatically over time and has assumed an increasingly strategic role. The demands on HR staff and expectations regarding their role have evolved as HRM has changed. HR practices have been shaped by society’s prevailing beliefs and attitudes about workers and their rights, which have evolved in three stages.

Scientific Management: Concern for Production Frederick Taylor was the driving force behind scientific management, the process of “scientifically” analyzing manufacturing processes, reducing production costs, and compensating employees based on their performance.8 As a result, management practices in the late 1800s and early 1900s emphasized task simplification and performance-based pay. Such incentives were expected to lead to higher wages for workers, increased profits for the organization, and workplace harmony. Taylor’s views were not accepted by all management theorists. For example, Mary Parker Follett, a writer ahead of her time, advocated the use of self-management, cross- functional cooperation, empowerment, and managers as leaders, not dictators.9

The Human Resources Movement: Concern for People and Productivity HRM is currently based on the theoretical assumptions of the human resources movement. Arriving at this joint focus on people and productivity involved four evolutionary phases.10

Phase 1 In the early 1900s, HRM—or personnel administration, as it was then called— played a very minor or non-existent role in organizations. During this era, personnel administrators assumed responsibility for hiring and firing (a duty formerly looked after by first-line supervisors), ran the payroll department, and administered benefits. Their job consisted largely of ensuring that procedures regarding employees and employment were followed.

Phase 2 As the scientific management movement gained momentum, operational efficiency increased but wage increases did not keep up, causing workers to distrust management. The resulting increase in unionization led to personnel departments serving as the primary contact for union representatives. Following

scientific management The process of “scientifically” analyzing manufacturing processes, reducing production costs, and compensating employees based on their performance levels.

human resources movement A management philosophy focusing on concern for people and productivity.

Part 1 Human Resources Management in Perspective4

the depression of the 1930s, various pieces of legislation were enacted, including a minimum wage act, an unemployment insurance program, and protection of workers’ right to belong to unions. Legal compliance was subsequently added to  the responsibilities of personnel managers. During the 1940s and 1950s, personnel managers were also involved in dealing with the impact of the human relations movement. Orientation, performance appraisal, and employee relations responsibilities were added to their job.

Phase 3 The third major phase in personnel management was a direct result of government legislation passed during the 1960s, 1970s, and 1980s. This legislation affected employees’ human rights, wages and benefits, working conditions, health and safety, and established penalties for failure to comply. The role of personnel depart- ments expanded dramatically. They continued to provide expertise in such areas as compensation, recruitment, and training but in an expanded capacity.

Technological advances resulted in outsourcing much of the operational HR activities. Outsourcing involves contracting with outside vendors to handle specified business functions on a permanent basis. Although using outside experts to provide employee counselling and payroll services has been com- mon for many years, the outsourcing of other specific HR functions, including pension and benefits administration, recruitment, management development, and training, has become increasingly common.11

For example, Air Canada, CIBC, BMO Financial Group, Hewlett-Packard Canada, IBM Canada, Calgary Health, and TELUS all outsourced part or all of their administrative HR functions. During the latter part of this era, the term human resources management emerged. This change represented a shift in emphasis—from maintenance and administration to corporate contribution, proactive management, and initiation of change.12

Phase 4 The fourth phase of HRM is the current phase, in which the role of HR departments has evolved to that of helping their organization achieve its strategic objectives.13 HR activities have become ubiquitous, with not only the HR department but also every line manager bearing responsibilities related to employees as they move through the stages of the human-capital life cycle: selection and assimilation into the organization, development of capabilities while working in the organization, and transition out of the organization. Demonstrating the infiltration of HRM activities throughout the organization, Figure 1.2 highlights core job requirements

outsourcing The practice of contracting with outside vendors to handle specified business functions on a permanent basis.

FIGURE 1.2 Traditional HR Responsibilities in Non-HR Roles

Source: O*NET OnLine, www.onetonline.org, (accessed October 3, 2011).

Senior Managers May specialize in areas such as finance, marketing, or human resources or in the sale of a particular product or provision of a particular service • establish objectives for the company and formulate or approve policies and programs (Strategy: Chapter 1) • authorize and organize the establishment of major departments and associated senior staff positions (Designing and

Analyzing Jobs: Chapter 3) • allocate material, human, and financial resources to implement organizational policies and programs; establish financial

and administrative controls; formulate and approve promotional campaigns; and approve overall personnel planning (HR Planning: Chapter 4)

• select middle managers, directors, or other executive staff (Selection: Chapter 7) • coordinate the work of regions, divisions, or departments (Designing and Analyzing Jobs: Chapter 3)

5Chapter 1 The Strategic Role of Human Resources Management

that are found in non-HR roles that were traditionally limited to the HR depart- ment, thus providing further evidence for the permeation of HR skills throughout the organization. Thus, all potential managers and organizational leaders must be aware of the basics of HR to succeed in their respective roles and manage/align employees to achieve organizational success. In the most current phase, HR pro- fessionals often serve as subject-matter experts or in-house consultants to line managers, offering advice on HR-related matters, formulating HR policies and procedures, and providing a wide range of HR services.

A 2011 national survey of HR professionals identified five critical pieces of knowledge required by HR professionals today. Presented in prior- ity order, they are business acumen, an understanding of employment law and  legislation,  talent management, broad HR knowledge, and employee– labour relations knowledge.14 The results align with an overall trend of increased expectations of HR professionals, suggesting that there are core competencies that those responsible for HR activities (within the HRM department and outside of it) must secure to help deliver value to the organi- zation (see Figure 1.3).

Credible Activist A core HR competency is that of being both credible (respect- ed, listened to, trusted) and active (a person who takes a position and challenges assumptions). Both of these qualities are required to help an organization opti- mize the value added from its human resources.

Source: D. Ulrich, W. Brockbank, D. Johnson, and J. Younger, “Human Resource Competencies: Responding to Increased Expectations,” Exhibit 3, p. 8. http://marino72.files.wordpress.com/2009/06/hr_competencies_increased_expectations.pdf. (Accessed July 3, 2012). © The RBL Group. Reprinted by permission.

ORGANIZATION CAPABILITIES

SYSTEMS & PROCESSES

RELATIONSHIPS

PROFESSIONALISM HR

TALENT MANAGER/

ORGANIZATIONAL DESIGNER

CULTURE & CHANGE STEWARD

OPERATIONAL EXECUTOR

BUSINESS ALLY

CREDIBLE ACTIVIST

STRATEGY ARCHITECT

PEO PLE BU

SI N

ES S

FIGURE 1.3 HR Competency Model

Part 1 Human Resources Management in Perspective6

The activist role is shared with non-HR positions as well. For example, a recent study conducted by Monster.com found that 73 percent of CEOs spend more than 25 percent of their time on talent-related activities, with three in every five identifying employee satisfaction/engagement as a key goal for their job, and three of every four identifying retention of high-performing employees as one of their goals.15

Culture and Change Steward The ability to appreciate, help shape, and articulate an organization’s corporate culture includes understanding, guiding, and reacting to both internal and external stakeholder expectations. HR staff has a responsibility to shape and support a culture of change as well as develop programs, strategies, or projects to embed desired change throughout the organization.

Intense global competition and the need for more responsiveness to envi- ronmental changes put a premium on employee engagement: the emotional and intellectual involvement of employees in their work, and the intensity, focus, and involvement they bring to their jobs and organizations. Engaged employ- ees drive desired organizational outcomes—they go beyond what is required; understand and share the values and goals of the organization; perceive that there are opportunities for growth, development, and advancement; enjoy colle- gial relationships with managers and co-workers; trust their leaders; and regard the success of the organization as their success.16 According to an analysis of a Hewitt Associates database (over 4 million employees from almost 1 500 com- panies), there is a strong positive relationship between employee engagement and organizational performance (sales growth and total shareholder return).17 Similarly, a recent Global Workforce Study of 32 000 employees found that com- panies with engaged employees secured profit margins almost three times higher than companies with disengaged employees.18

Talent Manager and Organizational Designer Traditional linear career paths are changing, and the importance of an HR professional’s ability to effectively manage human resources has become more critical as employees enter, exit, or move up, down, or across the organization. Accordingly, HR specialists must embed theory, research, and practice into the processes, policies, and structures of an organization.

HR professionals and line managers play a pivotal role in lowering labour costs, the single largest operating expense in many organizations, particularly in the service sector. Doing so might involve introducing strategies to reduce turn- over, absenteeism, and the rate of incidence of occupational illnesses and injuries. It could also mean adopting more effective recruitment, selection, and training programs. At one international tire manufacturing firm, adopting a b ehaviour- based interview strategy as the basis for selection of entry-level engineers resulted in savings of $500 000 in three years. These savings were due to lower turnover, lower training costs, and improved capabilities of the engineering staff because of a better fit.19

Strategy Architect HR professionals significantly contribute to strategy by inte- grating internal stakeholder and external stakeholder expectations. Through identifying, forecasting, and facilitating organizational responses to an ever- changing internal workforce and often volatile external pressures, HR plays an active role in the establishment and execution of overall strategy.

employee engagement The emotional and intellectual involvement of employees in their work, and the intensity, focus, and involvement they bring to their jobs and organizations.

RPC Monitors expenditures and timelines

7Chapter 1 The Strategic Role of Human Resources Management

Traditionally, strategy—the company’s plan for how it will balance its internal strengths and weaknesses with external opportunities and threats to main- tain a competitive advantage—was formulated without HR input. But today, HR  professionals are increasingly involved in both formulating and implement- ing organizational strategy. A recent survey of over 1 100 corporate managers in Canada found that three-quarters of them strongly believe that the HR function contributes significantly to the overall success of their company and view having an HR professional on staff as a strategic advantage.20

Operational Executor Leading HR researcher Brian Becker says, “It isn’t the content of the strategy that differentiates the winners and losers, it is the ability to execute.”21 HR specialists are expected to be change agents who lead the organization and its employees through organizational change. Making the  enterprise more responsive to product or service innovations and techno- logical change is the objective of many management strategies. Flattening the pyramid, empowering employees, and organizing around teams are ways in which HRM can help an organization respond quickly to its customers’ needs

and competitors’ challenges. Drafting, adapting, and implementing policies, as

well as dealing with employees’ administrative needs, were traditional roles that HR fulfilled. In recent years, the efficiency in dealing with operational issues has significantly improved through the use of technology, shared services, or outsourcing. However, much of the expertise in operational aspects of employee-related policies remains largely within the HR professional’s realm of responsibility.

Business Ally Organizational goal setting and devel- opment of business objectives is highly dependent on external opportunities or threats. HR professionals, to- gether with other organizational managers, play a role

in what strategic planners call environmental scanning, which involves identify- ing and analyzing external opportunities and threats that may be crucial to the organization’s success. These managers can also supply competitive intelligence that may be useful as the company formulates its strategic plans. Details regard- ing a successful incentive plan being used by a competitor, impending labour shortages, and information about pending legislative changes are examples.

HR professionals can also add value to the strategy-formulation process by supplying information regarding the company’s internal strengths and weak- nesses, particularly as they relate to the organization’s workforce. HR profes- sionals not only understand the value and social context of the business, but they are also increasingly relied on to determine how an organization should be structured and how work can be integrated to ensure financial success.

As highlighted in the Strategic HR box, the evolution of HR is far from done. HR’s transformation has been underway for several years, but progress has been somewhat inconsistent because of lack of senior management sup- port and the fact that many non-HR managers still view HR as a cost centre. Many HR professionals need to acquire more broad-based business knowl- edge and skill sets to be considered and respected as equal business partners by other executives in the company.22 In a few organizations, HR remains

strategy The company’s plan for how it will balance its internal strengths and weaknesses with external opportunities and threats to maintain a competitive advantage.

change agents Specialists who lead the organization and its employees through organizational change.

environmental scanning Identifying and analyzing external opportuni- ties and threats that may be crucial to the organization’s success.

Resources Consulting www.cfthr.com/en/index.php

HR Dept www.hrdept.co.uk

RPC Provides support and expertise to managers and supervisors with respect to managing people

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Part 1 Human Resources Management in Perspective8

locked in an operational mode, processing forms and requests, administering compensation and benefits, managing policies and programs, and overseeing hiring and training.23

Table 1.1 illustrates the difference in the focus of operational versus strategic HR activities.

Measuring the Value of HR: Metrics Today’s HR professionals need to be able to measure the value and impact of their organization’s human capital and HRM practices. The use of various metrics, or statistics to measure the activities and results of HR, is now quite common. Traditional operational measures focused on the amount of activity and the costs of the HR function (such as number of job candidates inter- viewed per month, cost per hire, and so on), but today’s measures need to reflect the quality of people and the effectiveness of HRM initiatives that build workforce capability. These new measures provide critical information that can be linked to organizational outcomes such as productivity, product or ser- vice quality, sales, market share, and profits. For example, the percentage of

metrics Statistics used to measure activities and results.

The HR Role Continues to Evolve The current shift in human resources management as a department and as a profession will continue to undergo evolution well into the 2020s. There are five major forces driving this change:

1. Changing Technology. Technology has helped auto- mate basic HR functions, including managing day-to-day transactions and employee self-service systems. Rather than maintain HR technology experts in-house, nearly half of companies out- source operational functions of HR (payroll, benefits administration, employee education, recruitment processes, and workforce analytics).

2. New Rules. Corporate accounting scandals that plagued the early 2000s resulted in a more focused alignment of organizational activities with new laws and compliance expectations. The financial cri- sis that started in 2008 included a series of addi- tional regulations and expectations of organizational accountability. In this highly volatile environment with high accountability expectations, HR’s role is increasingly strategic, including helping the organi- zation recover from changes and comply with new regulations.

3. Succession Planning. Fifty percent of companies do not have a succession plan in place for their CEO. HR’s role extends significantly beyond operational

tasks to think critically about the complexities, time, and contingencies that must be considered in suc- cession planning. Thus, HR executives are critical to organizational success through development and management of a comprehensive succession plan- ning process.

4. Identifying Top Talent. While some companies argue that all employees must be motivated, educated, rewarded, and evaluated, others argue that a bet- ter return on investment can be secured by focus- ing on a smaller portion of workers (for example, the top 3 percent of all employees). HR is continually asked to establish a commitment to talent develop- ment that is fair, realistic, aware of limitations, and sustainable.

5. A New Breed of HR Leaders. The rise of the CHRO (Chief HR Officer) or CTO (Chief Talent Officer) con- firms the seriousness and intent of many boards of directors in elevating and recognizing the role and capabilities of HR in an organization’s leadership. HR’s participation at the highest level of organiza- tional decision making marks the transformation of the role of HR from operational expert to strategic expert in a concrete way.

Source: Reprinted from Human Resource Executive. Coyright 2012. All rights reserved.

STRATEGIC HR

9Chapter 1 The Strategic Role of Human Resources Management

first-choice job candidates accepting an offer to hire indicates the strength of the organization’s employment brand in the marketplace and directly affects the quality of the workforce.24

Many organizations are using the balanced scorecard system that includes measures of the impact of HRM on organizational outcomes. The balanced scorecard approach translates an organization’s strategy into a comprehensive set of performance measures. It includes financial measures that tell the results of actions already taken. It complements the financial measures with operational measures of organizational, business unit, or department success that will drive future performance. It balances long-term and short-term actions and measures of success relating to financial results, customers, internal business processes, and human capital management.25

balanced scorecard A  measurement system that translates an organization’s strategy into a comprehensive set of performance measures.

Source: D.M. Cox and C.H. Cox, “At the Table: Transitioning to Strategic Business Partner,” Workspan (November 2003), p. 22.

TABLE 1.1 Operational versus Strategic HR

Operational Strategic

Skills Concepts

Administrative tasks Planning

Reactive Proactive

Collecting metrics/measurements Analyzing metrics/measurements

Working to achieve goals and objectives Setting the goals and objectives

Following the laws, policies, and proce- dures

Interpreting, establishing, and revising the laws, policies, and procedures

Employee focus Organizational focus

Explaining benefits to employees Designing benefit plans that help the organiza- tion achieve its mission and goals

Setting up training sessions for employees Assessing training needs for the entire organiza- tion

Recruiting and selecting employees Workforce planning and building relationships with external resources

Administering the salary/wage plan Creating a pay plan that maximizes employees’ productivity, morale, and retention

Always doing things the same way Recognizing that there may be better ways of doing things; recognizing how changes affect the entire organization—not just HR

Works within the organizational culture Attempts to improve the organizational culture

GROWING PROFESSIONALISM IN HRM Today, HR practitioners must be professionals in terms of both performance and qualifications.26 Every profession has several characteristics: (1) a com- mon body of knowledge; (2) benchmarked performance standards; (3) a rep- resentative professional association; (4) an external perception as a profession;

Part 1 Human Resources Management in Perspective10

RPC Stays current with professional knowledge

Fosters and promotes the advancement of the profession

(5) a code of ethics; (6) required training credentials for entry and career mobility; (7) an ongoing need for skill development; and (8) a need to ensure professional competence is maintained and put to socially responsible uses.

The Certified Human Resources Professional (CHRP) designation is a nationally recognized certification for Canadian HR professionals (there are approximately 21 000 of them at present).27 Managed by the CCHRA and administered through provincial HR associations, the CHRP is similar to other professional designations, such as Chartered Accountant (CA) and Professional Engineer (P.Eng.); it recognizes members’ qualifications and experience based on established levels of 187 required professional capabilities in seven functional dimensions: (1) professional practice; (2) organizational effectiveness; (3) staffing; (4) employee and labour relations; (5) total compensation; (6) organizational learning, training, and development; and (7) occupational health, safety, and wellness. The national certification requirements are shown in Figure 1.4. A recently launched SHRP designation (Senior Human Resources Professional) is aimed at professionals who possess other internationally recognized desig- nations (for example, the US Society for Human Resource Management), or a work history demonstrating leadership, advisory capabilities, strategic orienta- tion, a breadth of general business knowledge (not just limited to HR), and a significant impact on their organization and profession.

There is no nation-wide association guiding HR practitioners in Canada. Instead, every province has an association of HR practitioners (Prince Edward Island is included in Nova Scotia’s) that currently assumes dual roles: first, as a professional association serving the interests of its members, and second, as a regulatory body serving the public. These two roles sometimes conflict, for instance, when the dis- ciplinary role of a regulator conflicts with the professional interests of a member.28

Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

CHRP Qualifications

The CHRP designation represents a commitment to a national standard of excellence, sets a benchmark for effective human resources practices, and emphasizes the strategic role of human resource management in business. To pursue the CHRP, you must meet the following qualifications: 1. Association Membership To obtain and maintain the Certified Human Resources

Professional (CHRP) designation, you must be a member in good standing with your provincial HR association.

2. National Knowledge Exam The National Knowledge Exam® (NKE) assesses your understanding of HR knowledge and skills. After you have passed the exam, you are considered a candidate for certification.

3. Degree Requirement You must hold a minimum of a bachelor’s degree from an accredited college or university.

4. Experience Requirement Submit a completed experience assessment which is validated by your current employer. This assessment must prove: • A minimum of three years working in an HR role within the last ten years. • Experience gained at the professional level and a level of autonomy in the application

of your HR knowledge. It is not necessary to be a manager or supervisor. • Experience covers at least two of the seven Required Professional Capabilities.

To maintain a current designation, you will need to retain your membership with your provincial association and recertify your CHRP every three years. Note: The CHRP is a provincially granted designation. As such, requirements may vary slightly in your province. Please also consult your provincial association’s website for details on requirements. http://www.chrp.ca/?page=CHRP_Qualifications

FIGURE 1.4 National CHRP Certification Requirements

11Chapter 1 The Strategic Role of Human Resources Management

The Canadian Council of Human Resources Associations (CCHRA) is the 40 000-member national body through which all provincial HR associations are affiliated. The CCHRA is in turn a member of the World Federation of People Management Associations (WFPMA). The International Personnel Management Association (IPMA)–Canada is the national association for public-sector and quasi-public-sector HR professionals.

Other important associations for HR specialists include the Canadian Industrial Relations Association; WorldatWork for compensation and rewards issues; health and safety associations, such as the Industrial Accident Prevention Association, the Construction Safety Association, and Safe Communities Canada; and the Canadian Society for Training and Development.

In addition to the international- and national-level broad HR designations, a  series of more specialized or specific professional designations in Canada allows those who may be interested in specialized areas to gain recognition for a deeper level of subject matter expertise. Table 1.2 highlights a series of addi- tional HR designations.29

Ethics The professionalization of HRM has created the need for a uniform code of ethics, as agreement to abide by the code of ethics is one of the requirements of maintaining professional status. Since what is ethical or unethical is gen- erally open to debate (except in a few very clear-cut cases such as willful

Canadian Council of Human Resources Associations www.cchra.ca/en/

World Federation of People Management Associations www.wfpma.com

certification Recognition for having met certain professional standards.

TABLE 1.2 Professional HR Designations in Canada (as of 2006)

Designation Designation Holders in Canada

Certified Human Resources Professional (CHRP) 18 000

Group Benefits Associate (GBA) 1 430

Registered Professional Recruiter (RPR) 1 200

Canadian Payroll Manager (CPM) 1 200

Certified Employee Benefits Specialist (CEBS) 896

Payroll Compliance Practitioner (PCP) 850

Certified Compensation Professional (CCP) 734

Retirement Plans Associate (RPA) 652

Canadian Management Professional (CMP) 550

International Personnel Management Association (IPMA) – Certified Practitioner

266

Registered Assessment Specialist (RAS) 250

Certified Training and Development Professional (CTDP) 250

Registered Professional Trainer (RPT) 200

Compensation Management Specialist (CMS) 174

Global Remuneration Professional (GPR) 37

Senior Professional in HR (SPHR) 37

Source: Adapted with permission from S. Klie, “Senior HR Designations Unveiled,” Canadian HR Reporter, July 7, 2009.

RPC Understands and adheres to the Canadian Council of Human Resources Association’s code of ethics and applicable provincial/ territorial HR associations’ codes

Part 1 Human Resources Management in Perspective12

misrepresentation), most codes do not tell employees what they should do. Rather, they provide a guide to help employees discover the best course of action by themselves.30 Increasingly, HR departments are being given

a greater role in providing ethics training and moni- toring to ensure compliance with the code of ethics. Some organizations have such a commitment to ethics that they have a full-time ethics officer. On the other hand, a 2008 survey of Ontario HR professionals found that 78.2 percent had been coerced into doing something morally or legally ambiguous at least once in their careers.31

The most prevalent ethical issues confronting Canadian organizations today pertain to security of information, employee and client privacy, environmen- tal issues, governance, and conflicts of interest.32 The major reasons for the failure of ethics programs to achieve the desired results are lack of effective leadership and inadequate training. Positive outcomes associated with properly implemented ethics programs include increased confidence among stakeholders, such as clients, partners, and employees; greater client/customer and employee loyalty; decreased vulnerability to crime; reduced losses due to internal theft; and increased public trust.33

In recent years, the concept of social responsibility has frequently been discussed as an important manifestation of ethics. A company that exer- cises social responsibility attempts to balance its commitments, not only to its investors but also to its employees and customers, other businesses, and the community or communities in which it operates. Mountain Equipment Co-op (MEC) is an example of a company that considers socially respon- sible approaches to all aspects of its business—selecting and designing products, manufacturing MEC-brand products, transporting products and people, greening operations, engaging employees, equipping members, sup- porting the community, driving economic performance, and governing the co- operative. It examines every aspect of a product’s life cycle from a social responsibility perspective, from the resources that go into making and ship- ping it, to the satisfaction of the employees and the members who take the products home.34

social responsibility The implied, enforced, or felt obligation of managers, acting in their official capacities, to serve or protect the interests of groups other than themselves.

An Ethical Dilemma Can or should an employee reveal information that was disclosed in confidence about a troubled co-worker, and if so, under what circumstances?

ENVIRONMENTAL INFLUENCES ON HRM There are numerous external and internal environmental influences that drive the strategic focus of HRM. To be effective, all managers, including those with responsibility for HR, must monitor the environment on an ongoing basis, assess the impact of any changes, and be proactive in responding to such challenges. Table 1.3 illustrates the major external and internal environmental influences on HRM.

External Environmental Influences Six major external environmental influences on HRM will be discussed: eco- nomic conditions, labour market issues, technology, government, globalization, and environmental concerns.

13Chapter 1 The Strategic Role of Human Resources Management

Economic Conditions Economic conditions affect supply and demand for products and services, which, in turn, have a dramatic impact on the number and types of employees required as well as on an employer’s ability to pay wages and provide benefits. When the economy is healthy, companies often hire more workers as demand for products and services increases. Consequently, when unemployment rates fall, there is more competition for qualified employees, and training and reten- tion strategies increase in importance. Conversely, during an economic down- turn, some firms reduce pay and benefits to maintain workers’ jobs. Other employers are forced to downsize by offering attractive early retirement and early leave programs or by laying off or terminating employees. Unemployment rates rise, and employers are often overwhelmed with applicants when vacan- cies are advertised.

Productivity refers to the ratio of an organization’s outputs (goods and services) to its inputs (people, capital, energy, and materials). Canada’s relatively low pro- ductivity growth rate is of concern because of increasing global competition. To improve productivity, managers must find ways to produce more outputs with current input levels or use fewer resources to maintain current output levels. In most organizations today, productivity improvement is essential for long-term success.

Employment trends in Canada have been experiencing dramatic change. The primary sector, which includes agriculture, fishing and trapping, forestry, and mining, now represents only 4 percent of jobs. Employment in the secondary sector (manufacturing and construction) has decreased to 19 percent of jobs. The sector that has grown to represent 77 percent of jobs, dominating the Canadian economy, is the tertiary or service sector, which includes public administration, personal and business services, finance, trade, public utilities, and transportation/ communications.

productivity The ratio of an organization’s outputs (goods and services) to its inputs (people, capital, energy, and materials).

primary sector Jobs in agriculture, fishing and trapping, forestry, and mining.

secondary sector Jobs in manufac- turing and construction.

tertiary or service sector Jobs in public administration, personal and business services, finance, trade, public utilities, and transportation/ communications.

TABLE 1.3 External and Internal Environmental Influences on HRM

External Internal

Economic Conditions: affect supply and demand for products, impacting quantity and quality of employees required and ability to pay/give benefits.

Organizational Culture: values, beliefs, and norms of organizational members.

Labour Diversity: protected groups (visible/ ethnic minorities, women, Aboriginal, dis- abled) and generational differences (tradition- alists, baby boomers, Gen X-ers, Gen Y-ers).

Organizational Climate: the atmosphere’s impact on employee motivation, job perfor- mance, and productivity.

Technology: controlling data and privacy. Management Practices: organizational structure and employee empowerment.

Government: abiding by provincial and national standards.

Globalization: managing the workforce in an intense, hypercompetitive global economy.

Environment: managing sustainability and corporate social responsibility.

Part 1 Human Resources Management in Perspective14

Since all jobs in the service sector involve the provi- sion of services by employees to individual customers, effectively managing and motivating human resources is critical. Although there are some lesser-skilled jobs (in housekeeping and food services, for example), many service-sector jobs demand highly knowledgeable employees.

Labour Market Issues Increasing Workforce Diversity Canada’s workforce is among the most diverse in the world. Diversity refers to the attributes that humans are likely to use to tell themselves “that person is different from me.” These attributes include demographic factors (such as race, gender, and age) as well as values and cultural norms.35 HR by the Numbers demonstrates the diversity in Cana- da’s workforce and focuses on the four protected groups: visible and ethnic minorities, women, Aboriginals, and persons with disabilities.

Generational Issues Another aspect of diversity is generational differences. There are four generations in the workplace, and nearly half of all Canadians say they have experienced a clash with workers older or younger than themselves. On the other hand, about one-quarter of workers say they don’t notice age differences and another one-quarter think this situation provides an excellent learning opportunity. Table 1.4 outlines atti- tudes, key characteristics, and expectations of the four generations.

Education Approximately 54 percent of Canada’s pop- ulation has some postsecondary education (trades, col- lege, or university).36 Given the higher expectations of the better-educated labour force, managers are expected to ensure that the talents and capabilities of employees are fully utilized and that opportunities are provided for career growth.

On the other hand, a startlingly high proportion (26 percent) have only marginal literacy skills, meaning their ability to understand and use printed and written docu- ments in daily activities to achieve goals and to develop

knowledge and potential is limited. A frightening reality is that inadequate reading and writing skills have replaced lack of experience as the major reason for rejecting entry-level candidates.37 Figure 1.5 provides a recent

the number of different ethnic origins reported in 2011 in Canada1200

percentage of women in Canada who are now the primary bread- winner in dual-earner couples3

H R

by the N um

bers

the approximate number of people who identified themselves as a visible minority in 20112

6.3 m

Visible and Ethnic Minorities

Women

31%

the number of women bet- ween the working ages of 15 to 65 in Canada4

11.8 m

Aboriginals of Aboriginals in Canada are youths between the ages of 15 to 245

18.2%

the increase in the Aboriginal population between 2006 to 20116

20.1%

higher unemployment rate experi- enced by disabled persons compared to the able-bodied population7

Persons with Disabilities

50%

lower income experienced by disabled persons compared to the able-bodied population8

17%

Workforce Diversity ◀ in Canada

15Chapter 1 The Strategic Role of Human Resources Management

RPC Keeps current with emerging HR trends

breakdown of literacy levels in Canada. Functional illiteracy is exacting a toll not only on individual social and economic opportunities, but also on organiza- tions’ accident rates and productivity levels.

Non-Standard or Contingent Workers The labour market has undergone major structural changes with the growth of contingent (or “non-standard”) workers, that is, workers who do not fit the traditional definition of permanent, full- time employment with the same employer on an indeterminate basis. These non-traditional workers are often used by companies to provide flexible, on-

demand labour, without the same guarantees for contin- ued employment, employee development, or benefits that regular full-time employees are given.

The forms of employment involving part-time, fixed- term, temporary, home, and standby workers, those who have more than one job, and the self-employed have become so significant numerically that they now affect about one-third of the workforce. More women fall into

contingent/non-standard workers Workers who do not have regular full-time employment status.

TABLE 1.4 The Four Generations

Traditionalists 1922–1945

Baby Boomers 1946–1964

Gen X-ers 1965–1980

Gen Y-ers 1981–2000

Notes Grew up in an era of hard- ship, including a war and the Great Depression.

The largest group in the workforce. Grew up in a time of major optimism and change amidst the moon landing and the women’s movement.

This group grew up as divorce rates skyrocketed. First technology-literate generation.

Beginning to enter the workforce. Expect to change jobs frequently.

Attitudes, Values, and Expectations

• Loyalty • Respect for authority • Dedication • Sacrifice • Conformity • Honour • Privacy • Stability • Economic conservatism

• Optimism • Involvement • Team oriented • Personal growth and

gratification • Youthfulness • Equality • Career focused

• Independence • Self-reliance • Pragmatism • Skepticism • Informality • Balance

• Confidence • Diversity • Civic duty • Optimism • Immediate access to

information and services

Key Charac- teristics

• Compliant • Detail oriented • Hard-working • Fiscally frugal • Trustworthy • Risk averse • Long-term focused

• Driven to succeed • Team player • Relationship focused • Eager to add value • Politically savvy in the

workplace • Competitive

• Tech-literate • Flexible and adaptable • Creative • Entrepren-eurial • Multitasker • Results driven • Individualistic

• Tech-savvy • Collective action • Expressive and tolerant

of differences • Eager to accept

challenges • Innovative and creative

Source: Reprinted with permission from HR Professional magazine and the Human Resources Professionals Association (HRPA). www.hrpa.ca

An Ethical Dilemma The maintenance department supervisor has just come to you, the HR manager, voicing concern about the safety of two of her  reporting employees whom she recently discovered to be functionally illiterate. What are your responsibilities to these employees, if any?

Part 1 Human Resources Management in Perspective16

RPC Contributes to improvements in the organization’s structures and work processes

this category than men.38 Non-standard work is often poorly paid, offers little or no job security, and is generally not covered by employment legislation. HR by the Numbers identifies some core metrics associated with the use of contingent workers in Canada.

Technology From Twitter to Facebook to videoconferencing setups that make it seem as if everyone were in the same room, a wide range of technology is available to organizations today. All of this technology can make working in and man- aging a dispersed workforce easier and can enable people to work anywhere and everywhere. The workplace of today includes “hotels, cafes and confer- ence venues, as well as public areas of lounges and airports.”39 However, it has also brought new concerns as the line between work and family time has become blurred.40

Level 1: 14.6% of Canadians

This level represents individuals with very low levels of literacy skills. They may be unable to follow written instructions at work or determine correct measurements required for task completion.

Level 2: 27.3% of Canadians

This level includes individuals who can comprehend material that is is simple and straightforward. While they can read, they generally score poorly on tests involving reading. They can cope on a non-complex, daily level, but face difficulty with more complex demands, such as learning new job skills.

Level 3: 38.6% of Canadians

The majority of Canadians are at the level 3 literacy level. This skill level involves the ability to integrate multiple sources of information, or solve complex problems.

Level 4 & 5: 19.5% of Canadians

This is the highest literacy level. Individuals at this level have higher-order information processing skills.

FIGURE 1.5 Literacy Levels of Canadians (16–64 years old)

Source: Adapted from: The Conference Board of Canada, “All Signs Point to Yes: Literacy’s Impact on Workplace Health and Safety,” September 2008, p. 4.

RPC Advises on the status of dependent and independent contractors and determinants of employee status

17Chapter 1 The Strategic Role of Human Resources Management

Questions concerning data control, accuracy, the right to privacy, and ethics are at the core of a growing contro- versy brought about by the new information technologies. In some firms, sophisticated computerized control systems are used to monitor employee speed, accuracy, and effi- ciency. More firms are also monitoring employee email, voice mail, telephone conversations, and computer usage, and some now monitor employee behaviour using video surveillance.41

Government Various laws enacted by governments have had, and will continue to have, a dramatic impact on the employer– employee relationship in Canada. One of the factors that makes employment law in Canada so challenging is that there are 14 different jurisdictions involved. Each of the ten provinces and three territories has its own human rights, employment standards, labour relations, health and safety, and workers’ compensation legislation. In addition, about 10 percent of the workforce (including employees of the federal government and Crown corporations, chartered banks, airlines, national railways, and the Canadian Armed Forces) is covered by federal employment legislation.

Although there is some commonality across juris- dictions, there is also considerable variation. Minimum wage, overtime pay requirements, vacation entitlement, and grounds protected under human rights legislation, for example, vary from one province/territory to another. Furthermore, some jurisdictions have pay equity and employment equity legisla- tion while others do not. This means that in companies with employees in more than one jurisdiction, different rules apply to different employees. There are, however, certain laws that apply to all employers and employees across Canada, such as employment insurance and the Canada/Quebec Pension Plan.

Globalization Globalization refers to the emergence of a single global market for most products and services. There are increasing numbers of multinational corporations—firms that conduct a large part of their business outside the country in which they are headquartered and that locate a significant percentage of their physical facilities and human resources in other countries. For example, Toyota has a large mar- ket share in the United States, Europe, and Africa, and is the market leader in Australia. Toyota has factories all over the world, manufacturing or assembling vehicles like the Corolla for local markets. Notably, Toyota has manufacturing or assembly plants in the United States, Japan, Australia, Canada, Indonesia, Poland, South Africa, Turkey, the United Kingdom, France, and Brazil, and has recently added plants in Pakistan, India, Argentina, the Czech Republic, Mexico, Malaysia, Thailand, China, and Venezuela.42

Hints TO ENSURE LEGAL COMPLIANCE

RPC Gathers, analyzes, and reports relevant business and industry information ( including global trends) to influence the development of strategic business HR plans

readers of HR Reporter and mem- bers of HRPA polled

Increased Use of Contract ◀ Workers

377

identify that contract workers in their company receive no benefits at all

H R

by the N um

bers

have seen an increase in the use of contract workers in their organization in the last five years

63%

51.2%

feel company does not have well-defined processes in

place to manage contract workers

23.6%

18 Part 1 Human Resources Management in Perspective

Globalization means that HR professionals need to become familiar with employment legislation in other countries and need to manage ethical dilemmas when labour standards are substantially lower than those in Canada. Companies doing business in sub-Saharan Africa, for example, have to deal with a high death rate among employees with AIDS. Some companies are paying for antiret- roviral drugs to keep their employees alive.43

Environmental Concerns Environmental concerns have suddenly (some might say finally) emerged as an issue for people, particu- larly the younger generations.44 Sustainability, climate change, global warming, pollution, carbon footprints, extinction of wildlife species, ecosystem fragility, and other related issues are increasingly important to people around the world. There is increasing evidence that interest in environmental issues is motivating the behaviour of employees, and that they are concerned about whether they work for environmentally respon- sible companies. Companies like Fairmont Hotels have made environmental stewardship a priority for almost 20 years. They have found that developing a reputa-

tion as an environmental leader and demonstrating corporate social responsibil- ity have not only helped them to gain market share, but have also been a strong employee retention tool.45

Internal Environmental Influences How a firm deals with the three internal environmental influences of organiza- tional culture, organizational climate, and management practices has a major impact on its ability to meet its objectives.

Organizational Culture Organizational culture consists of the core values, beliefs, and assumptions that are widely shared by members of an organization. Culture is often conveyed through an organization’s mission statement, as well as through stories, myths, symbols, and ceremonies. It serves a variety of purposes:

• communicating what the organization “believes in” and “stands for”

• providing employees with a sense of direction and expected behaviour (norms)

• shaping employees’ attitudes about themselves, the organization, and their roles

• creating a sense of identity, orderliness, and consistency

• fostering employee loyalty and commitment

organizational culture The core values, beliefs, and assumptions that are widely shared by members of an organization.

Employees are increasingly concerned about social responsibility, including environmental responsibility, on the part of their employers.

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19Chapter 1 The Strategic Role of Human Resources Management

All managers with HR responsibilities play an important role in creating and maintaining the type of organizational culture desired. For example, they may organize recognition ceremonies for high-performing employees and be involved in decisions regarding symbols, such as a logo or the design of new com- pany premises. Having a positive culture has a positive impact on employer branding, recruitment, retention, and productivity.

Organizational Climate Organizational climate refers to the prevailing atmo- sphere, or “internal weather,” that exists in an orga- nization and its impact on employees.46 It can be friendly or unfriendly, open or secretive, rigid or flex-

ible, innovative or stagnant. The major factors influencing the climate are man- agement’s leadership style, HR policies and practices, and the amount and style of organizational communication. The type of climate that exists is generally reflected in the level of employee motivation, job satisfaction, performance, and productivity. HR professionals play a key role in helping managers throughout the firm establish and maintain a positive organizational climate.

Management Practices Management practices have changed considerably over the past decade, with  many HRM implications. For example, the traditional bureaucratic structure with many levels of management is being replaced by flatter orga- nizational forms, using cross-functional teams and improved communication. Since managers have more people reporting to them in flat structures, they cannot supervise their employees as closely, and employee empowerment has greatly increased.

organizational climate The prevail- ing atmosphere that exists in an organization and its impact on employees.

empowerment Providing workers with the skills and authority to make decisions that would tradi- tionally be made by managers.

Chapter SUMMARY

1. Human resources management (HRM) refers to the management of people in organizations. Strategic HRM involves linking HRM with strategic goals and objectives to improve business performance. In more and more firms, HR pro- fessionals are becoming partners in strategy formulation and execution.

2. The two major stages in the evolution of manage- ment thinking about workers were (1) scientific management, which focused on production, and (2) the human resources movement, in which it was recognized that organizational success is linked to operational and strategic management of labour.

Employees in fast-food establishments are taught how to provide courteous, efficient customer service.

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Part 1 Human Resources Management in Perspective20

Key TERMS

balanced scorecard (p. 9) certification (p. 11) change agents (p. 7) contingent/non-standard workers (p. 15) employee engagement (p. 6) empowerment (p. 19) environmental scanning (p. 7) human capital (p. 2) human resources management (HRM) (p. 2) human resources movement (p. 3) metrics (p. 8)

organizational climate (p. 19) organizational culture (p. 18) outsourcing (p. 4) primary sector (p. 13) productivity (p. 13) scientific management (p. 3) secondary sector (p. 13) social responsibility (p. 12) strategy (p. 7) tertiary or service sector (p. 13)

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

3. Core roles that HR professionals must fulfill today include the those of talent manager, culture/change steward, strategic architect, operational executor, business ally, and credible activist. These roles are shared with managers and executives in the organization, with HR professionals often assuming roles of advisers or subject matter experts.

4. There are numerous professional designa- tions that will boost a career trajectory in human resources. The most basic of these is the Canadian Human Resources Professional (CHRP). However, additional designations exist that are important and may be influential in building expertise and careers in management or human resources management.

5. Activities of employee management, empower- ment, training, and guidance are often shared between managers in the organization ( executive and line managers) and HR professionals.

Therefore, managers, executives, and HR person- nel are all influential in effective human resources management.

6. Human resources activities are now being seen as falling into two categories. The first is the traditional operational (administrative) category, in which HR hires and maintains employees and then manages employee separations. The second is the more recent strategic category, in which HR is focused on ensuring that the organization is staffed with the most effective human capital to achieve its strategic goals.

7. A number of external factors have an impact on HRM, including economic factors, labour market issues, technology, government, globalization, and environmental concerns.

21Chapter 1 The Strategic Role of Human Resources Management

as per the ads. Contrast these required com- petencies (both implied and explicit) with the core HR professional competencies highlighted in this chapter. Discuss the most consistently required competency and the impact of that competency on organizational success.

1. Working alone or with a small group of class- mates, interview an HR manager and prepare a short essay regarding his or her role in strategy formulation and implementation.

2. Review job ads for five senior HR roles on job posting websites or corporate websites. Identify common competencies required for those roles

Experiential EXERCISES

you have worked. How has your business responded to these pressures?

3. A firm has requested your assistance in ensur- ing that its multigenerational workforce func- tions effectively as a team. What strategies or programs would you recommend? Why?

4. Choose a non-HR role you have had in your previous jobs. Identify how you used the core competencies of HR professionals in that role and how it affected your job performance.

1. Explain how demographics and workforce diversity have had an impact on the organiza- tion in which you are working or one in which you have worked. What policies or practices did managers or HR in the organization have in place to help assist with the management of a diverse internal labour force?

2. Explain how changing economic and competitive pressures have had an impact on the organiza- tion in which you are working or one in which

Critical Thinking QUESTIONS

1. Describe the transformation that HR has undergone over the years. Discuss how changes in internal and external factors have contributed to the evolution in HR.

2. Describe the role of HR in strategy formulation and strategy implementation.

3. Describe how the external environment influences HR.

4. Differentiate between organizational culture and organizational climate.

5. Describe the multiple jurisdictions related to employment legislation affecting HRM in Canada.

6. Discuss the six core competencies required of HR professionals. Identify how these competencies are also embedded in the roles of line managers, senior managers, and C-level executives in an organization.

7. Explain how HR has become profes- sionalized and describe the value of this professionalization.

Review and Discussion QUESTIONS

Part 1 Human Resources Management in Perspective22

and markets that these organizations target. As a team, discuss the similarities and differences among the strategies, objectives, and markets of these 10 employers. Explain how these factors might affect Generation Y’s perception of these companies as desirable employers.

5. Using the sample balanced scorecard template provided by your professor, in pairs develop a balanced scorecard measure for a hypothetical company in the retail urban clothing sector. This company has many stores in large and small cities in Ontario and Quebec. As you develop your measures, be sure to take into consideration current economic conditions.

Exchange your completed set of measures with that of another pair. Compare and contrast your measures. Is one set “better” than the other? Why or why not? Debrief as instructed.

3. Review job ads for five executive roles (such as CEO, vice-president, or president) on job posting websites or corporate websites. Identify common competencies required for those roles as per the ads. Contrast these required competencies (both implied and explicit) with the core HR profes- sional competencies highlighted in this chapter. Discuss the most consistently required compe- tency and how it is important in non-HR roles.

4. According to a 2012 study of the world’s most attractive firms (released by Universum), the top 10 employers for career seekers with a business background were (in priority order): Apple, Google, Government of Canada, Bank of Canada, Microsoft, Royal Bank of Canada, Facebook, Air Canada, Canadian Revenue Agency, and BMW. In groups, review the company websites of these organizations to determine the corporate strategy, objectives,

CBC To view the CBC videos, read a summary, and answer discussion questions, go to MyManagementLab.

The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

CHAPTER

2 REQUIRED PROFESSIONAL CAPABILITIES (RPC)

• Identifies and masters legislation and jurisprudence relevant to HR functions

• Ensures the organization’s HR policies and practices align with human rights legislation

• Promotes a productive culture in the organization that values diversity, trust, and respect for individuals and their contributions

• Assesses requests for HR information in light of corporate policy, freedom of information legislation, evidentiary privileges, and contractual or other releases

• Contributes to the develop- ment of information security measures issues

LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

EXPLAIN how employment-related issues are governed in Canada.

DISCUSS at least five prohibited grounds for discrimination under human rights legislation, and DESCRIBE the requirements for reasonable accommodation.

DESCRIBE behaviour that could constitute harassment and EXPLAIN the employers’ responsibilities regarding harassment.

DESCRIBE the role of minimums established in employment standards legislation and the enforcement process.

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Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

Part 1 Human Resources Management in Perspective24

THE LEGAL FRAMEWORK FOR EMPLOYMENT LAW IN CANADA

A 2011 survey conducted by Queen’s University in partnership with the Human Resources Institute of Alberta (HRIA) and the International Personnel Management Association (IPMA) asked 451 HR professionals to identify the top five critical pieces of knowledge required in their roles. While business acu- men was identified as the most critical piece of knowledge, employment law/ legislative awareness and talent management were tied for second position.1 While HR professionals are expected to provide guidance, training, programs, and policy developments that are legally defensible, the actions of supervisors and managers, as agents of the organization, must also be in accordance with legislated rules and regulations. Given the risk of expensive lawsuits and their impact on employer branding or reputation, an awareness of employment law is required throughout the entire organization, extending well beyond just the HR professionals.

A number of distinct sets of responsibilities, including formal and informal expectations, exist between the employee and employer. There is a mutual expectation of each party to maintain the employment relationship by fulfilling their own responsibilities within the relationship. For example, there may be an implied, informal expectation from an employee’s point of view that as long as he or she works for the scheduled number of hours, he or she can expect job security and continued employment from the employer. Such informal and personalized expectations are difficult to manage and correct if one party feels that the other has violated the expectations within the mutual relationship. As a result, the influence and impact of formal expectations (largely established through legislation and the interpretation of it) play a significant role in the Canadian workplace.

The primary objective of most employment legislation in Canada is to pre- vent employers from exploiting paid workers, assuming that an implicit power imbalance exists in the employment relationship (in favour of the employer).2 Figure 2.1 illustrates the balance between employer, government, and employee. The judicial system provides a forum for interpreting legislation according to precedents established by past judicial rulings.

Hierarchy of Employment Legislation in Canada 1. As highlighted in Figure 2.2, at the broadest level all persons residing in

Canada are guaranteed protection under constitutional law, particularly the Charter of Rights and Freedoms. The regulations set forth in the Charter are not employment specific, but all employers must abide by them because they are fundamental, guaranteed rights to all persons residing in Canada.

2. Provincial human rights codes ensure that the rights of every Canadian are protected and that all persons are treated with equality and respect. Discrimination based on protected grounds highlighted in the legislation is prohibited in not only the employment relationship but also the delivery of goods and services. Therefore, while the Charter of Rights and Freedom and human rights codes extend beyond just the employment relationship, they both have a significant impact on workplace practices.

RPC Identifies and masters legislation and jurisprudence relevant to HR functions

25Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

3. In Canada, employers must abide by a series of employment-specific legislation, such as the Employment Standards Act, which vary slightly by jurisdiction. There is a great deal of commonality to the legislation, but there are also some differences. For example, vacations, statutory holidays, and minimum wage standards are provided by all jurisdictions, but specific entitlements may vary

FIGURE 2.2 Multiple Layers of Canadian Legislation Affecting Workplace Practices

Affects the General Population

Affects Specific Employees or Conditions

• Canadian Charter of Rights and Freedom—Basic rights guaranteed to all persons residing in Canada

• Human Rights Legislation—Protection from discrimination in employment relationships and the delivery of goods and services

• Collective Bargaining Agreement—A legally binding agreement establishing minimum terms and conditions of employment affecting unionized positions

• Employment Contract—A contract between an individual employee and their employer regarding specified employment conditions in specified roles

• Employment Standards Legislation—Establishes minimum terms and conditions of the employment relationship within each jurisdiction (e.g., minimum wages, hours of work, maternity leave)

• Ordinary Laws—Protection under context- or content-specific laws affecting workplaces (like Occupational Health and Safety)

Source: Based on Chhinzer, 2011.

The government’s role is to balance employee

and employer needs through the

development and maintenance of

employment legislation.

Employers have a right to modify

employee work terms and arrangements

according to legitimate business

needs.

Employees have a right to be protected

from harmful business practices.

FIGURE 2.1 It is the government’s role to balance employer and employee needs.

Source: Data from Chhinzer, N. (2013).

Part 1 Human Resources Management in Perspective26

from one jurisdiction to the next. Therefore, a company with employees in more than one province/territory must monitor the legislation in each of those jurisdictions and remain current as legislation changes. Ensuring legality across multiple jurisdictions can be complex, since it is possible for a policy, practice, or procedure to be legal in one jurisdiction yet illegal in others.

4. There are laws that specifically regulate some areas of HRM— occupational health and safety (occupational health and safety acts are reviewed in Chapter 10), union relations (labour relations acts are reviewed in Chapter 12), as well as pensions and compensation (pay equity acts, the Income Tax Act, and others are discussed briefly in Chapter 9).

5. Even more specific is the issue of contract law, which governs collective agreements and individual employment contracts. Such laws impose specific requirements and constraints on management and employee policies, procedures, and practices. For example, a collective bargaining agreement is a contract regarding the terms and conditions of employment that both employees and employers must abide by legally. In non-unionized situations, individual employment contracts are often signed prior to the commencement of the employment relationship and constitute individualized legal agreements that employees and employers must abide by.

Tort Law In addition to the legislation above, Canada has also inherited the English sys- tem of tort law. Tort law is primarily judge-based law, whereby the precedent and jurisprudences set by one judge through his or her assessment of a case establishes how similar cases will be interpreted. Tort laws are often separated into two categories: intentional torts (for example, assault, battery, trespass, intentional affliction of mental distress) and unintentional torts (for example, negligence based on events in which harm is caused by carelessness).

To avoid flooding the courts with complaints and the prosecutions of rela- tively minor infractions, the government in each jurisdiction creates special regu- latory bodies to enforce compliance with the law and aid in its interpretation. Such bodies, which include human rights commissions and ministries of labour, develop legally binding rules called regulations and evaluate complaints.

Within these various levels of legislation there is a sense of hierarchy, as per Figure 2.2. The more general the impact of the legislation, the more it supersedes

lower levels of legislation. For example, a collective bargain- ing agreement cannot agree to wages less than the minimum wage established in the provincial Employment Standards Act. Likewise, the Employment Standards Act cannot violate the minimums set forth in the Charter of Rights and Freedom.

There are two opposing interpretations of Canadian leg- islation. Employees often choose to view the regulations as a statutory floor and expect to receive higher than the mini- mum requirements (more than the minimum wage, mini- mum entitlement for vacation days, minimum entitlement for severance pay, and so on). In contrast, employers often prefer to view legislated guidelines as a contractual ceiling and align maximum commitment levels to the minimums established in the guidelines. HR professionals play a critical role in bal- ancing these divergent sets of expectations, with obligations toward both the employees and employers.

tort law Primarily judge-based law, whereby the precedent and jurisprudences set by one judge through his or her assessment of a case establishes how similar cases will be interpreted.

regulations Legally binding rules established by special regulatory bodies created to enforce compliance with the law and aid in its interpretation.

Government of Canada http://canada.gc.ca

Hints TO ENSURE LEGAL COMPLIANCE

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27Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

Human rights legislation makes it illegal to discriminate, even unintentionally, against various groups. Reactive (complaint driven) in nature, the focus of such legislation is on the types of acts in which employers should not engage. Included in this category are

1. the Charter of Rights and Freedoms, federal legislation that is the corner- stone of human rights in Canada, and

2. human rights legislation, which is present in every jurisdiction.

The Charter of Rights and Freedoms The cornerstone of Canada’s legislation pertaining to issues of human rights is the Constitution Act, which contains the Charter of Rights and Freedoms. The Charter applies to the actions of all levels of government (federal, provincial/ territorial, and municipal) and agencies under their jurisdiction as they go about their work of creating laws. The Charter takes precedence over all other laws, which means that all legislation must meet Charter standards; thus, it is quite far-reaching in scope.

There are two notable exceptions to this generalization. The Charter allows laws to infringe on Charter rights if they can be demonstrably justified as rea- sonable limits in a “free and democratic society.” Since “demonstrably justified” and “reasonable” are open to interpretation, many issues challenged under the Charter eventually end up before the ultimate interpreter for the Charter, the Supreme Court of Canada. The second exception occurs when a legislative body invokes the “notwithstanding” provision, which allows the legislation to be exempted from challenge under the Charter.

The Charter provides the following fundamental rights and freedoms to every Canadian, including but not limited to:

1. freedom of conscience and religion 2. freedom of thought, belief, opinion, and expression, including freedom of the

press and other media of communication 3. freedom of peaceful assembly 4. freedom of association

In addition, the Charter provides Canadian multicultural heritage rights, First Nations’ rights, minority language education rights, equality rights, the right to live and work anywhere in Canada, the right to due process in criminal proceedings, and the right to democracy.3

Section 15—equality rights—provides the basis for human rights legislation, as it guarantees the right to equal protection and benefit of the law without  discrimination, in particular without dis- crimination based on race, national or ethnic ori- gin, colour,  religion, sex, age, or mental or physical disability.4

Charter of Rights and Freedoms Federal law enacted in 1982 that guarantees fundamental freedoms to all Canadians.

Supreme Court of Canada www.scc-csc.gc.ca

equality rights Section 15 of the Charter of Rights and Freedoms, which guarantees the right to equal protection and benefit of the law without discrimination.

LEGISLATION PROTECTING THE GENERAL  POPULATION

The freedom of religion is protected under the Charter of Rights and Freedoms and applies to all levels of government.

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Human Rights Legislation Every person residing in Canada is protected by human rights legislation, which prohibits intentional and unintentional discrimination in employment situations and in the delivery of goods and services. Human rights legislation is extremely broad in scope, affecting almost all aspects of HRM when applied to the employ- ment relationship. An important feature of human rights legislation is that it supersedes the terms of any employment contract or collective agreement.5 For these reasons, supervisors and managers must be thoroughly familiar with the human rights legislation of their jurisdiction and their legal obligations and responsibilities as specified therein.

Human rights legislation prohibits discrimination against all Canadians in a number of areas, including employment. To review individual provincial and territorial human rights laws would be confusing because of the many but gener- ally minor differences among them, often only in terminology (for example, some provinces use the term “creed,” others “religion”). As indicated in Figure 2.3, most provincial/territorial laws are similar to the federal statute in terms of scope, interpretation, and application. All jurisdictions prohibit discrimination on the grounds of race, colour, religion/creed, sex, marital status, age, disability, and sexual orientation. Some, but not all, jurisdictions further prohibit discrimi- nation on the basis of family status, nationality or ethnic origin, and various other grounds.

Discrimination Defined Central to human rights laws is the concept of discrimination. When someone is accused of discrimination, it generally means that he or she is perceived to be acting in an unfair or prejudiced manner within the context of prohibited grounds for discrimination. For example, if an employee were discriminated against based on his or her initials or for wearing a black top to work, this would fall outside the scope of human rights legislation. The law prohibits unfair discrimination—making choices on the basis of perceived but inaccurate differ- ences to the detriment of specific individuals or groups. Standards pertaining to unfair discrimination have changed over time. Both intentional and uninten- tional discrimination are prohibited.

Intentional Discrimination Except in specific circumstances that will be described later, intentional discrimination is prohibited. An employer cannot discrimi- nate directly by deliberately refusing to hire, train, or promote an individual, for example, on any of the prohibited grounds. It is important to realize that deliberate discrimination is not necessarily overt. In fact, overt (blatant) dis- crimination is relatively rare today. But subtle, indirect discrimination can be difficult to prove. For example, if a 60-year-old applicant is not selected for a job and is told that there was a better-qualified candidate, it is often difficult for the rejected job seeker to determine if someone else truly did more closely match the firm’s specifications or if the employer discriminated on the basis of age.

An employer is also prohibited from intentional discrimination in the form of differential or unequal treatment. No individuals or groups may be treated differ- ently in any aspects or terms and conditions of employment based on any of the prohibited grounds. For example, it is illegal for an employer to request that only female applicants for a factory job demonstrate their lifting skills or to insist that

human rights legislation Jurisdiction-specific legislation that prohibits intentional and uninten- tional discrimination in employment situations and in the delivery of goods and services.

discrimination As used in the con- text of human rights in employment, a distinction, exclusion, or prefer- ence based on one of the prohibited grounds that has the effect of nullifying or impairing the right of a person to full and equal recognition and exercise of his or her human rights and freedoms.

differential or unequal treatment Treating an individual or group differently in any aspect of terms and conditions of employment based on any of the prohibited grounds.

RPC Ensures the organization’s HR policies and practices align with human rights legislation

Canadian Human Rights Tribunal www.chrt-tcdp.gc.ca

29Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

any candidates with a physical disability undergo a pre-employment medical, unless all applicants are being asked to do so.

It is also illegal for an employer to engage in intentional discrimination indirectly through another party. This means that an employer may not ask someone else to discriminate on his or her behalf. For example, an employer cannot request that an employment agency refer only male candidates for con- sideration as management trainees or instruct supervisors that racial minorities are to be excluded from consideration for promotions.

Discrimination because of association is another possible type of intentional discrimination listed specifically as a prohibited ground in several Canadian jurisdictions. It involves the denial of rights because of friendship or other rela- tionship with a protected group member. An example would be the refusal of a firm to promote a highly qualified male into senior management on the basis

discrimination because of association Denial of rights because of friendship or other relationship with a protected group member.

Prohibited Grounds of Discrimination Federal Alta. B.C. Man. N.B. N.L. N.S. Ont. P.E.I. Que. Sask. N.W.T. Y.T. Nunavut

Race

Colour

Creed or religion

Sex

Marital status

Age

Mental & physical disability

Sexual orientation

National or ethnic origin

Family status

Ancestry or place of origin

Political belief

Association

Source of income

Social condition or origin

Language

Pardoned conviction

Record of criminal conviction

Assignment, attachment, or seizure of pay

18+ 19–65 19–65 18+ 18–64

FIGURE 2.3 Prohibited Grounds of Discrimination in Employment by Jurisdiction

Courtesy: Canadian Human Rights Commission.

Part 1 Human Resources Management in Perspective30

of the assumption that his wife, who has recently been diagnosed with multiple sclerosis, will require too much of his time and attention and that her needs may restrict his willingness to travel on company business.

Unintentional Discrimination This type of discrimination, also known as constructive or systemic discrimination, is the most difficult to detect and com- bat. Typically, it is embedded in policies and practices that appear neutral on the surface and that are implemented impartially, but have an adverse impact on specific groups of people for reasons that are not job related or required for the safe and efficient operation of the business. Examples include maximum height and weight requirements, limited accessibility to company premises, job evalu- ation systems that are not gender-neutral and lack of a harassment policy or guidelines.

Permissible Discrimination via Bona Fide Occupational Requirements Employers are permitted to discriminate if employment preferences are based on a bona fide occupational requirement (BFOR), defined as a justifiable rea- son for discrimination based on business necessity, such as the requirement for the safe and efficient operation of the organization (for example, a person who is blind cannot be employed as a truck driver or bus driver). In some cases, a BFOR exception to human rights protection is fairly obvious. For example, when casting in the theatre, there may be specific roles that justify using age, sex, or national origin as a recruitment and selection criterion.

The Meiorin case (Supreme Court of Canada, 1999) established three criteria that are now used to assess if the discrimination qualifies as a bona fide occupa- tional requirement:

1. Question of rationale: Was the policy or procedure that resulted in the discrimination based on a legitimate, work-related purpose?

2. Question of good faith: Did the decision makers or other agents of the organization honestly believe that the requirement was necessary to fulfill the requirements of the role?

3. Question of reasonable necessity: Was it impossi- ble to accommodate those who have been discrimi- nated against without imposing undue hardship on the employer?

The issue of BFORs gets more complicated in situations in which the occupational requirement is less obvious; the onus of proof is then placed on the employer. There are a number of instances in which BFORs have been established. For example, adher- ence to the tenets of the Roman Catholic Church has been deemed a BFOR when selecting faculty to teach in a Roman Catholic school.6

unintentional/constructive/ systemic discrimination Discrimination that is embedded in policies and practices that appear neutral on the surface and are imple- mented impartially, but have an adverse impact on specific groups of people for reasons that are not job related or required for the safe and efficient operation of the business.

bona fide occupational requirement (BFOR) A justifiable reason for discrimination based on business necessity (that is, required for the safe and efficient operation of the organization) or a requirement that can be clearly defended as intrinsically required by the tasks an employee is expected to perform.

The Royal Canadian Mounted Police has a requirement that guards be of the same sex as prisoners being guarded, which is considered a Bona Fide Occupational Requirement.

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31Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

Reasonable Accommodation An important feature of human rights legislation is the requirement for reasonable accommodation. Employers are required to adjust employment policies and prac- tices so that no individual is prevented from doing his or her job on the basis of prohibited grounds for discrimination. Accommodation may involve scheduling adjustments to accommodate religious beliefs or workstation redesign to enable an individual with a physical disability to perform a particular task.

Employers are expected to accommodate to the point of undue hardship, meaning that the financial cost of the accommodation (even with outside sources of funding) or health and safety risks to the individual concerned or other employ- ees would make accommodation impossible.7 Failure to make every reasonable effort to accommodate employees is a violation of human rights legislation in all Canadian jurisdictions. The term “reasonable” is relatively vague and open to interpretation, which can be found in the precedent that has been established in the legal system. The Supreme Court of Canada recently clarified the scope of the duty to accommodate by stating that it does not require an employer to completely alter the essence of the employment contract, whereby the employee has a duty to perform work in exchange for remuneration. For example, if the characteristics of an illness are such that the employee remains unable to work for the foreseeable future, even though the employer has tried to accommodate the employee, the employer will have satisfied the test of undue hardship.8

Human Rights Case Examples In claims of discrimination, it does not matter if the protected grounds were the primary or heaviest weighted factor in the decision being challenged or if it was one of many considerations made in the decision. If there were 20 criteria used to make a decision, and even one of those criteria violated protection against discrimination as per the applicable human rights legislation, then the entire decision made by the employer can be deemed illegal. Figure 2.4 provides clarity as to the distribution of case type encountered by Human Rights Commissions.

Disability In human rights legislation, disability includes a wide range of conditions, some which are visible and some which are not. A disability may be present from birth, caused by an accident, or develop over time.

Claims of discrimination based on disability make up almost half of all human rights claims. In general, a distinction can be drawn between a physical

reasonable accommodation The adjustment of employment policies and practices that an employer may be expected to make so that no individual is denied benefits, disadvantaged in employment, or prevented from carrying out the essential components of a job because of grounds prohibited in human rights legislation.

undue hardship The point to which employers are expected to accom- modate employees under human rights legislative requirements.

disability A protected ground in human rights legislation, including a wide range of conditions, some which are visible and some which are not. A disability may be present from birth, caused by an accident, or develop over time.

Gender (Including Pregnancy)

Harassment

Discrimination Claims

Race and Ethnicity50%

20%

15%

15%

FIGURE 2.4 Types of Cases Encountered by Provincial/Territorial Human Rights Commissions

The Job Accommodation Network http://askjan.org/

Source: According to Raj Anand, Partner with WeirFoulds LP and former Chief Commission at the Ontario Human Rights Commission. Presentation on “Equity, Diversity and Accommodation” at OsGoode Hall Law School, April 7, 2011.

Part 1 Human Resources Management in Perspective32

disability and a mental one. A disability may include (depending on the jurisdiction) physical, mental, and learning disabilities; mental disorders; hearing or vision disabilities; epilepsy; drug and alcohol depen- dencies; environmental sensitivities; as well as other conditions. Temporary illnesses are generally not con- sidered to be disabilities under human rights legisla- tion (unless related to a workplace safety claim), but mental disorders, even temporary ones, are included in the definition of a disability. The intent of providing protection from discrimination based on past, present, or perceived disabilities is largely based on the prin- ciple of having an inclusive society with a barrier-free design and equal participation of persons with varying

levels of ability.9 Because employers set standards or requirements, they there- fore “owe an obligation to be aware of both the differences between individuals, and differences that characterize groups of individuals. They must build concep- tions of equality into workplace [or other] standards.”10

Case According to the Supreme Court of Canada, the focus of a disability is not simply the presence of it, but the effect of the disability. In a case heard by the Supreme Court of Canada in 2000 against the City of Boisbriand and the Communauté urbaine de Montréal, the city had dismissed an employee, Palmerino Troilo, from his position as a police officer because he suffered from Crohn’s disease. Crohn’s disease is linked to problems with a person’s immune system response and people with it have (ongoing) inflammation of their gastrointestinal tract. There is no known cure for Crohn’s at the moment.11 Medical evidence pre- sented in the case indicated that Troilo could perform the normal functions of his job, but the city argued that his illness was permanent and could be interpreted subjectively as an indication of future job-related challenges. The judge found that the illness did not actually result in any functional limitations and held that Troilo had been a victim of discriminatory exclusion. In this case, it was not the pres- ence of a disability that was of concern to employment-related legislation, but the impact of that disability on creating job-related functional limitations.

The Supreme Court of Canada has suggested three broad inquiries to deter- mine if discrimination has taken place:

1. Differential treatment: Was there substantively differential treatment due to a distinction, exclusion, or preference, or because of a failure to take into account the complainant’s already disadvantaged position within Canadian society?

2. An enumerated ground (a condition or clause that is explicitly protected by legislation): Was the differential treatment based on an enumerated ground?

3. Discrimination in a substantive sense: Does the differential treatment dis- criminate by imposing a burden upon or withholding a benefit from a per- son? Does the differential treatment amount to discrimination because it makes distinctions that are offensive to human dignity?

Duty to Accommodate Although each situation is unique, there are general prin- ciples for accommodating persons with disabilities.

1. Providing equal access to employment is largely based on the removal of physi- cal, attitudinal, and systemic barriers. The accommodation should be provided in a manner that most respects the dignity of the person, including an awareness of

In some jurisdictions a dependency on alcohol is considered a disability.

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Alberta Human Rights Commission www.albertahumanrights.ab.ca

British Columbia Human Rights Tribunal www.bchrt.bc.ca

Manitoba Human Rights Commission www.gov.mb.ca/hrc

New Brunswick Human Rights Commission www.gnb.ca/hrc-cdp/index-e.asp

Newfoundland and Labrador Human Rights Commission www.justice.gov.nl.ca/hrc

Northwest Territories Human Rights Commission www.nwthumanrights.ca

Nova Scotia Human Rights Commission www.gov.ns.ca/humanrights

Nunavut Human Rights Tribunal www.nhrt.ca

Ontario Human Rights Commission www.ohrc.on.ca

Prince Edward Island Human Rights Commission www.gov.pe.ca/humanrights/

Québec Commission des droits de la personne et des droits de la jeunesse www.cdpdj.qc.ca

Saskatchewan Human Rights Commission www.shrc.gov.sk.ca

Yukon Human Rights Commission www.yhrc.yk.ca

33Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

privacy, confidentiality, autonomy, individuality, and self-esteem. Each person’s needs are unique and must be considered independently. Persons with disabili- ties have the fundamental right to integration and full participation; therefore, barriers should be removed to the point of undue hardship. Workplace programs and policies should be designed by inclusion to combat “social handicapping,” in which societal attitudes and actions create non-inclusive thinking against people who have no or few limitations. Even when all of these factors are con- sidered, there might still be a need for accommodation.

2. If discrimination does exist, the company must demonstrate individualized attempts to accommodate the disability to the point of undue hardship. The Meiorin test discussed earlier is used to establish if a company has reached the point of undue hardship. Employers have the legal duty to accommodate persons with disability, and the employees have a responsibility to seek accom- modation, cooperate in the process, exchange relevant information, and explore accommodation solutions together.12 Examples of employer and employee responsibilities associated with the duty to accommodate disabilities are high- lighted in Figure 2.5. Often, accommodations can be made easily and at mini- mal cost, for instance, by increasing flexibility in work hours or break times; providing reading material in digitized, Braille, or large-print formats; installing automatic doors and making washrooms accessible; job restructuring, retrain- ing, or assignment to an alternative position within the company.

3. The duty to accommodate requires that the most appropriate accommodation be undertaken to the point of undue hardship. The principle underlying this con- dition is that accommodations are unique, numerous, part of a process, and a matter of degree. An accommodation can be considered appropriate if it results in equal opportunity to attain the same level of performance, benefits, and privi- leges that others experience, or if it is adopted for the purpose of achieving equal opportunity and meets the individual’s disability-related needs. In cases in which alternative options preserve the same level of dignity and respect, employers are entitled to select the less expensive or less disruptive option.

FIGURE 2.5 Duty to Accommodate Disabilities: Shared Responsibilities

As a person with a disability

Tell your employer or union what your disability-related needs are as they relate to your job duties. Provide supporting information about your disability-related needs, including medical or other expert opinions where necessary. Participate in exploring possible accommodation solutions.

•

As an employer or union

Accept requests for accommodation from employees in good faith. Request only information that is required to provide the accommodation. For example, you need to know that an employee’s loss of vision prevents them from using printed material, but you do not need to know they have diabetes. Take an active role in examining accommodation solutions that meet individual needs. Deal with accommodation requests as quickly as possible, even if it means creating a temporary solution while a long-term one is developed. Maximize confidentiality for the person seeking accommodation and be respectful of his or her dignity. Cover the costs of accommodations, including any necessary medical or other expert opinion or documentation.

•

•

•

•

•

•

•

•

Source: © Queen’s Printer for Ontario, 2000. Reproduced with permission.

Part 1 Human Resources Management in Perspective34

Harassment Harassment includes unwelcome behaviour that demeans, humili- ates, or embarrasses a person and that a reasonable person should have known would be unwelcome.13 Examples of harassment are included in Figure 2.6.

The most historic battle for protection against harass- ment was initiated in 1982, at a time when it was largely interpreted that sexual harassment was not a form of sex discrimination (therefore, not illegal) and it was perceived that employers were not responsible for the actions of their employees. Perspectives on sexual harassment and employers’ responsibilities toward protecting employees from sexual harassment have shifted significantly over the last three decades, largely due to a Supreme Court ruling on a case initiated by two young waitresses.

Case In August 1982, a cook at Pharos Restaurant in Winnipeg, Manitoba started groping the women and mak- ing sexual advances during each woman’s shift at work. When the women approached the owner, he commented that they “needed to get laid.” In mid-1989, the case was reviewed by the Supreme Court of Canada. In this historic case, the Supreme Court agreed that the women were sex- ually harassed at work, that sexual harassment is a form of sex discrimination (and is therefore illegal), and that employers are responsible for their employees’ actions.14

One type of intentional harassment that is increasingly receiving attention is bullying, which involves repeated and deliberate incidents of negative behaviour that cumula- tively undermine a person’s self-image. This psychological form of harassment is much more prevalent and pervasive in workplaces than physical violence.15 In 2004, a Quebec law prohibiting workplace psychological harassment came into effect with the intent of ending bullying in the work- place. This issue is a concern in other countries as well, as described in the Global HRM box.

harassment Unwelcome behaviour that demeans, humiliates, or embar- rasses a person and that a reason- able person should have known would be unwelcome.

UK Court Awards $1.7 Million to Bullied Employee A banking employee in the UK was the victim of bul- lying from four female co-workers over a period of four years. Some examples of her co-workers’ behaviour included ignoring her or staring silently at her, often with arms crossed; talking over her or pretending they could not hear anything she said; removing her name from circulation lists; hiding her mail; and removing papers from her desk.

As a result, she suffered two major episodes of depressive disorder requiring hospitalization and a suicide watch, followed by a period of four years in which she was not able to return to work and in which her capacity to enjoy life to the fullest had been

seriously disrupted. The court concluded that she had been subjected to a relentless campaign of mean and spiteful behaviour designed to cause her distress, amounting to a deliberate and concerted campaign of bullying.

The court held the employer vicariously liable for the conduct of the co-workers because the managers had collectively closed their eyes to what was going on. They awarded damages of $1.7 million, including $1.3  million for future loss of earnings because she had lost her lifetime career.

Source: Adapted with permission from H. Gray, “British Court Punishes Employer that Let Bullying Go Unchecked,” Canadian HR Reporter (October 9, 2006).

GLOBAL HRM

The Supreme Court of Canada has determined that sexual harassment at work is a form of sex discrimination (and is therefore illegal), and that employers are responsible for their employees’ actions.

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35Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

Some examples of harassment include:

• unwelcome remarks, slurs, jokes, taunts, or suggestions about a person’s body, clothing, race, national or ethnic origin, colour, religion, age, sex, marital status, family status, physical or mental disability, sexual orienta- tion, pardoned conviction, or other personal characteristics;

• unwelcome sexual remarks, invitations, or requests (including persistent, unwanted contact after the end of a relationship);

• display of sexually explicit, sexist, racist, or other offensive or derogatory material;

• written or verbal abuse or threats; • practical jokes that embarrass or insult someone; • leering (suggestive staring) or other offensive gestures; • unwelcome physical contact, such as patting, touching, pinching, hitting; • patronizing or condescending behaviour; • humiliating an employee in front of co-workers; • abuse of authority that undermines someone’s performance or threatens

his or her career; • vandalism of personal property; and • physical or sexual assault.

FIGURE 2.6 Examples of Harassment

Courtesy: Canadian Human Rights Commission

Sexual Harassment: Your Rights and Responsibilities www.ohrc.on.ca/en/sexual-and- gender-based-harassment-know- your-rights

sexual harassment Offensive or humiliating behaviour that is related to a person’s sex, as well as behaviour of a sexual nature that creates an intimidating, unwelcome, hostile, or offensive work environment or that could reasonably be thought to put sexual conditions on a person’s job or employment opportunities.

Employer Responsibility The Supreme Court has made it clear that protecting employees from harassment is part of an employer’s responsibility to provide a safe and healthy working environment. If harassment is occurring and employ- ers are aware or ought to have been aware, they can be charged as well as the alleged harasser. 16 Employer responsibility also includes addressing employee harassment by clients or customers once it has been reported.

Case In a recent Ontario case, Bell Mobility was ordered to pay an employee more than $500 000 after a supervisor assaulted her in the office and she devel- oped post-traumatic stress disorder. The company was found vicariously liable for the supervisor’s aggressive behaviours and was found to have breached its duty of care to provide a safe and harassment-free working environment.17

Sexual Harassment The type of harassment that has attracted the most atten- tion in the workplace is sexual harassment. Sexual harassment is offensive or humiliating behaviour that is related to a person’s sex, as well as behaviour of a sexual nature that creates an intimidating, unwelcome, hostile, or offensive work environment or that could reasonably be thought to put sexual conditions on a person’s job or employment opportunities.

Sexual harassment can be divided into two categories: sexual coercion and sexual annoyance.18 Sexual coercion involves harassment of a sexual nature that results in some direct consequence to the worker’s employment status or some gain in or loss of tangible job benefits. Typically, this involves a supervisor using control over employment, pay, performance appraisal results, or promotion to

sexual coercion Harassment of a sexual nature that results in some direct consequence to the worker’s employment status or some gain in or loss of tangible job benefits.

Part 1 Human Resources Management in Perspective36

attempt to coerce an employee to grant sexual favours. If the worker agrees to the request, tangible job benefits follow; if the worker refuses, job benefits are denied or taken away.

Sexual annoyance is sexually related conduct that is hostile, intimidating, or offensive to the employee but has no direct link to tangible job benefits or loss thereof. Rather, a “poisoned work environment” is created for the employee, the tolerance of which effectively becomes a term or condition of employment.

Harassment Policies To reduce liability, employers should establish sound harassment policies, communicate such policies to all employees, enforce the policies in a fair and consistent manner, and take an active role in maintaining a working environment that is free of harassment. Effective harassment policies should include19

1. an anti-harassment policy statement, stating the organization’s commitment to a safe and respectful work environment and specifying that harassment is against the law;

2. information for victims (for example, identifying and defining harassment); 3. employees’ rights and responsibilities (for example, respecting others, speak-

ing up, reporting harassment); 4. employers’ and managers’ responsibilities (for example, putting a stop to

harassment, being aware, listening to employees); 5. anti-harassment policy procedures (what to do if you are being harassed,

what to do if you are accused of harassment, what to do if you are a third- party employee, investigation guidelines, remedies for the victim and correc- tive action for harassers, guidelines for handling unsubstantiated complaints and complaints made in bad faith, confidentiality);

6. penalties for retaliation against a complainant; 7. guidelines for appeals; 8. other options such as union grievance procedures and human rights com-

plaints; and 9. how the policy will be monitored and adjusted.

Race and Colour Discrimination on the basis of race and colour is illegal in every Canadian jurisdiction.

Case The British Columbia Human Rights Tribunal found that two construc- tion companies had discriminated against 38 Latin American workers brought in to work on a public transit project; the Latin Americans were treated dif- ferently than workers brought in from European countries in that they were paid lower wages and provided with inferior accommodation. As a result, the Tribunal awarded each worker $100 000.20

Religion It is a violation of human rights laws across Canada to deny time to pray or to prohibit clothing recognized as religiously required (for example, hijabs for Muslim women or turbans for Sikh men). An organization should never ask an employee about their religious affiliation, but employees have the right to disclose such affiliations and ask for reasonable accommodation regard- ing their religious commitments in the workplace. Discrimination on the basis of religion can take many forms in Canada’s multicultural society.

Case A well-recognized case on religion involved Canadian National Railway (CN). An employee, Mr. Bhinder, worked as a maintenance electrician in the Toronto coach yard. As a practising Sikh, he wore a turban both on and off work

sexual annoyance Sexually related conduct that is hostile, intimidating, or offensive to the employee but has no direct link to tangible job benefits or loss thereof.

Hints TO ENSURE LEGAL COMPLIANCE

Urban Alliance on Race Relations www.tgmag.ca/magic/uarr.html

Racism and Racial Harassment: Your Rights and Responsibilities www.ohrc.on.ca/en/racial- harassment-know-your-rights

37Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

premises. Four years after Bhinder first started work- ing for CN, the company introduced a rule requiring all employees working in the coach yard to wear a hard hat, citing safety reasons. Bhinder informed manage- ment that he was unable to wear the hard hat, since his faith prohibited him from wearing anything on his head other than the turban and there was no way he could wear anything under or over it. He was fired and subse- quently launched a discrimination case against CN. In 1995, the Supreme Court of Canada found that the rule discriminated against Bhinder on religious grounds, but that the requirement was bona fide. Therefore, it was not considered to be a discriminatory process and CN did not have a duty to accommodate Bhinder.

Sexual Orientation Discrimination on the basis of sexual orientation is prohibited in all jurisdictions in

Canada. As a result of lawsuits by same-sex couples, the Supreme Court ruled that all laws must define “common-law partners” to include both same-sex and opposite-sex couples.21

Case In a recent federal case, a lesbian employee alleged that she was harassed by a co-worker. She made a complaint to her supervisors but felt the complaint was not investigated properly. She alleged that she was given a poor performance review because of her complaint and that her request for a transfer to another work site was denied. The Canadian Human Rights Commission ordered her

employer to provide a letter of apology, financial com- pensation for pain and suffering, and a transfer to another work site. The Commission also ordered a meeting with the employer’s harassment coordinator to talk about the complainant’s experiences with the internal complaint process.22

Age Many employers believe that it is justifiable to specify minimum or maximum ages for certain jobs. In actual fact, evidence is rarely available to support the position that age is an accurate indicator of a person’s ability to perform a particular type of work.23

Case Because of an economic downturn, an Ontario company was forced to lay off staff. Two foremen (aged 56 and 57) were terminated with generous retirement packages. The two foremen who remained were younger than the two released. The vice-president of the organization had prepared a note indicating that the two older workers who were terminated were told of the need to reduce the number of employees and that they “hoped to keep people with career potential.” The Ontario Human Rights Tribunal finding that the company had engaged in age discrimina- tion was based on the good employment record of the complainant, the ages of those selected for layoff compared with those retained, and the vice-president’s statement, which was found to be a “euphemism; its meaning concerns age.”24

Enforcement Enforcement of human rights acts is the responsibility of the human rights com- mission in each jurisdiction. It should be noted that all costs are borne not by the complainant but by the commission, which makes the process accessible to

Sexual Orientation: Your Rights and Responsibilities www.ohrc.on.ca/en/sexual- orientation-and-human-rights

In the case of Bhinder vs. CN, the Supreme Court determined that wearing a hard hat was a BFOR and therefore CN did not have a duty to accommo- date Bhinder, positioning safety as a higher priority than protection from unintentional discrimination.

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An Ethical Dilemma Your company president tells you not to hire any gay or lesbian employees to work as part of his office staff because it would make him uncomfortable. What would you do?

The Canadian Council on Rehabilitation and Work www.workink.com

Part 1 Human Resources Management in Perspective38

all employees, regardless of financial means. The commission itself can initiate a complaint if it has reasonable grounds to assume that a party is engaging in a discriminatory practice.

Challenges of human rights legislation are heard by the human rights tribunal. The tribunal’s primary role is to provide a speedy and accessible process to help parties affected by discrimination claims resolve the conflict through mediation. Once a claim is filed with the human rights commission or tribunal, the orga- nization is notified and given a relatively short period of time (for example, 30 calendar days) to prepare their case. Regardless of whether a formal com- plaint or an informal accusation has been filed against a company, the employer has a duty to investigate claims of discrimination. Fulfilling the duty to inves- tigate starts with the selection of an appropriate investigator. A checklist to be reviewed when selecting an investigator is provided in Figure 2.7.

An employer’s obligations include the following:

1. demonstrating an awareness of the issues of discrimination or harassment, including having an antidiscrimination/antiharassment policy in place, a complaint mechanism, and training available for employees

2. fulfilling post-complaint actions, including assessing the seriousness of the complaint, launching an investigation promptly, focusing on employee welfare, and taking actions based on the complaint

3. resolving the complaint by demonstrating reasonable resolution and communication

Source: Chhinzer, N., summary from Module 4 at the HR Law Certificate Program at Osgoode Hall Law School, 2011.

1. Internal or external investigators: Many employers select trained internal HR experts to conduct workplace investigations, while others rely on external investigators. Selection is dependent on the resources (time and money) of the firm, the complexities of the case (potential conflicts of interest), the expertise of the in-house staff, and the severity of the case.

2. One investigator or two: The nature of the case may warrant the involvement of more than one investigator (e.g., one male and one female in the case of a sexual harassment claim).

3. Respecting the mandate: Investigators should be able to maintain the role within the mandate of the task they have been assigned (e.g., fact finder or adviser) and not stray too far off track. Assigned investigators are perceived as agents of the organization, therefore the organization can be held partially accountable for investigator actions.

4. Impartiality or neutrality: Investigators should have no conflict of interest vested in the conditions, persons, or context of the case they are handling.

5. Reliable, thorough, and professional: Although these qualities should go without saying, an investigator is expected to be a competent, effective, and professional communicator throughout the investigation, and must be capable of making credible assessments.

6. Quality of the written report: The details and word selection in the written report can become evidence in a case. Therefore, a high-quality report details “what happened” and assists counsel in their defence.

7. Respects confidentiality: The investigator should discuss the investigation only when required and respect the confidentiality of all parties affected by the investigation.

FIGURE 2.7 A Checklist for Employers when Selecting a Workplace Investigator

39Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

If discrimination is found, two forms of remedies can be imposed. Systemic remedies (forward looking) require the respondent to take positive steps to ensure compliance with legislation, both in respect to the current complaint and with respect to any future practices. If a pattern of discrimination is detected, the employer will be ordered to cease such practices and may be required to attend a training session or hold regular human rights workshops. Restitutional remedies include monetary compensation for the complainant to put him or her back to the position he or she would be in if the discrimination had not occurred (this includes compensation for injury to dignity and self-respect). A written letter of apology may also be required.

The most common reason for restitutional remedies is compensation for lost wages; others include compensation for general damages, complainant expenses, and pain and humiliation. The violator is generally asked to restore the rights, opportunities, and privileges denied the victim, such as employment or promotion. The total compensation received by the complainant is generally between $0 and $20 000, with a general range of $10 000 to $20 000 for cases in which evidence has confirmed that discrimination occurred and a restitution was ordered. Figure 2.8 highlights examples of common remedies issued by a human rights tribunal.

systemic remedies Forward- looking solutions to discrimina- tion that require respondents to take positive steps to ensure compliance with legislation, with respect to both the current com- plaint and any future practices.

restitutional remedies Monetary compensation for the complain- ant to put him or her back to the position he or she would be in if the discrimination had not occurred (this includes compen- sation for injury to dignity and self-respect), and may include an apology letter.

Source: Raj Anand, Partner, WeirFoulds LLP.

Systemic Remedies (forward looking)

• Cease and desist the discriminatory practice

• Change a program to eliminate discriminatory elements, such as offering same-sex benefits under an employee benefit plan

• Make physical modifications to work places as mandated

• Develop non-discriminatory action plans

• Develop employment equity plans

• Post notices regarding provisions and protection offered to employees under the human rights code

• Develop information-sharing practices for future programs to allow monitoring of progress toward antidiscrimination goals

• Payment of retroactive benefits

• Reinstatement of employment

• Payment for lost wages

• Compensation for insult to dignity, mental anguish, or infringement of rights under the human rights code

• Make a public apology

Restitution Remedies (penalties for past events)

FIGURE 2.8 Common Remedies Issued by the Human Rights Tribunals

LEGISLATION SPECIFIC TO THE WORKPLACE Employment Equity Legislation The Charter of Rights and Freedoms legalizes employment equity initiatives, which go beyond human rights laws in that they are proactive programs devel- oped by employers to remedy past discrimination or prevent future discrimina- tion. Human rights laws focus on prohibiting various kinds of discrimination; however, over time it became obvious that there were certain groups for whom this complaint-based, reactive approach was insufficient. Investigation revealed

Part 1 Human Resources Management in Perspective40

that four identifiable groups—women, Aboriginal people, persons with dis- abilities, and visible minorities—had been subjected to pervasive patterns of differential treatment by employers, as evidenced by lower pay on average, occupational segregation, higher rates of unemployment, underemployment, and concentration in low-status jobs with little potential for career growth. An example of occupational segregation is the fact that the majority of women worked in a very small number of jobs, such as nursing, teaching, sales, and secretarial/clerical work. Advancement of women and other designated group members into senior management positions has been hindered by the existence of a glass ceiling, an “invisible” barrier caused by attitudinal or organizational bias that limits the advancement opportunities of qualified individuals. As you can see in Figure 2.9, a survey from 2012 confirmed that the glass ceiling is still intact.

An employment equity program is designed to achieve a balanced rep- resentation of designated group members in the organization. It is a major management exercise because existing employees must become comfortable working with others from diverse backgrounds, cultures, religions, and so on, and this represents a major change in the work environment. A deliberately structured process is involved, which can be tailored to suit the unique needs of the firm. The employment equity process usually takes six months. The first step is the demonstration of senior management’s commitment and support, which leads to data collection and analysis of the current workforce demo- graphics. Following that, there is an employment systems review, which leads to plan development and eventual plan implementation. The last step is moni- toring, evaluating, and revising the plan.

Although embracing employee equity or diversity offers opportunities to enhance organizational effectiveness, transforming an organizational culture presents a set of challenges that must be handled properly. Diversity initiatives should be undertaken slowly, since they involve a complex change process. Resistance to change may have to be overcome, along with stereotyped beliefs or prejudices and employee resentment.

occupational segregation The existence of certain occupations that have traditionally been male dominated and others that have been female dominated.

glass ceiling An invisible barrier, caused by attitudinal or organiza- tional bias, that limits the advance- ment opportunities of qualified designated group members.

employment equity program A detailed plan designed to identify and correct existing discrimination, redress past discrimination, and achieve a balanced representation of designated group members in the organization.

Sources: Catalyst Pyramid: Canadian Women in Business. New York: Catalyst, 2013. Reproduced by permis- sion of Catalyst, www.catalyst.org/knowledge/canadian-women-business-0

5.7% CEOs/Heads

Top Earners

Board Directors

Senior Officers

Management Occupations

Canadian Labor Force

CANADIAN WOMEN IN BUSINESS

6.9%

14.5%

18.1%

36.6%

47.5%

FIGURE 2.9 The Catalyst Pyramid—Canadian Women in Business

RPC Promotes a productive culture in the organization that values diversity, trust, and respect for individuals and their contributions

41Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

Canadian Association of Administrators of Labour Legislation www.caall-acalo.org

The Plight of the Four Designated Groups Women Women accounted for 47 percent of the employed workforce in 2006. Two-thirds of all employed women were working in teaching, nursing and related health occupations, clerical or other administrative positions, and sales and service occupations. There has been virtually no change in the proportion of women employed in these traditionally female-dominated occupations over the past decade. Women continue to be under-represented in engineering, natural sciences, and mathematics, a trend unlikely to change in the near future since women are still under-represented in university programs in these fields.25

Every jurisdiction in Canada has legislation incorporating the principle of equal pay for equal work. In most jurisdictions, this entitlement is found in the employment (labour) standards legislation; otherwise, it is in the human rights legislation. Equal pay for equal work specifies that an employer can- not pay male and female employees differently if they are performing the same or substantially similar work. Pay differences based on a valid merit or seniority system or employee productivity are permitted; it is only sex-based discrimination that is prohibited. This principle makes it illegal, for example, for the Canadian government to employ nurses (mostly women) as “program administrators” and doctors (mainly men) as “health professionals” to do the same job adjudicating Canada Pension Plan disability claims and pay the men twice as much.26

Aboriginals Most Aboriginal employees in the workforce are concentrated in low- skill, low-paid jobs such as trades helpers. The unemployment rate for Aboriginal people is significantly higher than the rate among non-Aboriginals, and their income is significantly lower.27

People with Disabilities About 45 percent of people with disabilities are in the labour force, compared with almost 80 percent of the non-disabled population. Although 63 percent of people with a mild disability are in the workforce, only 28 percent of those with a severe to very severe disability are working. The median employment income of workers with disabilities is 83 percent of that of other Canadian workers.28

Visible Minorities According to the federal Employment Eq- uity Act, a visible minority is defined as “persons, other than Aboriginal peoples, who are non-Caucasian in race or non-white in colour.” Often the terms “visible minor- ity” and “immigrant” are used interchangeably, but these two terms are actually distinct. An immigrant represents a person who was not born in Canada, but resides in Canada for the purpose of settlement. In the 2011 Ca- nadian census, there were almost 6.8 million immigrants in the Canadian population.29 There were almost 6.3 million persons who self-identified as visible minorities,30 with the largest representation among South Asians and Chinese, followed by persons who self-identified as black, Filipino, and Latin American. In  1981, 55.5 percent of new immigrants to Canada were visible minorities, but by 2001 that proportion reached 72.9 percent.31

equal pay for equal work Specifies that an employer cannot pay male and female employees differently if they are performing the same or substantially similar work.

It is illegal in every jurisdiction in Canada to discriminate on the basis of disability.

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Workplace Standards www.workplace.ca/laws/employ_ standard_comp.html

Part 1 Human Resources Management in Perspective42

This suggests that almost three out of every ten immigrants in the last decade were not visible minorities, while there are millions of people born in Canada who are visible minorities, but not immigrants.

Traditionally, visible minorities were typically unable to obtain employment that took full advantage of their knowledge, skills, and abilities (KSAs), and thus faced underemployment. As a result, visible minorities were included as a desig- nated group. A recent study on diversity in the Greater Toronto Area (GTA) high- lighted the continuing disadvantaged status of visible minorities. The study looked at 3257 leaders in the GTA in all sectors and found that just 13 percent were visible minorities (even though visible minorities make up half of the GTA population).32

Employment/Labour Standards Legislation All employers and employees in Canada, including unionized employees, are covered by employment (labour) standards legislation. The intent of an employ- ment standards act (ESA) is to establish minimum terms and conditions for workplaces pertaining to such issues as wages; paid holidays and vacations; maternity, parental, or adoption leave (or some mix thereof); bereavement leave; compassionate care leave; termination notice; and overtime pay. They also set the maximum number of hours of work permitted per day or week; overtime pay is required for any work in excess of the maximum.

While employer and employee agreements or practices can exceed minimums established in the ESA, neither party can choose to opt out of or waive their rights as established in the ESA. For example, if the ESA minimum requirement establishes a minimum vacation rate of 4 percent of pay, an employment agreement cannot have a provision for only 3 percent of pay as vacation pay, even if both parties consent.

In contrast, the minimums established in the ESA can be exceeded in employ- ment contracts, through collective bargaining agreements (in unionized posi- tions), or based on common law (precedent established by the judicial system). An employer or employee can agree to 5 percent of pay as vacation pay without violating the ESA, for example.

If there is a conflict between the ESA and another contract, the principle of greater benefit is applied. An example of this would be an employment policy or contract that is communicated to employees stating that in the case of a layoff, employees will be provided with one month’s notice for every year that they have worked for the employer. The ESA minimum requires the provision of only one week’s notice per year that an employee has worked, up to an eight-week maximum. In this example, an employee who has worked for 10 years would be given the greater benefit (10 months of notice before a layoff), not the minimum under the ESA, to preserve the greater benefit to the employee.

While the ESA provides minimum terms and conditions of employment, it is not totally inclusive. Often, students on work exchange programs, inmates on work projects, police officers, independent officers, and others are explicitly excluded from protection under the ESA. In addition, regulations for specific occupations such as doctors, lawyers, managers, architects, and specific types of salespersons modify the applicability of certain sections of the ESA.

Enforcement of the ESA Governed by federal, provincial, or territorial employment standards acts (ESAs), enforcement is complaint based, and violators can be fined. Enforcement is initiated through the filing of a formal written or electronic complaint against the violator to the appropriate authorities (often the provincial or territorial ministry of labour).

KSAs Knowledge, skills, and abilities.

underemployment Employment in a job that does not fully utilize one’s knowledge, skills, and abilities (KSAs).

employment (labour) standards legislation Laws present in every Canadian jurisdiction that establish minimum employee entitlements and set a limit on the maximum number of hours of work permitted per day or week.

43Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

Complaints regarding violations can be filed with the ministry by persons, unions, or corporations, given that the ESA has an interest in mitigating conflicts in the employment relationships between employee and employers.

Employees are required to give up their rights to sue an employer in civil court once a claim is filed with the ministry of labour. This protects employers from dual proceedings on the same issue, and protects courts from being over- whelmed with duplicate cases. There are also strict limitation periods, establish- ing the maximum amount of time that can elapse between the violation and the filing of a complaint, with these limits differing based on the violation (unpaid wages, vacation pay, and so on). There is also a general maximum claim limit (for example, $10 000 under the Ontario ESA) for unpaid wages. Under the ESA, employees have been awarded compensation for actual unpaid wages and direct earnings losses, time required to find a new job and expenses to seek a new job, benefit plan entitlements, severance pay, and loss of “reasonable expectation” of continued employment.

Respecting Employee Privacy Today’s employers are grappling with the problem of how to balance employee privacy rights with their own need to monitor the use of technology-related tools in the workplace. Employers must maintain the ability to effectively man- age their employees and prevent exposure to risk for the company, which can be held legally liable for the actions of its employees.33 The company would want to eliminate time wasted (surfing the web, playing computer games, and so on) and abuse of company resources (such as using the internet and email at work for personal and possibly illegal uses, such as gambling or visiting pornographic sites).34 Another concern is employee blogging, because although a posting that includes confidential company information or comments about management may be intended to be seen by only a few friends, it can easily make its way to a national media outlet without the author even knowing it.35

Employees are concerned with privacy—their control over information about themselves and their freedom from unjustifiable interference in their personal life. The Personal Information Protection and Electronic Documents Act (PIPEDA) governs the collection, use, and disclosure of personal infor- mation across Canada, including employers’ collection and dissemination of personal information about employees. Any information beyond name, title, business address, and telephone number is regarded as personal and private, including health-related information provided to insurers. Employers must obtain consent from employees whenever personal information is collected, used, or disclosed.36 A recent media leak regarding a questionnaire used to assess integrity of applicants to the Canadian Border Services Agency provides an example of questions that may be considered a violation of an individual’s privacy, as provided in Figure 2.10 below. The onus is on the company to prove that any information collected from applicants is legitimately linked to job requirements, and the debate about whether these questions are related to job requirements for Border Agents is currently quite active.

Some employers have resorted to electronic monitoring, which is becoming easier and less expensive as new software is developed, that can track websites visited by workers and the time spent on each.37 In general, courts in Canada have permitted electronic surveillance as long as there is proper balancing of opposing interests. Employers are given substantial leeway in monitoring their employees’

Privacy Commissioner of Canada www.priv.gc.ca Information and Privacy Commissioner of Ontario www.ipc.on.ca

RPC Assesses requests for HR infor- mation in light of corporate policy, freedom of information legisla- tion, evidentiary privileges, and contractual or other releases Contributes to the development of information security measures issues

Part 1 Human Resources Management in Perspective44

use of the Internet and email, and they are in an even stronger position if there is a written policy in place. The policy should be updated regularly to reflect changes in technology and should address the use of all company technological equipment away from the employer’s premises, including laptops, cellphones, BlackBerrys, and so on.38

A recent example of how monitoring systems being used to identify the misappropriation of work time and resources occurred with the City of Hamilton workers. GPS surveillance revealed that, rather than engaging in roadwork (pothole repairs), some employees were work- ing as little as 30  minutes per day—running errands, visiting their homes, and frequenting coffee shops for the remainder of the day. The surveillance helped iden- tify 29  employees whose abuse of company time and resources was so severe that the company decided to ter- minate their employment, while 2 other employees were given 30-day suspensions.39

Video Surveillance Some employers install video surveillance equipment to pre- vent employee theft and vandalism and to monitor produc- tivity. Employees must be made aware of the surveillance. Unions often file grievances against video surveillance, and arbitrators have been reluctant to support it because of pri- vacy concerns. Courts typically assess whether the surveil- lance was reasonable and whether there were reasonable

alternatives available. Generally, they have decided that video surveillance is not reasonable and that other means could be used.40 Federal, British Columbia, and Alberta privacy commissioners have jointly issued video surveil- lance guidelines, available from the Office of the Privacy Commissioner of Canada.

FIGURE 2.10 Sample Questions from the CBSA integrity questionnaire

Hints TO ENSURE LEGAL COMPLIANCE

An Ethical Dilemma Is it ethical to use video surveillance of employees? Do you think employees need to be told of surveillance tools if they are used?

Employees must be made aware of video surveillance.

Source: A. Silliker, “Border Guards Asked to Declare Drug Use, Unlawful Sexual Activity,” Canadian HR Reporter, Nov 5, 2012, Vol. 25(19), p. 1.

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• Do you knowingly associate with anyone who uses illegal drugs? • Have you ever been subjected to blackmail? • Have you ever threatened the use of violence against your spouse, partner, parents,

children, siblings, pets, etc.? • Have you ever pointed a weapon such as a knife or firearm whether loaded or not, at

yourself or another person? • Have you ever viewed child pornography or bestiality? • Have you ever associated with organized crime or a terrorist group? • Have you ever hacked into a computer system?

45Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

1. The legal framework in Canada attempts to balance employee and employer rights using multiple overlapping legislative pieces, including legislation aimed at protecting the general public (the Charter of Rights and Freedoms, human rights legislation) as well as more specific legisla- tion (employment equity legislation, employment standards acts, and privacy legislation).

2. The responsibility for employment-related law resides with the provinces and territories; however, employees of the federal civil service, Crown corporations and agencies, and businesses engaged in transportation, banking, and communications are federally regulated. So there are 14 jurisdictions for employment law in Canada—ten provinces, three territories, and the federal jurisdiction. Ninety percent of Canadians are covered by provincial/territorial employment legislation, and 10 percent are covered by federal employment legislation.

3. Harassment includes a wide range of behav- iours that a reasonable person ought to know are unwelcome. Employers and managers have a responsibility to provide a safe and healthy working environment. If harassment occurs and they are aware or ought to have been aware of it, they can be charged along with the alleged harasser. To reduce liability, employers should establish harassment policies, communicate these to employees, enforce the policies, and play an active role in maintaining a work environment free of harassment.

4. All jurisdictions prohibit discrimination on the grounds of race, colour, sexual orientation, religion/creed, physical and mental disability, sex, age, and marital status. Employers are required to make reasonable accommodation for employees by adjusting employment policies and practices, so that no one is disadvantaged in employment on any of the prohibited grounds, to the point of undue hardship. Employers are allowed to put in employment-related conditions related to employment that may discriminate, provided that these conditions are bona fide occupational requirements.

5. Employment standards legislation establishes minimum terms and conditions for workplaces in each jurisdiction, and violations of these terms are identified in a complaint-based process, whereby the ministry of labour will investigate violations once employees file a complaint.

6. Privacy legislation focuses on how to balance employee privacy rights with an employer’s need to monitor the use of technology-related tools in the workplace. The Personal Information Protection and Electronic Documents Act (PIPEDA) governs the collection, use, and disclo- sure of personal information across Canada.

Chapter SUMMARY

equal pay for equal work (p. 41) equality rights (p. 27) glass ceiling (p. 40) harassment (p. 34) human rights legislation (p. 28) KSAs (p. 42) occupational segregation (p. 40) reasonable accommodation (p. 31)

bona fide occupational requirement (BFOR) (p. 30) Charter of Rights and Freedoms (p. 27) differential or unequal treatment (p. 28) disability (p. 31) discrimination (p. 28) discrimination because of association (p. 29) employment (labour) standards legislation (p. 42) employment equity program (p. 40)

Key TERMS

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

Part 1 Human Resources Management in Perspective46

1. Explain how the legal system in Canada is differ- ent from the legal system in the United States.

2. Describe the impact of the Charter of Rights and Freedoms on HRM.

3. Differentiate among the following types of dis- crimination and provide one example of each: direct, differential treatment, indirect, because of association, and systemic.

4. Provide five examples of prohibited grounds for discrimination in employment in Canadian jurisdictions.

5. Explain the purpose of employment standards legislation, and the concept of “the greater good” when assessing minimums.

6. Define “sexual harassment” and describe five types of behaviour that could constitute such harassment.

7. Define the concepts of occupational segregation, underemployment, and the glass ceiling.

8. What is the test to define if a bona fide occupa- tional requirement exists? What are the three elements of this test?

9. What is the role of privacy legislation in Canada? Describe the act that protects employees’ privacy.

regulations (p. 26) restitutional remedies (p. 39) sexual annoyance (p. 36) sexual coercion (p. 35) sexual harassment (p. 35) systemic remedies (p. 39)

tort law (p. 26) underemployment (p. 42) undue hardship (p. 31) unintentional/constructive/systemic

discrimination (p. 30)

Review and Discussion QUESTIONS

1. Go to your provincial or territorial employment (labour) standards website and determine the following:

• minimum legal age to work in this jurisdiction

• minimum hourly wages

• maximum number of hours that can be worked in a week before overtime must be paid

How does this information apply to you and your friends and family? Did you notice any- thing else that caught your interest that you were previously unaware of?

2. Prepare a report outlining legally acceptable questions that may be asked at a selection inter- view with a young female engineer applying for the job of engineering project manager at an oil field in rural northern Alberta with an other- wise all-male group. (Refer to Appendix 5.1 on page 141 for help.)

3. Working with a small group of classmates, search the web for a company in your community that has an anti-discriminatory employment program. Contact the company’s HR manager and request more information on the program. Prepare a brief report summarizing its key features.

4. The organization you are working for is rela- tively new and growing and has no HR depart- ment. They have asked you to prepare a briefing about what can and cannot be asked during an employment interview. Given that it is a small organization, management usually conducts interviews. You notice a number of managers huffing about how the law doesn’t apply to them and that their actions can’t result in a lawsuit. In addition to preparing a briefing about the types of questions that can and cannot be asked in an interview, prepare a response to the perception that the law does not apply to the managers in this situation.

Critical Thinking QUESTIONS

47Chapter 2 The Changing Legal Emphasis Compliance and Impact on Canadian Workplaces

Experiential EXERCISES

1. You are an HR manager at a moving company. The owner of your company has just informed you that there are certain jobs, namely those per- formed by the movers themselves, for which he feels minimum strength requirements are BFORs. How would you handle this situation?

2. An employee who has been off work for two months with a stress-related ailment has just contacted you indicating that she would like to return to work next week but won’t be able to work full time for another month or so. How would you handle this?

3. A supervisor has just approached you to indi- cate a concern she has with an employee. The supervisor indicates that the employee is often

surfing the internet while at work and fears that not only is this affecting productivity negatively, but is also a violation of the company’s rules for internet surfing using a company computer. The supervisor would like you to ask the IT team to investigate how many hours a day are logged to non-work-related activities for that employee and also asks for a list of websites that the employee visits. What is the role of privacy legislation from the employer and employee per- spectives? What additional information would you need in order to make a decision about next steps? What recommendations can you make to the supervisor to help her deal with the situation in the short term?

CBC To view the CBC videos, read a summary, and answer discussion questions, go to MyManagementLab.

• Provides the information necessary for the organization to effectively manage its people practices

• Identifies the data required to support HR planning

REQUIRED PROFESSIONAL CAPABILITIES (RPC)LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

EXPLAIN the steps in job analysis and the difference between a job and a position.

DESCRIBE the evolution of job design and how organizational structure influences job design.

EXPLAIN the three reasons why competency- based job analysis has become more common.

DESCRIBE and evaluate multiple methods of collecting job analysis information.

EXPLAIN the difference between a job description and a job specification.

Designing and Analyzing Jobs3

CHAPTER

P A R T T W O Meeting Human Resources Requirements

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49Chapter 3 Designing and Analyzing Jobs

FUNDAMENTALS OF JOB ANALYSIS Job analysis is a process by which information about jobs is systematically gathered and organized. Job analysis is sometimes called the cornerstone of HRM.

A job consists of a group of related activities and duties. Ideally, the duties of a job should be clear and distinct from those of other jobs, and they should involve natural units of work that are similar and related. This approach helps to minimize conflict and enhance employee performance. A job may be held by a single employee or may have a number of incumbents. The collection of tasks and responsibilities performed by one person is known as a position. To clarify, in a department with 1 supervisor, 1 clerk, 40 assemblers, and 3 tow-motor operators, there are 45 positions and 4 jobs.

Uses of Job Analysis Information Job analysis is the procedure firms use to determine the tasks, duties, and respon- sibilities of each job, and the human attributes (in terms of knowledge, skills, and abilities) required to perform it. Once this information has been gathered, it is used for developing job descriptions (what the job entails) and job specifications (what the human requirements are). As illustrated in Figure 3.1, the informa- tion gathered, evaluated, and summarized through job analysis is the basis for a number of interrelated HRM activities.

Human Resources Planning Knowing the actual requirements of an organization’s various jobs is essential for planning future staffing needs. When this information is combined with knowledge about the skills and qualifications of current employees, it is possible to determine which jobs can be filled internally and which will require external recruitment.

job A group of related activities and duties, held by a single employee or a number of incumbents.

position The collection of tasks and responsibilities performed by one person.

job analysis The procedure for determining the tasks, duties, and responsibilities of each job, and the human attributes (in terms of knowledge, skills, and abilities) required to perform it.

Job analysis

Human resources planning

Recruitment and

selection

Job evaluation— wage and salary

decisions (compensation)

Performance appraisal

Labour relations

Training, development, and career

management

Restructuring

Job descriptions and

job specifications

FIGURE 3.1 Uses of Job Analysis Information

RPC Provides the information necessary for the organization to effectively manage its people practices Identifies the data required to support HR planning

Part 2 Meeting Human Resources Requirements50

Recruitment and Selection The job description and job specification information should be used to decide what sort of person to recruit and hire. Identifying bona fide occupational requirements and ensuring that all activities related to recruitment and selection (such as advertising, screening, and testing) are based on these requirements is necessary for legal compliance in all Canadian jurisdictions.

Compensation Job analysis information is also essential for determining the relative value of and appropriate compensation for each job. Job evaluation should be based on the required skills, physical and mental demands, responsibilities, and working conditions—all assessed through job analysis. The relative value of jobs is one of the key factors used to determine appropriate compensation and justify pay differences if they are challenged under human rights or pay equity legislation. Information about the actual job duties is also necessary to determine whether a job qualifies for overtime pay and for maximum-hours purposes, as specified in employment standards legislation.

Performance Management To be legally defensible, the criteria used to assess employee performance must be directly related to the duties and responsibilities identified through job analysis. For many jobs involving routine tasks, especially those of a quantifiable nature, performance standards are determined through job analysis. For more complex jobs, performance standards are often jointly established by employees and their supervisors. To be realistic and achievable, such standards should be based on actual job requirements as identified through job analysis.

Labour Relations In unionized environments, the job descriptions developed from the job analy- sis information are generally subject to union approval before being finalized. Such union-approved job descriptions then become the basis for classifying jobs and bargaining over wages, performance criteria, and working condi- tions. Once job descriptions are approved, significant changes to them may have to be negotiated.

Training, Development, and Career Management By comparing the knowledge, skills, and abilities (KSAs) that employees bring to the job with those that are identified by job analysis, managers can deter- mine gaps that require training programs. Having accurate information about jobs also means that employees can prepare for future advancement by identify- ing gaps between their current KSAs and those specified for the jobs to which they aspire.

Restructuring Job analysis is useful for ensuring that all of the duties that need to be done have actually been assigned and for identifying areas of overlap within duties. Also, having an accurate description of each job may lead to the

51Chapter 3 Designing and Analyzing Jobs

identification of unnecessary requirements, areas of conflict or dissatisfac- tion, or health and safety concerns that can be eliminated through job rede- sign or restructuring.

Steps in Job Analysis There are six critical steps involved in analyzing jobs. Organizations collect details about jobs on a relatively continuous basis for many uses, such as the ones outlined above (planning, recruitment and selection, performance management, compensation, and so on). Traditionally, organizations would first determine the intended use of job analysis information, since this determined the types of data that should be collected and the techniques used. However, this preliminary step has been largely abolished in practice, given the diverse uses of job analysis information and the continual need for such information.

The six steps involved in job analysis are as follows:

1. Relevant organizational information is reviewed.

2. Jobs are selected to be analyzed.

3. Using one or more job analysis techniques, data are collected on job activities.

4. The information collected in Step 3 is then verified and modified, if required.

5. Job descriptions and specifications are developed based on the verified information.

6. The information is then communicated and updated on an as-needed basis.

The structure of this chapter aligns with the six steps of job analysis.

STEP 1: REVIEW RELEVANT ORGANIZATIONAL INFORMATION

An organization consists of one or more employees who perform various tasks. The relationships between people and tasks must be structured so that the orga- nization achieves its strategic goals in an efficient and effective manner through a motivated and engaged workforce. There are many ways to distribute work among employees, and careful consideration of how this is done can provide a strategic advantage over competitors.

Organizational structure refers to the formal relationships among jobs in an organization. An organization chart is often used to depict the structure. As illus- trated in Figure 3.2, the chart indicates the types of departments established and the title of each manager’s job. By means of connecting lines, it clarifies the chain of command and shows who is accountable to whom. An organiza- tion chart presents a “snapshot” of the firm at a particular point in time, but it does not provide details about actual communication patterns, degree of supervision, amount of power and authority, or specific duties and responsibili- ties. In the example provided in Figure 3.2, there may be the expectation that

organizational structure The formal relationships among jobs in an organization.

organization chart A “ snapshot” of the firm, depicting the organization’s structure in chart form at a particular point in time.

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President

Vice-President Finance

Manager Plant A

Manager Plant B

Manager Human Resources

Plant A

Manager Industrial Relations

Manager Human Resources

Plant B

Vice-President Operations

Vice-President Human Resources

Vice-President Sales

Auditor Plant A

Auditor Plant B

Supervisor Supervisor Supervisor Supervisor

District Sales Manager

West

District Sales Manager

East

FIGURE 3.2 A Sample Organization Chart

Auditor Plant A will have to report some information to Manager Plant A. Often an organizational chart will exclude this information or identify secondary reporting responsibilities using a dotted line.

Designing an organization involves choosing a structure that is appropriate, given the company’s strategic goals. Figure 3.3 depicts three common types of organizational structure: bureaucratic, flat, and matrix. In flatter organizations, managers have increased spans of control (the number of employees reporting to them) and thus less time to manage each one. Therefore, employees’ jobs involve more responsibility. In organizations using self-managed work teams, employees’ jobs change daily, so management intentionally avoids having employees view their jobs as a specific, narrow set of responsibilities. The focus is on defining the job at hand in terms of the overall best interests of the organization.

Step 1 includes the review of relevant background information, such as organization charts, process charts, and existing job descriptions.1 A process chart (like the one in Figure 3.4) shows the flow of inputs to and outputs from the job under study. (In Figure 3.4, the inventory control clerk is expected to receive inventory from suppliers, take requests for inventory from the two plant managers, provide requested inventory to these managers, and give information to the plant accountant on the status of in-stock inventories.)

process chart A diagram showing the flow of inputs to and outputs from the job under study.

Online Organization Charts www.nakisa.com

Example of Online Organization Charts www.forces.gc.ca/site/about- notresujet/org-eng.asp or http:// office.microsoft.com/en-us/tem- plates/business-organizational- chart-TC006088976.aspx

53Chapter 3 Designing and Analyzing Jobs

President

Vice-presidents

Directors

Managers

Staff

Owner

Managers

Associates

Marketing

Finance

Sales

Production

A consumer products company

Structure

A typical manufacturing organization

A typical research and development organization

Product A Product B Product C

BUREAUCRATIC Characteristics

• Top-down management approach • Many levels, and hierarchical communication channels and career paths • Highly specialized jobs with narrowly defined job descriptions • Focus on independent performance

• Decentralized management approach • Few levels and multidirectional communication • Broadly defined jobs with general job descriptions • Emphasis on teams and on product development

• Each job has two components: functional and product • Finance personnel for product B are responsible to both the finance executive and the product B executive

FLAT

MATRIX

FIGURE 3.3 Bureaucratic, Flat, and Matrix Organizational Structures

Part 2 Meeting Human Resources Requirements54

Source: Henderson, Richard I., Compensation Management in a Knowledge-based World, 10th ed. (c) 2006, p. 114. Reprinted and Electronically reproduced by permission of Pearson Education, Inc., Upper Saddle River, NJ.

Input from plant managers

Input from suppliers

Information output to

plant managers

Inventory output to

plant managers

Job under study –

Inventory Control Clerk

FIGURE 3.4 Process Chart for Analyzing a Job’s Workflow

STEP 2: SELECT JOBS TO BE ANALYZED The next step involves the selection of representative positions and jobs to be analyzed. This selection is necessary when there are many incumbents in a single job and when a number of similar jobs are to be analyzed, because it would be too time-consuming to analyze every position and job.

Job design is the process of systematically organizing work into the tasks that are required to perform a specific job. An organization’s strategy and structure influence the ways in which jobs are designed. In bureaucratic organizations, for example, because a hierarchical division of labour exists, jobs are generally highly specialized. In addition, effective job design also takes into consideration human and technological factors.

In the twenty-first century, the traditional meaning of a “job” as a set of well- defined and clearly delineated responsibilities has changed. Companies are grap- pling with challenges such as rapid product and technological change, global competition, deregulation, political instability, demographic changes, and the shift to a service economy. This has increased the need for firms to be responsive, flexible, and much more competitive. In turn, the organizational methods that managers use to accomplish this have helped weaken the traditional definition of a “job.” Requiring employees to limit themselves to narrow jobs runs counter to the need to have them willingly switch from task to task as jobs and team assignments change.

All these changes have led to work becoming more cognitively complex, more team-based and collaborative, more dependent on social skills, more dependent on technological competence, more time pressured, more mobile, and less dependent on geography.2 This situation has led some organizations to focus on personal competencies and skills in job analysis, hiring, and compensation management, rather than on specific duties and tasks.

job design The process of systematically organizing work into tasks that are required to perform a specific job.

55Chapter 3 Designing and Analyzing Jobs

The Evolution of Jobs and Job Design In most organizations, work is divided into manageable units and, ultimately, into jobs that can be performed by employees. The term “job” as it is known today is largely an outgrowth of the efficiency demands of the Industrial Revolution. As the substitution of machine power for people power became more widespread, experts wrote glowingly about the positive correlation between (1) job spe- cialization and (2) productivity and efficiency.3 The popularity of specialized, short-cycle jobs soared—at least among management experts and managers.

Work Simplification Work simplification evolved from scientific management theory. It is based on the premise that work can be broken down into clearly defined, highly specialized, repetitive tasks to maximize efficiency. This approach to job design involves assign- ing most of the administrative aspects of work (such as planning and organizing) to supervisors and managers, while giving lower-level employees narrowly defined tasks to perform according to methods established and specified by management.

Work simplification can increase operating efficiency in a stable environment and may be very appropriate in settings employing individuals with intellectual disabilities or those lacking education and training (as in some operations in the developing world); it is not effective, however, in a changing environment in which customers/clients demand custom-designed products and/or high-quality services, or one in which employees want challenging work. Moreover, among educated employees, simplified jobs often lead to lower satisfaction, higher rates of absenteeism and turnover, and sometimes to a demand for premium pay to compensate for the repetitive nature of the work.

Industrial Engineering Another important contribution of scientific management was the study of work. Industrial engineering, which evolved with this movement, is concerned

with analyzing work methods and establishing time stan- dards to improve efficiency. Industrial engineers system- atically identify, analyze, and time the elements of each job’s work cycle and determine which, if any, elements can be modified, combined, rearranged, or eliminated to reduce the time needed to complete the cycle.

Too much emphasis on the concerns of industrial engi- neering—improving efficiency and simplifying work meth- ods—may result in human considerations being neglected or downplayed. For example, an assembly line, with its simpli- fied and repetitive tasks, embodies the principles of industrial engineering but may lead to repetitive strain injuries, high turnover, and low satisfaction because of the lack of psycho- logical fulfillment. Thus, to be effective, job design must also satisfy human psychological and physiological needs.

Job Enlargement (Horizontal Loading) By the mid-1900s, reacting to what they viewed as the “dehumanizing” aspects of highly repetitive and specialized jobs, various management theorists proposed

work simplification An approach to job design that involves assigning most of the administrative aspects of work (such as planning and organizing) to supervisors and managers, while giving lower-level employees narrowly defined tasks to perform according to methods established and specified by management.

industrial engineering A field of study concerned with analyzing work methods; making work cycles more efficient by modifying, combining, rearranging, or eliminating tasks; and establishing time standards.

Industrial engineering improves efficiency and simplifies work meth- ods but neglects human considerations, such as repetitive strain and lack of psychological fulfillment.

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ways of broadening the activities engaged in by employees. Job enlargement, also known as horizontal loading, involves assigning workers additional tasks at the same level of responsibility to increase the number of tasks they have to perform. Thus, if the work was assembling chairs, the worker who previ- ously only bolted the seat to the legs might take on the additional tasks of assembling the legs and attaching the back as well. Job enlargement reduces monotony and fatigue by expanding the job cycle and drawing on a wider range of employee skills.

Job Rotation Another technique to relieve monotony and employee boredom is job rotation. This involves systematically moving employees from one job to another. Although the jobs themselves don’t change, workers experience more task variety, motivation, and productivity. The company gains by having more versatile, multiskilled employees who can cover for one another efficiently.

Job Enrichment It has also been suggested that the best way to motivate workers is to build opportunities for challenge and achievement into jobs through job  enrichment, also known as vertical loading.4 This is defined as any effort that makes an employee’s job more rewarding or satisfying by adding more meaningful tasks and duties. Job enrichment involves increasing autonomy and responsibility by allowing employees to assume a greater role in the decision-making process.

Enriching a job can be accomplished through activities such as

• increasing the level of difficulty and responsibility of the job;

• assigning workers more authority and control over outcomes;

• providing feedback about individual or unit job performance directly to employees;

• adding new tasks requiring training, thereby providing an opportunity for growth; and

• assigning individuals entire tasks or responsibility for performing a whole job rather than only parts of it, such as conducting an entire background check rather than just checking educational credentials.

Job enrichment is not always the best approach. It is more successful in some jobs and settings than in others; for example, not all employees want additional responsibilities and challenges. Some people prefer routine jobs and may resist job redesign efforts. In addition, job redesign efforts almost always fail when employees lack the physical or mental skills, abilities, or education needed to perform the additional tasks required post job enrichment.

Ergonomics In addition to considering psychological needs, effective job design also required taking physiological needs and health and safety issues into account. Ergonomics seeks to integrate and accommodate the physical needs of workers into the design of jobs. It aims to adapt the entire job system—the work, envi- ronment, machines, equipment, and processes—to match human characteristics.

job enlargement (horizontal loading) A technique to relieve monotony and boredom that involves assigning workers additional tasks at the same level of responsibility to increase the number of tasks they have to perform.

job rotation A technique to relieve monotony and employee boredom that involves systematically moving employees from one job to another.

job enrichment (vertical loading) Any effort that makes an employee’s job more rewarding or satisfying by adding more meaningful tasks and duties.

ergonomics An interdisciplinary approach that seeks to integrate and accommodate the physical needs of workers into the design of jobs. It aims to adapt the entire job system—the work, environ- ment, machines, equipment, and processes—to match human characteristics.

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57Chapter 3 Designing and Analyzing Jobs

Doing so results in eliminating or minimizing product defects, damage to equipment, and worker injuries or ill- nesses caused by poor work design.

Competency-Based Job Analysis Not coincidently, many employers and job analysis experts say that traditional job analysis procedures can’t go on playing a central role in HR management.5 Their basic concern is this: In high-performance work environments in which employers need workers to seamlessly move from job to job and exercise self- control, job descriptions based on lists of job-specific duties may actually inhibit (or fail to encourage) the flexible behaviour companies need. Employers are therefore shifting toward newer approaches for describing jobs, such as competency-based analysis.

Competency-based job analysis basically means writ- ing job descriptions based on competencies rather than job duties. It emphasizes what the employee must be capable of doing, rather than a list of the duties he or she must perform.

Competencies are demonstrable characteristics of a person that enable per- formance. Job competencies are always observable and measurable behaviours that comprise part of a job. The job’s required competencies can be identified by simply completing this sentence: “In order to perform this job competently, the employee should be able to . . .”

Competency-based job analysis means describing the job in terms of the mea- surable, observable behavioural competencies (knowledge, skills, or behaviours) that an employee doing that job must exhibit to do the job well. This contrasts with the traditional way of describing a job in terms of job duties and responsi- bilities. Traditional job analysis focuses on “what” is accomplished—on duties and responsibilities. Competency-based analysis focuses more on “how” the worker meets the job’s objectives or actually accomplishes the work. Traditional job analysis is thus job focused; competency-based analysis is worker focused— specifically, what must he or she be competent to do?

Three Reasons to Use Competency Analysis There are three reasons to describe jobs in terms of competencies rather than duties. Giving someone a job description with a list of specific duties may simply breed a “that’s-not-my-job” attitude by pigeonholing workers too narrowly.

1. Traditional job descriptions (with their lists of specific duties) may actually backfire if a high-performance work system is the goal. The whole thrust of these systems is to encourage employees to work in a self-motivated way by organizing the work around teams, encouraging team members to rotate freely among jobs (each with its own skill set), pushing more respon- sibility for things like day-to-day supervision down to the workers, and organizing work around projects or processes in which jobs may blend or overlap. Employees here must be enthusiastic about learning and moving among jobs.

competencies Demonstrable characteristics of a person that enable performance of a job.

competency-based job analysis Describing a job in terms of the measurable, observable behavioural competencies an employee must exhibit to do a job well.

Ergonomics considerations apply to manual and knowledge work- ers alike, and aim at adapting job aspects to physical aspects in a sustainable way.

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2. Describing the job in terms of the skills, knowledge, and competencies the worker needs is more strategic. For example, a company with a strategic emphasis on miniaturization and precision manufacturing should encourage some employees to develop their expertise in these two strategically crucial areas.

3. Measurable skills, knowledge, and competencies support the employer’s performance management process. Training, appraisals, and rewards should be based on fostering and rewarding the skills and competencies required to achieve work goals. Describing the job in terms of skills and competencies facilitates understanding of those required competencies.

Examples of Competencies In practice, managers often write paragraph-length com- petencies for jobs and organize these into two or three clusters. For example, the job’s required competencies might include general or core competencies (such as read- ing, writing, and mathematical reasoning), leadership competencies (such as leadership, strategic thinking, and teaching others), and technical/task/functional competen- cies (which focus on the specific technical competencies required for specific types of jobs or occupations).

So, some technical competencies for the job of systems engineer might include the following:

• design complex software applications, establish pro- tocols, and create prototypes

• establish the necessary platform requirements to efficiently and completely coordinate data transfer

• prepare comprehensive and complete documentation including specifications, flow diagrams, process patrols, and budgets6

Similarly, for a corporate treasurer, technical compe- tencies might include the following:

• formulate trade recommendations by studying several computer models for currency trends and using vari- ous quantitative techniques to determine the financial impact of certain financial trades

• recommend specific trades and when to make them

• present recommendations and persuade others to follow the recommended course of action7 (Note: Exhibiting this competency presumes the treasurer has certain knowledge and skills that one could measure.)

Comparing Traditional versus Competency-Based Job Analysis In practice, in almost any job description today some of the job’s listed duties and responsibilities are competency based, while most are not. For example, con- sider the typical duties you might find in a marketing manager’s job description.

At a Nissan factory in Tokyo, Japan, workers meet at a productivity session, surrounded by unfinished car frames hanging along the assembly line. Work teams like this are part of the trend toward a multiskilled, cross-functional, self-directed team organization that allows workers greater autonomy in meeting goals. In plants like these, broadly described jobs that emphasize employees’ required competencies are replacing narrowly defined jobs.

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59Chapter 3 Designing and Analyzing Jobs

Which of the duties would complete this phrase: “In order to perform this job competently, the employee should be able to . . .”?

Some familiar duties and responsibilities would not easily fit these require- ments. For example, “work with writers and artists and oversee copywriting, design, layout, and production of promotional materials” is not particularly measurable. How can the extent to which the employee “works with writers and artists” or “oversees copywriting, design, and layout” be measured? Put another way, in analyzing this job, how would one determine whether the person had been adequately trained to work with writers and artists? In fact, what sort of training would that duty and responsibility even imply? It’s not clear at all.

On the other hand, some of the job’s typical duties and responsibilities are more easily expressed as competencies. For example, the phrase “to perform this job competently, the employee should be able to . . .” could easily be completed with “conduct marketing surveys on current and new-product concepts; pre- pare marketing activity reports; and develop and execute marketing plans and programs.”

Team-Based Job Designs A logical outgrowth of job enrichment and the job characteristics model has been the increasing use of team-based job designs, which focus on giving a team, rather than an individual, a whole and meaningful piece of work to do. Team members are empowered to decide among themselves how to accomplish the work.8 Often they are cross-trained and then rotated through different tasks. Team-based designs are best suited to flat and matrix organization structures. Increasingly, organizations are using “virtual teams”—people working together effectively and efficiently across boundaries of time and space and using soft- ware to make team meetings more productive.9

team-based job designs Job designs that focus on giving a team, rather than an individual, a whole and meaningful piece of work to do and empowering team members to decide among themselves how to accomplish the work.

team A small group of people with complementary skills who work toward common goals for which they hold joint responsibility and accountability.

STEP 3: COLLECTING JOB ANALYSIS INFORMATION

Various qualitative and quantitative techniques are used to collect informa- tion about the duties, responsibilities, and requirements of the job; the most important ones will be discussed in this section. In practice, when the informa- tion is being used for multiple purposes, ranging from developing recruitment criteria to making compensation decisions, several techniques may be used in combination.

Collecting job analysis data usually involves a joint effort by an HR specialist, the incumbent, and the jobholder’s supervisor. The HR specialist (an HR man- ager, job analyst, or consultant) might observe and analyze the work being done and then develop a job description and specification. The supervisor and incum- bent generally also get involved, perhaps by filling out questionnaires. The super- visor and incumbent typically review and verify the job analyst’s conclusions regarding the job’s duties, responsibilities, and requirements.

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The Interview The interview is probably the most widely used method for determining the duties and responsibilities of a job. Three types of interviews are used to collect job analysis data:

1. individual interviews with each employee;

2. group interviews with employees who have the same job; and

3. supervisory interviews with one or more supervisors who are thoroughly knowledgeable about the job being analyzed.

The group interview is used when a large number of employees are perform- ing similar or identical work, and it can be a quick and inexpensive way of learning about the job. As a rule, the immediate supervisor attends the group ses- sion; if not, the supervisor should be interviewed separately to get that person’s perspective on the duties and responsibilities of the job.

The most fruitful interviews follow a structured or checklist format. A job analysis questionnaire may be used to interview job incumbents or may be filled out by them. It includes a series of detailed questions regarding such matters as the general purpose of the job; responsibilities and duties; the edu- cation, experience, and skills required; physical and mental demands; and working conditions.

Interview Guidelines When conducting a job analysis interview, supervisors and job analysts should keep five major considerations in mind:

1. The job analyst and supervisor should work together to identify the employ- ees who know the job best as well as those who might be expected to be the most objective in describing their duties and responsibilities.

2. Rapport should be established quickly with the interviewee by using the individual’s name, speaking in easily understood language, briefly reviewing the purpose of the interview (job analysis, not performance appraisal), and explaining how the person came to be chosen.

3. A structured guide or checklist that lists questions and provides spaces for answers should be used. Using a form ensures that crucial questions are iden- tified ahead of time, that complete and accurate information is gathered, and that all interviewers (if there is more than one) glean the same types of data, thereby helping to ensure comparability of results. However, leeway should also be permitted by including some open-ended questions, such as “Is there anything that we didn’t cover with our questions?”

4. When duties are not performed in a regular manner—for instance, when the incumbent doesn’t perform the same tasks or jobs over and over again many times a day—the incumbent should be asked to list his or her duties in order of importance and frequency of occurrence. This will ensure that crucial activities that occur infrequently—like a nurse’s occasional emergency room duties—aren’t overlooked.

5. The data should be reviewed and verified by both the interviewee and his or her immediate supervisor.

Incumbent Individual currently holding the position.

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61Chapter 3 Designing and Analyzing Jobs

Questionnaire Having employees or supervisors fill out questionnaires to describe job-related duties and responsibilities is another good method of obtaining job analysis information. There are two major decisions around questionnaires: how struc- tured it will be and who will complete it. In practice, a typical job analysis ques- tionnaire often falls between the two extremes of structured and open-ended. Table 3.1 shows the difference between the two.

One of the most popular pre-developed, structured job analysis question- naires is the Position Analysis Questionnaire (PAQ)10 The PAQ itself is filled in by a job analyst, who should already be acquainted with the particular job to be analyzed. The PAQ contains 194 items, each of which represents a basic ele- ment that may or may not play an important role in the job. The job analyst decides whether each item plays a role in the job and, if so, to what extent (using a five-point scale). If, for example, “written materials” received a rating of four, this would indicate that materials such as books, reports, and office notes play a considerable role in this job.

The advantage of the PAQ is that it provides a quantitative score or profile of the job in terms of how that job rates on six basic dimensions: (1) informa- tion input, (2) mental processes, (3) work output (physical activities and tools), (4) relationships with others, (5) job context (the physical and social environ- ment), and (6) other job characteristics (such as pace and structure). Because it allows for the assignment of a quantitative score to each job based on these six dimensions, the PAQ’s real strength is in classifying jobs. Results can be used to compare jobs with one another; this information can then be used to determine appropriate pay levels.11

Functional Job Analysis (FJA) is also a regularly used pre-established ques- tionnaire that rates a job on responsibilities for data, people, and things from simple to complex. For example, working with “things” literally means the phys- ical interaction with tangibles such as desktop equipment (pencils, paper clips, telephone), groceries, luggage, or a bus. Physical involvement with tangibles such as a telephone may not seem very important in tasks primarily concerned with data (such as data analysis) or people (such as nursing), but its importance is quickly apparent for a worker with a disability. This technique also identifies performance standards and training requirements. Thus, FJA allows the analyst to answer the question: “To do this task and meet these standards, what training does the worker require?”12

Position Analysis Questionnaire (PAQ) A questionnaire used to collect quantifiable data concerning the duties and responsibilities of various jobs.

Functional Job Analysis (FJA) A quantitative method for classifying jobs based on types and amounts of responsibility for data, people, and things. Performance standards and training require- ments are also identified.

PAQ Services Inc. www.paq.com

TABLE 3.1 How Structured Is a Questionnaire?

Structured Open-ended

a long list of specific duties or tasks (such as “change and splice wire”)

simply describes the major duties of the job

asks whether or not each duty or task is performed

how much time is normally spent on the task

Who will complete questionnaire?

Employees: may inflate requirements Supervisors: may be unaware of all components of the job

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Observations Observation involves watching employees perform their work and recording the frequency of behaviours or the nature of performance. This can be done using infor- mation that is prepared in advance (structured), or in real time with no advance information provided to the observer (unstructured), or a combination of the two.

Direct observation is especially useful when jobs con- sist mainly of observable physical activities. Jobs like those of a janitor, assembly-line worker, and accounting clerk are examples. Third-party observation focuses more on reality than perception. As a result, third-party obser- vation is often viewed as having more credibility, since there is minimal incentive to distort the results.

A challenge in using this job analysis method is that observations can influence job behaviour. Additionally, observation is usually not appropriate when the job entails a lot of immeasurable mental activity (e.g.,  lawyers or design engineers). Nor is it useful if the employee engages in important activities that might occur only occasionally, such as compiling year-end reports. Often, direct observa- tion and interviewing are used together.

Participant Diary/Log Another technique involves asking employees to keep a diary/ log or list of what they do during the day. Each employee records every activity in which he or she is involved (along with the time spent) in a log. This can produce a very com- plete picture of the job, especially when supplemented with

subsequent interviews with the employee and his or her supervisor. The employee might, of course, try to exaggerate some activities and underplay others. However, the detailed, chronological nature of the log tends to minimize this problem.

The National Occupational Classification The National Occupational Classification (NOC), the product of systematic, field-based research by Human Resources and Skills Development Canada (HRSDC), is an excellent source of standardized job information. It was updated and revised in 2011 and contains comprehensive descriptions of approximately 40 000 occupations and the requirements for each. To illustrate the types of information included, the NOC listing for specialists in human resources is shown in Figure 3.5.

Organizations can readily access information regarding the activities, requirements, competencies, and so on required by job title. However, it is highly recommended that companies who use external sources such as the NOC

1. adjust information based on their organizational strategy and structure;

2. update information as required; and

3. engage in the verification techniques in detail as per Step 4 (which we will discuss shortly).

diary/log Daily listings made by employees of every activity in which they engage, along with the time each activity takes.

National Occupational Classification (NOC) A reference tool for writing job descriptions and job specifications. Compiled by the federal government, it contains comprehensive, standardized descriptions of about 40 000 occupations and the requirements for each.

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Work observation is helpful in identifying work activities performed but is not useful for jobs that change tasks or fluctuate significantly over short periods of time.

63Chapter 3 Designing and Analyzing Jobs

Adapted from Human Resources and Skills Development Canada, National Occupational Classification, 2001 Source: Based on http://www5.hrsdc.gc.ca/noc/english/noc/2011/QuickSearch.aspx?val65=1121

Human resources professionals

Human resources professionals recommend, develop, execute, and evaluate human resources and labour relations policies, programs, and procedures. They act as advisors to management and employers on a variety of human resource issues.

Example Titles

• business agent, labour organization • classification officer – human resources • classification specialist • compensation research analyst • conciliator

(more available online)

Main duties

Human resources professionals add value to the organization in a variety of ways:

• They recommend, develop, execute, and evaluate human resources and labour relations policies, programs, and procedures to match labour supply with labour demand • They act as advisors to management and employers on the application and interpretation of polizies, legislation, compensation and collective bargaining agreements • Mediate the relationships between employees and employer, or union and employer (where applicable), including negotiation and communication of relevant information • Provide a course of competitive and business intelligence, including an assessment of internal factors (e.g. turnover levels, job evaluations) and externals factors (salary benchmarking, occupational classifications)

(more available online)

Employment requirements

• Post-secondary education (university degree or college diploma) in human resources management or a related field (e.g. business administration, industrial relations, commerce, or psychology)

or Professional/executive development program in human resources is required.

• May possess a Certified Human Resources Professional (CHRP) designation.

Additional information

• Progression to management positions is possible based on performance and experience.

Classified elsewhere

• Human resources and recruitment officers (1223) • Human resources managers (0112) • Personnel clerks (1415) • Professional occupations in business management consulting (1122) • Training officers and instructors (in 4021 College and other vocational instructors)

FIGURE 3.5 NOC Job Description for Specialists in Human Resources

Part 2 Meeting Human Resources Requirements64

The NOC and its counselling component, the Career Handbook (2nd ed.), both focus on occupations rather than jobs. An occupation is defined as a collec- tion of jobs that share some or all of a set of main duties. The list of examples of job titles within each of the 520 Unit Groups in the NOC provides a frame of reference for the boundaries of that occupational group. The jobs within each group are characterized by similar skills.

To provide a complete representation of work in the Canadian economy, the NOC classifies occupations into Major Groups based on two key dimensions— skill level and skill type. The Major Groups, which are identified by two-digit numbers, are then broken down further into Minor Groups, with a third digit added, and Unit Groups, at which level a fourth digit is added. Within these three levels of classification, a Unit Group provides the actual profile of an occu- pation.13 For example:

Major Group 31—Professional Occupations in Health

Minor Group 311—Physicians, Dentists, and Veterinarians

Unit Group 3113—Dentists

Using Multiple Sources of Job Analysis Information Job analysis information can be obtained from individual workers, groups, supervisors, or observers. Interviews, observations, or questionnaires can be used. Some firms use a single approach, but one study suggests that using only one source is not wise, because each approach has drawbacks. For example, in a

group interview, some group members may feel pressure to go along with the group’s consensus, or an individual employee may be careless about how he or she completes a questionnaire. Thus, since collecting job analysis data from only one source may lead to inaccurate conclusions, job analysis data should be collected from several sources whenever possible.

occupation A collection of jobs that share some or all of a set of main duties.

Occupational Information Network www.job-analysis.net

An Ethical Dilemma If a job analyst is on the other side of the world from an employee who completed a web-based job analysis questionnaire, should another method of job analysis also be used to confirm the accuracy of the information?

STEP 4: VERIFYING INFORMATION The job analysis information should be verified with any workers performing the job and with the immediate supervisor. This corroboration will help to con- firm that the information is factually correct and complete, and it can also help gain the employees’ acceptance of the job analysis data.

The knowledge that information will be verified increases the reliability and validity of the results in two ways. First, areas of inconsistency or concern can be further probed to develop awareness as to why the inconsistency exists and what should be done about it. Second, knowing that they may later be held account- able for their contributions, participants in the data collection techniques will be more honest and consistent.

65Chapter 3 Designing and Analyzing Jobs

STEP 5: WRITING JOB DESCRIPTIONS AND JOB  SPECIFICATIONS

Job Descriptions A job description is a written statement of what the jobholder actually does, how he or she does it, and under what conditions the job is performed. The description is quite comprehensive and includes such essential elements as job identification, summary, and duties and responsibilities, as well as the human qualifications for the job.

No standard format is used in writing job descriptions, but most include the following types of information: job identification, job summary, relationships, duties and responsibilities, authority of incumbent, performance standards, and working conditions. As mentioned previously, job specifications (human qualifi- cations) may also be included.

Job Identification The job identification section generally contains several categories of infor- mation. The position title specifies the title of the job, such as vice-president, marketing manager, recruiter, or inventory control clerk. The department and location are also indicated, along with the title of the immediate supervisor—in this case under the heading reports to.

Job Summary The job summary should describe the general nature of the job, listing only its major functions or activities. For example, for the job of materials manager, the summary might state that he or she will “purchase economically, regulate deliveries of, store, and distribute all materials necessary on the production line,” while the summary for a mailroom supervisor might indicate that he or she will “receive, sort, and deliver all incoming mail properly, and he or she will handle all outgoing mail, including the accurate and timely posting of such mail.”14

Relationships The relationships section indicates the jobholder’s relationships with others inside and outside the organization. Others directly and indirectly supervised are included, along with peers, superiors, and outsiders relevant to the job.

Duties and Responsibilities This section presents a detailed list of the job’s major duties and responsibilities. Each of the job’s major duties should be listed separately and described in a few sentences. Typical duties of jobs might include maintaining balanced and con-

trolled inventories, making accurate postings to accounts payable, maintaining favourable purchase price vari- ances, or repairing production line tools and equipment.

Most experts state unequivocally that “one item fre- quently found that should never be included in a job descrip- tion is a ‘cop-out clause’ like ‘other duties, as assigned.’”

job description A list of the duties, responsibilities, reporting relation- ships, and working conditions of a job—one product of a job analysis.

An Ethical Dilemma In view of the fact that job descriptions are not required by law and that some organizations have found them no longer relevant, would abolishing job descriptions raise any moral or legal concerns?

Part 2 Meeting Human Resources Requirements66

This phrase leaves open the nature of the job and the people needed to staff it, and it can be subject to abuse.15

Authority This section of a job description should define the limits of the jobholder’s authority, including his or her decision-making authority, direct supervision of other employees, and budgetary limitations. For example, the vice-president of human resources may have the authority to approve all budgeted non- capital expenditures and budgeted capital expenditures up to $100 000; approve expense accounts for subordinates; hire and fire subordinates; and exercise line authority over direct reporting positions.

Performance Standards/Indicators Some job descriptions also contain a performance standards/indicators section, which indicates the standards the employee is expected to achieve in each of the job description’s main duties and responsibilities.

Setting standards is never easy. Most managers soon learn, however, that just telling employees to “do their best” doesn’t provide enough guidance to ensure top performance. One straightforward way of setting standards is to finish the statement “I will be completely satisfied with your work when . . .” This sentence, if completed for each duty listed in the job description, should result in a usable set of performance standards.16 Some examples would include the following:

Duty: Accurately Posting Accounts Payable

• All invoices received are posted within the same working day.

• All invoices are routed to the proper department managers for approval no later than the day following receipt.

• No more than three posting errors per month occur, on average.

• The posting ledger is balanced by the end of the third working day of each month.

Duty: Meeting Daily Production Schedule

• Work group produces no fewer than 426 units per working day.

• No more than 2 percent of units are rejected at the next workstation, on average.

• Work is completed with no more than 5 percent overtime per week, on average.

Working Conditions and Physical Environment The job description should also list the general working conditions involved in the job. This section generally includes information about noise level, tem- perature, lighting, degree of privacy, frequency of interruptions, hours of work, amount of travel, and hazards to which the incumbent may be exposed.

Special guidelines for entrepreneurial and small businesses are provided in the Entrepreneurs and HR box.

67Chapter 3 Designing and Analyzing Jobs

Hints TO ENSURE LEGAL COMPLIANCE

Job Descriptions and Human Rights Legislation Human rights legislation requires employers to ensure that there is no dis- crimination on any of the prohibited grounds in any aspect of the terms and conditions of employment. To ensure that job descriptions comply with this legislation, a few key points should be kept in mind:

• Job descriptions are not legally required but are highly advisable.

• Essential job duties should be clearly identified in the job description. Indicating the percentage of time spent on each duty or listing duties in order of importance are strategies used to differentiate between essen- tial and non-essential tasks and responsibilities.

• When assessing suitability for employment, training program enrollment, and transfers or promotions, and when appraising performance, the only criteria examined should be the knowledge, skills, and abilities (KSAs) required for the essential duties of the job.

• When an employee cannot perform one or more of the essential duties for reasons related to a prohibited ground, such as a physical disability or religion, reasonable accommodation to the point of undue hardship is required.

A Practical Approach to Job Analysis and Job Descriptions Without their own job analysts or even their own HR managers, many small-business owners need a more streamlined approach to job analysis. A resource that includes all of the possible positions that they might encounter, with a detailed listing of the duties normally assigned to these positions, exists in the National Occupational Classification (NOC) mentioned earlier. The practical approach to job analysis for small-busi- ness owners presented next is built around this invalu- able reference tool.

Step 1: Develop an Organization Chart Drawing up the organization chart of the present structure comes first. Then, depending on how far in advance planning is being done, a chart can be pro- duced that shows how the organization should look in the immediate future (say, in two months), as well as two or three other charts showing how the organiza- tion is likely to evolve over the next two or three years.

Step 2: Use a Job Analysis Questionnaire Next, a job analysis questionnaire can be used to determine what each job entails. A shorter version of one of the more comprehensive job analysis questionnaires may be useful for collecting job analysis data.

Step 3: Obtain a Copy of the National Occupational Classification (NOC) and Related Publications for Reference Next, standardized examples of the job descriptions needed should be obtained from the NOC website at www.hrsdc.gc.ca/eng/workplaceskills/noc/index. shtml. A related publication entitled Job Descriptions: An Employers’ Handbook is also available for down- loading from the NOC website at www.hrsdc.gc.ca/ eng/workplaceskills/noc/employers/emplr_handbooks. shtml.

Step 4: Choose Appropriate Job Titles and Job Descriptions and Copy Them for Reference For each department, the NOC job titles and job descriptions that are believed to be appropriate should be chosen. The NOC definition will provide a firm foun- dation for the job description being created. It will pro- vide a standardized list and a constant reminder of the specific duties that should be included.

Step 5: Complete the Job Description An appropriate job description for the job under consid- eration can then be written. The job analysis informa- tion, together with the information from the NOC, can be used to create a complete listing of the tasks and duties of each of the jobs. The working conditions sec- tion can be completed once all of the tasks and duties have been specified.

ENTREPRENEURS and HR

Part 2 Meeting Human Resources Requirements68

Job Specifications Writing the job specification involves examining the duties and responsibilities of the job and answering the question, “What human traits and experience are required to do this job?” Much of this information can be obtained from the job analysis questionnaire. The job specification clarifies what kind of person to recruit and which qualities that person should be tested for. It is sometimes included with the job description.

Complying with human rights legislation means keeping a few pointers in mind:

• All listed qualifications are bona fide occupational requirements (BFORs) based on the current job duties and responsibilities.

• Unjustifiably high educational or lengthy experience requirements can lead to systemic discrimination.

• The qualifications of the current incumbent should not be confused with the minimum requirements, since he or she might be underqualified or overqualified.

• For entry-level jobs, identifying the actual physical and mental demands is criti- cal. For example, if the job requires detailed manipulation on a circuit-board assembly line, finger dexterity is extremely important and is something for which candidates should be tested. A physical demands analysis—which iden- tifies the senses used and the type, frequency, and amount of physical effort involved in the job—is often used to supplement the job specification. A sample form is included in Figure 3.6. Having such detailed information is particularly beneficial when determining accommodation requirements. The mental and emotional demands of a job are typically missing from job analysis information. They should be specified so that the mental and emotional competencies of job applicants can be assessed and any need for accommodation can be identified.

Identifying the human requirements for a job can be accomplished through a judgmental approach (based on educated guesses of job incumbents, super- visors, and HR managers) or statistical analysis (based on the relationship between some human trait or skill and some criterion of job effectiveness).

Basing job specifications on statistical analysis is more legally defensible. For example, the Personality-Related Position Requirements Form (PPRF) is a survey instru- ment designed to assist managers in identifying poten- tial personality-related traits that may be important in a job. Identifying personality dimensions is difficult when

using most job analysis techniques, because they tend to be much better suited to unearthing human aptitudes and skills—such as manual dexterity. The PPRF uses questionnaire items to assess the relevance of such basic personality dimensions as agreeableness, conscientiousness, and emotional stability to the job under study. The relevance of these personality traits can then be assessed through statistical analysis.17

Completing the Job Specification Form Once the required human characteristics have been determined, whether using sta- tistical analysis or a judgmental approach, a job specification form should be com- pleted. To illustrate the types of information and amount of detail that should be provided in a well-written job specification, a sample has been included in Figure 3.7.

job specification A list of the “human requirements,” that is, the requisite knowledge, skills, and abilities needed to perform the job—another product of a job analysis.

physical demands analysis Identification of the senses used and the type, frequency, and amount of physical effort involved in a job.

An Ethical Dilemma Are personality traits really part of the KSAs and the bona fide occupational requirements/essential duties of a job?

Hints TO ENSURE LEGAL COMPLIANCE

69Chapter 3 Designing and Analyzing Jobs

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Mobility: Indicate which category the job functions fall under by placing a check next to those that apply.

Sits constantly (6 hours or more with two breaks and one lunch break) Sits intermittently (6 hours or more with frequent change, due to breaks and getting up to perform jobs outside of the area) Stands intermittently (6 hours or more with frequent changes, due to breaks and getting up to perform jobs outside of the area) Bending constantly (4 hours or more with two breaks and one lunch break) Bending intermittently (4 hours or more with frequent changes, due to breaks and getting up to perform jobs outside of the area) Walks constantly (6 hours or more with two breaks and one lunch break) Walks intermittently (6 hours or more with frequent changes, due to breaks and getting up to perform jobs outside of the area)

Physical Requirements Review the chart below. Indicate which of the following are essential to perform the functions of this job, with or without accommodation. Check one box in each section.

Lifting capacity: Indicate, by checking the appropriate box, the amount of lifting necessary for this job, with or without accommodation.

FIGURE 3.6 Physical Demands Analysis

continued

Part 2 Meeting Human Resources Requirements70

Visual acuity: Indicate the minimum acceptable level, with or without accommodation, necessary for the job

Excellent visual acuity Good visual acuity Not relevant to the job

Auditory acuity: Indicate the minimum acceptable level, with or without accommodation, necessary for the job.

Excellent auditory acuity Good auditory acuity Not relevant to the job

Job Title: Lifeguard Location: Lethbridge Community Pool Job Code: LG1 Supervisor: Head Lifeguard Department: Recreation Division: Parks and Recreation Date: May 1, 2013

Job Summary The incumbent is required to safeguard the health of pool users by patrolling the pool, rescuing swimmers in difficulty, treating injuries, advising pool users of safety rules, and enforcing safety rules.

Skill Formal Qualifications: Royal Life Saving Society Bronze Medallion or equivalent Experience: No prior experience required but would be an asset. Communication Skills: Good oral communication skills are required. Proficiency in one or

more foreign languages would be an asset. The incumbent must be able to communicate courteously and effectively. Strong interpersonal skills are required. All interaction with the public must be handled with tact and diplomacy.

Effort Physical Effort: The incumbent is required to stand during the majority of working hours.

In the event of an emergency where a swimmer is in distress, the incumbent must initiate rescue procedures immediately, which may involve strenuous physical exertion.

Mental Effort: Continuous mental attention to pool users. Must remain vigilant despite many simultaneous demands on his or her attention.

Emotional Effort: Enforcement of safety rules and water rescue can be stressful. Must maintain a professional demeanour when dealing with serious injuries or death.

Working Conditions Job is performed in humid indoor environment, temperature-controlled. No privacy. Shift work to cover pool hours from 7 A.M. to 11 P.M., seven days a week. Some over- time and split shifts may be required.

Approval Signatures Incumbent: _____________________________ Supervisor: _____________________________ Date: __________________________________

FIGURE 3.7 Job Specification

Source: M. Rock and D.R. Berger, eds., The Compensation Handbook: A State-of-the-Art Guide to Compensation Strategy and Design, 4th ed. Columbus, OH: McGraw-Hill, 2000, pp. 69–70. © 2000 The McGraw-Hill Companies, Inc. Reprinted by permission.

FIGURE 3.6 (Continued)

Source: M. Rock and D.R. Berger, eds., The Compensation Handbook: A State-of-the-Art Guide to Compensation Strategy and Design, 4th ed. Columbus, OH: McGraw-Hill, 2000, pp. 69–70. © 2000 The McGraw-Hill Companies, Inc. Reprinted by permission.

71Chapter 3 Designing and Analyzing Jobs

STEP 6: COMMUNICATION AND PREPARATIONS FOR REVISIONS

Organizations are often affected by internal and external factors, as described in Chapter 1, that influence organizational strategy, structure, or processes. Most organizations adopt strategies with a three- to five-year target, and many are forced to adjust according to environmental factors much sooner. Significant organizational changes such as restructuring, new product develop- ment, technological changes, and competition modify the way in which work is done, resulting in a need for revisions to the existing job descriptions and specifications.

Job analysis must be structured enough to allow for modifications as required while still providing current and future employees with an understanding of what they are expected to do. Once a system is developed to collect data, an organization may choose to (1) regularly update the data collected in a proactive manner, (2) develop systems to collect data on an ongoing basis, or (3) adjust job analysis activities in a reactive manner after a significant organizational change has been initiated.

Information provided from the job analysis must be communicated to all relevant stakeholders. For example, employees must be aware of the core job requirements if they are to achieve desired performance. Line manag- ers must be aware of information provided in the job analysis to help align expectations of various jobs, manage performance, and manage HR planning activities. Recruiters use this information to determine and assess the desired knowledge, skills, abilities, and other characteristics (KSAOs) of potential candidates and to develop job ads. Compensation specialists can use this information to develop or modify pay scales according to job-related activi- ties. Overall, the job analysis process is a fundamental component of HRM and a cornerstone that is critical to other organizational activities related to labour and work processes.

Writing Competency-Based Job Descriptions Defining the job’s competencies and writing them up involves a process that is similar in most respects to traditional job analysis. In other words, the manager will interview job incumbents and their supervisors, ask open-ended ques- tions regarding job responsibilities and activities, and perhaps identify critical incidents that pinpoint success on the job. These job descriptions can be par- ticularly useful in organizations that use competency-based pay, as discussed in Chapter 8.

Part 2 Meeting Human Resources Requirements72

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

job rotation (p. 56) job specification (p. 68) National Occupational Classification (NOC) (p. 62) occupation (p. 64) organization chart (p. 51) organizational structure (p. 51) physical demands analysis (p. 68) position (p. 49) Position Analysis Questionnaire (PAQ) (p. 61) process chart (p. 52) team (p. 59) team-based job design (p. 59) work simplification (p. 55)

competencies (p. 57) competency-based job analysis (p. 57) diary/log (p. 62) ergonomics (p. 56) Functional Job Analysis (FJA) (p. 61) incumbent (p. 60) industrial engineering (p. 55) job (p. 49) job analysis (p. 49) job description (p. 65) job design (p. 54) job enlargement (horizontal loading) (p. 56) job enrichment (vertical loading) (p. 56)

Key TERMS

1. In any organization, work has to be divided into manageable units and ultimately into jobs that can be performed by employees. The process of organizing work into tasks that are required to perform a specific job is known as job design. The term “job” means a group of tasks and duties, and several employees may have the same job. The collection of tasks and responsibilities performed by one person is known as a “position.”

2. Job analysis involves six steps: (1) collecting background information, (2) selecting the representative positions and jobs to be analyzed, (3) collecting data, (4) reviewing the informa- tion collected with the incumbents and their supervisors, (5) developing job descriptions and job specifications, and (6) communicating and reviewing on an ongoing basis.

3. Techniques used to gather job analysis data include interviews, questionnaires (includ- ing the PAQ and FJA), direct observation, participant diaries/logs, and the National Occupational Classification (NOC), to list just a few.

4. Competency-based job analysis, focusing on how the job is done (the behaviours required) more than on task requirements, has become more common for three reasons. First, tradi- tional job descriptions may not be appropri- ate in organizations with flexible jobs. Second, describing the job in terms of the skills, knowledge, and competencies the worker needs is more strategic. Third, competency-based job analysis supports the employer’s performance management process.

5. A job description is a written statement of what the jobholder actually does, how he or she does it, and under what conditions the job is per- formed. The job specification involves examining the duties and responsibilities and answering this question: “What human traits and experience are required to do this job?”

Chapter SUMMARY

73Chapter 3 Designing and Analyzing Jobs

Review and Discussion QUESTIONS

1. Explain how job analysis provides important information that is required for at least three different functions of HRM.

2. Differentiate among job enlargement, job rotation, and job enrichment, and provide an example of each.

3. Why is ergonomic job design becoming increasingly important?

4. Several methods for collecting job analysis data are available—interviews, the Position Analysis Questionnaire, and so on. Compare and

contrast four of these methods, explaining what each is useful for and listing the pros and cons of each.

5. Although not legally required, having job descriptions is highly advisable. Why? How can firms ensure that their job specifications are legally defensible?

6. What are competencies? Why are companies starting to use competency-based job analysis? How is this approach different from the traditional approach?

3. Because the top job in a firm (such as president, executive director, or CEO) is by nature more strategic and broader in scope than any other job, is competency-based job analysis more appropriate? Is there less need for a job description for the president? Why or why not?

4. If you were designing a job for a new marketing and sales representative for a small entrepreneur- ial company that is experiencing rapid growth, what approach would you take? Explain why you would take this approach. How would you go about determining job specifications?

5. If a supervisor reviews the job analysis information provided by an employee and says that the job duties and responsibilities have been inflated, but the employee says that the supervisor does not really know what the job entails, how can a decision be made about what information is accurate?

1. Why is it sometimes undesirable or inappropriate to use job enrichment when designing jobs? How would you determine how enriched an individual employee’s job should be?

2. Assume that you are the job analyst at a bicycle manufacturing company in British Columbia and have been assigned responsibility for preparing job descriptions (including specifications) for all the supervisory and managerial positions. One of the production managers has just indicated that he will not complete the job analysis question- naire you have developed.

a. How would you handle this situation?

b. What arguments would you use to attempt to persuade him to change his mind?

c. If your persuasion efforts fail, how would you go about obtaining the job analysis information you need to develop the job description for his position?

Critical Thinking QUESTIONS

Part 2 Meeting Human Resources Requirements74

CBC To view the CBC videos, read a summary, and answer discussion questions, go to to MyManagementLab.

similar are they? Why do you think this is so? Compare and discuss your results with other individual students or groups.

3. Working individually, prepare a job description (including job specifications) for a position that you know well, using the job analysis question- naire in this chapter. Once you have done so, exchange job descriptions with someone else in the class. Critique your colleague’s job descrip- tion and provide specific suggestions regarding any additions/deletions/revisions that you would recommend to ensure that the job description accurately reflects the job and is legally defensible.

4. Working in groups of three or four, identify the jobs that have been or are held by students in your group. Select one job to analyze. Use the job analysis questionnaire provided in the chapter to conduct a job analysis interview and document a job description and specifications. Compare and critique your work with the work done by another group.

1. Use organization chart software to draw an organization chart that accurately depicts the structure of the organization in which you are currently employed or one with which you are thoroughly familiar. Once you have completed this task, form a group with several of your classmates. Taking turns, have each member show his or her organization chart to the group, briefly describe the structure depicted, explain whether or not the structure seems to be appro- priate, and identify several advantages and disad- vantages he or she experienced working within this structure.

2. Working individually or in groups and using the HRSDC website, find the National Occupational Classification (NOC) job descriptions for both a university professor and a college professor. Compare the two descriptions, noting similari- ties and differences. Using the NOC descriptions and your own observations of people in this role, create a competency profile for each job. How

Experiential EXERCISES

Human Resources Planning and Recruitment

CHAPTER

4 REQUIRED PROFESSIONAL CAPABILITIES (RPC)

• Researches, analyzes, and reports on potential people issues affecting the organization

• Identifies the organization’s staffing needs

• Develops, implements, and monitors processes for attracting qualified candidates

• Identifies the potential sources of internal and external qualified candidates

• Evaluates the relevance of alternatives to recruitment (developing, outsourcing, contingent workers, agencies, and so on)

LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

DEFINE human resources planning (HRP) and DISCUSS its strategic importance. DISCUSS briefly the four strategies used to forecast internal human resources supply and four types of market conditions assessed when forecasting external human resources supply. DESCRIBE four quantitative and two qualitative techniques used to forecast human resources demand. EXPLAIN how organizations deal with labour surpluses and labour shortages. DEFINE recruitment and DISCUSS the increasing use of employer branding. ANALYZE the role of job posting, human resources records, and skills inventories in recruiting from within. IDENTIFY at least 10 methods used for external recruitment. DISCUSS strategies for recruiting a more diverse workforce.

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Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

Part 2 Meeting Human Resources Requirements76

THE STRATEGIC IMPORTANCE OF HUMAN RESOURCES PLANNING

Human resources planning (HRP) is the process of forecasting future human resources requirements to ensure that the organization will have the required number of employees with the necessary skills to meet its strategic objectives. HRP is a proactive process, which both anticipates and influences an organiza- tion’s future by systematically forecasting the supply of and demand for employ- ees under changing conditions and by developing plans and activities to satisfy these needs. Effective HRP helps an organization achieve its strategic goals and objectives, achieve economies in hiring new workers, make major labour mar- ket demands more successfully, anticipate and avoid shortages and surpluses of human resources, as well as control or reduce labour costs.

HRP has recently become a key strategic priority not just for HR depart- ments but for strategic business planners as well. The existing labour shortage in Canada is forecast to increase to 1 million workers over the next 15 years.1 Currently, Canada is in the beginning stages of a major labour shortage. As the baby boom generation begins to retire, there are not enough candidates to fill vacant positions.2 On average, two out of every three job openings over the next decade will be focused on replacing retiring workers. In addition, fertility rates in Canada continue to decline, resulting in fewer possible workers for the future labour force. Combined, these conditions create a situation of fierce labour com- petition, further increasing the importance of effective HRP. HRP will be abso- lutely essential for successful strategy implementation.3

As illustrated in Figure 4.1, key steps in the HRP process include analyzing forecasted labour supply, forecasting labour demands, and then planning and implementing HR programs to balance supply and demand.

Lack of or inadequate human resources planning within an organization can result in significant costs when unstaffed positions create costly inefficiencies and when severance pay is required for large numbers of employees being laid off. It can also create situations in which one department is laying off employees while another is hiring individuals with similar skills, which can reduce morale or productivity and can often result in turnover. The greater concern is that ineffective HRP can lead to an organization’s inability to accomplish short-term operational plans or long-range strategic plans.

The Relationship between HRP and Strategic Planning An HR plan (HRP) does not occur independently of the other departments within an organization (such as finance, marketing, research and development). The HRP must align with the overall goals of the organization as well as both the long-term and short-term strategic plans set by the organization. Fundamental to the business planning process is the impact and alignment of HRP (as discussed in detail in Chapter 1). An organization’s strategic decision to expand, redirect, diverge, divest, partner, or merge will have an associated effect on the HR expec- tations and plans of the organization.

Failure to integrate HRP and strategic planning can have very serious conse- quences. For example, in Ontario, a fifth year of high school called the Ontario

human resources planning (HRP) The process of forecasting future human resources requirements to ensure that the organization will have the required number of employees with the necessary skills to meet its strategic objectives.

77Chapter 4 Human Resources Planning and Recruitment

Academic Credit (OAC) year (often referred to as Grade 13) was abolished in 2003. As a result, there was a double cohort of students (from both Grade 12 and Grade 13) graduating and aspiring to attend postsecondary institutions. Most universities and colleges adopted a strategic decision to significantly increase admissions in 2003 to accommodate the double cohort. Postsecondary institutions that aligned their HRP with the strategy of increased admissions benefited from an associated increase in labour. Organizations that did not link their strategic decisions with HRP struggled to support the increased number of students inside the classroom (professors and teaching assistants) and outside of the classroom (libraries, career and learning centres, cafeterias, and so on).

The Importance of Environmental Scanning Environmental scanning is a critical component of HRP and strategic planning processes; the most successful organizations are prepared for changes before they occur. Environment scanning involves assessing factors that affect the exter- nal labour market as well as an organization’s ability to find and secure talent from outside of the organization. The external environmental factors most fre- quently monitored include the following:

• economic conditions (local, regional, national, international); for example, if the unemployment rate in a region is low, an organization would have to be more aggressive in recruiting talent, as availability of talent may be more scarce

Forecasting Labour Demand

Quantitative Techniques - Trend analysis - Ratio analysis - Scatterplots - Regression analysis

Qualitative Techniques - Nominal group technique - Delphi technique

Forecasting Labour Supply

Considerations - Organization’s current and

expected organizational and HR policies

- Changes to the external labour force (general economic conditions, labour market conditions, occupational marker conditions)

Techniques Used - Skills inventory and

management inventories - Replacement charts and

replacement summaries - Succession plans - Markov analysis

Gap Analysis

Comparing forecasted demand to forecasted supply to determine if there is a projected labour equilibrium, shortage, or surplus

Solutions Analysis

Determine the next course of action to reach the point of a labour equilibrium

FIGURE 4.1 Human Resources Planning Model

environment scanning An assessment of external factors influencing the organization’s ability to find and secure talent from the external labour market, including economic, competitive, legislative, social, technological, and demographic trends.

Part 2 Meeting Human Resources Requirements78

• market and competitive trends; for example, compensation policies that lag behind competitors’ policies may result in higher turnover or more difficul- ties in attracting talent

• new or revised laws and the decisions of courts and quasi-judicial bodies; for example, a raise in the minimum wage rate can inflate the cost of labour in an organization, therefore creating budgetary pressure to reduce labour expenses

• social concerns such as healthcare, childcare, and educational priorities; for example, a trend toward securing higher education can reduce the size of the available external workforce in the short run, but in the longer run can result in retaining applicants with more specialized training

• technological changes affecting processes, products, and people; for example, a new technology devel- oped can be implemented in the organization and significantly reduce labour demands through auto- mation of a previously labour-intensive process

• demographic trends of an internal and external labour force; for example, if an organization is situ- ated in a community largely inhabited by senior citizens, it may face difficulties securing a diverse or full-time workforce from the local area

Steps in Human Resources Planning HRP is critical to an organization’s success as it aligns forecasted labour sup- ply (provided by the human resources department) with the predicted labour demands of the organization (such as the number of employees needed and the skill sets required). An element of HR planning that is often taken for granted is the availability and accuracy of information regarding the current HR situa- tion. Understanding the current internal labour force is the basis for a number of demand and supply estimates. Therefore, before embarking on an HR planning exercise, current HR levels (quantity and quality) must be assessed.

There are numerous sources of information available to identify existing tal- ent or human resources in an organization. An organization chart can provide HR planners and managers with an understanding of the organizational struc- ture, business units, and possible career paths. This macro-level information can be linked to more micro-level information, such as how many employees the company currently has at each level, what existing skill sets the employees have, as well as the demographic information and job-related information about the existing employee base.

An organization must forecast not only future HR demand (the number of employees and the skill sets needed in the future) but also future HR supply (internal availability of workers). These two forecasts can occur simultaneously or one after the other, depending on the resources available (time, money, people, and so on). Only after demand and supply have been forecast can an organiza- tion identify potential labour imbalance issues, after which plans to balance HR can be developed and implemented.

A trend toward higher education can reduce the size of the available external workforce in the short run.

RPC Researches, analyzes, and reports on potential people issues affecting the organization

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79Chapter 4 Human Resources Planning and Recruitment

Short-term and long-range HR demand forecasts only provide half of the staff- ing equation by answering the question, “How many employees will we need?” The next major concern is how projected openings will be filled. There are two sources of supply:

1. Internal—present employees who can be trained, transferred, or promoted to meet anticipated needs

2. External—people in the labour market not currently working for the orga- nization, including those who are employed elsewhere and those who are unemployed, who can be expected to join the organization to meet antici- pated needs

While internal forecasting identifies which members of the internal workforce will remain within the organization and where, an awareness of the external labour force can help organizations identify challenges that the expected recruit- ment of candidates into the internal labour force may bring. Such challenges could include the number of graduates in a specific program, the literacy levels of the local or target population, as well as general economic trends. These exter- nal factors can impact how much compensation an organization must provide to secure top talent. As well, in times of low unemployment the internal workforce may be more inclined to seek employment elsewhere, perceiving favourable ease of movement. Therefore, trends in the external labour force have a direct impact on projections of the internal labour force.

Forecasting the Supply of Internal Candidates Before estimating how many external candidates will need to be hired, manage- ment must determine how many candidates for projected openings will likely come from within the firm. This is the purpose of forecasting the supply of internal candidates. This can be accomplished using tools such as a skills/man- agement inventory, replacement plan/summaries, succession plans, or Markov analysis. Each of these is discussed in detail below.

Skills Inventories and Management Inventories Skills inventories contain comprehensive information about the capabilities of current employees. Data gathered for each employee include name, age, date of employment, current position, present duties and responsibilities, educational background, previous work history, skills, abilities, and interests. Information about current performance and readiness for promotion is generally included as well. Data pertaining to managerial staff are compiled in management inventories. Records summarizing the background, qualifications, interests, and skills of management employees, as well as information about managerial responsibilities and management training, are used to identify internal candi- dates eligible for promotion or transfer opportunities.

To be useful, skills and management inventories must be updated regularly. Failure to do so can lead to present employees being overlooked for job open- ings. Updating every two years is generally adequate if employees are encouraged

skills inventories Manual or computerized records summarizing employees’ education, experience, interests, skills, and so on, which are used to identify internal candidates eligible for transfer or promotion.

management inventories Records summarizing the qualifications, interests, and skills of management employees, along with the number and types of employees supervised, duties of such employees, total budget managed, previous manage- rial duties and responsibilities, and managerial training received.

FORECASTING THE AVAILABILITY OF CANDIDATES (SUPPLY)

Part 2 Meeting Human Resources Requirements80

to report significant qualifications changes (such as new skills learned or courses completed) to the HR department as they occur.

Replacement Charts and Replacement Summaries Replacement charts are typically used to keep track of potential internal candi- dates for the firm’s most critical positions. It assumes that the organization chart will remain static for a long period of time and usually identifies three poten- tial candidates for a top-level position, should it become vacant. Such charts typically indicate the age of potential internal candidates (which cannot be used as a criterion in making selection or promotion decisions but is necessary to project potential or likely retirement dates), the current performance level of the employee, and his or her promotion potential. The latter is based on the employee’s future career aspirations and a supervisory assessment of readiness for promotion.

To provide a more objective estimate of future potential, this information may be supplemented by results of psychological tests, interviews with HR spe- cialists, and other selection techniques.

Although replacement charts provide an excellent quick reference tool, they contain very little information. For that reason, many firms prefer to use replacement summaries. Such summaries list likely replacements for each position and their relative strengths and weaknesses, as well as information about current position, performance, promotability, age, and experience. These additional data can be extremely helpful to decision makers, although caution must be taken to ensure that no discrimination occurs on the basis of age, sex, and so on.

Succession Plans Forecasting the availability of inside candidates is particularly important in suc- cession planning. In a nutshell, succession planning refers to the plans a com- pany makes to fill its most important executive positions. It extends beyond the replacement chart by focusing on developing people rather than simply identify- ing potential replacements. As a result, there is a stronger focus on skills develop- ment for a specific list of potential successors within an organization.

In the days when companies were hierarchical and employees tended to remain with a firm for years, executive succession was often straightforward: Staff climbed the ladder one rung at a time, and it wasn’t unusual for someone to start on the shop floor and end up in the president’s office. Although that kind of ascent is still possible, employee turnover and flatter structures mean

that the lines of succession are no longer as direct. For example, potential successors for top positions might be routed through the top jobs at several key divisions, as well as overseas, and sent through a university graduate- level, advanced management program.

Succession planning is extremely important today, affecting both large and small organizations. The Entrepreneurs and HR box highlights some of the chal- lenges that entrepreneurial organizations often face with succession planning. Because succession planning requires balancing the organization’s top management needs with the potential career aspirations of available candidates, succession should include these activities:

replacement charts Visual representations of who will replace whom in the event of a job opening. Likely internal candidates are listed, along with their age, present performance rating, and promot- ability status.

replacement summaries Lists of likely replacements for each position and their relative strengths and weaknesses, as well as information about current position, performance, promotability, age, and experience.

Cenera www.cenera.ca

succession planning The process of ensuring a suitable supply of successors for current and future senior or key jobs so that the careers of individuals can be effectively planned and managed.

An Ethical Dilemma You were recently asked to identify one employee under your management as a top performer to align with a new company program offering top performers intensive management skills training. The employee you identified for this role is unaware of the program. This morning, she confided in you that she has just applied for graduate school. Five months from now, she will find out if she has been accepted, and she would start the program one month after that. Would you change your identification of the top performer in your team based on this information? Why or why not?

81Chapter 4 Human Resources Planning and Recruitment

• analysis of the demand for managers and professionals in the company

• audit of existing executives and projection of likely future supply

• planning of individual career paths based on objective estimates of future needs, performance appraisal data, and assessments of potential

• career counselling and performance-related training and development to pre- pare individuals for future roles

• accelerated promotions, with development targeted at future business needs

• planned strategic recruitment aimed at obtaining people with the potential to meet future needs as well as filling current openings4

It should be noted that replacement charts, replacement summaries, and suc- cession plans are considered highly confidential in most organizations.

Markov Analysis Estimating internal supply involves much more than simply calculating the num- ber of employees. Some firms use the Markov analysis technique to track the pattern of employee movements through various jobs and develop a transitional probability matrix for forecasting internal supply by specific categories, such as position and gender. As illustrated in Figure 4.2, such an analysis shows the actual number (and percentage) of employees who remain in each job from one year to the next, as well as the proportions promoted, demoted, transferred,

Tips FOR THE FRONT LINE

Markov analysis A method of forecasting internal labour supply that involves tracking the pattern of employee movements through various jobs and developing a transitional probability matrix.

Plant Manager

Plant Manager (n = 5)

Foreperson (n = 35)

Team Leader

(n = 110)

Production Worker (n = 861)

Projected Supply

Foreperson Team

Leader Production

Worker Exit

80%

4 1

3 28 4

12 77 8 13

52 620 189

7 40 129 628

20%

8% 82%

11% 70% 7% 12%

6% 72% 22%

10%

Percentages represent transitions (previous year’s actuals). Actual numbers of employees are shown as whole numbers in each block (projections for 2014 based on current staffing).

2014

2013

FIGURE 4.2 Hypothetical Markov Analysis for a Manufacturing Operation

Part 2 Meeting Human Resources Requirements82

and leaving the organization. These proportions (probabilities) are used to forecast human resources supply.

Succession Planning and Family Businesses In the second quarter of 2010, small businesses cre- ated 35 549 jobs, while large firms created only 728 jobs. During that period, small businesses in the construction sector alone accounted for 23 014 new jobs, while those in the healthcare and social assis- tance sectors introduced 9 755 new jobs.

Multigenerational family-controlled businesses often struggle with succession planning. Only one-third of family-owned businesses survive the transition to the second generation. And of these, only one-third survive the transition to the third generation.5

There are many reasons for these failures.

1. Determining who will inherit the business and how ownership will be determined among children can

be a source of immense stress for family business owners. Therefore, many choose to ignore the issue of succession planning altogether.

2. Second, a family business is a great source of pride for the business owner and is often their single largest asset. The concept of retirement or walking away can be incomprehensible to those who built the business.

3. There may not be a qualified or interested successor within the family.

While these are difficult issues to deal with, family businesses must begin to take an informed and strate- gic approach to these issues.

ENTREPRENEURS and HR

In the example provided, there were 35 employees in the foreperson occupa- tion in 2013. Out of these, 82 percent (28 employees) are expected to remain in that position next year (based on past levels of activity). The organization can anticipate that 8 percent of the foreperson population (which would be 3 out of the 35 employees in 2013) would be promotable to the role of plant manager. In addition, the past trends show that 10 percent of employees at this level are lost to turnover (representing 4 employees who are expected to leave the orga- nization before the start of next year). In addition, out of the 110 team leaders (the level below), 11 percent (12 employees) would be eligible for promotion to a foreperson position. Therefore, next year’s projected supply of forepersons would be the 28 from this year who are projected to stay in that role plus the 12 team leaders who are projected to be eligible for promotion over the year, for a total supply of 40 forepersons.

To complement such quantitative data, the skills and capabilities of current employees must be assessed and skills inventories prepared. From this informa- tion, replacement charts or summaries and succession plans can be developed.

Forecasting the Supply of External Candidates Some jobs cannot be filled with internal candidates because no current employ- ees are qualified (such as those holding entry-level jobs) or they are jobs that experience significant growth. In these situations, the firm looks for external candidates. Employer growth is primarily responsible for the number of entry- level openings. A key factor in determining the number of positions that must be filled externally is the effectiveness of the organization’s training, development,

83Chapter 4 Human Resources Planning and Recruitment

and career-planning initiatives. If employees are not encouraged to expand their capabilities, they may not be ready to fill vacancies as they arise, and external sources must be tapped.

To project the supply of outside candidates, employers assess general economic conditions, labour market conditions, and occupational market conditions.

General Economic Conditions General economic conditions refer to the natural fluctuations in economic activ- ity, which have an impact on all businesses. These include factors such as interest rates, wage rates, rate of inflation, and unemployment rates. In general terms, the lower the rate of unemployment, the smaller the labour supply and the more dif- ficult it will be to recruit employees. It is important to note that unemployment rates vary by occupation and geographic location and can result in an organiza- tion’s inability to fill certain positions.

Labour Market Conditions Labour market conditions refer to the demographics of those in the population, such as education levels, age, gender, marital status, and so on. Demographic conditions remain stable and can be forecast with a relatively high degree of accuracy. Fortunately, a wealth of national labour market information is avail- able from Statistics Canada and other government or private sources. Regional chambers of commerce and provincial/local development and planning agencies can be excellent sources of local labour market information.

A crucial reality is that a large portion of the population is expected to retire over the next decade, significantly decreasing the size of the labour force. Graduating students (from any level of education) who are just joining the work- force are projected to account for 550 000 new entrants to the labour market

Statistics Canada www.statcan.gc.ca

Pumping Up People Supply According to Judith Thompson, senior manager of HR at Burnaby, BC–based Sorin Group, “Canada isn’t well known for its biomedical engineers so even when we hire now, to ask for medical device experience, we wouldn’t get it. So we hire an engineer or scientist and train on the rest of it.” The company has come to real- ize the benefits, and necessity, of new immigrants as a major source of talent. “Our culture is very diverse. About 90 percent of our staff speak English as a second language, from production people to vice-presidents, so we don’t look for Canadian-born, Canadian-educated, Canadian experience because in these economic times that would set us back,” she says. “I would never have filled 60 positions last year with those criteria.”

Training is extensive, as it takes three or four months before workers, wearing gowns and gloves in a super- clean environment, can make a product that is usable.

And even then it takes another six months to ramp up to regular production, says Thompson. Sorin supports its employees with in-house English-language train- ing, through a partnership with immigration services, and provides subsidies to foreign-trained engineers who want to pursue an engineering degree in British Columbia.

“We’re getting better feedback on problems on the floor because the employees are more comfortable speaking to the researchers and scientists and surgeons who come in on tours. The confidence level of the group has gone up and they are very devoted to the company and the product they make,” says Thompson.

Source: Adapted with permission from S. Dobson, “Pumping Up People Supply at Sorin Group Canada to Build Heart Valves,” Canadian HR Reporter, February 23, 2009.

STRATEGIC HR

Part 2 Meeting Human Resources Requirements84

annually.6 In contrast, new immigrants are expected to account for 131 500 new entrants to the labour market per year. An example of a company that has come to realize the benefits of new immigrants as a major source of talent is provided in the Strategic HR box.

Occupational Market Conditions In addition to looking at the overall labour market, organizations also generally want to forecast the availability of potential candidates in specific occupations (engineers, drill press operators, accountants, and so on) for which they will be recruiting. Alberta has recently faced a severe labour shortage of workers in the oil and gas sector.7 Furthermore, the mining, construction, electricity, and manufacturing industries, as well as the non-profit sector are also experiencing significant labour shortages.8 A shortage of information technology workers is projected to cost the Canadian economy $10 billion per year until it is resolved.9 Shortages of civil service workers, accountants, lawyers, engineers, meteorolo- gists, funeral directors, and hospitality industry workers are also expected.10

RPC Identifies the organization’s staffing needs

FORECASTING FUTURE HUMAN RESOURCES NEEDS (DEMAND)

A key component of HRP is forecasting the number and type of people needed to meet organizational objectives. Managers should consider several factors when forecasting such requirements. From a practical point of view, the demand for the organization’s product or service is paramount. Thus, in a manufacturing firm, sales are projected first. Then the volume of production required to meet these sales requirements is determined. After this, the staff needed to maintain this volume of output is estimated. In addition to this basic requirement for staff, several other factors should be considered, including the following:

1. projected turnover as a result of resignations or terminations

2. quality and nature of employees in relation to what management sees as the changing needs of the organization

3. decisions to upgrade the quality of products or services or enter into new markets, which might change the required employee skill mix

4. planned technological and administrative changes aimed at increasing productivity and reducing employee head count, such as the installation of new equipment or introduction of a financial incentive plan

5. the financial resources available to each department; for example, a budget increase may enable managers to pay higher wages or hire more people; con- versely, a budget crunch might result in wage freezes or layoffs

In large organizations, forecasting demand is primarily quantitative in nature and is the responsibility of highly trained specialists. Quantitative techniques for determining human resources requirements include trend analysis, ratio analysis, scatter plot analysis, and regression analysis. These are often viewed as numerically or mathematically grounded, and therefore more objective in nature. Qualitative approaches to forecasting range from sophisticated analytical models to informal expert opinions about future needs, often involving subjective interpretations or estimates, such as the nominal group technique or the Delphi technique.

85Chapter 4 Human Resources Planning and Recruitment

Quantitative Approaches

Trend Analysis Trend analysis involves studying the firm’s employment levels over the last three to five years to predict future needs. The purpose is to identify employment trends that might continue into the future, assuming that the past is a strong predictor of the future. Trend analysis is valuable as an initial estimate only, since employment levels rarely depend solely on the passage of time. Other fac- tors (such as changes in sales volume and productivity) will also affect future staffing needs; thus, trend analysis is an approach used in relatively static and non-changing environments.

Ratio Analysis Ratio analysis involves making forecasts based on the ratio between some causal factor (such as sales volume) and the number of employees required (for example, the number of salespeople). Ratio analysis can also be used to help forecast other employee requirements. Like trend analysis, ratio analysis assumes that produc- tivity remains about the same; it is, however, more useful than trend analysis if there are significant changes between past patterns and future expectations. For example, suppose a salesperson traditionally generates $500 000 annually in sales and that the firm’s plans call for increasing sales by $3 million in the coming year. If the sales revenue–salespeople ratio remains the same, six new salespeople would be required (each of whom produces an extra $500 000 in sales). With ratio analysis, additional consideration can be given to changes in productivity. Using the example above, if we expect that the launch of a new technology and additional training programs will increase productivity by 20 percent, we can determine that in the future sales per employee will be $600 000. Based on the projected $3 million increase in sales, we would now need five additional employ- ees rather than the six predicted when things were static.

The Scatter Plot Scatter plots can be used to determine whether two factors—a measure of busi- ness activity and staffing levels—are related. If they are, then when the measure of business activity is forecast, HR requirements can also be estimated.

An example to illustrate follows. Legislative changes to the Canadian health- care system require that two 500-bed hospitals be amalgamated. Both previously had responsibility for acute, chronic, and long-term care. The government’s plan is for Hospital A to specialize in acute care while Hospital B assumes responsi- bility for chronic and long-term care. In general, providing acute care requires staffing with registered nurses (RNs), while chronic and long-term care facilities can be staffed primarily with registered practical nurses (RPNs).

By the end of the calendar year, 200 beds at Hospital A must be converted from chronic and long-term care beds to facilities for acute patients. At the same time, Hospital A’s 200 chronic and long-term patients must be transferred to Hospital B. In a joint meeting, the directors of nursing and HR decide that a good starting point in the planning process would be to calculate the relation- ship between hospital size (in terms of number of acute beds) and the number of RNs required. After placing telephone calls to their counterparts at eight hospi- tals in larger centres across the country, they obtain the following information:

trend analysis The study of a firm’s past employment levels over a period of years to predict future needs.

ratio analysis A forecasting technique for determining future staff needs by using ratios between some causal factor (such as sales volume) and the number of employees needed.

scatter plot A graphical method used to help identify the relationship between two variables.

Part 2 Meeting Human Resources Requirements86

To determine how many RNs would be needed, they use the data obtained to draw the scatter plot shown in Figure 4.3, in which hospital size is shown on the horizontal axis and number of RNs is shown on the vertical axis. If the two factors are related, then the points will tend to fall along a straight line, as they do in this case. Carefully drawing a line that minimizes the distances between the line and each of the plotted points (the line of best fit) permits an estimate of the number of nurses required for hospitals of various sizes. Thus, since Hospital A will now have 500 acute-care beds, the estimated number of RNs needed is 500.

Regression Analysis Regression analysis is a more sophisticated statistical technique to determine the line of best fit, often involving multiple variables (rather than just two, as per the example above). Using this statistical tool to determine the effect of one variable on another, the investigator is able to determine the magnitude and direction of the relationship between variables to develop future predictions. In the context of HRP, regression analysis involves the use of a mathematical formula to project future demands based on an established relationship between an organization’s

Size of Hospital (Number of Acute Beds)

Number of Registered Nurses

200 240

300 260

400 470

500 500

600 620

700 660

800 820

900 860

• •

• •

• •

••

1200

1000

800

600

400

200

200 400 600 800 1000 1200

Hospital size (Number of acute-care beds)

N um

be r

of r

eg is

te re

d nu

rs es

FIGURE 4.3 Determining the Relationship between Hospital Size and Number of Registered Nurses

Note: After fitting the line, the number of employees needed, given the projected volume, can be extrapolated (projected).

regression analysis A statistical technique involving the use of a mathematical formula to project future demands based on an established relationship between an organization’s employment level (dependent variable) and some measurable factor of output (independent variable).

87Chapter 4 Human Resources Planning and Recruitment

employment level (dependent variable) and some measurable factors of output (independent variables), such as revenue, sales, or production level.

Qualitative Approaches In contrast to quantitative approaches, which use statistical formulas, qualita- tive techniques rely solely on expert judgments. Two approaches used to fore- cast human resources demand (or supply) are the nominal group and Delphi techniques. Although managerial judgment is central to qualitative forecasting, it also plays a key role when quantitative techniques are used. It’s rare that any historical trend, ratio, or relationship will continue unchanged into the future. Judgment is therefore needed to modify the forecast based on anticipated changes.

Nominal Group Technique The nominal group technique involves a group of experts (such as first-line super- visors and managers) meeting face to face. Although one of its uses is human resources demand forecasting, this technique is used to deal with issues and problems ranging from identifying training needs to determining safety program incentives. The steps involved are as follows:11

1. Each member of the group independently writes down his or her ideas on the problem or issue (in this case, estimates of demand).

2. Going around the table, each member then presents one idea per round. This process continues until all ideas have been presented and recorded, typically on a flipchart or chalkboard. No discussion is permitted during this step.

3. Clarification is then sought, as necessary, followed by group discussion and evaluation.

4. Finally, each member is asked to rank the ideas. This is done independently and in silence.

The advantages of this technique include involvement of key decision makers, a future focus, and the fact that the group discussion involved in the third step can facilitate the exchange of ideas and greater acceptance of results. Drawbacks

include subjectivity and the potential for group pres- sure to lead to a less accurate assessment than could be obtained through other means.

Delphi Technique Although short-term forecasting is generally handled by managers, the Delphi technique is useful for long- range forecasting and other strategic planning issues. It typically involves outside experts as well as company employees, based on the premise that outsiders may be able to assess changes in economic, demographic, gov- ernmental, technological, and social conditions, and predict the potential impact of these external changes more objectively. The Delphi technique involves the following steps:12

nominal group technique A decision-making technique that involves a group of experts meeting face to face. Steps include independent idea generation, clarification and open discussion, and private assessment.

In the nominal group technique, each member presents ideas indepen- dently, followed bygroup discussion and evaluation of ideas.

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Delphi technique A judgmental forecasting method used to arrive at a group decision, typically involving outside experts as well as organizational employees. Ideas are exchanged without face-to- face interaction, and feedback is provided and used to fine-tune independent judgments until a consensus is reached.

1. The problem is identified (in this case, estimates of demand), and each group member is requested to submit a potential solution by completing a carefully designed questionnaire. Direct face-to-face contact is not permitted.

2. After each member independently and anonymously completes the initial questionnaire, the results are compiled at a centralized location.

3. Each group member is then given a copy of the results. 4. If there are differences in opinion, each individual uses the feedback from

other experts to fine-tune his or her independent assessment. 5. The third and fourth steps are repeated as often as necessary until a consensus

is reached.

As with the nominal group technique, the advan- tages of the Delphi technique include involvement of key decision makers and a future focus; in addition, though, it permits the group to critically evaluate a wider range of views. Drawbacks include the fact that judgments may not efficiently use objective data, the time and costs involved, and the potential difficulty in integrating diverse opinions.

Gap Analysis: Summarizing Human Resources Requirements The end result of the forecasting process is an estimate of short-term and long-range HR requirements. Long- range plans are general statements of potential staffing needs and may not include specific numbers.

Short-term plans—although still approximations—are more specific and are often depicted in a staffing table. A staffing table is a pictorial representation of all jobs within the organization, along with the number of current incumbents and future employment requirements (monthly or yearly) for each.

In the Delphi technique, after each member independently and anonymously provides their forecast, the results are compiled at a centralized location.

staffing table A pictorial representation of all jobs within the organization, along with the number of current incumbents and future employment requirements (monthly or yearly) for each.

PLANNING AND IMPLEMENTING HR PROGRAMS TO BALANCE SUPPLY AND DEMAND

Once the supply and demand of human resources have been estimated, program planning and implementation begin. To successfully fill positions internally, orga- nizations must manage performance and careers. Performance is managed through effectively designing jobs and quality-of-working-life initiatives; establishing per- formance standards and goals; coaching, measuring, and evaluating; and imple- menting a suitable reward structure (compensation and benefits).

To manage careers effectively, policies and systems must be established for recruitment, selection and placement (including transfer, promotion, retirement, and termination), as well as training and development. Policies and systems are also required for job analysis, individual employee assessment, replacement and succession planning, and career tracking, in addition to career planning and development.

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89Chapter 4 Human Resources Planning and Recruitment

Specific strategies must be formulated to balance supply and demand considerations. As illustrated in Figure 4.4, there are three possible scenarios:

1. projected labour demand matches projected labour supply (equilibrium)

2. projected labour supply exceeds projected demand (surplus)

3. projected labour demand exceeds projected supply (shortage)

Labour Equilibrium Although it is extremely rare to have a labour equi- librium, when the expected supply matches the actual demand, organizations do not need to change their course of action. Existing plans to replace outgoing

employees should be maintained by promoting or transferring internal members of the organization as well as recruiting external labourers.

Once the future demand and supply of human resources has been estab- lished, managers and HR experts work together to determine actions required to reach the equilibrium point.

Conditions Possible Solutions

Labour Equilibrium (when labour demand equals labour supply)

• Vacancies are filled internally through training, transfers, or promotions or externally through hiring

Labour Surplus (when labour demand is less than labour supply)

• Hiring freeze: reassign current workers to job openings

• Attrition: standard employee resignation, retirement, or death

• Early retirement buyout programs: entice those close to retirement to retire early with a buyout program, access to full or reduced pension, and/or continuation of benefits

• Job sharing, work sharing, or reduced workweek programs: reducing work from the standard full-time workload to a less than full-time work

• Layoff: temporary or permanent withdrawal of employment due to business or economic reasons

• Termination: permanent separation from the organization because of job performance reasons

• Leave of absence: voluntary, temporary withdrawal of employment with guaranteed job upon return

Labour Shortage (when labour demand is greater than labour supply)

• Scheduling overtime hours • Hiring temporary workers • Subcontracting work • External recruitment • Internal promotions or transfers

FIGURE 4.4 Balancing Supply and Demand Considerations

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Labour Surplus A labour surplus exists when the internal supply of employees exceeds the organi- zation’s demand. Most employers respond initially by instituting a hiring freeze, which means that openings are filled by reassigning current employees and no outsiders are hired. The surplus is slowly reduced through attrition, which is the normal separation of employees because of resignation, retirement, or death. When employees leave, the ensuing vacancies are not filled and the staffing level decreases gradually without any involuntary terminations. In addition to the time it takes, a major drawback of this approach is that the firm has no control over who stays and who leaves.

Some organizations attempt to accelerate attrition by offering incentives to employees to leave, such as early retirement or buyout programs. Staffing levels are reduced and internal job openings created by offering attractive buyout packages or the opportunity to retire on full pension with an attractive benefits package at a relatively early age (often 55 or 60). To be successful, buyouts must be handled carefully. Selection criteria should be established to ensure that key people who cannot be easily replaced do not leave the firm. A draw- back of buyouts and early retirement packages is that they often require a great deal of money up front. Care must also be taken to ensure that early retirement is voluntary, since forced early retirement is a contravention of human rights legislation.

Another strategy used to deal with an employee surplus involves reducing the total number of hours worked. Job sharing involves dividing the duties of a single position between two or more employees. Reducing full-time positions to part-time work is sometimes more effective, especially if there are peak demand periods. Creating a job-share position or offering part-time employment can be win-win strategies, since layoffs can be avoided. Although the employees involved work fewer hours and thus receive less pay, they are still employed, and they may enjoy having more free time at their disposal, while the organization benefits by retaining good employees.

Twenty-five years ago, the federal government introduced a work-sharing scheme, a layoff-avoidance strategy that involves employees working three or four days a week and receiving employment insurance (EI) benefits on their non-workday(s). Between February 1, 2009, and April 3, 2010, the program was temporarily extended to provide 52 weeks of benefits.13 Similar to work sharing, but without a formal arrangement with the government regarding EI benefits, is a reduced workweek. Employees simply work fewer hours and receive less pay. The organization retains a skilled workforce, lessens the financial and emotional impact of a full layoff, and reduces production costs. One potential drawback is that it is sometimes difficult to accurately predict in advance how many hours of work should be scheduled each week.

Another strategy used to manage an employee surplus is a layoff: the tempo- rary withdrawal of employment to workers for economic or business reasons. Layoffs may be short in duration (for example, when a plant closes for brief periods in order to adjust inventory levels or to retool for a new product line), but can last months or even years at a time if the organization is negatively affected by a major change in the business cycle. Unfortunately, layoffs are often permanent in nature. Layoffs are not easy for managers, who have to reduce the

hiring freeze A common initial response to an employee surplus; openings are filled by reassigning current employees and no outsiders are hired. attrition The normal separation of employees from an organization because of resignation, retirement, or death.

early retirement or buyout programs Strategies used to accel- erate attrition that involve offering attractive buyout packages or the opportunity to retire on full pension with an attractive benefits package.

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job sharing A strategy that involves dividing the duties of a single position between two or more employees.

work sharing Employees work three or four days a week and receive EI benefits on their non-workday(s).

reduced workweek Employees work fewer hours and receive less pay.

Tips FOR THE FRONT LINE

layoff The temporary or permanent withdrawal of employment to workers for economic or business reasons.

91Chapter 4 Human Resources Planning and Recruitment

number of employees to the required level, or for workers, but are usually neces- sary to ultimately reduce the impact of the organization’s economic downturn. Layoffs and terminations are discussed in depth in Chapter 11.

Termination is a broad term that encompasses permanent separation of the worker from the organization. Termination is often triggered by a management decision to sever the employment relationship for job performance reasons. Purging poorly performing employees is often an ongoing activity in any organi- zation, regardless of any projected labour surpluses; however, the rate of termi- nation may increase if there is a projected surplus of labour.

The option of a voluntary leave of absence can also be used if the labour surplus is temporary in nature. A leave of absence allows those who may be interested in time off for personal, educational, or other reasons to have a set period of time away from their position, with a guarantee that their job will be available upon their return. A leave of absence can be paid or unpaid, but often seniority and benefits remain intact. Terms of the leave and expected return must be clearly outlined, including potential conflicts of interest and mutual expecta- tions from each party.

Easing the Pain of Labour Surplus Management Although restructuring initiatives, ranging from layoffs to mergers and acqui- sitions, were prevalent in the last two decades, organizations that engaged in layoffs were not consistently achieving the desired goals or financial benefits of their decisions. In a study of 6 418 workforce reductions in Fortune 500 firms over 18 years, researchers found no consistent evidence that downsizing led to improved financial performance.14

A primary reason for this is the high cost associated with survivor syndrome, a range of emotions that can include feelings of betrayal or violation, guilt, or detachment. The remaining employees, anxious about the next round of termi- nations, often suffer stress symptoms, including depression, increased errors, and reduced performance.

To ease the financial burden of layoffs, some organizations offer supplemental unemployment benefits (SUBs), which are a top-up of EI benefits to bring income levels of temporarily laid-off workers closer to their regular, on-the-job pay. SUB programs are generally negotiated through collective bargaining between the employee and employer. Benefits are payable until the pool of funds set aside has been exhausted.

A severance package is typically provided when employees are being termi- nated through no fault of their own in order to avoid wrongful dismissal law- suits. Severance pay is legally required in certain situations, such as mass layoffs.

In addition to pay, severance packages often include the continuation of ben- efits for a specified period. In determining the appropriate package, employ- ers should take salary, years of service, the employee’s age, and the likelihood

of him or her obtaining another job into consideration.15 Executives may be protected by a golden parachute clause in their contract of employment; this is a guarantee by the employer to pay specified compensation and benefits in the case of termination due to downsizing or restructuring. To soften the blow of termination, outplacement assistance,

Research INSIGHT

termination Permanent separation from the organization for any reason.

leave of absence Allows an employee who may be interested in taking time away from work for a variety of reasons (e.g., personal, educational, etc.) to have a set period of time away from their position without pay, but with a guarantee that their job will be available upon their return.

survivor syndrome A range of negative emotions experienced by employees remaining after a major restructuring initiative, which can include feelings of betrayal or violation, guilt, or detachment, and can result in stress symptoms, including depression, increased errors, and reduced performance.

An Ethical Dilemma How much time, effort, and money should firms devote to helping “surviving” employees deal with downsizing? With mergers and acquisitions?

supplemental unemployment benefits (SUBs) A top-up of EI benefits to bring income levels closer to what an employee would receive if on the job. severance package A lump-sum payment, continuation of benefits for a specified period of time, and other benefits that are provided to employees who are being terminated.

Part 2 Meeting Human Resources Requirements92

generally offered by an outside agency, can assist affected employees in finding employment elsewhere. The issues and processes related to managing a labour surplus legally and fairly are provided in signifi- cant detail in Chapter 11.

Labour Shortage A labour shortage exists when the internal supply of human resources cannot meet the organization’s needs. Scheduling over- time hours is often the initial response. Employers may also subcon- tract work on a temporary or permanent basis. Another short-term solution is to hire temporary employees.

As vacancies are created within the firm, opportunities are generally provided for employee transfers and promotions, which necessitate performance management, training (and retraining), and career development. Of course, internal movement does not elimi- nate a shortage, which means that recruitment will be required. It is hoped that resultant vacancies will be for entry-level jobs, which can be filled more easily externally.

Internal Solutions to a Labour Shortage A transfer involves a lateral movement from one job to another that is relatively equal in pay, responsibility, or organizational level. Transfers can lead to more effective use of human resources, broaden an employee’s skills and perspectives, and help make him

or her a better candidate for future promotions. Transfers also offer additional technical and interpersonal challenges and increased variety of work, which may enhance job satisfaction and motivation.

A promotion involves the movement of an employee from one job to another that is higher in pay, responsibility, or organizational level. Such a move may be based on merit, seniority, or a combination of both. Merit-based promotions are awarded in recognition of a person’s outstanding performance in his or her pres- ent job or as an assessment of his or her future potential.

A focus on employee retention initiatives can also mitigate potential labour shortages. The HRP process often highlights challenges the organization is hav-

ing with turnover or retention at specific levels. This may warrant further investigation into why employees are leaving and which types of employees are leaving. Rather than a broad focus on retention, organizations can benefit from focusing on retaining key employees or employees with strong job performance. A discussion of career planning to assist with internal solutions in response to a labour shortage is provided in Chapters 6 and 7 (Orientation and Training, and Performance Management).

External Solutions to a Labour Shortage External solutions to managing a labour shortage involve recruiting the right quality and quantity of talent needed in an organization to meet the long-term goals

A golden parachute clause protects executives’ compensation in the case of termination due to downsizing or restructuring.

transfer Movement of an employee from one job to another that is rela- tively equal in pay, responsibility, or organizational level.

promotion Movement of an employee from one job to another that is higher in pay, responsibility, or organiza- tional level, usually based on merit, seniority, or a combination of both.

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93Chapter 4 Human Resources Planning and Recruitment

Recruitment is the process of searching out and attracting qualified job appli- cants. It begins with the identification of a position that requires staffing and is completed when résumés or completed application forms are received from an adequate number of applicants. A Watson Wyatt study found that organiza- tions with superior recruiting practices financially outperform those with less effective programs and that successful recruiting is a strong indicator of higher shareholder value.16

Authority for recruitment is generally delegated to HR staff members, except in small businesses where line managers usually recruit their own staff. In large organizations in which recruiting is done on a continual basis, the HR team typi- cally includes specialists, known as recruiters, whose job is to find and attract qualified applicants. As a growing talent shortage leads to increased competition for the employees needed to implement strategy, recruiters are becoming increas- ingly critical to achieving an organization’s strategic objectives.

Organizations are increasingly seeking the high profile given to an “employer of choice,” such as those included in lists such as Mediacorp’s “Top 100 Employers,” the Hewitt Associates “50 Best Employers,” and the Financial Post’s “Ten Best Companies to Work for.” Employers such as Scotiabank, Purolator, Tim Hortons, and many others are also applying the marketing concept of branding to strengthen their recruitment activities.17

Employer Branding Gabriel Bouchard, founder of the Monster Canada online job board, says, “In an increasingly tight job market, employers must remain permanently visible to potential employees, establishing and maintaining relationships with potential candidates before they even begin pursuing a new job. This is particularly crucial when it comes to hard-to-fill or mission-critical positions.”18 Proactive employ- ers are trying to obtain a competitive advantage in recruitment by establishing

themselves as employers of choice through employer branding. The purpose of an employer brand is to attract people to apply to work at the organization and to earn the loyalty of current employees.

Employer branding is the image or impression of an organization as an employer based on the perceived benefits of being employed by the organization. It is the experience of an employee when working for a company, based on feelings, emotions, senses, reali- ties, and benefits (functional benefits such as personal development, economic benefits such as monetary rewards, and psychological benefits such as feelings of purpose, belonging, and recognition). It is essentially a promise made to employees and their perception of how well that promise is delivered.19 Employer brand- ing involves three steps as summarized in Table 4.1.

recruitment The process of searching out and attracting qualified job applicants, which begins with the identification of a position that requires staffing and is completed when résumés or completed application forms are received from an adequate number of applicants.

recruiter A specialist in recruitment whose job is to find and attract capable candidates.

Recruiters Café www.recruiterscafe.com

Great Place to Work Institute Canada www.greatplacetowork.ca

and strategy of the company. Options for selection related to managing a labour shortage are provided in Chapter 5 (Selection).

RECRUITMENT

Gabriel Bouchard, founder of Monster Canada online job board, encour- ages employers to create a brand for themselves.

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Part 2 Meeting Human Resources Requirements94

Employer branding is particularly important during the recruitment process, not only for applicants who are eventually hired, but also for those not hired who are out in the marketplace communicating their experience as an applicant to other job seekers.23 Inconsiderate recruiting practices can be brand suicide for companies. Branding includes the experiences a candidate goes through while interacting with a company throughout the recruitment process, including24

• what candidates experience when they go to the company’s website,

• whether HR sends an acknowledgement letter or email thanking each candi- date who sends in a résumé,

• how candidates are greeted by the receptionist when they make initial con- tact by phone or in person, and

• whether the HR person who interviews candidates is a good spokesperson who can articulate the organization’s values and culture.

McDonald’s used focus groups to identify the interests of one of its target markets for recruitment (young people). The results of the focus groups suggest that this target market is interested in balancing its own freedom and goals with making money. As a result, McDonald’s offered flexible hours, uniform choices, scholarships, and discount cards to support its value proposition slogan “We take care of our employees.” This value proposition was also communicated through television ads and a recruiting website. Following the introduction of this branding initiative, McDonald’s saw a surge in the number of young people who recognized McDonald’s as a great place to work.25 With the right branding strategy, job seekers line up to apply for jobs. A successful brand results in job seekers saying “I’d like to work there.”26

TABLE 4.1 Employer Branding Steps

Step Example

1 Define the target audience The target group may be one of the four generations in today’s workforce, the underemployed, or the four employment equity groups.

2 Develop the employee value proposition

Loblaw and Fairmont Hotels offer potential employees the opportunity to participate in “green” environmental initiatives.20 At PCL Construction of Alberta, 80 percent of employees own stock in the company.21

3 Reinforce value proposition in communication

An integrated marketing approach to internal and external communication should use various channels, such as television, radio, print, websites, social media, and so on.22

employer branding The image or impression of an organization as an employer based on the benefits of being employed by the organization.

McDonald’s Recruiting www.worksforme.ca/mcd

RPC Develops, implements, and monitors processes for attracting qualified candidates

As illustrated in Figure 4.5, the recruitment process has a number of steps:

1. Job openings are identified through HR planning (based on the organiza- tion’s strategic plan) or manager request. Openings do arise unexpectedly, though, when managers request that a new employee be hired.

THE RECRUITMENT PROCESS

95Chapter 4 Human Resources Planning and Recruitment

2. The job requirements are determined. This step involves reviewing the job description and the job specifications and updating them, if necessary.

3. Appropriate recruiting source(s) and method(s) are chosen. The major decision here is whether to start with internal or external recruiting. There is no single, best recruiting technique, and the most appropriate for any given position depends on a number of factors, which will be discussed in the next section.

4. A pool of qualified recruits is generated. The requirements of employment equity legislation (if any) and the organization’s diversity goals should be reflected in the applicant pool.

To be successful in his or her job, a recruiter must be aware of constraints affecting the recruitment process. Constraints arise from organizational policies, such as promote-from-within policies, which mean that a recruiter cannot start recruiting externally for a specified period, even if he or she is aware that there are no suitable internal candidates. Constraints also arise from compensation policies, since they influence the attractiveness of the job to potential applicants. If there is an employment equity plan, it will specify goals for increasing recruit- ment from the designated groups. Monetary and non-monetary inducements offered by competitors impose a constraint, since recruiters must try to meet the prevailing standards or use alternative inducements.

Perhaps the biggest constraint on recruiting activity at this time is the current labour shortage, which makes recruiting more difficult. One survey by Hewitt Associates found that recruitment practices will have to undergo “enormous change” over the next several years.27

TABLE 4.1 Employer Branding Steps

Select methods of recruitment

- Internal - External

Generate pool of qualified applicants

- Employment equity/ diversity goals

Specify job requirements

- From job description/ job specification

Identify job openings

- HR planning/ strategic plan - Employee resignations/ terminations

FIGURE 4.5 An Overview of the Recruitment Process

DEVELOPING AND USING APPLICATION FORMS For most employers, completion of an application form or uploading a résumé into an applicant tracking system that codes and logs data is the last step in the recruitment process. These provide an efficient means of collecting verifiable historical data from each candidate in a standardized format; it usually includes information about education, prior work history, and other job-related skills.

The use of online applications significantly reduces the risk of lost applications, increases the exposure level of the job ad (global reach), and minimizes the likeli- hood of biases associated with other forms of face-to-face recruitment. However, online application forms can also result in a large number of applications (for example, Google receives over 3 000 per day28), thus puts pressure on staff to man- age the high volume. HRIS (Human Resources Information System) software can be extremely useful here for automatically coding and storing applications, thus

Part 2 Meeting Human Resources Requirements96

allowing HR professionals to search through the applications using specified search functions. The HRIS can also pre-screen applicants against predetermined criteria, providing an automated shortlist of qualified candidates. This significantly reduces the need for HR staff to screen résumés, but increases the importance of the content of the résumés and the validity of the pre-screening criteria. Due to the convenience and ubiquity of web browsers, application forms are increasingly being used online to allow applicants to build a profile and submit information directly or indirectly to potential employers. This offers around-the-clock convenience, since applicants can create and submit applications or résumés on an ongoing, real-time basis.

Even when detailed résumés have been submitted, most firms also request that a standardized company application form be completed. There are many reasons for this practice:

• Candidate comparison is facilitated because information is collected in a uni- form manner.

• The information that the company receives is that which it specifically requests, rather than simply what the candidate wants to reveal.

• Candidates are typically asked to complete an application form while on the company premises, and thus it is a sample of the candidate’s own work (obtaining assistance with résumés is common, given that many job boards offer online résumé-building options).

• Application forms typically ask the candidate to provide written authoriza- tion for reference checking.

• Candidates are asked to acknowledge that the information provided is true and accurate, which protects the company from applicants who falsify their credentials.

• Many application forms today have an optional section regarding designated group member status.

One type of application form that can be used to predict performance is a biographical information blank (BIB), also known as a biodata form, focuses on biographical data found to be predictive of job success. Questions relating to age, gender, race, or other grounds are prohibited under human rights legisla- tion and cannot be asked. Candidates respond to a series of questions about their background, experiences, and preferences, including willingness to travel and leisure activities. Because biographical questions rarely have right or wrong answers, BIBs are difficult to fake. The development of a BIB requires that the items that are valid predictors of job success be identified and that scores be established for different responses to these items. By totalling the scores for each item, it is possible to obtain a composite score for each applicant.

biographical information blank (BIB) A detailed job application form requesting biographical data pertaining to background, experiences, and preferences, and found to be predictive of success on the job. Responses are scored.

human capital theory The accumulation of firm-specific knowledge and experience involves a joint investment by both the employee and employer; therefore, both parties benefit from maintaining a long-term relationship.

RECRUITING FROM WITHIN THE ORGANIZATION Although recruiting often brings job boards and employment agencies to mind, current employees are generally the largest source of recruits. Filling open posi- tions with inside candidates has several advantages. According to human capital theory, the accumulation of firm-specific knowledge and experience involves a joint investment by both the employee and employer, therefore, both parties

Tips FOR THE FRONT LINE

97Chapter 4 Human Resources Planning and Recruitment

benefit from maintaining a long-term relationship. Employees see that compe- tence is rewarded, thus enhancing their commitment, morale, and performance. Having already been with the firm for some time, insiders may be more commit- ted to the company’s goals and less likely to leave. Managers (as agents of the organization) are provided with a longer-term perspective when making business decisions. It is generally safer to promote from within, because the firm is likely to have a more accurate assessment of a person’s skills and performance level than would otherwise be the case. In addition, inside candidates require less ori- entation than outsiders do.

Recruiting from within also has a number of drawbacks. Employees who apply for vacant positions and don’t get them may become discontented (inform- ing unsuccessful applicants as to why they were rejected and what remedial action they might take to be more successful in the future is thus essential).29 Managers may be required to post all job openings and interview all inside can- didates, even when they already know whom they want to hire, thus wasting considerable time and creating false hope on the part of those employees not genuinely being considered. Employees may be less satisfied with and accepting of a boss appointed from within their own ranks than they would be with a new- comer; it is sometimes difficult for a newly chosen leader to adjust to no longer being “one of the gang.”30 There is also a possibility of “inbreeding.” When an entire management team has been brought up through the ranks, they may have a tendency to make decisions “by the book” and to maintain the status quo when a new and innovative direction is needed.

Internal Recruitment Methods Recruiting from within can be accomplished by using job posting, human resources records, and skills inventories.

Job Posting Job posting is a process of notifying current employees about vacant positions. Most companies now use computerized job-posting systems, where information about job vacancies can be found on the company’s intranet. This involves a notice outlining the job title, duties (as listed in the job description), qualifica- tions (taken from the job specification), hours of work, pay range, posting date, and closing date. Not all firms use intranets. Some post jobs on bulletin boards or in employee publications. As illustrated in Figure 4.6, there are advantages and disadvantages to using job postings to facilitate the transfer and promotion of qualified internal candidates.

Human Resources Records Human resources records are often consulted to ensure that qualified individuals

are notified, individually, of vacant positions. An exami- nation of employee files, including résumés and applica- tion forms, may uncover employees who are working in jobs below their education or skill levels, people who already have the requisite KSAs, or individuals with the potential to move into the vacant position if given some additional training.

job posting The process of notifying current employees about vacant positions.

An Ethical Dilemma Suppose a manager has already made up his or her mind about who will be selected for an internal position. But an internal job posting and subsequent interviews have shown another equally qualified candidate. Who should be offered the position?

Part 2 Meeting Human Resources Requirements98

Skills Inventories Skills inventories are a useful recruitment tool. Although such inventories may be used instead of job postings, they are more often used as a supplement. Whether computerized or manual, referring to such inventories ensures that qualified internal candidates are identified and considered for transfer or promotion when opportunities arise.

Limitations of Recruiting from Within It is rarely possible to fill all non-entry-level positions with current employees. Middle- and upper-level positions may be vacated unexpectedly, with no inter- nal replacements yet qualified or ready for transfer or promotion; or the job may require such specialized training and experience that there are no potential internal replacements. Even in firms with a policy of promoting from within, potential external candidates are increasingly being considered to meet strategic objectives. Hiring someone from outside may be preferable in order to acquire the latest knowledge and expertise or to gain new ideas and revitalize the depart- ment or organization.31

Advantages • Provides every qualified employee with a chance for a transfer or promotion. • Reduces the likelihood of special deals and favouritism. • Demonstrates the organization’s commitment to career growth and development. • Communicates to employees the organization’s policies and guidelines regarding promotions

and transfers. • Provides equal opportunity to all qualified employees.

Disadvantages • Unsuccessful job candidates may become demotivated, demoralized, discontented, and

unhappy if feedback is not communicated in a timely and sensitive manner. • Tensions may rise if it appears that a qualified internal candidate was passed over for an

equally qualified or less qualified external candidate. • The decision about which candidate to select may be more difficult if there are two or

more equally qualified candidates.

FIGURE 4.6 Advantages and Disadvantages of Job Posting

RPC Identifies the potential sources of internal and external qualified candidates

RECRUITING FROM OUTSIDE THE ORGANIZATION

Unless there is a workforce reduction, even in firms with a promote-from-within policy, a replacement from outside must eventually be found to fill the job left vacant once all eligible employees have been given the opportunity for transfer or promotion. In addition, most entry-level positions must be filled by external candidates (by definition, there is no one to promote up to an entry-level posi- tion). The advantages of external recruitment include the following:

99Chapter 4 Human Resources Planning and Recruitment

• the generation of a larger pool of qualified candidates, which may have a positive impact on the quality of the selection decision

• the availability of a more diverse applicant pool, which can assist in meeting employment equity goals and timetables

• the acquisition of skills or knowledge not currently available within the organization or the introduction of new ideas and creative problem-solving techniques

• the elimination of rivalry and competition caused by employees jockeying for transfers and promotions, which can hinder interpersonal and interdepart- mental cooperation

• the potential cost savings resulting from hiring individuals who already have the required skills, rather than providing extensive training

Planning External Recruitment If the external recruitment method(s) is chosen, several factors should be consid- ered in addition to the constraints mentioned earlier. The type of job to be filled has a major impact on the recruitment method selected. For example, most firms normally rely on professional search firms for recruiting executive-level employ- ees. In contrast, internet advertising is commonly used for recruiting other salaried employees.

Yield ratios help to indicate which recruitment methods are the most effective at producing qualified job candidates. A yield ratio is the percentage of appli- cants that proceed to the next stage of the selection process. A recruiting yield pyramid, such as that shown in Figure 4.7, can be devised for each method by calculating the yield ratio for each step in the selection process.

The hypothetical firm in Figure 4.7 typically hires 50 entry-level accountants each year. As the figure illustrates, of six leads generated through college/university recruiting efforts, one applicant is invited to attend an interview. Given these ratios, the firm knows that using this particular recruitment method, 1 200 leads must be generated to hire 50 new accountants.

The average number of days from when the company initiates a recruitment method to when the successful candidate begins to work is called time-lapse data. Assume that the accounting company in the above example found the fol- lowing scenario: six days elapsed between submission of application forms and

yield ratio The percentage of applicants who proceed to the next stage of the selection process.

New hires

Offers made (100:50 = 2:1)

Candidates interviewed (150:100 = 3:2)

Candidates invited (200:150 = 4:3)

Leads generated (1200:200 = 6:1)

50

100

150

200

1200

FIGURE 4.7 Recruiting Yield Pyramid

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résumés to invitation for an interview; five days then passed from invitation to actual interview; five days from interview to job offer; six days from job offer to acceptance; and 23 days from acceptance of job offer to commencement of work. These data indicate that, using on-campus recruiting, the firm must initi- ate recruitment efforts at least 45 days before the anticipated job opening date. Calculating time-lapse data for each recruitment method means that the amount of lead time available can be taken into account when deciding which strategy or strategies would be most appropriate.

External Recruitment Methods Many methods of recruiting from the external labour market are used. A 2010 study by Right Management of 5 858 job seekers found that the most success- ful way to find a job was through traditional networking, followed by online job boards. The results of the study are highlighted in Figure 4.8. Traditional networking includes employee referrals, former employees who have remained in contact with the organization, concentrated job fairs based on relationships formed with educational institutes, professional and trade associations, labour organizations, and military personnel. Online job boards include traditional online job boards, corporate websites, and government-initiated job boards.

Traditional Networking

1. Employee Referrals Some organizations encourage applications from friends and relatives of current employees by mounting an employee referral campaign. Openings are announced in the company’s intranet or newsletter along with a request for referrals. Cash awards or prizes may be offered for referrals that cul- minate in a new hire. Because no advertising or agency fees are involved, paying referral rewards still represents a low recruiting cost.

Note: Often candidates rely on more than one method (for example, networking leads to an awareness about a job posted online in a colleague’s com- pany). The above survey forced respondents to identify only one tool that they used to find their most recent job.

Source: Survey by Right Management, published in “Networking Gets the Job Done,” Canadian HR Reporter (August 15, 2011), p. 4. Reprinted with permission.

0% 10 20 30 35%

35%

24%

13%

10%

5%

3%

5 15 25

Newspaper, classified ads

Online network

Cold calls

Agencies, recruiters

Online job boards

Traditional networking

FIGURE 4.8 Most Successful Ways to Find a Job in Canada, 2010

101Chapter 4 Human Resources Planning and Recruitment

The disadvantages associated with employee referrals include the poten- tial for inbreeding and nepotism to cause morale problems and dissatisfaction among employees whose referrals are not hired. Perhaps the biggest drawback, however, is that this method may result in systemic discrimination.

2. Former Employees In these times of talent shortage and diminishing employee loyalty, some organizations are making efforts to keep in touch with former employees who may be interested in rejoining the organization in future. Orga- nizations such as Microsoft, Ernst & Young, and Procter & Gamble established alumni networks that offer benefits such as healthcare, job boards, and alumni parties. About 25 percent of hires at the manager level and above at Microsoft are returning employees, known as “boomerangs.”32

3. Educational Institutions Recruiting at educational institutions is extremely effective when candidates require formal training but need relatively little full- time work experience. Most high schools, colleges, and universities have counsel- ling centres that provide job-search assistance to students through such activities as skills assessment testing and workshops on résumé preparation and interview strategies. High schools can provide recruits for entry level jobs. Colleges and universities often host career fairs at multiple points throughout the academic year; some are generic in nature while others are more focused (e.g., a hospitality career fair).

Cooperative (co-op) education and field placement programs have become increasingly popular in Canada. These programs require students to spend a specified amount of time working in organizations as an integral part of the academic program, thereby gaining some hands-on skills in an actual work set- ting. Co-op programs are offered in some high schools, as well as in colleges and universities.

Summer internship programs hire college or university students to complete summer projects between their second-last and final year of study. Their perfor- mance is assessed, and those who are judged to be superior are offered perma- nent positions following graduation. Other firms offer internship opportunities to graduates or students close to graduation, thereby enabling them to acquire hands-on skills to supplement their education. As with student internships, out- standing performers are often offered full-time employment at the end of the program. It is now possible for firms to recruit graduate interns online through Career Edge, an organization committed to helping university, college, and high school graduates gain essential career-related experience through internships. Career Edge uses the internet as its sole means of bringing companies and youth together. More than 12 000 young Canadians have started their careers through the program in more than 1 000 organizations. Within a few months of complet- ing their internship, nearly 80 percent of interns have found permanent employ- ment with competitive salaries, and nearly 60 percent of the interns are hired by host organizations on a full-time basis.33

Internship, co-op, and field placement programs can produce a win-win result. The employer is provided with an inexpensive opportunity to assess potential employees while benefiting from the current knowledge and enthusi- asm of bright, talented individuals. Because co-op students and interns have been exposed to the organization, they are less likely to leave shortly after permanent hire than recruits with no previous exposure to the firm.34 Recognizing these

nepotism A preference for hiring relatives of current employees.

Career Edge www.careeredge.ca

Job Postings (Student Job Magazine) www.jobpostings.ca

Halifax Career Fair www.halifaxcareerfair.com

Part 2 Meeting Human Resources Requirements102

Canadian Forces Liaison Council (CFLC) www.cflc.forces.gc.ca

benefits has made such programs a major recruitment method in many organizations.

4. Open Houses and Job Fairs Another popular recruitment method involves holding an open house. Open houses have also been the choice of corporations trying to draw out scarce talent in an ultra- tight job market. A similar recruitment method involves holding a job fair onsite. At such events, recruiters share information about the organization and job opportunities with those attending in an informal, relaxed setting. Some organizations are now holding job fairs online (known as virtual job fairs) to connect with a wider geographical audience. Top prospects are invited to visit the firm or to return at a later date for a more in-depth assessment.

5. Professional and Trade Associations Professional and trade associations can be extremely helpful when recruiters are seeking individuals with specialized skills in such fields as IT, engineering, HR, and accounting, particularly if experience is a job requirement. Many such associations conduct ongoing placement activities on behalf of their members, and most regularly send their members

newsletters or magazines in which organizations can place job advertisements. Such advertising may attract individuals who hadn’t previously thought about changing jobs, as well as those actively seeking employment. For example, the Human Resources Professionals Association (HRPA) in Ontario has an employ- ment service called the Hire Authority. For a nominal fee, employers can post HR-related employment opportunities on the HRPA website, where they can be viewed by HRPA members. Additionally, employers can pay for access to an online database of member résumés and can search, sort, and pre-screen qualified candidates for vacant positions.35

6. Labour Organizations Some firms, particularly in the construction industry, obtain recruits through union hiring halls. The union maintains a roster of members (typically skilled tradespeople, such as carpenters, pipefitters, welders, plumbers, and electricians), whom it sends out on assignment as requests from employers are received. Once the union members have completed their con- tracted work at one firm, they notify the union of their availability for another assignment.

7. Military Personnel Military reservists are also potential recruits. The Canadian Forces Liaison Council (CFLC) is responsible for promoting the hiring of reservists by civilian employers. The CFLC also encourages civilian employers to give reservists time off for military training. Reserve force training develops skills and attributes sought after in the civilian workforce, such as leadership, planning, coordination, and teamwork.36 Many organizations—such as Home Depot Canada and Énergie New Brunswick Power—have recognized the value of such leave and have joined the 4 700 organizations in Canada that have signed a statement of support for the reserve forces with the CFLC.37 The CFLC’s Reserve Employment Assistance Program (REAP) allows employers to place job post- ings for skilled personnel at more than 300 military units across the country at no charge.38

Internships, co-ops, and field placements allow interns the opportunity to acquire hands-on skills to supplement their education and offer employers the opportunity to assess the performance of potential recruits.

CA Source www.casource.com

Hire Authority www.hireauthoritycanada.com

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Online Recruiting The majority of companies now use online recruitment, and a majority of Canadian workers use the internet to research prospective employers, review job postings, complete online applications, and post their résumés. The internet provides recruiters with a large audience for job postings and a vast talent pool. Online recruiting can involve accessing one or more internet job boards, using a corporate website, or using social networking sites.

1. Internet Job Boards Online job boards are fast, easy, and convenient, allowing recruiters to search for candidates for positions in two ways. First, companies can post a job opening online (often for a fee) and customize it by using cor- porate logos and adding details about the company benefits and culture. Job seekers can search through the job postings, often by job type, region, or other criteria, and apply for the position online through the job board. The popularity of internet job boards among job seekers is high because of the number of job postings available on one site.

Second, job seekers can post their résumés on job boards, and firms can search the database. Canada has hundreds of job boards, ranging from the two largest, Workopolis and Monster, to many smaller job boards serving specific fields from tourism to medicine.39 Job board meta-crawlers enable job seekers to search multiple job boards with one query.

The advantages of job boards include candidate assistance with self-assessment and résumé writing, and pre-screening assistance for recruiters. One problem with internet job boards is their vulnerability to privacy breaches. Fake job postings can lead to identity theft from submitted résumés, and résumés are sometimes copied onto competing job boards or other sites.40 As a result, job boards are now providing tips for job seekers on maintaining privacy and confidentiality.41

In addition, the disclosure of reference persons names and contact information on online resumes is problematic and no longer recommended.

2. Corporate Websites With the overabundance of applicants found on most online job boards, employers are now using their own corporate websites to recruit. Career pages provide a single platform for recruitment that promotes the employer brand, educates the applicant about the company, captures data about the applicant, and provides an important link to job boards where a com- pany’s positions may be advertised.42 Virtual workplace tours using video can be provided to attract top talent aligned with the employer brand.43 Corporate websites also help the company create a pool of candidates who have already expressed interest in the organization.44

Active job seekers are not the only potential future employees who visit cor- porate websites. Customers, investors, and competitors also visit them.45 Many of those visiting career websites are “happily employed” individuals (known as “passive” job seekers) who are likely to arrive at the career site after browsing the company’s main pages for other reasons, such as research into products or services. Therefore, it is important that a firm have a prominently positioned link on the homepage leading directly to the careers section, to make it easy for pas- sive job seekers to pursue job opportunities within the company.46

Jobster www.jobster.com

Nicejob.ca www.nicejob.ca

Canadajobs.com www.canadajobs.com

Canjobs.com www.canjobs.com

Monster Canada www.monster.ca

Workopolis www.workopolis.com

CareerBuilder www.careerbuilder.ca

Part 2 Meeting Human Resources Requirements104

Job Bank www.jobbank.gc.ca

Agency Recruiters

1. Human Resources and Skills Development Canada (HRSDC) Through vari- ous programs, including those for youth, Aboriginals, and persons with dis- abilities, HRSDC helps unemployed individuals find suitable jobs and helps employers locate qualified candidates to meet their needs—at no cost to either party. The Job Bank is the largest web-based network of job postings available to Canadian employers free of charge, and it provides access to 700 000 new jobs each year, with more than 40 000 jobs at any given time and up to 2 000 new jobs posted every day. HRSDC also operates Job Match, a web-based recruitment tool that can match employers’ skill requirements with individuals’ skill sets. Job seekers receive a list of employers with a matching job vacancy, and employers receive a list of qualified candidates.47

2. Executive Search Firms Employers use executive search firms to fill critical positions in a firm, usually middle- to senior-level professional and managerial positions. Such firms often specialize in a particular type of talent, such as execu- tives, sales, scientific, or middle-management employees. They typically know and understand the marketplace, have many contacts, and are especially adept at contacting qualified candidates who are employed and not actively looking to change jobs (which is why they have been given the nickname “headhunters”). Generally, one-third of the fee is payable as a retainer at the outset. Compared with the value of the time savings realized by the client firm’s executive team, however, such a fee often turns out to be insignificant.

Using this recruitment method has some potential pitfalls.48 Executive search firms cannot do an effective job if they are given inaccurate or incomplete infor- mation about the job or the firm. It is therefore essential for employers to explain in detail the type of candidate required—and why. A few headhunters are more salespeople than professionals, and they are more interested in persuading the employer to hire a candidate than in finding one who really meets the job speci- fications. Some firms have also been known to present an unpromising candi- date to a client simply to make their one or two other prospects look that much better. The Association of Canadian Search, Employment, and Staffing Services (ACSESS) sponsors the Certified Personnel Consultant (CPC) designation, which signifies that recruiters have met specific educational and testing requirements and confirms an individual’s commitment to best industry practices.49

3. Private Employment Agencies Private employment agencies are often called on to provide assistance to employers seeking clerical staff, functional specialists, and technical employees. The “staffing” business has grown into a $6 billion industry that places hundreds of thousands of job seekers each year.50 Generally, it is the employer who pays the agency fee. It is not uncommon for employers to be charged a fee equal to 15 to 30 percent of the first year’s salary of the individual hired through agency referral. This percentage may vary depending on the volume of business provided by the client and the type of employee sought.

These agencies take an employer’s request for recruits and then solicit job seekers, relying primarily on internet job boards, advertising, and walk-ins/ write-ins. Employment agencies serve two basic functions: (1) expanding the applicant pool and (2) performing preliminary interviewing and screening.

Training and Careers www.jobsetc.gc.ca

Association of Canadian Search, Employment, and Staffing Services (ACSESS) www.acsess.org

105Chapter 4 Human Resources Planning and Recruitment

Specific situations in which an employment agency might be used for recruiting include the following:

• The organization does not have an HR department or does not have anyone with the requisite time and/or expertise.

• The firm has previously experienced difficulty in generating a pool of quali- fied candidates for the position or a similar type of position.

• A particular opening must be filled quickly.

• There is a desire to recruit a greater number of designated group members than the firm has been able to attract on its own.

• The recruitment effort is aimed at reaching individuals who are currently employed and might therefore feel more comfortable answering ads placed by an employment agency and subsequently dealing with one.

It should be noted, however, that the amount of service provided varies widely, as does the level of professionalism and the calibre of staff. Although most agencies screen applicants carefully, some simply provide a stream of appli- cants and let the client’s HR department staff do the screening. Agency staff is usually paid on a commission basis, and their desire to earn a commission may occasionally compromise their professionalism (for example, encouraging job seekers to accept jobs for which they are neither qualified nor suited).

Cold Calls: Walk-Ins and Write-Ins Individuals who go to organizations in person to apply for jobs without refer- ral or invitation are called walk-ins. People who submit unsolicited résumés to organizations are known as write-ins. Walk-ins and write-ins are an inexpensive recruitment method. Their résumés are generally screened by the HR depart- ment, and if an applicant is considered suitable, his or her résumé is retained on file for three to six months or passed on to the relevant department manager if there is an immediate or upcoming opening for which the applicant is qualified. Some organizations, such as RBC Financial Group, use computer databases to store the information found on the résumés and application forms of walk-in and write-in candidates. Whether the original document is paper based or sub- mitted online, it can be scanned and stored in databases for fast, easy access using a few key words.51

Online Networking Sites Many organizations are turning to social networking sites such as Facebook to find young, tech-savvy recruits. Some create virtual recruitment booths and others create a company profiles where they can post jobs and publicize their employer brand. Job seekers can become “friends” of potential employers and can upload their profiles, which contain more information than résumés, to the company site. Ernst & Young has used this approach—it has even established its own company social networking site for employees and alumni.52

The advantage of using social networking for recruit- ment purposes is the opportunity to connect with millions of other users at little or no cost. One disadvantage is the possibility of unhappy employees or customers posting negative comments on the site.53

Tips FOR THE FRONT LINE

An Ethical Dilemma Is it ethical to use personal information on social networking sites to assess job candidates?

Part 2 Meeting Human Resources Requirements106

Print Advertising To achieve optimum results from an advertisement, the following four-point guide should be kept in mind as the ad is being constructed: attract attention, develop interest, create desire, instigate action. There are two general types of newspaper advertisements: want ads and blind ads. Want ads describe the job and its specifications, the compensation package, and the hiring employer. Although the content pertaining to the job, specifications, and compensation is identi- cal in blind ads, such ads omit the identity and address of the hiring employer. Although many job seekers do not like responding to blind ads because there is always the danger of unknowingly sending a résumé to the firm at which they are currently employed, such ads do result in the opening remaining confidential.

Recruiting Non-Permanent Staff In recent years, many companies have increased their use of contingent work- ers to attain labour flexibility and acquire employees with special skills on an as-needed basis. In these firms, recruiters are spending more time seeking tem- porary (term, seasonal, casual) and contract workers and less time recruiting permanent staff.54 Two common sources of non-permanent staff are temporary help agencies and contract workers.

Temporary Help Agencies Temporary help agencies, such as Kelly Services, exist in major cities in Canada. They specialize in providing temporary workers to cover for employees who are

ill, on vacation, or on leave of absence. Firms also use temporary employees to handle seasonal work, peak workloads, and special projects for which no current employees have the time or exper- tise. Temporary workers (temps) are agency employees and are reassigned to another employer when their services are no longer required.

Temporary employees (temps) provide employers with three major benefits:

1. They cost much less than permanent employees, as they gener- ally receive less compensation than permanent staff. There are also savings related to the hiring and training costs associated with permanent employees. In fact, training has become the central investment in the business strategy of many temporary employment agencies. For example, Accountemps invests in the skills and training of employees after they have worked for a specified amount of time. This training includes online tutoring in software they may use on the job and tuition reimbursement for skills training.55

2. If a temp performs unsatisfactorily, a substitute can be requested immediately. Generally, a suitable replacement is sent to the firm within one business day.

3. Individuals who are working as temps but seeking full-time employment are often highly motivated, knowing that many firms choose full-time employees from the ranks of their top- performing temps.

want ad A recruitment ad describ- ing the job and its specifications, the compensation package, and the hiring employer. The address to which applications or résu- més should be submitted is also provided.

blind ad A recruitment ad in which the identity and address of the employer are omitted.

RPC Evaluates the relevance of alter- natives to recruitment (develop- ing, outsourcing, contingent workers, agencies, and so on)

The number of temporary and freelance workers is increasing all over the world. Freelancing allows employ- ers to match their job needs to independent workers who complete tasks on an as-needed basis.

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107Chapter 4 Human Resources Planning and Recruitment

Contract Workers Contract workers are employees who develop work relationships directly with the employer for a specific type of work or period of time.56 For example, Parc Aviation is a major supplier of contract workers to the airline industry. Airline organizations benefit from the services of contract engineers by having them cover seasonal or unplanned peaks in business, carry out special tasks or proj- ects, and reduce the necessity for airlines to downsize permanent staff during cyclical downturns.57

Many professionals with specialized skills become contract workers, includ- ing project managers, accountants, and lawyers. Some have consciously made a

decision to work for themselves; others have been unable to obtain full-time employment in their field of expertise or have found themselves out of a full-time job because of cutbacks. Thus, some want to remain self-employed; others work a contract while hoping to obtain a full-time position eventually. Some firms hire former employees (such as retirees) on a contract basis.

contract workers Employees who develop work relationships directly with the employer for a specific type of work or period of time.

An Ethical Dilemma Is it ethical or socially responsible to keep extending the con- tracts of contract workers, rather than hiring them as perma- nent employees, to avoid the cost of employee benefits?

Prime50 www.prime50.com

RECRUITING A MORE DIVERSE WORKFORCE Recruiting a diverse workforce is not just socially responsible—it’s a necessity. As noted previously, the composition of Canada’s workforce is changing dra- matically. Trends of particular significance include the increasing necessity of hiring older employees, a decrease in the availability of young workers, and an increase in the number of women, visible minorities, Aboriginal people, and per- sons with disabilities in the workforce.

Attracting Older Workers Hiring and retaining older employees has significant benefits. These workers typically have high job satisfaction, a strong sense of loyalty and organizational commitment, a strong work ethic, good people skills, and a willingness to work in a variety of roles, including part time.58

To make a company attractive to older workers, it is important to deal with stereotypical attitudes toward older workers through education, ensure that HR policies do not discourage recruitment of older workers, develop flexible work arrangements, and redesign jobs to accommodate decreased dexterity and strength. A 2008 Conference Board of Canada study found that the most com- mon recruitment strategy for older workers was rehiring former employees and retirees. Less than 20 percent of Canadian companies use recruitment campaigns directed specifically at mature workers.59

Attracting Younger Employees Many firms are taking steps to address the pending shortage of younger employees.

Part 2 Meeting Human Resources Requirements108

Younger members of the workforce are part of the Generation X and Generation Y cohorts. To appeal to Generation X-ers, it is important for the company to stress that employees will be able to work independently and that work–life balance will be supported.

Recruiting Designated Group Members Most of the recruitment methods already discussed can be used to attract mem- bers of designated groups (Aboriginal people, women, visible minorities, and persons with disabilities), provided that the employer’s commitment to equality and diversity is made clear to all involved in the recruitment process—be it the employees who are asked for referrals or private employment agencies. This can also be stressed in all recruitment advertising. Alternative publications targeted at designated group members should be considered for advertising, and linkages can be formed with organizations and agencies specializing in assisting desig- nated group members. Specific examples follow.

The Aboriginal Human Resource Council, head- quartered in Saskatoon, Saskatchewan, sponsors the Aboriginal Inclusion Network, which offers a job board, résumé database, and other tools to hire, retain, and promote Aboriginal talent. The Inclusion Network is linked to 350 Aboriginal employment centres across Canada, and the number of job seekers on the network increased 70 percent from 2009 to 2011.60

The Society for Canadian Women in Science and Technology (SCWIST) is a not-for-profit, volunteer organization aimed at improving attitudes and stereo- types about and assisting women in scientific, techno- logical, and engineering careers. Employers can access valuable resources such as websites, employment agen- cies, and publications to attract professional women for employment opportunities in industries where they generally have a low representation.61

Attracting the Younger Generation The younger generation aims to take advantage of every form of technology to make their job search successful and easier. Certain key words attract these individuals to an organization’s ads when they do online searches. The younger generation likes short, snappy copy that gets right to the point of what they will be doing. But of equal or more importance, the ad needs to adver- tise the culture of the organization as it relates to

the values of this generation. The ads should include statements such as “fast-paced environment,” “indi- vidual contribution,” “work–life balance,” “do it your way,” “opportunity to grow,” “no rules,” and “state- of-the-art technology.” Of course, organizations should list these kinds of features in the ads only if they truly offer them.

Source: Based on R. Throckmorton and L. Gravett, “Attracting the Younger Generation,” Canadian HR Reporter (April 23, 2007).

STRATEGIC HR

After struggling to restart his career in Canada, Sibaway Issah found the assistance he needed with Career Edge, a not-for-profit agency that links qualified immigrants with possible employers.

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WORKink is Canada’s most powerful online career development and employment portal for Canadians with disabilities. The WORKink site offers a full complement of employment and recruitment resources and services for job seekers with disabilities and for employers looking to create an inclusive work- place. WORKink is sponsored by the Canadian Council on Rehabilitation and Work. Employers can post job openings free of charge, browse résumés of people with disabilities, or access information on how to adapt the work envi- ronment to accommodate people with disabilities in their region.62

The Ontario Ministry of Community and Social Services sponsors a program called Paths to Equal Opportunity intended to provide links to information on removing and preventing barriers so that people with disabilities can work, learn, and play to their fullest potential. In conjunction with the Canadian Abilities Foundation, the program publishes a resource booklet called Abilities @ Work, which provides specific information to employers who want to find out about recruiting, interviewing, hiring, and working with people with disabilities. It also provides information to employees and job seekers with disabilities who want information on looking for work, accommodation in the workplace, and main- taining employment.

Another useful tool is the guidebook Tapping the Talents of People with Disabilities: A Guidebook for Employers, which is available through the Conference Board of Canada. More information on hiring people with disabili- ties is provided in the Workforce Diversity box.

Aboriginal Human Resource Council http://aboriginalhr.ca

Canadian Council on Rehabilitation and Work www.ccrw.org

WORKink www.workink.com

HireImmigrants.ca www.hireimmigrants.ca

The Disconnect in Recruiting People with Disabilities The good news is that employers want to hire people with disabilities, and qualified candidates are available. But putting employers and job seekers together needs improved coordination to create more success stories. Inclusiveness is a competitive advantage that lets an organization better connect with a diverse community and customer base. Inclusiveness provides access to a larger pool of strong job candidates in a time of skills shortages and enhances an organization’s reputation as an employer of choice.

The good news is that a small number of disabil- ity organizations have made significant inroads in their regions by using employer partnerships. One example is the Dartmouth Work Activity Society in Nova Scotia,

which started its new approach with just a single employer “partner” who was highly satisfied with the services provided. EmployAbilities, a full-time service agency serving Edmonton and northern Alberta for more than 35 years, has also launched a partnership-building strategy. A unique feature of the agency’s approach is its partnership with the local chamber of commerce through which it offers advice on disability issues to employers.

So why aren’t more employers tapping into the wealth of human potential in people with disabilities? After all, as a group they make up roughly 13 percent of the working-age population.

Source: Based on A. Prost, “Successful Recruiting from an Untapped Source,” Canadian HR Reporter (January 16, 2006), pp. 11–12.

WORKFORCE DIVERSITY

Part 2 Meeting Human Resources Requirements110

1. Human resources planning (HRP) is the process of reviewing HR requirements to ensure that the organization has the required number of employ- ees with the necessary skills to meet its strategic goals. Forecasting future labour demand and supply is a critical element of the strategic plan- ning process. HRP and strategic planning become effective when a reciprocal and interdependent relationship exists between them.

2. Four quantitative techniques for forecasting future HR demand are trend analysis, ratio analysis, scat- ter plots, and regression analysis. Two qualitative techniques used to forecast demand are the nomi- nal group technique and the Delphi technique.

3. Four strategies used to forecast internal HR sup- ply are Markov analysis, skills and management inventories, replacement charts and summaries, and succession planning. Forecasting external HR supply requires an assessment of general eco- nomic conditions, labour market conditions, and occupational labour conditions.

4. Strategies to manage a labour surplus include a hiring freeze; downsizing through attrition; early retirement buyout programs; reduced hours through job sharing, part-time work, work shar- ing, or reduced workweeks; leaves of absence; and termination of employment.

5. Strategies to manage a human resources shortage include internal and external solutions, such as hiring employees, employee transfers and promo- tions, and retention programs.

6. Recruitment is the process of searching out and attracting qualified job applicants. It begins with the identification of a position that requires staff- ing and is completed when résumés or completed application forms are received. In order to manage the increasing talent shortage, proactive employ- ers are trying to obtain a competitive advantage in recruitment by establishing themselves as employ- ers of choice through employer branding.

7. The recruitment process has four steps: First, job openings are identified through HR plan- ning or manager request. Second, the job description and job specifications are reviewed to determine the job requirements. Third, appro- priate recruiting source(s) and method(s) are chosen. Fourth, using these strategies, a pool of qualified candidates is generated.

8. Application forms have been largely replaced by online applications, on which candidates provide information on their education and experience, a brief overview of past career progress, and other information that can be used to predict whether an applicant will succeed on the job.

9. Job posting is the process of notifying exist- ing employees about vacant positions. Human resources records may indicate appropriate applicants for vacant positions. Skills invento- ries may provide even better information.

10. External recruitment methods include traditional networking, online job boards, agencies, recruit- ers, cold calls, online networks, and print ads.

11. Two strategies for obtaining non-permanent staff include using temporary help agencies and hiring contract workers.

12. Recruiting a diverse workforce is a necessity, given the shrinking labour force. In particular, recruiters are trying to attract older workers, younger workers, women, visible minorities, Aboriginal people, and people with disabilities.

Chapter SUMMARY

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

111Chapter 4 Human Resources Planning and Recruitment

Review and Discussion QUESTIONS

1. Describe the costs associated with a lack of or inadequate HRP.

2. After analyzing the human resources implications of an organization’s strategic plans, what are the three subsequent processes involved in HRP?

3. Discuss the pros and cons of five of the approaches to dealing with a labour surplus from both the organization and employee perspective.

4. Differentiate between replacement charts and succession plans, and explain in which situation each is preferred.

5. Discuss various methods of easing the burden of a layoff or termination.

6. Discuss the advantages and disadvantages of recruiting from within the organization. Identify and describe the three tools that are used in this process.

7. Brainstorm the advantages of external recruit- ment. Discuss the risks associated with external recruiting.

8. Explain the difference between an internet job board and a corporate career website.

9. Under what circumstances should a private employment agency be used?

10. Describe the advantages of using online applica- tion forms or résumé repositories as part of the recruitment process.

ratio analysis (p. 85) recruiter (p. 93) recruitment (p. 93) reduced workweek (p. 90) regression analysis (p. 86) replacement charts (p. 80) replacement summaries (p. 80) scatter plot (p. 85) severance package (p. 91) skills inventories (p. 79) staffing table (p. 88) succession planning (p. 80) supplemental unemployment benefits (SUBs) (p. 91) survivor syndrome (p. 91) termination (p. 91) transfer (p. 92) trend analysis (p. 85) want ad (p. 106) work sharing (p. 90) yield ratio (p. 99)

attrition (p. 90) biographical information blank (BIB) (p. 96) blind ad (p. 106) contract workers (p. 107) Delphi technique (p. 88) early retirement buyout programs (p. 90) employer branding (p. 94) environment scanning (p. 77) hiring freeze (p. 90) human capital theory (p. 96) human resources planning (HRP) (p. 76) job posting (p. 97) job sharing (p. 90) layoff (p. 90) leave of absence (p. 91) management inventories (p. 79) Markov analysis (p. 81) nepotism (p. 101) nominal group technique (p. 87) promotion (p. 92)

Key TERMS

Part 2 Meeting Human Resources Requirements112

any other factors that seem to play a role in the choice of forecasting techniques used?

2. Form teams of three or four people. Your instructor will assign you a position on the fol- lowing statement: “All employees in an organiza- tion should be aware of their personal standing with respect to replacement charts and suc- cession planning.” Formulate your arguments to support your assigned position and then debate the statement with an opposing team, as instructed.

1. Contact the HR manager at a firm in your area and find out whether the firm uses any of the following: (a) skills/management inventories, (b) replacement charts or summaries, and (c) a succession plan. Prepare a brief summary of the information gathered. Once you have completed these tasks, form a group with several of your classmates. Share your findings with the group members. Were there similarities across firms? Did company size seem to make a difference in terms of strategies used for forecasting the supply of internal candidates? Can you identify

Experiential EXERCISES

4. What potential problems may result if the employer branding value proposition presented during the recruitment process is not reinforced once the new recruit is working for the organiza- tion? What could organizations do to avoid this situation?

5. What potential problems could be created by offering referral bonuses to existing employees?

6. As the labour supply gets tighter and tighter, would you be in favour of loosening require- ments for foreign-trained professionals (for example, doctors, professors, accountants, engineers) to become immediately qualified in Canada? Why or why not? Identify the underly- ing assumptions in the position you took.

7. What are some of the specific reservations that a 30-year-old candidate might have about applying for a job that requires managing a workforce that is on average 10 years older than he or she is?

8. Assume you are the HR manager in a highly homogenous company that now wants to better reflect the diversity of the target client group in its employee population. What must you con- sider as you think about implementing your new recruitment strategy?

1. A number of quantitative and qualitative tech- niques for forecasting human resources demand were discussed in this chapter. Working in groups, identify which strategies would be most appropriate for (a) small versus large companies, (b) industries undergoing rapid change, and (c) businesses/industries in which there are seasonal variations in HR requirements.

2. Suppose that it has just been projected that, because of a number of technological innova- tions, your firm will need 20 percent fewer clerical employees within the next three years. There are currently 122 clerical positions in the company, split between three departments of equal size. Retirements at this level are pro- jected to be roughly 2 percent per year. Annual voluntary turnover and involuntary turnover for Department A is 2 percent and 5 percent, respec- tively; Department B is 3 percent and 3 percent; and Department C is 5 percent and 0 percent. Do you project a labour shortage or surplus in the next three years for clerical positions? What actions would you take in this situation?

3. Suppose that you are the HR manager at a firm at which a hiring freeze has just been declared. The plan is to downsize through attrition. What steps would you take to ensure that you reap the advantages of this strategy while minimizing the disadvantages?

Critical Thinking QUESTIONS

113Chapter 4 Human Resources Planning and Recruitment

3. Go to your university’s or college’s career centre and gather information on all the services they provide. How many companies come to recruit students through the centre each year? What ser- vices does the centre provide to employers seeking to hire graduating students? Employers seeking to hire summer students? Employers seeking to hire students for internships?

4. Given the importance of networking to recruit- ment success, organize the class around core jobs that students would like to have. In each group, brainstorm sources of networking. Poll the group to determine how many people in the group are taking advantage of each available network. Highlight reasons for low involvement and brainstorm ideas about how these challenges can be overcome.

5. Considering the current economic situation and using the following list of jobs, identify all of the

CBC To view the CBC videos, read a summary, and answer discussion questions, go to MyManagementLab.

sources that could be used to recruit qualified applicants:

• registered nurses to work in the critical-care unit of a new regional hospital

• carpenters to work on a new home building project

• chief financial officer for an international engineering firm with a head office located in Vancouver

• retail sales associates to work in an urban clothing chain

• customer service representatives to work in a bank branch

• bilingual administrative assistants for a Canadian financial services company operating internationally

• Analyzes position and competency requirements to establish selection criteria

• Supports managers in the selection of candidates

• Establishes screening and assessment procedures

• Evaluates the effectiveness of selection processes, tools, and outcomes

• Determines the appropriate selection tools and develops new tools as required

• Administers a variety of selection tools, including tests, interviews, reference checks, and so on

• Establishes appointment procedures for candidates selected through the recruit- ment process, ensuring that conditions of employment are documented and consistent with established policies

• Supports managers in the negotiation of terms and conditions of employment

REQUIRED PROFESSIONAL CAPABILITIES (RPC)LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

DEFINE selection and DISCUSS its strategic importance.

DEFINE reliability and validity and EXPLAIN their importance in selection techniques.

DESCRIBE at least four types of testing used in selection and ANALYZE the conflicting legal concerns related to alcohol and drug testing.

DESCRIBE the major types of selection interviews by degree of structure, type of content, and manner of administration.

EXPLAIN the importance of reference checking, DESCRIBE strategies to make such checking effective, and ANALYZE the legal issues involved.

Selection5 CHAPTER

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Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

115Chapter 5 Selection

THE STRATEGIC IMPORTANCE OF EMPLOYEE  SELECTION

Selection is the process of choosing among individuals who have been recruited to fill existing or projected job openings. Whether considering current employees for a transfer or promotion or outside candidates for a first-time position with the firm, information about the applicants must be collected and evaluated. Selection begins when a pool of applicants has sub- mitted their résumés or completed application forms as a result of the recruit- ing process.

The selection process has important strategic signifi- cance. More and more managers have realized that the quality of the company’s human resources is often the single most important factor in determining whether the firm is going to survive and be successful in reach- ing the objectives specified in its strategic plan. Those individuals selected will be implementing strategic deci- sions and, in some cases, creating strategic plans. Thus, successful candidates must fit with the strategic direction of the organization. For example, if the organization is planning to expand internationally, language skills and international experience will become important selection criteria.

When a poor selection decision is made and the indi- vidual selected for the job is not capable of acceptable performance in the job, strategic objectives will not be met. In addition, when an unsuccessful employee must be terminated, the recruitment and selection process must begin all over again, and the successor must be properly oriented and trained. The “hidden” costs are frequently even higher, including internal disorganization and dis- ruption, and customer alienation. Recent research (as summarized in HR by the Numbers) identifies that while ideally selection should involve a clear process, in reality, the adoption and use of an appropriate selection process (as summarized in this chapter) may be problematic in many organization, often resulting in a number of hiring mistakes.

selection The process of choosing among individuals who have been recruited to fill existing or projected job openings.

Supply Challenges Although it is desirable to have a large pool of qualified recruits from which to select applicants, this is not always possible. Certain vacant positions may be subject to a labour shortage (based on job requirements, location, work environment, and so on), while other simultaneous vacant positions may be subject to a labour surplus (due to external environment factors, training and

of new hires are considered unsuccessful by the employer.1

times the annual salary is the estimated cost of turnover from a position.2

of new hires regret accepting the job offer.3

of new hires feel they did not receive an accurate description of

the job.4

of employers who feel new hire was unsuccessful blame over-reliance

on hiring manager’s evaluations.5

of employers who feel new hire was unsuccessful blame employee

for overselling skills.6

Hiring Mistakes ◀ 14%

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Part 2 Meeting Human Resources Requirements116

education levels, immigration patterns, and so on). A selection ratio is the ratio of the number of applicants hired to the total number of applicants available, as follows:

Number of Applicants Hired : Total Number of Applicants = Selection Ratio

A small selection ratio, such as 1:2, may be indicative of a limited number of applicants from which to select, and it may also mean low-quality recruits. If this is the case, it is generally better to start the recruitment process over again,

even if it means a hiring delay, rather than taking the risk of hiring an employee who will be a marginal performer at best.

A large selection ratio, such as 1:400, may be indica- tive that the job ad is too vague, that the organization’s HR team may need to automate the screening process, or that there is a need for more resources to find the right job candidate among the large number of applicants.

The Selection Process Most firms use a sequential selection system involving a series of successive steps—a multiple-hurdle strategy. Only candidates clearing a “hurdle” (selection techniques including pre-screening, testing, interviewing, and background/reference checking) are permitted to move on to the next step. Clearing the hurdle requires meeting or exceeding the minimum requirements established for that hurdle. Thus, only can- didates who have cleared all of the previous hurdles remain in contention for the position at the time that the hiring decision is being made.

To assess each applicant’s potential for success on the job, organizations typically rely on a number of sources of information. The number of steps in the selection process and their sequence vary with the organization. The types of selection instruments and screening devices used are also not standardized across organizations. Even within a firm, the number and sequence of steps often vary with the type and level of the job, as well as the source and method of recruitment. Figure 5.1 illustrates the steps commonly involved.

An Ethical Dilemma As the company recruiter, how would you handle a request from the CEO that you hire her son for a summer job, knowing that, given current hiring constraints, the sons and daughters of other employees will not be able to obtain such positions?

multiple-hurdle strategy An approach to selection involving a series of successive steps or hurdles. Only candidates clearing the hurdle are permitted to move on to the next step.

RPC Analyzes position and competency requirements to establish selection criteria

2. Selection testing 3. Selection interview

4. Background investigation/ reference checking

5. Supervisory interview and realistic job preview

1. Preliminary applicant screening

6. Hiring decision and candidate notification

FIGURE 5.1 Six Typical Hurdles in the Selection Process

selection ratio The ratio of the number of applicants hired to the total number of applicants.

117Chapter 5 Selection

At each step in the selection process, carefully chosen selection criteria must be used to determine which applicants will move on to the next step. It is through job analysis that the duties, responsibilities, and human requirements for each job are identified. By basing selection criteria on these requirements, firms can create a legally defensible hiring system.1 Individuals hired after thorough screen- ing against these carefully developed selection criteria (based directly on the job description and job specifications) learn their jobs readily, are productive, and generally adjust to their jobs with a minimum of difficulty.

Design Issues in Selection Designing an effective selection process involves composing a series of job- related questions to be asked of all applicants for a particular job. There are also a few job-related, candidate-specific questions. Designing the process involves the following five steps, the first two of which should occur before recruitment:2

1. Decide who will be involved in the selection process and develop selection criteria. Specifying selection criteria involves clarifying and weighting the information in the job description and job specifications and holding discus- sions among the interview-team members, especially those most familiar with the job and co-workers.

2. Specify musts and wants and weight the wants. Once agreed on, the selec- tion criteria should be divided into the two categories: musts and wants.3 Must criteria are those that are absolutely essential for the job, include a measurable standard of acceptability, or are absolute. There are often only two musts: a specific level of education (or equivalent combination of edu- cation and work experience) and a minimum amount of prior work experi- ence. These criteria can be initially screened, based on the applicants’ résumés or applications. The want criteria include skills and abilities that cannot be screened on paper (such as verbal skills) or are not readily measurable (such as leadership ability, teamwork skills, and enthusiasm), as well as qualifica- tions that are desirable but not critical.

3. Determine assessment strategies and develop an evaluation form. Once the must and want criteria have been identified, appropriate strategies for learn- ing about each should be specified. For some qualifications, especially those that are critically important, the team may decide to use several assessment strategies. For example, leadership skills might be assessed through behav- ioural questions, situational questions, a written test, and an assessment cen- tre. Once all want criteria have been agreed on and weighted, it becomes the basis for candidate comparison and evaluation.

4. Develop interview questions to be asked of all candidates. Questions should be developed for each KSA to be assessed during the interview. Job-knowledge questions and worker-requirements questions to gauge the applicants’ moti- vation and willingness to perform under prevailing working conditions, such as shift work or travel, should also be included.

5. Develop candidate-specific questions. A few open-ended, job-related questions that are candidate specific should be planned, based on each candidate’s résumé and application form.

must criteria Requirements that are absolutely essential for the job, include a measurable standard of acceptability, or are absolute and can be screened initially on paper.

want criteria Those criteria that represent qualifications that cannot be screened on paper or are not readily measurable, as well as those that are highly desirable but not critical.

RPC Supports managers in the selection of candidates

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Acquiring Employees and the Law The complete recruitment and selection procedure must comply with human rights legislation. All information collected from the time an ad is posted to the time that the selection decision is made must be free of both content and questions that would directly or indirectly classify candidates on the basis of any of the prohibited grounds under human rights legislation. For example, a potential employer cannot ask for the following: a photograph, information about illnesses, disabilities or workers’ compensation claims, or information that could lead to direct, intentional discrimination, such as age, gender, sexual orientation, marital status, maiden name, date of birth, place of origin, number of dependents, and so on.

If the process collects any information that is considered a prohibited ground for discrimination, an unsuccessful candidate may challenge the legality of the entire recruitment and selection process. In such cases, the burden of proof is on the employer. Thus, taking human rights legislation requirements into consideration when designing effective recruitment and selection procedures is imperative. A Guide to Screening and Selection in Employment in Appendix 5.1 provides helpful hints. Specific guidelines regarding questions that can and can- not be asked on application forms are available through the human rights com- missions in each jurisdiction.

Managing the process in a legally defensible way involves keeping the follow- ing guidelines in mind:

1. Ensure that all selection criteria and strategies are based on the job descrip- tion and the job specifications.

2. Do not ask questions that would violate human rights legislation, either directly or indirectly. Questions cannot be asked about candidates’ marital status, childcare arrangements, ethnic background, or workers’ compensa- tion history, for example.

3. Obtain written authorization for reference checking from prospective employees, and check references carefully.

4. Save all records and information obtained about the applicant during each stage of the selection process.

5. Reject applicants who make false statements on their application forms or résumés.

6. Treat all applicants in the same manner regardless of personal factors (e.g., gender, marital status). However, accommodation must be provided to appli- cants with disabilities (see the Workforce Diversity box).

RPC Establishes screening and assessment procedures

119Chapter 5 Selection

Initial applicant screening is generally performed by members of the HR department. Application forms and résumés are reviewed, and those can- didates not meeting the essential selection criteria are eliminated first. Then, the remaining applica- tions are examined and those candidates who most closely match the remaining job specifications are identified and given further consideration.

The use of technology is becoming increasingly popular to help HR professionals improve the ini- tial screening process. Almost all large firms or firms with high turnover use technological appli- cations to help screen large numbers of candidates and generate short lists of individuals who will move on to the next step in the selection process.

Principles for Assessment Accommodations When assessing persons with disabilities, those respon- sible for assessment should be guided by four princi- ples to determine accommodations: Principle 1: Provide all applicants with an equal opportu- nity to fully demonstrate their qualifications.

A disability may hinder a person from fully dem- onstrating his or her qualifications using a particular assessment instrument. Therefore, adjustments need to be made to either the administration procedures or the assessment instrument itself, so that the person is in a position to fully demonstrate his or her qualifications. Principle 2: Determine assessment accommodations on a case-by-case basis.

Three key elements must be considered when deter- mining appropriate accommodations: the nature and the extent of the individual’s functional limitation, the type of assessment instrument being used, and the nature and level of the qualification being assessed.

Principle 3: Do not alter the nature or level of the qualifica- tion being assessed.

For example, although providing additional time to complete a test could be appropriate when the qualifi- cation “knowledge of the organization’s mandate and its business” is assessed, providing additional time could be inappropriate for a test assessing the quali- fication “verify information rapidly and accurately.” In the latter case, the obtained result may not be representative of the applicant’s true ability to do the task rapidly. Principle 4: Base assessment accommodations on complete information.

To make appropriate decisions when determining assessment accommodations, there is a need to rely on complete information on the three elements mentioned earlier, justifying the case-by-case approach.

Source: Reproduced with the permission of the Public Service Commission of Canada.

WORKFORCE DIVERSITY

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More and more HR professionals are improving the initial screening process with the use of technology.

STEP 1: PRELIMINARY APPLICANT SCREENING

Part 2 Meeting Human Resources Requirements120

STEP 2: SELECTION TESTING Selection testing is a common screening device used by approximately two-thirds of Canadian organizations to assess specific job-related skills as well as general intelli- gence, personality characteristics, mental abilities, interests, and preferences.4 Testing techniques provide efficient, standardized procedures for screening large numbers of applicants. Several thousand psychological and personality tests are on the market.5

The Importance of Reliability and Validity Tests and other selection techniques are useful only if they provide reliable and valid measures.6 All reputable tests will provide information to users about the reliability and validity of the test.

Reliability The degree to which interviews, tests, and other selection procedures yield compa- rable data over time is known as reliability. Reliability is the degree of dependabil- ity, consistency, or stability of the measures used. For example, a test that results in widely variable scores when it is administered on different occasions to the same individual (for example, 60 percent, 82 percent, and 71 percent) is unreliable. Reliability also refers to the extent to which two or more methods yield the same results or are consistent. For example, applicants with high scores on personality tests for impulsivity or lack of self-control are correlated with the likelihood of fail- ing background checks due to criminal behaviour.7 Reliability also means the extent to which there is agreement between two or more raters (inter-rater reliability).

Another measure of the reliability of tests is internal consistency. For exam- ple, suppose a vocational interest test has 10 items, all of which are supposed to measure, in one way or another, the person’s interest in working outdoors. To assess internal reliability, the degree to which responses to those 10 items vary together would be statistically analyzed (which is one reason that tests often include questions that appear rather repetitive). Reliability can be diminished when questions are answered randomly, when the test setting is noisy or uncom- fortable, or when the applicant is tired or unwell.

Validity Validity, in the context of selection, is an indicator of the extent to which data from a selection technique, such as a test or interview, are related to or predic- tive of subsequent performance on the job. For example, high impulsivity is correlated with low productivity.8 Separate validation studies of selection tech- niques should be conducted for different subgroups, such as visible minorities and women, to assess differential validity. In some cases, the technique may be a valid predictor of job success for one group (such as Caucasian males) but not for other applicants, thereby leading to systemic discrimination.

Three types of validity are particularly relevant to selection: criterion-related, content, and construct validity.

Criterion-Related Validity The extent to which a selection tool predicts or sig- nificantly correlates with important elements of work behaviour is known as criterion-related validity. Demonstrating criterion-related validity requires prov- ing that those who exhibit strong sales ability on a test or in an interview, for example, also have high sales on the job, and that those individuals who do poorly on the test or in the interview have poor sales results.

reliability The degree to which interviews, tests, and other selection procedures yield comparable data over time; in other words, the degree of dependability, consistency, or stability of the measures used.

validity The accuracy with which a predictor measures what it is intended to measure.

differential validity Confirmation that the selection tool accurately predicts the performance of all possible employee subgroups, including white males, women, visible minorities, persons with disabilities, and Aboriginal people.

criterion-related validity The extent to which a selection tool predicts or significantly correlates with important elements of work behaviour.

121Chapter 5 Selection

Content Validity When a selection instrument, such as a test, adequately samples the knowledge and skills needed to perform the job, content validity is assumed to exist. The closer the content of the selection instrument is to actual samples of work or work behaviour, the greater the content validity. For example, asking a candidate for a secretarial position to demonstrate word processing skills, as required on the job, has high content validity.

Construct Validity The extent to which a selection tool measures a theoretical construct or trait deemed necessary to perform the job successfully is known as construct validity. Intelligence, verbal skills, analytical ability, and leader- ship skills are all examples of constructs. Measuring construct validity requires demonstrating that the psychological trait or attribute is related to satisfactory job performance, as well as showing that the test or other selection tool used accurately measures the psychological trait or attribute. As an example of poor construct validity, an accounting firm was selecting applicants for auditor posi- tions based on a test for high extroversion, when the job in fact required work- ing alone with data. A test to select applicants with high introversion would have had higher construct validity and would have helped to avoid the high turnover rate the firm was experiencing.9

Tests of Cognitive Abilities Ensuring the validity of selection tools when assessing candidates with disabili- ties may require accommodation of the disability. Some guidelines were pro- vided in the Workforce Diversity box on page 119. Included in the category of tests of cognitive abilities are tests of general reasoning ability (intelligence), tests of emotional intelligence, and tests of specific cognitive abilities, such as memory and inductive reasoning.

Intelligence Tests Intelligence (IQ) tests are tests of general intellectual abilities (also referred to as general mental abilities) and have been used since the end of World War I.10 They measure not a single “intelligence” trait, but rather a number of abilities, includ-

ing memory, vocabulary, verbal fluency, and numerical ability. An IQ score is actually a derived score, reflect- ing the extent to which the person is above or below the “average” adult’s intelligence score. Empirical research suggests that general mental ability is the strongest gen- eral predictor of job performance at one’s chosen occu- pation.11 Intelligence is often measured with individually administered tests, such as the Stanford-Binet test or the Wechsler test. Other IQ tests, such as the Wonderlic Personnel Test, can be administered to groups of people. These are relatively quick pen-and-paper or online tests that can be accessed for a nominal fee.

Emotional Intelligence Tests Emotional intelligence (EI) tests measure a person’s ability to monitor his or her own emotions and the emotions of others and to use that knowledge to guide thoughts and actions. Someone with a high emotional

content validity The extent to which a selection instrument, such as a test, adequately samples the knowledge and skills needed to perform the job.

construct validity The extent to which a selection tool measures a theoretical construct or trait deemed necessary to perform the job successfully.

intelligence (IQ) tests Tests that measure general intellectual abilities, such as verbal com- prehension, inductive reasoning, memory, numerical ability, speed of perception, spatial visualization, and word fluency.

RPC Evaluates the effectiveness of selection processes, tools, and outcomes

RPC Determines the appropriate selec- tion tools and develops new tools as required

General reasoning ability (intelligence), tests of emotional intelligence, and tests of specific cognitive abilities are all included in the category of tests of cognitive abilities.

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quotient (EQ) is self-aware, can control his or her impulses, is self-motivated, and demonstrates empathy and social awareness. Many people believe that EQ, which can be modified through conscious effort and practice, is actually a more important determinant of success than a high IQ. However, there is extremely lim- ited and somewhat highly controversial empirical evidence to support the impor- tance of EI in the workplace.12 Self-assessment EI tests include the Emotional Quotient Inventory (EQ-i), the EQ Map, the Mayer-Salovey-Caruso Emotional Intelligence Test (MSCEIT), and the Emotional Intelligence Questionnaire (EIQ). The Emotional Competence Inventory (ECI) is a 360-degree assessment in which several individuals evaluate one person to get a more complete picture of the individual’s emotional competencies.13

Specific Cognitive Abilities There are also measures of specific thinking skills, such as inductive and deduc- tive reasoning, verbal comprehension, memory, and numerical ability. Tests in this category are often called aptitude tests, since they purport to measure the applicant’s aptitude for the job in question, that is, the applicant’s potential to perform the job, once given proper training. An example is the test of mechani- cal comprehension illustrated in Figure 5.2. It tests the applicant’s understanding

emotional intelligence (EI) tests Tests that measure a person’s ability to monitor his or her own emotions and the emotions of others and to use that knowledge to guide thoughts and actions.

aptitude tests Tests that measure an individual’s aptitude or potential to perform a job, provided he or she is given proper training.

FIGURE 5.2 Two Problems from the Test of Mechanical Comprehension

Emotional Intelligence Consortium www.eiconsortium.org

Source: Sample Items from the Bennett Mechanical Comprehension Test. Copyright, 1942, 1967–1970, and 1980 by NCS Pearson, Inc. Reproduced with permission. All rights reserved.

123Chapter 5 Selection

of basic mechanical principles. It may therefore reflect a person’s aptitude for jobs—like that of machinist or engineer—that require mechanical comprehen- sion. Multidimensional aptitude tests commonly used in applicant selection include the General Aptitude Test Battery (GATB).

Tests of Motor and Physical Abilities There are many motor abilities that a firm might want to measure. These include finger dexterity, manual dexterity, speed of arm movement, and reaction time. The Crawford Small Parts Dexterity Test, as illustrated in Figure  5.3, is an example. It measures the speed and accuracy of simple judgment, as well as the speed of finger, hand, and arm movements. Other tests include the Stromberg Dexterity Test, the Minnesota Rate of Manipulation Test, and the Purdue Pegboard.

Tests of physical abilities may also be required.14 For example, some firms are now using functional abilities evaluations (FAE) to assist with placement decisions. An FAE, which measures a whole series of physical abilities—rang- ing from lifting, to pulling and pushing, sitting, squatting, climbing, and carry- ing—is particularly useful for positions with a multitude of physical demands, such as those of firefighters or police officers.15 Ensuring that physical abili- ties tests do not violate human rights legislation requires basing such tests on job duties identified through job analysis and a physical demands analysis, ensuring that the tests duplicate the actual physical requirements of the job, developing and imposing such tests honestly and in good faith, ensuring that those administering the tests are properly trained and administer the tests in a consistent manner, and ensuring that testing standards are objectively related to job performance.16

Hints TO ENSURE LEGAL COMPLIANCE

FIGURE 5.3 Crawford Small Parts Dexterity Test

Source: Photo of the Crawford Small Parts Dexterity Test. Copyright 1946, 1956, 1981 by NCS Pearson, Inc. Reproduced with permission. All rights reserved.

Part 2 Meeting Human Resources Requirements124

Measuring Personality and Interests A person’s mental and physical abilities are seldom sufficient to predict his or her job performance. Other factors, such as the person’s motivation and inter- personal skills, are important too. Personality and interest inventories are some- times used as predictors of such intangibles.

Personality tests can measure basic aspects of an applicant’s personality, such as introversion, stability, and motivation. The use of such tests for selection assumes that it is possible to find a relationship between a measurable personal- ity trait (such as conscientiousness) and success on the job.17 Many of these tests are projective. In the Thematic Apperception Test, an ambiguous stimulus (such as the one provided in Figure 5.4) is presented to the test taker, and he or she is asked to interpret or react to it. Because the pictures are ambiguous, the person’s interpretation must come from within—the viewer supposedly projects into the picture his or her own emotional attitudes about life.

The Myers-Briggs Type Indicator instrument, which has been in use for more than 50 years, is believed to be the most widely used personality inventory in the world. More than 2 million assessments are administered annually in the United States alone.18 Another example of a common personality test is the Minnesota Multiphasic Personality Inventory (MMPI), which measures traits like hypo- chondria and paranoia.

Research studies confirm that personality tests can help companies hire more effective workers. For example, industrial psychologists often talk in terms of the “Big Five” personality dimensions as they apply to employment testing: extro- version, emotional stability, agreeableness, conscientiousness, and openness to experience.19 These dimensions can be measured using the NEO Five-Factor Inventory (NEO-FFI) and similar tests. One study focused on the extent to which these dimensions predicted performance (in terms of job and training pro- ficiency, for example) for professionals, police officers, managers, sales workers, and skilled/semi-skilled workers. Conscientiousness showed a consistent rela- tionship with all performance criteria for every occupation.

Extroversion was a valid predictor of performance for managers and sales employees—the two occupations involving the most social interaction.

personality tests Instruments used to measure basic aspects of per- sonality, such as introversion, sta- bility, motivation, neurotic tendency, self-confidence, self-sufficiency, and sociability.

FIGURE 5.4 Sample Picture from Thematic Apperception Test: How Do You Interpret It?

Research INSIGHT

Psychometric Assessments www.psychometrics.com

Source: Lewis J Merrim/Getty Images

125Chapter 5 Selection

Both openness to experience and extroversion predicted training proficiency for all occupations.20

There has been an ongoing debate in the research world on whether person- ality can be faked. In a test of 77 experienced assessors, over 70 percent agreed that “faking is a serious threat to the validity of personality inventory in the assessment process.”21 Evidence supports two specific trends in personality tests and faking: (1) people can fake personality inventories when they are motivated to do so, and (2) individual differences exist in the ability to fake.22

Interest inventories compare a candidate’s interests with those of people in various occupations. Thus, a person taking the Strong-Campbell Interest Inventory would receive a report comparing his or her interests with those of people already in occupations, such as accountants, engineers, managers, or medical technologists. Interest inventories have many uses. One is career plan- ning, since people generally do better in jobs involving activities in which they have an interest. Another is selection. If the firm can select people whose interests are roughly the same as those of high-performing incumbents in the jobs for which it is hiring, the new employees are more likely to be successful.23

Achievement Tests An achievement test is basically a measure of what a person has learned. Most of the tests taken in school are achievement tests. They measure knowledge or proficiency in such areas as economics, marketing, or HRM. Achievement tests are also widely used in selection. For example, the Purdue Test for Machinists and Machine Operators tests the job knowledge of experienced machinists with such questions as “What is meant by ‘tolerance’?” Other tests are available for electricians, welders, carpenters, and so forth. In addition to job knowledge, achievement tests measure the applicant’s abilities; a key- boarding test is one example.

Work Sampling Work samples focus on measuring job performance directly and thus are among the best predictors of job performance. In developing a work- sampling test, experts first list all the possible tasks that jobholders would be required to perform. Then, by listing the frequency of performance and relative importance of each task, key tasks are identified. Each applicant then performs the key tasks, and his or her work is monitored by the test admin- istrator, who records the approach taken. Finally, the work-sampling test is validated by determining the relationship between the applicants’ scores on the work samples and their actual performance on the job. Once it is shown that the work sample is a valid predictor of job success, the employer can begin using it for selection.24

Management Assessment Centres At a management assessment centre the management potential of 10 or 12 can- didates is assessed by expert appraisers who observe them performing realistic management tasks. The centre may be a plain conference room, but it is often a special room with a one-way mirror to facilitate unobtrusive observations.

interest inventories Tests that compare a candidate’s interests with those of people in various occupations.

achievement tests Tests used to measure knowledge or proficiency acquired through education, train- ing, or experience.

management assessment centre A comprehensive, systematic pro- cedure used to assess candidates’ management potential that uses a combination of realistic exercises, management games, objective test- ing, presentations, and interviews.

Research Psychologists Press www.rpp.on.ca

Part 2 Meeting Human Resources Requirements126

Examples of the types of activities and exercises involved include the following:

1. An in-basket exercise. Each candidate is faced with an accumulation of reports, memos, messages from incoming phone calls, letters, and other materials collected in the in-basket of the simulated job that he or she is to take over and is required to take appropriate action. For example, he or she must write letters, return phone calls, and prepare meet- ing agendas. The trained evaluators then review the results.

2. A leaderless group discussion. A leaderless group is given a discussion question and told to arrive at a group decision. The raters evaluate each can- didate’s interpersonal skills, acceptance by the group, leadership ability, and individual influence.

3. Management games. Participants engage in realis- tic problem solving, usually as members of two or more simulated companies that are competing in the marketplace. Decisions might have to be made about issues such as how to advertise and manu- facture and how much inventory to keep in stock.

4. Individual presentations. During oral presentations on an assigned topic, each participant’s communication skills and persuasiveness are evaluated.

5. Objective tests. Candidates may be asked to complete paper-and-pencil or computer-based per- sonality, aptitude, interest, or achievement tests.

6. An interview. Most centres also require an interview between at least one of the expert assessors and each participant to evaluate interests, background, past performance, and motivation.

Situational Testing In situational tests, candidates are presented with hypothetical situations repre- sentative of the job for which they are applying (often on video) and are evalu- ated on their responses.25 Several of the assessment centre exercises described above are examples of situational tests. In a typical test, a number of realistic scenarios are presented and each is followed by a multiple-choice question with several possible courses of action, from which candidates are asked to select the “best” response, in their opinion.26 The level of each candidate’s skills is then evaluated, and an assessment report can be easily generated, making the simulation easier and less expensive to administer than other screening tools. Simulations also provide a realistic job preview by exposing candidates to the types of activities they will encounter on the job.

A research study of situational testing on 160 civil service employees demon- strated the validity of the situational test in predicting overall job performance as well as three performance dimensions: core technical proficiency, job dedication,

situational tests Tests in which candidates are presented with hypothetical situations representa- tive of the job for which they are applying and are evaluated on their responses.

Research INSIGHT

A management game or simulation is a typical component in a management assessment centre.

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127Chapter 5 Selection

and interpersonal facilitation. The situational test provided valid predictive information over and above cognitive ability tests, personality tests, and job experience.27

Micro-Assessments An entirely performance-based testing strategy that focuses on individual perfor- mance is a micro-assessment. In a micro-assessment, each applicant completes a series of verbal, paper-based, or computer-based questions and exercises that cover the range of activities required on the job for which he or she is applying. In addi- tion to technical exercises, participants are required to solve a set of work-related problems that demonstrate their ability to perform well within the confines of a certain department or corporate culture. Exercises are simple to develop because they are taken directly from the job.

Physical Examination, Substance Abuse Testing, and Polygraph Tests The use of medical examinations in selection has decreased, in part because of the loss of physically demanding manufacturing and natural resource jobs. Before 1980, 25 percent of new hires underwent a medical exam, but by 2001, only 11 percent were required to do so.28 Three main reasons that firms may include a medical examination as a step in the selection process are as follows:

1. To determine that the applicant qualifies for the physical requirements of the position and, if not, to document any accommodation requirements;

2. To establish a record and baseline of the applicant’s health for the purpose of future insurance or compensation claims; and

3. To reduce absenteeism and accidents by identifying any health issues or con- cerns that need to be addressed, including communicable diseases of which the applicant may have been unaware. Medical exams are permitted only after a written offer of employment has been extended (except in the case of bona fide occupational requirements, as for food handlers).

The purpose of pre-employment substance abuse testing is to avoid hiring employees who would pose unnecessary risks to themselves and others or per- form below expectations. However, in Canada, employers are not permitted to screen candidates for substance abuse. Alcohol and drug addiction is consid- ered to be a disability under human rights codes (as per Chapter 2), and an employee cannot be discriminated against during the selection process based on a disability.29

A polygraph test (also referred to as a lie detector test) involves using a series of controlled questions while simultaneously assessing physiological conditions of individuals such as blood pressure, pulse, respiration, and skin conductivity, based on the assumption that deceptive responses produce different physiologi- cal responses than truthful responses. Such tests have been widely rejected by the scientific community since they have failed to produce valid or reliable results. In Ontario, the Employment Standards Act specifically prohibits use of polygraphs in pre-employment selection. Validated tests of honesty or integrity are more useful and reliable in the selection process.

micro-assessment A series of verbal, paper-based, or computer- based questions and exercises that a candidate is required to complete, covering the range of activities required on the job for which he or she is applying.

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The interview is used by virtually all organizations for selecting job applicants. The selection interview, which involves a process of two-way communication between the interviewee and the interviewer, can be defined as “a procedure designed to predict future job performance on the basis of applicants’ oral responses to oral inquiries.”30

Interviews are considered to be one of the most important aspects of the selection process and generally have a major impact on both applicants and interviewers. Interviews significantly influence applicants’ views about the job and organization, enable employers to fill in any gaps in the information pro- vided on application forms and résumés, and supplement the results of any tests administered. They may also reveal entirely new types of information.

A major reason for the popularity of selection interviews is that they meet a number of the objectives of both the interviewer and interviewee. Interviewer objectives include assessing applicants’ qualifications and observing relevant aspects of applicants’ behaviour, such as verbal communication skills, degree of self-confidence, and interpersonal skills; providing candidates with information about the job and expected duties and responsibilities; promoting the organiza- tion and highlighting its attractiveness; and determining how well the applicants would fit into the organization. Typical objectives of job applicants include pre- senting a positive image of themselves, selling their skills and marketing their positive attributes to the interviewer(s), and gathering information about the job and the organization so that they can make an informed decision about the job, career opportunities in the firm, and the work environment.31

Types of Interviews Selection interviews can be classified according to the degree of structure, their content, and the way in which the interview is administered.

The Structure of the Interview First, interviews can be classified according to the degree to which they are struc- tured. In an unstructured interview, questions are asked as they come to mind. Thus, interviewees for the same job may or may not be asked the same or similar questions, and the interview’s unstructured nature allows the interviewer to ask questions based on the candidate’s last statements and to pursue points of interest as they develop. Unstructured interviews generally have low reliability and validity.32

The interview can also be structured. In the classical structured interview, the questions and acceptable responses are specified in advance and the responses are rated for appropriateness of content.33 In practice, however, most structured interviews do not involve specifying and rating responses in advance. Instead, each candidate is asked a series of predetermined, job-related questions based on the job description and specifications. Such interviews are generally high in validity and reliability. However, a totally structured interview does not provide the flexibility to pursue points of interest as they develop, which may result in an interview that seems quite mechanical to all concerned.

Between these two extremes is the mixed (semi-structured) interview, which involves a combination of pre-set, structured questions based on the job descrip- tion and specification, and a series of candidate-specific, job-related questions

selection interview A procedure designed to predict future job per- formance on the basis of applicants’ oral responses to oral inquiries.

unstructured interview An unstructured, conversational-style interview. The interviewer pursues points of interest as they come up in response to questions.

structured interview An inter- view following a set sequence of questions.

mixed (semi-structured) interview An interview format that combines the structured and unstructured techniques.

RPC Administers a variety of selection tools, including tests, interviews, reference checks, and so on

STEP 3: THE SELECTION INTERVIEW

129Chapter 5 Selection

based on information provided on the application form or résumé. The questions asked of all candidates facilitate candidate comparison, while the job-related, candidate-specific questions make the interview more conversational. A realistic approach that yields comparable answers and in-depth insights, the mixed inter- view format is extremely popular.

The Content of the Interview Interviews can also be classified according to the content of their questions. A situational interview is one in which the questions focus on the individual’s ability to project what his or her future behaviour would be in a given situation.34 The underlying premise is that intentions predict behaviour. For example, a candidate for a supervisory position might be asked how he or she would respond to an employee coming to work late three days in a row. The interview can be both structured and situational, with predetermined questions requiring the candidate to project what his or her behaviour would be. In a structured situational inter-

view, the applicant could be evaluated, say, on whether he or she would try to determine if the employee was experi- encing some difficulty in getting to work on time or would simply issue a verbal or written warning to the employee.

The behavioural interview, also known as a behaviour description interview (BDI), involves describing various situations and asking interviewees how they behaved in the past in such situations.35 The underlying assumption is that the best predictor of future performance is past performance in similar circumstances.

Administering the Interview Interviews can also be classified based on how they are administered:

•  face-to-face or technology-aided (such as video con- ferencing or by phone)

•   one-on-one or by a panel of interviewers

•  sequentially or all at once

The majority of interviews are sequential, face-to- face, and one-on-one. In recent years, the advancements of technology in recruitment have meant that candidates are rarely limited to a local region, while advancements in technology in selection allows cost-efficient access to video-conferencing technologies for interviews. Research has begun to evaluate the differences in the face-to-face versus the technology-aided interviews, as highlighted in HR by the Numbers.

A panel interview involves the candidate being inter- viewed simultaneously by a group (or panel) of interviewers, including an HR representative, the hiring manager, and potential co-workers, superiors, or reporting employees. The key advantages associated with this technique are the increased likelihood that the information provided will be heard and recorded accurately; varied questions pertaining

situational interview A series of job-related questions that focus on how the candidate would behave in a given situation.

panel interview An interview in which a group of interviewers questions the applicant.

behavioural interview or behaviour description interview (BDI) A series of job-related questions that focus on relevant past job-related behaviours.

Research INSIGHT

of interviewers prefer face-to-face over video conferencing

higher rating secured by women compared to men in

semi-structured face-to-face interviews

of interviewers felt that video conferencing added no additional

benefits over face-to-face interviews

of interviewers felt that video conferencing made it hard to read nonverbal cues (e.g., facial

expression, fidgeting)

higher rating secured by women compared to men in semi- structured video conferences

average higher rating secured for interviews using video conferencing over face-to-face methods

Growing Use of Electronic ◀ Mediums for Selection

76%

16.1%

40%

17.4%

7.5%

68%

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Source: Data from D. S. Chapman, & P. M. Rowe. 2001. “The impact of videoconference technology, interview structure, and interviewer gender on interviewer evalua- tions in the employment interview: A Field experiment,” Journal of Occupational and Organizational Psychology, Vol. 74, p. 279–298.

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to each interviewer’s area of expertise; minimized time and travel/accommodation expenses as each interviewee attends only one interview; reduced likelihood of human rights/employment equity violations, since an HR rep- resentative is present; and less likelihood of interviewer error, because of advanced planning and preparation.

In a sequential interview the applicant is inter- viewed by several persons in sequence before a selec- tion decision is made. In an unstructured sequential interview each interviewer may look at the applicant from his or her own point of view, ask different ques- tions, and form an independent opinion of the can- didate. Conversely, in a structured sequential (or serialized) interview, each interviewer rates the candi- date on a standard evaluation form, and the ratings are compared before the hiring decision is made.36

A more stressful variant of the panel interview is the mass interview, which involves a panel simultaneously interviewing several candidates. The panel poses a problem to be solved and then sits back and watches which candidate takes the lead in formulating an answer.

Common Interviewing Mistakes Several common interviewing errors that can undermine the usefulness of inter- views are discussed in the following section. These interviewer errors can be reduced by properly planning and training interviewers on the process, as well as educating interviewers about these risks.

Poor Planning Many selection interviews are simply not carefully planned and may be con- ducted without having prepared written questions in advance. Lack of planning often leads to a relatively unstructured interview, in which whatever comes up is discussed. The end result may be little or no cross-candidate job-related informa- tion. The less structured the interview is, the less reliable and valid the evaluation of each candidate will be.37

Snap Judgments One of the most consistent literature findings is that interviewers tend to jump to conclusions—make snap judgments—during the first few minutes of the inter- view or even before the interview begins based on the candidates’ test scores or résumé data. Thus, candidates feel pressure to start off on the right foot with the inter- viewer. However, snap judgments are not accurate or reliable in the selection process and should be avoided.

Negative Emphasis Many interviewers seem to have a consistent negative bias. They are generally more influenced by unfavour- able than favourable information about the candidate.

A panel interview is an efficient and cost-effective way of permitting a number of qualified persons to assess a candidate’s KSAs.

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131Chapter 5 Selection

Also, their impressions are much more likely to change from favourable to unfavourable than vice versa. Providing information about the value or weight of crite- ria in the selection process can ensure that the interviewer assesses the criteria accordingly. Research also suggests that a negative emphasis exists for candidates who are unemployed at the time of recruiting, as highlighted in HR by the Numbers.

Halo Effect It is also possible for a positive initial impression to distort an interviewer’s rating of a candidate, because subsequent information is judged with a positive bias. This is known as the halo effect. Having gained a posi- tive impression of the candidate on one or more factors, the interviewer may not seek contradictory informa- tion when listening to the candidate’s answers to the questions posed or may interpret/frame all responses positively.

Poor Knowledge of the Job Interviewers who do not know precisely what the job entails and what sort of candidate is best suited for it usually make their decisions based on incorrect stereo- types about what a good applicant is. Interviewers who have a clear understanding of what the job entails con- duct more effective interviews.

Contrast (Candidate-Order) Error Contrast or candidate-order error means that the order in which applicants are seen can affect how they are rated. In one study, managers were asked to evaluate a candidate who was “just average” after first evaluating sev- eral “unfavourable” candidates. The average candidate was evaluated more favourably than he or she might otherwise have been because, in contrast to the unfavourable candidates, the average one looked better than he or she actually was.

Influence of Nonverbal Behaviour Interviewers are also influenced by the applicant’s nonverbal behaviour, and the more eye contact, head moving, smiling, and other similar nonverbal behaviours, the higher the ratings. These nonverbal behaviours often account for more than 80 percent of the applicant’s rating. This finding is of particular concern since nonverbal behaviour is tied to ethnicity and cultural background. An applicant’s attractiveness and gender also play a role. Research has shown that those rated as being more physically attractive are also rated as more suitable for employ- ment, well ahead of those rated average-looking and those regarded as physi- cally unattractive. Although this bias is considered to be subconscious, it may have serious implications for aging employees.38

halo effect A positive initial impression that distorts an interviewer’s rating of a candidate because subsequent information is judged with a positive bias.

contrast or candidate-order error An error of judgment on the part of the interviewer because of his or her having interviewed one or more very good or very bad candidates just before the interview in question.

HR managers assessed comparable résumés for a marketing position (study 1)

lower score on both a competency scale and

hireability scale given to résumés of currently unemployed applicants over employed applicants (study 1)

fake résumés sent out for jobs posted online (study 2)

call-back rate of applicants (study 2)

lower chance that those being invited for an interview if unemployed for

8 months versus 1 month44

The Stigma of Being ◀ Unemployed

47

10–15 %

4.7%

45%

12 000

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Leading Some interviewers are so anxious to fill a job that they help the applicants to respond correctly to their questions by asking leading questions or guiding the candidate to the expected answer. An obvious example might be a question like “This job calls for handling a lot of stress. You can do that, right?” The leading is not always so obvious. Subtle cues regarding the preferred response, such as a smile or nod, are also forms of leading.39

Too Much/Too Little Talking If the applicant is permitted to dominate the interview, the interviewer may not have a chance to ask his or her prepared questions and often learns very little about the candidate’s job-related skills. At the other extreme, some interviewers talk so much that the interviewee is not given enough time to answer questions. One expert suggests using the 30/70 rule: During a selection interview, encour- age the candidate to speak 70 percent of the time, and restrict the interviewer speaking to just 30 percent of the time.40

Similar-to-Me Bias Interviewers tend to provide more favourable ratings to candidates who possess demographic, personality, and attitudinal characteristics similar to their own, regardless of the value of those characteristics to the job.41 The result can be a lack of diversity in the organization and a poor fit with the job if secured.

Designing an Effective Interview Problems like those just described can be avoided by designing and conduct- ing an effective interview. Combining several of the interview formats previ- ously discussed enables interviewers to capitalize on the advantages of each.42 To allow for probing and to prevent the interview from becoming too mechanical in nature, a semi-structured format is recommended. Given their higher validity in predicting job performance, the focus should be on situational and behavioural questions.

Conducting an Effective Interview Although the following discussion focuses on a semi-structured panel interview, the steps described apply to all selection interviews.43

Planning the Interview Before the first interview, agreement should be reached on the procedure that will be followed. Sometimes all members of the team ask a question in turn; in other situations, only one member of the team asks questions and the others serve as observers. Sitting around a large table in a conference room is much more appropriate and far less stressful than having all panel members seated across from the candidate behind a table or desk, which forms both a physical and a psychological barrier. As noted earlier, special planning is required when assessing candidates with disabilities.

133Chapter 5 Selection

Establishing Rapport The main purpose of an interview is to find out as much as possible about the candidate’s fit with the job specifications, something that is difficult to do if the individual is tense and nervous. The candidate should be greeted in a friendly manner and put at ease.

Asking Questions The questions written in advance should then be asked in order. Interviewers should listen carefully, encour- age the candidate to express his or her thoughts and ideas fully, and record the candidate’s answers briefly but thoroughly. Taking notes increases the validity of the interview process, since doing so (1) reduces the likelihood of forgetting job-relevant information and

subsequently reconstructing forgotten information in accordance with biases and stereotypes; (2) reduces the likelihood of making a snap judgment and helps to prevent the halo effect, negative emphasis, or candidate-order errors; and (3) helps to ensure that all candidates are assessed according to the same criteria.44 Some examples of appropriate interview questions are shown in Figure 5.5.

The rapport established with a job applicant not only puts the person at ease but also reflects the company’s attitude toward its public.

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1. How did you choose this profession? 2. What did you enjoy most about your previous job? 3. What did you like least about your previous job? 4. Why did you leave your last job? What were the circumstances? 5. What has been your greatest frustration on your current job? Why? 6. Why should we be hiring you? 7. What do you expect from us? 8. What are three things you will not do in your next job? 9. What would your last employer say your three weaknesses are?

10. What would your last employer say your three major strengths are? 11. How can your manager best help you obtain your goals? 12. How did your manager rate your job performance? 13. Would you change your last supervisor? How? 14. What are your career goals during the next 1–3 years? 5–10 years? 15. How will working for this company help you reach those goals? 16. What did you do the last time you received instructions with which you disagreed? 17. What are some of the disagreements between you and your manager? What did

you do? 18. Which do you prefer, working alone or working with teams? 19. What motivated you to do better at your last job? 20. Do you consider your progress on that job representative of your ability? Why? 21. Do you have any questions about the duties of the job for which you have applied? 22. How do you think you can perform the essential functions of the job for which you

have applied?

FIGURE 5.5 Suggested Supplementary Questions for Interviewing Applicants

Source: Based on www.HR.BLR.com

Part 2 Meeting Human Resources Requirements134

Closing the Interview Toward the end of the interview, time should be allocated to answer any ques- tions that the candidate may have and, if appropriate, to advocate for the firm and position. It is useful to also inform the candidate about the next steps and timelines that the organization will follow at this point.

Evaluating the Candidate Immediately following each interview, the applicant’s interview performance should be rated by each panel member independently, based on a review of his or her notes or an observation form. Since interviews are only one step in the process, and since a final decision cannot be reached until all assessments (including reference checking) have been completed, these evaluations should not be shared at this time.

1 Dates of employment

2 Job title (inflated rank)

3 Salary level

4 Criminal records

5 Education (bogus degrees, diploma mills)

6 Professional licence (MD, RN, etc.)

7 “Ghost” company (self-owned business)

FIGURE 5.6 Top Seven Résumé Lies

Source: AccuScreen Inc., www.accuscreen.com/TOP7 (accessed May 24, 2009). Used with permission.

CKR Global www.ckrglobal.com

BackCheck www.backcheck.ca

Investigative Research Group www.irgcanada.com

STEP 4: BACKGROUND INVESTIGATION/REFERENCE CHECKING

Background investigation and reference checking are used to verify the accuracy of the information provided by candidates on their application forms and résu- més. In an ideal world, every applicant’s story would be completely accurate, but in real life this is often not the case, as illustrated in Figure 5.6. At least one-third of applicants lie—overstating qualifications or achievements, attempting to hide negative information, or being deliberately evasive or untruthful.45

Unfortunately, some employers do not check references, an omission that can have grave consequences. Background checks are essential to avoid plac- ing people in situations of unnecessary and avoidable risk, which can lead to negligent-hiring lawsuits.46 Cases in Canada have included a nurse who prac- tised in a Toronto hospital for almost two years without a registered nurse quali- fication, a manufacturing plant payroll officer who embezzled almost $2 million, and a teacher arrested for possessing child pornography.47 Other problems can also be addressed through background checks.

Surveys indicate that at least 90 percent of Canadian organizations conduct background checks.48 Whether employers are requesting reference information in writing or asking for such information over the telephone, questions should

135Chapter 5 Selection

be written down in advance. If enough time is taken and the proper questions are asked, such checking is an inexpensive and straightforward way of verifying factual information about the applicant. This may include current and previous job titles, salary, dates of employment, and reasons for leaving, as well as information about the applicant’s fit with the pro- spective job and organizational culture.

Information to Be Verified A basic background check includes a criminal record check, independent verification of educational qualifi- cations, and verification of at least five years’ employ- ment, together with checks of three performance-related references from past supervisors. For financially sensi- tive positions, a credit check may also be included.

Obtaining Written Permission As a legal protection for all concerned, applicants should be asked to indicate, in writing, their willingness for the firm to check with current or former employers and other references. There is generally a section on the application form for this purpose. Many employers will not give out any reference information until they have received a copy of such written authorization. Because background checks may provide information on age or other prohibited grounds for discrimination, some employers do not conduct background checks until a conditional offer of employment has been extended.49

However, other employers do not hesitate to seek out information in the pub- lic domain at any time, without permission. A recent survey found that almost one-quarter of employers are using social networking sites like Facebook to gather information on job applicants. A third of those employers find enough negative information (such as the items listed in Figure 5.7) to eliminate a can- didate from further consideration, and one-quarter of them find favourable con- tent that supports the candidate’s application.50

Providing References In providing reference information, the concept of qualified privilege is impor- tant. Generally speaking, if comments are made in confidence for a public purpose, without malice, and are honestly believed, the defence of qualified privilege exists.

Thus, if honest, fair, and candid references are given by an individual who is asked to provide confidential information about the performance of a job applicant, then the doctrine of qualified privilege generally protects the refer- ence giver, even if negative information is imparted about the candidate.51 An overly positive reference, however, describing an employee dismissed for theft as “trustworthy,” for example, can be considered negligent misrepresentation if the former employee steals from a new employer.52 Due to concerns about the possibility of civil litigation, some Canadian companies have adopted a

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Part 2 Meeting Human Resources Requirements136

“no reference” policy regarding previous employees or are willing to confirm only the position held and dates of employment—especially in the case of discharged employees.53

Drug or alcohol use

Inappropriate photos or information

Poor communication skills

Bad-mouthing previous company

Lying about qualifications

Discriminatory remarks

Unprofessional screen name

Link to criminal behaviour

Sharing confidential employer information

0% 10% 20% 30% 40% 50% 60%

FIGURE 5.7 Online Postings by Job Candidates That Concern Hiring Managers

Source: Courtesy of CareerBuilder, LLC.

RPC Establishes appointment pro- cedures for candidates selected through the recruitment process, ensuring that conditions of employment are documented and consistent with established policies

STEP 5: SUPERVISORY INTERVIEW AND REALISTIC JOB PREVIEW

The two or three top candidates typically return for an interview with the immediate supervisor, who usually makes the final selection decision. The supervisory interview is important because the supervisor knows the techni- cal aspects of the job, is most qualified to assess the applicants’ job knowl- edge and skills, and is best equipped to answer any job-specific questions from the candidate. Also, the immediate supervisor generally has to work closely with the selected individual and must feel comfortable with that per- son. The selected individual must fit with the current members of the hiring department, something that the supervisor is often best able to assess. When a supervisor makes a hiring recommendation, he or she is usually committed to the new employee’s success and will try to provide assistance and guidance. If the new hire is not successful, the supervisor is more likely to accept some of the responsibility.

A realistic job preview (RJP) should be provided at the time of the super- visory interview. The purpose of an RJP is to create appropriate expectations about the job by presenting realistic information about the job demands, the organization’s expectations, and the work environment.54 Studies have reported that RJPs lead to improved employee job satisfaction, reduced vol- untary turnover, and enhanced communication.55 Although some candidates may choose not to accept employment with the firm after an RJP, those individuals probably would not have remained with the firm long had they accepted the job offer.56

realistic job preview (RJP) A strategy used to provide applicants with realistic information—both positive and negative—about the job demands, the organiza- tion’s expectations, and the work environment.

137Chapter 5 Selection

To make the hiring decision, HR must combine information from the multiple selection techniques used to identify the applicant who is the best fit with the selection criteria. HR department staff generally play a major role in compiling all the data. It is the immediate supervisor, however, who is usually responsible for making the final hiring decision. Firms generally make a subjective evalua- tion of all the information gleaned about each candidate and arrive at an overall judgment. The validity and reliability of these judgments can be improved by using tests that are objectively scored and by devising a candidate-rating sheet based on the weighted want criteria.

Another approach involves combining all the pieces of information accord- ing to a formula and giving the job to the candidate with the highest score. Research studies have indicated that this approach, called a statistical strategy, is generally more reliable and valid than a subjective evaluation.57

Regardless of collection methodology, all information used in making the selection decision—including interview notes, test results, reference-checking information, and so on—should be kept in a file. In the event of a human rights challenge, negligent hiring charge, or union grievance about the selection deci- sion, such data are critical.

Once the selection decision has been made, a job offer is extended to the successful candidate. Often, the initial offer is made by telephone, but it should be followed up with a written employment offer that clearly specifies important terms and conditions of employment, such as starting date, starting salary, pro- bation period, and so on.

Candidates should be given a reasonable length of time in which to think about the offer and not be pres- sured into making an immediate decision. If there are two candidates who are both excellent and the first-choice candidate declines the offer, the runner-up can then be offered the job.

statistical strategy A more objective technique used to determine whom the job should be offered to; involves identifying the most valid predictors and weighting them through statistical methods, such as multiple regression.

STEP 6: HIRING DECISION AND CANDIDATE NOTIFICATION

RPC Supports managers in the nego- tiation of terms and conditions of employment

An Ethical Dilemma As the HR manager, how much feedback should you provide to those individuals not selected for a position?

Chapter SUMMARY

1. Selection is the process of choosing among indi- viduals who have been recruited to fill existing or projected job openings. The purpose of selection is to find the “best” candidate. Because the qual- ity of the company’s human resources is often a competitive advantage in achieving the com- pany’s strategic objectives, selection of employees is of considerable strategic importance. Those individuals selected will be implementing strate- gic decisions and, in some cases, creating strategic

plans. Thus, the successful candidates must fit with the strategic direction of the organization.

2. Reliability (the degree to which selection tech- niques are dependable, consistent, and stable) and validity (which relates to accuracy) of selec- tion tests and interviews are critically important in order to achieve effective selection of the best candidate and to satisfy legal requirements.

3. The different types of tests used for selection include intelligence tests, emotional intelligence

Part 2 Meeting Human Resources Requirements138

tests, aptitude tests, tests of motor and physical abilities, personality tests, interest inventories, achievement tests, the work-sampling technique, management assessment centres, situational testing, micro-assessments, and medical examina- tions. Pre-employment substance abuse testing is not permitted under human rights legislation in Canada.

4. Selection interviewing can be unstructured, structured, or semi-structured. The content varies between situational interviews (focus on future behaviour) and behavioural interviews (focus on past behaviour). Interviews can be administered on a one-on-one basis, sequen- tially, or by using a panel.

5. Reference checking is an important source of information about job candidates. Failure to check references can lead to negligent- or

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

wrongful-hiring lawsuits. When providing refer- ences, the legal concept of qualified privilege means that if honest, fair, and candid refer- ences are given, the reference-giver is protected from litigation, even if negative information is imparted about the candidate. Providing falsely positive references can lead to charges of negli- gent misrepresentation by subsequent employers. Fear of civil litigation has led some Canadian companies to adopt a policy of “no references” or to confirm only a former employee’s position and dates of employment.

Key TERMS

achievement tests (p. 125) aptitude tests (p. 122) behavioural interview or behaviour description

interview (BDI) (p. 129) construct validity (p. 121) content validity (p. 121) contrast or candidate-order error (p. 131) criterion-related validity (p. 120) differential validity (p. 120) emotional intelligence (EI) tests (p. 122) halo effect (p. 131) intelligence (IQ) tests (p. 121) interest inventories (p. 125) management assessment centre (p. 125) micro-assessment (p. 127) mixed (semi-structured) interview (p. 128)

multiple-hurdle strategy (p. 116) must criteria (p. 117) panel interview (p. 129) personality tests (p. 124) realistic job preview (RJP) (p. 136) reliability (p. 120) selection (p. 115) selection interview (p. 128) selection ratio (p. 116) situational interview (p. 129) situational tests (p. 126) statistical strategy (p. 137) structured interview (p. 128) unstructured interview (p. 128) validity (p. 120) want criteria (p. 117)

Review and Discussion QUESTIONS

1. Explain the differences among criterion-related validity, content validity, and construct validity.

2. Describe five different types of testing that may be used in the selection process and give an example of each.

139Chapter 5 Selection

3. Describe any four activities involved in a manage- ment assessment centre.

4. Name and describe the pros and cons of the three different types of interview structures.

5. Explain the difference between situational and behavioural interviews. Give examples of situ- ational and behavioural interview questions.

6. Briefly discuss any five common interviewing mistakes and explain how such errors can be avoided.

7. Why is the supervisory interview so important in the selection process?

Critical Thinking QUESTIONS

1. If you were asked to design an effective selection process for retail sales representatives working on a 100 percent commission basis, which of the steps described in this chapter would you include and why? Justify the omission of any steps and explain why the quality of the selection decision would not be compromised by their elimination.

2. Assume that you have just been hired as the employment manager in a small manufacturing firm that has never done any selection testing. Write a memorandum to the CEO describing the types of tests that you would recommend the firm consider using in the future. Also list some of the legal and ethical concerns pertaining to such testing and how such concerns can be overcome, and the benefits to the firm for using the recommended testing.

3. Describe strategies that you could use to (a) establish rapport with an extremely nervous

candidate, (b) get an interviewee who is ram- bling “back on track,” (c) clarify a statement made by an applicant during an interview, and (d) obtain detailed reference information from an individual who seems reluctant to say much.

4. Alberta oil and gas companies are using pre- employment substance abuse testing even though it is prohibited. Their argument is that, because they have multibillion-dollar projects underway with a lot of potential for accidents, environ- mental damage, and so on, they want to be sure that they are not hiring employees who have substance abuse problems. They know that their young, transient, and relatively wealthy oil sands workforce commonly abuses drugs and alcohol. How could this situation be resolved in the spirit of the law on accommodating disabilities?

Experiential EXERCISES

1. Design a semi-structured interview questionnaire for a position with which you are extremely familiar, basing the candidate-specific questions on your own résumé. Ensure that behavioural, situational, job-knowledge, and worker- requirements questions are included. Once you have done so, select a partner. Role-play two selection interviews—one based on your ques- tionnaire and the other based on your partner’s

questionnaire. The individual who wrote the questions is to play the role of interviewee, with his or her partner serving as the interviewer. Do not forget to build rapport, ask the questions in order, take effective notes, and bring the inter- view to a close. Once you have completed the two role-plays, critically evaluate each interview questionnaire.

Part 2 Meeting Human Resources Requirements140

2. Create an offer of employment for a successful customer service representative at a call centre, outlining the terms and conditions of employ- ment. Keep in mind that a copy of the letter should be signed and returned by the new hire and that a signed letter of offer becomes an employment contract.

3. Using the NOC job description and the com- petency job analysis you created earlier in the

course for either a university or college profes- sor, develop two situational and two behavioural interview questions for the job along with an outline of a “good” answer for each that you expect from the interviewees. Share and critique both questions and answers. Discuss how tak- ing the time to complete this activity can help in candidate selection.

CBC To view the CBC videos, read a summary, and answer discussion questions, go to MyManagementLab.

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APPENDIX 5.1 A Guide to Screening and Selection in Employment

Subject Avoid Asking Preferred Comment

Name about name change: whether it was changed by court order, marriage, or other reason maiden name

ask after selection if needed to check on previously held jobs or educational credentials

Address for addresses outside Canada

ask place and duration of current or recent address

Age for birth certificates, baptis- mal records, or about age in general

ask applicants whether they are eligible to work under Canadian laws regarding age restrictions

if precise age is required for benefits plans or other le- gitimate purposes, it can be determined after selection

Sex males or females to fill in different applications about pregnancy, childbearing plans, or childcare arrange- ments

ask applicant if the at- tendance requirements can be met

during the interview or after selection, the applicant, for purposes of courtesy, may be asked which of Dr., Mr., Mrs., Miss, or Ms. is preferred

Marital Status whether the applicant is single, married, divorced, engaged, separated, wid- owed, or living common law whether an applicant’s spouse may be transferred about spouse’s employment

if transfer or travel is part of the job, the applicant can be asked if he or she can meet these requirements ask whether there are any circumstances that might prevent completion of a minimum service commit- ment

information on dependants can be determined after selection if necessary

Family Status number of children or dependants about childcare arrange- ments

if the applicant would be able to work the required hours and, where appli- cable, overtime

contacts for emergencies and/or details on depen- dants can be determined after selection

National or Ethnic Origin

about birthplace, national- ity of ancestors, spouse, or other relatives whether born in Canada for proof of citizenship

since those who are entitled to work in Canada must be citizens, permanent residents, or holders of valid work permits, applicants can be asked if they are legally entitled to work in Canada

documentation of eligibil- ity to work (papers, visas, etc.) can be requested after selection

Military Service about military service in other countries

inquire about Canadian mil- itary service where employ- ment preference is given to veterans by law

Language mother tongue where language skills ob- tained

ask whether applicant understands, reads, writes, or speaks languages required for the job

testing or scoring applicants for language proficiency is not permitted unless it is job related

continued

Part 2 Meeting Human Resources Requirements142

Subject Avoid Asking Preferred Comment

Race or Colour about race or colour, includ- ing colour of eyes, skin, or hair

Photographs for photo to be attached to applications or sent to inter- viewer before interview

photos for security passes or company files can be taken after selection

Religion whether applicant will work a specific religious holiday about religious affiliation, church membership, fre- quency of church atten- dance for references from clergy or religious leader

explain the required work shift, asking whether such a schedule poses problems for the applicant

reasonable accommodation of an employee’s religious beliefs is the employer’s duty

Height and Weight no inquiry unless there is evidence that they are genu- ine occupational require- ments

Disability for list of all disabilities, limitations, or health problems whether applicant drinks or uses drugs whether applicant has ever received psychiatric care or been hospitalized for emo- tional problems whether applicant has received workers’ compen- sation

the employer should: – disclose any informa- tion on medically related requirements or standards early in the application process – then ask whether the ap- plicant has any condition that could affect his or her ability to do the job, prefer- ably during a pre-employ- ment medical examination a disability is relevant to job ability only if it: – threatens the safety or property of others – prevents the applicant from safe and adequate job performance even when rea- sonable efforts are made to accommodate the disability

Medical Information whether currently under a physician’s care name of family doctor whether receiving counsel- ling or therapy

medical exams should be conducted after selection and only if an employee’s condition is related to job duties

offers of employment can be made conditional on successful completion of a medical exam

continued

143Chapter 5 Selection

Subject Avoid Asking Preferred Comment

Pardoned Conviction whether applicant has ever been convicted whether applicant has ever been arrested whether applicant has a criminal record

if bonding is a job require- ment, ask whether the applicant is eligible

inquiries about criminal records or convictions are discouraged unless related to job duties

Sexual Orientation about the applicant’s sexual orientation

contacts for emergencies and/or details on depen- dants can be determined after selection

References the same restrictions that apply to questions asked of applicants apply when asking for employment references

Courtesy: Canadian Human Rights Commission

P A R T T H R E E Developing Effective Human Resources

6 REQUIRED PROFESSIONAL CAPABILITIES (RPC)LEARNING OUTCOMES

AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

EXPLAIN how to develop an orientation program.

DESCRIBE the five-step training process.

DISCUSS two techniques used for assessing training needs and DESCRIBE how to evaluate the training effort.

EXPLAIN the strategic importance of career planning and development in the context of today’s talent shortage.

EXPLAIN the evolution of career development and the impact of that on employers and employees.

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• Develops orientation policies and procedures for new employees

• Ensures compliance with legislated training obligations

• Conducts training needs assessments

• Recommends the most appropriate way to meet identified learning needs

• Recommends the selection of external training providers

• Participates in course design and selection and delivery of learning materials

• Ensures arrangements are made for training schedules, facilities, trainers, partici- pants, and equipment and course materials

• Facilitates post-training support activities to ensure transfer of learning to the workplace

• Applies general principles of adult learning to ensure appropriate development methods and techniques

• Provides assessment tools for career development

• Assists employees in identifying career paths, establishing learning plans and activities required for achieving personal and organizational success

• Implements deployment procedures ensuring that nec- essary compensation and ben- efit changes and education plans are addressed

Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

145Chapter 6 Orientation and Training

The terms “orientation” and “training” are associated, but actually represent slightly different variations of employee assimilation efforts. Orientation refers to a long-term, continuous socialization process in which employee and employer expectations or obligations are considered. With a focus on organization- specific topics, orientation attempts to transfer learning into behaviour, using disciplined, consistent efforts.1 In comparison, training refers to short-term, discrete efforts in which organizations impart information and instructions in an effort to help the recipient gain the required skills or knowledge to perform the job at an adequate level.

In addition, career planning has become a critical strategic issue for CEOs and boards of directors, as well as HR executives.2 The aging workforce and shifts in occupations and employment patterns have created a sense of urgency regarding the development of careers for the next generation of managers and executives. Increased competition for talent is expected to create a serious challenge for retaining high-potential employees. Proactive organizations have already started to take action to manage the need for more managerial talent.

At the same time, there is an increasing need for employees who are interested in global careers, in virtual work as a key aspect of their careers, in careers that involve continuously changing technology, and many other variations on tradi- tional career paths. HRM activities play an important role in career planning and career development. Career-related programs help HR professionals main- tain employee commitment—an employee’s identification with, and agreement to pursue, the company’s or the unit’s strategic goals. Most employees appreciate and respond well to having their skills and potential enhanced, and to knowing that they will be more marketable. Developmental activities, such as provid- ing the educational and training resources required to help employees identify and develop their promotion and career potential, are extremely important to younger employees today. Career-oriented firms also stress career- oriented appraisals that link the employee’s past performance, career preferences, and developmental needs in a formal career plan.

BECOME A LEARNING ORGANIZATION Learning is a survival technique for both individuals and organizations. Today, employees at all levels know that they must engage in lifelong learning to remain employable and have a satisfying career. A learning organization is an organiza- tion skilled at creating, acquiring, and transferring knowledge and at modifying its behaviour to reflect new knowledge and insights. The HR department is often the driving force behind ensuring that the training and development opportunities necessary to create a learning organization are in place, particularly in transferring knowledge, learning from experience, experimentation through searching for and testing new knowledge, learning from others, and systematic problem solving.

According to a Conference Board of Canada 2011 study, the average organi- zation in Canada spends $688 on learning and development per employee and the average employee undergoes 25 hours of training and development a year. However, expenditures on learning and development appear to be in decline and significantly less than our American comparators (see Figure 6.1. In addition, learning and development expenses in Canada are split largely between exter- nal providers, internal providers, and third-party (e.g., university) providers, as e videnced in Figure 6.2.

learning organization An organiza- tion skilled at creating, acquiring, and transferring knowledge and at modifying its behaviour to reflect new knowledge and insights.

Part 3 Developing Effective Human Resources146

Given that training often occurs after the orientation process, this chapter first reviews the process of orienting employees, followed by a review of the training process. The last section of this chapter discusses career planning.

1,540

912

1,1,76

811 1,071

688

2,000

1,500

1,000

500

0 2006 2008

(constant 2010 C$)

2010

U.S. Canada

FIGURE 6.1 Direct Learning Expenditure per Employee: Canada Versus U.S. (2006–2010)

Source: Data from The Conference Board of Canada; Training, “2006 Training Industry Report,” 22–32; “2008 Training Industry Report,” 16–34; “2010 Training Industry Report,” 18–31.

ORIENTING EMPLOYEES Once employees have been recruited and selected, the next step is orienting them to their new company and their new job. A strategic approach to recruitment and retention of employees includes a well-integrated orientation program, both before and after hiring.3 New employees need a clear understanding of company policies, expectations regarding their performance, and operating procedures. In the long term, a comprehensive orientation (also called onboarding) program

Employee tuition

Technology (excluding learning management systems)

Learning facilities

External providers

L&D staff salaries

Other

(per cent, n�53*)

*Organizations providing expenditure data for all categories.

37%

30%

22%

4%

1%

6%

FIGURE 6.2 Breakdown of Direct Learning and Development Expenditure

Source: The Conference Board of Canada. “Learning and Development Outlook 2011: Are Organizations Ready for Learning 2.0?,” October 2011, p. 16. Reprinted by permission.

147Chapter 6 Orientation and Training

can lead to reductions in turnover, increased morale, fewer instances of corrective discipline, and fewer employee grievances. It can also reduce the number of work- place injuries, particularly for young workers.4 The bottom-line implications of successful orientation can be dramatic, as described in the Strategic HR box.

Purpose of Orientation Programs Employee orientation (onboarding) provides new employees with basic back- ground information about the employer and specific information that they need to perform their jobs satisfactorily. At the Law Society of Upper Canada, any

employee orientation (onboarding) A procedure for providing new employees with basic background information about the firm and the job.

Onboarding: The First Step in Motivation and Retention

Professor Jerry Newman is one of the authors of a best- selling book on compensation. He worked undercover as a crew member in seven fast-food restaurants during a 14-month period to research total rewards. One of his findings was that the onboarding (also known as employee orientation) process played a significant role in long-term perceptions of management’s leadership abilities and the quality of non-monetary rewards.

In the best restaurant he worked for, he walked in and asked a counter worker for an application. She handed

it to him, suggested that he fill out the application in the lobby, and in one simple gesture, created a posi- tive first impression by asking, “Would you like a soda?” Although it may seem trivial, it was one of the few times anyone went to any lengths, however minor, to satisfy the needs of a future employee.

The first days and weeks of employment are crucial in the turnover reduction process as reality begins to converge with or diverge from an employee’s needs and aspirations. Making good first impressions goes a long way toward shaping a future view of non-monetary rewards.

In recent years, the fast-food industry has made concerted efforts to reduce turnover. Many chains have cut turnover in half during the past five years. Why? Because when they start to analyze costs, the results of successful onboarding are dramatic.

Assume a typical store does $1 million in sales and profits are 10 percent ($100 000). A typical turnover, according to most brands, costs between $1 500 and $2 000. If turnover is 150 percent and the typical store has 40 employees, then 60 employees turn over dur- ing the course of the year. Taking the midpoint of the replacement cost, 60 employees at $1 750 each equals $105 000. With profits at $100 000, the turnover costs eat up a store’s profitability. This is why fast food has made reducing turnover a high priority. And the cost of turnover in, say, high-tech industries is much higher than $1 500 or $2 000. It quickly becomes apparent that reducing turnover, partially accomplished through a positive and successful onboarding experience, can have very positive payoffs.

Source: Onboarding: The First Step in Motivation and Retention. Contents © 2007. WorldatWork.

STRATEGIC HR

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Part 3 Developing Effective Human Resources148

time a new employee walks through the door the organization acts quickly to help the person get started on the right foot. The Law Society views orientation as an investment in the retention of talent. The essence of the orientation pro- gram is to introduce people to the culture, give them a common bond, teach the importance of teamwork in the workplace, and provide the tools and informa- tion to be successful at the Law Society.5

Orientation is actually one component of the employer’s new-employee socialization process. Socialization is the ongoing process of instilling in all employees the prevailing attitudes, standards, values, and patterns of behaviour that are expected by the organization.6 During the time required for socializa- tion to occur, a new employee is less than fully productive. A strong onboarding program can speed up the socialization process and result in the new employee achieving full productivity as quickly as possible.

Orientation helps the employee to perform better by providing necessary information about company rules and practices. It helps to clarify the orga- nization’s expectations of an employee regarding his or her job, thus helping to reduce the new employee’s first-day jitters and reality shock (also referred to as cognitive dissonance)—the discrepancy between what the new employee expected from his or her new job and its realities.

An important part of any effective orientation program is sitting down and deciding on work-related goals with the new employee. These goals provide the basis for early feedback and establish a foundation for ongoing performance management.7 Orientation is the first step in helping the new employee manage the learning curve; it helps new employees become productive more quickly than they might otherwise.

Some organizations commence orientation activity before the first day of employment. At Ernst & Young, the firm keeps in touch with people who have been hired but have not yet started work by sending them internal newsletters, inviting them to drop by for chats, and hosting dinners for them.8 Others use ori- entation as an ongoing “new-hire development process” and extend it in stages throughout the first year of employment to improve retention levels and reduce the overall costs of recruitment.9

Online onboarding systems that can be provided to new employees as soon as they accept the job offer are increasingly being used to engage employees more quickly and accelerate employee performance.10 Online onboarding provides strate- gic benefits starting with building the brand as an employer of choice. This approach engages new hires in a personalized way and accelerates their time-to-productivity by completing benefits decisions, payroll forms, new-hire data, introduction of policies and procedures, and preliminary socialization using videos and graphics before the first day on the job, leading to a productive day one.11

Content of Orientation Programs Orientation programs range from brief, informal introductions to lengthy, formal programs. In the latter, the new employee is usually given (over an extended period of time) the following:

• internal publications, including employee handbooks that cover matters such as company history, current mission, activities, products, and people

• facility tour and staff introductions

socialization The ongoing process of instilling in all employees the pre- vailing attitudes, standards, values, and patterns of be haviour that are expected by the organization.

reality shock (cognitive dissonance) The state that results from the discrepancy between what the new employee expected from his or her new job and its realities.

RPC Develops orientation policies and procedures for new employees

149Chapter 6 Orientation and Training

• job-related documents, including an explanation of job procedures, duties and responsibilities, working hours, and attendance expectations; vacations and holidays; payroll, employee benefits, and pensions; and work regulations and policies such as personal use of company technology

• expected training to be received (when and why)

• performance appraisal criteria, including the estimated time to achieve full productivity

Note that some courts have found employee handbook contents to represent a contract with the employee. Therefore, disclaimers should be included that make it clear that statements of company policies, benefits, and regulations do not constitute the terms and conditions of an employment contract, either expressed or implied. Firms should think twice before including in the handbook such state- ments as “No employee will be terminated without just cause,” or statements that imply or state that employees have tenure or job security based on seniority or other non-performance reasons; these could be viewed as legal and binding commitments.

Responsibility for Orientation The first day of the orientation usually involves the HR specialist, who explains such matters as working hours and vacation. The employee is also introduced to his or her new supervisor, who contributes to the orientation by explaining the exact nature of the job, introducing the person to his or her new colleagues, and familiarizing the new employee with the workplace. Sometimes, another employee at a peer level will be assigned as a “buddy” or mentor for the newly hired employee for the first few weeks or months of employment.12 It is a good idea for the HR department to follow up with each new employee about three months after the initial orientation to address any remaining questions.

Special Orientation Situations Diverse Workforce In an organization that has not had a diverse workforce in the past, orienting new employees from different backgrounds poses a special challenge. The values of the organization may be new to the new employees if these values were not part of their past experience. New employees should be advised to expect a vari- ety of reactions from current employees to someone from a different background and be given some tips on how to deal with these reactions. In particular, they need to know which reactions are prohibited under human rights legislation and how to report these, should they occur. In addition, as diversity of the internal workforce increases, existing employees can be oriented toward a broader range of employee perceptions and effective communication techniques.

Mergers and Acquisitions Employees of a newly merged company need to receive information about the details of the merger or acquisition as part of the information on company history. They also need to be made aware of any ongoing, as-yet-unresolved difficulties regarding day-to-day operational issues related to their work. A further orienta- tion issue arises with respect to the existing employees at the time of the merger

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Part 3 Developing Effective Human Resources150

or acquisition: A new company culture will evolve in the merged organization, and everyone will experience a resocialization process. This presents an opportu- nity for the merged organization to emphasize the new organizational values and beliefs, thereby reinforcing corporate culture and furthering the new organiza- tion’s business objectives.13

Union versus Non-Union Employees New employees in unionized positions need to be provided with a copy of the collective bargaining agreement and be told which information relates specifically to their particular job. They also need to be introduced to their union steward, have payroll deduction of union dues explained, and be informed of the names of union executive members. New employees, both unionized and non-unionized, need to be made aware of which jobs are unionized and which ones are not.

Multi-Location Organizations New employees in a multi-location company need to be made aware of where the other locations are and what business functions are performed in each loca- tion. The Ontario Ministry of Education is one such organization, and it uses a web-based, online orientation to deliver corporate-level information.14 All employees have equal access regardless of their location, and the same message is delivered to each one. Updates can be made instantaneously, and employees can view the information at their own pace.

IBM has been piloting two virtual onboarding programs for interns in China and India. In the Chinese pilot, US-based HR staff and Chinese interns create indi- vidual avatars to build relationships, learn about their functions, and hold meetings within Second Life (an online artificial 3-D world). In India, IBM is using another virtual tool called Plane Shift to allow virtual teams to simulate project work.15

Executive Integration The orientation process is a continuous, long-term process aimed at moulding desired behaviours and aligning the values of the employee with those of the organization. To this end, there is a formal component of orientation that often occurs when a new employee first joins the organization. There is also an ongoing informal orientation process, with the aim of building a strong employee bond with organizational values, history, and tradition. This can include staff involve- ment through mentoring or management guidance (by using high-level staff, firms communicate the importance of messages and experiences in a more mean- ingful way), and through employee empowerment (indoctrination of values and information to guide workplace behaviour).

Additionally, newly hired or promoted executives typically do not participate in formal orientation activities, and there is little planning regarding how they will be integrated into their new position and company. The common assumption is that the new executive is a professional and will know what to do, but full exec- utive integration can take up to 18 months.16 To make things even more difficult, executives are often brought in as change agents, in which case they can expect to face considerable resistance. Thus, a lack of attention to executive integration can result in serious problems with assimilation and work effectiveness. It is com- mon to perceive executive integration as an orientation issue, but integration at senior levels in the organization requires an ongoing process that can continue

151Chapter 6 Orientation and Training

for months as the new executive learns about the unspo- ken dynamics of the organization that are not covered in orientation programs, such as how decisions are really made and who holds what type of power.17

Executive integration is of critical importance to a productive relationship between a new executive and his or her organization, and it is important to review previous successes and failures at executive integration on an ongoing basis. Key aspects of the integration process include the following:

• identifying position specifications (particularly the ability to deal with and overcome jealousy)

• providing realistic information to job candidates and providing support in the event of reality shock

• assessing each candidate’s previous record at mak- ing organizational transitions

• announcing the hiring with enthusiasm

• stressing the importance of listening as well as dem- onstrating competency, and promoting more time spent talking with the boss

• assisting new executives who are balancing their work to change cultural norms while they them- selves are part of the culture itself18

Problems with Orientation Programs A number of potential problems can arise with orientation programs. Often, too much information is provided in a short time (usually one day) and the new employee is overwhelmed. New employees commonly find themselves inundated with forms to fill out for payroll, benefits, pensions, and so on. Another prob- lem is that little or no orientation is provided, which means that new employees must personally seek answers to each question that arises and work without a good understanding of what is expected of them. This is a common problem for part-time and contract workers. Finally, the orientation information provided by the HR department can be too broad to be meaningful to a new employee, especially on the first day, whereas the orientation information provided by the immediate supervisor may be too detailed to realistically be remembered by the new employee.

Evaluation of Orientation Programs Orientation programs should be evaluated to assess whether they are providing timely, useful information to new employees in a timely and cost-effective manner. Three approaches to evaluating orientation programs are as follows:

1. Employee reaction. Interview or survey new employees for their opinion on the usefulness of the orientation program. Also, evaluate job performance within specified time periods to assess transference of learning and behav- iours where possible.

New employees in a multi-location company need to be made aware of where the other locations are and what business functions are performed in each location.

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An Ethical Dilemma Is it ethical to withhold information from an incoming executive about critical problems that he or she will face?

Part 3 Developing Effective Human Resources152

2. Socialization effects. Review new employees at regular intervals to assess progress toward understanding and acceptance of the beliefs, values, and norms of the organization.

3. Cost/benefit analysis. Compare (1) orientation costs, such as printing hand- books and time spent orienting new employees by HR staff and immediate supervisors, with (2) benefits of orientation, including reduction in errors, rate of productivity, efficiency levels, and so on.

THE TRAINING PROCESS Training employees involves a learning process in which workers are provided with the information and skills that they need to successfully perform their jobs. Training might mean showing a new production worker how to operate a machine, a new salesperson how to sell the firm’s product, or a new supervisor how to interview and appraise employees. Whereas training focuses on skills and competencies needed to perform employees’ current jobs, development is train- ing of a long-term nature. Its aim is to prepare current employees for future jobs within the organization.

It is important to ensure that business and training goals are aligned and that training is part of an organization’s strategic plan.19 A training professional in today’s business world has to understand the organization’s business, speak its language, and demonstrate the business value of training investment.20 In today’s service-based economy, highly knowledgeable workers can be the com- pany’s most important assets. Thus, it is important to treat training as a strategic investment in human capital.21

The Necessity of Training A recent federal government report concluded that Canada’s ability to remain glob- ally competitive and manage the technological change effectively is highly contingent on our ability to upgrade and renew the skills of our labour force. The assumption that youth workers alone hold the responsibility for skills development is no longer valid, and older workers must also adopt a lifelong learning approach.22

Already, a skills crisis has arisen in the manufacturing sector, where lack of qualified workers is a major problem. Skills in greatest need of improvement are problem solving, communications, and teamwork.23 Training is therefore moving to centre stage as a necessity for improving employers’ competitive- ness. The federal government has called for businesses to increase spending on training, and business has asked the government to expand programs for pro- fessional immigrants to get Canadian qualifications in their fields. In response, the Canadian Council on Learning was created by the federal government to promote best practices in workplace learning. For example, the Quebec govern- ment has legislated that all firms with a payroll of more than $1 000 000 must spend 1 percent of payroll on employee training (or else pay a tax in the same amount).24

Another benefit of increased training is the fact that training can strengthen employee commitment. It implies faith in the future of the company and of the individual employee. Few things can better illustrate a firm’s commitment to

training The process of teaching employees the basic skills/ competencies that they need to perform their jobs.

Canadian Society for Training and Development (CSTD) www.cstd.ca

153Chapter 6 Orientation and Training

its employees than continuing developmental opportunities to improve them- selves, and such commitment is usually reciprocated.25 This loyalty is one reason that a high-commitment firm like the Bank of Montreal provides all employees with seven days of training per year at a cost of $1 800 per employee—more than double the national average.26 Today’s young employees view learning and growth as the pathway to a successful and secure future and are attracted to organizations that have a commitment to keeping and growing their talent.27

Training and Learning Training is essentially a learning process. To train employees, therefore, it is useful to know something about how people learn. For example, people have three main learning styles: auditory, learning through talking and listening; visual, learning through pictures and print; and kinesthetic, tactile learning through a whole-body experience. Training effectiveness can be enhanced by identifying learning styles and personalizing the training accordingly.28 The following four guidelines help trainers maximize the effectiveness of the training process:

1. At the start of training, provide the trainees with an overall picture of the material to be presented. When presenting material, use as many visual aids as possible and a variety of familiar examples. Organize the material so that it is presented in a logical manner and in meaningful units. Try to use terms and concepts that are already familiar to trainees.

2. Maximize the similarity between the training situation and the work situa- tion and provide adequate training practice. Give trainees the chance to use their new skills immediately on their return to work. Train managers first and employees second to send a message about the importance of the training, and control contingencies by planning rewards for trainees who successfully complete and integrate the new training.29

3. Motivation affects training outcomes independently of any increase in cogni- tive ability. Training motivation is affected by individual characteristics like conscientiousness and by the training climate.30 Therefore, it is important to try to provide as much realistic practice as possible. Trainees learn best at their own pace and when correct responses are immediately reinforced, perhaps with a quick “Well done.” For many younger employees, the use of technology can motivate learning. Simulations, games, virtual worlds, and online networking are revolutionizing how people learn and how learning experiences are designed and delivered. Learners who are immersed in deep experiential learning in highly visual and interactive environments become intellectually engaged in the experience.31

4. Research evidence shows that the trainee’s pre-training preparation is a crucial step in the training process. It is important to create a perceived need for training in the minds of participants.32 Also, provide preparatory information that will help to set the trainees’ expectations about the events and consequences of actions that are likely to occur in the training envi- ronment (and, eventually, on the job). For example, trainees learning to become first-line supervisors may face stressful situations, high workloads, and difficult employees. Studies suggest that the negative impact of such conditions can be reduced by letting trainees know ahead of time what might occur.33

Research INSIGHT

Part 3 Developing Effective Human Resources154

Legal Aspects of Training Under human rights and employment equity legislation, several aspects of employee training programs must be assessed regarding the program’s impact on designated group members.34 For example, if relatively few women or vis- ible minorities are selected for a training program, there may be a requirement to show that the admissions procedures are valid—that they predict perfor- mance on the job for which the person is being trained. It could turn out that the reading level of the training manuals is too advanced for many trainees for whom English is not their first language—which may result in their doing poorly in the program, regardless of their aptitude for the jobs for which they are being trained. The training program might then be found to be unfairly discriminatory. On the other hand, employees who refuse a lawful and reason- able order to attend a training program may be considered to have abandoned their position.35

Negligent training is another potential problem. Negligent training occurs when an employer fails to train adequately, and an employee subsequently harms a third party. Also, an employee who is dismissed for poor performance or disciplined for safety infractions may claim that by failing to provide adequate training, the employer was negligent.

negligent training Occurs when an employer fails to adequately train an employee who subsequently harms a third party.

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RPC Ensures compliance with le gislated training obligations

THE FIVE-STEP TRAINING PROCESS A typical training program consists of five steps, as summarized in Figure 6.3, with each step detailed below.

Step 1: Training Needs Analysis The first step in training is to determine what training is required, if any. The main challenge in assessing the training needs of new employees is to determine what the job entails and to break it down into subtasks, each of which is then taught to the new employee.

Task analysis and performance analysis are the two main techniques for iden- tifying training needs.

Task Analysis: Assessing the Training Needs of New Employees Task analysis—identifying the broad competencies and specific skills required to perform job-related tasks—is used for determining the training needs of employees who are new to their jobs. Particularly with entry-level workers, it is common to hire inexperienced people and train them.36 Thus, the aim is to develop the skills and knowledge required for effective performance—like soldering (in the case of an assembly worker) or interviewing (in the case of a supervisor).

The job description and job specifications are helpful here. These list the spe- cific duties and skills required on the job and become the basic reference point in determining the training required to perform the job.

task analysis Identifying the broad competencies and specific skills required to perform job-related tasks.

International Personnel Assessment Council www.ipacweb.org

RPC Conducts training needs assessments

155Chapter 6 Orientation and Training

FIGURE 6.3 The Five Steps in the Training and Development Process

1. NEEDS ANALYSIS • Identify specific job performance skills needed to improve performance and

productivity. • Analyze the audience to ensure that the program will be suited to their spe-

cific levels of education, experience, and skills, as well as their attitudes and personal motivations.

• Use research to develop specific measurable knowledge and performance objectives.

2. INSTRUCTIONAL DESIGN • Gather instructional objectives, methods, media, description of and

sequence of content, examples, exercises, and activities. Organize them into a curriculum that supports adult learning theory and provides a blueprint for program development.

• Make sure all materials (such as video scripts, leaders’ guides, and partici- pants’ workbooks) complement each other, are written clearly, and blend into unified training geared directly to the stated learning objectives.

• Carefully and professionally handle all program elements—whether repro- duced on paper, film, or tape—to guarantee quality and effectiveness.

3. VALIDATION • Introduce and validate the training before a representative audience. Base

final revisions on pilot results to ensure program effectiveness.

4. IMPLEMENTATION • When applicable, boost success with a train-the-trainer workshop that

focuses on presentation knowledge and skills in addition to training content.

5. EVALUATION AND FOLLOW-UP • Assess program success according to

REACTION—Document the learners’ immediate reactions to the training. LEARNING—Use feedback devices or pre- and post-tests to measure what learners have actually learned. BEHAVIOUR—Note supervisors’ reactions to learners’ performance following completion of the training. This is one way to measure the degree to which learners apply new skills and knowledge to their jobs. RESULTS—Determine the level of improvement in job performance and assess needed maintenance.

Source: Courtesy of Kennedy Information, LLC.

Part 3 Developing Effective Human Resources156

Some employers supplement the current job description and specification with a task analysis record form, which typically contains six types of information:

1. list of job’s main tasks and subtasks

2. indication of frequency of tasks and subtasks

3. measurable description of performance standards for each task and subtask, for instance “tolerance of 0.007 inches” or “within two days of receiving the order”

4. conditions under which task is performed

5. the competencies and specific skills or knowledge required for each task and subtask, specifying exactly what knowledge or skills must be taught

6. the decision as to whether the task is best learned on or off the job, based on several considerations such as training objectives, methods, and resources (for example, prospective jet pilots must learn something about the plane off the job in a simulator before actually getting behind the controls)

Once the essential skills involved in doing the job are determined, new employees’ proficiency in these skills can be assessed and training needs identi- fied for each individual.

Performance Analysis: Determining the Training Needs of Current Employees Performance analysis means verifying whether there is a significant performance deficiency and, if so, determin- ing whether that deficiency should be rectified through training or some other means (such as transferring the employee). The first step is to appraise the employee’s performance because, to improve it, the firm must first compare the person’s current performance with what it should be. Examples of specific performance deficiencies follow:

“Salespeople are expected to make ten new contacts per week, but John averages only six.” “Other plants our size average no more than two serious accidents per month; we are aver- aging five.”

Distinguishing between can’t do and won’t do problems is at the heart of per- formance analysis. First, the firm must determine whether a problem is a can’t do problem and, if so, its specific causes. For example, the employees do not know what to do or are unaware of the standards; there are obstacles in the system (such as a lack of tools or supplies); job aids are needed; poor selection has resulted in hiring people who do not have the skills to do the job; or training is inadequate. Conversely, it might be a won’t do problem. In this case, employees could do a good job if they wanted to. If so, the reward system may have to be changed, perhaps by the implementation of an incentive program.

Establish Training Objectives Once training needs have been identified, concrete and measurable training objec- tives can be established. Objectives specify what the trainee should be able to accomplish after successfully completing the training program. They thus provide a focus for the efforts of both the trainee and the trainer and provide a benchmark

performance analysis Verifying whether there is a significant performance deficiency and, if so, determining whether that deficiency should be rectified through training or some other means.

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for evaluating the success of the training program. A training program can then be developed and implemented with the intent to achieve these objectives. These objectives must be accomplished within the organization’s training budget.

Step 2: Instructional Design After the employees’ training needs have been determined and training objec- tives have been set, the training program can be designed. There are two major considerations in developing the instructional design: First, will learning be pro- grammed or informal? Second, what is the medium for training? While a large portion of training occurs in the workplace (on-the-job training and appren- ticeships), the option of assisted or third-party learning allows organizations to gain expertise not available in house and may offer significant cost reductions through the benefits of economies of scale.

Programmed Learning Whether the programmed instruction device is a textbook or a computer, p rogrammed learning consists of three components:

1. presenting questions, facts, or problems to the learner

2. allowing the person to respond

3. providing feedback on the accuracy of his or her answers

The main advantage of programmed learning is that it reduces training time by about one-third.37 Programmed instruction can also facilitate learning because it lets trainees learn at their own pace, provides immediate feedback, and (from the learner’s point of view) reduces the risk of error. However, train- ees do not learn much more from programmed learning than they would from a traditional textbook. Therefore, the cost of developing the manuals or software for programmed instruction has to be weighed against the accelerated but not improved learning that should occur.

Informal Learning About two-thirds of industrial training is not formal at all but rather results from day-to-day unplanned interactions between the new worker and his or her colleagues. Informal learning may be defined as “any learning that occurs in which the learning process is not determined or designed by the organization.”38

Workplace and Traditional Training Techniques Classroom Training Classroom training continues to be the primary method of providing corporate training in Canada, and lectures are a widely used method of classroom training delivery. Lecturing has several advantages. It is a quick and simple way of providing knowledge to large groups of trainees, as when the sales force must be taught the special features of a new product.

Classroom learning has evolved to maintain its relevance in the technological age. With features such as wikis, blogs, and podcasts, learning opportunities must reflect employees’ new abilities and needs. Blended learning, using a combination of instructor-led training and online e-learning, has been found to p rovide better learning results and higher learner engagement and enthusiasm than expected. In blended learning, the in-class training becomes tightly integrated with the online experience, and the relevance to the learner is vastly improved. Thus, the

programmed learning A systematic method for teaching job skills that involves presenting questions or facts, allowing the person to respond, and giving the learner immediate feedback on the a ccuracy of his or her answers.

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classroom has evolved to include interactions with remote colleagues and instructors, e-learning in many forms, coaching, assessment, and feedback.39

On-the-Job Training On-the-job training (OJT) involves having a person learn a job by actually performing it. Virtually every employee—from mailroom clerk to company president—gets some on-the-job training when he or she joins a firm. In many com- panies, OJT is the only type of training available. It usually involves assigning new employees to experienced workers or supervisors who then do the actual training.40

OJT has several advantages: it is relatively inexpensive, trainees learn while producing, and there is no need for expensive off-job facilities like classrooms or manuals. The method also facilitates learning, since trainees learn by actually doing the job and get quick feedback about the quality of their performance.

Apprenticeship Training Apprenticeship training basi- cally involves having the learner/apprentice study under the tutelage of a master craftsperson. A pprenticeship training is critical today, as more than half of skilled tradespeople are expecting to retire by 2020. Federal, provincial, and territorial governments are increasing their funding of apprenticeship training programs to meet this growing need for more tradespeople.41

Apprentices become skilled workers through a combination of classroom instruction and on-the-job training. Apprenticeships are widely used to train indi- viduals for many occupations, including those of elec- trician and plumber. In Canada, close to 170 established trades have recognized apprenticeship programs.42

Job Instruction Training Many jobs consist of a logical sequence of steps and are best taught step by step. This step-by-step process is called job instruction training (JIT). To begin, all necessary steps in the job are listed, each in its proper sequence. Along- side each step, a corresponding “key point” (if any) should be noted. The steps show what is to be done, while the key points show how it is to be done and why. In today’s service economy, job instruction training for step-by-step manual work is being superseded by behaviour modelling for service workers (as discussed later under the section Focus on Life T rajectories).

Technology-Enabled Training Techniques E-Learning Electronic dependent or web-based training is now commonly used by Canadian organizations. It is generally estimated that online training costs about 50 percent less than traditional classroom-based training. Also, online learning is ideal for adults, who learn what they want, when they want, and where they want. Online training is often the best solution for highly special- ized business professionals who have little time available for ongoing education. F urther, online training is ideal for global organizations that want consistent training for all employees worldwide. Alcan Inc. is using this approach to stan- dardize its training programs for 72 000 employees in 55 countries.43

However, critics point out that content management, sound educational strat- egy, learner support, and system administration should receive more attention, as they are often the critical determining factors in successful training o utcomes. In the last few years, “learner content management systems” have been developed to deliver personalized content in small units or modules of learning. These systems complement learning management systems that are focused on the logistics of managing learning. Together, they form a powerful combination for an e-learning

job instruction training (JIT) The listing of each job’s basic tasks along with key points to provide step-by-step training for employees.

On-the-job training is structured and concrete. Here, a supervisor teaches an employee to use a drum-forming machine.

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platform. This development is considered part of the new phase of e-learning, involving greater standardization and the emergence of norms. However, the free- dom of online learning means that unless learners are highly motivated, they may not complete the training. It is estimated that learners don’t complete 50 to 90 percent of online courses. In general, it is important to seek blended learning, including both personal interaction and online tr aining tools.44

Audiovisual Techniques Audiovisual techniques (CDs, DVDs, computer-based tech- niques) can be very effective and are widely used. They can be more expensive than conventional lectures to develop, but offer some advantages. Trainers should consider using these when there is a need to illustrate how a certain sequence should be followed over time, there is a need to expose trainees to events not easily demonstrable in live lectures, or the training is going to be used organization-wide.

There are three options when it comes to audiovisual material: buying an existing product, making one, or using a production company. Dozens of busi- nesses issue catalogues that list audiovisual programs on topics ranging from applicant interviewing to zoo management.

The advantages of audiovisual techniques include instructional consistency (computers, unlike human trainers, do not have good days and bad days), mas- tery of learning (if the trainee does not learn it, he or she generally cannot move on to the next step), flexibility for the trainee, and increased trainee motivation (resulting from the responsive feedback).

Video conferencing, in which an instructor is televised live to multiple loca- tions, is now a common method for training employees. It has been defined as “a means of joining two or more distant groups using a combination of audio and visual equipment.”45 Video conferencing allows people in one location to communicate live with people in another city or country or with groups in sev- eral places at once. It is particularly important to prepare a training guide ahead of time, as most or all of the learners will not be in the same location as the trainer. It is also important for the trainer to arrive early and test all equipment that will be used.

Vestibule or simulated training is a technique by which trainees learn on the actual or simulated equipment that they will use on the job, with the training taking place off the job. Therefore, it aims to obtain the advan- tages of on-the-job training without actually putting the trainee on the job. Vestibule training is virtually a necessity when it is too costly or dangerous to train employees on the job. Putting new assembly-line workers right to work could slow production, for instance, and when safety is a c oncern—as with pilots—vestibule training may be the only practical alternative.

Vestibule training may consist of simply placing a trainee in a sepa- rate room with the equipment that he or she will actually be using on the job; however, it often involves the use of equipment simulators. In pilot training, for instance, the main advantages of flight simulators are safety, learning efficiency, and cost savings (on maintenance costs, pilot cost, fuel cost, and the cost of not having the aircraft in regular service).46

A new generation of simulations has been developed to simulate role-play situations designed to teach behavioural skills and emotional intelligence. Body language, facial expressions, and subtle nuances are programmed in. These new simulations offer authentic and relevant sce- narios involving pressure situations that tap users’ emotions and force them to act.47

video conferencing Connecting two or more distant groups by using audiovisual equipment.

vestibule or simulated training Training employees on special off- the-job equipment, as in airplane pilot training, whereby training costs and hazards can be reduced.

Vestibule training simulates flight conditions at NASA headquarters.

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Steps 3 and 4: Validation and Implementation Validation of the training program that has been designed is an often-overlooked step in the training process. In order to ensure that the program will accomplish its objectives, it is necessary to conduct a pilot study, or run-through, with a rep- resentative group of trainees. The results of the pilot study are used to assess the effectiveness of the training.

Revisions to the program can be made to address any problems encountered by the pilot group of trainees in using the training material and the experiences provided to them. Testing at the end of the pilot study can measure whether or not the program is producing the desired improvement in skill level. If the results fall below the level of the training objectives, then more work must be under- taken to strengthen the instructional design.

Once the program has been validated, it is ready to be implemented by pro- fessional trainers. In some cases, a train-the-trainer workshop may be required to familiarize trainers with unfamiliar content or with unique and innovative new methods for presenting the training content.

Step 5: Evaluation of Training It is important to assess the return on investment in human capital made through training by determining whether the training has actually achieved the objectives. Transfer of training is the application of the skills acquired during the training program into the work environment and the maintenance of these skills over time. A number of actions can be taken before, during, and after a training program to enhance transfer of training.48

Before training, potential trainees can be assessed on their level of abil- ity, aptitude, and motivation regarding the skill to be taught, and those with higher levels can be selected for the training program. Trainees can be involved in designing the training, and management should provide active support at this stage.

During the training, it is important to provide frequent feedback, oppor- tunities for practice, and positive reinforcement. After the training program, trainees can use goal-setting and relapse-prevention techniques to increase the likelihood of applying what they have learned. Management can enhance transfer of training by providing opportunities to apply new skills and by con- tinuing to provide positive reinforcement of the new skills while being tolerant of errors.

After trainees complete their training (or at planned intervals during the training), the program should be evaluated to see how well its objectives have been met and the extent to which transfer of training has occurred. For example, are trainees learning as much as they can? Are they learning as fast as they can? Is there a better method for training them? These are some of the questions that are answered by properly evaluating training efforts.

Overall, there is little doubt that training and development can be effective. Formal studies of training programs substantiate the potential positive impact of such programs. Profitable companies spend the most on training, and those rated as being among the 100 best companies to work for in Canada spend the most per employee on training.49

There are two basic issues to address when evaluating a training program: whether controlled experimentation will be used, and which training effect will be measured.

transfer of training Application of the skills acquired during the training program into the work environment and the maintenance of these skills over time.

RPC Ensures arrangements are made for training schedules, facilities, trainers, participants, equipment, and course materials

RPC Facilitates post-training support activities to ensure transfer of learning to the workplace

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Controlled experimentation is the best method to use in evaluating a train- ing program. A controlled experiment uses both a training group and a control group (that receives no training). Data (for example, on quantity of production or quality of soldered junctions) should be obtained both before and after the training effort in the training group, and before and after a corresponding work period in the control group. In this way, it is possible to determine the extent to which any change in performance in the training group resulted from the train- ing itself, rather than from some organization-wide change like a raise in pay, which would likely have affected employees in both groups equally.

Training Effects to Measure Four basic categories of training outcomes can be measured:50

1. Reaction. First, evaluate trainees’ reactions to the program. Did they like the program? Did they think it worthwhile?

2. Learning. Second, test the trainees to determine whether they learned the principles, skills, and facts that they were supposed to learn.

3. Behaviour. Next, ask whether the trainees’ behaviour on the job has changed because of the training program. For example, are employees in the store’s complaint department more courteous toward disgruntled customers than they were previously? These measures determine the degree of transfer of training.

4. Results. Last, but probably most important, ask questions such as these: Did the number of customer complaints about employees drop? Did the rejection rate improve? Was turnover reduced? Are production quotas now being met? and so on. The training program may succeed in terms of the reactions from trainees, increased learning, and even changes in behaviour, but if the results are not achieved, then in the final analysis the training has not achieved its goals.

controlled experimentation Uses both a group for which the situation is modified (e.g., receives training) and a group for which the situation is not modified (e.g., receives no training) to assess the impact of the modification.

CAREER PLANNING AND DEVELOPMENT Career planning can play a significant role in retaining employees in the orga- nization and reducing turnover of valued workers. The key factors in employee retention today are an organizational culture that values and nurtures talented employees, fair processes in “people” decisions, and managers who understand what motivates employees.51 Employers and employees also recognize the need for lifelong learning. Retention can be strengthened by providing extensive continuing training—from basic remedial skills to advanced decision-making techniques—throughout employees’ careers.

Before we proceed, it would be useful to clarify some of the terms that will be used.52 A career is a series of work-related positions, paid or unpaid, that help a person to grow in job skills, success, and fulfillment. Career development is the lifelong series of activities (such as workshops) that contribute to a person’s career exploration, establishment, success, and fulfillment. And, as the Workforce Diversity box illustrates, career development for older workers is just as impor- tant as it is for younger employees. Career planning is the deliberate process through which someone becomes aware of personal skills, interests, knowledge, motivations, and other characteristics; acquires information about opportunities and choices; identifies career-related goals; and establishes action plans to attain specific goals.

Career Planning Exercises www.careerstorm.com Career Networking www.careerkey.com career A series of work-related positions, paid or unpaid, that help a person to grow in job skills, success, and fulfillment.

career development The lifelong series of activities (such as work- shops) that contribute to a person’s career exploration, establishment, success, and fulfillment. career planning The deliberate process through which someone becomes aware of personal skills, interests, knowledge, motivations, and other characteristics; acquires information about opportunities and choices; identifies career-related goals; and establishes action plans to attain specific goals.

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Career Development for Older Workers While mandatory retirement has been largely abolished in Canada, employers often neglect career development of older workers. The “second middle age” refers to the 20-year period when an individual is between ages 60 and 80. Research has shown that they have lower rates of absenteeism, fewer accidents, higher levels of job satisfaction, and a stronger work ethic.

Here are practical career development strategies that will help keep employees fully engaged during their second middle age:

• Adopt a new attitude: Older workers’ views are gener- ally grounded in years of experience, but at the same time many of them reflect an open mind, a flexible and forward-thinking attitude, and a willingness to take calculated risks.

• Provide career counselling: People want to do work that is consistent with their values, and that taps into their interests, knowledge base, and skill set. These factors may change over the course of an individual’s career, and counselling may help address this change. For example, it may help an older worker realize that returning to an earlier role could be rejuvenating, or that embarking on a completely new endeavour may be a great alternative to retirement.

• Invest in training and development: As long as intel- lectual capability is valued at the workplace, it is easy for older workers to adjust for slower mental pace and occasional memory lapse, which are typical of aging. The workplace should separate signs of aging from capacity in primary mental functions, such as language fluency, numerical ability, and spatial orientation.

• Honour the need for work–life balance: Creative work arrangements should be considered. Things such as flexible working hours and sabbaticals enable sec- ond middle-agers to spend the necessary time with family, as well as fulfill their professional ambitions and responsibilities.

Source: Based on M. Watters of Optimum Talent/KWA Partners, “Career Development for Employees Heading into Their ‘Second Middle Age,’” Canadian HR Reporter (February 13, 2006), p. 13.

WORKFORCE DIVERSITY

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The Evolution of Career Development In the early stages of career development research, career patterns were assumed to be stable, predictable, linear, and based on hierarchies. Career stages were seen as influential on the employee’s knowledge of and preference for various occu- pations, and were often associated to the concept that based on an employee’s age, their career stage could be established. Later studies, like the Vocational Preference Test (VPT) by John Holland suggested that a person’s personal- ity (including values, motives, and needs) determines his or her occupational orientation, which is another important factor in career choices.

Research INSIGHT

occupational orientation The theory that there are six basic per- sonal orientations that determine the sorts of careers to which people are drawn.

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Based on research with the Vocational Preference Test (VPT), six basic p ersonality types or orientations were identified:

1. Realistic orientation: attracted to occupations that involve physical activities requiring skill, strength, and coordination

2. Investigative orientation: attracted to careers that involve cognitive activi- ties (thinking, organizing, and understanding) rather than affective activities (feeling, acting, or interpersonal and emotional tasks)

3. Social orientation: attracted to careers that involve interpersonal rather than intellectual or physical activities

4. Conventional orientation: favours careers that involve structured, rule- regulated activities, as well as careers in which it is expected that the employee subordinate his or her personal needs to those of the organization

5. Enterprising orientation: attracted to careers aimed at influencing others

6. Artistic orientation: attracted to careers that involve self-expression, artistic creation, expression of emotions, and individualistic activities

Most people have more than one orientation (they might be social, realistic, and investigative, for example). Holland believes that the more similar or com- patible these orientations are, the less internal conflict or indecision a person will face in making a career choice.

New Approaches to Career Development Now, because job transitions are more frequent, occupational prospects and lin- ear career patterns lose definability and predictability. As a result, a new concept of career development has emerged, in which the primary stakeholder of a career is the person, not the organization.53 Therefore, a more dynamic and holistic approach to career development is emerging, with a focus on lifelong learning, flexibility, and adaptability. As a consequence, a number of individual and orga- nizational considerations need to be taken into account.

Identify Skills and Aptitudes Successful performance depends not only on moti- vation but also on ability. Someone may have a conventional orientation, but whether he or she has the skills to be an accountant, banker, or credit man- ager will largely determine the specific occupation ultimately chosen. Therefore, the identification of each individual’s skills must based on his or her education and experience. In organizations using competency- or skill-based pay, a formal system for evaluating skills will already be in place.

For career-planning purposes, a person’s aptitudes are usually measured with a test battery, such as the general aptitude test battery (GATB). This instrument measures various aptitudes, including intelligence and mathematical ability. Considerable work has been done to relate aptitudes, such as those measured by the GATB, to specific occupations.

Identify Career Anchors Edgar Schein says that career planning is a continuing process of self-discovery. As a person learns more about him- or herself, a domi- nant career anchor may become apparent. Career anchors, as their name implies,

career anchor A concern or value that a person will not give up if a choice has to be made.

RPC Applies general principles of adult learning to ensure appropriate development methods and techniques

RPC Provides assessment tools for career development

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are concerns or values that a person will not give up if a choice has to be made. Schein identified eight career anchors:

1. Technical/functional: A strong technical/functional career anchor suggests that they will make decisions enabling them to remain and grow in their chosen technical or functional fields.

2. Managerial competence: A strong motivation to become managers as well as career experience convince them that they have the skills and values required to rise to general management positions.

3. Creativity: They need to build or create something that is entirely their own product—a product or process that bears their name, a company of their own, or a personal fortune that reflects their accomplishments.

4. Autonomy and independence: A drive to be to be on their own without being anybody’s subordinate often drives them into entrepreneurial activities.

5. Security: A stable future with one organization that offers a good r etirement program and benefits or allows them to maintain similar geographic surroundings may be important.

6. Service/dedication: They need to do something meaningful in a larger context.

7. Pure challenge: They desire to overcome impossible odds, solve unsolved problems, and beat competitors.

8. Lifestyle: They define their careers as a part of life and a larger lifestyle, integrating careers and personal and family concerns.

Focus on Life Trajectories Issues of work–life balance are becoming more significant in peoples’ reflections about their career aspirations. In addition, the growth in the number of people employed in the contingent workforce ( temporary, part time, contractual, freelance, casual, and so on) makes managing interactions between work and life domains even more critical in career planning.

As a result, career development can be envisioned as a life trajectory, in which a person designs and builds his or her career and life simultaneously. This increases the importance of ensuring that employees are empowered decision makers when an organization engages in career planning. As well, the value of career development initiatives must extend beyond adding value to the employer to also include an explicit discussion of the transferability and value of the initia- tives to the employee.54

The focus on life trajectories requires a shift in thinking about career devel- opment, as outlined below:

1. From Traits to Context: Research on personality traits and ability factors to guide occupation-driven careers relied on stability and predictability. In the new economy, career patterns should be viewed as professional identities that are dynamic. Understanding the range of factors that are outside of the organization’s control is critical to the new approach of career development.

2. From Prescriptive to Process: On average, people up to the age of 36 change their jobs every two years. Traditional career paths involving a single, com- mitted occupational choice are no longer a reality. Instead, career planners must stay informed about all of the job-specific requirements and offer a best fit of career patterns, focusing on adding information and content to enable employees to achieve a range of career ambitions.

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3. From Linear to Non-linear: Traditional career development was very deductive in that it assumed past employment patterns were valid predictors of future career ambitions. Thus, there is a necessary shift to a more holistic life design for career development, with an awareness of non-linear, often mutually dependant, causalities. Career plans must be frequently reevaluated and updated, involving an iterative strategy between organizational agents and employees.

4. From Scientific to Narrative: The old path of completing all desired educa- tion, securing a job, then establishing a family is no longer a reality for many Canadians; there is growing diversity of individual realities. Career develop- ment must empower employees to self-assess and interpret their own life experiences (often in the form of a narrative) and assist employees in making sense of their distinct perspective and implementing co-evolution.

5. From Describing to Modelling: Career development must adapt to individual experiences, ambitions, abilities, opportunities, and perspectives. Thus, the use of simple descriptive or scientific statistics alone undermines the com- plexity of career development. Career forecasting in this sense should develop a number of possible configurations and continuously monitor interacting variables to increase the success of career development.

Roles in Career Development The individual, the manager, and the employer all have roles in the individual’s career development. Ultimately, however, it is the individual who must accept responsibility for his or her own career, since workers are often seen as collabo- rators in the organizations that employ them.55 This requires an entrepreneurial, goal-oriented approach that uses four key skills: self-motivation, independent learning, effective time and money management, and self-promotion.56 Younger workers today are increasingly expecting to develop these skills by pursuing a career path that involves moving through multiple organizations.57 Networking is the foundation of active career management and is essential for accessing the most valuable career resource—people. Networking is an organized process whereby the individual arranges and conducts a series of face-to-face meetings with his or her colleagues and contacts, plus individuals whom they recommend. Networking does not involve asking for a job, and it is not a one-sided encoun- ter where only one individual benefits; rather, it is a mutual sharing process. Its objectives are to let people know about one’s background and career goals, and to exchange information, advice, and referrals.58 A personal networking chart is shown in Figure 6.4.

Within the organization, the individual’s manager plays a role in career development, too. The manager should provide timely and objective perfor- mance feedback, offer developmental assignments and support, and participate in career development discussions. The manager acts as a coach, an appraiser, an adviser, and a referral agent by listening to and clarifying the individual’s career plans, giving feedback, generating career options, and linking the employee to organizational resources and career options.

Finally, the employer also plays a career development role. For example, an orga- nization wanting to retain good employees should provide career-oriented training and development opportunities, offer career information and career programs, and give employees a variety of career options. Most employees will ultimately assess

networking An organized process whereby the individual arranges and conducts a series of face-to- face meetings with his or her colleagues and contacts, plus individuals whom they recommend.

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their employers on the extent to which the organization allowed them to excel and to become the people they believed they had the potential to become. How well an employer fulfills this career development role will help determine an employee’s overall job satisfaction and commitment to his or her employer.59

Colleagues

Managers

Human Resources

Former Employer

Career Organizational

ProfessionalPersonal

Accountant

Lawyer

Family Doctor

Dentist

Veterinarian

Trade Associations

Fundraising Groups

Networking Groups

Volunteer Groups

Friends

Family

Neighbours

Alumni

FIGURE 6.4 Personal Networking Chart

Source: Based on It’s Your Move by Marge Watters. Published by HarperCollins Publishers Ltd.

MANAGING INTERNAL EMPLOYEE MOVEMENT Transfer and promotion decisions have important career development implications for transferred or promoted employees and substantial benefits for the organization in terms of creating a pool of potential future managers with broad experience throughout the firm. Employees may seek transfers into jobs that offer greater possibility for career advancement or opportu- nities for personal enrichment, or into those that are more interesting or more convenient—better hours, location of work, and so on.60 Many organizations are recognizing that future leaders will need international experience to effectively manage their organizations in the increasingly globalized world of business, and they are providing international assignments as a career development experience. Chapter  13 includes details on how to manage international HRM.

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Employers must also decide on the criteria by which to promote employees, and the way that these decisions are made will affect the e mployees’ motivation, performance, and commitment.

Decision 1: Is Seniority or Competence the Rule? From the point of view of motivation, promotion based on competence is best. However, union agreements often contain a clause that emphasizes seniority in promotions, meaning that only substantial differences in abilities can be taken into account in such situations. 61

Decision 2: How Is Competence Measured? If promotion is to be based on competence, how will competence be defined and measured? Defining and measuring past performance are relatively straight- forward matters, but promotion also requires predicting the person’s potential; thus, there must be a valid procedure for predicting a candidate’s future per- formance. Tests and assessment centres can be used to evaluate employees and identify those with executive potential.62

Decision 3: Is the Process Formal or Informal? Many employers still depend on an informal system whereby the availability and requirements of open positions are kept secret. Key managers make pro- motion decisions among employees whom they know personally and who have impressed them.63 However, the link between performance and promo- tion is severed, thereby diminishing the effectiveness of promotion as a reward. Employers should establish formal, published promotion policies and proce- dures that describe the criteria by which promotions are awarded. Skills inven- tories, replacement charts, and replacement summaries (like those discussed in Chapter 4) can be used to compile detailed information about the qualifications of many employees. This ensures that (1) all qualified employees are considered for openings, and (2) promotion is more closely linked with performance in the minds of employees, which also increases the legal defensibility of the decision.

RPC Implements deployment proce- dures ensuring that necessary compensation and benefit changes and education plans are addressed

Hints TO ENSURE LEGAL COMPLIANCE

Chapter SUMMARY

1. A strategic approach to the recruitment and retention of employees includes a well-integrated orientation (onboarding) program both before and after hiring. New employees need a clear understanding of company policies, expectations regarding their performance, and operating pro- cedures. Orientation is part of the socialization process that instills in new employees the prevail- ing attitudes, standards, values, and patterns of behaviour that are expected by the organization. Onboarding helps to reduce reality shock—the

discrepancy between what the new employee expected from his or her job and its realities.

2. The basic training process consists of five steps: needs analysis, instructional design, validation, implementation, and evaluation.

3. Two techniques for assessing training needs are (1) task analysis to determine the training needs of employees who are new to their jobs, and (2) performance analysis to appraise the perfor- mance of current employees to determine whether training could reduce performance problems.

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4. Traditional training techniques include on-the- job-training, apprenticeship training, informal learning, job instruction training, classroom training, audiovisual techniques, programmed learning, and vestibule or simulated training.

5. Three types of e-learning are computer-based training, online training, and electronic perfor- mance support systems.

6. In evaluating the effectiveness of a training p rogram, four categories of outcomes can be m easured: reaction, learning, behaviour, and results.

7. Career planning and development is a critical strategic issue in ensuring that the supply of necessary talent is available. It involves the delib- erate process through which a person becomes aware of personal career-related attributes, and the lifelong series of activities that contribute to his or her career fulfillment.

8. The evolution of career development involved identifying occupational orientation: realistic, investigative, social, conventional, enterprising, and artistic. In addition, skills and aptitudes can be identified, as can career anchors: technical/ functional, managerial competence, creativity, autonomy, security, service/dedication, pure c hallenge, or lifestyle.

9. The focus on life trajectories involves refram- ing career development from traits and states to context, from prescriptive to process, from linear to non-linear, from scientific to narrative, and from descriptive to modelling. In this evolution, organizations can benefit from becoming learn- ing organizations that use behaviour modelling, including role-playing, simulations, management games, and mentoring opportunities.

10. Transfers offer an opportunity for personal and career development, but they have become more difficult to manage because of spousal and family concerns. Thus, career-transition programs for spouses are often provided. In making promotion decisions, firms have to (1) decide to promote based on seniority or competence, (2) decide how to measure competence, and (3) choose between a formal or informal promotion system.

career (p. 161) career anchor (p. 163) career development (p. 161) career planning (p. 161) controlled experimentation (p. 161) employee orientation (onboarding) (p. 147) job instruction training (JIT) (p. 158) learning organization (p. 145) negligent training (p. 154) networking (p. 165)

occupational orientation (p. 162) performance analysis (p. 156) programmed learning (p. 157) reality shock (cognitive dissonance) (p. 148) socialization (p. 148) task analysis (p. 154) training (p. 152) transfer of training (p. 160) vestibule or simulated training (p. 159) video conferencing (p. 159)

Key TERMS

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

169Chapter 6 Orientation and Training

technique from the chapter that you think would have been good to use, providing a justification as to why this would be a suitable technique.

5. Describe why career planning and development has become more strategically important. Give a brief outline of what organizations are doing to take a more strategic approach in this area.

6. Briefly describe each of the five aspects of the new approach to career development.

7. What are the six main types of occupational orientation?

8. What is a career anchor? Explain why you think each of the five career anchors is important today.

1. Prepare an orientation program checklist for your current or most recent job.

2. Choose a task you are familiar with—such as mowing the lawn or using a chat room—and develop a job instruction training sheet for it.

3. Ali Khan is an undergraduate business student majoring in accounting. He has just failed the first accounting course, Accounting 101, and is understandably upset. Explain how you would use performance analysis to identify what, if any, are Ali’s training needs.

4. Think about a job you have had in the past. For this job, identify which training technique was used and reflect on reasons why you think that system was used. Next, select a different training

Review and Discussion QUESTIONS

4. Would you tell high-potential employees that they are on the “fast track”? How might this knowledge affect their behaviour? How might the behaviour of employees who are disap- pointed at not being included in management development activities be affected?

5. How do you think employees are going to respond to the new focus on career planning, given the emphasis in recent years on “being in charge of your own career”?

1. “A well-thought-out onboarding program is especially important for employees (like many recent graduates) who have had little or no work experience.” Explain why you agree or disagree with this statement.

2. What do you think are some of the main d rawbacks of relying on informal on-the-job training for teaching new employees their jobs?

3. Most training programs are not formally evaluated beyond a reaction measure. Why do you think employers do not measure the impact of training on learning, behaviour, and results more often?

Critical Thinking QUESTIONS

1. Obtain a copy of an employee handbook from your employer or from some other organization. Review it and make recommendations for improvement.

2. Working individually or in groups, follow the steps in Figure 6.3 and prepare a training program for a job that you currently hold or have had in the past.

3. In small groups of four to six students, complete the following exercise:

WestJet has asked you to quickly develop the outline of a training program for its new reserva- tion clerks. Airline reservation clerks obviously need numerous skills to perform their jobs. (You may want to start by listing the job’s main duties, using the information provided below.)

Experiential EXERCISES

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Produce the requested training outline, making sure to be very specific about what you want to teach the new clerks and what methods and aids you suggest using to train them.

Duties of Airline Reservation Clerks:

Customers contact airline reservation clerks to obtain flight schedules, prices, and itineraries. The reservation clerks look up the requested information on the airline’s flight schedule systems, which are updated continuously. The reservation clerk must deal courteously and expeditiously with the customer and be able to quickly find alternative flight arrangements to provide the customer with the itinerary that fits his or her needs. Alternative flights and prices must be found quickly so that the customer is not kept waiting and so that the reservation operations group maintains its efficiency stan- dards. It is often necessary to look under various routings, since there may be a dozen or more alternative routes between the customer’s start- ing point and destination.

4. Working in groups of four to six students, complete the following exercise:

Determine who in your group knows how to make paper objects such as cranes, boxes, balloons, ninja darts, fortunes, boats, and so on. Select one person who is willing to be a subject matter expert (SME) to assist your group in developing an on-the-job training program to make one product.

Using the expertise of your SME, develop, document (refer to the sample job instruction

template earlier in the chapter), and validate a training plan to make the chosen product. Modify the documented plan as required after your pilot. Ensure that everyone in your group has a copy of the plan and can reliably make the product to standards. Once this is accomplished, each group member will pair up with a member of another group that made a different product. Each person in the resulting pairs will train his or her partner on how to make the products using the training plan and sample he or she created.

Debrief the exercise as instructed.

5. Review the website of a provider of management development seminars, such as the Canadian Institute of Management. Obtain copies of recent listings of seminar offerings. At what levels of management are the seminar offerings aimed? What seem to be the most popular types of development programs? Why do you think that is the case?

6. Review all positions you have ever held. Below each position, identify core knowledge, skills, and abilities that you learned in each position. Next, identify a career you would like to be actively engaged in over the next three years. Under the future career, outline core knowledge, skills, and abilities the position would require. Now reflect on your own career trajectory to highlight your history of skill development and identify any gaps that may exist for you to advance to your desired career in the future.

CBC To view the CBC videos, read a summary, and answer discussion questions, go to to MyManagementLab.

CHAPTER

7 REQUIRED PROFESSIONAL CAPABILITIES (RPC)

• Provides the information necessary for the organization to effectively manage its people practices

• Provides development information, support activities, and procedures for learners, supervisors, and managers to assist in achieving performance improvement

• Assists and coaches supervisors to help employees achieve required performance levels

LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

EXPLAIN the five steps in the performance management process.

DESCRIBE five performance appraisal methods and the pros and cons of each.

DISCUSS the major problems inhibiting effective performance appraisals.

DISCUSS 360-degree appraisal from multiple sources.

DESCRIBE the three types of appraisal interviews.

DISCUSS the future of performance management.

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Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

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TABLE 7.1 Elements of Performance Appraisals (used by 337 Canadian Organizations)

THE STRATEGIC IMPORTANCE OF PERFORMANCE MANAGEMENT

In any organization, achieving strategic objectives requires employee productivity above all else as organizations strive to create a high-performance culture while using a minimum number of employees. Thus, it has been suggested that better performance management represents a largely untapped opportunity to improve company profitability.1 Many companies are still dealing with the reality that their performance management systems are ineffective—for example, although they need to downsize poor performers, performance appraisal records indicate that all employees are performing adequately.

Performance management is a process encompassing all activities related to improving employee performance, productivity, and effectiveness. It includes goal setting, pay for performance, training and development, career management, and disciplinary action. The performance management system must provide an integrated network of procedures across the organization that will influence all work behaviour.2 This involves assessing a number of elements regarding an employee’s performance, as highlighted in Table 7.1. While individual objectives and goals are elements of performance appraisals in 97 out of 337 companies, significantly less consideration is given to the assessment of values, skills, or team objectives. There are three major purposes of performance management: it aligns employee actions with strategic goals, it is a vehicle for culture change, and it provides input into other HR systems such as development and remuneration.3

performance management The process encompassing all activities related to improving employee performance, productivity, and effectiveness.

THE PERFORMANCE MANAGEMENT PROCESS Performance management is of considerable strategic importance to today’s organizations because the most effective way for firms to differentiate them- selves in a highly competitive, service-oriented, global marketplace is through the quality of its employees.4 Similar to selection, the performance management process contains five steps shown in Figure 7.1.5

Performance appraisals in Canada are legal documents. While they should be used for planning promotions, career development, training and performance improvement plans, they can also be required in courts when assessing wrongful

Individual objectives/goals 97

Training and professional development 70

Competencies 69

Behaviours 61

Organizational objectives/goals 53

Team objectives/goals 53

Skills enhancement plan 41

Values 35

Other (e.g., self-appraisal, results) 4

Source: The Conference Board of Canada. “Performance Management: Turning Individual Stress to Organizational Strategy,” June 2012, p. 2. Reprinted by permission.

173Chapter 7 Performance Management

termination cases. Given the importance of performance appraisals, it is problematic that in a 2012 survey of 746 Human Resource Professional Association members and HR reporter readers, 11 percent of respondents identified that performance appraisals were not mandatory in their organization. Addition, 42  percent of respondents said that there were no consequences for non-completion of apprais- als, and 65 percent of respondents identified that they were somewhat to very satisfied with information obtained from performance reports.6

Robert Thorndike researched performance management processes and suggests that employment decisions (such as a performance appraisal system) must be valid, practical, reliable, and free from bias.7 Failure to measure and use appraisal results effectively in human resource decision making and career development negates the primary purpose of performance evaluations. Effective performance management thus begins with defining the job and its performance standards, which will now be discussed.

STEP 1: DEFINING PERFORMANCE EXPECTATIONS Defining performance expectations and goals is a critical step in employees’ understanding of how their work makes a contribution to achieving business results. Over the last 30 years, there has been more recognition that job perfor- mance is a multidimensional construct which can be split into what has become widely acknowledged as task versus contextual performance.8

Task performance reflects an individual’s direct contribution to their job-related processes. Focusing on tasks means that performance expectations are grounded in realistic job demands and align with the organization’s strategic objectives and implementation plans. They may also be partially based on previ- ous performance evaluations.

However, as part of the movement toward more corporate social responsibil- ity, expectations are beginning to extend beyond job skills and skills required for promotion to addressing the concept of whole person development (aligned with the direction, attitudes, motivation, and advancement opportunities of the employee). In addition to task performance, contextual performance is often evaluated as a second factor contributing to an employee’s overall work-related

task performance An individual’s direct contribution to their job-related processes.

RPC Provides the information necessary for the organization to effectively manage its people practices.

2. Providing ongoing feedback and coaching

3. Conducting performance appraisal and evaluation discussions

4. Determining performance rewards/ consequences

5. Conducting development and career opportunities discussions

1. Defining performance expectations and goals

FIGURE 7.1 Performance Management Process

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performance. Contextual performance reflects an individual’s indirect contribu- tion to the organization in terms of improving the organizational, social, and psychological behaviours that contribute to organizational effectiveness, beyond those specified for the job. This includes extra-role behaviours and contextual factors like “demonstrates a positive attitude” and “pitches in to help others when needed,” which have surfaced as contextual performance expectations.9 These goals may be informally known, but not formally defined, which can become problematic in performance management. For the legitimacy of the performance management system to be maintained, employees also need to be aware of which behaviours are expected and which are discretionary.

Ultimately, the performance management process cannot be separated from performance measurement. Performance expectations need to be developed in a legally defensible (correlated with job activities), clear, and measurable way. In addition, they must be com- municated and supported as such by the organization. Aligned with the sales associate example, a “personal selling” activity can be measured in terms of how many dollars of sales the associate is to generate personally. “Keeping customers away from executives” can be mea- sured with a standard of no more than 10 customer

complaints per year being the sales associate’s target. In general, employees should always know ahead of time how and on what basis they will be appraised. It is important to note that expectations cannot discriminate directly or indirectly against anyone on protected grounds (gender, age, disability, and so on).

In global companies, performance appraisal criteria may need to be modi- fied to be consistent with cultural norms and values. An interesting study found that some criteria are acceptable in many cultures, as discussed in the Global HRM box.

contextual performance An individual’s indirect contribution to the organization in terms of improving the organizational, social, and psychological behaviours that contribute to  organizational effectiveness, beyond those specified for the job.

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Performance Appraisal Criteria in China In the West, where individuals have an inalienable right to choose their own lifestyles and moralities, performance criteria cannot be based on personal character, but instead need to focus on more objective criteria, such as job com- petence, abilities, and achievements. In China, however, the attitudes and moral character of a person are regarded as highly relevant to performance. Chinese culture tends to ascribe achievement more to effort (that is, diligence, which reflects one’s morality) than to ability (which, con- ceived as an inborn trait, requires no moral effort). These deeply rooted Confucian values in China thus lead to an emphasis on appraisals that are based upon personal attitudes and moral characteristics that appear to reflect traditional Chinese values, such as hard work, and loyalty and respect toward senior staff. Some specific examples are accepting overtime work; being punctual, careful, helpful, loyal, and respectful toward senior staff; as well as being persistent, adaptable, dedicated, and hard working.

Research found three performance appraisal factors that were very acceptable to Chinese employees: work dedication, work efficiency, and teamwork. Work dedi- cation behaviours, such as punctuality, loyalty, working hard, and dedication toward one’s work, exist in both Eastern and Western cultures. Employee efficiency has long been considered important to good job per- formance, as it is considered to be a means to achieve organizational goals. Chinese employees appear to rec- ognize this managerial objective since they were willing to be evaluated on criteria that assess the efficiency of their work. Teamwork is a behavioural manifestation of the group orientation in Eastern cultures.

Source: Robert J. Taormina and Jennifer H. Gao (2009). Identifying Acceptable Performance Appraisal Criteria: An International Perspective. Asia Pacific Journal of Human Resources 47(1), pp. 102–125. Copyright © 2009, Australian Human Resources Institute.

GLOBAL HRM

175Chapter 7 Performance Management

STEP 2: PROVIDING ONGOING COACHING AND FEEDBACK

Throughout the performance management process, managers and their reports should continue to discuss progress. A performance improvement plan (often referred to as a PIP) can be used to focus such discussions and facilitate ongoing performance improvement. A PIP highlights in writing the expectations of the employer and employee, complete with the timeline (often 30 to 90 days) required to bring performance to acceptable levels. It lists objectives, in clear and action- able terms that are considered to be reasonable, aimed at improving performance, complete with a date of follow-up and the names of parties who engaged in the conversation. It is important to have open two-way communication, and both the employee and the manager need to check in frequently throughout the performance management process to talk about progression toward goals.

STEP 3: PERFORMANCE APPRAISAL AND EVALUATION DISCUSSION

The appraisal itself is generally conducted with the aid of a predetermined and formal method, like one or more of those described in this section.

Formal Appraisal Methods Graphic Rating Scale The graphic rating scale is the simplest and most popular technique for appraising performance. It lists traits (such as reliability) and a range of performance values (from unsatisfactory to outstanding) for each one. The supervisor rates each employee by circling or checking the score that best describes his or her perfor- mance for each trait. The assigned values are then totalled.

Instead of appraising generic traits or factors, many firms specify the duties to be appraised. For a payroll coordinator, these might include being the liaison with accounting and benefits staff; continually updating knowledge regarding relevant legislation; maintaining payroll records, data entry and payroll calculations; and providing ongoing responses to employee inquiries regarding payroll issues.

Alternation Ranking Method Ranking employees from best to worst on a trait or traits is another method for evaluating employees. Because it is usually easier to distinguish between the worst and best employees than to rank them, an alternation ranking method is popular. First, list all employees to be rated, and then cross out the names of any not known well enough to be ranked. Next, indicate the employee who is the highest on the characteristic being measured and also the one who is the lowest. Then choose the next highest and the next lowest, alternating between highest and lowest until all the employees to be rated have been ranked.

Paired Comparison Method The paired comparison method helps to make the ranking method more precise. For every trait (quantity of work, quality of work, and so on), every employee is paired with and compared with every other employee.

graphic rating scale A scale that lists a number of traits and a range of performance for each. The employee is then rated by a score that best describes his or her level of performance for each trait.

alternation ranking method Ranking employees from best to worst on a particular trait.

paired comparison method Ranking employees by mak- ing a chart of all possible pairs of employees for each trait and indicating the better employee of the pair.

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Suppose that five employees are to be rated. In the paired comparison method, a chart is prepared, as in Figure 7.2, of all possible pairs of employees for each trait. Then, for each trait, indicate (with a + or –) who is the better employee of the pair. Next, the number of times that an employee is rated as better is added up. In Figure 7.2, employee Maria was ranked highest (she has the most + marks) for quality of work, while Art was ranked highest for creativity.

Forced Distribution Method Jack Welch, retired chief executive officer of General Electric (GE), is most often associated with the forced distribution method, which places predetermined per- centages of ratees in performance categories. At GE, the bell curve was used to identify the top 10 to 20 percent of the workforce (which are then identified as those exceeding expectations, with a focus on receiving the highest compensa- tion increases and advancement opportunities), the bottom 10 percent (which are identified as those not meeting expectations, with a focus on coaching for improvement or possible termination). The remaining employees, by default, are considered the backbone of the workforce and receive moderate compensation increases and development opportunities.

In 2012, 3 percent of organizations polled by the Conference Board of Canada use forced distribution, while 44 percent of organizations did not use it explicitly, but had guidelines to force a normal distribution of performance evaluations.10 While the method allows for a concentration of effort and resources on those deemed to be top performers, this method has been criticized as being demotivat- ing, since the majority of the workforce are classified as at or below average.11

Critical Incident Method With the critical incident method, the supervisor keeps a log of desirable or undesirable examples or incidents of each employee’s work-related behaviour. Then, every six months or so, the supervisor and employee meet to discuss the latter’s performance by using the specific incidents as examples.

forced distribution method Predetermined percentages of ratees are placed in various performance categories.

critical incident method Keeping a record of uncommonly good or undesirable examples of an employee’s work-related behaviour and reviewing the list with the employee at predetermined times.

FOR THE TRAIT “QUALITY OF WORK”

Employee Rated:

As Compared A B C D E

with: Art Maria Chuck Diane José

A + + − −Art B − − − −Maria C − + + −Chuck D + + − +Diane E + + + −José

Maria Ranks Highest Here

FOR THE TRAIT “CREATIVITY”

Employee Rated:

As Compared A B C D E

with: Art Maria Chuck Diane José

A − − − −Art B + − + +Maria C + + − +Chuck D + − + −Diane E + − − +José

Art Ranks Highest Here

FIGURE 7.2 Ranking Employees by the Paired Comparison Method

Note: “+” means “better than” and “–” means “worse than.” For each chart, add up the number of + signs in each column to get the highest-ranked employee.

177Chapter 7 Performance Management

This method has several advantages. It provides specific hard facts for explain- ing the appraisal. It also ensures that a manager thinks about the employee’s appraisal throughout the year, because the incidents must be accumulated; there- fore, the rating does not just reflect the employee’s most recent performance. Keeping a running list of critical incidents should also provide concrete examples of what an employee can do to eliminate any performance deficiencies.

The critical incident method is often used to supplement another appraisal technique, such as a ranking system. It is useful for identifying specific exam- ples of good and poor performance and for planning how deficiencies can be corrected. On its own, however, this method is not as useful for comparing employees, therefore, cannot contribute to decision-making regarding salary decisions.

Behaviourally Anchored Rating Scales A behaviourally anchored rating scale (BARS) combines the benefits of narra- tives, critical incidents, and quantified ratings by anchoring a series of quan- tified scales, one for each performance dimension, with specific behavioural examples of good or poor performance. The guiding principle to BARS is that by elaborating on the dimension and rating scale, it gives raters a uniform interpretation as to the types of behaviour being measured.12 BARS usually involves a scale of nine anchors, although seven and five anchors have also been used.13

The midpoint scales are more difficult to develop in a standardized format than the scale extremes. Recent efforts have focused on addressing midpoint scale development to influence inter-rater reliability and inter-rater agreement.14 The research suggests that, to increase uniform use of the scale, all levels of the scale be anchored with statements reflecting how users are to interpret them. As well, developers of the scales should be involved in the training of users to increase the consistency in how the scale is used, thus increasing the effectiveness and legal defensibility of the performance appraisal. Figure 7.3 provides an example of a BARS for one performance dimension: “sales skills.”

Developing a BARS can be more time-consuming than developing other appraisal tools, such as graphic rating scales. But BARS may also have impor- tant advantages:15

1. A more accurate measure. People who know the job and its requirements better than anyone else does develop BARS. The result should therefore be a good measure of performance on that job.

2. Clearer standards. The critical incidents along the scale help to clarify what is meant by extremely good performance, average performance, and so forth.

3. Feedback. The critical incidents may be more useful in providing feedback to appraisees than simply informing them of their performance rating without providing specific behavioural examples.

4. Independent dimensions. Systematically clustering the critical incidents into five or six performance dimensions (such as “knowledge and judgment”) should help to make the dimensions more independent of one another. For example, a rater should be less likely to rate an employee high on all dimen- sions simply because he or she was rated high on “conscientiousness.”

5. Consistency. BARS evaluations also seem to be relatively consistent and reli- able in that different raters’ appraisals of the same person tend to be similar.16

behaviourally anchored rating scale (BARS) An appraisal method that aims to combine the benefits of narratives, critical incidents, and quantified ratings by anchoring a quantified scale with specific nar- rative examples of good and poor performance.

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Management by Objectives (MBO) Stripped to its essentials, management by objectives (MBO) requires the manager and employee to jointly set specific measurable goals and periodi- cally discuss progress toward these goals, aligned with a comprehensive, organization-wide goal-setting and appraisal program. When managers and employees set goals collaboratively, employees become more engaged and committed to the goal, leading to a higher rate of success.17 While there is a notion that difficult goals (also referred to as “stretch goals”) can increase personal growth and professional development, and improve organizational effectiveness,18 it is important to set objectives that match the job description and the person’s abilities. Goals that push an employee too far beyond his or her abilities may lead to burnout.19 To motivate performance, the objectives must be fair and attainable.

management by objectives (MBO) Involves setting specific measurable goals with each employee and then periodically reviewing the progress made.

SALES SKILLS

If a customer insists on a particular brand name, the sales- person perseveres. Although products with this particular brand name are not available, the salesperson does not give up; instead, the salesperson persuades the customer that his or her needs could be better met with another product.

5

The salesperson treats objections to purchasing the product seriously; works hard to counter the objections with relevant positive arguments regarding the benefits of the product.

4

When a customer is deciding on which product to purchase, the salesperson tries to sell the product with the highest profit magin.

3

The salesperson insists on describing more features of the product even though the customer wants to purchase it right now.

2

When a customer states an objection to purchasing a product, the salesperson ends the conversation, assuming that the prospect must not be interested.

1

Skilfully persuading customers to purchase products; using product benefits and opportunities effectively; closing skills; adapting sales techniques appropriately to different customers; effectively overcoming objections to purchasing products.

FIGURE 7.3 Behaviourally Anchored Rating Scale

179Chapter 7 Performance Management

1. Set the organization’s goals. Establish an organiza- tion-wide plan for the next year and set goals.

2. Set departmental goals. Department heads and their superiors jointly set goals for their departments.

3. Discuss departmental goals. Department heads dis- cuss the department’s goals with all employees in the department (often at a department-wide meeting) and ask them to develop their own individual goals; in other words, how can each employee contribute to the department’s attainment of its goals?

4. Define expected results (set individual goals). Here, department heads and employees set short-term performance targets.

5. Performance reviews: Measure the results. Department heads compare the actual performance of each employee with the expected results.

6. Provide feedback. Department heads hold periodic performance review meetings with employees to discuss and evaluate progress in achieving expected results.

Problems to Avoid Using MBO has three potential problems. Setting unclear, unmeasurable objectives is the main one. Such an objective as “will do a better job of training” is useless. Conversely, “will have four employees promoted during the year” is a measurable objective. Second, MBO is time-consuming. Taking the time to set objectives, measure progress, and provide feedback can take several hours per employee per year, over and above the time already spent doing each person’s appraisal. Third, setting objectives with an employee sometimes turns into a tug- of-war; managers push for higher goals and employees push for lower ones. It is thus important to know the job and the person’s ability.

Mixing the Methods Most firms combine several appraisal techniques. The quantifiable ranking method permits comparisons of employees and is therefore useful for making salary, transfer, and promotion decisions. The critical incidents provide specific examples of performance relative to expectations and can be used to develop the high and low anchors for the BARS technique.20 Ultimately, no one single solution is best for all performance management systems. Instead, resource constraints (time, money, people) and organizational factors ( budget, turnover, strategy) will help determine which of the options is best for each organization.

The Use of Technology in Performance Appraisals Over the past few years, web-based performance management has moved from being a leading-edge approach adopted by only large companies to a mainstream practice that is quickly becoming an industry standard among medium and small organizations.21 It enables managers to keep computerized notes on employees, combine these with ratings on several performance traits, and then generate written text to support each part of the appraisal.

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But the true value in web-based performance manage- ment goes beyond simply automating time-consuming, tedious tasks like tracking down paper-based appraisal forms. It ultimately improves the overall performance management process, starting with higher completion rates, which can dramatically increase the value of per- formance management within organizations of all sizes. Performance management systems provide employees with a clear development path and a better understanding of how their goals are aligned with those of the organiza- tion, which in turn increases their support of the process. Managers have the information they need to ensure that development plans are relevant and executed. Executives have a clear picture of the organization’s talent strategy and how it ties into the bottom line.

Most web-based performance management systems provide advanced reporting capabilities, which allow managers to track the status of performance

m anagement initiatives easily. Goal management functions enable organizations to link individual goals to strategic corporate goals, meaning that executives have insight into the progress being made on corporate objectives. Succession planning tools provide executives with a clear plan to build a talent pool to meet the organization’s business needs and address potential attrition.

With the development of powerful, web-based tools, employee performance management has undergone a rapid evolution in a relatively short time. HR pro- fessionals are no longer mired in paperwork and other mundane administrative tasks. They have more time to focus on meeting strategic objectives, better tools to implement best practices programs, and access to critical workforce metrics they can share with their executive team.

Electronic performance monitoring (EPM) is in some respects the ultimate in computerized appraising. Electronic performance monitoring means having supervisors electronically observe the employee’s output or whereabouts. This typically involves using computer networks and wireless audio or video links to monitor and record employees’ work activities. It includes, for instance, moni- toring a data clerk’s hourly keystrokes, tracking via GPS the whereabouts of delivery drivers, and monitoring the calls of customer service clerks.

electronic performance monitoring (EPM) Having supervisors electronically monitor the amount of computerized data an employee is processing per day and thereby his or her performance.

This food service supervisor is conducting a feedback session about an employee’s performance during a major banquet to keep communications open and build employee commitment.

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STEP 4: DETERMINE PERFORMANCE REWARDS/ CONSEQUENCES

Some time after the performance review has taken place, the manager should use the salary planning guidelines to determine the appropriate rewards or conse- quences, comparing actual performance against the defined levels. Performance rewards are given through merit pay or extra payment such as a cash bonus. The two most important aspects used to determine the appropriate reward/ consequence are achievement of goals and how the employee meets the defined standards. Further detail on compensation and rewards is provided in Chapter 8.

181Chapter 7 Performance Management

Few of the things a manager does are fraught with more peril than apprais- ing employees’ performance. Employees in general tend to be overly optimistic about what their ratings will be, and they also know that their raises, career progress, and peace of mind may well hinge on how they are rated. Thus, an honest appraisal inevitably involves an emotional component, which is particu- larly difficult when managers are not trained on formal appraisal discussion skills. The result is often dishonest appraisals or the avoidance of appraisals.22

Even more problematic, however, are the numerous structural problems that can cast serious doubt on just how fair the whole process is. Fortunately, research shows that action by management to implement a more acceptable performance appraisal system can increase employee trust in management.23 According to several studies, the majority of organizations view their performance manage- ment systems as ineffective. What is required, instead of new techniques and methods, is more focus on the execution of performance appraisal.24 Some of the main appraisal problems and how to solve them, as well as several other pertinent appraisal issues, will now be reviewed.

Validity and Reliability Appraisal systems must be based on performance criteria that are valid for the position being rated and must be reliable, in that their application must produce consistent ratings for the same performance. Employee concerns about appraisal fairness are influenced by these characteristics of the performance appraisal system.

Criteria used in performance appraisal must be accurate, or valid, to produce useful results. Criteria must be (1) relevant to the job being appraised, (2) broad enough to cover all aspects of the job requirements, and (3) specific. For example, including a broad criterion, such as “leadership,” may not be relevant to non-management jobs and may be so vague that it can be interpreted in many different ways.

Effective appraisal criteria are precise enough to result in consistent measures of performance when applied across many employees by many different raters. This is difficult to achieve without quantifiable and measurable criteria.

STEP 5: CAREER DEVELOPMENT DISCUSSION During this discussion, the manager and employee discuss opportunities for development to strengthen or improve the employee’s knowledge, skills, and abilities. Business needs must be balanced with the employee’s preferences. These opportunities may focus on actions to boost performance in the area of current goals or to develop new knowledge aimed at a future career plan. Further detail on career planning and development was provided in Chapter 6.

PERFORMANCE APPRAISAL PROBLEMS AND SOLUTIONS

Research INSIGHT

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Rating Scale Problems Seven main problems can undermine such appraisal tools as graphic rating scales: unclear standards, the halo effect, central tendency, leniency or strictness, appraisal bias, the recency effect, and the similar-to- me bias.

Unclear Performance Standards The problem of unclear performance standards is illustrated in Table 7.2. Although the graphic rating scale seems objective, it would probably result in unfair appraisals because the traits and degrees of merit are open to interpretation. For example, different supervisors would probably differently define “good” performance, “fair” perfor-

mance, and so on. The same is true of traits, such as “quality of work” or “cre- ativity.” There are several ways in which to rectify this problem. The best way is to develop and include descriptive phrases that define each trait. For example, the form provided in as Table 7.2 fails to specify what was meant by “outstand- ing,” “very good,” and “good” quality of work. More specificity or definitions differentiating the categories will result in appraisals that are more consistent and more easily explained.

Halo Effect The halo effect means that the rating of an employee on one trait (such as “gets along with others”) biases the way that person is rated on other traits (such as “reliability”). This problem often occurs with em ployees who are especially friendly (or unfriendly) toward the supervisor. For example, an unfriendly employee will often be rated unsatisfactory for all traits rather than just for the trait “gets along well with others.” Being aware of this prob- lem is a major step toward avoiding it. Supervisory training can also alleviate the problem.25

Central Tendency Many supervisors have a central tendency when filling in rating scales. For example, if the rating scale ranges from one to seven, they tend to avoid the highs (six and seven) and lows (one and two) and rate most of their employees between three and five. If a graphic rating scale is used,

unclear performance standards An appraisal scale that is too open to interpretation of traits and standards.

halo effect In performance appraisal, the problem that occurs when a supervisor’s rating of an employee on one trait biases the rating of that person on other traits.

central tendency A tendency to rate all employees in the middle of the scale.

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Note: For example, what exactly is meant by “good,” “quantity of work,” and so forth?

TABLE 7.2 A Graphic Rating Scale with Unclear Standards

Excellent Good Fair Poor

Quality of work

Quantity of work

Creativity

Integrity

183Chapter 7 Performance Management

this central tendency could mean that all employees are simply rated “average.” Such a restriction can distort the evaluations, making them less useful for promotion, salary, or counselling purposes. Rank- ing employees instead of using a graphic rating scale can avoid this central tendency problem, because all employees  must  be ranked and thus cannot all be rated average.

Strictness/Leniency Some supervisors tend to rate all of their employees consistently high (or low), just as some instructors are notoriously high graders and others are not. Fear of interpersonal conflict is often the reason for leniency.26 Conversely, evaluators tend to give more weight to negative attributes than to positive ones.27 This strictness/leniency problem is especially serious with graphic rating scales, since supervisors are not necessarily required to avoid giving all of their employees low (or high) ratings.

However, when ranking employees, a manager is forced to distinguish between high and low performers. Thus, strictness/ leniency is not a problem with the ranking or forced distribution approaches.

Appraisal Bias Individual differences among ratees in terms of a wide variety of characteristics, such as age, race, and sex, can affect their ratings, often quite apart from their actual performance.28 In fact, research shows that less than half of performance evaluation ratings are actually related to employee performance and that most of the rating is based on idiosyncratic factors.29 This is known as appraisal bias. Not only does this bias result in inaccu- rate feedback, but it is also illegal under human rights legislation. Although age-related bias is typically thought of as affecting older workers, one study found a negative relationship between age and performance evaluation for entry-level jobs in public accounting firms.30 A related issue is described in the Workforce Diversity box.

Interestingly, the friendliness and likeability of an employee have been found to have little effect on that person’s performance ratings.31 However, an employee’s previous performance can affect the evaluation of his or her current performance.32 The actual error can take several forms. Sometimes the rater may systematically overestimate improvement by a poor worker or decline by a good worker, for instance. In some situations—especially when the change in behaviour is more gradual—the rater may simply be insensitive to improve- ment or decline. In any case, it is important to rate performance objectively. Such factors as previous performance, age, or race should not be allowed to influence results.

strictness/leniency The problem that occurs when a supervisor has a tendency to rate all employees either low or high.

appraisal bias The tendency to allow individual differences, such as age, race, and sex, to affect the appraisal ratings that these employees receive.

Canadian Human Rights Commission www.chrc-ccdp.ca

With the halo effect, an employee who is friendly towards his or her supervisor they may be rated more favourably on other traits.

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Recency Effect The recency effect occurs when ratings are based on the employ- ee’s most recent performance, whether good or bad. To the extent that this recent performance does not exemplify the employee’s average performance over the appraisal period, the appraisal is biased.

Similar-to-me Bias If a supervisor tends to give higher ratings to employees with whom he or she has something in common, the similar-to-me bias is occurring. This bias can be discriminatory if it is based on similarity in race, gender, or other prohibited grounds.

How to Avoid Appraisal Problems There are at least four ways in which managers can minimize the impact of appraisal problems, such as bias and central tendency. First, raters must be famil- iar with the problems just discussed. Understanding the problem can help to prevent it.

Second, training supervisors on how to eliminate rating errors, such as the halo effect, leniency, and central tendency, can help them avoid these problems.33 In a typical training program, raters are shown videos of jobs being performed and are asked to rate the worker. Ratings made by each participant are then placed on a flip chart and the various errors (such as leniency and halo) are explained. For example, if a trainee rated all criteria (such as quality, quan- tity, and so on) about the same, the trainer might explain that a halo error had occurred. Typically, the trainer gives the correct rating and then illustrates the rating errors made by the participants.34 According to one study, computer- assisted appraisal training improved managers’ ability to conduct performance appraisal discussions with their employees.35

Rater training will not eliminate all rating errors or ensure absolute accu- racy. In practice, several factors—including the extent to which pay is tied to performance ratings, union pressure, employee turnover, time constraints, and the need to justify ratings—may be more important than training. This

recency effect The rating error that occurs when ratings are based on the employee’s most recent perfor- mance rather than on performance throughout the appraisal period.

similar-to-me bias The tendency to give higher performance ratings to employees who are perceived to be similar to the rater in some way.

Watch for Cultural Biases in Assessing Employees The performance appraisal, with its goal-setting procedures and inherent feedback process, is a Western concept that can be a cultural disconnect for employees with different cultural roots. As Canadian organiza- tions increasingly turn to immigrants, as the supply of workers dries up in Canada, this poses some unique challenges in terms of performance management. In Eastern cultures, appraisals are as likely to deal with attributes such as cooperation and sociability as they are with achievement of results. And because status is so important in Eastern cultures, it is important to ensure that the employee does not become insulted or lose face.

In some cultures, managers provide explicit direc- tions and employees are more deferential to their superiors. Technical expertise is the proven path to promotion rather than taking initiative and seeking new responsibilities. Also, performance is more often assessed on a group basis. Typical performance criteria used in Canada are more individual-focused and may not value group-oriented performance.

Source: Adapted with permission from R. Singer, “Watch for Cultural Biases in Assessing Employees,” Canadian HR Reporter (June 19, 2006).

WORKFORCE DIVERSITY

RPC Provides development information, support activities, and procedures for learners, supervisors, and managers to assist in achieving performance improvement

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means that improving appraisal accuracy calls not only for training but also for reducing outside factors, such as union pressure and time constraints.36 It has also been found that employee reaction to current performance reviews is affected by past appraisal feedback, which is beyond the control of the current manager.37

Third, raters must choose the right appraisal tool. Each tool, such as the graphic rating scale or critical incident method, has its own advantages and disadvantages. For example, the ranking method avoids central tendency but can cause ill feelings when employees’ performances are, in fact, all “high” (see Table 7.3).

Fourth, errors in performance appraisals can be reduced by using multiple raters in the evaluation. Multiple raters increase the validity and accuracy of the rating by controlling for individual biases or idiosyncrasies. Also, responsibility for poor appraisals is diffused; therefore, raters are more comfortable giving a poor rating. When raters are accountable for their rating, reliability also increases.38 As an additional benefit, multiple ratings may be more legally defensible.

Who Should Do the Appraising? Who should actually rate an employee’s performance? Several options exist  as  to who can be involved in the performance management appraisal process.

TABLE 7.3 Important Advantages and Disadvantages of Appraisal Tools

Advantages Disadvantages

Graphic rating scale Simple to use; provides a quantitative rating for each employee.

Standards may be unclear; halo effect, central tendency, leniency, and bias can also be problems.

Alternation ranking Simple to use (but not as simple as graphic rating scale); avoids central tendency and other problems of rating scales.

Can cause disagreements among employees and may be unfair if all employees are, in fact, excellent.

Paired comparison method A more precise ranking method that involves multiple traits.

Difficult to use as employee numbers increase; differences may not be noticeable enough to rank.

Forced distribution method Ends up with a predetermined number of people in each group.

Appraisal results depend on the adequacy of the original choice of cutoff points.

Critical incident method Helps specify what is “right” and “wrong” about the employee’s performance; forces the supervisor to evaluate employees on an ongoing basis.

Difficult to rate or rank employees relative to one another; cannot be used to defend salary decisions.

Narrative form Explicitly states improvement goals and associated outcomes or consequences.

Employees may take these too personally.

Behaviourally anchored rating scale (BARS)

Provides behavioural “anchors”; very accurate; high inter-rater reliability.

Difficult to develop.

Management by objectives Tied to jointly agreed-upon performance objectives.

Risk of unclear performance measures, time-consuming, and inflated/deflated goals due to tug-of-war.

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Supervisors Supervisors’ ratings are still the heart of most appraisal systems. Getting a supervisor’s appraisal is relatively easy and also makes a great deal of sense. The super- visor should be—and usually is—in the best position to observe and evaluate the performance of employ- ees reporting to him or her and is responsible for their performance.

Self Employees’ self-ratings of performance are sometimes used, generally in conjunction with supervisors’ rat- ings. Employees value the opportunity to participate in performance appraisal, more for the opportunity to be heard than for the opportunity to influence the

end result.39 Nevertheless, the basic problem with self-ratings is that employees usually rate themselves higher than they are rated by supervisors or peers.40 In one study, for example, it was found that when asked to rate their own job performance, 40 percent of the employees in jobs of all types placed themselves in the top 10 percent (“one of the best”), while virtually all remaining employ- ees rated themselves either in the top 25 percent (“well above average”) or at least in the top 50 percent (“above average”). Usually no more than 1  percent or 2 percent will place themselves in a below-average category, and then almost invariably in the top below-average category. However, self-ratings have been found to more accurately represent actual performance if employees know that this comparison will be made and if they are instructed to compare themselves with others.41

Supervisors requesting self-appraisals should know that their appraisals and their employees’ self-appraisals may accentuate appraiser–appraisee differences, and rigidify positions.42 Furthermore, even if self-appraisals are not formally requested, each employee will enter the performance review meeting with his or her own self-appraisal in mind, and this will usually be higher than the supervi- sor’s rating.

Peers The appraisal of an employee by his or her peers can be effective in predicting future management success. Peers may have more opportunity to observe ratees and to observe them at more revealing times than supervi- sors do. One potential problem is logrolling; here, all the peers simply get together to rate each other highly.

With more firms using self-managing teams, peer or team appraisals are becoming more popular. One study found that peer ratings had an immediate posi- tive impact on perceptions of open communication, motivation, group cohesion, and satisfaction, and these were not dependent on the ratio of positive to nega- tive feedback.43 Thus, peer appraisals would appear to have great potential for work teams.

The best performance appraisal systems are those in which the supervisor or manager makes an ongoing effort to coach and monitor employees instead of leaving evaluation to the last minute.

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Peers may have more opportunity than supervisors to observe ratees— and to observe them at more revealing times.

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Committees Many employers use rating committees to evaluate employees. These committees usually comprise the employee’s immediate supervisor and three or four other supervisors. Using multiple raters can be advantageous. Although there may be a discrepancy in the ratings made by individual supervisors, the composite ratings tend to be more reliable, fair, and valid.44 Using several raters can help cancel out problems such as bias and the halo effect on the part of individual raters. Furthermore, when there are variations in raters’ ratings, they usually stem from the fact that raters often observe different facets of an employee’s performance and the appraisal ought to reflect these differences.45 Even when a committee is not used, it is common to have the appraisal reviewed by the manager immedi- ately above the one who makes the appraisal.

Subordinates Traditionally, supervisors feared that being appraised by their employees would undermine their management authority. However, with today’s flatter organi- zations and empowered workers, much managerial authority is a thing of the past, and employees are in a good position to observe managerial performance.46 Thus, more firms today are letting employees anonymously evaluate their super- visors’ performance, a process many call upward feedback.47 When conducted throughout the firm, the process helps top managers diagnose management styles, identify potential “people” problems, and take corrective action with indi- vidual managers as required. Such employee ratings are especially valuable when used for developmental rather than evaluative purposes.48 Managers receiving feedback from employees who identify themselves view the upward appraisal process more positively than do managers who receive anonymous feedback; however, employees (not surprisingly) are more comfortable giving anonymous responses, and those who have to identify themselves tend to provide inflated ratings.49 Research comparing employee and peer ratings of managers found them to be comparable.50

Upward feedback from reporting employees is quite effective in terms of improving the supervisor’s behaviour, according to the research evidence. One study examined data for 92 managers who were rated by one or more reporting employees in each of four administrations of an upward feedback survey over two and a half years. The reporting employees were asked to rate themselves and their managers in surveys that consisted of 33 behavioural statements. The feedback to the managers also contained results from previous administrations of the survey so that they could track their performance over time.

According to the researchers, managers whose initial performance level was lower than the average employee performance level improved performance by the next performance assessment and sustained this improvement two years later. Interestingly, the results also suggest that it is not necessarily the specific feedback that caused the performance improvement, because low-performing managers seemed to improve over time even if they did not receive any feed- back. Instead, learning what the critical supervisory behaviours were (as a result of themselves filling out the appraisal surveys) and knowing that they might be appraised may have been enough to result in the improved supervisory behav- iours. In a sense, therefore, it is the existence of the formal upward feedback program rather than the actual feedback itself that may signal and motivate supervisors to get their behaviours in line with what they should be.51

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360-Degree Appraisal Many Canadian firms are now using what is called 360-degree appraisal, or “multisource feedback.” Here, as shown in Figure 7.4, performance information is collected “all around” an employee—from his or her supervisors, subordi- nates, peers, and internal or external customers.52 This feedback was originally used only for training and development purposes, but it has rapidly spread to the management of performance and pay.53 The 360-degree approach supports the activities of performance feedback, coaching, leadership development, succession planning, and rewards and recognition.54

There are a number of reasons for the rapid growth of 360-degree appraisal, despite the significant investment of time required for it to function successfully. Today’s flatter organizations employ a more open communicative climate condu- cive to such an approach, and 360-degree appraisal fits closely with the goals of organizations committed to continuous learning. A multiple-rater system is also more meaningful in today’s reality of complex jobs, with matrix and team report- ing relationships. A 360-degree appraisal can be perceived as a jury of peers, rather than the supervisor as a single judge, which enhances perceptions of fairness.55

Most 360-degree appraisal systems, including internet-based 360-degree feedback systems, contain several common features. They are usually applied in a confidential and anonymous manner. Appropriate parties—peers, superiors, employees, and customers, for instance—complete survey questionnaires about an individual. The questionnaires must be custom-designed and linked to the organization’s strategic direction, vision, and values.56 All this information is then compiled into individualized reports. When the information is being used for self-development purposes only, the report is presented to the person being rated, who then meets with his or her own supervisor; information pertinent for the purpose of developing a self-improvement plan is shared. When the infor- mation is being used for management of performance or pay, the information is also provided to the ratee’s supervisor, and a supportive and facilitative pro- cess to follow up is required to ensure that the behavioural change required for performance improvement is made.57

360-degree appraisal A perfor- mance appraisal technique that uses multiple raters including peers, employees reporting to the appraisee, supervisors, and customers.

Suppliers

SELF

Manager/Supervisor

Skip-Level Reports

Co-workers/Colleagues External Clients

Additional Superiors Internal Clients

Subordinates

FIGURE 7.4 360-Degree Performance Appraisals

Source: Alma M. McCarthy, Thomas N. Garavan, “360° Feedback Process: Performance, Improvement and Employee Career Development,” Journal of European Industrial Training, 25, no. 1 (2001), pp. 5–32. © Emerald Group Publishing Limited all rights reserved.

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There is a limited amount of research data on the effectiveness of 360-degree feedback. Some organizations have abandoned it for appraisal purposes because of inflated ratings and negative attitudes from employees.58 Some studies have found that the different raters often disagree on performance ratings.59 A recent study by researchers at Concordia University in Montreal found that 360-degree feedback is popular among Canadian employers, despite such problems as the amount of time and effort involved, lack of trust in the system by employees, and lack of fit with strategic goals and other HR practices. The results showed that organizations that successfully implemented 360-degree feedback were

those that had the most clarity on what their initial objec- tives were. Organizations that rely exclusively on external consultants to establish 360-degree appraisal have less success than organizations that are more sensitive to con- textual factors, such as the readiness of employees and the culture of the organization.60

Some experts suggest that 360-degree feedback be used for developmental purposes only.61 In general, it is advisable to use 360-degree feedback for developmental/career-planning purposes initially, and then to deter- mine whether the organization is ready to use it for evaluative appraisal pur- poses. A pilot test in one department is often recommended. Once a decision to use 360-degree appraisal has been made, organizations should consider the following advice:62

• Have the performance criteria developed by a representative group that is familiar with each job.

• Be clear about who will have access to reports.

• Provide training for all supervisors, raters, and ratees.

• Assure all raters that their comments will be kept anonymous.

• Plan to evaluate the 360-degree feedback system for fine-tuning.

Formal Appraisal Discussions The essence of a performance appraisal is the feedback provided in a one-on-one conversation called the formal appraisal discussion. This is an interview in which the supervisor and employee review the appraisal and make plans to remedy deficiencies and reinforce strengths. Unfortunately, surveys show that fewer than half of compa- nies describe their performance appraisal systems as effective or very effective; the reason for this is weak execution due to managers abdicating their responsibility for screening out poor performers.63 This discussion is often avoided by supervisors and managers who have not been trained to provide constructive feedback and to deal with defensive employees. Ultimately, feedback should be ongoing, making the formal appraisal discussion one of many performance discussions.

Types of Performance Appraisal Results There are three basic types of formal appraisal discussions, each with its own objectives:64

Satisfactory—Promotable Here, the person’s performance is satisfactory and there is a promotion ahead. This is the easiest of the three formal appraisal discus- sions. The objective is to discuss the person’s career plans and to develop a

formal appraisal discussion An interview in which the supervisor and employee review the appraisal and make plans to remedy deficien- cies and reinforce strengths.

Research INSIGHT

An Ethical Dilemma Is it fair to factor in employee self-ratings in 360-degree perfor- mance appraisal, when we know that these appraisals tend to be inflated?

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specific action plan for the educational and professional development that the person needs to move to the next job.

Satisfactory—Not Promotable This interview is for employees whose performance is satisfactory but for whom promotion is not possible. Perhaps there is no more room in the company; some employees are happy where they are and do not want a promotion.65 The objective here is not to improve or develop the person but to maintain satisfactory performance.

This situation is not easy. The best option is usually to find incentives that are important to the person and are enough to maintain satisfactory performance. These might include extra time off, a small bonus, additional authority to handle a slightly enlarged job, and verbal reinforcement in the form of “Well done!”

Unsatisfactory—Correctable vs. Uncorrectable When the person’s performance is unsatisfactory but correctable, the interview objective is to lay out an action plan (such as a PIP) for correcting the unsatisfactory performance. If the employee’s performance is unsatisfactory and the situation uncorrectable, there is usually no need for any formal appraisal discussion because the person’s performance is not correctable anyway. Either the person’s poor performance is tolerated for now, or he or she is dismissed.

Preparing for the Formal Appraisal Discussion An important component of the performance management process is the effec- tive use of feedback. This often happens in a formal appraisal discussion after the performance has been evaluated. There are three things to do in preparation for the interview.66 First, assemble the data. Study the person’s job description, compare the employee’s performance to the standards, and review the files of the employee’s previous appraisals. Next, prepare the employee. Give the employee at least a week’s notice to review his or her own work, read over his or her job description, analyze problems he or she may be dealing with, and gather questions and comments for the interview. Finally, find a mutually agreeable time and place and allow plenty of time for the interview. Interviews with non- supervisory staff should take no more than an hour. Appraising management employees often takes two or three hours. Be sure that the interview is conducted in a private place where there will be no interruptions. It is important to keep in mind what is said and how it is said. The Strategic HR box provides an example of how management teams in a global company were guided on managing the formal appraisal discussion.

How to Conduct the Interview Constructive feedback is considered a positive and motivating experience.67 There are four things to keep in mind when conducting a formal appraisal discussion to ensure the feedback is constructive.68

1. Be direct and specific. Talk in terms of objective work data. Use examples, such as absences, tardiness, quality records, inspection reports, scrap or waste, orders processed, productivity records, material used or consumed, timeliness of tasks or projects, control or reduction of costs, numbers of errors, costs compared with budgets, customers’ comments, product returns, order pro- cessing time, inventory level and accuracy, accident reports, and so on.

RPC Assists and coaches supervisors to help employees achieve required performance levels

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2. Do not get personal. Do not say, “You are too slow in producing those reports.” Instead, try to compare the person’s performance with a standard (“These reports should normally be done within 10 days.”). Similarly, do not compare the person’s performance with that of other people (“He is quicker than you are.”).

3. Encourage the person to talk. Stop and listen to what the person is saying; ask open-ended questions, such as, “What do you think we can do to improve the situation?” Use phrases such as, “Go on,” or “Tell me more.” Restate the person’s last point as a question, such as, “You do not think that you can get the job done?”

4. Develop an action plan. Do not get personal, but do make sure that by the end of the interview you have (a) provided specific examples of performance that does and does not need attention or improvement, (b) made sure the person understands how he or she should improve his or her performance, (c) obtained an agreement from the person that he or she understands the reasons for the appraisal, and (d) developed an action plan that shows steps to achieving specified goals and the results expected. Be sure that a timeline is included in the plan.

Jaguar Land Rover Formal Appraisal Discussion Training In 2008, an Indian conglomerate (Tata) took over the Jaguar Land Rover carmaker. This triggered a new set of management behaviours, including the redesign of the performance management process. Management was coached on techniques for managing behaviour during the formal appraisal discussion, including the following suggestions:

• Verbally acknowledge your observations—providing verbal feedback based on observations allows the individual receiving feedback to reflect on cause and effect

• Be empathetic—demonstrating sincere concern and ability to put yourself in the other’s position

• Listen actively—accurately and clearly listen to the comments being made and reflect on the main con- tent of the issues

• Questioning—Elicit information using a variety of probing questions (open ended and close ended)

• Communicate non-verbally—demonstrate body lan- guage that suggests and elicits open and honest information sharing

• Speak rationally, clearly, and calming—Consider the conversation a mutual exchange of information, per- spectives, and challenges without being irrationally or emotionally overwhelmed or skewed

The training program is viewed as a success by management and participants alike. Jaguar Land Rover believes that managers are now equipped with the skills to implement the performance management system successfully.

Source: Based on J. Hicks, “Jaguar Land Rover Bosses Get to Grips with Performance Management: Program Teaches Practical Skills for the Workplace,” Human Resource Management International Digest (2011), volume 19, issue 4, pp. 10–12.

STRATEGIC HR

How to Handle Criticism and Defensive Employees When criticism is required, it should be done in a manner that lets the person maintain his or her dignity and sense of worth. Specifically, criticism should be provided constructively, in private, and immediately following poor perfor- mance. Provide examples of critical incidents and specific suggestions of what could be done and why. Finally, ensure that criticism is objective and free of any personal biases.

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When poor performance by an employee is described, the first reaction will often be denial. By denying the fault, the person avoids having to question his or her own competence. Others react to criticism with anger and aggression. This helps them let off steam and postpones confronting the immediate problem until they are able to cope with it. Still others react to criticism by retreating into a shell.

Understanding and dealing with defensiveness is an important appraisal skill that requires the following:69

1. Recognize that defensive behaviour is normal.

2. Never attack a person’s defences. Do not try to “explain someone” to himself or herself by saying things like, “You know the real reason you are using that excuse is that you cannot bear to be blamed for anything.” Instead, try to concentrate on the act itself (“Sales are down.”) rather than on the person (“You are not selling enough.”).

3. Postpone action. Sometimes it is best to do nothing at all. People frequently react to sudden threats by instinctively hiding behind their “masks.” Given sufficient time, however, a more rational reaction usually takes over.

4. Recognize human limitations. Do not expect to be able to solve every prob- lem that comes up, especially the human ones. More importantly, remember that a supervisor should not try to be a psychologist. Offering employees understanding is one thing; trying to deal with deep psychological problems is another matter entirely.

Ensuring That the Formal Appraisal Discussion Leads to Improved Performance It is important to clear up performance problems by setting goals and a schedule for achieving them. However, even if you have obtained agreement from your employees about the areas for performance improvement, they may or may not be satisfied with their appraisal. In one study, researchers found that whether or not employees expressed satisfaction with their formal appraisal discussion depended mostly on three factors: (1) not feeling threatened during the interview, (2) having an opportunity to present their ideas and feelings and to influence the course of the interview, and (3) having a helpful and constructive supervisor conduct the interview.70

Ultimately, the main objective of performance appraisals is to improve employee performance, keeping performance expectations clear and targeted on activities that build value for the organization. In dealing with employee perfor- mance issues, legal experts suggest that management follow seven steps to ensure that performance appraisals have the desired effect and are legally defensible:

1. Let the employee know that his or her performance is unacceptable and explain your minimum expectations.

2. Ensure that your expectations are reasonable.

3. Let employees know that warnings play a significant role in the process of establishing just cause; employees must be warned and told that discharge will result if they continue to fail to meet minimum standards.

4. Ensure that you take prompt corrective measures when required; failure to do so could lead to a finding that you condoned your employee’s conduct.

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5. Avoid sending mixed messages, such as a warning letter together with a “ satisfactory” performance review.

6. Provide the employee with a reasonable amount of time to improve performance.

7. Be prepared to provide your employees with the necessary support to facilitate improvement.71

How to Handle a Formal Written Warning There will be times when an employee’s performance is so poor that a formal written warning is required. Such written warnings serve two purposes: (1) They may serve to shake the employee out of his or her bad habits, and (2) they can help the manager defend his or her rating of the employee, both to his or her boss and (if needed) to a court or human rights commission.

Written warnings should identify the standards under which the employee is judged, make it clear that the employee was aware of the standard, specify any violation of the standard, indicate that the employee has had an opportunity to correct his or her behaviour, and specify what the employee must now do to cor- rect his or her behaviour.

LEGAL AND ETHICAL ISSUES IN PERFORMANCE MANAGEMENT

Ethics should be the bedrock of performance management. Accurate, well- documented performance records and performance appraisal feedback are necessary to avoid legal penalties and to defend against charges of bias based on grounds prohibited under human rights legislation, such as age, sex, and so on, as described in Chapter 2. The ultimate goal of performance manage- ment and reviews is that employees and employers alike should have a fair and similar understanding as to an employee’s work effectiveness. This should be used to develop a realistic and focused plan for improvements that is honest and mutually understood.72

Guidelines for developing an effective appraisal process include the following:73

1. Conduct a job analysis to ascertain characteristics (such as “timely project completion”) required for successful job performance. Use this information to create job performance standards.

2. Incorporate these characteristics into a rating instrument. (The professional literature recommends rating instruments that are tied to specific job behav- iours, that is, BARS.)

3. Make sure that definitive performance standards are provided to all raters and ratees.

4. Use clearly defined individual dimensions of job performance (such as “quantity” or “quality”) rather than undefined, global measures of job performance (such as “overall performance”).

Hints TO ENSURE LEGAL COMPLIANCE

Part 3 Developing Effective Human Resources194

5. When using a graphic rating scale, avoid abstract trait names (such as “loyalty” or “honesty”) unless they can be defined in terms of observable behaviours.

6. Employ subjective supervisory ratings (essays, for instance) as only one component of the overall appraisal process.

7. Train supervisors to use the rating instrument properly. Give instructions on how to apply performance appraisal standards (“outstanding,” “satisfactory,” and so on) when making judgments. Ensure that subjective standards are not subject to bias.

8. Allow appraisers regular contact with the employee being evaluated.

9. Whenever possible, have more than one appraiser conduct the appraisal, and conduct all such appraisals independently. This process can help to cancel out individual errors and biases.

10. Use formal appeal mechanisms and a review of ratings by upper-level managers.

11. Document evaluations and reasons for any termination decision.

12. Where appropriate, provide corrective guidance to assist poor performers in improving their performance.

THE FUTURE OF PERFORMANCE MANAGEMENT Effective appraisals are the basis for successful performance management. Although performance appraisal is a difficult interpersonal task for managers, it cannot be eliminated.

Managers need some way to review employees’ work-related behaviour, and no one has offered any concrete alternative. Despite the difficulties involved, performance management is still the basis for fostering and managing employee skills and talents, and it can be a key component of improved organizational effectiveness. Performance management techniques in high- and low-performing organizations are essentially the same, but managers in high-performing organi- zations tend to conduct and implement appraisals and manage performance on a daily basis more effectively.74

Recent research indicates that effective performance management involves

• linking individual goals and business strategy,

• showing leadership and accountability at all levels of the organization,

• ensuring close ties among appraisal results, rewards, and recognition outcomes,

• investing in employee development planning, and

• having an administratively efficient system with sufficient communication support.75

The key success factor for effective performance appraisal that will lead to optimum employee performance is the quality of the performance appraisal dialogue between a manager and an employee.76 Managers need to engage in training on an ongoing basis to ensure that they are in a position to engage in high-quality formal appraisal discussions.

195Chapter 7 Performance Management

Overall, the solution is to create more effective appraisals, as described in this chapter. Effective appraisals are essential to managing the performance required of an organization’s employees to achieve that organization’s strategic objectives.

1. The five steps in the performance management process are (1) defining performance expectations and goals, (2) providing ongoing feedback and coaching, (3) conducting performance appraisal and evaluation discus- sions, (4) determining performance rewards/ consequences, and (5)  conducting development and career opportunities discussions.

2. There are a number of performance appraisal methods. Graphic rating scales are simple to use and facilitate comparison of employees, but the performance standards are often unclear and bias can be a problem. Alternation ranking is a simple method that avoids central tendency, but it can be unfair if most employees are doing well. Paired comparison ensures that all employees are compared with each other, but it can also be unfair if most employees are performing similarly. Narrative forms provide concrete information to the employee but are time-consuming and can be subjective. The forced distribution method ensures differentiation of performance ratings but can be demotivating for employees classified as less than average. The critical incident method is very specific about the employee’s strengths and weaknesses and forces the supervisor to evalu- ate employees on an ongoing basis, but it makes it difficult to compare employees. BARS is very accurate, but is difficult and time-consuming to develop. MBO ties performance ratings to jointly agreed-upon performance objectives, but it is time-consuming to administer.

3. Appraisal problems to be aware of include unclear standards, the halo effect, central tendency, leniency or strictness, appraisal bias, the recency effect, and the similar-to-me bias.

4. The use of 360-degree feedback has grown rapidly. Performance information is collected from the individual being appraised, his or her

supervisor, other employees reporting to the person being appraised, and customers. This approach supports the activities of performance appraisal, coaching, leadership development, succession planning, and employee rewards and recognition.

5. There are three types of formal appraisal results and associated discussions. When performance is unsatisfactory but correctable, the objective of the interview is to set out an action plan for correcting performance. For employees whose performance is satisfactory but for whom promotion is not possible, the objective of the interview is to maintain satisfactory perfor- mance. Finally, the satisfactory-and-promotable interview has the main objective of discuss- ing the person’s career plans and developing a specific action plan for the educational and professional development that the person needs to move on to the next job.

6. Although appraisals can be a difficult interpersonal task for managers, they cannot be eliminated. There is no alternative method for assessing employee performance, which is essential for talent management and improved organizational effectiveness. The key success factor is the quality of the performance appraisal dialogue between managers and employees. More training on how to effectively conduct these discussions is required.

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

Chapter SUMMARY

196 Part 3 Developing Effective Human Resources

360-degree appraisal (p. 188) alternation ranking method (p.175) appraisal bias (p. 183) behaviourally anchored rating scale (BARS) (p. 177) central tendency (p. 182) contextual performance (p. 174) critical incident method (p. 176) electronic performance monitoring (EPM) (p. 180) forced distribution method (p. 176) formal appraisal discussion (p. 189)

graphic rating scale (p. 175) halo effect (p. 182) management by objectives (MBO) (p. 178) paired comparison method (p. 175) performance management (p. 172) recency effect (p. 184) similar-to-me bias (p. 184) strictness/leniency (p. 183) task performance (p. 173) unclear performance standards (p. 182)

Key TERMS

1. Describe the five steps in the performance appraisal process.

2. Explain how to ensure that the performance appraisal process is carried out ethically and without violating human rights laws.

3. Discuss the pros and cons of using differ- ent potential raters to appraise a person’s performance.

4. What are the four key actions in conducting a formal appraisal discussion?

5. Explain how to handle a defensive employee in a formal appraisal discussion.

Review and Discussion QUESTIONS

6. How might a supervisor handle a situation in which negative appraisals in the past have caused an employee to undervalue his or her performance?

7. Discuss how employees might respond to the proposed implementation of electronic performance management systems, such as call monitoring, and so on. How might an organization deal with employees’ reactions?

8. How might a supervisor deal with an extremely defensive yet productive member of his or her team in the event of having to deliver the “improvement portion” of the employee’s per- formance appraisal? What techniques would the supervisor need to use to maximize the efficacy of the appraisal and reduce the defensiveness of the employee?

1. Assume you are presenting to an upper-year group of business students and one of them asks, “Which performance appraisal system is the best?” How would you respond to that question?

2. How can the problem of inconsistency between managers who are rating workers be solved or at least diminished? Make two or more suggestions.

3. Given the difficulty of providing traditional performance standards for jobs that are quite flexible, what sort of “standards” could be developed for these flexible jobs?

4. Some HR professionals avoid using BARS, given that it is so time-consuming to develop. How could the development steps be streamlined?

5. Do you agree with the use of forced distribution methods to rate employees? Why or why not?

Critical Thinking QUESTIONS

197Chapter 7 Performance Management

the cafeteria. You may also want to consider your own experience when constructing your form.

Once you have drafted your form, exchange forms with another student or group. Critique and suggest possible improvements to the forms. Then with your revised form in hand, develop statements of behav- ioural incidents for two of your rating scale items to address the following circumstances:

• The employee has achieved outstanding results.

• The employee meets acceptable standards.

• The employee has performed very poorly in this aspect of the job.

Be prepared to share and critique statements developed by other students. Debrief the exercise as directed.

1. Working individually or in groups, develop a graphic rating scale for a retail sales associate and a fast-food restaurant manager.

2. Working individually or in groups, develop, over a week, a set of critical incidents covering the classroom performance of one of your instructors. Categorize the critical incidents to identify themes within activities that are viewed positively and negatively. Expand on this identification by assess- ing how the one-week period may be affecting the results and what differences you would have expected had you selected a different week within the year to conduct the assessment.

3. Working in groups, using the NOC job descrip- tion for cafeteria staff at a local university or college, develop a graphic rating scale with behavioural incidents for a job of a chef within

Experiential EXERCISES

CBC To view the CBC videos, read a summary, and answer discussion questions, go to MyManagementLab.

Strategic Pay Plans

CHAPTER

8 REQUIRED PROFESSIONAL CAPABILITIES (RPC)

• Monitors the competitiveness of the total compensation strategy on an ongoing basis

• Provides for delivery of payroll services in compliance with applicable legislation and company policy and advises the organization on related matters

• Ensures accurate and timely delivery of pay

• Monitors the competitiveness of the compensation pro- gram relative to comparable organizations

• Ensures pay records are accurate and complete

LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

EXPLAIN the strategic importance of total rewards.

DEFINE pay equity and EXPLAIN its importance today.

EXPLAIN in detail each of the three stages in establishing pay rates.

DISCUSS competency-based pay.

EXPLAIN under what conditions it is best to use an incentive plan.

COMPARE the three types of organization-wide incentive plans.

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P A R T F O U R Total Rewards

Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

199Chapter 8 Strategic Pay Plans

THE STRATEGIC IMPORTANCE OF TOTAL EMPLOYMENT REWARDS

Employee value is created when rewards are meaningful to employees and influence their affiliation with the organization.1 Compensation and rewards management is extremely important to every employee. Total employment rewards refers to an integrated package of all rewards gained by employees aris- ing from their employment. These rewards encompass everything that employees value in the employment relationship.

Rewards can be segmented based on the monetary (extrinsic), non-monetary (intrinsic) divide, with further differentiation between cash payments and ben- efits that are a cash expense for the organization but are not paid as cash to the employees, as illustrated in Figure 8.1.2

This approach considers individual reward components as part of an inte- grated whole to determine the best mix of rewards that are aligned with business strategy and that provide employee value, all within the cost constraints of the organization. Alignment is the extent to which rewards support outcomes that are important to achieving the organization’s strategic objectives. For example, when competitive advantage relies on relentless customer service, this behaviour should be reinforced.

The Five Components of Total Rewards 1. Compensation. This category includes direct financial payments in the form

of wages, salaries, incentives, commissions, and bonuses. Wages, salaries and other direct financial payments are discussed in this chapter.

2. Benefits. This category includes indirect payments in the form of financial benefits, such as employer-paid insurance and vacations. It also includes employee services, as discussed in the next chapter.

3. Work–life programs. This category of rewards relates to programs that help employees do their jobs effectively, such as flexible scheduling, telecommut- ing, childcare, and so on.

total employment rewards An integrated package of all rewards (monetary and non-monetary, extrinsic and intrinsic) gained by employees arising from their employment.

Total Rewards

- Compensation - Personal growth rewards - Interpersonal rewards

- Base pay - Merit plans - Incentive plans

- Vacations - Insurance - Pensions

Non-Monetary RewardsMonetary Rewards

Cash Payments Benefits

FIGURE 8.1 Employment Rewards: An Integrated Package of Rewards

RPC Monitors the competitiveness of the total compensation strategy on an ongoing basis

Part 4 Total Rewards200

4. Performance and recognition. This category includes pay-for-performance and recognition programs.

5. Development and career opportunities. This category of rewards focuses on planning for the advancement or change in responsibilities to best suit indi- vidual skills, talents, and desires. Tuition assistance, professional development, sabbaticals, coaching and mentoring opportunities, succession planning, and apprenticeships are all examples of career-enhancing programs.

The world’s most admired companies excel at taking a total rewards approach, as discussed in the Strategic HR box.

Rewards Program Effectiveness at the World’s Most Admired Companies Every year, the world’s most admired companies (MACs) are featured in Fortune magazine. In 2009, these companies excelled in six key areas related to reward program effectiveness:

1. focusing on excellence in the execution of rewards programs

2. ensuring their rewards programs are aligned with organizational goals, strategy, and culture

3. promoting a total rewards view across the organiza- tion and effectively leveraging intangible rewards

4. having stronger programs for developing talent from within, resulting in lower base salaries than that of their peers

5. better leveraging their managers’ skills in rewards program implementation

6. reinforcing HR’s role in helping managers succeed at putting reward programs into action

MACs generally pay lower base salaries than their peers. On average, MACs pay approximately 5 percent less in base pay for management and professional roles than other organizations. This is most likely the result of the emphasis that MACs place on intangible rewards like career development. They have a stronger pool of home- grown talent to choose from when job vacancies arise, so they are less reliant on hiring expensive external talent.

Source: Adapted from T. McMullen, M. Royal, and M. Stark, “Rewards-Program Effectiveness: What Makes the World’s Most Admired Companies Great?” WorldatWork Journal, 18, no. 1, pp. 65–74. Contents © 2009.

STRATEGIC HR

Impact of Rewards The purposes of rewards are to attract, retain, motivate, and engage employees. Engagement refers to a positive emotional connection to the employer and a clear understanding of the strategic significance of the job, which results in discretion- ary effort on the part of the employee. A Global Workforce Study by Towers Perrin (now known as Towers Watson) consultants found that, for Canadians, competitive base pay was the number-one factor in attracting employees to an organization, having excellent career opportunities was the most important fac- tor in retaining employees, and senior management’s interest in employee well- being was the top factor influencing employee engagement.3 Similarly, a study of 446 organizations across Canada by Western Compensation and Benefits Consultants found that the most effective attraction strategy was offering com- petitive base salaries, and the top reason for turnover among employees was dissatisfaction with cash compensation. Opportunities for advancement, work– life balance programs, and competitive benefits programs are also used by over 70 percent of Canadian companies to attract talent.4

Towers Perrin (now known as Towers Watson) www.towerswatson.com

201Chapter 8 Strategic Pay Plans

external equity Employees perceive their pay as fair, given the pay rates in other organizations.

BASIC CONSIDERATIONS IN DETERMINING PAY RATES

Four basic considerations influence the formulation of any pay plan: union issues, compensation policy, equity, and legal requirements.

Union Influences on Compensation Decisions Unions and labour relations laws also influence how pay plans are designed. Historically, wage rates have been the main issue in collective bargaining. However, other issues—including time off with pay, income security (for those in industries with periodic layoffs), cost-of-living adjustments, and pensions—are also important.5

The Canada Industrial Relations Board and similar bodies in each province and territory oversee employer practices and ensure that employees are treated in accordance with their legal rights. Their decisions underscore the need to involve union officials in developing the compensation package.

Compensation Policies An employer’s compensation policies provide important guidelines regarding the wages and benefits that it pays. A number of factors are taken into account in the devel- opment of a compensation policy, including whether the organization wants to be a leader or a follower regard- ing pay, business strategy, and the cost of different types of compensation. Important policies include the basis for salary increases, promotion and demotion policies, overtime pay policy, and policies regarding probation- ary pay and leaves for military service, jury duty, and holidays. Compensation policies are usually written by the HR agent or compensation manager in conjunction with senior management contributions.6

Perceptions of Equity Internally and Externally A crucial factor in determining pay rates is the need

for equity, specifically external equity and internal equity. Research has indi- cated that employee perceptions of fairness are one of the two key conditions for effective reward programs.7 Externally, pay must compare favourably with rates in other organizations or an employer will find it hard to attract and retain qualified employees. Pay rates must also be equitable internally: Each employee should view his or her pay as equitable, given other pay rates in the organization.

Legal Considerations in Compensation All of the 14 jurisdictions regulating employment in Canada (10 provinces, 3 territories, and the federal jurisdiction) have laws regulating compensation. Thus, HR managers must pay careful attention to which legislation affects

RPC Provides for delivery of payroll services in compliance with appli- cable legislation and company policy and advises the organiza- tion on related matters

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internal equity Employees perceive their pay as fair, given the pay rates of others in the organization.

Part 4 Total Rewards202

their employees. Further, these laws are constantly changing and require continual monitoring to ensure compliance. Employment Standards Acts and Human Rights Acts must also be taken into consideration, as discussed in Chapter 2. Pay equity is a major compensation issue and stems from the per- ceptions of equity discussion above. In addition, workers’ compensation laws also apply.

PAY EQUITY The purpose of pay equity legislation is to redress systemic gender discrimination in compensation for work performed by employees in female-dominated job classes. Pay equity requires that equal wages be paid for jobs of equal value or “worth” to the employer, as determined by gender-neutral (i.e., free of any bias

based on gender) job evaluation techniques. Although such factors as differences in hours worked, experience levels, education levels, and level of unionization contrib- ute to the wage gap, systemic discrimination is also pres- ent.8 The HR by the Numbers box highlights the impact of using different perspectives to identify how meaning- ful differences in pay can be overall.

Instances of pay inequity continue to occur, even in large, structured organizations. Several internal assess- ments of pay equity at the University of British Columbia established that on average, compensation of full-time female professors was $14 000 less than that of their male counterparts. After adjusting for confounding fac- tors (such as specialization, tenure, etc.), a $3 000 gap in pay still existed. As a result, in 2013, the university gave all 880 tenure-tracked and tenured female faculty members a 2 percent increase in base salary in order to achieve pay equity. The increase was made retroactive to January 1, 2010 at a cost of $2 million to the univer- sity. A similar situation occurred at Western University in 2006, resulting in individual adjustments to female faculty members’ salaries to compensate for the $2 200 post-confounding factor difference in pay between men and women. These cases highlight how the struggle for income parity between genders is far from over, and a challenge in even the most structured organizations.9

In addition, each jurisdiction has its own workers’ compensation laws. The objective of these laws is to pro- vide a prompt, sure, and reasonable income to victims of work-related accidents and illnesses. The Employment Insurance Act is aimed at protecting Canadian work- ers from total economic destitution in the event of employment termination that is beyond their control. Employers and employees both contribute to the benefits

provided by this act. This act also provides up to 45 weeks of compensation for workers unemployed through no fault of their

pay equity Providing equal pay to male-dominated job classes and female-dominated job classes of equal value to the employer.

Estimated per-woman lifetime-difference

financial loss (depending on education) due to pay inequities

71 percent of the way through the calendar year,

marking the day women in Canada start working for free, according to the Equal Pay Coalition

Canada’s rank among Organization for Economic Co-operation and

Development (OECD) countries

Amount young women graduating from university earn less than male

graduates

Cents women earn for each dollar a man earns in Ontario

Amount young women graduating from high school earn less than

male high school graduates

Have We Achieved Pay ◀ Equity Yet?

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27%

Sept. 17

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Source: Based on “Women Work for Free as of Sept.  17,” Canadian HR Reporter (September 18, 2008); and M.  Cornish, “Much Work to Be Done on Pay Equity,” Canadian HR Reporter (February 28, 2008).

203Chapter 8 Strategic Pay Plans

own (depending on the unemployment rate in the claimant’s region and other factors). Maternity leave, parental leave, and compassionate care leave benefits are also provided under the Employment Insurance Act.10

RPC Ensures accurate and timely delivery of pay

Association of Workers’ Compensation Boards of Canada www.awcbc.org

ESTABLISHING PAY RATES In practice, the process of establishing pay rates that are both externally and inter- nally equitable requires three stages: evaluating jobs, conducting wage/salary sur- veys, and combining the two pieces of information to determine pay for jobs.

Stage 1: Job Evaluation Job evaluation is aimed at determining a job’s relative worth. It is a formal and systematic comparison of jobs within a firm to determine the worth of one job relative to another, and it eventually results in a job hierarchy.

The basic procedure is to compare the content of jobs in relation to one another, for example, in terms of their effort, responsibility, skills, and working conditions. Job evaluation usually focuses on benchmark jobs that are critical to the firm’s operations or that are commonly found in other organizations. Rohm and Haas, a multinational chemical company, ensures that its bench- mark jobs represent all the various business units and departments in the orga- nization, are drawn from all levels of the organization, have large numbers of incumbents, are clear and well known in the industry, are stable and easily understood in terms of purpose and work content, and are visible and well understood by all employees.11 The resulting evaluations of benchmark jobs are used as reference points around which other jobs are arranged in order of relative worth.

Compensable Factors Jobs can be compared intuitively by deciding that one job is “more important” or “of greater value or worth” than another without digging any deeper into why in terms of specific job-related factors. This approach, called the ranking method, is hard to defend to employees or others who may not agree with the resulting job hierarchy. As an alternative, jobs can be compared by focusing on certain basic factors that they have in common. In compensation management, these basic factors are called compensable factors. They are the factors that deter- mine the definition of job content, establish how the jobs compare with one another, and set the compensation paid for each job.

Some employers develop their own compensable factors. However, most use factors that have been popularized by packaged job evaluation systems or by leg- islation. For example, most of the pay equity acts in Canada focus on four com- pensable factors: skill, effort, responsibility, and working conditions. As another example, the job evaluation method popularized by the Hay Group consulting firm focuses on four compensable factors: know-how, problem solving, account- ability, and working conditions. Often, different job evaluation systems are used for different departments, employee groups, or business units.

Identifying compensable factors plays a pivotal role in job evaluation. All jobs in each employee group, department, or business unit are evaluated using the same compensable factors. An employer thus evaluates the same elemental

job evaluation A systematic com- parison to determine the relative worth of jobs within a firm.

benchmark job A job that is critical to the firm’s operations or that is commonly found in other organizations.

compensable factor A fundamen- tal, compensable element of a job, such as skill, effort, responsibility, and working conditions.

Part 4 Total Rewards204

components for each job within the work group and is then better able to com- pare jobs—for example, in terms of the degree of skill, effort, responsibility, and working conditions present in each.12

Job Evaluation Committee Job evaluation is largely a judgmental process and one that demands close coop- eration among supervisors, compensation specialists, and the employees and their union representatives. The main steps involved include identifying the need

for the program, getting cooperation, and choosing an evaluation committee; the committee then carries out the actual job evaluation.13

A job evaluation committee is established to ensure the representation of the points of view of various peo- ple who are familiar with the jobs in question, each of whom may have a different perspective regarding the nature of the jobs. The committee may include employ- ees, HR staff, managers, and union representatives.

The evaluation committee first identifies 10 or 15 key benchmark jobs. These will be the first jobs to be evaluated and will serve as the anchors or benchmarks against which the relative importance or value of all other jobs can be compared. Then the committee turns to its most important function—actually evaluating the worth of each job. For this, the committee will probably use either the job classification method or the point method.

Classification Method The classification/grading method involves categorizing jobs into groups. The groups are called classes if they contain similar jobs or grades if they contain jobs that are similar in difficulty but otherwise different.

This method is widely used in the public sector. The federal government’s University Teaching job group is an example of a job class because it contains similar jobs involving teaching, research, and consulting. Conversely, the Audit, Commerce, and Purchasing job group is an example of a job grade because it contains dissimilar jobs, involving auditing, economic development consulting, and purchasing.

There are several ways to categorize jobs. One is to draw up class descrip- tions (similar to job descriptions) and place jobs into classes based on their cor- respondence to these descriptions. Another is to draw up a set of classifying rules for each class (for instance, the amount of independent judgment, skill, physical effort, and so on that the class of jobs requires). Then the jobs are categorized according to these rules.

The usual procedure is to choose compensable factors and then develop class or grade descriptions that describe each class in terms of the amount or level of compensable factor(s) in jobs. The federal government’s classification system, for example, employs different compensable factors for various job groups. Based on these compensable factors, a grade/group description is written. Then, the evaluation committee reviews all job descriptions and slots each job into its appropriate class or grade.

job evaluation committee A diverse group (including employees, HR staff, managers, and union representatives) established to ensure the fair and comprehen- sive representation of the nature and requirements of the jobs in question.

classification/grading method A method for categorizing jobs into groups.

classes Groups of jobs based on a set of rules for each class, such as amount of independent judgment, skill, physical effort, and so forth. Classes usually contain similar jobs—all secretarial jobs, for instance.

grades Groups of jobs based on a set of rules for each grade, whereby the jobs are similar in difficulty but otherwise different. Grades often contain dissimilar jobs, such as those of secretaries, mechanics, and firefighters.

grade/group description A written description of the level of compensable factors required by jobs in each grade; used to combine similar jobs into grades or classes.

The job evaluation committee typically includes several employees and has the important task of evaluating the worth of each job using compensable factors.

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205Chapter 8 Strategic Pay Plans

The job classification method has several advantages. The main one is that most employers usually end up classifying jobs anyway, regardless of the job evaluation method that they use. They do this to avoid having to work with and develop pay rates for an unmanageable number of jobs; with the job classifica- tion method, all jobs are already grouped into several classes. The disadvantages are that it is difficult to write the class or grade descriptions and that consider- able judgment is required in applying them. Yet many employers use this method with success.

Point Method The point method is widely used in the private sector and requires identifying several compensable factors. The extent or degree to which each factor is present in the job is evaluated, a corresponding number of points is assigned for each factor, and the number of points for each factor is summed to arrive at an overall point value for the job.

1. Preliminary steps. To use the point method, it is necessary to have current job descriptions and job specifications based on a thorough job analysis. The foundation of the job evaluation plan is a number of compensable factors that must be agreed upon. In Canada, four compensable factors are com- monly used: skill, effort, responsibility, and working conditions. These factors are general and can mean different things in different workplaces. Therefore sub-factors of each one may also be determined to clarify the specific mean- ing of each factor, as shown below.

Factor Sub-Factors

Skill Education and Experience

Interpersonal Skill

Effort Physical Effort

Mental Effort

Responsibility Supervision of Others

Planning

Working Conditions Physical Environment

Travel

Each sub-factor must be carefully defined to ensure that the evaluation com- mittee members apply them consistently.

2. Determine factor weights and degrees. The next step is to decide on the maxi- mum number of points (called “weight”) to assign to each factor. Assigning factor weights is generally done by the evaluation committee. The committee members carefully study each factor and determine the relative value of the factors. For example:

Skill 30 percent

Effort 30 percent

Responsibility 30 percent

Working conditions 10 percent

100 percent

point method A job evaluation method in which a number of compensable factors are identi- fied, the degree to which each of these factors is present in the job is determined, and an overall point value is calculated.

Part 4 Total Rewards206

Then definitions of varying amounts (called “degrees” or “levels”) of each sub-factor (or overall factor if no sub-factors are used) are prepared so that raters can judge the degree of a sub-factor/factor existing in a job. Thus, sub-factor “physical environment” for the factor “working conditions” might have three degrees—occasional, frequent, continuous—defined as follows:

Degree 1: Occasional—less than 30 percent of the time on an annual basis. Typically occurs once in a while, but not every day, or every day for less than 30 percent of the day.

Degree 2: Frequent—30 percent to 60 percent of the time on an annual basis. A regular feature of the job that occurs during any given day, week, or season.

Degree 3: Continuous—More than 60 percent of the time on an annual basis. Typically occurs for most of the regular work day, all year round (on average).

The number of degrees usually does not exceed five or six, and the actual number depends mostly on judgment. It is not necessary to have the same number of degrees for each factor, and degrees should be limited to the num- ber necessary to distinguish among jobs.

3. Assign points for each degree of each sub-factor. Points are then assigned to each factor, as in Table 8.1. For example, suppose that it is decided to use a total number of 1 000 points in the point plan. Then, since the factor “skill” had a weight of 30 percent, it would be assigned a total of 30 percent of 1 000, or 300 points. This automatically means that the highest degree for each sub-factor of the skill factor would be 300 points. Points are then assigned to the other degrees for this factor, in equal amounts from the lowest to the highest degree. This step is repeated for each factor and its sub-factors, resulting in the final job evaluation plan, as shown in Table 8.1. All these decisions are recorded in a job evaluation manual to be used by the job evalu- ation committee.

TABLE 8.1 Point Method Job Evaluation Plan

Degrees Maximum Weight

Factor Sub-Factors 1 2 3 4 Points

Skill Education and Experience 50 100 150 200 200

Interpersonal Skill 25 50 75 100 100

300 30%

Effort Physical Effort 25 50 75 100 100

Mental Effort 50 100 150 200 200

300 30%

Responsibility Supervision of Others 50 100 150 150

Planning 50 100 150 150

300 30%

Working Physical Environment 20 40 60 60

Conditions Travel 10 20 30 40 40

100 10%

1000 100%

207Chapter 8 Strategic Pay Plans

4. Evaluate the jobs. Once the manual is complete, the actual evaluations can begin. Each job is evaluated factor by factor to determine the number of points that should be assigned to it. First, committee members determine the degree (first degree, second degree, and so on) to which each factor is present in the job. Then they note the corresponding points (see Table 8.1) that were assigned to each of these degrees. Finally, they add up the points for all fac- tors, arriving at a total point value for the job. Raters generally start by rating benchmark jobs and obtaining consensus on these, and then they rate the rest of the jobs.

Point systems involve a quantitative technique that is easily explained to and used by employees. However, it can be difficult and time consuming to develop a point plan and to effectively train the job evaluation user group. This is one reason why many organizations adopt a point plan developed and marketed by a consulting firm. In fact, the availability of a number of ready- made plans probably accounts in part for the wide use of point plans in job evaluation.

If the committee assigned pay rates to each individual job, it would be dif- ficult to administer, since there might be different pay rates for hundreds or even thousands of jobs. Even in smaller organizations there is a tendency to try to simplify wage and salary structures as much as possible. Therefore, the commit- tee will probably want to group similar jobs (in terms of their number of points, for instance) into grades for pay purposes. Then, instead of having to deal with pay rates for hundreds of jobs, it might have to focus on pay rates for only 10 or 12 groupings of jobs.

A pay grade comprises jobs of approximately equal value or importance, as determined by job evaluation. If the point method was used, the pay grade consists of jobs falling within a range of points. If the classification system was used, then the jobs are already categorized into classes or grades. The next stage is to obtain information on market pay rates by conducting a wage/ salary survey.

Stage 2: Conduct a Wage/Salary Survey Compensation or wage/salary surveys play a central role in determining pay rates for jobs.14 An employer may use wage/salary surveys in three ways:

1. Survey data are used to determine pay rates for benchmark jobs that serve as reference points or anchors for the employer’s pay scale, meaning that other jobs are then paid based on their relative worth compared to the benchmark jobs.

2. Given that an increasing number of positions are paid solely based on the marketplace (rather than relative to the firm’s benchmark jobs) and that there is a current shift away from long-term employment, compensation is increasingly shaped by market wages and less by how it fits into the hierarchy of jobs in one organization.15

3. Surveys also collect data on employee benefits, work–life programs, pay-for- performance plans, recognition plans, and so on to provide a basis on which to make decisions regarding other types of rewards.

pay grade Comprises jobs of approximately equal value.

wage/salary survey A survey aimed at determining prevailing wage rates. A good salary survey provides specific wage rates for comparable jobs. Formal written questionnaire surveys are the most comprehensive.

Part 4 Total Rewards208

Formal and Informal Surveys by the Employer Most employers rely heavily on formal or informal surveys of what other employers are paying.16 Informal telephone surveys are good for collecting data on a relatively small number of easily identified and quickly recognized jobs, such as when a bank’s HR director wants to determine the salary at which a newly opened customer service representative’s job should be advertised. Informal dis- cussions among human resources specialists at regular professional association meetings are other occasions for informal salary surveys. Some employers use formal questionnaire surveys to collect compensation information from other employers, including things like number of employees, overtime policies, starting salaries, and paid vacations.

Commercial, Professional, and Government Salary Surveys Many employers also rely on surveys published by various commercial firms, professional associations, or government agencies. For example, Statistics Canada provides monthly data on earnings by geographic area, by industry, and by occupation. Table 8.2 provides an example of earnings data by industry and occupation, which can be used to establish pay, determine average changes, benchmark compensation, and so on. Statistics Canada also makes more detailed data regarding industry-specific benchmarks readily available.

The Toronto Board of Trade conducts five compensation surveys annually, covering executive; management; professional, supervisory, and sales; informa- tion technology; and administrative and support positions. The surveys include information from small, medium, and large employers in the Greater Toronto Area. A separate survey of employee benefits and employment practices is also conducted.

Private consulting or executive recruiting companies, such as Towers Watson, Mercer, and Hewitt Associates, annually publish data covering the compensation of senior and middle managers and members of boards of directors. Professional organizations, such as the Certified General Accountants and Professional Engineers Ontario, conduct surveys of compensation practices among members of their associations.

For some jobs, salaries are determined directly based on formal or informal salary surveys like those available from Monster.ca. In most cases, though, sur- veys are used to price benchmark jobs around which other jobs are then slotted based on their relative worth as determined through job evaluation.

Monster.ca Salary & Benefits Centre http://career-advice.monster.ca/ Salary-Benefits/careers.aspx

TABLE 8.2 Average Weekly Earnings by Industry 2012–2013 in Canada (including overtime)

April 2012 April 2013 April 2012 to April 2013

Industry $ $ % change

Industrial aggregate excluding unclassified businesses 890.51 910.25 +2.2

Goods-producing industries 1,140.42 1,156.75 +1.4

Service-producing industries 833.32 855.28 +2.6

Source: Statistics Canada, Earnings, average weekly, by industry, monthly, CANSIM table 281-0028. Available for free.

209Chapter 8 Strategic Pay Plans

Salary Survey Interpretation and Use Upward bias can be a problem regardless of the type of compensation survey used. At least one compensation expert argues that the way in which most surveys are constructed, interpreted, and used leads almost invariably to a situation in which firms set higher wages than they otherwise might. For example, “companies like to compare themselves against well-regarded, high-paying, and high-performing com- panies,” so baseline salaries tend to be biased upward. Similarly, “companies that sponsor surveys often do so with an implicit (albeit unstated) objective: to show the company [is] paying either competitively or somewhat below the market, so as to justify positive corrective action.” For these and similar reasons, it is probably wise to review survey results with a skeptical eye and to acknowledge that upward bias may exist and should perhaps be considered when making decisions.17

Whatever the source of the survey, the data must be carefully assessed for accuracy before they are used to make compensation decisions. Problems can arise when the organization’s job descriptions only partially match the descrip- tions contained in the survey, the survey data were collected several months before the time of use, the participants in the survey do not represent the appro- priate labour market for the jobs being matched, and so on.18

Now all the information necessary to move to the next stage—determining pay for jobs—has been obtained.

Stage 3: Combine the Job Evaluation and Salary Survey Information to Determine Pay for Jobs The final stage is to assign pay rates to each pay grade. Of course, if jobs were not grouped into pay grades, individual pay rates would have to be assigned to each job. Assigning pay rates to each pay grade (or to each job) is usually accom- plished with a wage curve.

The wage curve graphically depicts the market pay rates currently being paid for jobs in each pay grade, relative to the job evaluation points for each job or grade. An example of a wage curve is presented in Figure 8.2. Note that pay rates are shown on the vertical axis, while the points for pay grades are shown along the horizontal axis. The purpose of the wage curve is to show the relationship between the value of the job as determined by one of the job evaluation methods and the current average pay rates for each job or grade.

There are several steps in determining pay for pay grades using a wage curve. First, find the average pay for each pay grade, since each of the pay grades consists of several jobs. Next, plot the pay rates for each pay grade, as was done in Figure 8.2. Then fit a line (called a “wage line”) through the points just plotted. This can be done either freehand or by using a statistical method known as regression analysis. Finally, determine pay for jobs. Wages along the wage line are the target wages or salary rates for the jobs in each pay grade.

Developing Rate Ranges Most employers do not just pay one rate for all jobs in a particular pay grade. Instead, they develop pay ranges for each grade so that there might, for instance, be 10 levels or “steps” and 10 corresponding pay rates within each pay grade. This approach is illustrated in Table 8.3, which shows the pay rates and levels

wage curve A graphic description of the relationship between the value of the job and the average wage paid for this job.

pay ranges A series of steps or levels within a pay grade, usually based on years of service.

RPC Monitors the competitiveness of the compensation program rela- tive to comparable organizations

Tips FOR THE FRONT LINE

An Ethical Dilemma What should employers do when there is a shortage of a certain type of skill and they cannot attract any workers unless they pay a market rate above the maximum of their salary range for that job? How should other jobs (without a skills shortage) in the same company in the same salary range be paid?

Part 4 Total Rewards210

for some of the federal government pay grades. As of the time of this pay sched- ule, for instance, employees in positions that were classified in grade CX-1 could be paid annual salaries between $54 873 and $69 277, depending on the level at which they were hired into the grade, the amount of time they had been in the grade, and their merit increases (if any). Another way to depict the rate ranges for each grade is with a wage structure, as in Figure 8.3. The wage structure graphically depicts the range of pay rates (in this case, per hour) to be paid for each grade.

The use of pay ranges for each pay grade has several benefits. First, the employer can take a more flexible stance with respect to the labour market; for example, some flexibility makes it easier to attract experienced, higher-paid employees into a pay grade where the starting salary for the lowest step may be too low to attract such experienced people. Pay ranges also allow employ- ers to provide for performance differences between employees within the same grade or between those with differing seniority. As in Figure 8.3, most employ- ers structure their pay ranges to overlap a bit so that an employee with greater experience or seniority may earn more than an entry-level person in the next higher pay grade.

Note: Some wage rates may fall well off the wage curve

Points

0 100 200 300 400 500 $6.00

$7.00

$8.00

$9.00

$10.00

$11.00

A ve

ra ge

w ag

e ra

te s

I II III IV V VI VII VIII IX X XI XII

FIGURE 8.2 Plotting a Wage Curve

Note: The average market pay rate for jobs in each grade (Grade I, Grade II, Grade III, etc.) is plotted, and the wage curve is fitted to the resulting points.

TABLE 8.3 Federal Government Pay Schedules Correctional Services Group

Rate Levels within Grade

Grade 1 2 3 4 5

CX-1 $54 873 58 166 61 655 65 353 69 277

CX-2 $58 233 61 727 65 430 69 355 73 515

Source: CX - Correctional Services Group Annual Rates of Pay, www.tbs-sct.gc.ca/pubs_pol/hrpubs/coll_agre/cx/cx08-eng.asp, Treasury Board of Canada Secretariat, 2006. Reproduced with the permission of the Minister of Public Works and Government Services Canada, 2012.

211Chapter 8 Strategic Pay Plans

Broadbanding The trend today is for employers to reduce their salary grades and ranges from 10 or more down to three to five, a process that is called broadbanding. Broadbanding means combining salary grades and ranges into just a few wide levels or “bands,” each of which then contains a relatively wide range of jobs and salary levels.

Broadbanding a pay system involves several steps. First, the number of bands is decided on and each is assigned a salary range. The bands usually have wide salary ranges and also overlap substantially. As a result, there is much more flexibility to move employees from job to job within bands and less need to “promote” them to new grades just to give them higher salaries.

Broadbanding’s basic advantage is that it injects greater flexibility into employee compensation.19 The new, broad salary bands can include both super- visors and those reporting to them. Broadbanding also facilitates less specialized, boundaryless jobs and organizations. Less specialization and more participation in cross-departmental processes generally mean enlarged duties or capabilities and more possibilities for alternative career tracks.

broadbanding Reducing the number of salary grades and ranges into just a few wide levels or “bands,” each of which then contains a relatively wide range of jobs and salary levels.

0 100 200 300 I II III IV V VI

50 150 250 $4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50

10.00

W ag

e ra

te s

(d ol

la rs

)

Grades and evaluated points

Wage curve (or line)

FIGURE 8.3 Wage Structure

Part 4 Total Rewards212

Correcting Out-of-Line Rates The actual wage rate for a job may fall well off the wage line or well outside the rate range for its grade. This means that the average pay for that job is currently too high or too low relative to other jobs in the firm. If a point falls well below the line, a pay raise for the job may be required. If the plot falls well above the wage line, pay cuts or a pay freeze may be required.

Underpaid employees should have their wages raised to the minimum of the rate range for their pay grade, assuming that the organization wants to retain the employees and has the funds. This can be done either immediately or in one or two steps.

Pay rates of overpaid employees are often called red circle pay rates, and there are several ways to cope with this problem. One is to freeze the rate paid to employees in this grade until general salary increases bring the other jobs into line with it. A second alternative is to transfer or promote some or all of the employees involved to jobs for which they can legitimately be paid their current pay rates. The third alternative is to freeze the rate for six months, during which time attempts are made to transfer or promote the overpaid employee(s). If this is not possible, then the rate at which these employees are paid is cut to the maxi- mum in the pay range for their grade.

red circle pay rate A rate of pay that is above the pay range maximum.

RPC Ensures pay records are accurate and complete

Tips FOR THE FRONT LINE

PAY FOR KNOWLEDGE Pay-for-knowledge systems are known as competency-based pay (for management and professional employees) and skill-based pay (for manufacturing employ- ees). These plans pay employees for the range, depth, and types of knowledge that they are capable of using, rather than for the job that they currently hold. Competencies are individual knowledge, skills, and behaviours that are critical to successful individual or corporate performance based on their relation to the organization’s visions, values, and business strategy.20

Core competencies describe knowledge and behaviours that employees throughout the organization must exhibit for the organization to succeed, such as “customer service orientation” for all hotel employees. Functional competencies are associated with a particular organizational function, such as “negotiation skills” for salespeople, or “safety orientation” for pilots. Behavioural competencies are expected behaviours, such as “always walking a customer to the product they are looking for rather than pointing.”21 A pay-for-knowledge program should include the following:

• Competencies and skills—directly important to job performance—that can be defined in measurable and objective terms. Skills tend to be easier to define and measure than competencies.

• New and different competencies that replace obsolete competencies or competencies that are no longer important to job performance. If additional competencies are needed, the obsolete competency should be removed from the program.

• On-the-job training, not “in-the-classroom” training. Those who possess the competencies or skills should teach them. Also include on-the-job assess- ment, which can be supplemented by paper-and-pencil exams administered on the job.22

213Chapter 8 Strategic Pay Plans

As an example, in a manufacturing plant setting, workers would be paid based on their attained skill levels. In a three-level plan

1. Level 1 would indicate limited ability, such as knowl- edge of basic facts and ability to perform simple tasks without direction.

2. Level 2 would mean that the employee has attained partial proficiency and could, for instance, apply t echnical principles on the job.

3. Level 3 would mean that the employee is fully compe- tent in the area and could, for example, analyze and solve production problems.

Although only about 15 to 20 percent of workplaces use pay for knowledge at present, experts predict that the viewpoint that people, rather than jobs, provide advantages to organizations will continue to grow in pop- ularity. They foresee the emergence of new pay systems combining competencies and market values.23

The greatest challenge is measurement of c ompetencies. As time goes on, employees often become dissatisfied if these measurements are not valid or if the people responsible for assessing competencies are considered incompetent or biased.24 Another major employee concern is that pay be linked sufficiently to performance as well as competencies. Some compensation con- sultants suggest that firms should not pay for competencies at the exclusion of rewards for high performance results. For example, competencies could be linked to the determination of base salary combined with bonuses that are based on performance.25 One final issue for many Canadian companies is that pay-for- knowledge systems do not meet pay equity requirements.26

Construction workers today are often compensated for their work through the method of skill-based pay.

© h xd bz xy / Sh

ut te rs to ck

DEVELOPING EFFECTIVE INCENTIVE PLANS There are two major practical considerations in developing an effective incentive plan: when to use it and how to implement it.

When to Use Incentives Before deciding to implement an incentive plan, it is important to remember several points:

1. Performance pay cannot replace good management. Performance pay is sup- posed to motivate workers, but lack of motivation is not always the culprit. Ambiguous instructions, lack of clear goals, inadequate employee selection and training, unavailability of tools, and a hostile workforce (or manage- ment) are just a few of the factors that impede performance.

2. Firms get what they pay for. Psychologists know that people often put their effort where they know they will be rewarded. However, this can backfire. An incentive plan that rewards a group based on how many pieces are produced

Part 4 Total Rewards214

could lead to rushed production and lower quality. Awarding a plant-wide incentive for reducing accidents may simply reduce the number of reported accidents.

3. “Pay is not a motivator.”27 Psychologist Frederick Herzberg makes the point that money only buys temporary compliance; as soon as the incentive is removed, the “motivation” disappears too. Instead, Herzberg says, employers should provide adequate financial rewards and then build other motivators, like opportunities for achievement and psychological success, into their jobs.

4. Rewards rupture relationships. Incentive plans have the potential for reduc- ing teamwork by encouraging individuals (or individual groups) to blindly pursue financial rewards for themselves.

5. Rewards may undermine responsiveness. Since the employees’ primary focus is on achieving some specific goal, like cutting costs, any changes or extrane- ous distractions mean that achieving that goal will be harder. Incentive plans can, therefore, mediate against change and responsiveness.

Research by two professors at the University of Alberta focused on resolving a longstanding debate about whether extrinsic rewards can backfire by reduc- ing intrinsic motivation, or whether extrinsic rewards boost performance and enhance intrinsic motivation. The authors concluded that careful management of rewards does enhance performance. Common problem areas to be avoided include not tying rewards to performance, not delivering on all rewards initially promised, and delivering rewards in an authoritarian style or manner.28

Potential pitfalls like these do not mean that financial incentive plans cannot be useful or should not be used. They do suggest, however, that goals need to be reasonable and achievable, but not so easily attained that employees view incen- tives as entitlements.29 In general, any incentive plan is more apt to succeed if implemented with management support, employee acceptance, and a supportive culture characterized by teamwork, trust, and involvement at all levels.30 This probably helps to explain why some of the longest-lasting incentive plans, like the improshare and Rucker plans, depend heavily on two-way communication and employee involvement in addition to incentive pay.

Therefore, in general, it makes more sense to use an incentive plan when units of output can be measured, the job is standardized, the workflow is regular, and delays are few or consistent. It is also important that there be a clear relationship between employee effort and quantity of output and that quality is less important than quantity, or, if quality is important, that it is easily measured and controlled.

How to Implement Incentive Plans There are several specific common-sense considerations in establishing any incentive plan. Of primary importance is “line of sight.” The employee or group must be able to see their own impact on the goals or objectives for which incen- tives are being provided.31

Research indicates that seven principles support effective implementation of incentive plans that lead to superior business results:

1. Pay for performance—and make sure that performance is tied to the success- ful achievement of critical business goals.

2. Link incentives to other activities that engage employees in the business, such as career development and challenging opportunities.

Nelson Motivation Inc. www.drbobnelson.com

Research INSIGHT

Tips FOR THE FRONT LINE

215Chapter 8 Strategic Pay Plans

3. Link incentives to measurable competencies that are valued by the organization.

4. Match incentives to the culture of the organization—its vision, mission, and operation principles.

5. Keep group incentives clear and simple—employee understanding is the most important factor differentiating effective from ineffective group incentive plans.

6. Overcommunicate—employees become engaged when they hear the message that they are neither faceless nor expendable.

7. Remember that the greatest incentive is the work itself.

MONEY AND MOTIVATION Today’s efforts to achieve the organization’s strategy through motivated employees include fixed and variable compensation plans. Fixed pay represents compensation that is independent of the performance level of the individual, group, or organization. Fixed compensation includes base pay and other forms of relatively consistent compensation (for example, allowances) that satisfy the need for income stability. In contrast, variable pay represents any plan that links pay with productivity, profitability, or some other measure of organizational performance. Employers continue to increase their use of variable pay plans while holding salary increases or fixed compensation at modest levels. On aver- age, organizations spend roughly 11 percent of total pay-related spending on variable pay–related expenses. More than 84 percent of Canadian employers have one or more types of variable pay plans in place.32 As shown in Figure 8.4, cash bonuses or incentives are the most common form of short-term incentives, used in 87 percent of organizations that have short-term incentive plans in place.

Variable pay facilitates management of total compensation by keeping base pay inflation controlled. The fundamental premise of variable pay plans is that top performers must get top pay to secure their commitment to the organization. Thus, accurate performance appraisal or measurable outcomes is a precondition of effective pay-for-performance plans. Employees need to understand corporate strategy and how their work as individual employees is important to the achieve- ment of strategic objectives.33

fixed pay Compensation that is independent of the performance level of the individual, group, or organization.

variable pay Any plan that ties pay to productivity or profitability.

0 10 20 30 40 50 60 70 80 90

Cash bonus/incentive

Percent of Canadian organizations that offer this pay program

Profit–sharing

Gainsharing

Team–based incentive

Other incentive 6

6

7

12

87

FIGURE 8.4 Variable Pay Programs, 2011

Note: n = 323; percent based on organizations with at least one annual variable pay plan in place.

Figures do not add to 100 because some respondents have more than one plan.

Source: Courtesy of Conference Board of Canada.

Part 4 Total Rewards216

Merit pay or a merit raise is any salary increase that is awarded to an employee based on his or her individual performance. It is different from a bonus in that it usually represents a continuing increment, whereas the bonus represents a one- time payment. Although the term “merit pay” can apply to the incentive raises given to any employees—office or factory, management or non-management— the term is more often used with respect to white-collar employees, and particu- larly professional, office, and clerical employees.

Traditional merit pay plans have two basic characteristics: (1) Merit increases are usually granted to employees at a designated time of the year in the form of a higher base salary (or raise); and (2) the merit raise is usually based exclusively on individual performance, although the overall level of company profits may affect the total sum available for merit raises.34 In some cases, merit raises are awarded in a single lump sum once a year, without changing base salary. Occasionally, awards are tied to both individual and organizational performance.

Merit pay detractors present good reasons why merit pay can backfire. If per- formance appraisals are viewed as unfair, so too will the merit pay that is based on them. Second, supervisors often give most employees about the same raise, either because of a reluctance to alienate some employees or a desire to give everyone a raise that will at least help them to stay even with the cost of living. Third, almost every employee thinks that he or she is an above-average performer; being paid a below-average merit increase can thus be demoralizing. Finally, some believe that merit pay pits employees against each other and harms team spirit.35

However, although problems like these can undermine a merit pay plan, the consensus of opinion is that merit pay can and does improve performance.36 Advocates argue that only pay or other rewards tied directly to performance can motivate improved performance. They contend that the effect of awarding identical pay raises to all employees (without regard to individual performance) may actually detract from performance by showing employees that they will be rewarded the same regardless of how they perform.

merit pay (merit raise) Any salary increase awarded to an employee based on his or her individual performance.

RPC Monitors the competitiveness of the total compensation strategy on an ongoing basis

TYPES OF INCENTIVE PLANS There are several types of incentive plans. Individual incentive programs give income over and above base salary to individual employees who meet a specific individual performance standard. Informal incentives may be awarded, generally to individual employees, for accomplishments that are not readily measured by a standard, such as “to recognize the long hours that this employee put in last month,” or “to recognize exemplary customer service this week.” Group incen- tive programs are like individual incentive plans, but they provide payments over and above base salary to all team members when the group or team collectively meets a specified standard for performance, productivity, or other work-related behaviour. Organization-wide incentive plans provide monetary incentives to all employees of the organization. Examples are profit-sharing plans that provide employees with a share of the organization’s profits in a specified period, and gainsharing programs designed to reward employees for improvements in orga- nizational productivity. Finally, non-monetary recognition programs motivate employees through praise and expressions of appreciation for their work.

It is important to ensure that whatever incentive is being provided is appeal- ing to the individual receiving it. Demographic factors can have an impact on what is appealing, as discussed in the Strategic HR box.

217Chapter 8 Strategic Pay Plans

Rewards That Work

Traditionalists (born 1922–1945)

• Flexible schedules that allow them to work seasonally

• Health and fitness rewards

• Entertainment rewards that they would not purchase for themselves

Gen X-ers (born 1965–1980)

• Gadgets and high-tech rewards that are state-of-the- art technology

• Work–life balance rewards

• Flexibility to allow time for family, friends, and mean- ingful life experiences

Boomers (born 1946–1964)

• Recognition and being appreciated for their work

• Travel rewards

• Luxury and health-related rewards

Gen Y-ers (born 1981–2000)

• Relationship enhancers, such as electronic commu- nications equipment

• Personalized rewards where they can choose colours and accessories

• Charitable rewards, like time off to volunteer

STRATEGIC HR

For simplicity, these plans will be discussed as follows: incentives for opera- tions employees, incentives for senior managers and executives, incentives for salespeople, and organization-wide incentives.

Incentives for Operations Employees Piecework Plans Several incentive plans are particularly well suited for use with operations employ- ees, such as those doing production work.37 Piecework is the oldest incentive plan and still the most commonly used. Earnings are tied directly to what the worker produces—the person is paid a piece rate for each unit that he or she produces. Thus, if Tom Smith gets $0.50 per piece for stamping out door jambs, then he would make $50 for stamping out 100 a day and $100 for stamping out 200.

Developing a workable piece-rate plan requires both job evaluation and (usu- ally) industrial engineering. The crucial issue in piece-rate planning is the pro- duction standard, however, and this standard is usually developed by industrial engineers. With a straight piecework plan, Tom Smith would be paid on the basis of the number of door jambs that he produced; there would be no guaranteed minimum wage. However, after passage of employment/labour standards leg- islation, it became necessary for most employers to guarantee their workers a minimum wage. With a guaranteed piecework plan, Tom Smith would be paid the minimum wage whether or not he stamped out the number of door jambs required to make minimum wage—for example, 22 pieces if minimum wage is $10.50 per hour. As an incentive he would, however, also be paid at the piece

piecework A system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or items per day.

straight piecework plan A set payment for each piece produced or processed in a factory or shop.

guaranteed piecework plan The minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour.

Source: Rewards That Work. Adapted from R. Stotz, “Targeting Employee Incentives for Maximum Performance,” Workspan (June 2006), pp. 46–48.

Part 4 Total Rewards218

rate of $0.50 for each unit that he produced over the number required to make minimum wage.

“Piecework” generally implies straight piecework, a strict proportionality between results and rewards regardless of the level of output. Thus, in Smith’s case, he continues to get $0.50 apiece for stamping out door jambs, even if he stamps out many more than planned (say, 500 per day). Other types of piece- work incentive plans call for a sharing of productivity gains between worker and employer such that the worker does not receive full credit for all production above normal.38

The differential piece-rate plan is like the standard piece-rate plan with one major difference: With a piece-rate plan, the worker is paid a particular rate for each piece that he or she produces; with the differential piece-rate plan, the worker is rewarded by a premium that equals the percentage by which his or her performance exceeds the standard. The plan assumes the worker has a guar- anteed base rate. (The base rate may, but need not, equal the hourly rate deter- mined by the job evaluation; however, it must meet or exceed the minimums established in the applicable Employment Standards Act.)

Advantages and Disadvantages Piecework incentive plans have several advan- tages. They are simple to calculate and easily understood by employees. Piece-rate plans appear equitable in principle, and their incentive value can be powerful since rewards are directly tied to performance.

Piecework also has some disadvantages. A main one is its somewhat unsa- voury reputation among many employees, based on some employers’ habits of arbitrarily raising production standards whenever they find their workers earn- ing “excessive” wages. Since the piece rate is quoted on a per-piece basis, in workers’ minds production standards become tied inseparably to the amount of money earned. When an attempt is made to revise production standards, it is met with considerable worker resistance, even if the revision is fully justified.39

The differential piece-rate plan has most of the advantages of the piecework plan and is fairly simple to compute and easy to understand. The incentive is expressed in units of time instead of in monetary terms (as it is with the standard piece-rate system). Therefore, there is less of a tendency on the part of workers to link their production standard with their pay. Furthermore, the clerical job of recomputing piece rates whenever hourly wage rates are re-evaluated is avoided.

Such problems as these have led some firms to drop their piecework plans and to substitute team-based incentive plans or programs, such as gainsharing, which will be discussed later in this chapter.

Incentives for Teams or Groups There are several ways in which to implement team or group incentive plans.40 One is to set work standards for each member of the group and maintain a count of the output of each member. Members are then paid based on one of three formulas: (1) All members receive the pay earned by the highest producer; (2) all members receive the pay earned by the lowest producer; or (3) all mem- bers receive payment equal to the average pay earned by the group. Group incen- tive plans have been found to be more effective when there are high levels of communication with employees about the specifics of the plan, when there is strong worker involvement in the plan’s design and implementation, and when group members perceive the plan as fair.41

differential piece-rate plan A plan by which a worker is paid a basic hourly rate plus an extra percentage of his or her base rate for production exceeding the standard per hour or per day. It is similar to piecework payment but is based on a percentage premium.

team or group incentive plan A plan in which a production standard is set for a specific work group and its members are paid incentives if the group exceeds the production standard.

219Chapter 8 Strategic Pay Plans

The second approach is to set a production standard based on the final out- put of the group as a whole; all members then receive the same pay, based on the piece rate that exists for the group’s job. The group incentive can be based on either the piece rate or standard hour plan, but the latter is somewhat more prevalent.

A third option is to choose a measurable definition of group performance or productivity that the group can control. For instance, broad criteria, such as total labour hours per final product, could be used; piecework’s engineered standards are thus not necessarily required here.42

There are several reasons to use team incentive plans. Sometimes, several jobs are interrelated, as they are on project teams. Here, one worker’s performance reflects not only his or her own effort but that of co-workers as well; thus, team incentives make sense. Team plans also reinforce group planning and problem solving and help to ensure that collaboration takes place. Group incentive plans also facilitate on-the-job training, since each member of the group has an interest in getting new members trained as quickly as possible.43

A group incentive plan’s chief disadvantage is that each worker’s rewards are no longer based solely on his or her own effort. To the extent that the person does not see his or her effort leading to the desired reward, a group plan may be less effective at motivating employees than an individual plan is.

Incentives for Senior Managers and Executives There are five elements in an executive/managerial compensation package: salary, benefits, short-term incentives, long-term incentives, and perquisites.44 Salary is the cornerstone of executive compensation because it is the element on which the

others are layered, with benefits, incentives, and perqui- sites often awarded in some proportion to base pay. There has been considerable debate regarding whether top exec- utives are worth what they are paid. Some argue that the job of an executive is increasingly difficult. The stakes are high, and job tenure is often short. Expectations are getting higher, the questions from shareholders are more direct, and the challenge of navigating an organization

through difficult economic times has never been so great. However, shareholder activism regarding executive pay has attempted to tighten the restrictions on what firms pay their top executives.

Short-Term Incentives: The Annual Bonus More than 90 percent of firms in Canada with variable pay plans provide an annual bonus.45 Unlike salaries, which rarely decline with reduced performance, short-term incentive bonuses can easily result in an increase or decrease of up to 70 percent or more in total pay relative to the previous year. Three basic issues should be considered when awarding short-term incentives: eligibility, fund-size determination, and individual awards.

Eligibility Eligibility is usually decided in one of three ways. The first criterion is key position. Here, a job-by-job review is conducted to identify the key jobs ( typically only line jobs) that have a measurable impact on profitability. The second approach to determining eligibility is to set a salary-level cut-off point; all  employees earning

Research INSIGHT

An Ethical Dilemma Is it right that CEOs earn enormous amounts of money when most employees are getting small increases each year (some- times even less than inflation)?

Part 4 Total Rewards220

over that threshold amount are automatically eligible for consideration for short-term incentives. Finally, eligibility can be determined by salary grade. This is a refinement of the salary cut-off approach and assumes that all employees at a certain grade or above should be eligible for the short- term incentive program. The simplest approach is just to use salary level as a cut-off.46 The size of the bonus is usu- ally greater for top-level executives.

How Much to Pay Out (Fund Size) Next, a decision must be made regarding the fund size—the total amount of bonus money that will be available—and there are several formulas to do this. Some companies use a non- deductible formula. Here a straight percentage ( usually of the company’s net income) is used to create the short-term incentive fund. Others use a deductible formula on the assumption that the short-term incentive fund should begin to accumulate only after the firm has met a sp ecified level of earnings.

In practice, what proportion of profits is usually paid out as bonuses? In fact, there are no hard-and-fast rules about what an ideal payout size would be, and some

firms do not even have a formula for developing the bonus fund. One alternative is to reserve a minimum amount of the profits, say 10 percent, for safeguard- ing shareholders’ investments, and then to establish a fund for bonuses equal to 20 percent of the corporate operating profit before taxes in excess of this base amount. Thus, if the operating profits were $100 000, then the management bonus fund might be 20 percent of $90 000, or $18 000.

Determining Individual Awards The third issue is determining the individual awards to be paid. In some cases, the amount is determined on a discretionary basis, but typically a target bonus is set for each eligible position and adjust- ments are then made for greater or less than targeted performance. A maxi- mum amount, perhaps double the target bonus, may be set. Performance ratings are obtained for each manager, and preliminary bonus estimates are computed.

Estimates for the total amount of money to be spent on short-term incentives are thereby made and compared with the bonus fund available. If necessary, the individual estimates are then adjusted.

Many experts argue that, in most organizations, man- agerial and executive-level bonuses should be tied to both organizational and individual performance, and there are

several ways to do this.47 Perhaps the simplest is the split-award method, which breaks the bonus into two parts. Here, the manager actually gets two separate bonuses, one based on his or her individual effort and one based on the organi- zation’s overall performance. Thus, a manager might be eligible for an individual performance bonus of up to $10 000 but receive an individual performance bonus of only $8 000 at the end of the year, based on his or her individual per- formance evaluation. In addition, though, the person might also receive a second bonus of $8 000 based on the company’s profits for the year. Thus, even if there

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An Ethical Dilemma Is it ethical to provide potentially large bonuses to managers and executives on a purely discretionary basis, not necessarily related to performance?

221Chapter 8 Strategic Pay Plans

were no company profits, the high-performing manager would still get an indi- vidual performance bonus.

One drawback to this approach is that it pays too much to the marginal performer, who, even if his or her own performance is mediocre, at least gets that second, company-based bonus. One way to get around this problem is to use the multiplier method. For example, a manager whose individual performance was “poor” might not even receive a company-performance-based bonus, on the assumption that the bonus should be a product of individual and corporate performance. When either is very poor, the product is zero.

Whichever approach is used, outstanding performers should get substantially larger awards than do other managers. They are people whom the company can- not afford to lose, and their performance should always be adequately rewarded by the organization’s incentive system. Conversely, marginal or below-average performers should never receive awards that are normal or average, and poor performers should be awarded nothing. The money saved on those people should be given to above-average performers.48

Long-Term Incentives Long-term incentives are intended to motivate and reward top management for the firm’s long-term growth and prosperity and to inject a long-term perspective into executive decisions. If only short-term criteria are used, a manager could, for instance, increase profitability in one year by reducing plant maintenance; this tactic might, however, reduce profits over the next two or three years. This issue of long- versus short-term perspective has received considerable attention in the past several years as shareholders have become increasingly critical of management’s focus on short-term returns at the expense of a long-term increase in share price. The deep economic recession that began in late 2008 following the sub-prime mortgage lending crisis resulted in increasing regulatory focus on this type of compensation.

Long-term incentives are also intended to encourage executives to stay with the company by giving them the opportunity to accumulate capital (in the form of company shares) based on the firm’s long-term success. Long-term incentives, or capital accumulation programs, are most often reserved for senior executives but have more recently begun to be extended to employees at lower organizational levels.49 Approximately 60 percent of Canadian private sector organizations provide long-term incentives. They are rarely provided to public sector employees.50

Some of the most common long-term incentive plans (for capital accumula- tion) in Canada are stock options, performance share unit plans, restricted share unit plans, and deferred share unit plans.51 The popularity of these plans changes over time because of economic conditions and trends, internal company finan- cial pressures, changing attitudes toward long-term incentives, and changes in tax law, as well as other factors. Figure 8.5 illustrates the popularity of various long-term incentive plans.

Stock Options The stock option is the most popular long-term incentive in Canada, but its use is decreasing. Forty-six percent of organizations using long- term incentives provided stock options in 2011, compared with 57  percent in 2005 and 72 percent in 2002.52 A stock option is the right to purchase a

capital accumulation programs Long-term incentives most often reserved for senior executives.

stock option The right to purchase a stated number of shares of a company stock at today’s price at some time in the future.

The Conference Board of Canada www.conferenceboard.ca

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specific number of shares of company stock at a specific price at some point in the future.

Often a vesting (waiting) period is required to ensure that the employee has contributed to any increase in stock price, which also aligns the stock option with the goal of long-term retention of talent. The executive thus hopes to profit by exercising his or her option to buy the shares in the future but at today’s price. The assumption is that the price of the stock will go up rather than going down or staying the same. For example, if shares provided at an option price of $20 per share are exercised (bought) later for $20 when the market price is $60 per share and sold on the stock market when the market price is $80 per share, a cash gain of $60 per share results. The difference between fair market value of the stock at the time the option is sold and the amount paid by the employee to acquire it is treated as a taxable benefit. Often, the employee ben- efits, since they are required to pay capital gains tax on only 50 percent of the gain. In comparison, from the employer’s perspective, capital gains from cash incentive plans and stock purchase plans are taxed at full income inclusion lev- els. Thus, stock option plans are often seen as a cash windfall with no downside risk but unlimited upside potential.53

Proposals have been made to require that stock options be shown as an expense on company financial statements because the excessive issuing of options dilutes share values for shareholders and creates a distorted impression of the true value of a company.

Stock options are a less effective and less efficient form of compensation than direct share ownership in aligning the interests of directors with those of share- holders, [and] it does not motivate the executive to enhance long-term corporate performance. Stock-based compensation is superior to option-based compensa- tion plans for three broad reasons:

0 5 10 15 20 25 30 35 40 45

1Other

Performance–accelerated stock options 1

Stock grants 3

Performance–contingent stock options 3

Stock appreciation rights 4

Phantom share plan 4

Restricted stock 7

Deferred share units (DSUs) 10

Long–term cash 21

Performance share plans (PSUs) 28

Restricted share units (RSUs) 28

Traditional stock options 41

Percent of Canadian organizations that offer this long term incentive plan

FIGURE 8.5 Long-Term Incentive Plans, 2011

Notes: n = 170; percent based on organizations with at least one LTIP in place.

Figures do not add to 100 because some respondents have more than one plan.

Source: Courtesy of Conference Board of Canada.

223Chapter 8 Strategic Pay Plans

• It provides better alignment of interest of employees with shareholders (across a wide range of future share prices);

• It is a more efficient form of compensation (in terms of the perceived value received by the executive); and

• It alters the capital structure in a more predictable way (with less potential dilution and more straightforward accounting treatment).54

Plans Providing Performance Share “Units” Although the use of stock options persists, a new approach based on providing “units,” tied to performance, instead of stock has become increasingly common.55 Executives are granted a speci- fied number of units whose value is equal to (and fluctuates with) a c ompany’s share price, subject to the organization’s achievement of performance targets. A  performance share unit plan provides units subject to the achievement of predetermined financial targets, such as profit or growth in earnings per share (often over a multiyear period). If the performance goals are met, then the value of the units is paid to the executive in cash or stock. The units have no value if the pre-established performance criteria are not met. In a restricted share unit plan, units are promised to the executive but will be forfeited if an executive leaves the company before a vesting period (typically three years). If the execu- tive is still employed at the company after the vesting period, the full value of the units based on the current stock price is payable in cash or stock. In a deferred share unit plan, units are promised to the executive but are only payable when the executive leaves the company.

Incentives for Salespeople Sales compensation plans have typically relied heavily on incentives (sales com-

missions), although this varies by industry. In the real estate industry, for instance, salespeople are paid entirely via commissions, while in the pharmaceutical industry, salespeople tend to be paid a salary. However, the most prevalent approach is to use a combination of salary and commissions to compensate salespeople.56

The widespread use of incentives for salespeople is due to three factors: tradition, the unsupervised nature of most sales work, and the assumption that incentives are needed to motivate salespeople. The pros and cons of salary, commission, and combination plans follow.

Salary Plan In a salary plan, salespeople are paid a fixed salary, although there may be occasional incentives in the

form of bonuses, sales contest prizes, and the like. There are several reasons to use straight salary. It works well when the main sales objective is prospect- ing (finding new clients) or when the salesperson is mostly involved in account servicing, such as developing and executing product training programs for a distributor’s sales force or participating in national and local trade shows.57 Jobs like these are often found in industries that sell technical products. This is one reason why the aerospace and transportation equipment industries have a rela- tively heavy emphasis on salary plans for their salespeople.

Realtors rely on sales commissions as their source of income.

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There are advantages to paying salespeople on a straight salary basis. Sales- people know in advance what their income will be, and the employer also has fixed, predictable sales force expenses. Straight salary makes it simple to switch territories or quotas or to reassign salespeople, and it can develop a high degree of loyalty among the sales staff. Commissions tend to shift the salesperson’s emphasis to making the sale rather than to prospecting and cultivating long-term customers. A long-term perspective is encouraged by straight salary compensation.

The main disadvantage is that salary plans do not depend on results.58 In fact, salaries are often tied to seniority rather than to performance, which can be demotivating to potentially high-performing salespeople who see seniority—not performance—being rewarded.

Commission Plan Commission plans pay salespeople in direct proportion to their sales—they pay for results and only for results. The commission plan has several advantages. Salespeople have the greatest possible incentive, and there is a tendency to attract high-performing salespeople who see that effort will clearly lead to rewards. Sales costs are proportional to sales rather than fixed, and the company’s sell- ing investment is reduced. The commission basis is also easy to understand and compute.

The commission plan also has drawbacks, however. Salespeople focus on making a sale and on high-volume items; cultivating dedicated customers and working to push hard-to-sell items may be neglected. Wide variances in income

between salespeople may occur and this can lead to a feel- ing that the plan is inequitable. More serious is the fact that salespeople are encouraged to neglect other duties, like servicing small accounts. In addition, pay is often excessive in boom times and very low in recessions.

Recent research evidence presents further insights into the impact of sales commissions. One study addressed whether paying salespeople on commission “without a financial net” might induce more sales- people to leave. The participants in this study were 225 field sales representa- tives from a telecommunications company. Results showed that paying sales- people a commission accounting for 100 percent of pay was the situation that resulted in the highest turnover of salespersons by far. Turnover was much lower in the situation in which salespeople are paid a combination of a base salary plus commissions.59 These findings suggest that although 100 percent commissions can drive higher sales by focusing the attention of strong-willed salespeople on maximizing sales, without a financial safety net it can also undermine the desire of salespeople to stay.

Combination Plan There has been a definite movement away from the extremes of straight com- mission or fixed salary to combination plans for salespeople. Combination plans provide some of the advantages of both straight salary and straight commis- sion plans and also some of their disadvantages. Salespeople have a floor to their earnings. Furthermore, the company can direct its salespeople’s activities by detailing what services the salary component is being paid for, while the commis- sion component provides a built-in incentive for superior performance.

Research INSIGHT

An Ethical Dilemma Is it fair to compensate sales employees on a 100 percent commission basis with no financial security?

225Chapter 8 Strategic Pay Plans

However, the salary component is not tied to performance, and the employer is therefore trading away some incentive value. Combination plans also tend to become complicated, and misunderstandings can result. This might not be a problem with a simple “salary plus commission” plan, but most plans are not so simple. For example, there is a “commission plus drawing account” plan, whereby a salesperson is paid basically on commissions but can draw on future earnings to get through low sales periods. Similarly, in the “commission plus bonus” plan, salespeople are again paid primarily on the basis of commissions, but they are also given a small bonus for directed activities, like selling slow-moving items.

Tips FOR THE FRONT LINE

ORGANIZATION-WIDE INCENTIVE PLANS Many employers have incentive plans in which virtually all employees can participate. These include profit-sharing, employee stock ownership, and gain- sharing plans.

Profit-Sharing Plans In a profit-sharing plan, most or all employees receive a share of the company’s profits. Fewer than 15 percent of Canadian organizations offer profit-sharing

plans.60 These plans are easy to administer and have a broad appeal to employees and other company stakeholders. In addition to helping attract, retain, and motivate workers, profit-sharing plans have tax advantages for employees, including tax deferrals and income splitting. The main weakness of profit-sharing plans is “line of sight.” It is unlikely that most employ- ees perceive that they personally have the ability to influence overall company profit. It has been found that these plans produce a one-time productivity improvement but no change thereafter. Another weak- ness of these plans is that they typically provide an annual payout, which is not as effective as more fre- quent payouts.61

Employee Share Purchase/Stock Ownership Plan Employee share purchase/stock ownership plans (ESOPs) are in place at approximately 60 percent of Canadian organizations with publicly traded stock.62 A trust is established to purchase shares of the firm’s stock for employees by using cash from employee (and

sometimes employer) contributions. Employers may also issue treasury shares to the trust instead of paying cash for a purchase on the open market. The trust holds the stock in individual employee accounts and distributes it to employees,

profit-sharing plan A plan whereby most or all employees share in the company’s profits.

Profit-sharing plans are easy to administer and help to attract and motivate employees.

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often on retirement or other separation from service. Some plans distribute the stock to employees once a year.

The corporation receives a tax deduction equal to the fair market value of the shares that are purchased by the trustee by using employer contributions, but not for any treasury shares issued. The value of the shares purchased with employer contributions, and of any treasury shares issued, is a taxable benefit to the employees in the year of purchase of the shares. This tax treatment can create two problems. First, if the plan requires employees to complete a certain period of service before taking ownership of the shares and the employee leaves before being eligible for ownership, the employee has paid tax on the value of shares that he or she never owns. Therefore, most plans have immediate vest- ing.63 Second, if the value of the shares drops, employees may have paid tax on a greater amount than they will receive when they eventually sell the shares.

ESOPs can encourage employees to develop a sense of ownership in and com- mitment to the firm, particularly when combined with good communication, employee involvement in decision making, and employee understanding of the business and the economic environment.64 For example, one employee at Creo, a digital products company in Burnaby, BC, that offers an ESOP said, “It’s not just the shares. It’s the way of thinking. I’m extremely happy here.”65

Gainsharing Plans A gainsharing plan is an incentive plan that engages many or all employees in a common effort to achieve a company’s productivity objectives; any resulting incremental cost-saving gains are shared among employees and the company.66 Popular types of gainsharing plans include the Rucker and improshare plans.

The basic difference between these plans is in the formula used to determine employee bonuses.67 The Rucker formula uses sales value minus materials and supplies, all divided into payroll expenses. It includes participative management systems that use committees. The improshare plan creates production standards for each department. It does not include a participative management component but instead considers participation an outcome of the bonus plan.

Gainsharing works well in stable organizations with predictable goals and measures of performance, but is less flexible and useful in dynamic industries that require rapid business adjustment. In general, most of their cost savings are generated in the early years.68 For example, in 2011, US Airways announced that its employees would receive profit-sharing payouts totalling more than $47 million associated with the previous year’s financial performance success. US Airways’ chair and chief executive officer, Doug Parker, said, “Thank you and congratulations to our professional team members on an outstanding 2010. Our team ran a safe, reliable airline in 2010, completing more scheduled flights and delivering baggage more reliably than our network peers. Our customers have noticed the turnaround and our financial results reflect these positive results.” Individual employee payouts vary by the employee’s base salary and collective bargaining agreement. In addition, US Airways’ employees also received more than $25  million in operational incentive bonuses and individual employee recognition rewards in 2010.69

employee share purchase/stock ownership plan (ESOP) A plan whereby a trust is established to hold shares of company stock pur- chased for or issued to employees. The trust distributes the stock to employees on retirement, separa- tion from service, or as otherwise prescribed by the plan.

gainsharing plan An incentive plan that engages employees in a com- mon effort to achieve productivity objectives and share the gains.

Hints TO ENSURE LEGAL COMPLIANCE

National Center for Employee Ownership www.nceo.org

227Chapter 8 Strategic Pay Plans

1. A total rewards approach considers individual reward components as part of an integrated whole to determine the best mix of rewards that are aligned with business strategy and provide employee value, all within the cost constraints of the organization. Alignment is the extent to which rewards support outcomes that are important to achieving the organization’s strategic objectives.

2. Establishing pay rates involves three stages: job evaluation (to ensure internal equity), conducting wage/salary surveys (to ensure external equity), and combining job evaluation and salary survey results to determine pay rates. Job evaluation is aimed at determining the relative worth of jobs within a firm. It compares jobs with one another based on their content, which is usually defined in terms of compensable factors, such as skill, effort, responsibility, and working conditions. Jobs of approximately equal value are combined into pay grades for pay purposes. Salary surveys collect data from other employers in the mar- ketplace who are competing for employees in similar kinds of positions. The wage curve shows the average market wage for each pay grade (or job). It illustrates what the average wage for each grade should be and whether any present wages or salaries are out of line.

3. Competency-based pay plans provide employee compensation based on the skills and knowledge that they are capable of using, rather than the job that they currently hold.

4. The five basic elements of compensation for managers are salary, benefits, short-term incentives, long-term incentives, and perquisites.

5. Pay equity is intended to redress systemic gender discrimination as measured by the wage gap, and requires equal pay for female-dominated jobs of equal value to male-dominated jobs (where value is determined through job evaluation).

6. Piecework is the oldest type of incentive plan. Here, a worker is paid a piece rate for each unit that he or she produces. The differential piece- rate plan rewards workers by a premium that equals the percentage by which their performance is above standard.

7. Most management employees receive a short- term incentive, usually in the form of an annual bonus linked to company or divisional profits. Long-term incentives are intended to motivate and reward top management for the firm’s long-term growth and prosperity and to inject a long-term perspective into executive decisions.

8. Salary plans for salespeople are effective when the main sales objective is finding new clients or servicing accounts. Commission plans attract high-performing salespeople who see that perfor- mance will clearly lead to rewards.

9. Profit-sharing plans, employee share purchase/ stock ownership plans, and gainsharing plans are examples of organization-wide incentive plans. Profit-sharing plans provide a share of com- pany profits to all employees in the organization. The problem with such plans is that sometimes the link between a person’s efforts and rewards is unclear. Stock purchase plans provide a vehicle for employees to purchase company stock with their own and sometimes employer contributions. Gainsharing plans engage employees in a com- mon effort to achieve a company’s productivity objectives in which incremental cost savings are shared among employees and the company.

Chapter SUMMARY

MyManagementLab Visit MyManagementLab to access a personalized Study Plan and additional study tools for this chapter.

Part 4 Total Rewards228

job evaluation committee (p. 204) merit pay (merit raise) (p. 216) pay equity (p. 202) pay grade (p. 207) pay ranges (p. 209) piecework (p. 217) point method (p. 205) profit-sharing plan (p. 225) red circle pay rate (p. 212) stock option (p. 221) straight piecework plan (p. 217) team or group incentive plan (p. 218) total employment rewards (p. 199) variable pay (p. 215) wage curve (p. 209) wage/salary survey (p. 207)

benchmark job (p. 203) broadbanding (p. 211) capital accumulation programs (p. 221) classes (p. 204) classification/grading method (p. 204) compensable factor (p. 203) differential piece-rate plan (p. 218) employee share purchase/stock ownership plan

(ESOP) (p. 226) external equity (p. 201) fixed pay (p. 215) gainsharing plan (p. 226) guaranteed piecework plan (p. 217) grade/group description (p. 204) grades (p. 204) internal equity (p. 201) job evaluation (p. 203)

Key TERMS

Review and Discussion QUESTIONS

1. What are the five components of total rewards?

2. Describe what is meant by the term “benchmark job.”

3. Identify and briefly describe the three stages in establishing pay rates.

4. What are the pros and cons of the following methods of job evaluation: ranking, classifica- tion, factor comparison, point method?

5. Explain the term “competencies” and explain the differences among core, functional, and behav- ioural competencies.

6. Explain what is meant by the market-pricing approach in evaluating professional jobs.

7. Explain what pay equity legislation is intended to accomplish, what action is required by the legis- lation to accomplish it, and how effective the leg- islation has been in accomplishing its objectives.

8. Describe the three basic issues to be consid- ered when awarding short-term management bonuses.

9. Explain how stock options work. What are some of the reasons that stock options have been criticized in recent years?

10. When and why should a salesperson be paid a salary? A commission? Salary and commission combined?

11. Explain five reasons why incentive plans fail.

for this difference? Should anything be done about this? Why or why not?

2. Do you agree with paying people for competen- cies and skills that they are rarely required to use on the job?

1. It was recently reported in the news that the base pay for Canadian bank CEOs ranges in the millions of dollars, and the pay for the governor of the Bank of Canada is less than half of that of the lowest-paid bank CEO. How do you account

Critical Thinking QUESTIONS

229Chapter 8 Strategic Pay Plans

3. You are the HR manager at a large construc- tion firm headquartered in Edmonton. Most of the company’s administrative staff are also in Edmonton. You have regional and local site offices across the country. Draft a memo to employees about your company’s new pay-for- knowledge-and-skills policy. Make sure to docu- ment at least one fully complete section on how this policy will be administered. Your professor may give you some ideas on what might be considered or you may create your own circum- stances under which pay for knowledge and skills will be applied.

4. Working individually or in groups, develop an incentive plan for each of the following posi- tions: web designer, hotel manager, and used-car salesperson. What factors had to be taken into consideration?

5. Employee recognition plans are growing in popularity. There has been some debate in research literature suggesting that once incentives are provided, they are viewed as entitlements by employees and therefore become non-removable. Assume that you are working for your local university or college in the HR department. Due to financial restraints, it has been suggested that the university eliminate a $5 000 gift certificate

1. Working individually or in groups, conduct salary surveys for the positions of entry-level accountant and entry-level chemical engineer. What sources did you use, and what conclusions did you reach? If you were the HR manager for a local engineering firm, what salary would you recommend for each job?

2. You have been asked by the owner of your medium-sized import and export company (200+ people) to develop a way to standardize pay ranges for various jobs in the company. He says he is tired of employees’ complaining about their pay as compared to that of others and is concerned that if he does nothing someone will complain about inequitable pay practices. Outline the steps you will follow to do this. Make sure to give a rationale for the type of job evaluation system you propose as well as for the method you suggest to obtain comparable salary data. The jobs he is most concerned about are

• sales representative

• shipping and receiving manager

• multilingual contract negotiator

• accounts receivable clerk

• shipping clerk.

Experiential EXERCISES

3. What are some of the potential reasons that gender-based pay discrimination is so hard to eradicate?

4. A major consulting firm recently launched a new “project managers’ incentive” plan. Basically, senior managers in the company were told to award $5 000 raises (not bonuses) to about 40 percent of the project managers in their team, based on how well they managed people on their projects and met deadlines, and the number of projects each project manager was respon- sible for that year. No additional criteria were provided, given the wide variance in projects and teams that the consulting firm secures in a given year. What are the potential advantages and pitfalls of such an incentive program? What areas of support or concern do you think project

managers might have with the incentives? What areas of support or concern do you think senior managers might have with the incentives?

5. Is it ethical for companies to offer incentive bonuses only to top managers? Why or why not? What are the pros and cons of making such bonuses available to all employees who meet performance criteria?

6. Do you think that it is a good idea to reward employees with merit raises? Why or why not? If not, what approach would you take to incentive compensation?

7. Recognition can take many forms. Prepare a list of some forms of recognition that would be particu- larly motivational for Generation Y employees, and explain why you have chosen them.

Part 4 Total Rewards230

CBC To view the CBC videos, read a summary, and answer discussion questions, go to to MyManagementLab.

ninth straight quarter. Customer complaints included the following:

• It was hard to get prompt feedback from mechanics by phone.

• Salespeople often did not return phone calls.

• The finance people seemed “pushy.”

• New cars were often not properly cleaned or had minor items that needed immediate repair or adjustment.

• Cars often had to be returned to have repair work redone.

The following table describes Express Automotive’s current compensation system.

award offered to professors who publish in specific top-tier journals (which cost the university $225 000 last year alone). Interview two professors in your university or college to understand their position on the incentive. Based on the information provided in this chapter and your interviews, draft a memo targeted to faculty assuming you were forced to adopt the cut and effectively communicate the change.

6. Express Automotive, an automobile mega- dealership with more than 600 employees that represents 22 brands, has just received a very discouraging set of survey results. It seems its customer satisfaction scores have fallen for the

Team Responsibility Current Compensation Method

Sales force Persuade buyers to purchase a car. Very small salary (minimum wage) with com- missions; commission rate increases with every 20 cars sold per month.

Finance office Help close the sale; persuade customer to use company finance plan.

Salary, plus bonus for each $10 000 financed with the company.

Detailing Inspect cars delivered from factory, clean them, and make minor adjustments.

Piecework paid on the number of cars detailed per day.

Mechanics Provide factory warranty service, maintenance, and repair.

Small hourly wage, plus bonus based on (1)  number of cars completed per day and (2)  finishing each car faster than the standard estimated time to repair.

Receptionists/phone service personnel

Act as primary liaison between customer and sales force, finance, and mechanics.

Minimum wage.

The class is to be divided into five groups. Each group is assigned to one of the five teams in column one. Each group should analyze the compensation pack- age for its team. Each group should be able to iden- tify the ways in which the current compensation plan (1) helps company performance or (2) impedes com- pany performance. Once the groups have completed their analyses, the following questions are to be dis- cussed as a class:

1. In what ways might your group’s compensa- tion plan contribute to the customer service problems?

2. Do the rewards provided by your department impede the work of other departments?

3. What recommendations would you make to improve the compensation system in a way that would likely improve customer satisfaction?

Employee Benefits and Services

CHAPTER

9 REQUIRED PROFESSIONAL CAPABILITIES (RPC)

• Ensures compliance with legally required programs

• Integrates the basic benefits program with disability management

• Performs an analysis of organizational and employee needs related to benefit plans

• Administers the reporting, funding, and fiduciary aspects of the plan

• Provides information and counselling to pension plan participants

LEARNING OUTCOMES AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO

EXPLAIN the strategic role of employee benefits.

DESCRIBE seven government-mandated benefits.

EXPLAIN why the cost of health insurance benefits is increasing and how employers can reduce these costs.

DESCRIBE the two categories of pension plans and the shift that is occurring in their relative popularity.

DISCUSS three types of personal employee services and six types of job-related services offered to employees.

EXPLAIN how to set up a flexible benefits program.

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Source: Human Resources Professionals in Canada: Revised Body of Knowledge and Required Professional Capabilities (RPCs). Reprinted by permission.

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THE STRATEGIC ROLE OF EMPLOYEE BENEFITS Employee benefits and services can be defined as all the indirect financial payments that an employee receives during his or her employment with an employer.1 Benefits are generally provided to all of a firm’s employees and include such things as time off with pay, supplementary health and life insur- ance, and employee assistance plans. Employee services, traditionally a minor aspect of compensation, are becoming more sought after by today’s employ- ees in the post–job security era. Research indicates that benefits do matter to employees and that, if they are aligned with business strategy, they can help to attract and retain the right people to achieve business objectives, as highlighted in Table 9.1.2

Employee benefits are an important part of most employees’ compensation, particularly given today’s reality of modest salary increases.3 Three mandatory benefits (CPP/QPP, EI premiums, and workers’ compensation) account for over 50 percent of the employer portion of benefits.4 Over half of employers indicate that from 2010 to 2011, cost of benefits in their organization rose at a rate twice the general rate of inflation.5

Administering benefits today represents an increasingly specialized task because workers are more financially sophisticated and demanding and because benefit plans must comply with a wide variety of laws. Providing and administering benefits is also an increasingly expensive task. Benefits as a percentage of payroll (for public and private sectors combined) are approxi- mately 37 percent today (compared with about 15 percent in 1953). Most employees do not realize the market value and high cost to the employer of their benefits.

As a result, cost containment of benefits is a challenge organizations are cur- rently struggling with.

Certain benefits are mandated by law, and most Canadian companies vol- untarily provide additional employee benefits such as group life insurance, health and dental care insurance, and retirement benefits. In the remainder of this chapter, government-sponsored benefits, voluntary employer-sponsored benefits, employee services, flexible benefits, and benefits administration will be discussed. Table 9.2 provides a summary of mandated and voluntary benefits.

employee benefits Indirect financial payments given to employees. They may include supplementary health and life insurance, vacation, pension plans, education plans, and discounts on company products.

Benefits Canada www.benefitscanada.ca

BenefitsLink.com www.benefitslink.com

Employee Benefit Research Institute www.ebri.org

Benefits Interface www.benefits.org

Source: The Conference Board of Canada. “Benefits Benchmarking 2012,” October 2012, p. 3. Reprinted by permission.

TABLE 9.1 Objectives of a Benefits Strategy (2012)

Objectives of Benefits Strategy percent of organizations that rated the objective as “very important”

Complying with accounting, regulatory, and company standards 51

Containing benefits costs 50

Increasing job satisfaction/employee engagement 35

Reducing absenteeism 29

Addressing the diverse needs of employees 22

233Chapter 9 Employee Benefits and Services

GOVERNMENT-MANDATED BENEFITS

TABLE 9.2 Employee Benefits: Government-mandated vs. Voluntary

Government-Mandated Benefits Voluntary Employer-Sponsored Benefits

•  Employment Insurance (EI) •  Pay on termination of employment •  Leaves of absence •  Canada/Quebec Pension Plan (C/QPP) •  Workers’ compensation •  Vacations and holidays •  Paid breaks

•  Life insurance •  Supplementary healthcare/medical insurance •  Short-term disability plans and sick leave plans •  Long-term disability •  Sabbaticals •  Retirement benefits

Canada has one of the world’s finest collections of social programs to protect its citizens when they cannot earn income. Employers and employees provide fund- ing for these plans, along with general tax revenues.

Employment Insurance (EI) Employment insurance (EI) is a federal program intended to provide temporary financial assistance to eligible persons who experience interruption to their work through no fault of their own. EI benefits are not payable when an employee is terminated for just cause—for example, for theft of company property—or when an employee quits for no good reason. EI is perceived to be a benefit, since it provides employees who are laid off, terminated without just cause, or who quit their job for a justifiable reason (such as harassment) with an alternative form of government income until they secure employment.

In addition to loss of employment through no fault of the employee, eligibil- ity is also restricted to persons who have paid into the account (for example, a contractor who does not contribute to the EI account is ineligible for the ben- efit), have worked a minimum number of hours in a specified time, and are will- ing and able to work.

The EI benefit is generally 55 percent of average earnings during the last 14 to 45 weeks of the qualifying period or a maximum weekly rate (for example, as of January 1, 2013, in Canada the maximum weekly rate was $501),6 depend- ing on the regional unemployment rate. The benefit is payable for a maximum number of weeks, depending on factors such as the regional unemployment rate. To continue receiving EI benefits, individuals must demonstrate that they are actively seeking work. Claimants are encouraged to work part time, as they can earn a portion of their EI benefit amount (e.g., 25 percent) before these earnings will be deducted from the benefit.

To receive benefits, an employee must first have worked a minimum number of hours during a minimum number of weeks called a qualifying period (the number of hours and weeks varies among regions of the country). Then there is a waiting period from the last day of work until benefits begin. The waiting period varies by jurisdiction but is often two weeks. If the employee was provided with severance pay or holiday pay by the employer at the time of losing the job, these payments must run out before the waiting period begins.

employment insurance (EI) A federal program intended to provide temporary financial assistance to eligible persons who experience interruption to their work through no fault of their own.

RPC Ensures compliance with legally required programs

Hints TO ENSURE LEGAL COMPLIANCE

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The EI program is funded by contributions from eligible employees and their employers. Employee contributions are collected by payroll deduction, and employers pay 1.4 times the employee contribution. Employer contributions can be reduced if the employer provides a wage loss replacement plan for employee sick leave.

A supplemental unemployment benefit (SUB) plan is an agreement between an employer and the employees (often the result of collective bargaining) for a plan that enables employees who are eligible for EI benefits to receive additional ben- efits from a SUB fund created by the employer. SUB plans help employees maintain their standard of living during periods of unemployment (most often maternity leave) by receiving a combined benefit closer to their actual working wage. Most SUBs provide benefits of 90 percent of the working wage or greater.7 Work-sharing programs are a related arrangement in which employees work a reduced workweek and receive EI benefits for the remainder of the week. The Canada Employment Insurance Commission must approve SUB plans and work-sharing programs.

Pay on Termination of Employment Employment/labour standards legislation requires that employees whose employment is being terminated by the employer be provided with termination pay when they leave. The amount to be paid varies among jurisdictions and with the circumstances, as follows. Specifically, it should be noted that employees often confuse severance pay with reasonable advanced notice pay.

Reasonable Advance Notice Periods An employee must be provided with advance written notice when the employer terminates his or her employment, unless the employee was working on a short- term contract or was fired for just cause (such as continued poor performance, theft, or if the employee initiated the termination of employment). The amount of advance notice that is required applies only to employees whose employment rela- tionship is terminated through no cause of their own, increases with the length of employment of the employee (e.g., one week per year of employment to a specified maximum), and varies among jurisdictions. In practice, many employers do not provide advance written notice. Instead, they ask the employee to cease working immediately and provide the employee with a lump sum equal to their pay for the notice period. This amount is called pay in lieu of reasonable notice.

Severance Pay Employees only in Ontario and the federal jurisdiction may be eligible for sever- ance pay in addition to pay in lieu of notice in certain termination situations (no other jurisdictions mandate severance pay). For example, in Ontario, employees with five or more years of service may be eligible for severance pay if (1) the employer’s annual Ontario payroll is $2.5 million or more, or (2) the employer is closing down the business and 50 or more employees will be losing their jobs within a six-month period. The amount of the severance pay is one week’s pay for each year of employment (maximum 26 weeks). In the federal jurisdiction system, employees who have been employed for 12 months or more receive the greater of either two days’ worth of wages for every year employed with the company or a total of five days’ wages (for example, an employee who has been with the company for one year would be entitled to five days’ worth of severance,

pay in lieu of reasonable notice A lump sum equal to an employee’s pay for the notice period provided to employees who cease working immediately.

235Chapter 9 Employee Benefits and Services

which is the greater of the two options above). Severance pay is an additional payout on top of the minimum notice period requirements and applies only if the specific conditions in the applicable jurisdiction are met.

Pay for Mass Layoffs The provinces of British Columbia, Manitoba, Ontario, New Brunswick, and Newfoundland and Labrador require that additional pay be provided when a layoff of 50 or more employees occurs. The rationale behind this regulation is that larger layoffs result in longer time to re-employment, so in cases of larger layoffs the employees are given longer reasonable notice periods. In Nova Scotia and Saskatchewan, additional pay is required if 10 or more employees are being laid off. The amount of additional pay ranges from 6 weeks to 18 weeks, depend- ing on the province and the number of employees being laid off.

Leaves of Absence All provinces and territories and the federal jurisdiction require unpaid leaves of absence to be provided to employees in certain circumstances. Maternity/ parental leave is provided in every jurisdiction (usually after one year of service). The amount of maternity leave is 17 or 18 weeks in each jurisdiction (15 weeks in Alberta),8 but parental and adoption leaves range from 34 to 52  weeks. Employees who take these leaves of absence are guaranteed their old job or a similar job when they return to work. Parental leave benefits can be taken by one parent or split between both parents.

Bereavement leave on the death of a family member is provided for employees in some but not all jurisdictions. The amount of time off varies by jurisdiction and depends on the closeness of the relationship between the employee and the deceased. Bereavement leave is usually unpaid, but in some cases it can be partially or fully paid. All jurisdictions except Alberta provide compassionate care leave for employees who are caring for a critically or terminally ill relative (six weeks of EI is payable during these leaves).9 Quebec has extended compassionate leave to cover situations in which close family members are victims of criminal acts, com- mit suicide, or if a child disappears.10

Some employers provide full or partial pay for all or part of legally required unpaid leaves by “topping up” what employees receive from EI, such that the total amount they receive more closely matches their regu- lar salary. For example, in some cases of bereavement, leave may be partially or fully paid by the employer.

Having a clear procedure for any leave of absence is essential. An application form should be the centrepiece of any such procedure. In general, no employee should be given a leave until it is clear what the leave is for. If the leave is for medical or family reasons, medical cer- tification should be obtained from the attending physi- cian or medical practitioner. A form like this creates a record of the employee’s expected return date and the fact that, without an authorized extension, his or her employment may be terminated.

Although these leaves are unpaid, it is incorrect to assume that the leave is costless to the employer. For example, one study concluded that the costs associated ©

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with recruiting new temporary workers, training replacement workers, and com- pensating for the lower level of productivity of these workers could represent a substantial expense over and above what employers would normally pay their full-time employees.11

Canada/Quebec Pension Plan (C/QPP) The Canada/Quebec Pension Plans (C/QPP) were introduced in 1966 to pro- vide working Canadians with a basic level of financial security on retirement or disability. Four decades later, these benefits do indeed provide a significant part of most Canadians’ retirement income. Almost all employed Canadians between the ages of 18 and 65 are covered, including self-employed individuals. Casual and migrant workers are excluded, as are people who are not earning any employment income, such as homemakers or volunteers. The benefits are por- table, meaning that pension rights are not affected by changes in job or residence within Canada. Both contributions and benefits are based only on earnings up to the “year’s maximum pensionable earnings” (intended to approximate the aver- age industrial wage), as defined in the legislation. Benefits are adjusted based on inflation each year in line with the consumer price index. Contributions made by employees (4.95 percent of pensionable earnings as of January 2013) are matched by employers.

Three types of benefits are provided: retirement pensions, disability pen- sions, and survivor benefits. The retirement pension is calculated as 25 percent of the average earnings (adjusted for inflation up to the average inflation level during the last five years before retirement) over the years during which contri- butions were made. Plan members can choose to begin receiving benefits at any time between the ages of 60 and 70. Benefits are reduced on early retirement before age 65 and are increased in the case of late retirement after age 65. A number of significant changes were initiated in 2012 that will impact CPP pay- outs and associated employee decisions on when to retire that HRM managers must consider. For example, there has been a move to increase the reduction level for individuals who access CPP early. In 2012, the deduction for each month that an individual collected CPP before the age of 65 was 0.5 percent. This value is currently increasing, and will be 0.6 percent by 2016. There is also an increase in the value of the payment premium for those who delay retirement to consider.

Disability benefits are paid only for severe disabilities that are expected to be permanent or to last for an extended period. The disability benefit is 75 percent of the pension benefit earned at the date of disability, plus a flat-rate amount per child. Survivor benefits are paid on the death of a plan member. A lump-sum payment is made to the plan member’s estate, and a monthly pension is also pay- able to the surviving spouse and each dependant child.

Workers’ Compensation Workers’ compensation laws are aimed at providing sure, prompt income and medical benefits to victims of work-related accidents or illnesses, or to their dependants, regardless of fault. Every province and territory and the federal jurisdiction has its own workers’ compensation law. These laws impose com- pulsory collective liability for workplace accidents and work-related illnesses.

Canada/Quebec Pension Plans (C/QPP) Programs that provide three types of benefits: retirement income, survivor or death benefits payable to the employee’s depen- dants regardless of age at time of death, and disability benefits pay- able to employees with disabilities and their dependants. Benefits are payable only to those individuals who make contributions to the plans, or to their family members.

Canada Pension Plan www.servicecanada.gc.ca/eng/ services/pensions/cpp/retirement/ index.shtml

workers’ compensation Provides income and medical benefits to victims of work-related accidents or illnesses, or to their dependants, regardless of fault.

237Chapter 9 Employee Benefits and Services

This means that employees and employers cannot sue each other regarding the costs of workplace accidents or illnesses. Workers’ compensation is, in effect, a “no-fault” insurance plan designed to help injured or ill workers get well and return to work. For an injury or illness to be covered by workers’ compensation, one must only prove that it arose while the employee was on the job. It does not matter that the employee may have been at fault; if he or she was on the job when the injury or illness occurred, he or she is entitled to workers’ compensa- tion. For example, suppose all employees are instructed to wear safety goggles when working at their machines, and one does not and is injured. Workers’ com- pensation benefits will still be provided. The fact that the worker was at fault in no way waives his or her claim to benefits.

Employers collectively pay the full cost of the workers’ compensation s ystem, which can be an onerous financial burden for small businesses. The cost varies by industry and with actual employer costs; employer premiums are tax deductible. Workers’ compensation boards (or equivalent bodies) exist in each jurisdiction to determine and collect payments from employers, determine rights to com- pensation, and pay workers the amount of benefit to which they are entitled under the legislation in their jurisdiction. Employers and employees have some representation on these boards, but usually both parties believe they should have more control.

Workers’ compensation benefits include payment of expenses for medical treatment and rehabilitation, and income benefits during the time in which the worker is unable to work (temporarily or permanently) because of his or her disability (partial or total). Survivor benefits are payable if a work-related death occurs. All benefits are non-taxable. Although workers’ compensation boards pay the claims, the premiums for most employers depend on the number of claims and on the amounts of money that are paid. Minimizing such claims is thus important. Chapter 10 focuses on occupational health and safety, providing awareness of accident prevention methods, which can effectively help manage workers’ compensation costs.

Vacations and Holidays Labour/employment standards legislation sets out a minimum amount of paid vacation that must be provided to employees, usually two weeks per year, but the requirements vary by jurisdiction. The actual number of paid employee vacation days also varies considerably from employer to employer. Many employers provide additional paid holidays and paid vacation over and above the amount required by law. Thus, a typical annual vacation determination policy might be as follows:

• two weeks for the first 5 years of service

• three weeks for 6 to 10 years of service

• four weeks for 11 to 15 years of service

• five weeks for 16 to 25 years of service

• six weeks after 25 years of service

The number of paid holidays similarly varies considerably from one juris- diction to another, from five to nine. The most co mmon paid holidays include New Year’s Day, Good Friday, Canada Day, Labour Day, and Christmas and Boxing Day. Other common holidays include Victoria Day, Thanksgiving Day,

Association of Workers’ Compensation Boards of Canada www.awcbc.org

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and Remembrance Day. Additional holidays may be observed in each province, such as Saint-Jean-Baptiste Day in Quebec.

Paid Breaks While vacation requirements mandate paid time off, in terms of full days of work off, there are also mandated paid and unpaid time off requirements within a work day at the provincial, territorial, or federal level. For exam- ple, in Nova Scotia, an employee shift of over five hours requires a minimum 30-minute uninterrupted break. If the employee is under direct control of the employer and expected to be available for work during this time, then

the break must be paid. If not, then it can be unpaid. Similar conditions apply in each jurisdiction. Contrary to popular belief, coffee or other rest breaks in addition to the eating period are often not government mandated. If the employee is free to leave the workplace, then the employer does not have to pay for the time.

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There are a number of commonly paid holidays in Canada, including Thanksgiving Day.

VOLUNTARY EMPLOYER-SPONSORED BENEFITS Although they are not required to do so, employers often provide many other employee benefits. There are some benefits that appear to be more valued by Canadian employees, based on a 2012 Mercer survey (as highlighted in Figure 9.1), however offering a mix of benefits appears to be the norm in most organizations. Several of the most common types of employee benefits will now be described.

Life Insurance Virtually all employers provide group life insurance plans for their employees. As a group, employees can obtain lower rates than if they bought such insur- ance as individuals. In addition, group plans usually contain a provision for coverage of all employees—including new ones—regardless of health or physi- cal condition.

In most cases, the employer pays 100 percent of the base premium, which usually provides life insurance equal to about two years’ salary. Additional life insurance coverage is sometimes made available to employees on an optional, employee-paid basis. Accidental death and dismemberment coverage provides a fixed lump-sum benefit in addition to life insurance benefits when death is acci- dental. It also provides a range of benefits in case of accidental loss of limbs or sight and is often paid for by the employer.

Critical illness insurance provides a lump-sum benefit to an employee who is diagnosed with and survives a life-threatening illness. This benefit bridges the gap between life insurance and disability insurance by providing immediate funds to relieve some the financial burden associated with the illness (such as paying for

group life insurance Life insurance provided at lower rates for all employees, including new employees, regardless of health or physical condition.

239Chapter 9 Employee Benefits and Services

out-of-country treatment or experimental treatment) or enabling employees to enjoy their remaining time by pursuing activities that would normally be beyond their financial means.12

Supplementary Healthcare/Medical Insurance Most employers provide their employees with supplementary healthcare/medical insurance (over and above that provided by provincial healthcare plans). Along with life insurance and long-term disability, these benefits form the cornerstone of almost all benefits programs.13 Supplementary healthcare insurance is aimed at providing protection against medical costs arising from off-the-job accidents or illness.

Most supplementary health insurance plans provide insurance at group rates, which are usually lower than individual rates and are generally avail- able to all employees—including new ones—regardless of health or physical condition. Supplementary healthcare plans provide major medical coverage to meet medical expenses not covered by government healthcare plans, including prescription drugs, private or semi-private hospital rooms, private duty nurs- ing, physiotherapy, medical supplies, ambulance services, and so on. In most employer-sponsored drug plans, employees must pay a specified amount of deductible expense (typically $25 or $50) per year before plan benefits begin. Many employers also sponsor health-related insurance plans that cover expenses like vision care, hearing aids, and dental services, often with deductibles. In a majority of cases, the participants in such plans have their premiums paid for entirely by their employers.14

deductible The annual amount of health/dental expenses that an employee must pay before insurance benefits will be paid.

$500 to reduce health/dental employee premium

$500 to health savings accounts

$500 toward critical illness coverage

$500 to wellness account

$500 tuition reimbursement

$500 transportation subsidy

$500 toward gym membership

Employee health-risk appraisal

$500 Child-care voucher

0% 5% 10% 15% 20%

Additional week of paid time off

Percent of Canadians who selected this benefit choice as the most desirable out of the options presented

$500 salary increase

$500 employer contribution to retirement savings plan/TSFA

$500 toward improved health/dental coverage

FIGURE 9.1 Top Benefits Choices among Canadians

Source: A. Silliker, “Employees want vacations, not raises: Survey,” Canadian HR Reporter, Jan 14, 2013, Vol. 26(1), p. 1.

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Reducing Health-Benefit Costs Dramatic increases in healthcare costs are the biggest issue facing benefits managers in Canada today. Figure 9.2 shows how increases in medical and dental plan costs have continued to escalate since 2006. The main reasons for these increases are increased use of expensive new drugs and rising drug use by an aging population.15 Despite government healthcare plans, Canadian employers pay about 30 percent of all healthcare expenses in Canada, most of this for prescription drugs.16

Many Canadian managers now find controlling and reducing healthcare costs topping their to-do lists. The simplest approach to reducing health- benefit costs is to increase the amount of healthcare costs paid by employees. This can be accomplished by increasing employee premiums, increasing deductibles, reducing company coinsurance levels, instituting or lower- ing annual maximums on some services, or even eliminating coverage for spouses, private hospital rooms, and other benefits. An Angus Reid poll of 1 500 Canadians found that three-quarters of the respondents were willing

to pay higher premiums to cover the high cost of prescription drugs.17

Another cost-reduction strategy is to publish a restricted list of drugs that will be paid for under the plan to encourage the use of generic rather than more expensive brand-name drugs. New drugs may not be covered if equally effective, cheaper alternatives are available. This approach should be combined with employee education to effectively manage the demand for drugs.18

A third approach is health promotion. In-house newsletters can caution workers to take medication properly and advertise programs on weight man- agement, smoking cessation, exercise classes, onsite massage therapy, nutrition counselling, and other wellness programs. After 10 years of providing an

coinsurance The percentage of expenses (in excess of the deductible) that are paid for by the insurance plan.

Public Health Agency of Canada www.publichealth.gc.ca

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An onsite employee fitness centre.

0% 5% 10% 15% 20%

2006

2007

2008

2009

2010

13.20%

13.94%

13.76%

14.81%

15%

Ye ar

Health plan cost (average) as a percent of salary

FIGURE 9.2 Increases in Health Plan Costs, 2006–2010

Source: Courtesy of Buck Consultants Limited.

241Chapter 9 Employee Benefits and Services

onsite exercise program for employees, Canada Life Assurance Company found that absenteeism dropped 24 percent for employees who exercised two to three times per week.19 Employee assistance programs can help to combat alcohol and drug addiction and provide stress-management counselling. HR by the Numbers provides a quick snap shot of the effect of smoking and the impact of smoking cessation programs in the workplace.

A fourth approach is to implement risk-assessment programs. Such programs are being used by CIBC and other companies. A third party conducts a confiden- tial survey of the health history and lifestyle choices of employees to identify common health risk factors, such as those associated with heart disease or men- tal health, so that problem-specific programs can be implemented.20

Finally, healthcare spending accounts (HCSA) are offered by more than 90 percent of Canadian employ- ers, either alone or in combination with a standard healthcare plan.21 The employer establishes an annual account for each employee containing a certain amount of money (determined by the employer to control costs). The employee can spend the money on healthcare costs as he or she wants. This provides flexibility for the employee. These accounts are governed by the Income Tax Act, which allows expenses not normally covered under employer-sponsored healthcare plans (such as laser eye surgery) and defines dependants more broadly than most employer plans.22 HCSAs are very popular with employees.

Retiree Health Benefits Another concern is the cost of health benefits provided to retirees. These benefits typically include life insurance, drugs, and private/semi-private hospital coverage. Some continue coverage to a surviving spouse. Retiree benefit costs are already exceeding the costs for active employ- ees in some organizations, in part because many early retirees between the ages of 50 and 65 are not yet eli- gible for government health benefits that start at age 65. Employers are required to disclose liabilities for retiree benefits in their financial statements. These liabilities are not required to be pre-funded and thus are at risk in the case of business failure.23

Employers can cut costs by increasing retiree con- tributions, increasing deductibles, tightening eligibility requirements, and reducing maximum payouts.24 The last few years have seen a trend away from employer-provided

estimated annual per- employee cost to

organization associated with smoking

of employer health/benefit plans cover prescription smoking

cessation medicines.

the number of additional days per year that employees who smoke are

absent from work, when compared to non-smokers

of employer health/benefits plans cover nicotine replacement therapies like gums, lozenges, and patches.

the average percentage of smokers employed in an organization

of Canadian organizations completely ban smoking on their property.

typical smoking quit rate without medication or counselling

of participants in the Alberta and Northwest Territories Lung

Association workplace smoking cessation program were smoke-free one year after the end of the program.

of participants in the Windsor- Essex County Health Units

pharmacist-led smoking cessation program were smoke-free six months after the program ended.

Smoking and the Workplace ◀

Success with Workplace Smoking Cessation Programs

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retiree health benefits. This trend is expected to continue as a result of rising healthcare costs, growing retiree populations, uncertain business profitability, and federal regulations that provide only limited opportunities for funding retiree medical benefits.25

Short-Term Disability Plans and Sick Leave Plans Short-term disability plans (also known as salary continuation plans) provide a continuation of all or part of an employee’s earnings when the employee is absent from work because of non-work-related illness or injury. Usually a medi- cal certificate is required if the absence extends beyond two or three days. These plans typically provide full pay for some period (often two or three weeks) and

then gradually reduce the percentage of earnings paid as the period of absence lengthens. The benefits cease when the employee returns to work or when the employee qual- ifies for long-term disability. These plans are sometimes provided through an insurance company.

Sick leave plans operate quite differently from short- term disability plans. Most sick leave policies grant full pay for a specified number of permissible sick days— usually up to about 12 per year (often accumulated at the rate of one day per month of service). Most jurisdic- tions require a few days of sick leave (unpaid) as a mini- mum standard. Sick leave pay creates difficulty for many employers. The problem is that, although many employees use their sick days only when they are legitimately sick, others simply use their sick leave as extensions to their vacations, whether they are sick or not. A 2013 study of 1 513 Canadians provides evidence as to the abuse of sick time, identifying that 54 percent of Canadians admit to calling in sick when they were not sick.26 The reasons include: feeling stressed or burned out (65 percent), need- ing to care for a sick child (35 percent), having too heavy

a workload (13 percent), and having insufficient paid vacation days (12 percent). Limiting sick days is equally problematic in that seriously ill or injured employ- ees get no pay once their sick days are used up; thus, the policy can encourage legitimately sick employees to come to work despite their illness.

Long-Term Disability Long-term disability insurance is aimed at providing income protection or com- pensation for loss of income because of long-term illness or injury that is not work related. The disability payments usually begin when normal short-term disability or sick leave is used up and may continue to provide income to age 65 or beyond. The disability benefits usually range from 50 to 75 percent of the employee’s base pay.

The number of long-term disability claims in Canada is rising sharply. This trend is expected to accelerate as the average age of the workforce continues to rise, because the likelihood of chronic illnesses, such as arthritis, heart disease,

short-term disability and sick leave Plans that provide pay to an employee when he or she is unable to work because of a non-work- related illness or injury.

An Ethical Dilemma Should it be the employer’s responsibility to cover healthcare costs for early retirees until they become eligible for government healthcare benefits at age 65?

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243Chapter 9 Employee Benefits and Services

and diabetes, increases with age. Therefore, disability management programs with a goal of returning workers safely back to work are becoming a priority in many organizations.27 For example, employers are beginning to put more effort into managing employees with episodic disabilities, which are chronic illnesses such as HIV, lupus, multiple sclerosis, arthritis, and some cancers and mental ill- nesses that are unpredictable. These employees may have long periods of good health followed by unpredicted episodes of poor health.28

Disability management is a proactive, employer-centred process that coor- dinates the activities of the employer, the insurance company, and healthcare providers in an effort to minimize the impact of injury, disability, or disease on a worker’s capacity to successfully perform his or her job. Maintaining contact with a worker who is ill or injured is imperative in disability management so that the worker can be involved in the return-to-work process from the beginning. Ongoing contact also allows the employer to monitor the employee’s emotional well-being, which is always affected by illness or injury.29

Effective disability management programs include prevention, early assess- ment and intervention regarding employee health problems, monitoring and management of employee absences, and early and safe return-to-work policies.30 The three most common approaches to returning a worker with a disability to work are reduced work hours, reduced work duties, and workstation modifica- tion.31 Evaluating the physical capabilities of the worker is an important step in designing work modifications to safely reintegrate injured workers. In many cases, the cost of accommodating an employee’s disability can be quite modest.

Mental Health Benefits Mental health issues continue to be the leading cause of short- and long-term disability claims in Canada. Psychiatric disabilities are the fastest growing of all occupational disabilities, with depression being the most common (even though only 32 percent of those afflicted seek treatment, as they do not want to admit it to their employer).32

For Canadian employers, the cost of mental health benefits is about $51 bil- lion annually.33 Despite the staggering costs, depression is not being addressed in a systematic way, and employers are unprepared to deal with stress, depression, and anxiety in the workplace. Some of the challenges involved in improving this situation are shown in Figure 9.3. Only one-third of employers have imple- mented return-to-work programs specific to mental health. Companies such as Bell Canada, Alcan, and Superior Propane are trying to help reduce costs with prevention and early intervention programs, including psychiatric counselling and peer-support groups.34

Sabbaticals A few employers provide sabbatical leaves for employees who want time off to rejuvenate or to pursue a personal goal. Sabbatical leaves are usually unpaid, but some employers provide partial or full pay. Sabbaticals can help to retain employees and to avoid employee burnout, without the employee losing job security or seniority.

Canadian Council on Rehabilitation and Work www.ccrw.org

National Institute of Disability Management and Research www.nidmar.ca

disability management A proactive, employer-centred process that coordinates the activities of the employer, the insurance company, and healthcare providers in an effort to minimize the impact of injury, disability, or disease on a worker’s capacity to successfully perform his or her job.

World Federation for Mental Health www.wfmh.org

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Retirement Benefits Employer-sponsored pension plans are intended to supplement an employ- ee’s government-sponsored retirement benefits, which, on average, make up 50  percent of the average Canadian’s retirement income.35 Unlike government- provided retirement benefits, employer-sponsored pension plans are pre-funded. Money is set aside in a pension fund to accumulate with investment income until it is needed to pay benefits at retirement. Pension fund assets have grown rap- idly over the past 40 years. Much of this money is invested in Canadian stocks and bonds because of laws restricting the investment of these assets in foreign securities.

Two Categories of Pension Plans Pension plans fall into two categories—defined benefit pension plans and defined contribution pension plans. A defined benefit pension plan contains a formula for determining retirement benefits so that the actual benefits to be received are defined ahead of time. For example, the plan might include a formula, such as 2 percent of final year’s earnings for each year of service, which would provide a pension of 70 percent of final year’s earnings to an employee with 35 years of service.

A defined contribution pension plan specifies what contribution the employer will make to a retirement fund set up for the employee. The defined contribution plan does not define the eventual benefit amount, only the periodic contribution to the plan. In a defined benefit plan, the employee knows ahead of time what his or her retirement benefits will be on retirement. With a defined contribution plan, the employee cannot be sure of his or her retirement benefits until retire- ment, when his or her share of the money in the pension fund is used to buy an annuity. Thus, benefits depend on both the amounts contributed to the fund and the retirement fund’s investment earnings.

There are two other types of defined contribution arrangements. Under a group registered retirement savings plan (group RRSP), employees can have a portion of their compensation (which would otherwise be paid in cash) put into

pension plans Plans that provide income when employees reach a pre-determined retirement age.

defined benefit pension plan A plan that contains a formula for determining retirement benefits.

defined contribution pension plan A plan in which the employer’s contribution to the employees’ retirement fund is specified.

Association of Canadian Pension Management www.acpm.com

Benefits and Pensions Monitor www.bpmmagazine.com

Canadian Association for Retired Persons www.carp.ca

1. Employee perceptions and stigma related to mental health issues 60%

%45ssenerawa reganam enil t-norf fo kcaL.2

%04krow deifidom elbatius yfitnedi ot ytilibanI.3

%93snoitpo ytilibixelf tnacifingis ecudortni ot ytilibanI.4

%92stroppus dna sloot fo kcaL.5

%32stnemecnahne margorp rof tegdub/sdnuf fo kcaL.6

%02ni-yub tnemeganam roines fo kcaL.7

%41trats ot erehw wonk t’noD.8

9. Other 8%

FIGURE 9.3 The Top Challenges in Improving How Mental Health Issues Are Addressed

in the Workplace

Source: “What Are the Top Challenges You Face in Improving How Mental Health Issues Are Addressed in  Your Workplace?” 2008 Mental Health in the Workplace National Survey (Toronto, ON: Mercer and Canadian  Alliance on Mental Illness and Mental Health, 2008), p. 22. Reprinted with permission.

245Chapter 9 Employee Benefits and Services

an RRSP by the employer. The employee is not taxed on those set-aside dol- lars until after he or she retires (or removes the money from the plan). Most employers do not match all or a portion of what the employee contributes to the group RRSP because employer contributions are considered taxable income to employees. Instead, the employer often establishes a deferred profit-sharing plan (DPSP) and contributes a portion of company profits into the DPSP fund, where an account is set up for each employee. No employee contributions to a DPSP are allowed under Canadian tax law. Group RRSP/DPSP combinations are popular in Canada because no tax is paid until money is received from the plans at the time of the employee’s death or termination of employment (at retirement or otherwise).

As shown in Table 9.3, both plans are quite popular, and a few companies use combination or other forms of pension plans.

The entire area of pension planning is complicated, a result of the laws governing pensions. For example, companies want to ensure that their pen- sion contributions are tax deductible and must therefore adhere to the Income Tax Act. The provincial and federal jurisdictions also have laws governing employer-sponsored pension plans. In some cases, the complicated and over- lapping nature of federal and provincial legislation can make employers unsure whether or not to sponsor a pension plan.36 Legislation regarding pension plans varies around the world, and Canada’s regulators can learn important lessons from other countries’ successes and failures, as described in the Global HRM box.

Employers must pay careful attention to their obligation to educate and inform (but not advise) plan members about pension investments. There have been cases in which plan members who were unhappy with the information pro- vided by the employer and surprised by small benefits have sued their employers and won.

deferred profit-sharing plan (DPSP) A plan in which a certain amount of company profits is credited to each employee’s account, payable at retirement, termination, or death.

Source: Adapted from Statistics Canada, CANSIM, table 280-0016, “Registered pension plans (RPPs)  and  members, by type of plan and sector,” http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/ famil120a-eng.htm. This does not constitute an endorsement by Statistics Canada of this product.

TABLE 9.3 Registered Pension Plans by Type, 2011

Plan type

Defined benefit plans 61.53%

Defined contribution plans 35.04%

Composite or combination plans1 0.70%

Defined benefit and contribution plans 2.60%

Other types of plans2 0.15%

Gender

Male 50.07%

Female 49.93%

1 In composite or combination plans, the pension has both defined benefit and defined contribution characteristics. 2 These plans may be for different classes of employees, or one benefit type may be for current employees and the other for new employees, or these plans may be hybrid plans in which the pension benefit is the better of that provided by defined benefit or defined contribution provisions.

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The severe economic recession that began in late 2008 resulted in major shrinkage in the value of pen- sion funds and highlighted issues with both types of plans. For defined benefit plans, the recession neces- sitated major increases in contributions to pension funds in order to maintain their required funding lev- els.37 Although some jurisdictions eased the funding rules temporarily to allow more time to repay fund- ing shortfalls, defined benefit plans began to be called an “endangered species.”38 For defined contribution plans, many plan members nearing retirement saw no other option but to defer retirement and continue working until the markets recovered and their pen- sion fund account balance recovered to an amount

that would provide them with the retirement income they needed. These issues created considerable debate about the adequacy of retirement savings for future generations.

When designing a pension plan, there are several legal and policy issues to consider:39

Defined Benefit Pension Problems and Solutions around the World Many  countries  designed  generous  defined  benefit  social security programs between 1950 and 1970 based on fertility rates that created a stable popula- tion.  The  actual  experience  of  declining  populations  in many countries, particularly Japan, created serious intergenerational inequity as younger employees were subsidizing  older  ones.  Solutions  included  increasing  contribution rates (Belgium, Canada), raising the nor- mal  retirement  age  to  67  (European  Union),  both  of  these (Germany), moving to defined contribution plans (Australia, France, Switzerland, United Kingdom), and  even more complex protective legislation (Netherlands).

Unfortunately, none of these national actions seem  to be the optimal solution to the global defined ben- efits plan  issue. The European Union encourages  the  creation  of  pan-European  pension  plans  whereby  an  employer can create a plan in one location and cover all  European  employees  under  that  single  plan.  This  encourages employee mobility and reduces administra- tive costs. The plans must comply with the rules from the plan’s home country while still respecting some of  the pension laws of other countries where employees reside or have retired. Countries such as Luxembourg,  Ireland, and Belgium have tried to create the best tax 

and legal environment to attract these plans, but it is too early to tell if a leader will emerge.

The European Union situation is v