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Joseph J. Martocchio

New York, NY

Human Resource Management

Fifteenth Edition

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Vice President, Business, Economics, and UK Courseware: Donna Battista Director of Portfolio Management: Stephanie Wall Editorial Assistant: Linda Siebert Albelli Vice President, Product Marketing: Roxanne McCarley Product Marketer: Kaylee Claymore Product Marketing Assistant: Marianela Silvestri Manager of Field Marketing, Business Publishing: Adam Goldstein Field Marketing Manager: Nicole Price Vice President, Production and Digital Studio, Arts and Business: Etain O’Dea Director of Production, Business: Jeff Holcomb Managing Producer, Business: Melissa Feimer Content Producer: Yasmita Hota Operations Specialist: Carol Melville

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Copyright © 2019, 2016, 2014 by Pearson Education, Inc. or its affiliates. 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 otherwise. For information regarding permissions, request forms, and the appropriate contacts within the Pearson Education Global Rights and Permissions department, please visit www.pearsoned.com/permissions/.

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Library of Congress Cataloging-in-Publication Data Names: Martocchio, Joseph J., author. | Mondy, R. Wayne, 1940- Human resource management. Title: Human resource management / Joseph J. Martocchio. Description: Fifteenth Edition. | Boston : Pearson, [2017] | Revised edition of Human resource management, [2016] Identifiers: LCCN 2017037154| ISBN 9780134739724 | ISBN 0134739728 Subjects: LCSH: Personnel management—United States. | Personnel management. Classification: LCC HF5549.2.U5 M66 2017 | DDC 658.3—dc23 LC record available at https://lccn.loc.gov/2017037154

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ISBN 10: 0-13-473972-8

ISBN 13: 978-0-13-473972-4

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To my parents—for their sacrifices which have provided me with great opportunities.

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Brief Contents

Part One Setting the Stage 1 Chapter 1 Human Resource Management: An Overview 2

Chapter 2 Business Ethics, Corporate Social Responsibility, and Sustainability 28

Chapter 3 Equal Employment Opportunity, Affirmative Action, and Workforce Diversity 52

Part Two Staffing 89 Chapter 4 Strategic Planning, Human Resource Planning, and Job Analysis 90

Chapter 5 Recruitment 120

Chapter 6 Selection 146

Part Three Performance Management and Training 179 Chapter 7 Performance Management and Appraisal 180

Chapter 8 Training and Development 208

Part Four Compensation 243 Chapter 9 Direct Financial Compensation (Monetary Compensation) 244

Chapter 10 Indirect Financial Compensation (Employee Benefits) 278

Part Five Labor Relations, Employee Relations, Safety, and Health 305 Chapter 11 Labor Unions and Collective Bargaining 306

Chapter 12 Internal Employee Relations 338

Chapter 13 Employee Safety, Health, and Wellness 362

Part Six Operating in a Global Environment 391 Chapter 14 Global Human Resource Management 392

vii

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Contents

Part One Setting the Stage 1

Chapter 1 Human Resource Management: An Overview 2

Human Resource Management: What It is and Why It is Important 3

Why Study HRM? 4 Human Resource Management Functions 4

Who Performs Human Resource Management Activities? 6 Human Resource Management Professional 7 Line Managers 7 Human Resources Outsourcing 8 Human Resources Shared Service Centers 8 Professional Employer Organizations 9 More about HR Professionals 9

■■ HR BLOOPERS: Staffing Stone Consulting 9 Human Resources as a Strategic Business Partner in a Dynamic Environment 12

Capital and Human Capital 13 Dynamic Human Resource Management Environment 13

The Role of HRM in Building Corporate Culture and Employer Branding 16

Corporate Culture 16 Employer Branding 17

Human Resource Management in Small Businesses 18 Country Culture and Global Business 18 Developing Skills for Your Career 20

Communication 20 Critical Thinking 20 Collaboration 20 Knowledge Application and Analysis 21 Business Ethics and Social Responsibility 21 Information Technology Application and Computing Skills 21 Data Literacy 21 Scope of This Book 21

Preparing for Exams/Quizzes 22 • Key Terms 23 Questions for Review 23 • Preparing for My Career 24

■■ ETHICS DILEMMA: Broken Promises 24 HRM Is Everyone’s Business 24 • HRM by the Numbers 25 Working Together: Team Exercise 25 • INCIDENT 1: HR After a Disaster 25 • INCIDENT 2: Parental Leave at Yahoo 26 • Endnotes 26

Chapter 2 Business Ethics, Corporate Social Responsibility, and Sustainability 28

Defining Ethics and the Sources of Ethical Guidance 29 Business Ethics 29 Sources of Ethical Guidance 30

Legislating Ethics 31

Creating an Ethical Culture and a Code of Ethics 34 Ethical Culture 34 Code of Ethics 35

Human Resource Ethics 36 Linking Pay to Ethical Behavior 37 Ethics Training 38

■■ HR BLOOPERS: Sales Incentives at Pinser Pharmaceuticals 39

Corporate Social Responsibility and Sustainability 39 Corporate Social Responsibility 40 Corporate Sustainability 42

Conducting a Social Audit 44 Preparing for Exams/Quizzes 45 • Key Terms 46 Questions for Review 46 • Preparing for My Career 46

■■ ETHICS DILEMMA: A Selection Quandary 46 HRM Is Everyone’s Business 47 • HRM by the Numbers 47 • Working Together: Team Exercise 47 • INCIDENT 1: An Ethical Flaw 48 INCIDENT 2: Illegal Hiring 48 • Endnotes 49

Chapter 3 Equal Employment Opportunity, Affirmative Action, and Workforce Diversity 52

Equal Employment Opportunity and the Federal Laws Affecting EEO 54

Constitutional Amendments and the Civil Rights Act of 1866 54 Title VII of the Civil Rights Act of 1964, Amended in 1972 54 Equal Pay Act of 1963, Amended in 1972 57 Lilly Ledbetter Fair Pay Act of 2009 58 Pregnancy Discrimination Act of 1978 58 Civil Rights Act of 1991 59 Age Discrimination in Employment Act of 1967, Amended in 1978, 1986, and 1990 60 Age Can Actually Be a Bona Fide Occupational Qualification 60 Rehabilitation Act of 1973 61 Vietnam Era Veteran’s Readjustment Assistance Act of 1974 61 Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as Amended 61 Americans with Disabilities Act of 1990 62 Americans with Disabilities Act Amendments Act of 2008 62 Immigration Reform and Control Act of 1986 63 Uniformed Services Employment and Reemployment Rights Act of 1994 63 Genetic Information Nondiscrimination Act of 2008 63 State and Local Laws 63

Who’s Responsible for Ensuring Equal Employment Opportunity? 64

Equal Employment Opportunity Commission 64

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x CONTENTS

Office of Federal Contract Compliance Programs 65 Employers 65

Illegal Discrimination and Affirmative Action 66 Uniform Guidelines on Employee Selection Procedures 66 Types of Unlawful Employment Discrimination 66 Affirmative Action 68

Uniform Guidelines on Preventing Specific Illegal Employment Discrimination 70

Guidelines on Sexual Harassment 71 Guidelines on Discrimination Because of National Origin 72 Guidelines on Discrimination Because of Religion 73 Guidelines on Caregiver (Family Responsibility) Discrimination 74 Discrimination Because of Disability 74

Diversity and Diversity Management 75 Elements of the Diverse Workforce 76

Single Parents and Working Mothers 76 Women in Business 76 Mothers Returning to the Workforce (on Ramping) 77 Dual-Career Families 77 Ethnicity and Race 77 Older Workers 78 People with Disabilities 78 Immigrants 78 Foreign Workers 79 Young Persons, Some with Limited Education or Skills 79 Baby Boomers, Gen X, Gen Y, and Gen Z 80

■■ HR BLOOPERS: Affirmative Action and Workforce Diversity 80 Multi-generational Diversity 81 Lesbian, Gay, Bisexual, and Transgender Employees 82

Preparing for Exam/Quizzes 82 • Key Terms 83 Questions for Review 83 • Preparing for My Career 84

■■ ETHICS DILEMMA: How About Me? 84 HRM Is Everyone’s Business 84 • HRM by the Numbers 85 Working Together: Team Exercise 85 • INCIDENT 1: You’re Not a Good Employee 86 • INCIDENT 2: So, What’s Affirmative Action? 86 Endnotes 87

Part Two Staffing 89

Chapter 4 Strategic Planning, Human Resource Planning, and Job Analysis 90

HR Strategic Planning Process 91 Mission Determination 92

Human Resource Planning 96 Forecasting Human Resource Requirements 97

■■ HR BLOOPERS: Workforce Planning at Master Cleaners 97 Forecasting Human Resource Availability 98 Shortage or Surplus of Workers Forecasted 98 Succession Planning: A Component of Strategic Planning 101

Job Analysis: Process and Methods 102 Reasons for Conducting Job Analysis 103

Job Analysis Methods 105

Job Descriptions 107 Job Identification 107 Date of the Job Analysis 107 Job Summary 108 Duties Performed 108 Job Specification 108 Standard Occupational Classification (SOC) 109 The Occupational Information Network (O*NET) 110

Competencies and Competency Modeling 110 Job Design Concepts 112 Preparing For Exam/Quizzes 114 • Key Terms 115 Questions for Review 115 • Preparing For My Career 116

■■ ETHICS DILEMMA: Which “Thinker” Should Go? 116

HRM Is Everyone’s Business 116 • HRM by the Numbers 117 • Working Together: Team Exercise 117 INCIDENT 1: Competitive Strategy at Buddy Dog Foods 1 17 INCIDENT 2: Who’s Flying the Plane? 118 • Endnotes 118

Chapter 5 Recruitment 120 Recruitment and the Recruitment Process 121 Environment of Recruitment 122

Labor Market Conditions 122 Active or Passive Job Seekers 123 Legal Considerations 124

Internal Recruitment Methods 124 Human Resource Databases 124 Job Posting and Job Bidding 124

■■ HR BLOOPERS: Recruiting Skilled Machinists 125 Employee Referrals 125

External Recruitment Sources 126 High Schools and Vocational Schools 127 Community Colleges 127 Colleges and Universities 127 Competitors in the Labor Market 128 Former Employees 128 Unemployed 128 Military Personnel 129 Self-Employed Workers 129 Ex-Offenders 129

External Recruitment Methods 130 Online and Mobile Recruiting 130 Traditional Methods 134 Tailoring Recruitment Methods to Sources 138

Alternatives to Recruitment 138 Promotion Policies 139 Overtime 139

Preparing for Exam/Quizzes 140 • Key Terms 140 Questions for Review 141 • Preparing for My Career 141

■■ ETHICS DILEMMA: Unfair Advantage? 141 HRM Is Everyone’s Business 141 • HRM by the Numbers 142 • Working Together: Team Exercise 142 INCIDENT 1: A Problem Ad? 142 • INCIDENT 2: I Am Qualified, Why Not Me? 143 • Endnotes 143

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CONTENTS xi

Chapter 6 Selection 146 Selection and Environmental Factors Affecting the Selection Process 147

The Selection Process 147 The Environment of Selection 148

Preliminary Screening and Review of Applications and Résumés 151 Selection Tests 153

Preliminary Considerations 153 Advantages and Disadvantages of Selection Tests 154 Characteristics of Properly Designed Selection Tests 154 Test Validation Approaches 155 Employment Tests 156 Unique Forms of Testing 158 Legal Considerations 159

Employment Interview 160 Interview Planning 160

■■ HR BLOOPERS: The First Interview 160 Content of the Interview 161 Candidate’s Role and Expectations 161 General Types of Interviews 162 Methods of Interviewing 163 Potential Interviewing Problems 164 Concluding the Interview 166

Pre-Employment Screening and Background Checks 166

Employment Eligibility Verification (Form I-9) 167 Continuous Background Investigation 167 Background Investigation with Social Media 167 Remembering Hiring Standards to Avoid 168

Selection Decision and Evaluating the Effectiveness of Selection Decisions 169

Making the Selection Decision 170 Evaluating Selection Decisions 170

Preparing for Exam/Quizzes 172 • Key Terms 173 Questions for Review 173 • Preparing for My Career 173

■■ ETHICS DILEMMA: Hiring with Incomplete Information 174

HRM Is Everyone’s Business 174 • HRM by the Numbers 174 • Working Together: Team Exercise 175 INCIDENT 1: A Matter of Priorities 175 • INCIDENT 2: National Career Day 176 • Endnotes 176

Part Three Performance Management and Training 179

Chapter 7 Performance Management and Appraisal 180

Performance Management, Performance Appraisal, and the Performance Appraisal Process 181

Performance Management 182 Performance Appraisal 182 Performance Appraisal Process 182

The Uses of Performance Appraisal and Performance Criteria 183

Uses of Performance Appraisal 183

Performance Criteria 184 Responsibility for Performance Appraisal 185 Performance Appraisal Period 187

Choosing a Performance Appraisal Method 188 Trait Systems 188 Comparison Systems 189 Behavioral Systems 191 Results-Based Systems 193

■■ HR BLOOPERS: Appraising Performance at Global Insurance 193

Assessing the Effectiveness and Limitations of Performance Appraisal Practices 195

Characteristics of an Effective Appraisal System 195 Limitations of Performance Appraisal 197 Legal Considerations 199

Performance Appraisal Interview 199 Scheduling the Interview 199 Interview Structure 200 Use of Praise and Criticism 200 Employees’ Role 200 Concluding the Interview 201

Trends in Performance Appraisal Practice 201 Preparing for Exams/Quizzes 202 • Key Terms 203 Questions for Review 203 • Preparing for My Career 204

■■ ETHICS DILEMMA: Abdication of Responsibility 204 HRM Is Everyone’s Business 204 • HRM by the Numbers 205 Working Together: Team Exercise 205 • INCIDENT 1: These Things Are a Pain 206 • INCIDENT 2: Good Job! 206 • Endnotes 207

Chapter 8 Training and Development 208 Training and Development and Related Practices 209 Training and Development Process 210

Determine Specific Training and Development Needs 211 Establish Training and Development Program Objectives 212 Training Methods 213 Training and Development Delivery Systems 217 Implementing Training and Development Programs 219 Metrics for Evaluating Training and Development 219 Factors Influencing Training and Development 221

Human Resource Management Training Initiatives 223 Careers and Career Planning Approaches and Methods 225

Traditional Career Path 225 Network Career Path 225 Lateral Skill Path 226 Dual-Career Path 226 Adding Value to Your Career 226 Demotion 226 Free Agents (Being Your Own Boss) 227 Career Planning Approaches 227 Career Development Methods 230

Management Development 231 Mentoring and Coaching 232 Reverse Mentoring 233

■■ HR BLOOPERS: Management Development at Trends Apparel 233

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xii CONTENTS

Organization Development and the Learning Organization 234

OD Interventions 234 Learning Organization 235

Preparing for Exams/Quizzes 236 • Key Terms 237 Questions for Review 237 • Preparing for My Career 237

■■ ETHICS DILEMMA: Consequences of Inadequate Training Design 238

HRM Is Everyone’s Business 238 • HRM by the Numbers 239 • Working Together: Team Exercise 239 INCIDENT 1: Career Development at Meyers and Brown 239 INCIDENT 2: There’s No Future Here! 240 • Endnotes 240

Part Four Compensation 243

Chapter 9 Direct Financial Compensation (Monetary Compensation) 244

Total Compensation and the Environment of Compensation Practice 245

Direct and Indirect Financial Compensation 246 Structure of Direct Financial Compensation Plans 247 Contextual Influences 248

Direct Financial Compensation Components 252 Base Pay 252 Cost-of-Living Adjustments 252 Seniority Pay 252 Performance-Based Pay 253

■■ HR BLOOPERS: Motivating Software Development Teams 258 Person-Focused Pay 259

Building Job Structures 260 Ranking Method 260 Classification Method 261 Factor Comparison Method 261 Point Method 261

Establishing Competitive Compensation Policies 261 Pay Level Compensation Policies 262 Pay Mix 263

Building Pay Structures 263 Pay Grades 264 Pay Ranges 265 Broadbanding 265 Two-Tier Wage System 266 Adjusting Pay Rates 266 Pay Compression 267

Exceptions to the Rules: Sales Professionals, Contingent Workers, and Executives 267

Sales Professionals 267 Contingent Workers 268 Executive Compensation 268

Preparing for Exams/Quizzes 270 • Key Terms 271 Questions for Review 272

■■ ETHICS DILEMMA: Sales Tactics at Wells Fargo Bank 272

HRM Is Everyone’s Business 272 • Questions for Review 272 • HRM by the Numbers 273 • Working Together: Team Exercise 274 • INCIDENT 1: The Pay Gap

at Barker Enterprise 274 • INCIDENT 2: The Controversial Job 274 • Endnotes 275

Chapter 10 Indirect Financial Compensation (Employee Benefits) 278

Indirect Financial Compensation (Employee Benefits) 279 Legally Required Benefits 280

Social Security 281 Unemployment Insurance 281 Workers’ Compensation 281 Health Care 282

Discretionary Benefits 285 Retirement Plans 286 Life Insurance and Disability Insurance 288 Paid Time-Off 288 Employee Services 291

Workplace Flexibility (Work–Life Balance) 293 Flextime 294 Compressed Workweek 294 Job Sharing 295 Two-in-a-Box 295 Telecommuting 295 Part-Time Work 296

■■ HR BLOOPERS: The Job-Sharing Problem at SunTrust Bank 297

Customized Benefit Plans 297 Communicating Information about the Benefits Package 297 Preparing for Exams/Quizzes 298 • Key Terms 298 Questions for Review 299

■■ ETHICS DILEMMA: A Poor Bid 299 HRM Is Everyone’s Business 300 • HRM by the Numbers • 300 • Working Together: Team Exercise 301 • INCIDENT 1: Flextime 301 • INCIDENT 2: Communicating Benefits at Seaview Property Management Company 301 • Endnotes 302

Part Five Labor Relations, Employee Relations, Safety, and Health 305

Chapter 11 Labor Unions and Collective Bargaining 306

The Role of Labor Unions 307 Why Employees Join Unions 308 Prevalence of Unions 309

Union Structure and Labor Strategies 310 Structure of Unions 310 Organized Labor’s Strategies for Promoting a Stronger Labor Movement 312

Laws Affecting Collective Bargaining 314 National Labor Relations Act 314

■■ HR BLOOPERS: Stopping Unionization at Packer Industries 315 Labor-Management Relations Act 315 Antidiscrimination Laws and Executive Orders 316

Bargaining Unit Formation and the Collective Bargaining Process 316

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CONTENTS xiii

Forming a Bargaining Unit 316 Collective Bargaining Process 318 Bargaining Issues 319 Preparation for Negotiations 321 Negotiating the Agreement 322 Overcoming Breakdowns in Negotiations 324 Reaching the Labor-Management Agreement 327 Ratifying the Labor-Management Agreement 327 Administration of the Labor-Management Agreement 327 Public Sector Collective Bargaining 328

Grievance Procedure in a Union Environment 328 Union Decertification 330 Preparing for Exams/Quizzes 331 • Key Terms 332 Questions for Review 333 • Preparing for My Career 333

■■ ETHICS DILEMMA: A Strategic Move 333 HRM Is Everyone’s Business 334 • HRM by the Numbers 334 • Working Together: Team Exercise 335 INCIDENT 1: Break Down the Barrier 335 • INCIDENT 2: We’re Listening 336 • Endnotes 336

Chapter 12 Internal Employee Relations 338 Employment at Will 339 Discipline and Disciplinary Action 340

Disciplinary Action Process 341 Approaches to Disciplinary Action 342 Problems in the Administration of Disciplinary Action 344

Employment Termination 345 “Just Cause” as a Standard for Choosing to Terminate Employment 345 Considerations in Communicating the Termination Decision 346 Termination of Employees at Various Levels 346

■■ HR BLOOPERS: Effective Discipline at Berries Groceries 346 Demotion as an Alternative to Termination 347 Downsizing 348

Ombudspersons and Alternative Dispute Resolution 350

Ombudspersons 350 Alternative Dispute Resolution 351

More Considerations for Internal Employee Relations 351

Transfers 351 Promotions 352 Resignations 352 Retirements 354

Preparing for Exams/Quizzes 355 • Key Terms 356 Questions for Review 356 • Preparing for My Career 356

■■ ETHICS DILEMMA: To Fire or Not to Fire 356 HRM Is Everyone’s Business 357 • HRM by the Numbers 357 • Working Together: Team Exercise 359 INCIDENT 1: Employment at Will 359 • INCIDENT 2: To Heck with Them! 359 • Endnotes 360

Chapter 13 Employee Safety, Health, and Wellness 362

Nature and Role of Safety, Health, and Wellness 363 Occupational Safety and Health Administration 364

OSHA and Whistle-Blowers 366 OSHA and the Small Business 367

■■ HR BLOOPERS: Health and Safety Problems at XIF Chemicals 367 The Economic Impact of Safety 368

Workplace Safety Programs 368 Unsafe Employee Actions 368 Unsafe Working Conditions 368 Developing Safety Programs 368 Accident Investigation 370 Evaluation of Safety Programs 370 Musculoskeletal Disorders 370 Ergonomics 371

Workplace Bullying and Violence 372 Workplace Bullying 372 Workplace Violence 373 Legal Consequences of Workplace Violence 374

Employee Stress and Burnout 376 Potential Consequences of Stress 377 Stressful Jobs 377 Burnout 377

Substance Abuse, Substance-Abuse-Free Workplaces, and Drug-Testing Programs 378

Alcohol Abuse 379 Drug Abuse 379 Substance-Abuse-Free Workplace and Drug Testing 379

Employee Wellness and Employee Assistance Programs 382 Wellness Programs 382 Social Networking and Wellness 383 Employee Assistance Programs 384

Preparing for Exams/Quizzes 384 • Key Terms 385 Questions for Review 386 • Preparing for My Career 386

■■ ETHICS DILEMMA: In Confidence 386 HRM Is Everyone’s Business 387 HRM by the Numbers 387 • Working Together: Team Exercise 388 • INCIDENT 1: Something Isn’t Quite Right 388 • INCIDENT 2: A Commitment to Safety? 388 • Endnotes 389

Part Six Operating in a Global Environment 391

Chapter 14 Global Human Resource Management 392

Evolution and Context of Global Business and Human Resource Management 393

Evolution of Global Business 393 Context of Global Business 395

Global Staffing 400 Expatriate 400 Host-Country National 400 Third-Country National 400 Approaches to Global Staffing 400 Recruiting Host-Country Nationals 401 Selecting Expatriates 401 Background Investigation 402

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xiv CONTENTS

■■ HR BLOOPERS: United Architect’s Expatriate Problems 402

Global Performance Management and Human Resource Development 403

Performance Management 403 Expatriate Human Resource Development 403 Pre-Move Orientation and Training 404 Continual Development: Online Assistance and Training 404 Repatriation Orientation and Training 405 Global E-learning 405 Virtual Teams in a Global Environment 406

Global Compensation 407 Compensation for Host-Country Nationals 407 Expatriate Compensation 408

Global Safety, Health, and Employee and Labor Relations 408

Safety and Health 408

Global Employee Relations 409 Global Labor Relations 410

Globalization for Small to Medium-Sized Businesses 410 Preparing for Exams/Quizzes 411 • Key Terms 412 Questions for Review 412 • Preparing for My Career 413

■■ ETHICS DILEMMA: Meeting Customer Demand at Any Cost 413

HRM Is Everyone’s Business 413 • HRM by the Numbers 414 Working Together: Team Exercise 414 • INCIDENT 1: My Darling 414 • INCIDENT 2: Was There Enough Preparation? 415 • Endnotes 415

Glossary 418 Name Index 429 Company Index 430 Subject Index 432

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Preface

New to this Edition Four new features appear in each chapter that enable students to integrate knowledge and valu- able skills regardless whether choosing a career in the HRM profession or other business func- tion in smaller or larger organizations, all available in MyLab.

42 PART 1 • SETTING THE STAGE

Also, long before the enormous oil spill in 2010, BP promoted itself as being eco-friendly. Its literature stated that BP stood for “Beyond Petroleum.” BP marketed itself as a producer of alternative energies, an image that was seriously damaged by the devastating oil spill in the Gulf of Mexico in 2010. Instead of spending billions on eco-friendly energy and building an employer brand campaign around it, many believe that BP would have been much better off if it had spent more time and effort in training its employees on its oil drilling platforms, establishing stronger safety protocols, and waiting until they were safe to operate. Even during this public relations campaign, BP had a history of safety violation. BP had been “fined more than $100 million for safety violations that led to deaths of workers, explosions of refineries, and leaking pipelines.” 102

The following Watch It video describes the environmental impact of another oil company’s spill and leadership’s reaction to the disaster.

☛ F Y I The 2017 Global 100 Most Sustainable Corporations were most commonly found in the following countries:

● United States: 19 companies ● France: 12 companies ● United Kingdom: 11 companies ● Canada and Germany: 6 companies ● Netherlands: 5 companies 105

Corporate Sustainability Corporate sustainability has evolved from the more traditional view of CSR. According to the World Commission on Environment and Sustainability, the narrow definition of sustainability is, “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” 106 The Dow Jones World Sustainability Index (DJSI) provides a good working definition of this term. They define it as, “An approach to creating long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social trends and challenges.” 107 In recent years, sustainability has been

Watch It 2 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Co Responsible for Oil Spill Under Fire and to respond to questions.

Brighter Planet, a sustainability technology company, discovered in a recent survey that although more firms are engaging in green activities, the effectiveness of these efforts has declined. 103 Some believe that the problem with CSR is that it consists of a universal set of guidelines such as the “triple bottom line” (society, environment, and economy) mentioned previ- ously. To be “socially responsible,” each firm should follow the same guidelines instead of what would be the most appropriate strategy for each firm. Using this logic, it would be more logical for oil companies such as BP to focus on being profitable, yet be an environmentally conscious oil company. Fast-food restaurants such as McDonald’s and retailers such as Walmart should each use a different set of rules to do the same thing in their own industries.

There are those who believe that all shareholders should not be required to be involved in CSR investments. They think that only investors who want to be involved should participate. These investors would do so with the understanding that the objective is not just to make money but also to do good. For example, an oil company such as Exxon could establish an alternative-energy subsidiary. Exxon would own a controlling stake, but funding would come from new investors who want to support alternative energy and thus be socially responsible. If the subsidiary was unsuccessful, the losses would be confined to the new investors. If it succeeded, the profits would be shared by all shareholders. 104

$$ FYI. This feature provides tidbits of information from survey research and extensive databases (e.g., employment statistics) that illuminate trends, opinions, and the use of specific HR practices.

CHAPTER 2 • BUSINESS ETHICS, CORPORATE SOCIAL RESPONSIBILITY, AND SUSTAINABILITY 47

HRM by the Numbers Paying the Price for Underpaying Workers

An additional HRM by the Numbers exercise can be found on MyLab Management.

HR professionals should ensure that workers are paid for their work on a timely basis. Sometimes, companies pay workers less than what they should and there are various possible reasons such as intent to save money or in error. Either way, paying employ- ees lesser amounts than owed may violate the law. For instance, the Fair Labor Standards Act (FLSA) , which we will discuss in Chapter 3 , requires employers to pay eligible workers a higher pay for overtime work. Specifically, the overtime pay rate equals 1.5 times the regular hourly pay rate for each additional hour exceeding 40 in a work week.

You’ve learned that the company has not been paying employees appropriately for overtime work hours. It is your responsibil- ity to calculate the amount of overtime pay owed to workers. After reviewing the payroll records, you discovered the following details:

1. Group 1: 225 workers. Each worker earns a regular hourly pay rate of $18.00. For each of the past 15 work weeks, every- one worked 45 hours.

2. Group 2: 310 workers. Each worker earns a regular hourly pay rate of $21.00. For each of the past 20 work weeks, every- one worked 47 hours.

Every worker received regular pay for all their hours worked, but they did not receive an additional overtime pay amount.

Questions 2- 13. Calculate the hourly overtime pay rate for each worker in (a) group 1 and (b) group 2. 2- 14. How much money does the company owe all the workers in (a) group 1 over 15 weeks and (b) group 2 over 20 weeks? 2- 15. How much money did the company save by not paying all the workers (groups 1 and 2 combined) overtime pay?

Working Together: Team Exercise In small groups of three or four, come up with specific answers to the following questions. Talk through your perspectives and come up with a brief team response. Be prepared to share your ideas with the class.

HRM Is Everyone’s Business Most company leaders and employees will face ethical challenges at one time or another. Some employees will intentionally commit ethics violations for personal gain. Other employees may unknowingly do so. Whether you are a manager or HR profes- sional—an employee may bring concerns about possible ethical violations to your attention or you may observe them yourself. Once you are aware of a situation where ethics are in question, you are obligated to respond.

Action checklist for managers and HR—responding to allegations of unethical behavior HR takes the lead

Work with managers to ensure that they understand the company’s code of ethics and communicate the procedures for addressing instances of potential ethical violations.

Encourage managers to share the company’s code of ethics with employees, lead open discussions about everyone’s obliga- tion to behave ethically, and create a safe environment for employees to report their concerns about possible ethical violations to the appropriate authority.

Guide managers through the process of handling employees who are suspected of committing ethical violations.

Managers take the lead Educate HR on certain aspects of employee roles to better understand how unethical behavior may manifest in your depart- ment. Bringing HR up to speed creates a partnership for more effectively responding to possible ethical violations.

Discuss concerns with HR about possible ethical violations and follow through based on company policy and procedures. Work together with HR to implement a training plan on the company’s code of ethics and creating hypothetical scenarios illustrating ethical and unethical behavior relevant to your departmental activities.

$$ Working Together. This feature offers oppor- tunities for students to collaborate through sharing ideas, listening to others’ ideas, and coming up with a cohesive team response to the assignment.

CHAPTER 2 • BUSINESS ETHICS, CORPORATE SOCIAL RESPONSIBILITY, AND SUSTAINABILITY 47

HRM by the Numbers Paying the Price for Underpaying Workers

An additional HRM by the Numbers exercise can be found on MyLab Management.

1. Group 1: 225 workers. Each worker earns a regular hourly pay rate of $18.00. For each of the past 15 work weeks, every- one worked 45 hours.

2. Group 2: 310 workers. Each worker earns a regular hourly pay rate of $21.00. For each of the past 20 work weeks, every- one worked 47 hours.

Every worker received regular pay for all their hours worked, but they did not receive an additional overtime pay amount.

Action checklist for managers and HR—responding to allegations of unethical behavior HR takes the lead

Work with managers to ensure that they understand the company’s code of ethics and communicate the procedures for addressing instances of potential ethical violations.

Guide managers through the process of handling employees who are suspected of committing ethical violations.

$$ HRM by the Numbers. This feature provides an excel- lent opportunity to think through concepts and their applications as well as analyze quantitative data to facilitate problem solving.

CHAPTER 2 • BUSINESS ETHICS, CORPORATE SOCIAL RESPONSIBILITY, AND SUSTAINABILITY 47

HRM by the Numbers Paying the Price for Underpaying Workers

An additional HRM by the Numbers exercise can be found on MyLab Management.

1. Group 1: 225 workers. Each worker earns a regular hourly pay rate of $18.00. For each of the past 15 work weeks, every- one worked 45 hours.

2. Group 2: 310 workers. Each worker earns a regular hourly pay rate of $21.00. For each of the past 20 work weeks, every- one worked 47 hours.

Every worker received regular pay for all their hours worked, but they did not receive an additional overtime pay amount.

Action checklist for managers and HR—responding to allegations of unethical behavior HR takes the lead

Work with managers to ensure that they understand the company’s code of ethics and communicate the procedures for addressing instances of potential ethical violations.

Guide managers through the process of handling employees who are suspected of committing ethical violations.

$$ HRM Is Everyone’s Business. This feature explains how HR professionals and managers throughout the organization work together to address important workplace issues by highlighting specific connec- tions and the reality that HR activities are never performed in isolation.

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xvi PREFACE

Updates to the 15th Edition There are three significant updates made to this edition of the textbook; revised learning objec- tives, updates to HRM practices, and new content in the majority of special features. First, the learning objectives in each chapter have been revised to be consistent across chapters (there are now six learning objectives per chapter with the exception of chapter 1) in order to better inte- grate the chapter material together in a more effective manner to improve learning.

Second, there are substantial updates that highlight evolving HRM practices, statistics, and business professionals’ perspectives. For instance, Chapter 7 (performance management and per- formance appraisal) includes a section on trends in performance appraisal practice. In a nutshell, some companies are providing performance feedback more frequently and as needed on a less structured basis rather than putting off providing feedback until structured annual reviews are given. This section also addresses the pros and cons of this more contemporary thinking as well the same of longstanding approaches to provide students a balanced view.

Third, fifty percent of the Ethics Dilemma and fifty percent of the Incident features are new. Business ethics are sets of guiding principles that influence the way individuals and organiza- tions behave within the society that they operate. Analysis of the incidents, which depict realistic scenarios, requires interpretation and proposed actionable responses. Many new Watch It! videos appear throughout this edition.

Solving Teaching and Learning Challenges Increasingly, students expect to see the applicability of their coursework to life and work after graduation. When the connection is not clear to students, many may lose interest and, perhaps, choose to do as little as possible to earn a good enough grade on quizzes and exams. How the author conveys content and the choice of pedagogical features can pique interest in the subject matter and enhance learning and development of seven critical employability skills, which I have discussed in the Developing Employability Skills section in Chapter 1.

I approach the study of HRM in a realistic, practical, interesting, and stimulating manner. I focus on showing how HRM is practiced in the real world. Throughout the book, you will see examples of how organizations practice HRM. In explaining a concept, I often quote HRM professionals and other business professionals, yet all HRM discussion is based on sound theoretical concepts and practice. Where appropriate, the strategic role of HRM is apparent in the discussion of each major HRM function. In addition, I show how HRM topics are related to other HRM topics. For instance, a firm that emphasizes recruiting top-quality candidates but neglects to provide satisfactory compensation is wasting time, effort, and money. If a firm’s compensation system pays below-market wages, the firm will always be hiring and training new employees only to see the best leave for a competitor’s higher wages. Besides this one example, the interrelationship of HRM practices set in a dynamic business environment will become more obvious as these topics are addressed throughout the book. These interrelation- ships are also shown to be important as organizations operate within the global environment. I included several features that appear in the textbook and MyLab, designed to enhance student learning by actively engaging students.

Learn It Practice Students can be assigned the Chapter Warm-Up before coming to class. Assigning these questions ahead of time will ensure that students are coming to class prepared.

Watch It Videos Recommends a video clip that can be assigned to students for outside classroom viewing or that can be watched in the classroom. The video corresponds to the chapter material and is accompa- nied by multiple choice questions that reinforce student’s comprehension of the chapter content.

2. 1 Discuss what ethics means and the sources of ethical guidance.

2. 2 Explore human resource management’s (HRM) role in creating an ethical culture and a code of ethics.

2. 3 Define human resource ethics.

MyLab Management Improve Your Grade!

If your professor is using MyLab Management, visit www.pearson.com/mylab/management for videos, simulations, and writing exercises.

Business Ethics, Corporate Social Responsibility, and Sustainability

LEARNING OBJECTIVES After completing this chapter, students should be able to:

2. 4 Explain the concepts and practices related to corporate social responsibility and corporate sustainability.

2. 5 Describe a social audit.

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

34 PART 1 • SETTING THE STAGE

Creating an Ethical Culture and a Code of Ethics Ethics is an important component of an organization’s culture. And it’s turning out to be more key for organizations to conduct business in an ethical fashion. Why? The public insists on it. Customers call for it. Most companies that take ethics seriously have a code of ethics that codifies ethical principles and guides employees to behave ethically. Let’s explore HR professionals’ roles in facilitating ethical cultures and codes of ethics.

Ethical Culture Mark Twain once said, “Always do right. This will gratify some people and astonish the rest.” 37

This is certainly good advice for both employees and employers if the firm wants to create an ethical culture. Saying that a company has an ethical culture and having one may be two differ- ent things. Culture is concerned with the way people think, which affects the way that they act. Changing an organization’s culture thus requires modifying the common way of thinking of its members. 38 Organizations with strong ethical cultures take steps to ensure that their standards are widely accessible, promoted, and followed by their leaders and employees. 39 For example, the Volkswagen debacle was not supposed to happen. The Volkswagen Code of Conduct was 24 pages long and had a foreword by Martin Winterkorn, who was then the company’s CEO, and other top executives saying, “We stand for respectable, honest, and actions in everyday business that are in accordance with rules, and we commit ourselves to the following Code of Conduct.” 40

Even with the ethical code, it is apparent that Volkswagen’s top management pursued business as usual.

One way for a firm to create and sustain an ethical culture is to audit ethics, much like a company audits its finances each year. 41 An ethics audit is simply a systematic, independent, and documented process for obtaining evidence regarding the status of an organization’s ethical culture. It takes a closer look at a firm’s ethical culture instead of just allowing it to remain unexamined. An ethical culture is made up of factors such as ethical leadership, accountability, and values. The climate with top management is fundamental to a company’s ethical culture. 42 Ethical leadership begins with the board of directors and CEO and contin- ues to middle managers, supervisors, and employees. 43 Building an ethical culture that lasts requires a foundation of practices that continue even when leaders change. 44 The following Watch It video illustrates how employees and members of management are brought together to enact a change within the company. Their goal is to limit the negative environmental impacts of their company as much as possible by applying the best practices concept to their everyday activities.

2. 2 Explore human resource management’s (HRM) role in creating an ethical culture and a code of ethics.

Watch It 1 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Patagonia: Ethics and Social Responsibility and to respond to questions.

That’s a noteworthy difference. As important as endorsing ethical cultures is, more companies need to get on board. A survey of compliance and ethics professionals revealed that only half maintain that promoting an ethical culture is a priority. 47 Perhaps this is the case because only 13.3 percent believe that management embraces an ethical culture as a primary objective of ethics programs. The results are not much better when it comes to their view of the board of directors’ values. Only 15.6 percent of the respondents saw creating an ethical culture as the board’s primary objective.

For organizations to grow and prosper, good people must be employed. Recent studies suggest that six personality characteristics are useful predictors of ethical individuals. 48 Individuals who

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PREFACE xvii

Personal Inventory Assessments The Personal Inventory Assessment feature, included in most chapters, gives students the opportunity for self-assessment and personal reflection. Understanding yourself and finding your voice will help you approach situations within and outside the employment setting with greater confidence.

CHAPTER 2 • BUSINESS ETHICS, CORPORATE SOCIAL RESPONSIBILITY, AND SUSTAINABILITY 45

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

PREPARING FOR EXAMS/QUIZZES

Chapter Summary by Learning Objectives 1. Discuss what ethics means and the sources of ethical

guidance. Ethics is the discipline dealing with what is good and bad, right and wrong, or with moral duty and obligation. Business ethics addresses matters of choices about right and wrong made by business leaders. One might use numerous sources to determine what is right or wrong, good or bad, and moral or immoral, such as holy books or one’s conscience. Another source of ethical guidance is the behavior and advice of people, including our parents, friends, and role models and members of our churches, clubs, and associations. For most professionals, there are codes of ethics that pre- scribe certain behavior.

2. Explore human resource management’s (HRM) role in creating an ethical culture and a code of ethics. An ethi- cal culture is made up of factors such as ethical leadership, accountability, and values. The climate at the top is funda- mental to a company’s ethical culture. Ethical leadership begins with the board of directors and CEO and continues to HR managers, all other managers, and supervisors. Building an ethical culture that lasts requires a foundation of practices that continue even when leaders change.

A code of ethics establishes the rules that the organi- zation lives by. Only a few companies have made ethics

and compliance a process for determining how employees are compensated.

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

4. Explain the concepts and practices related to corporate social responsibility and corporate sustainability. Cor- porate social responsibility is the implied, enforced, or felt obligation of managers, acting in their official capac- ity, to serve or protect the interests of groups other than themselves, and corporate sustainability focuses on the possible future impact of an organization on society, includ- ing social welfare, the economy, and the environment. According to the World Commission on Environment and Sustainability, the narrow definition of sustainability is, “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” In recent years, sustainability has been expanded to include the social, economic, environmental, and cultural systems needed to support an organization.

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

Some of the topics included in the audit focus on core values such as social responsibility, open communication, treatment of employees, confidentiality, and leadership. Firms are now acknowledging responsibilities to various stakeholder groups other than corpo- rate owners. 128

Some audits even set specific objectives in social areas. They are attempting to formally measure their contributions to various elements of society and to society. An increasing number of companies, as well as public and voluntary sector organizations, are trying to assess their social performance systematically. Three types of social audits are currently being used: (1) simple inven- tory of activities; (2) compilation of socially relevant expenditures; and (3) determination of social impact. The inventory is generally a good starting place. It consists of a listing of socially oriented activities undertaken by the firm. Here are some examples: minority employment and training, support of minority enterprises, pollution control, corporate giving, involvement in selected com- munity projects by executives, and a hard-core unemployment program. The ideal social audit would go well beyond a simple listing and involve determining the true benefits to society of any socially oriented business activity.

CHAPTER 2 • BUSINESS ETHICS, CORPORATE SOCIAL RESPONSIBILITY, AND SUSTAINABILITY 39

If your professor has assigned this, go to www.pearson.com/mylab/management to complete the HR Bloopers exercise and test your ap- plication of these concepts when faced with real-world decisions.

H R B L O O P E R S

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

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

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

☛ F Y I ● Eighty-eight percent feel their job is more fulfilling when they are provided opportunities to make

a positive impact on social or environmental issues. 83

from more than 120 people from departments across the organization, including legal, human resources, IT security, and records management. 80

Ethics training for global organizations is more complicated than preparing the training for U.S. employees. One must also train for the country in which the global company operates. Since 1994, LRN has helped 15 million people at 700 companies across the world simultaneously navigate legal and regulatory environments and foster ethical cultures. 81 A few of their customers include CBS, Dow Chemical, eBay, 3M, and Siemens. Chris Campbell, creative director at LRN, says, “Localization is as important as the accuracy of the translation process. Learners need to be able to connect in a way that is believable to them.” 82

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

Ethics, CSR, and corporate sustainability are everyone’s business. HR professionals par- ticularly concern themselves with establishing policies to promote ethical behavior and discour- age unethical behavior. In addition, the HRM function’s leadership works with other executive leadership to identify training opportunities for educating employees about how they may make positive contributions to these objectives and developing performance-based pay programs that align employee performance with CSR and social responsibility goals.

2. 4 Explain the concepts and practices related to corporate social responsibility and corpo- rate sustainability.

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

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

46 PART 1 • SETTING THE STAGE

PREPARING FOR MY CAREER

P I A Personal Inventory Assessment An additional Personal Inventory Assessment can be found on MyLab Management.

Ethical Leadership Assessment Organizations need ethical leadership from all employees, but especially from managers. In this PIA, you’ll see how much thought and effort goes into being ethical in your workplace behavior.

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management to complete the problems marked with this icon .

Questions for Review 2- 1. What are ethics and business ethics? 2- 2. What are some sources of ethical guidance? 2- 3. What laws have been passed to legislate ethics? 2- 4. Why is it important to have a code of ethics? 2- 5. Regarding business ethics, what does the statement

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

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

2- 8. What is corporate social responsibility? 2- 9. What does corporate sustainability mean?

2- 10. What are some of the practices companies can use to promote sustainability?

Key Terms ethics 29 code of ethics 35 human resource ethics 36

corporate social responsibility (CSR) 39

corporate sustainability 39 social audit 44

E T H I C S D I L E M M A

A Selection Quandary You are being promoted to a new assignment

within your company, and your boss has asked you to nominate one of your subordinates as your replacement. The possible candidates are Randy Carlton, who is obviously more qualified, and James Mitchell, who, though not as experienced, is much better liked by the workers. If Randy is given the promotion, you are not certain the workers will accept him as their leader. James, on the other hand, is a hard worker and is well liked and respected by the others, including Randy. As you labor over the decision, you think about how unfair it would be

to Randy if the feelings of the other workers kept him from getting a deserved promotion. At the same time, you feel that your primary responsibility should be to maintain the productivity of the work unit. If your former division fell apart after your departure, it would hurt your reputation, not to mention the company. 2- 11. What would you do? 2- 12. What factor(s) in this ethics dilemma might influence a person

to make a less-than-ethical decision?

HRM Is Everyone’s Business As noted earlier, HRM Is Everyone’s Business explains how HR professionals and managers throughout the organization work together to address important work- place issues. This feature highlights some of the specific connections between man- agers and HR professionals, and the reality that HR activities are never performed in isolation.

HRM By The Numbers Exercises As noted earlier, HRM by the Numbers provides an excel- lent opportunity to sharpen problem solving skills through the analysis of numerical data, creating the foundation for quantifying HRM concepts and practices. There are two data-driven exercises per chapter, one in the book and both in MyLab Management. Answers are found in the Instructor’s Manual and in MyLab Management.

Try It Mini Simulations Recommends a mini simulation that can be assigned to stu- dents as an outside classroom activity or it can be done in the classroom. As the students watch the simulation they will be

asked to make choices based on the scenario presented in the simulation. At the end of the simula- tion the student will receive immediate feedback based on the answers they gave. These simula- tions reinforces the concepts of the chapter and the students’ comprehension of those concepts.

HR Bloopers Exercises HR Bloopers present scenarios that describe potential mistakes that may occur in HR practice. Questions that follow in MyLab Management provide students with the opportunity to test their understanding and recall of the chapter material based on the information contained in the scenarios.

CHAPTER 3 • EQUAL EMPLOYMENT OPPORTUNITY, AFFIRMATIVE ACTION, AND WORKFORCE DIVERSITY 85

HRM by the Numbers Detecting Adverse Impact An additional HRM by the Numbers exercise can be found on MyLab Management.

Adverse impact usually takes place when an employment decision, practice, or policy has a disproportionately negative effect on a protected group. HR professionals rely on the “four-fifths” or “80 percent” rule to judge whether adverse impact may have occurred. Consider the situation for men and for women:

Sex Total Applicants Selected Applicants Selection Rate

Female 750 375 Male 1,050 450 Total 1,800 825

3- 18. Calculate (a) the selection rate for females and (b) the selection rate for males. 3- 19. What is the ratio of the female selection rate to the male selection rate? 3- 20. Based on your answer to question 3-19, is there evidence of possible adverse impact?

Most schools actively seek to admit a highly diversified student body. As a group, discuss student diversity at your school. Think about visible characteristics (e.g., race) and characteristics not visible (e.g., political party affiliation) that describe diversity. Besides your experiences, consider your school’s registered student organizations.

3- 21. What are some of the features that shape diversity at your school? Explain your reasoning. 3- 22. How would your student experience be different if your school’s student body was not diverse? Explain.

Action checklist for managers and HR—understanding and applying the legal landscape HR takes the lead

Work with the legal department to conduct training sessions designed to educate managers on some of the most important legislation that will govern employee-related actions (e.g., Civil Rights Acts, ADEA, and ADA).

Conduct an audit to identify potential for disparate impact; disparate impact training is conducted to ensure that managers and other decision makers are aware of the pitfalls.

Consider private sector companies that hold government contracts to understand what additional standards may be placed on them because of their relationship with the federal government.

Provide legal updates to managers because legislation is changing quickly (particularly in these times). Many law firms provide these services via pro bono teleconferences. In-house employment lawyers can also provide these updates. For instance, we learned in this chapter that the EEOC considers treating gay, lesbian, bisexual, and transgender employees less favorably than others as a form of sex discrimination under the Civil Rights Act of 1964.

Make sure that the legislative necessities create a starting point for establishing company policy and not merely the justifica- tion for doing the bare minimum.

experience for you to work with as a manager (e.g., in most jobs, you will have more experience working with minority employees than disabled employees or transgender employees).

Encourage employees to discuss in confidence with managers and HR professionals any concerns they may have about instances of possible illegal discrimination whether it be about themselves or out of concern for their coworkers. It is impor- tant to provide a safe haven for employees who come forward.

174 PART 2 • STAFFING

E T H I C S D I L E M M A

Hiring with Incomplete Information Roberta Blythe recently opened a new business

named “Assisting You.” The company is a referral agency, matching service providers with customers who have home projects. Roberta’s strategy is to build a large clientele quickly by offering lower prices and shorter wait times than the competing agencies. Before long, cli- ents’ requests began coming in faster than she could meet them on a timely basis. Also, the recruiting and selection process from start to finish increased from 30 days to 50 days. Desperate to meet demand,

Roberta decided to streamline the process. Dropping background checks would reduce the wait time by 15 days. Feeling intense pressure to succeed, Roberta began hiring providers without first conducting background checks. Roberta feels confident in her decision because she has heard about many of the service providers, but certainly not all. 6- 22. What would you do? 6- 23. What factor(s) in this ethics dilemma might influence a person

to make a less-than-ethical decision?

HRM Is Everyone’s Business In Chapter 5 , we explained the role of HR professionals and managers in the recruitment process. Together, identified the best approaches to building a pool of qualified candidates. Now, it’s time to make selection (hiring) decisions. Successful selection decisions are based on the collaboration between HR professionals and hiring managers who bring complementary expertise and perspectives to the task. HR professionals are experts on every aspect of the selection process (e.g., reliability and validity), and hiring managers are most well-acquainted with their staffing needs.

Action checklist for managers and HR—understanding and applying selection concepts and methods HR takes the lead

Review the appropriate guidelines for evaluating applications and résumés. Communicate what should and should not be considered. For example, some people list birthdate or marital status on their résumés and this information should never be considered when formulating interview questions or making the selection decision.

Discuss whether testing will add useful information for making more accurate selection decisions. Review the guidelines for conducting effective interviews and coordinate the types of interview questions that will be asked by HR and the questions that will be asked by managers.

HR professionals conduct background checks. HR professionals share their evaluations of the job candidates, and inform managers whether the results of the background check warrant further consideration.

Managers take the lead Review the top candidates with HR after prescreening applications and résumés. If testing is considered relevant, explain the minimum performance standards expected of successful employees. Share interview questions with HR to ensure job-relatedness. Consider all the job-related information and discuss whether a job offer should be made.

HRM by the Numbers Measuring Selection Outcomes

An additional HRM by the Numbers exercise can be found on MyLab Management .

You were hired to develop a new recruitment and selection system to fill marketing assistant jobs. The Vice President of HR asked you to calculate various metrics to judge the effectiveness of the system using data from the previous calendar year. You have the following data to judge the effectiveness of the selection system:

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Working Together Exercise As noted earlier, Working Together offers opportunities for students to collaborate through shar- ing ideas, listening to others’ ideas, and coming up with a cohesive team response to the assign- ment. If assigned by the instructor, students may make brief oral presentations of their ideas to the class, creating an additional opportunity for working together.

Assisted Graded Writing Questions These are short essay questions which the students can complete as an assignment and submit to you, the professor for grading.

MyLab Management Reach every student with MyLab MyLab is the teaching and learning platform that empowers you to reach every student. By com- bining trusted author content with digital tools and a flexible platform, MyLab personalizes the learning experience and improves results for each student. Learn more at MyLab Management.

Deliver trusted content You deserve teaching materials that meet your own high standards for your course. That’s why we partner with highly respected authors to develop interactive content and course-specific resources that you can trust — and that keep your students engaged.

Empower each learner Each student learns at a different pace. Personalized learning pinpoints the precise areas where each student needs practice, giving all students the support they need — when and where they need it — to be successful.

Teach your course your way Your course is unique. So whether you’d like to build your own assignments, teach multiple sec- tions, or set prerequisites, MyLab gives you the flexibility to easily create your course to fit your needs.

Improve student results When you teach with MyLab, student performance improves. That’s why instructors have cho- sen MyLab for over 15 years, touching the lives of over 50 million students. Learn more.

Developing Employability Skills For students to succeed in a rapidly changing job market, they should be aware of their career options and how to go about developing a variety of skills. In this book and MyLab, I focus on developing these skills in the following ways: In this course, and, specifically in this text, students will have the opportunity to develop and practice seven important skills based on vari- ous learning features that are summarized in the matrix and subsequently illustrating some of the connections between the employability skills and learning features:

xviii PREFACE

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Communication Critical Thinking Collaboration

Knowledge Application and Analysis

Business Ethics and Social Responsibility

Information Technology and Computing Skills

Data Literacy

FYI ✓ ✓

Watch It! ✓ ✓

Try It! Simulation ✓ ✓ ✓ ✓

HR Bloopers ✓ ✓ ✓ ✓

Chapter Review ✓ ✓

Personal Inventory Assessment

✓ ✓

Ethics Dilemma ✓ ✓ ✓

HRM Is Everyone’s Business

✓ ✓ ✓

HRM by the Numbers ✓ ✓ ✓ ✓

Working Together ✓ ✓ ✓

Case Incident 1 ✓ ✓ ✓

Case Incident 2 ✓ ✓ ✓

Instructor Teaching Resources Human Resource Management comes with the following teaching resources.

Supplements available to instruc- tors at www.pearsonhighered.com/

Features of the Supplement

Instructor’s Manual $$ Chapter-by-chapter summaries $$ Examples and activities not in the main book $$ Teaching outlines $$ Solutions to all questions and problems in the book

Test Bank More than 2,000 multiple-choice, true/false, and short-answer questions with these annotations: $$ Difficulty level (1 for easy, 2 for moderate, 3 for difficult) $$ Type (Multiple-choice, true/false, short-answer, essay $$ Topic (The term or concept the question supports) $$ Learning outcome $$ AACSB learning standard (Written and Oral Communication, Ethical Understanding and

Reasoning; Analytical Thinking; Information Technology; Diverse and Multicultural Work; Reflective Thinking; Application of Knowledge; Interpersonal Relations and Teamwork)

Computerized TestGen TestGen allows instructors to: $$ Customize, save, and generate classroom tests $$ Edit, add, or delete questions from the Test Item Files $$ Analyze test results $$ Organize a database of tests and student results.

PowerPoints Slides include many of the figures and table in the textbook

PowerPoints meet accessibility standards for students with disabilities. Features include, but not limited to: $$ Keyboard and Screen Reader access $$ Alternative text for images $$ High color contrast between background and foreground colors

PREFACE xix

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Acknowledgments I wish to give a special thank you to R. Wayne Mondy whose dedication and expertise in the first 14 editions have positively impacted thousands of students’ educational experiences. I am thrilled and honored to carry the torch forward in pursuit of doing the same for thousands more.

At Pearson, I wish to thank my editor, Dan Tylman, who provided excellent insights through- out the preparation of this edition. Many others at Pearson provided excellent advice throughout the process and project management oversight, including Yasmita Hota, Ashley Santora, Melissa Feimer, and Stephanie Wall. At SPi Global, I thank Raja Natesan and Nicole Suddeth. In addition, student feedback has made this book an invaluable resource. Finally, the support and encourage- ment of many practicing HRM professionals and faculty members has helped to make this book possible.

About Joseph J. Martocchio My interest in the human resource management field began while I was a junior at Babson College. I found myself want- ing to practice in the field as well as to become a university professor and researcher. I pursued both professional desires starting with employment at Cameron and Colby (a reinsur- ance company) in Boston and General Electric’s Aerospace business group in Valley Forge, Pennsylvania.

I advanced my education in the human resource manage- ment (HRM) field by earning a master’s degree and Ph.D. degree at Michigan State University. My master’s degree en- abled me to build an even stronger foundation in practice and my doctoral degree provided me with the skills to con- duct scholarly research and teach college-level courses. Since earning my graduate degrees, I have been a professor in the School of Labor and Employment Relations at the University

of Illinois, Urbana–Champaign and assumed administrative roles as a Provost Fellow, Associate Dean for Academic Affairs, and Interim Dean. All the while, I have taught a variety of courses in the HRM field. These include compensation systems, employee benefits, employment systems (HRM and labor relations), HR planning and staffing, and statistics. I also teach the compensa- tion and statistics courses online. For many years, I served as the faculty advisor to the student chapter of the Society for Human Resource Management at the University of Illinois during which time students earned Merit Awards and Superior Merit awards on multiple occasions.

As a researcher, I have studied a variety of topics that include employee absenteeism, employee training and development, compensation systems, employee benefits, and generational diversity. My work appears in leading scholarly journals such as Academy of Management Journal, Academy of Management Review, Journal of Applied Psychology, Journal of Management, and Personnel Psychology. I received the Ernest J. McCormick Award for Distinguished Early Career Contributions from the Society for Industrial and Organizational Psychology (SIOP), and I was subsequently elected as a Fellow in both the American Psychological Association and SIOP. Following the attainment of this recognition, I served as the Chair of the HR Division of the Academy of Management as well as in various other leadership roles within that organization.

Besides writing scholarly articles and Human Resource Management, I have two sole- authored textbooks: Strategic Compensation: A Human Resource Management Approach (Pearson Higher Education), which is in its 9th edition, and Employee Benefits: A Primer for Human Resource Professionals (McGraw-Hill), which is in its 6th edition.

xx PREFACE

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Part One Setting the Stage Chapter 1

Human Resource Management: An Overview

Chapter 2

Business Ethics, Corporate Social Responsibility,

and Sustainability

Chapter 3

Equal Employment Opportunity, Affirmative

Action, and Workforce Diversity

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MyLab Management Improve Your Grade!

If your professor is using MyLab Management, visit www.pearson.com/mylab/management for videos, simulations, and writing exercises.

Human Resource Management: An Overview1 LEARNING OBJECTIVES After completing this chapter, students should be able to:

1.1 Define human resource management (HRM) and the importance of studying it.

1.2 Describe who performs HRM.

1.3 Explain how the HRM function serves as a strategic business partner and the elements of the dynamic HRM environment.

1.4 Discuss the role of HRM in building corporate culture and employer branding.

1.5 Summarize HRM issues for small businesses.

1.6 Identify ways that country culture influences global business.

1.7 Explore essential skills for developing your career in HR or any other career path.

Learn It If your professor has chosen to assign this, go to www.pearson.com/mylab/management to see what you should particularly focus on and to take the Chapter 1 Warm-Up.

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http://www.pearson.com/mylab/management

LEARNING OBJECTIVES After completing this chapter, students should be able to: Like many students, you’ve probably had a job (or two) at some time or another while working on your degree. Your work experiences are likely to have been influenced by the knowledge and skills of a human resource (HR) manager and your manager. Both HR professionals and manag- ers work together to recruit and hire the right individuals as well as evaluating and rewarding job performance. This textbook is about the important work that HR managers accomplish and how they work with managers and employees to promote a mutually beneficial employment experi- ence. Mutually beneficial employment experiences can be described by goal-directed managers who create a positive environment for you to achieve exemplary job performance, which, together with other employees, will help the company meet its strategic objectives.

This chapter will enable you to describe and understand the human resource management function and why it is worthwhile to study it. In the sections that follow, we introduce you to the functions that make up human resource management (HRM) and identify who is responsible for managing it. Next, we discuss HRM as a strategic business partner and the dynamic role of the environment that influences HRM practice, followed by considering the role of HRM in building corporate culture and employer branding. Then, we turn our attention to HRM in small businesses and the influence of country culture on global business. Finally, we explore essential skills for developing your career in HR or any other career path.

Human Resource Management: What It is and Why It is Important Human resource management (HRM) is the use of individuals to achieve organizational objec- tives. Basically, all managers get things done through the efforts of others. Consequently, manag- ers at every level must concern themselves with HRM. Individuals dealing with human resource matters face a multitude of challenges, ranging from a constantly changing workforce to ever- present government regulations, a technological revolution, and the economy of the United States and the world. Furthermore, global competition has forced both large and small organizations to

1.1 Define human resource management (HRM) and the importance of studying it.

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

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4 PART 1 • SETTING THE STAGE

be more conscious of costs and productivity. Because of the critical nature of human resource issues, these matters must receive major attention from upper management.

Why Study HRM? Many of you plan to seek a career in HRM; others do not. Even if you don’t, HRM is everyone’s business. Why should you care about studying HRM if you plan to work in accounting, finance, marketing, operations, or starting your own business? Here are two things to consider. First, understanding HRM will give you a solid foundation for understanding your rights and responsi- bilities as an employee. For instance, you will be more informed about whether the employer is evaluating your performance relative to other employees’ performance or on an absolute standard. Knowing about the Fair Labor Standards Act primes an understanding about whether you qualify for overtime pay. The list goes on and on. Just read the book!

Second, at some point in the future, you will probably have the opportunity to supervise employees or lead a department. When you do, you will need to have the most qualified employees on your team; and, you will want to ensure that they are achieving exemplary performance by providing regular feedback and rewarding excellence. Also, when employees are not perform- ing to standard, you will be responsible for identifying strategies for improvement, perhaps by recommending participation in a training program or two, or deciding to terminate employment. You will seek guidance from HR professionals and they will work with you to use appropriate methods to recruit, select, evaluate, and reward employees. In the end, success in your career will not only depend on your expertise, but also on having good employees.

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

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

Job analysis is the systematic process of determining the skills, duties, and knowledge required for performing jobs in an organization. It impacts virtually every aspect of HRM, includ- ing planning, recruitment, and selection. Human resource planning is the systematic process of

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

FIGURE 1-1 Human Resource Management Functions

Human Resource

management

St af fi ng

Human Resource Development

C o m

p en

satio n

Sa fe

ty a

nd H

ea lt

Employee and Labor Relations

Perform ance

m anagem

ent

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CHAPTER 1 • HumAN RESouRCE mANAGEmENT: AN ovERvIEw 5

matching the internal and external supply of people with job openings anticipated in the organiza- tion over a specified period. The data provided set the stage for recruitment or other HR actions. Recruitment is the process of attracting individuals on a timely basis, in sufficient numbers, and with appropriate qualifications to apply for jobs with an organization. Selection is the process of choosing the individual best suited for a position and the organization from a group of applicants. Successful accomplishment of the staffing function is vital if the organization is to effectively accomplish its mission. These topics are collectively often referred to as staffing.

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

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

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

Career planning is an ongoing process whereby an individual sets career goals and identifies the means to achieve them. According to the U.S. Bureau of Labor Statistics, today’s employees will work for approximately 7 to 10 companies during their careers based on the assumption that most people will work 30 to 40 years.2 A survey conducted by LinkedIn revealed that on average, individuals under the age of 32 change jobs four times.3 Employee loyalty loses its meaning in this environment.

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

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

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

$$ Indirect Financial Compensation (Employee Benefits): All financial rewards that are not included in direct compensation, such as paid vacations, sick leave, holidays, and medical insurance.

$$ Non-financial Compensation: Satisfaction that a person receives from the job itself or from the psychological or physical environment in which the person works.4

EMPLOYEE AND LABOR RELATIONS Businesses are required by law to recognize a union and bargain with it in good faith if the firm’s employees want the union to represent them. In the past, this relationship was an accepted way of life for many employers, but most firms today would rather have a union-free environment. As a starting point, union wages and benefits are on average 54 percent higher than nonunion wages and benefits.5 When a labor union represents a firm’s employees, the human resource activity is often referred to as labor relations, which handles the job of collective bargaining (i.e., negotiating employment terms such as work hours). Internal employee relations comprise the HRM activities associated with the movement of employees within the organization such as promotions, demotion, termination, and resignation.

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

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

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

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

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

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6 PART 1 • SETTING THE STAGE

SAFETY AND HEALTH Safety involves protecting employees from injuries caused by work- related accidents. Health refers to the employees’ freedom from physical or emotional illness. These aspects of the job are important because employees who work in a safe environment and enjoy good health are more likely to be productive and yield long-term benefits to the organization. For instance, one survey showed that the injury rate in highly productive organizations was 18 times lower than in average performing companies and 60 percent lower than in less productive organizations.6 Today, because of federal and state legislation that reflect societal concerns, most organizations have become attentive to their employees’ safety and health needs.

HUMAN RESOURCE DATA ANALYTICS Although human resource data analytics is not a traditional HRM function, it pervades all functional areas. Analyzing employment data (e.g., employee productivity) and business outcomes (e.g., profits) has empowered HR professionals to quantify its influence. In 2016, 51 percent of companies correlated business outcomes with HR programs, which is up from 38 percent just one year earlier.7 Data analytics go a long way toward establishing the HRM function as a strategic business partner.

The scope of data analytics is growing rapidly. No longer do HR professionals limit analyses to internal data. Nowadays, they leverage technology, which has given unfettered access to exter- nal data. (We discuss the available technology as part of the dynamic HRM environment later in this chapter.) Internally, research on job safety may identify the causes of certain work-related accidents. The reasons for problems such as excessive absenteeism or excessive grievances may not be clear. However, when such problems occur, HR analytics can help HR professionals find the causes and offer possible solutions. Externally, data gathered through social media outlets, demographic information, hiring patterns, and turnover can help HR professionals develop strate- gies for attracting top talent.8

HR professionals should not rely exclusively on data analytics for making decisions. Because data, no matter how comprehensive or well analyzed, needs to be tempered by good judgment. For instance, a recent government report states: “Companies should remember that while big data is very good at detecting correlations, it does not explain which correlations are meaningful.”9 For example, researchers have generally established a correlation between pay and turnover (lower pay rates are associated with higher turnover rates). However, it certainly is not the case that every person with low pay will leave the company. Some may stay because they have supportive managers or commute times are short. When making decisions, it is important to remember that correlation does not equate with cause and effect.

INTERRELATIONSHIPS OF HUMAN RESOURCE MANAGEMENT FUNCTIONS All HRM functional areas are highly interrelated. Management must recognize that decisions in one area will affect other areas. For instance, a firm that emphasizes recruiting top-quality candidates but neglects to provide satisfactory compensation is wasting time, effort, and money. If a firm’s compensation system pays below-market wages, the firm will always be hiring and training new employees only to see the best leave for a competitor’s higher wages. For instance, Walmart raised the starting pay rate for store associates to $9 per hour. Walmart executives reasoned that raising pay is a good business decision because it should promote better customer service, higher sales, and lower expenses.10 The interrelationships among the HRM functional areas will become more obvious as these topics are addressed throughout the book.

Who Performs Human Resource Management Activities? The person or units who perform the HRM tasks have changed dramatically in recent years, and today there is no typical HR department. Many of these changes are being made so that HR profes- sionals can accomplish a more strategic role. Still, most organizations continue to perform most HR functions within the firm. However, as companies reexamine internal operations, questions are raised, such as: Can some HR tasks be performed more efficiently by line managers or outside vendors? Can some HR tasks be centralized or eliminated altogether? Can technology improve the productivity of HR professionals? One apparent fact is that all functions within today’s orga- nizations are being scrutinized for cost cutting, including HR. All units must operate under a lean budget in this competitive global environment, and HR is no exception.

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

health Employees’ freedom from physical or emotional illness.

1.2 Describe who performs HRM activities

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Evidence provided by The Hackett Group shows that the HR functions have been impacted more than other functions with regard to reductions in staff and operating budgets.11 In fact, the most efficient companies typically spend nearly 30 percent less per employee on HR and operate with 25 percent fewer HR employees.12 Mobile HR has been a major factor in this trend as we discuss later in the chapter. Also, many HR departments continue to get smaller because others outside the HR department now perform certain functions. For instance, HR outsourcing, shared service centers, professional employer organizations, and line managers now assist in the accom- plishment of many traditional HR activities.

Human Resource Management Professional Historically, the HR manager was responsible for each of the six HR functions. A human resource management professional is an individual who normally acts in an advisory or staff capacity, working with other managers to help them address human resource matters. Often, HR departments are created, with the central figure being the HR manager or executive. The HRM professional is primarily respon- sible for coordinating the management of HR to help the organization achieve its goals. We say more about the work of HR professionals later in the chapter before looking at HRM as a strategic business partner. In the meantime, Figure 1-2 displays a summary of a typical human resource professional’s job along with their usual duties. The typical tasks performed by these professionals.

Line Managers All managers get things done through the efforts of others. Consequently, managers at every level naturally concern themselves with HRM, for example, making decisions about which job candi- dates are likely to meet the needs of company, conducting employee performance evaluations, and determining pay raise amounts. Individuals directly involved in accomplishing the primary pur- pose of the organization are line managers. As the traditional work of HR managers evolves, line managers have assumed some tasks typically done by HR professionals.13 Automation has assisted greatly in this process. Managers are being assisted by manager self-service, the use of software, and the corporate network to automate paper-based human resource processes that require a manager’s approval, recordkeeping or input, and processes that support the manager’s job. Every- thing from recruitment, selection, and performance appraisal to employee development has been automated to assist line managers in performing traditional HR tasks.

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

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

FIGURE 1-2 Human Resource Professional Job Description Source: National Center for O*NET Development. 11-3121.00. O*NET OnLine. Retrieved January 2, 2017, from http://www.onetonline.org/link/ summary/11-3121.00

Plan, direct, or coordinate HR activities and staff of an organization. Sample of reported job titles: Human Resources manager (HR manager), Director of Human Resources, Human Resources Director (HR Director), Employee Benefits manager, Human Resources vice President, Employee Relations manager

Tasks

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

$$ Analyze and modify compensation and benefits policies to establish competitive programs and ensure compliance with legal requirements.

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

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

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

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

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

relations activities of an organization. $$ Represent organization at personnel-related hearings and investigations. $$ Administer compensation, benefits and performance management systems, and

safety and recreation programs.

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8 PART 1 • SETTING THE STAGE

There is a shared responsibility between line managers and HR professionals. Frequently, the line manager looks to HR for guidance in topics such as selection, training, promotion, and taking disciplinary action. The relationship between HR professionals and line managers is illustrated by the following account:

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

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

☛ F Y I $$ The HR outsourcing industry in 2020 is expected to generate $53.9 billion in revenue, up from

$42.6 billion in 2015.14

$$ The industry’s expected future annual global growth is nearly 13 percent.15

Human Resources Outsourcing HR outsourcing (HRO) is the process of hiring external HR professionals to do the HR work that was previously done internally. In the early days of HRO, cost savings was the primary driver in determining which activities to outsource. Today, outsourcing agreements are focusing more on quality of service and saving time, which is often more important than saving money.16 In addition, HRO enables HR to serve as strategic business partners. Paul Belliveau, global advisor at Avance Human Capital Management Advisors, said “Fundamentally, this is about the transfor- mation of HR. Wherever there’s transformation, you have to take away things HR shouldn’t be doing anymore so they can be more strategic.”17 As will be stressed throughout the text, strategic HR has become a major driver for HR professionals.18

Discrete services outsourcing involves one element of a business process or a single set of high-volume repetitive functions to be outsourced.19 Benefits have often been the HR task most likely to be outsourced. Dan Thomas, president of Trivalent Benefits Consulting Inc., said, “Benefits administration has become so complex that it really takes someone who works with it every single day to keep track of all of the different laws and changes that are going on.”20 For example, a survey conducted by The Prudential Financial and CFO research revealed that the complexity of employee benefits regulation has prompted companies to outsource or consider out- sourcing parts of their benefits function: 46 percent (Affordable Care Act), 40 percent (Americans with Disabilities Act), and 38 percent (Family and Medical Leave Act).21

Business process outsourcing (BPO) is the transfer of the majority of HR services to a third party. Typically, larger companies are involved with BPO, both as a provider and a user. A major HR outsourcer is Accenture that has more than $32 billion in revenue.22 For instance, Levi Strauss & Company signed a multiyear BPO agreement in which Accenture took over recruitment and hiring for all of Levi Strauss’ 55,000 retail outlets in more than 110 countries.23 Florida created a Web-based HR information system and outsourced administration of most HR functions for approximately 240,000 state employees and retirees. Outsourced services included recruiting, payroll, and HR administration services and benefits administration.24

Human Resources Shared Service Centers A shared service center (SSC), also known as a center of expertise, takes routine, transaction- based activities dispersed throughout the organization and consolidates them in one place. For example, a company with 20 strategic business units might consolidate routine HR tasks and perform them in one location. Shared service centers provide an alternative to HRO and can often

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

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

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provide the same cost savings and customer service. Fewer HR professionals are needed when shared service centers are used, resulting in significant cost savings. The most common HR func- tions that use SSCs are benefits and pension administration, payroll, relocation assistance and recruitment support, global training and development, succession planning, and talent retention.

Professional Employer Organizations A professional employer organization (PEO) is a company that leases employees to other busi- nesses. When a decision is made to use a PEO, the company releases its employees, who are then hired by the PEO. The PEO then manages the administrative needs associated with employees. It is the PEO that pays the employees’ salaries; it also pays workers’ compensation premiums, payroll-related taxes, and employee benefits. The PEO is responsible to the Internal Revenue Service (IRS) if, for example, the payroll taxes go unpaid. The company reimburses the PEO, which typically charges a fee of from 2 to 7 percent of the customer’s gross wages, with percent- ages based on the number of leased employees. Because the PEO is the employees’ legal employer it has the right to hire, fire, discipline, and reassign an employee. However, the client company maintains enough control so it can run the day-to-day operations of its business. Although PEOs have been available since the early 1980s, they have recently become a multi-billion dollar indus- try. The industry size is valued between $136 billion and $156 billion.25 In fact, there is an esti- mated two to three million U.S. workers employed under a PEO-type arrangement, and that number is certain to grow.26 PEOs permit business owners to focus on their core business, whereas the PEO handles HR activities.27 Companies using a PEO typically have a high level of benefits and greater HR expertise than they could possibly have had on their own.

More about HR Professionals Various designations are used within the HR profession; among these are HR executives, general- ists, and specialists. An executive is a top-level manager who reports directly to the corporation’s chief executive officer (CEO) or to the head of a major division. A generalist, who may be an executive, performs tasks in a variety of HR-related areas. The generalist is involved in several, or all, of the six HRM functions. A specialist may be an HR executive, manager, or nonmanager who is typically concerned with only one of the six functional areas of HRM. Figure 1-3 helps clarify these distinctions.

The vice president of industrial relations, shown in Figure 1-3, specializes primarily in union- related matters. This person is both an executive and a specialist. An HR vice president is both an executive and a generalist, having responsibility for a wide variety of functions. The compensation manager is a specialist, as is the benefits analyst. Whereas a position level in the organization identifies an executive, the breadth of such positions distinguishes generalists and specialists.

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

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

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

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

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

H R B L O O P E R S

Staffing Stone Consulting Business at Stone Consulting is growing faster

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

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

Unfortunately, one of the consultants has already left the firm after making a huge mistake that caused Shelly to lose a client. Some of

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

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10 PART 1 • SETTING THE STAGE

A profession is a vocation characterized by the existence of a common body of knowledge and a procedure for certifying members. Performance standards are established by members of the profession rather than by outsiders; that is, the profession is self-regulated. Most professions also have effective representative organizations that permit members to exchange ideas of mutual concern. These characteristics apply to the field of HR, and several well-known organizations serve the profession. Among the more prominent is the Society for Human Resource Management (www.shrm.org), the Human Resource Certification Institute (www.hrci.org), the Association for Talent Development (ATD, http://www.td.org), and WorldatWork (www.worldatwork.org). The HR profession is based on a variety of competencies. Figure 1-4 lists five competencies and brief descriptions. We will see throughout this book that effective HR professionals demonstrate these competencies. For example, we will look at the advocate competency, particularly, in Chapter 2 as it applies to ethics, corporate social responsibility, and sustainability. The HR expert compe- tency includes all of the knowledge we have already studied and to come in the remainder of this book, for example, staffing, training, and employee relations.

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

Employment of human resources managers is projected to grow 9 percent from 2014 to 2024, faster than the average for all occupations.

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

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

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

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

Candidates with certification or a master’s degree—particularly those with a concen- tration in human resources management—should have the best job prospects. Those with a solid background in human resources programs, policies, and employment law should also have better job opportunities.28

The median annual compensation for HR managers was $106,910, which is nearly three times the median annual earnings for all jobs. Human resource specialist median salaries ranged

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

HR Web Wisdom

Human Resource Certification Institute (HRCI) www.hrci.org

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

FIGURE 1-3 Human Resource Executives, Generalists, and Specialists

vice President, Industrial Relations

Human Resource Executives, Generalists, and Specialists

Benefits Analyst

Executive: Generalist: Specialist:

manager, Compensation

vice President, Human Resources

manager, Training and Development

manager, Staffing

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http://www.hrci.org/

http://www.td.org/

http://www.worldatwork.org/

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CHAPTER 1 • HumAN RESouRCE mANAGEmENT: AN ovERvIEw 11

between $59,020 for training and development specialists to $116,240 for compensation and benefits managers. Figure 1-5 lists the median annual salaries for various jobs in the HRM profes- sion. The salary levels vary on a number factors, including relevant work experience, educational credentials, and industry. For example, median annual salaries for HR managers were substantially higher in the management of companies and enterprises industry ($118,320) than in the health care and social assistance industry ($89,090).

FIGURE 1-4 Model of Human Resources Competencies Source: U.S. Office of Personnel Management. Online: http://archive.opm.gov/studies/ transapp.pdf. Accessed January 2, 2017.

Leader

Takes risks

Ethical

Decisive

Develops staff

Creates trust

Competency Model for HR Professionals

Business

mission oriented

Strategic planner

Systems innovator

understands team behavior

HR Expert

Knows HR principles

Customer oriented

Applies business procedures

manages resources

uses HR tools

NAPA

Change Agent manages change

Consults

Analyzes

uses coalition skills

Influences others Advocate

values diversity

Resolves conflict

Communicates well

Respects others

Occupation Job Duties 2016 Median Pay

Compensation and Benefits managers

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

$116,240

Compensation, Benefits, and Job Analysis Specialists

Compensation, benefits, and job analysis spe- cialists help conduct an organization’s com- pensation and benefits programs. They also evaluate job positions to determine details such as classification and salary.

$62,080

Human Resources managers

Human resources managers plan, direct, and coordinate the administrative functions of an organization. They oversee the recruiting, inter- viewing, and hiring of new staff; consult with top executives on strategic planning; and serve as a link between an organization’s manage- ment and its employees.

$106,910

Human Resources Specialists and Labor Relations Specialists

Human resources specialists recruit, screen, interview, and place workers. They often han- dle other human resources work, such as those related to employee relations, payroll and ben- efits, and training. Labor relations specialists interpret and administer labor contracts regard- ing issues such as wages and salaries, employee welfare, healthcare, pensions, and union and management practices.

$59,180

FIGURE 1-5 HR Professional Annual Salaries Source: U.S. Bureau of Labor Statistics, “Human Resources Managers,” Occupational Outlook Handbook, 2016–17 Edition,” Accessed January 2, 2017, at : www.bls.gov/ooh/ management/human-resources- managers.htm.

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12 PART 1 • SETTING THE STAGE

Human Resources as a Strategic Business Partner in a Dynamic Environment In the environment presently confronting HR, many HR professions are increasingly taking on the role of being a strategic partner with upper management.30 As a strategic business partner, HR professionals are able to focus on matters that are truly important to the company as a whole.31 For example, increasing sales and building customer loyalty to the brand are important goals of soft drink companies such as Coca Cola and PepsiCo. Increasing sales require hiring highly dedi- cated and motivated sales and distribution employees. As a strategic business partner, HR helps to identify and develop the employees necessary for excellent performance, builds recruitment systems, training programs for product distribution and interactions with customers, constructs performance management, and structures compensation programs that will greatly incentivize these employees to excel. The rapidly evolving world of HR will increasingly require HR profes- sionals to thoroughly understand all aspects of what the companies they work for do. Essentially, they must know more than just HR work.32 In moving from a transactional to a strategic model, HR professionals work toward solving strategic problems in the organization. No longer is an administrative and compliance role appropriate as their primary jobs. For instance, preparing the company’s affirmative action plan or administering the payroll system are compliance and administrative tasks. HR executives today need to think like the CEO to become a strategic partner in achieving organizational plans and results.33 In doing so, they understand the production side of the business and help to determine the strategic capabilities of the company’s workforce, both today and in the future. HR professionals need to be agile in their thinking as they adapt to the ebbs and flows of business. Therefore, HR executives are ensuring that human resources support the firm’s mission.

HR professionals have changed the way they work. Working as a strategic business partner requires a much deeper and broader understanding of business issues.34 What strategically should HR be doing exactly? Possible strategic tasks for HR include making workforce strategies fun- damental to company strategies and goals; increasing HR’s role in strategic planning, mergers, and acquisitions; developing awareness or an understanding of the business; and, helping line managers achieve their goals as in the previous example of soft drink companies.

HR professionals can give the CEO and chief financial officer (CFO) a powerful understand- ing of the role that employees play in the organization and the way it combines with business processes to expand or shrink shareholder value. HR professionals are integrating the goals of HR with the goals of the organization and focusing on expanding its strategic and high-level corpo- rate participation with an emphasis on adding value. In doing so, HR is demonstrating that it can produce a return on investment for its programs. It analyzes HR activities to determine whether

1.3 Explain how the HRM function serves as a strategic business partner and the elements of the dynamic HRM environment.

Occupation Job Duties 2016 Median Pay

Instructional Coordinators

Instructional coordinators oversee school cur- riculums and teaching standards. They develop instructional material, coordinate its implemen- tation with teachers and principals, and assess its effectiveness.

$62,460

Training and Development Specialists

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

$59,020

☛ F Y I HR is now more likely to serve on a company’s board of directors or hold an executive position:

$$ 2014 to 2015: 66 percent $$ 2004: 41 percent29

FIGURE 1-5 (Continued)

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they are maintaining acceptable profit margins. For example, HR professionals strive to develop cost-effective training strategies that boost sales revenue that far exceeds the cost of training. The CEO needs help in matters that HR professionals are qualified to handle. HR professionals are the enablers; they are the ones who should know about change and develop strategies to make it work.

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

Employees represent a specific type of capital called human capital. Human capital, as defined by economists, refers to sets of collective skills, knowledge, and ability that employees can apply to create value for their employers. Companies purchase the use of human capital by paying employees an hourly wage, salary, or bonuses and providing benefits such as paid vacation and health insurance. Also, companies help develop human capital to their advantage by offering training programs aimed at further boosting employee productivity.

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

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

Dynamic Human Resource Management Environment Many interrelated factors affect HRM practice within and outside the organization. As illustrated in Figure 1-6, environmental factors include legal considerations, labor market, society, political parties, unions, shareholders, competition, customers, technology, the economy, and unantici- pated events. Each factor, either separately or in combination with others, can create constraints or opportunities for HRM.

LEGAL CONSIDERATIONS A significant external force affecting HRM relates to federal, state, and local legislation and the many court decisions interpreting this legislation. For example, the Age Discrimination in Employment Act is an example of a federal law that protects older workers from illegal discrimination. In addition, presidential executive orders have had a major impact on HRM. Executive Order 13145 protects all qualified individuals in federal employment based on protected genetic information, or information about a request for or the receipt of genetic services. These legal considerations affect virtually the entire spectrum of human resource policies. Laws, court decisions, and executive orders affecting other HRM activities will be described in the appropriate chapters.

LABOR MARKET Potential employees located within the geographic area from which employees are normally recruited comprise the labor market. The capabilities of a firm’s employees determine, to a large extent, how well the organization can perform its mission. Because new employees are hired from outside the firm, the labor market is considered an important environmental factor. The labor market is always changing, and these shifts inevitably cause changes in the workforce of an organization. For example, members of the aging baby boom cohort, the largest current

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

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14 PART 1 • SETTING THE STAGE

generation of employees, are retiring in large numbers; however, younger generations are smaller and less well-prepared to assume leadership roles because they have had much less time in the workforce to develop them.

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

Ethics is the discipline dealing with what is good and bad, or right and wrong, or with moral duty and obligation. Corporate social responsibility (CSR) is closely related to ethics. CSR is the implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves.35 We take up these subjects in Chapter 2.

POLITICAL PARTIES Closely related to society, but not the same, are political parties. The Democratic and Republican parties are the two major political parties in the United States. These parties often have differing opinions on how HRM should be accomplished. For example, Democrats tend to favor more government regulation that protects the rights of virtually all employees to receive at least a minimum wage (the Fair Labor Standards Act) and unpaid family leave (the Family and Medical Leave Act). Republicans, on the other hand, tend to favor less government regulation, believing that businesses should have as much flexibility as possible to operate profitably.

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

SHAREHOLDERS The owners of a corporation are called shareholders. Because shareholders, or stockholders, have invested money in the firm, they may at times challenge programs considered by management to be beneficial to the organization. Stockholders are wielding increasing influence, and management may be forced to justify the merits of a program in terms of how it will affect

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

shareholders Owners of a corporation.

FIGURE 1-6 Environment of Human Resource Management

Customers

Legal Considerations Labor market So

cie ty

E co

n o

m y

T e

ch n

o lo

g y

u n

a n

ti ci

p a te

d E

ve n

Competition Shareholders unions

other Functional

Areas

operations

Finance

marketing

INTERNAL ENvIRoNmENT

EXTERNAL ENvIRoNmENT P o

litica l P

a rtie

Human Resource

management

St af fi ng

Human Resource Development

C o m

p en

satio n

Sa fe

ty a

nd H

ea lt

Employee and Labor Relations

Perform ance

m anagem

ent

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future projects, costs, revenues, profits, and even benefits to society as a whole.36 Considerable pressure has recently been exerted by shareholders and lawmakers to control the salaries of corporate executives as we shall see in the discussion of the Dodd-Frank Act in Chapters 2 and 9.37

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

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

☛ F Y I $$ In a survey of HR professionals, 36 percent have disqualified a job candidate because of troubling

information discovered on a public social media profile.38

HR TECHNOLOGY The rate of technological change is staggering. The development of technology has created new roles for HR professionals but also places additional pressures on them to keep abreast of the technology. As noted earlier, leveraging technology can help HR professionals to consider both internal and external data to aid in decision making. We will briefly review three applications: human resource information systems, cloud computing, and social media.

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

A rapidly developing trend is the increased mobility of tasks performed by HR profession- als.39 A major factor contributing to HR mobility is cloud computing, a means of providing software and data via the Internet. Cloud computing and the use of mobile devices are changing the way HR work is performed, and the change is moving at an amazing pace.40 With the cloud there is no more expensive, capital-intensive hardware and infrastructure and no more expensive, time-consuming, staff-intensive upgrades.41 Cloud computing permits businesses to buy and use what they need, when they need it. It allows large organizations to move away from managing their own computer centers and focus on the core competencies of the firm. Cloud users can access the application securely from anywhere in the world.42 HR professionals can be virtually anywhere and access the cloud, all through any standard Web.

HR departments are leveraging the increasing popularity of social media, including LinkedIn, Facebook, YouTube, and Twitter. In a 2015 Society for Human Resource Management survey, HR professionals revealed that social networking is an important tool for recruiting passive and active applicants. Most respondents, 84 percent, say that their organizations currently use social media and 9 percent plan to use it.43 There are two additional applications of social media. First, companies may use social media to promote knowledge sharing as well as training and development. Second, social media is often used to reinforce identification with the organization and promoting the brand.

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

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16 PART 1 • SETTING THE STAGE

ECONOMY The economy of the nation and world is a major environmental factor affecting HRM. As a generalization, when the economy is booming, it is more difficult to recruit qualified workers. On the other hand, when a downturn is experienced, more applicants are typically available. To complicate this situation even further, one segment of the country may be experiencing an economic downturn, another a slow recovery, and another a boom. A major challenge facing HR is working within this dynamic, ever-changing economic environment because it impacts every aspect of HRM.44

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

The Role of HRM in Building Corporate Culture and Employer Branding

As an internal environment factor affecting HRM, corporate culture refers to the firm’s social and psychological climate. Corporate culture is defined as the system of shared values, beliefs, and habits within an organization that interacts with the formal structure to produce behavioral norms. Employer branding is an extension of product or business branding. Employer branding is the firm’s corporate image or culture created to attract and retain the type of employees the firm is seeking. It is what the company stands for in the public eye.46 Establishing a positive corporate culture and brand is another way HR professionals contribute to a company’s success. We discuss corporate culture and employer branding next.

Corporate Culture Culture gives people a sense of how to behave and what they ought to be doing. Each individual gradually forms such perceptions over a period of time as the person performs assigned activities under the general guidance of a superior and a set of organizational policies. The culture existing within a firm influences the employees’ degree of satisfaction with the job as well as the level and quality of their performance. The assessment of how desirable the organization’s culture is may differ for each employee. One person may perceive the environment as bad, and another may see the same environment as positive. An employee may actually leave an organization in the hope of finding a more compatible culture. Max Caldwell, a managing director at Towers Watson, said, “Maybe the best definition of company culture is what everyone does when no one is looking.”47 Topics related to corporate culture are presented throughout this text. Some corporate culture topics include the following:

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

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

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

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

1.4 Discuss the role of HRM in building corporate culture and employer branding.

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

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

☛ F Y I $$ A survey of more than 7,000 CEOs and HR leaders revealed that 82 percent consider culture a source

of competitive advantage.45

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

$$ Organization development is a major means of achieving change in the corporate culture. $$ Anything that the company provides an employee is included in compensation, from pay

and benefits to the organization’s culture and environment. $$ A corporate culture that does not consider the needs of employees as individuals makes the

firm ripe for unionization. $$ Retaining the best employees often rests with the corporate culture that exists within the

organization. $$ Accident rates decline when the corporate culture encourages workers consciously or sub-

consciously to think about safety. $$ A country’s culture is the set of values, symbols, beliefs, languages, and norms that guide

human behavior within the country. Cultural differences are often the biggest barrier to doing business in the world market. Many of the global topics discussed throughout your text are influenced by the issue of corporate culture or country culture.

Employer Branding A colleague shared a memory about his mother, which bears directly on this subject. His mother would always buy a certain brand of canned fruit even though it was more expensive. The brand name itself caused her to buy a product that although higher priced was probably the same or similar quality as less expensive brands. The company had created a positive image that made her want to use the product. As with the canned fruit, companies want a brand that will entice individuals to join and remain with the firm.48 HR professionals play an essential role in creating and promot- ing a company’s brand. Effective branding communicates why the company is a cut above other workplaces by providing persuasive reasons for job seekers to choose the company over others.49 As such, the focus on employer branding has become increasingly important for organizations. Jeffrey St. Amour, national practice leader for PricewaterhouseCoopers’ HR Services strategic com- munication group said, “They’re both trying to create the same thing, which is product loyalty or a feeling that this is a high-quality company.”50 Employer branding has become a major recruitment and retention strategy and everyone in the company works to promote the image of the firm.51

Brands imply what employees will get from working there and why working for the company is a career and not just a job. For example, consulting firm PwC emphasizes its commitment to career development as part of its recruitment strategy: “Every career path is different. That’s why we help you design your own.”52 As more Gen-Yers enter the workforce, firms may need to alter their brand to attract and retain these young people who view having fun in an engaging work environment as important as a good salary. A well-paying job that is boring will not keep them for long. Cosmetic company L’Oréal understands this expectation. The company takes time to understand what employees value in their work experiences, and they incorporate much of these values in an employee value proposition. L’Oréal promises prospective employees a “thrilling experience” and an “environment that will inspire you.”53

An employer brand embodies the values and standards that guide people’s behavior. Through employer branding, people get to know what the company stands for, the people it hires, the fit between jobs and people, and the results it recognizes and rewards. Every company has a brand, which could be the company of choice or one of last resort. A robust employment brand attracts people and makes them want to stay. In fact, most workers want to belong to an organization that embraces the ideas and principles they share.54 Employer branding has become a driving force to engage and retain the firm’s most valuable employees.55 As the economy prospers, firms vigor- ously seek talent, and, employer branding is attracting more attention.

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

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

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

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18 PART 1 • SETTING THE STAGE

$$ Forbes magazine list of Best Companies for Work-Life Balance $$ Fortune magazine list of 100 Fastest-Growing Companies in the United States $$ Training magazine list of 125 Best Companies for Employee Development $$ Working Mother list of 100 Best Companies

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

Human Resource Management in Small Businesses The Small Business Administration (SBA) defines a small business as one that is independently owned and operated, is organized for profit, and is not dominant in its field. More than 99 percent of the businesses in the United States are classified as small businesses and they are responsible for at least half of private sector employment.56 The discussion throughout this text has historically focused primarily on how HR is practiced with major corporations. However, today, many college graduates obtain jobs in small businesses. In fact, growth of small business is often a primary driver for the economy. Therefore, the practice of HR as it is conducted in small businesses is discussed at various times in your text.

Typically, the same HR functions previously identified must be accomplished by small busi- ness, but the manner in which they are accomplished may be altered.57 Small businesses often do not have a formal HR unit or an HRM specialist. Rather, line managers often handle the HR functions. The focus of their activities is generally on hiring and retaining capable employees. Some aspects of HR functions may actually be more significant in smaller firms than in larger ones. For example, a staffing mistake in hiring an incompetent employee who alienates customers may cause the business to fail. In a larger firm, such an error might be much less harmful. As the business grows, the need for a more sophisticated HR function usually is needed.58 This move typically occurs at the 25-employee level when concerns about compliance with labor laws often begin.59 Also, new small businesses are faced with a host of federal and state government regula- tory requirements, tax laws, and compensation demands.

1.5 Summarize human resource management issues for small businesses.

HR Web Wisdom

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

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

Watch It 1 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Patagonia: Human Resource Management and to respond to questions.

Watch It 2 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Blackbird Guitars: Managing Human Resources in Entrepreneurial Firms and to respond to questions.

Country Culture and Global Business A country’s culture is the set of values, symbols, beliefs, languages, and norms that guide human behavior within the country. It is learned behavior that develops as individuals grow from child- hood to adulthood. As one goes from one side of this country to the other, a wide range of cultural differences will be experienced. The same can be said in traveling from north to south. Then, think about the cultural differences that exist in going from this country to another. Americans’ use of colloquialisms often creates cultural barriers. Perhaps surprisingly, misunderstanding can occur between two countries that share the same language such as is the case for the United States and the United Kingdom. For instance, Martin Brooks, Production and Export Manager of pet nutrition company Hilton Herbs considers the United States as one of the most challenging. “As an example,

1.6 Identify ways that coun- try culture influences global business.

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CHAPTER 1 • HumAN RESouRCE mANAGEmENT: AN ovERvIEw 19

we had a product for older horses and dogs called Veteran,” he says.60 Sales were flat until the company replaced the word “veteran” with “senior,” following the way people in the United States refer to older pets. Veteran is a commonplace descriptor in the UK. If a significant cultural divide can exist between two countries that share a common language, how much wider must the contrast be between countries that speak different languages? No doubt quite significant.

Even though the language may be the same, such as is the case with the United States and the United Kingdom, major cultural differences do exist. Dean Foster, a New York-based consultant on intercultural business issues said, “The United Kingdom really is a foreign country—and HR departments that ignore that fact are at their peril. It’s that expectation of similarity that throws everyone off.”61 A businessperson who travels from Switzerland to Italy goes from a country where meetings tend to be highly structured and expected to start on time to one where meetings can be more informal and punctuality is less important.62 Many believe that China has the most different culture for Americans to deal with.63

Throughout this text, cultural differences between countries will be identified as a major factor influencing global business. This borderless world adds dramatically to the difficulty of managing employees. Cultural differences reveal themselves in everything from the workplace environments to differences in the concept of time, space, and social interaction.64 Companies operating in the global environment recognize that national cultures differ and that such differ- ences cannot be ignored.65

Getting work done is less likely when individuals from one culture are tone deaf to cultural norms elsewhere. For example, L’Oréal’s decision making culture encourages open debate, which management maintain generates creativity.66 However, that style probably does not fit well with cultural differences in other countries. The company’s confrontational approach is inconsistent with the cultural values in Southeast Asia, which is a region where they conduct business. An Indonesian employee said, “To an Indonesian person, confrontation in a group setting is extremely negative, because it makes the other person lose face. So it’s something that we try strongly to avoid in any open manner.”67

Getting work done becomes especially more challenging when companies of different country origins merge. For instance, Chrysler Corporation employees have gone through major cultural changes in the last several years.68 The misfortune cost Daimler nearly $36 billion over a decade, which amounted to a loss of almost $10 million per day for 10 years.69 First, they were merged into a German firm, Daimler-Benz, then they were sold back to a U.S. company, and they are now merged into Fiat, an Italian firm. Each ownership change brought new cultural rules with which employees had to deal. Certainly, the Germans and Italians have two distinct cultures.70 InBev, based in Leuven, Belgium, purchased Anheuser-Busch several years ago, making it the leading global brewer and one of the world’s top five consumer products companies (AB InBev). Merg- ing two large corporate cultures after an acquisition is often not easy. In fact, InBev’s purchase of Anheuser-Busch was particularly difficult, even two-and-a-half years after the $52 billion deal closed, the story continues.71 AB InBev reached an agreement, valued at $100 billion, to acquire beer brewer SABMiller. No doubt, the companies will face further challenges as they merge their workforces and operations. For instance, AB InBev’s CEO Carlos Brito once said that he does not “like people at the company to have fun.”72 Brito’s sentiment does not fit with SABMiller’s work culture, which reportedly is more casual.

The cultural norms of Japan promote loyalty and teamwork. The work culture there is one in which honesty and hard work are prized assets. In Japan, most managers tend to remain with the same company for life. In the United States, senior executives often change companies, but the Japanese believe strongly that leaving a job is to be avoided out of respect for the business team.73 In Japan, if a boss gives detailed instructions to a subordinate, it is like saying the person is incompetent.74 Japan is not the only Asian country that promotes worker respect for their bosses and a team work ethic. For example, norms in Korean culture pressure workers to “pull late nights” because they feel the need to please their superiors. One observer described these workers: “They just sit in their chairs and they just watch their team leaders, and they’re thinking, ‘What time is he going to leave the office?”’75 Then, there is an expectation that the boss and employees will go out for drinks, and it is important that employees participate. In Korea, drinking together helps build workplace camaraderie and trust.76

Cultural misunderstandings are common, but they can be hazards to executives managing global workforces. Samuel Berner, head of HR of the private banking Asia Pacific division in

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20 PART 1 • SETTING THE STAGE

Singapore for Credit Suisse AG said, “Things that are perfectly natural in one culture offend in another.”77 Eric Rozenberg, CMM, CMP, president, Ince&Tive, of Brussels, Belgium, stated, “Even though people are aware that there are cultural differences between various nationalities, they’re still uncomfortable with it and are afraid of making mistakes.”78

Developing Skills for Your Career If you’re not an HRM major, you may be thinking that this section isn’t relevant to you. Let me assure you, it is. Whether or not you plan on a career in HRM, the lessons you learn in this course will help you in business and in your life. Also, it is only through the aggregate of your educational experience that you will have the opportunity to develop many of the skills that employers have identified as critical to success in the workplace. In this course, and, specifically in this text, you’ll have the opportunity to develop and practice seven important skills in the following ways: commu- nication, critical thinking, collaboration, knowledge application and analysis, business ethics and social responsibility, information technology application and computing skills, and data literacy.

Communication Communication is defined as effective use of oral, written, and nonverbal skills for multiple purposes (e.g., to inform, instruct, motivate, persuade, and share ideas); effective listening; using technology to communicate; and being able to evaluate the effectiveness of communication efforts—all within diverse contexts. The Working Together feature offers opportunities to col- laborate through sharing ideas, listening to others’ ideas, and coming up with a cohesive team response to the assignment. If assigned by your instructor, you may make brief oral presentations, creating an additional opportunity for working together. All the while, you will gain insight into your and your group members’ strengths and weaknesses pertaining to communication (and col- laboration) skills. Never pass up an opportunity to hone these skills.

Critical Thinking Critical thinking involves purposeful and goal-directed thinking used to define and solve prob- lems, make decisions or form judgments related to a situation or set of circumstances. The Chap- ter Review questions and a new feature in this edition, HRM by the Numbers, provide you with an excellent opportunity to think through concepts and their applications. HRM by the Numbers will also give you the chance to analyze quantitative data to facilitate problem solving. Analysis of the Incidents, which depict realistic scenarios that you will likely encounter in the workplace, requires your interpretation and an actionable response. Similarly, you will have the chance to think through and discuss your responses to common Ethics Dilemmas. More about the ethics dilemmas shortly. Critically thinking about situations is just one part of the story. The Personal Inventory Assessment feature, included in most chapters, gives you the opportunity for self- assessment and personal reflection. Understanding yourself and finding your voice will help you approach situations within and outside the employment setting with greater confidence.

Collaboration Collaborative learning takes place in a situation in which individuals actively work together on a task, constructing meaning and knowledge as a group through dialogue and negotiation resulting in a final product ref lective of their joint, interdependent actions. I’ve already made the case for Working Together. Your professor may similarly ask you to analyze Incidents in small groups. Another feature new in this edition, HRM is Everyone’s Business, explains how HR professionals and managers throughout the organization work together to address important workplace issues. This feature highlights the connections between managers and HR profes- sionals, and the reality that work is rarely performed in isolation.

1.7 Explore essential skills for developing your career in HR or any other career path.

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

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CHAPTER 1 • HumAN RESouRCE mANAGEmENT: AN ovERvIEw 21

Knowledge Application and Analysis Knowledge application and analysis is defined as the ability to learn a concept and then appro- priately apply that knowledge in another setting to achieve a higher level of understanding. All the activities discussed in this section provide you with multiple opportunities to think through solutions to specific problems and generalize these processes to other situations you will likely encounter in the future. Two additional features further help you develop this skill. Try It directs you to mini simulations and, in Watch It, you will review video clips that require a response to important workplace challenges.

Business Ethics and Social Responsibility Business ethics are sets of guiding principles that influence the way individuals and organizations behave within the society that they operate. Two additional issues require everyone’s attention. The first, CSR is the implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves. Second, corporate sustainability focuses on the possible future impact of an organization on society, including social welfare, the economy, and the environment. Both issues are like ethics; however, ethics also focuses on individual decision making and behavior as well as the impact of ethical choices on employee welfare. The review questions, particularly in Chapter 2 on ethics, social responsibility, and sus- tainability, and the Ethics Dilemmas throughout your textbook, will keep these important matters in the forefront as you move ahead in your career.

Information Technology Application and Computing Skills Information technology application and computing skills are defined as the ability to select and use appropriate technology to accomplish a given task. The individual is also able to apply computing skills to solve problems. HRM by the Numbers gives you the opportunity to develop these skills.

Data Literacy Data literacy is the ability to access, assess, interpret, manipulate, summarize, and communicate data. Throughout this book, the newly created feature titled FYI provides tidbits of information from survey research and extensive databases (e.g., employment statistics) that illuminate trends, opinions, and the use of specific HR practices. These data should enable you to translate quantita- tive information for placement into the employment context. Further, you can expand this skill by thinking through when and how to create new policies or modify existing ones.

In summary, you will find opportunities throughout this book to develop several critical skills that provide a foundation of success on any career path that you follow. As you learn about HRM, consider how you can generalize these skills to other workplace situations. Best of luck whether you are preparing for the start of your career or are in the process of changing career paths!

S C O P E O F T H I S B O O K

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

$$ An insight into the role of strategic HRM in today’s organizations and the strategic role of HR functions $$ An appreciation of the value of employees as human capital $$ An awareness of the importance of business ethics and corporate social responsibility $$ An understanding of job analysis, HR planning, recruitment, and selection $$ An awareness of the importance of HR development, including training and developing, for employ-

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

administered $$ An opportunity to understand employee and labor relations $$ An understanding of safety and health factors as they affect the firm’s profitability

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

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22 PART 1 • SETTING THE STAGE

FIGURE 1-7 Organization of This Book

PREPARING FOR EXAMS/QUIZZES

Chapter Summary by Learning Objectives 1. Define human resource management and the impor-

tance of studying it. Human resource management (HRM) is the utilization of employees to achieve organizational objectives. It is the business function of managing employees. HRM professionals embrace the idea that employees are essential to the success of organizations, and as such, they view employees as assets or human capital. Studying HRM is a worthwhile endeavor, whether you plan to become an HR professional. Possessing knowledge about HRM principles and practices will help you understand your rights and responsibilities as an employee. Also, if you eventually lead a department or supervise employees, you will seek guidance on issues such as appraising job performance. There are six func- tional areas associated with effective HRM: staffing, HR development, performance management, compensation, safety and health, and employee and labor relations.

2. Describe who performs HRM. Human resource manag- ers are individuals who normally act in an advisory or staff capacity, working with other managers to help them deal with human resource matters. HR outsourcing is the process of hiring an external provider to do the work that was previously done internally. HR shared service centers take routine, transaction-based activities that are dispersed throughout the organization and consolidate them in one

place. A professional employer organization is a company that leases employees to other businesses. Line managers in certain firms are being used more frequently than before to deliver HR services.

Various designations are used within the HR profes- sion; among these are HR executives, generalists, and specialists. A profession is a vocation characterized by the existence of a common body of knowledge and a proce- dure for certifying members.

Executives are top-level managers who report directly to the corporation’s CEO or the head of a major division. Generalists (who are often executives) are persons who perform tasks in a wide variety of HR-related areas. A specialist may be an HR executive, manager, or non manager who typically is concerned with only one of the functional areas of HRM.

Several well-known organizations serve the profes- sion. Among the more prominent are the Society for Human Resource Management (SHRM), the Human Resource Certification Institute (HRCI), the Association for Talent Development (ATD), and WorldatWork.

3. Explain how the HRM function serves as a strategic business partner and the elements of the dynamic HRM environment. Working as a strategic business partner requires a much deeper and broader understanding of

HUMAN RESOURCE MANAGEMENT, 15TH EDITION

PART ONE: SETTING THE STAGE Chapter 1: Human Resource management: An overview Chapter 2: Business Ethics, Corporate Social Responsibility, and Sustainability Chapter 3: Equal Employment opportunity, Affirmative Action, and workforce Diversity

PART TWO: STAFFING Chapter 4: Strategic Planning, Human Resource Planning, and Job Analysis Chapter 5: Recruitment Chapter 6: Selection

PART THREE: PERFORMANCE MANAGEMENT AND TRAINING Chapter 7: Performance management and Appraisal Chapter 8: Training and Development

PART FOUR: COMPENSATION Chapter 9: Direct Financial Compensation (monetary Compensation) Chapter 10: Indirect Financial Compensation (Employee Benefits)

PART FIVE: LABOR RELATIONS, EMPLOYEE RELATIONS, SAFETY AND HEALTH Chapter 11: Labor unions and Collective Bargaining Chapter 12: Internal Employee Relations Chapter 13: Employee Safety, Health, and wellness

PART SIX: OPERATING IN A GLOBAL ENVIRONMENT Chapter 14: Global Human Resource management

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CHAPTER 1 • HumAN RESouRCE mANAGEmENT: AN ovERvIEw 23

business issues. Possible strategic tasks for HR include making workforce strategies fundamental to company strategies and goals; increasing HR’s role in strategic plan- ning, mergers, and acquisitions; developing awareness or an understanding of the business; and helping line manag- ers achieve their goals. Also, as a strategic business partner, HR helps to identify and develop the human capital neces- sary for excellent performance, builds recruitment systems, training programs for product distribution and interactions with customers, constructs performance management, and structures compensation programs that will greatly incentivize these employees to excel. In the end, if HR is to be a strategic partner, HR executives must work with top management in achieving concrete plans and results. Fac- tors include legal considerations, the labor market, society, political parties, unions, shareholders, competition, cus- tomers, technology, economy, and unanticipated events.

4. Discuss the role of HRM in building corporate culture and employer branding. Corporate culture is the system of shared values, beliefs, and habits within an organiza- tion that interacts with the formal structure to produce behavioral norms. Culture gives people a sense of how to behave and what they ought to be doing. It often affects job performance throughout the organization and consequently

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

5. Summarize HRM issues for small businesses. Often the same HR functions previously identified must be accomplished by small business, but the manner in which they are accomplished may be altered. Small businesses often do not have a formal HR unit or HRM specialists. Rather, other line managers in the company handle HR functions.

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

7. Explore essential skills for developing your career in HR or any other career path. Whether you are embarking on a career in HRM on another path, there are seven essential skills needed for success: communication, critical thinking, collaboration, knowledge application and analysis, business ethics and social responsibility, information technology application and computing skills, and data literacy.

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

(benefits) 5 nonfinancial compensation 5 safety 6 health 6

human resource management professional 7

line managers 7 HR outsourcing (HRO) 8 shared service center (SSC) 9 professional employer organization

(PEO) 9 executive 9 generalist 9 specialist 10

profession 10 capital 13 human capital 13 union 15 shareholders 15 human resource information system

(HRIS) 15 corporate culture 16 country’s culture 17 employer branding 16

Questions for Review 1-1. Define human resource management. What HRM functions

must be performed regardless of the organization’s size? 1-2. Define profession. Do you believe that the field of HRM

is a profession? Explain your answer. 1-3. What are the environmental factors that affect HRM?

Describe each one. 1-4. How might HR technology affect the various HR

functions? 1-5. Define corporate culture. Explain why corporate culture

is a major internal environment factor.

1-6. This chapter describes HR’s changing role in business. Describe each component that is involved in HRM.

1-7. How does HRM become more complex as a company’s workforce reaches 25 employees?

1-8. What are the various designations associated with the HRM profession?

1-9. What has been the evolution of HRM? 1-10. Explain how the seven employability skills matter

regardless of your career aspirations.

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management to complete the problems marked with this icon .

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24 PART 1 • SETTING THE STAGE

PREPARING FOR MY CAREER

Personal Inventory Assessment Additional Personal Inventory Assessments can be found on MyLab Management.

What’s My Comfort with Change? Change is a big part of the external environment and an organization’s culture. This PIA will assess how comfortable you are with change.

HRM Is Everyone’s Business Many companies have moved from the personnel management model to the HR business partner model; however, some still look to HR to guarantee that policies are being enforced and the company mitigates legal risk. Depending on the company where you are employed—and whether you are a manager or HR professional—you may find yourself in a position to understand the competitive strategy of the business and align HR practices with the strategic thrust of the business.

Action checklist for managers and HR—aligning HR practice with competitive strategy HR takes the lead

Work with managers to fully understand which roles and types of employees will best support the execution of company strategy.

Collaborate with managers to run an analysis of market factors (e.g., competitors, industry standards, local labor market) to get indicators of norms and standards in order to keep your company’s HR practices competitive.

Create, together with managers, job structures wherein roles are placed into the organizational structure. Each job structure will have tailored pay ranges, performance standards, and training guidelines to help employees advance in the organization.

Managers take the lead

Educate employees, along with other managers and supervisors, about the company’s strategy and how everyone contributes to meeting strategic objectives.

Educate HR on certain aspects of roles (e.g., autonomy, skill variety, task significance, etc.) that, when enhanced, could improve motivation; thus, leading to benefits for employees and employers.

Work together with HR to implement a plan that promotes successful recruitment, training, and development, ensuring that the company is retaining the talent that is critical to the implementation and delivery of the strategic objectives.

E T H I C S D I L E M M A

Broken Promises You’ve recently joined the HR department and

noticed that employee turnover has been higher than usual. Most of the departing employees are star performers who worked in the mar- keting department. Naturally, losing too many high performers is a detriment to the company’s efforts to meet its strategic objectives. You’ve decided to investigate the possible reasons for higher turnover and learned some unsettling facts. One of the recruiters entices top job candidates to join the company by conveying its commitment to

career development when, in fact, the company does not provide any career development opportunities. You also learned that most of these job candidates possessed other job offers that they turned down on the promise of career development opportunities in your company.

1-11. What would you do? 1-12. What factors in this ethics dilemma might influence a person to

make a less-than-ethical decision?

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CHAPTER 1 • HumAN RESouRCE mANAGEmENT: AN ovERvIEw 25

HRM by the Numbers Making a Sufficient Number of Job Offers to Maintain Staffing Levels

An additional HRM by the Numbers exercise can be found on MyLab Management.

HR professionals and other managers work together to calculate the number of employees needed to meet objectives. For instance, they determined that 100 full-time production workers are needed to assemble 2,500 children’s bicycles each day. Each year, a total of 20 percent of these workers are either promoted or they leave the company due to poor performance or better job opportunities elsewhere. Management can use your help in understanding the impact of understaffing on meeting production goals as well as calculating the number of job offers needed to maintain the necessary staffing level.

Questions 1-13. If the company does not replace the workers who leave, how many bikes must each employee produce on a given day

(assume that on any given day, there are 20 percent fewer workers than needed to meet the production goal)? 1-14. Assume that each job candidate accepts the company’s job offer. Calculate the number of job offers necessary to main-

tain the required staffing level of 100 employees on an annual basis. 1-15. Instead, assume that only 50 percent of the job candidates accept a job offer. Calculate the number of job offers necessary

to maintain the required staffing level of 100 employees on an annual basis.

Working Together: Team Exercise In small groups of three or four, come up with specific answers to the following questions. Talk through your perspectives as you prepare your answers. Be prepared to share your ideas with the class.

As a group, identify a company with which members are familiar. On the company’s website, review its mission, products or services, and career opportunities.

1-16. How would you describe the company’s employment brand to your friends? 1-17. What information might lead you to choose working for the company?

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

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

command a premium salary. Walmart, known for remaining open 24 hours a day, could only stay open on an abbreviated schedule. Employ- ers often had to bus employees from locations not affected by the hur- ricane each morning and returned them at night because there were not enough workers available in the local area. Restaurants that nor- mally remained open late into the evening closed at 6:00 p.m., if they opened at all. Compensation scales that were in use before the hur- ricane had to be thrown out and new plans implemented. Minimum- wage jobs were nonexistent. Employees who earned minimum wage before the storm could now command $10 per hour just for being a flagger (a person who directs traffic). Fast-food restaurants that nor- mally paid minimum wage now paid $10 or $11. Burger King was even offering a $1,500 bonus for entry-level workers. Upscale restaurants that normally paid minimum wage plus tips now paid premium rate plus tips. Restaurants that remained open often had a much younger staff, and it was evident that the managers and assistant managers were working overtime to train these new workers. Restaurant patrons had to learn patience because there would be mistakes by these eager, but largely untrained workers.

Questions 1-18. Which environment factor(s) did Hurricane Rita affect? Discuss. 1-19. How were the HR functions affected by Hurricane Rita? 1-20. Do you believe the HR situations described regarding Hurri-

cane Rita would be typical in a disaster? Explain.

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26 PART 1 • SETTING THE STAGE

I N C I D E N T 2 Parental Leave at Yahoo Employer branding is an ongoing effort that requires a company to “puts its money where its mouth is.” In other words, building and maintaining a positive employer brand goes beyond written policy and good media coverage. Successful branding starts with executive leadership setting an example for employees. Take the Internet company Yahoo. Yahoo has a policy that provides generous paid parental leave and permits employees to work from home. The company had a golden opportunity to demon- strate commitment to its family leave policy after then CEO Marissa Mayer gave birth to her baby in 2012. Rather than taking several weeks to work from home, she built a nursery next to her office where she could be close to the baby. Then, in 2013, a leaked internal memo revealed that Yahoo would terminate its telecommuting policy that allowed employees to work from home. In the memo, she stated: “Speed and quality are often

sacrificed when we work from home.”79 In addition, “We need to be one Yahoo, and that starts with physically being together.” Media responses were mixed. On one hand, Mayer showed that she could continue to lead Yahoo as a new mother. On the other hand, media reports criticized her “for failing to set a realistic expectation for America’s working moms.”80 Since then, Yahoo expanded its parental leave policy for the birth or adop- tion of a child, foster child placement, or surrogacy.

1-21. How do these changes at Yahoo influence the company’s employment branding?

1-22. As an HR professional, what would you have done after Mayer chose not to take more time allowed under Yahoo’s parental leave policy?

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management for Auto-graded writing questions as well as the following Assisted-graded writing questions:

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

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

Endnotes 1 Jean M. Phillips and Stanley M. Gully, Strategic

Staffing, 3rd ed. (Hoboken, NJ: Prentice Hall, 2015).

2 U.S. Bureau of Labor Statistics, Employee Tenure in 2016 (September 22, 2016). USDL: 16-1867. Accessed January 2, 2017, at www.bls. gov/.

3 Heather Long, “The New Normal: 4 Job Changes by the Time You’re 32,” CNN Money online (April 12, 2016). Accessed on January 3, 2017, at www.money.cnn.com.

4 Joseph J. Martocchio, Strategic Compensation, 9th ed. (Hoboken, NJ: Pearson Education, 2017).

5 U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation–September 2016 (December 8, 2016). USDL: 16-2255. Accessed January 2, 2017, at www.bls.gov/.

6 Travis Hessman, “Safety Is Productivity,” EHS Today (December 12, 2014). Accessed on January 3, 2017, at http://ehstoday. com/safety-leadership-conference-2015/ safety-productivity.

7 “The New Organization: Different by Design,” Global Human Capital Trends 2016 (2016). Accessed December 20, 2016, https://www2. deloitte.com/us/en/pages/human-capital/articles/ introduction-human-capital-trends.html.

8 Ibid. 9 U.S. Federal Trade Commission, “Big Data:

A Tool for Inclusion or Exclusion,” (January 2016): 29.

10 Lauren Weber, “One Reason Wal-Mart Is Rais- ing Pay: Turnover,” The Wall Street Journal online (February 19, 2015). Accessed January 2, 2017, at http://www.wsj.com.

11 Eric Krell, “Change Within,” HR Magazine 56 (August 2011): 42–50.

12 “Despite Recession, World-Class HR Organiza- tions Reduce Costs by 13 Percent,” Controller’s Report 2011 (August 2011): 1–19.

13 Jon Severs, “Supervisors on the Front Line,” PrintWeek (January 21, 2011): 20–21.

14 Mark Feffer, “More HR Professionals Are Strik- ing Out on Their Own to Work as Independent Contractors,” HR Magazine, (July/August 2016): 55–61.

15 “Focus on Cost Effective People Management Drives A doption of Human Resource Outsourc- ing, According to a New Report by Global Industry Analysts, Inc,” Global Industry Ana- lysts, Inc. (Web site). Accessed January 2, 2017, at www.strategyr.com/pressMCP-1516.asp.

16 Accenture Inc., “Achieving High Performance in BPO: Research Report,” (2012). Accessed December 30, 2013, at www.accenture.com.

17 Mark Feffer, “Meet the People Behind Your HR Outsourcing,” HR Magazine (July/August 2016) online. Accessed January 2, 2017, at www.shrm.org/hr-today/news/hr-maga- zine/0716/Pages/meet-the-people-behind-your- hr-outsourcing.aspx.

18 Erika Andersen, “4 Ways to Become a Strategic Business Partner (And Why You Should Want to): Forbes (September 6, 2013). Accessed October 10, 2013, at www.forbes.com.

19 Eric Krell, “Amid Consolidation, Clients Grow Selective,” HR Magazine 58 (July 2013): 49–51.

20 Joel Berg, “Employers Outsource HR Work in Recession,” Central Penn Business Journal 25 (November 13, 2009): 17–21.

21 CFO Research, “A Rising Interest in Outsourc- ing Benefits Administration,” (2016 Research Report). Accessed January 2, 2017, at http:// research.prudential.com/documents/rp/ CFO_Prudential_ADA_Report5_4_19.pdf.

22 “Leading in the New,” Accenture Annual Report 2016,” Accessed January 2, 2017, at www .accenture.com/t20161030T213116__w__/ us-en/_acnmedia/PDF-35/Accenture- 2016-Shareholder-Letter10-K006.pdf#zoom=50.

23 “Levi Strauss: Recruitment Process Outsourc- ing,” (Case Study). Accessed January 2, 2017, at https://acn-uat.ciotest.accenture.com/ng-en/ success-levi-strauss-recruitment-process- outsourcing.

24 Bill Leonard, “Salvage, Don’t Scrap,” HR Magazine 56 (June 2011): 74–77.

25 Laurie Bassi and Dan McMurrer, “The State of the PEO Industry 2016: Markets, Value, and Trends,” National Association of Professional Employer Organizations (September 2016). Accessed January 3, 2017, at www.napeo.org.

26 Ibid. 27 David Imbrogno, “The Outsourcing of HR,”

Quality 49 (December 2010): 34–35. 28 U.S. Bureau of Labor Statistics, “Human

Resources Mangers,” Occupational Outlook Handbook, 2016–17 Edition.” Accessed January 2, 2017, at www.bls.gov/ooh/management/ human-resources-manages.htm.

29 Henry G. Jackson, “Being Strategic Is Not Optional,” HR Magazine, (November 2015): 6.

30 Adrienne Fox, “Reach New Height,” HR Maga- zine (July 2012): 34–39.

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http://www.accenture.com/t20161030T213116__w__/us%E2%80%90en/_acnmedia/PDF%E2%80%9035/Accenture%E2%80%902016%E2%80%90Shareholder%E2%80%90Letter10%E2%80%90K006.pdf#zoom=50

http://www.forbes.com/

http://www.shrm.org/hr%E2%80%90today/news/hr%E2%80%90magazine/0716/Pages/meet%E2%80%90the%E2%80%90people%E2%80%90behind%E2%80%90your%E2%80%90hr%E2%80%90outsourcing.aspx

http://www.pearson.com/mylab/%E2%80%90management

http://www.bls.gov/ooh/management/human%E2%80%90resources%E2%80%90manages.htm

http://www.napeo.org/

https//acn%E2%80%90uat.ciotest.accenture.com/ng%E2%80%90en/success%E2%80%90levi%E2%80%90strauss%E2%80%90recruitment%E2%80%90process%E2%80%90%E2%80%90outsourcing

http://research.prudential.com/documents/rp/CFO_Prudential_ADA_Report5_4_19.pdf

http://www.accenture.com/

http://www.strategyr.com/pressMCP%E2%80%901516.asp

http://www.wsj.com/

https//www2.deloitte.com/us/en/pages/human%E2%80%90capital/articles/introduction%E2%80%90human%E2%80%90capital%E2%80%90trends.html

http://ehstoday.com/safety%E2%80%90leadership%E2%80%90conference%E2%80%902015/safety%E2%80%90productivity

http://www.bls.gov/

http://www.money.cnn.com/

http://www.bls.gov/

CHAPTER 1 • HumAN RESouRCE mANAGEmENT: AN ovERvIEw 27

31 Edward E. Lawler III and John W. Boudreau, “Creating an Effective Human Capital Strategy,” HR Magazine 57 (August 2012): 57–59.

32 “HR in 2020 Should Understand Clearly All Aspects of Business,” HR Focus 90 (February 2013): 8–9.

33 “Attorney Urges HR Professionals to Think Like the CEO,” HR Focus 89 (April 2012): 10.

34 Cam Caldwell, Do X. Truong, Pham T. Linh, and Anh Tuan, “Strategic Human Resource Management as Ethical Stewardship,” Journal of Business Ethics 98 (January 2011): 171–182.

35 Kenneth E. Goodpaster and John B. Matthews, Jr., “Can a Corporation Have a Conscience?” Harvard Business Review 60 (January–February 1982): 132–141.

36 Steve Bates, “Report: Prepare for Increased Shareholder Activism,” HR Magazine 54 (June 2009): 32.

37 Joseph J. Martocchio, Strategic Compensation, 9th ed. (Hoboken, NJ: Pearson Education, Inc., 2017).

38 Society for Human Resource Management, “Using Social Media for Talent Acquisition— Recruitment and Screening,” (January 7, 2016). Accessed January 3, 2017, at www .shrm.org.

39 Jennifer Schramm, “A Cloud of Workers,” HR Magazine 58 (March 2013): 80; Bill Goodwin, “The Emerging Technologies Transforming How HR Works,” Computer Weekly (July 16, 2013): 16–18.

40 Katherine Noyes, “How the Cloud Is Trans- forming HR,” PC World (March 30, 2016). Accessed January 3, 2017, at http://www. pcworld.com/article/3049645/how-the-cloud- is-transforming-hr.html; Bill Roberts, “The Grand Convergence,” HR Magazine 56 (October 2011): 39–46.

41 Jane Ward, “Structuring Your Selection Pro- cess,” Human Resources Magazine 16 (Febru- ary/March 2012): 22–23.

42 Susan Galer, “3 Benefits of Cloud Computing for Human Resources,” Forbes online (March 26, 2015). Accessed January 3, 2017, at www .forbes.com; Michael Custers, “HR Technologies Guide Employers to Better Benefits Offerings,” Employee Benefit Plan Review 67 (February 2013): 20–21.

43 Society for Human Resource Management, “Using Social Media for Talent Acquisition— Recruitment and Screening,” (January 7, 2016). Accessed January 3, 2017, at www.shrm.org.

44 “As Economy Recovers, HR Will Have More Opportunities to Show Value,” HR Focus 89 (February 2012): 6.

45 “The New Organization: Different by Design,” Global Human Capital Trends 2016 (2016). Accessed December 20, 2016, www2.deloitte.

com/us/en/pages/human-capital/articles/ introduction-human-capital-trends.html.

46 Bob Duffy, “Rethinking Employer Brands,” Journal of Corporate Recruiting Leadership 5 (June 2010): 10–15.

47 Lydell C. Bridgeford, “Blinding Them with Science,” Employee Benefit News 25 (January 2011): 8–9.

48 Paul Jacobs, “Emergence of Human Techsourc- ing,” Human Resources Magazine 16 (February/ March 2012): 14–15.

49 Brandon Rigoni and Jim Asplund, “Strengths- Based Cultures Attract Top Talent,” Gallup (Web site), (January 3, 2017). Accessed January 4, 2017, www.gallup.com/businessjournal/ 200123/strengths-based-cultures-attract- top-talent.aspx?utm_source=alert&utm_ medium=email&utm_content=morelink&utm_ campaign=syndication.

50 Soumya Gaddam, “Modeling Employer Brand- ing Communication: The Softer Aspect of HR Marketing Management,” ICFAI Journal of Soft Skills 2 (2008): 45–55.

51 Kelly Borth, “Live Your Brand,” Smart Business Columbus 19 (March 2011): 6.

52 “Career Growth,” PwC Web site. Accessed January 3, 2017, at www.pwc.com/us/en/ careers/campus/why-pwc/career-growth.html.

53 “How L’Oréal developed a New Employee Value Proposition (EVP),” Link Human (Web site). Accessed January 3, 2017, at http://linkhumans.com/employer-branding/ loreal-employer-value.

54 Ronald J. Alsop, “Cultural Awareness,” Work- force Management 90 (July 2011): 42.

55 Brett Minchington, “Where to Next for Employer Branding?” Human Resources Maga- zine 16 (October/November 2011): 22.

56 Small Business Association, “Small Business Profile, 2016.” Accessed January 3, 2017, at www.sba.gov/sites/default/files/advocacy/ all_profiles_10_18_16.pdf.

57 Kelly Brent Massey and Nathanael Campbell, “Human Resource Management: Big Problem for Small Business,” Entrepreneurial Executive 18 (2013): 77–88.

58 Dan Emerson, “When to Outsource HR Duties and When to Hire,” Finance & Commerce (February 20 2013). Accessed May 7, 2014, at http://finance-commerce.com/2013/02/ when-to-outsource-hr-duties-and-when-to-hire/.

59 Susan J. Wells, “Big Fish, Small Ponds,” HR Magazine 58 (July 2013): 30–36.

60 Jenny Hirschkorn, “Business Etiquette: The Importance of Cultural Sensitivity,” The Tele- graph online (January 30, 2014). Accessed January 5, 2017, at www.telegraph.co.uk.

61 DeeDee Doke, “Perfect Strangers,” HR Maga- zine 49 (December 2004): 62–68.

62 Richard Miller, “Taste for Risk Varies Across Europe,” Business Insurance 43 (September 28, 2009): 9–10.

63 Stanley Bing, “Big Questions in the Middle Kingdom,” Fortune 167 (January 14, 2013): 100.

64 Norm Kamikow, “Lost in Translation,” Chief Learning Officer 8 (September 2009): 4.

65 Pankaj Ghemawat, “The Cosmopolitan Corpora- tion,” Harvard Business Review 89 (May 2011): 92–99.

66 Erin Meyer, “When Culture Doesn’t Translate,” Harvard Business Review, October 2015, p. 6.

67 Ibid. 68 “Cultural Gaps Can Spell Merger Disaster,”

Executive Leadership 28 (March 2013): 4. 69 Robert Whipple, “Avoid Common Major Pitfalls

of Restructuring,” T+D 67 (September 2013): 60–63.

70 John Freivalds, “Nokia Comes to the US: Cul- tural Differences,” MultiLingual 20 (September 2009): 30–31.

71 David Kesmode, “Bitter Brew: The Continued Budweiser/InBev Culture Clash,” Wall Street Journal online (May 2, 2011). Accessed May 7, 2014, at http://blogs.wsj.com/deals/2011/05/02/ bitter-brew-the-continued-budweiserinbev- culture-clash/.

72 Matthew Boyle, Matthew Campbell, and Thomas Buckley, “SABMiller Better Get Ready for a CEO Who Doesn’t Like to Have Fun,” Bloomberg online (October 9, 2015). Accessed January 5, 2017, at www.bloomberg.com.

73 Anumeha Chaturvedi, “Loving It in Tokyo,” Business Today 20 (August 21, 2011): 127.

74 Brad Klontz, “Multi-Culti Competence,” On Wall Street 23 (August 2013): 32–34.

75 Kathy Novak, “Never Say No! South Korea’s Pressure-Cooker Work Culture,” CNN (July 23, 2015). Accessed January 5, 2017, at www.cnn. com.

76 “South Korea’s Hangover,” Al Jazeera (February 5, 2016). Accessed January 5, 2017, at www. aljazeera.com.

77 Kathryn Tyler, “What Are Global Cultural Competencies?” HR Magazine 56 (May 2011): 44–46.

78 Julie Barker, “The Cultural Divide,” Incentive 182 (March 2008): 2–6. Cultural barriers are not easily overcome.

79 Susan Rohwer, “Balancing Family and Work Shouldn’t Be Hazardous to Your Employment,” The Los Angeles Times online (February 19, 2014). Accessed January 17, 2017, at www .latimes.com.

80 Lisa Fernandez and John Schuppe, “Yahoo Expands Maternity Leave After Banning Tele- commuting,” CNBC online (April 30, 2013). Accessed January 17, 2017, at http://www.cnbc .com/id/100689956.

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http://www.cnbc.com/id/100689956

http://www.latimes.com/

http://www.aljazeera.com/

http://www.cnn.com/

http://www.telegraph.co.uk/

http://www.gallup.com/businessjournal/200123/strengths%E2%80%90based%E2%80%90cultures%E2%80%90attract%E2%80%90top%E2%80%90talent.aspx?utm_source=alert&utm_medium=email&utm_content=morelink&utm_campaign=syndication

http://www.shrm.org/

http://www.forbes.com/

http://www.shrm.org/

http://www.bloomberg.com/

http://blogs.wsj.com/deals/2011/05/02/bitter%E2%80%90brew%E2%80%90the%E2%80%90continued%E2%80%90budweiserinbev%E2%80%90culture%E2%80%90clash/

http://financecommerce.com/2013/02/when%E2%80%90to%E2%80%90outsource%E2%80%90hr%E2%80%90duties%E2%80%90and%E2%80%90when%E2%80%90to%E2%80%90hire/

http://www.sba.gov/sites/default/files/advocacy/all_profiles_10_18_16.pdf

http://linkhumans.com/employer%E2%80%90branding/loreal%E2%80%90employer%E2%80%90value

http://www.pwc.com/us/en/careers/campus/why%E2%80%90pwc/career%E2%80%90growth.html

http://www2.deloitte.com/us/en/pages/human%E2%80%90capital/articles/introduction%E2%80%90human%E2%80%90capital%E2%80%90trends.html

http://www.pcworld.com/article/3049645/how%E2%80%90the%E2%80%90cloud%E2%80%90is%E2%80%90transforming%E2%80%90hr.html

2.1 Discuss what ethics means and the sources of ethical guidance.

2.2 Explore human resource management’s (HRM) role in creating an ethical culture and a code of ethics.

2.3 Define human resource ethics.

MyLab Management Improve Your Grade!

If your professor is using MyLab Management, visit www.pearson.com/mylab/management for videos, simulations, and writing exercises.

Business Ethics, Corporate Social Responsibility, and Sustainability

LEARNING OBJECTIVES After completing this chapter, students should be able to:

2.4 Explain the concepts and practices related to corporate social responsibility and corporate sustainability.

2.5 Describe a social audit.

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

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http://www.pearson.com/mylab/management

LEARNING OBJECTIVES After completing this chapter, students should be able to: Choosing how ethical and socially responsible an organization needs to be and when it should be brings up difficult issues all managers may have to address as they perform their duties. These issues can and do shape their decisions. HR professionals play a significant role in help- ing organizations start and stay on a path of ethical practice, corporate social responsibility, and sustainability. Let’s explore the role of HR professionals in managing ethical obligations and considerations related to corporate social responsibility and sustainability.

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

Business Ethics The past corrupt conduct of corporations such as WorldCom and Enron and the senior managers who led them provides deplorable examples of just how unethical company leadership can be. We also forgot to guard against the type of ethical abuses that ultimately bankrupted companies such as Bear Stearns and Lehman Brothers. Unfortunately, unethical behavior manifests in other ways. For exam- ple, Volkswagen (VW) distinguished itself from the competition when it developed the so-called clean diesel engine. The company falsely advertised these engines as good for the environment

2.1 Discuss what ethics means and the sources of ethical guidance.

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

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30 PART 1 • SETTING THE STAGE

because they emitted low levels of harmful nitrogen oxides. However, it was revealed that VW knowingly installed software, which, when the car was being tested for emissions, cleaned these pollutants from the exhaust. U.S. law enforcement agencies determined that the deception started in 1991 involving not only top executives but also lower level engineers.3 Since the news came to light, VW’s CEO resigned and numerous engineers were fired.4 Andrew McCabe, FBI deputy director, stated “It is now clear that Volkswagen’s top executives knew about this illegal activity and deliberately kept regulators, shareholders and consumers in the dark—and they did this for years.”5

CEOs should be clear that unethical behavior is not acceptable. In one survey, 67 percent of investors said they would move their account if they discovered the company was involved in unethical behavior.6 Jeff Immelt, General Electric’s (GE) CEO, begins and ends each annual meeting of 220 officers and 600 senior managers by restating the company’s fundamental integrity principles: “GE’s business success is built on our reputation with all stakeholders for lawful and ethical behavior.”7 At GE, when it comes to integrity violations, it is one strike and you are out. There are no second chances.8 The focus should be on just doing the right thing. The image of the business world would be in much better shape if this simple advice were followed. Hopefully, ethical standards are improving.

Most of the 500 largest corporations in the United States now have a code of ethics, which encompasses written conduct standards, internal education, and formal agreements on industry standards, ethics offices, social accounting, and social projects. Even so, business ethics scandals continue to be headline news. Lying on résumés, obstruction of justice, destruction of records, stock price manipulation, cutting corners to meet Wall Street’s expectations, fraud, waste, and abuse are unfortunately occurring all too often when those in business decide to make poor ethi- cal choices. Then, there are the corporate executives that took home millions even though their company failed and employees were laid off. Even more noteworthy is that some are rewarded for bad behavior. For instance, Jeff Smisek, former CEO of United Continental Holdings, was paid a severance package worth a whopping $36.8 million. He left the airline following alleged participation in a corruption scandal.9

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

Compliance with the law sets the minimum standard for ethical behavior; ethics, however, is much more. There must be leaders who are able and willing to instill ethics throughout the culture of the organization. Ethics is about deciding whether an action is good or bad and what to do about it if it is bad. Ethics is a philosophical discipline that describes and directs moral conduct. Those in management make ethical (or unethical) decisions every day. Do you hire the best-qualified person, who is a minority? Do you forget to tell a candidate about the dangerous aspect of a certain job? Some ethical decisions are major and some are minor. But decisions in small matters often set a pattern for the more important decisions a manager makes. Attitudes such as “It’s standard practice,” “It’s not a big deal,” “It’s not my responsibility,” and “I want to be loyal” are simply not acceptable.10 The Roman philosopher Cicero echoed this when he said, “It is a true saying that one falsehood leads easily to another.”11 In the sixteenth century, Sir Thomas More said, “If virtue were profitable, common sense would make us good and greed would make us saintly.”12 More knew that virtue is not profitable, so people must make hard choices from time to time.

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

HR Web Wisdom

International Business Ethics Institute www.business-ethics.org

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

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CHAPTER 2 • BuSINESS ETHICS, CoRPoRATE SoCIAl RESPoNSIBIlITy, ANd SuSTAINABIlITy 31

Laws also offer guidance to ethical behavior, prohibiting acts that can be especially harmful to others. They codify what society has deemed to be unacceptable.13 If a certain behavior is ille- gal, most would consider it to be unethical as well. There are exceptions, of course. For example, through the 1950s, laws in most southern states relegated black Americans to the backs of buses and otherwise assigned them inferior status. Martin Luther King Jr. resisted such laws and, in fact, engaged in civil disobedience and other nonviolent forms of resistance to their enforcement. King won the Nobel Peace Prize for his efforts.

Two conditions must exist if an individual or organization is to be considered ethical. First, ethics consists of the strength of the relationship between what an individual or an organization believes to be moral and correct and what available sources of guidance suggest is morally cor- rect. For example, suppose a manager believes it is acceptable not to hire minorities, even though almost everyone condemns this practice. This person would not be considered ethical. Having strong beliefs about what is right and wrong and basing them on the proper sources may have little relationship to what one does.

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

For most professionals, there are codes of ethics that prescribe certain behavior. Without this conscience that has developed, it might be easy to say, “Everyone does it,” “Just this once won’t hurt,” or “No one will ever know.” Some still believe that greed is acceptable if the Equal Employment Opportunity Commission (EEOC) or other regulatory agencies do not find out.14 Fortunately, the HRM profession subscribes to a code of ethics, which we discuss later in this chapter.

Legislating Ethics In 1907, Teddy Roosevelt said, “Men can never escape being governed. If from lawlessness or fickleness, from folly or self-indulgence, they refuse to govern themselves, then in the end they will be governed [by others].”15 Many contend that ethics cannot be legislated. Although laws cannot mandate ethics, they may be able to identify the baseline separating what is good and what is bad. Much of the current legislation was passed because of business ethics breakdowns. There have been at least four attempts to legislate business ethics since the late 1980s. We discuss some of these laws next.

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

FEDERAL SENTENCING GUIDELINES FOR ORGANIZATIONS ACT The second attempt occurred with the passage of the 1992 Federal Sentencing Guidelines for Organizations (FSGO) Act, which outlined an effective ethics training program and explained the seven minimum requirements for an effective program to prevent and detect violations.16 The FSGO promised softer punishments for wayward corporations that already had ethics programs in place. In the law were recommendations regarding standards, ethics training, and a system to anonymously report unacceptable conduct. Executives were supposed to be responsible for the misconduct of those lower in the organization. If executives were proactive in their efforts to prevent white-collar crime, it would lessen a judgment against them and reduce the liability. Organizations responded

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32 PART 1 • SETTING THE STAGE

by creating ethics officer positions, installing ethics hotlines, and developing codes of ethics. But it is one thing to have a code of ethics and quite another to have this code instilled in all employees from top to bottom.

CORPORATE AND AUDITING ACCOUNTABILITY, RESPONSIBILITY, AND TRANSPARENCY ACT The third attempt at legislating business ethics was the Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002, which criminalized many corporate acts that were previously relegated to various regulatory structures. Known as the Sarbanes–Oxley Act, its primary focus is to redress accounting and financial reporting abuses in light of corporate scandals.17 The Sarbanes–Oxley Act was intended to eliminate or at least reduce conf licts of interest by requiring audit-committee-level pre-approval for non-audit services auditors at companies they audit and enforcing a code of ethics on senior client financial management.18 The act contains broad employee whistle-blower protections that subject corporations and their managerial personnel to significant civil and criminal penalties for retaliating, harassing, or discriminating against employees who report suspected corporate wrongdoing. The whistle- blower protections of the act apply to corporations listed on U.S. stock exchanges; companies otherwise obligated to file reports under the Securities and Exchange Act; and officers, employees, contractors, subcontractors, and agents of those companies.

The act states that management may not discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee protected by the act. It protects any employee who lawfully provides information to governmental authorities concerning conduct he or she reasonably believes constitutes mail, wire, or securities fraud; violations of any rule or regulation issued by the Securities and Exchange Commission (SEC); or violations of any other federal law relating to fraud against shareholders. The act evidently has teeth because in the Bechtel v. Competitive Technologies Inc. (2003) Supreme Court case involving wrongful termination under Sarbanes–Oxley’s whistle-blower protection rule, the Court ruled that the company violated the act by firing two employees and ordered them reinstated. They were fired because during a meet- ing they had raised concerns about the company’s decision not to report, on its SEC filing, an act they thought should have been disclosed.19

The law prohibits loans to executives and directors. It requires publicly traded companies to disclose whether they have adopted a code of ethics for senior officers. The act does not require banks and bank-holding companies that report to the SEC to have a code of ethics, but if an SEC reporting company does not have one, it must explain why.20 However, as former SEC Chairman Arthur Levitt said, “While the Sarbanes–Oxley Act has brought about significant change, the greatest change is being brought about not by regulation or legislation, but by humiliation and embarrassment and private rights of action.”21

DODD–FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT The fourth, the Wall Street Reform and Consumer Protection Act (Dodd–Frank Act), was signed into law in 2010. The act was brought on by the worst financial crisis since the Great Depression, which resulted in the loss of 8 million jobs, failed businesses, a drop in housing prices, and wiped out personal savings of many workers. As the financial crisis advanced, it became clear that executive compensation played a major role in the financial services sector as well as in the capital markets following the collapse of investment services firms such as Lehman Brothers, Merrill Lynch, Bear Stearns, and AIG.22 The Dodd–Frank Act enhances the transparency of executive compensation practices. The act requires the companies that trade stock on public exchanges to comply with several provisions of which we describe three. The first provision requires say on pay. Say on pay gives company shareholders the right to vote yes or no on executive compensation. Although the say on pay provision guarantees shareholders the right to vote on executive compensation proposals, the vote is non-binding. The non-binding vote advises the company’s board of directors of possible concerns about the structure of executive compensation packages, including excessive perks and the lack of clarity between compensation and business results. The board may choose to modify the proposed compensation package.

The second provision details independence requirements for compensation committee members and their advisors, such as compensation consultants and legal counsel. Members of compensation committees typically receive compensation for their services, and this practice is acceptable. However, possible violations of the Dodd–Frank independence requirement may arise when at least one committee member also receives compensation as a company employee. For

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example, a compensation committee member who also serves as the company’s executive vice president may be considered violating the independence requirement.

The third provision addresses whistle-blower protection. In the legal use of the term, a whis- tle-blower is someone who participates in an activity that is protected. Corporate whistleblowing involves ethics, a topic of this chapter. It requires an individual to choose between personal ethics and the status quo. Often whistle-blowers view themselves as the company’s conscience.23 The use of whistle-blowers has been around since 1863 when President Abraham Lincoln signed into law the Federal False Claims Act, which was designed to protect the United States from purchases of fake gunpowder during the Civil War.24 The number of whistle-blower suits has increased dra- matically in recent years under federal and state laws aimed at uncovering fraud and protecting the public. Since 2007, the Justice Department recovered more than $3 billion in taxpayer funds thanks to whistle-blowers, who originated hundreds of lawsuits.25 In 2015 alone, whistle-blowers shared $501 million of the proceeds.26

☛ F Y I The number of whistle-blower tips has increased dramatically since the passage of the Dodd–Frank Act:

$ Fiscal Year 2011: 334 $ Fiscal Year 2012: 3,001 $ Fiscal Year 2013: 3,238 $ Fiscal Year 2014: 3,620 $ Fiscal Year 2015: 3,923 $ Fiscal Year 2016: 4,21827

The Dodd–Frank Act contains a whistle-blower protection provision, which is shaped after the successful IRS program. In passing the act, Congress believed that award programs were a good method to get people to provide fraud information to responsible law enforcement officials. The act requires the Securities SEC to give an award to qualified whistle-blowers of between 10 and 30 percent of the total amount obtained if the information is voluntarily provided and leads to a successful enforcement or related action. The act also improves whistle-blowers’ retaliation protection from their employers through the expansion of the whistle-blower protections of the Sarbanes–Oxley Act of 2002. Firms may not directly or indirectly discharge, demote, suspend, threaten, harass, or in any way discriminate against whistle-blowers that provide information to the SEC as specified in the program.28 This is important because in the past whistle-blowers often were fired, demoted, blacklisted, or quit under duress. Former SEC Chair Mary L. Scha- piro said, “While the SEC has a history of receiving a high volume of tips and complaints, the quality of the tips we have received has been better since Dodd–Frank became law, and we expect this trend to continue.”29 The most common complaint categories reported by whistle- blowers were corporate disclosures and financials (22 percent), fraud offerings (156 percent), and manipulation (11 percent).30 Until the end of 2016, the largest award to a whistle-blower totaled $30 million.31

Many believe that information provided by whistle-blowers is much more effective in uncov- ering wrongdoings than are external auditors. In testimony to the Senate Banking Committee, Certified Fraud Examiner Harry Markopolos stated that “whistle-blower tips detected 54.1 percent of uncovered fraud schemes in public companies. External auditors detected a mere 4.1 percent of fraud schemes.”32

Companies have some uneasiness regarding the whistle-blower provision of the Dodd–Frank Act.33 A recent survey of senior legal, compliance, and HR executives at publicly traded or highly regulated companies found that 96 percent expressed either moderate or great concerns about potential whistle-blower complaints.34 The major concern is that the rules run counter to a firm’s internal compliance efforts.35 Companies are afraid that employees will not go through internal channels first and instead go directly to government authorities to collect the reward.36 Another fear is that an employee might have another grievance with the company and use the whistle- blower provision to get back at the company.

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34 PART 1 • SETTING THE STAGE

Ethical Culture Mark Twain once said, “Always do right. This will gratify some people and astonish the rest.”37 This is certainly good advice for both employees and employers if the firm wants to create an ethical culture. Saying that a company has an ethical culture and having one may be two differ- ent things. Culture is concerned with the way people think, which affects the way that they act. Changing an organization’s culture thus requires modifying the common way of thinking of its members.38 Organizations with strong ethical cultures take steps to ensure that their standards are widely accessible, promoted, and followed by their leaders and employees.39 For example, the Volkswagen debacle was not supposed to happen. The Volkswagen Code of Conduct was 24 pages long and had a foreword by Martin Winterkorn, who was then the company’s CEO, and other top executives saying, “We stand for respectable, honest, and actions in everyday business that are in accordance with rules, and we commit ourselves to the following Code of Conduct.”40 Even with the ethical code, it is apparent that Volkswagen’s top management pursued business as usual.

One way for a firm to create and sustain an ethical culture is to audit ethics, much like a company audits its finances each year.41 An ethics audit is simply a systematic, independent, and documented process for obtaining evidence regarding the status of an organization’s ethical culture. It takes a closer look at a firm’s ethical culture instead of just allowing it to remain unexamined. An ethical culture is made up of factors such as ethical leadership, accountability, and values. The climate with top management is fundamental to a company’s ethical culture.42 Ethical leadership begins with the board of directors and CEO and contin- ues to middle managers, supervisors, and employees.43 Building an ethical culture that lasts requires a foundation of practices that continue even when leaders change.44 The following Watch It video illustrates how employees and members of management are brought together to enact a change within the company. Their goal is to limit the negative environmental impacts of their company as much as possible by applying the best practices concept to their everyday activities.

2.2 Explore human resource management’s (HRM) role in creating an ethical culture and a code of ethics.

Watch It 1 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Patagonia: Ethics and Social Responsibility and to respond to questions.

According to the Corporate Executive Board in Arlington, Virginia, companies with weak ethical cultures experience 10 times more misconduct than companies with strong ethical cul- tures.45 In workplaces with a strong ethical culture, only 4 percent of employees feel pressure to compromise standards and commit misconduct compared to 15 percent in a weaker culture.46 That’s a noteworthy difference. As important as endorsing ethical cultures is, more companies need to get on board. A survey of compliance and ethics professionals revealed that only half maintain that promoting an ethical culture is a priority.47 Perhaps this is the case because only 13.3 percent believe that management embraces an ethical culture as a primary objective of ethics programs. The results are not much better when it comes to their view of the board of directors’ values. Only 15.6 percent of the respondents saw creating an ethical culture as the board’s primary objective.

For organizations to grow and prosper, good people must be employed. Recent studies suggest that six personality characteristics are useful predictors of ethical individuals.48 Individuals who

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are conscientious and morally attentive are more likely to recognize whether activities are ethical. Dutiful employees and those who are customer-oriented are more likely to take ethical challenges seriously. Individuals who are highly proactive and assertive are more likely motivated to rectify them. Dov Seidman, a management guru who advocates corporate virtue to many companies, believes that companies that “outbehave” their competitors ethically will generally outperform them financially.49 Further, according to the National Association of Colleges and Employers, the ethical—or unethical—behavior of an organization is a critical factor for new college graduates seeking jobs.50

Selecting the right people doesn’t ensure a strong ethical culture. Unfortunately, good people sometimes make unethical choices because the organization has allowed and reinforced dysfunc- tional behavior. A body of research suggests that there are five common ways that companies may lead good employees to make unethical choices:

$ It is psychologically unsafe to speak up. $ There is excessive pressure to reach unrealistic performance targets. $ Conflicting goals provoke a sense of unfairness. $ Ethical behavior is not part of the routine conversation. $ A positive example isn’t being set.51

Organizations need to be willing to change their ways. By fostering a strong ethical culture, firms are better able to gain the confidence and loyalty of their employees and other stakeholders, which can result in reduced financial, legal, and reputation risks, as well as improvements in orga- nizational performance. Organizations are redesigning their ethics programs to facilitate a broader and more consistent process that incorporates the analysis of outcomes and continual improve- ment. To build and sustain an ethical culture, organizations need a comprehensive framework that encompasses communication of behavior expectations, training on ethics and compliance issues, stakeholder input, resolution of reported matters, and analysis of the entire ethics program. Well- designed training programs can educate employees about what is and is not ethical. Effective training starts with the recognition that problems such as conflicts of interest are not recogniz- able to many employees.52 Oftentimes, companies just assume that employees naturally know the difference, which is not always the case. To make it work, involvement by top management is certainly necessary.

Code of Ethics A distinction needs to be made between a code of conduct and a code of ethics; the former should tell employees what the rules of conduct are. A code of ethics establishes the rules that the organization lives by. It helps employees know what to do when there is not a rule for something.53 Jim Ward, associate vice president of ethics and compliance at Georgetown Uni- versity, summed it up by saying, “You can’t draft enough rules to cover everything.”54 A broad- based participation of those subject to the code is important. For a company to behave ethically, it must live and breathe its code of ethics, train its personnel, and communicate its code through its vision statements. It cannot just print a manual that sits on a corporate shelf. The code is a statement of the values adopted by the company, its employees, and its directors and sets the official tone of top management regarding expected behavior. Many industry associations adopt such codes, which are then recommended to members. There are many kinds of ethical codes. An excellent example of a code of ethics was developed by the Society for Human Resource Management (SHRM). The six core provisions in the SHRM code of ethics are professional responsibility, professional development, ethical leadership, fairness and justice, conf licts of interest, and use of information.55 Another excellent example is the code of ethics developed by the International Ethics Standards Board for Accountants (IESBA). The IESBA recognizes that accountants and auditors feel bound by client confidentiality rules, making them reluctant to report any wrong doing. These ethical standards are designed to guide accountants who face such conf licts of interest. Stavros Thomadakis, chairman of the IESBA, stated that “It’s trying to bring about early, early detection, if you will, but also early action by management authorities.”56

There are good reasons to encourage industry associations to develop and promote codes of ethics. It is difficult for a single firm to pioneer ethical practices if its competitors take advantage of

code of ethics Establishes the rules that the organization lives by.

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36 PART 1 • SETTING THE STAGE

unethical shortcuts. For example, U.S. companies must comply with the Foreign Corrupt Practices Act (FCPA), which prohibits bribes of foreign government officials or business executives. Obvi- ously, this law does not prevent foreign competitors from bribing government or business officials to get business, and such practices are common in many countries. This reality sometimes puts U.S. companies at a disadvantage. For instance, Johnson Controls violated the FCPA because one of its Chinese subsidiaries made nearly $5 million in illegal payments to employees of Chinese government-owned shipyards. The company avoided charges for its violations because it took immediate actions to rectify the problem. Johnson Controls’ CEO Alex Molinaroli showed that the company is poised to address ethical problems. He said: “The ability to identify and address issues when they do occur, reflects the company’s commitment to ethics, responsible management practices and the good governance systems that uphold them.”57

Just what should be included in a code of ethics? Topics typically covered might be business conduct, fair competition, and workplace and HR issues. For example, employees in purchas- ing would be shown what constitutes a conflict of interest. The same would occur for sales. At Walmart, it is considered unethical to accept gifts from suppliers. Gifts are either destroyed or given to charity. Fidelity International recently fired two Hong Kong-based fund managers over breaches of its internal code of ethics. Fidelity said, “Our routine checks discovered a pattern of behavior that breached our internal policies.”58 Some companies even include the subject of romantic relationships, which can sometimes lead to conflicts of interest. For instance, Fifth Third Bancorp fired its general counsel because she was engaged in a romantic relationship with Fannie Mae’s CEO. Fifth Third’s code of ethics states: “We all must avoid actual or apparent conflict of interest with Fifth Third or its Customers.”59 Fifth Third Bancorp’s leadership considered the relationship a possible conflict of interest because both companies conduct business with each other, and the appearance of conflict of interest even where one has not occurred could lead to public perception of impropriety. Fannie Mae’s approach was less punitive because it did not fire its CEO. Instead, the company’s board of directors prohibited the CEO from conducting any business transactions with Fifth Third Bancorp.

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

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

We have made a case for creating both an ethical culture and code of ethics. Is one more important than the other in promoting ethical business practice and employee behavior? Not sur- prisingly, there are differing opinions. Some business experts weigh culture as more important. For instance, Melissa Stapleton Barnes, chief ethics and compliance officer at Eli Lilly, maintains that emphasizing rules over culture can be detrimental to the organization because employees might seek loopholes to get around them.60 Rather, she believes that promoting an ethical culture motivates employees to seek ways to act ethically. Others assert that culture is too vague and should not be relied on to guide ethical behavior. Brian Beeghly, vice president of compliance at Johnson Controls, suggests that culture should be aligned with concrete practices, including compliance programs, training, policies, and procedures.61 Perhaps maintaining an ethical culture and enforcing a code of ethics are likely to provide the best outcomes.

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

2.3 Define human resource ethics.

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

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Some believe that those in HR have a great deal to do with establishing an organization’s conscience.62 In fact, according to a SHRM report, integrity and ethical behavior rank in the top five competencies needed for senior HR leaders.63 Certainly ethics is a quality the HR profes- sionals should possess; it is the duty of HR professionals to help create an ethical climate in their organization.64

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

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

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

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

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

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

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

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

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

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

HR should review, develop, and enforce organizational policies to ensure a high level of eth- ics throughout the organization. All employees should know what is ethical and unethical in their specific area of operations. It is insufficient to say that everyone should behave ethically. Let’s turn our attention to two areas where HR professionals use their expertise to promote practices and employee behavior in organizations: pay and training.

Linking Pay to Ethical Behavior The City of Los Angeles sued Wells Fargo Bank based on allegations that the company engaged in unlawful and fraudulent conduct. Bank employees routinely opened customer accounts with- out their authorization, and those accounts came with monthly fees. Los Angeles City Attorney Michael Feuer maintained that bank management was regularly, “abusing employees and telling them ‘to do whatever it takes’ to reach quotas on the number of new accounts they must open.”65 Shortly after the suit was filed, Wells Fargo agreed to settle the case out of court without admit- ting wrongdoing.66 The bank also agreed to reimburse customers for all of the fees associated with accounts the accounts in question. Clearly, management sent the signal that performance would be rewarded based on opening a highly unrealistic number of new accounts, and employees felt pressure to perform. Since this incident took place, Wells Fargo restructured its compensa- tion plan. Spokeswoman Mary Eshet stated that the new compensation plan, “eliminates sales goals, measures performance based on customer experience and adds more oversight and risk management.”67

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Wells Fargo is just one of many companies where the ethics of pay practices are in question, highlighting the importance of linking pay to performance when discussing ethics. It is well known in the compensation world that “what you reward is what you get.” If the statement is correct, then a problem exists because most companies do not link pay to ethical behavior but base pay on entitlement and custom.68 A survey of 358 compliance and ethics professionals by the Society of Corporate Compliance and Ethics (SCCE) and Health Care Compliance Association found that only a few companies have made ethics and compliance a process for determining how employees are compensated, and only about one company in six ties employee bonuses and incentives to ethical performance.69 In another survey, when asked how much impact the ethics and compliance function has on the compensation process for executives, just 34 percent of respondents said it had some or a great deal of impact. The majority indicated that compliance and ethics played very little (27 percent) or no role (29 percent), and the balance was unsure of the role of ethics and compliance.70 CEO Roy Snell of SCCE said, “The net result is that there is more work to be done in aligning business practices with stated commitment to compliant, ethical behavior.”71 For example, ethical expectation could be made part of the performance review and the results tied to pay raises.72 As one author recently stated, “When employees behave in undesirable ways, it’s a good idea to look at what you’re encouraging them to do.”73

☛ F Y I $ Eighty-one percent of companies provide ethics training.74

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

Companies that consistently rank high on the lists of best corporate citizens tend to make eth- ics training part of a company-wide initiative to promote integrity.75 Ethics training should be part of a proactive, not reactive, strategy. Regular training builds awareness of common ethical issues and provides tools for effective problem solving. Warren Buffett once said, “Pick out associates whose behavior is better than yours and you’ll drift in that direction.”76 Ethics training should begin at the top and continue through all levels in the organization.77 Ethics training should also take into consideration the differences in these levels. Although boards of directors and top man- agement set the ethical tone, middle managers are the ones who will likely be the first to receive reports of unethical behavior. Unfortunately, many companies do not follow this prescription. A survey of ethics and compliance officers revealed that board members receive less training about important matters including cybersecurity, workplace harassment, and conflicts of interest than others in the company.78 For instance, only 12 percent provides training to board members about workplace harassment versus 76 percent for employees.

KPMG believes that there are three fundamental factors in handing ethics issues: provide multiple channels for raising alarms, eliminate fear of retaliation for those who raise questions, and ensure consistent investigation and resolution of all matters reported. Individuals who report potential ethics violations could be subject to retaliation, so KPMG monitors performance reviews and other metrics to proactively identify retaliatory behavior. The credibility of the program requires all reports to be consistently investigated and resolved.79

Cisco created a unique ethics training program that showcased cartoon contestants singing about various ethical workplace situations found in Cisco’s Code of Business Conduct. Jeremy Wilson, manager, ethics office for Cisco Systems, Inc., said, “We wanted what was right for our employees, based upon our own risk analysis.” When Cisco created its program, it invited input

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If your professor has assigned this, go to www.pearson.com/mylab/management to complete the HR Bloopers exercise and test your ap- plication of these concepts when faced with real-world decisions.

H R B L O O P E R S

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

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

☛ F Y I $ Eighty-eight percent feel their job is more fulfilling when they are provided opportunities to make

a positive impact on social or environmental issues.83

from more than 120 people from departments across the organization, including legal, human resources, IT security, and records management.80

Ethics training for global organizations is more complicated than preparing the training for U.S. employees. One must also train for the country in which the global company operates. Since 1994, LRN has helped 15 million people at 700 companies across the world simultaneously navigate legal and regulatory environments and foster ethical cultures.81 A few of their customers include CBS, Dow Chemical, eBay, 3M, and Siemens. Chris Campbell, creative director at LRN, says, “Localization is as important as the accuracy of the translation process. Learners need to be able to connect in a way that is believable to them.”82

2.4 Explain the concepts and practices related to corporate social responsibility and corpo- rate sustainability.

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

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

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40 PART 1 • SETTING THE STAGE

Corporate Social Responsibility As previously stated, CSR is the implied, enforced, or felt obligation of managers, acting in their official capacity, to serve or protect the interests of groups other than themselves. A recent survey revealed that 86 percent of consumers wanted companies to tell them more about the results of CSR efforts.84 Another survey revealed that 58 percent of respondents consider a company’s social and environmental commitments when deciding where to work: 58 percent said they would choose to work for a socially responsible company, even if the salary was less, and 51 percent indicated they won’t work for a company that doesn’t have strong social or environmental commitments.85 Many companies are listening. About 60 percent of companies offer workers paid time off to volunteer, and 33 percent of them volunteered in 2015—up from 28 percent in 2013.What do the following U.S. companies have in common: Johnson & Johnson, Cisco Systems, Inc., McCormick & Co, Inc., Allergan, plc, and Prologis Inc.? They have been identified as having a commitment to excellence in CSR and are included in the 2017 Global 100 Most Sustainable Corporations in the World.86 These companies have demonstrated the ability to manage the “triple bottom line” of social responsibility (society, environment, and economy).87 They represent the top 5 percent of socially responsible companies.

CSR is the model in which economic, social, and environmental responsibilities are satisfied concurrently.88 Figure 2-1 illustrates the layers of responsibility associated with CSR. When a corporation behaves as if it has a conscience, it is said to be socially responsible. CSR considers the overall influence of corporations on society at large and goes beyond the interests of share- holders. It is how a company behaves toward society. In many companies, social responsibility has moved from nice to do to must do.89 More and more companies are issuing CSR reports that detail their environmental, labor, and corporate-giving practices. Some firms, such as Burger King, have created the position of director of CSR.

Apparently, socially responsible behavior pays off on the bottom line. When GE CEO Jeffrey Immelt announced that the company would double its spending on green technology research, it was no grand attempt to save the planet; it was an example of astute business strategy. Immelt said, “We plan to make money doing it.”90 Social responsibility has also impacted the recruiting process. College graduates of today often seek out corporations that have a reputation for being socially responsible, which was not often the case in the past. In fact, job seekers overall tend to be more attracted to organizations known for CSR.91

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

Deborah Leipziger, an Ethical Corporation Institute researcher, said, “The more credible efforts tend to be led by key players within a company.”92 An organization’s top executives usually determine a corporation’s approach to social responsibility. For example, under executive chair- man and (former) CEO Howard Schultz, Starbucks Coffee focuses its corporate responsibility

HR Web Wisdom

Business for Social Responsibility www.bsr.org

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

FIGURE 2-1 Carroll’s Pyramid of Corporate Social Responsibility Source: SHRM Foundation, “HRM’s Role in Corporate Social Responsibility and Environmental Sustainability,” 2012, Alexandria, VA: SHRM Foundation, page 4. Accessed January 14, 2017, at www. shrmfoundation.org.

discretionary

Ethical

legal

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

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

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

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

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CHAPTER 2 • BuSINESS ETHICS, CoRPoRATE SoCIAl RESPoNSIBIlITy, ANd SuSTAINABIlITy 41

efforts on three main areas: ethical sourcing, environmental stewardship, and community involve- ment.93 Starbucks approaches ethical sourcing by helping the farmers and suppliers who grow and produce their products use responsible growing methods. Environmental stewardship has been one of the more difficult activities for Starbucks. After all, Starbucks sells billions of beverages in disposable cups each year in the United States, most of which end up in landfills. The company has invested substantial amounts of money to come up with recyclable cups—one that can be recycled into other paper products again and again. Not only has this process been time consum- ing and expensive, but Starbucks has had to devote substantial time and resources to educating its customers and encourage responsible disposal of empty cups. In addition, Starbucks also looks after the communities where stores are located. It provides financial support and employees are encouraged to get involved in volunteering in their communities. For instance, Starbucks spear- headed the 100,000 Opportunities Hiring Initiative, which is a coalition of companies that offer meaningful work to youths.

The same can be said about leadership’s role in supporting environmental sustainability. For instance, SC Johnson Company collaborated with a European company to develop an environmentally friendly alternative to the original formulation of Saran Wrap, which had come under criticism for containing polyvinyl chloride and is known to have ill side effects. Even though the reformulated Saran Wrap product does not work as well as the original, the company’s leadership decided not to return to the original formulation despite consumer prefer- ences. SC Johnson’s CEO Fisk Johnson III and leadership team faced a dilemma: jeopardize losing customers and market share by replacing the original product with a lesser one or the goodwill the company had developed over the years with consumers and other stakeholders.94 Ultimately, the company sacrificed substantial market share and profits in favor of helping to protect the environment.

One of the best benchmarks for defining social responsibility in manufacturing is the one- page set of operating principles developed 60 years ago by Robert Wood Johnson, then Johnson & Johnson’s chairman of the board. The document is still in use today and addresses supporting good works and charities.95

During the Vietnam War, Dow Chemical gained a bad reputation for not being socially responsible because it produced the deadly chemical agent napalm. As a result, Dow had dif- ficulty recruiting the best scientists and other professionals. To overcome this image, Dow built a campaign that highlighted how Dow has benefitted agricultural production. Once people saw the positive side of Dow, its ability to recruit and retain the best chemists improved.96 However, the chemical industry continues to face widespread public mistrust despite being an enabler of advances that are vital to solving global challenges as well as efforts to improve product and process safety.97

Thus far, only the virtues of CSR have been provided. However, the question of whether businesses should promote CSR is at times hotly debated and not all companies have embraced the concept.98 Some have challenged the concept that doing well is doing good (DWDG). They believe that although appealing to some, DWDG is also profoundly wrong.99 Milton Friedman was a U.S. economist, statistician, academic, and author who taught at the University of Chicago for more than three decades and was a recipient of the Nobel Memorial Prize in Economic Sciences. In his book Capitalism and Freedom, he argued that the only social responsibility of business was to increase its profits. According to Friedman, as a firm creates wealth for its shareholders, society will also be benefited.100 Friedman disciples continue to condemn CSR as a hodgepodge of “value-destroying nonsense.”101

These days, more employers are publicly endorsing a culture of ethics and social responsibil- ity. However, some believe that it is being done more as a public relations campaign. For instance, the Wounded Warrior Project is a not-for-profit organization that helps wounded military service members, particularly facilitating access to mental health services. Television campaigns that showcase service members’ testimonial about how they (and their families) have benefited from the organization’s generosity. However, several employees claimed that the organization’s lead- ership routinely diverted money away from helping wounded service members to throw lavish parties and executives of the organization were subsequently fired. Certainly, Wounded Warrior is a legitimate organization; however, this incident illustrates that leaders’ behavior may sometimes be inconsistent with the mission they declare to uphold.

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42 PART 1 • SETTING THE STAGE

☛ F Y I The 2017 Global 100 Most Sustainable Corporations were most commonly found in the following countries:

$ United States: 19 companies $ France: 12 companies $ United Kingdom: 11 companies $ Canada and Germany: 6 companies $ Netherlands: 5 companies105

Corporate Sustainability Corporate sustainability has evolved from the more traditional view of CSR. According to the World Commission on Environment and Sustainability, the narrow definition of sustainability is, “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”106 The Dow Jones World Sustainability Index (DJSI) provides a good working definition of this term. They define it as, “An approach to creating long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social trends and challenges.”107 In recent years, sustainability has been

Watch It 2 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Co Responsible for Oil Spill Under Fire and to respond to questions.

Brighter Planet, a sustainability technology company, discovered in a recent survey that although more firms are engaging in green activities, the effectiveness of these efforts has declined.103 Some believe that the problem with CSR is that it consists of a universal set of guidelines such as the “triple bottom line” (society, environment, and economy) mentioned previ- ously. To be “socially responsible,” each firm should follow the same guidelines instead of what would be the most appropriate strategy for each firm. Using this logic, it would be more logical for oil companies such as BP to focus on being profitable, yet be an environmentally conscious oil company. Fast-food restaurants such as McDonald’s and retailers such as Walmart should each use a different set of rules to do the same thing in their own industries.

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expanded to include the social, economic, environmental, and cultural systems needed to support an organization. This type of organization can continue both now and in the future. A recent study revealed that 90 percent of the 250 world’s largest companies reported information about their corporate responsibility initiatives.108 Also, 154 U.S. companies voluntarily signed the American Business Act on Climate Pledge to demonstrate their additional commitment to promoting environmental sustainability.109 Among the companies signing the pledge, Berk- shire Hathaway Energy promised to retire more than 75 percent of its coal-fueled generating capacity in Nevada by 2019.

Corporate sustainability may be thought of as being a business and investment approach that strives to use the best business practices to meet the needs of current and future shareholders. According to Louis D. Coppola, executive vice president of the Government & Accountability Institute, “Leaders increasingly understand the critical importance of adopt- ing and implementing strategies, products, services, programs and initiatives that ref lect the twenty-first century business environment, and the interest of investors and important stake- holders.”110 HR professionals play an important role in promoting corporate sustainability objectives. Figure 2-2 illustrates how HR professionals can use their expertise toward this end. Today it relates to how an organization’s decisions could affect society and the environment. Essentially it is about how a firm handles its business while understanding how these decisions may affect others. One could think of corporate sustainability in a business sense as providing long-term profitability. Thus, sustainability should be a fundamental part of business strategy, product development, talent development, and capital investment. Some organizations have emphasized the importance of corporate sustainability by establishing the position of chief sustainability officer.111

Others such as Johnson & Johnson prefer to see it developed into the overall culture of the firm. Tish Lascelle, Johnson & Johnson’s senior director of environment, said, “Sustainability is embedded in our culture. It’s been a part of who we are for more than 65 years, long before the notion of sustainability became trendy.”112 The following Watch It video illustrates how a com- pany has taken to become, and remain, a “mission-driven business” with corporate social respon- sibility as one of its mission’s core values.

HR Web Wisdom

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

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

Watch It 3 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Honest Tea: Corporate Social Responsibility and to respond to questions.

Source: SHRM Foundation, “HRM’s Role in Corporate Social Responsibility and Environmental Sustainability,” 2012, Alexandria, VA: SHRM Foundation, page 8. Accessed January 14, 2017, at www. shrmfoundation.org.

FIGURE 2-2 How to Embed Sustainability Using HRM Tools

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

$ Employee attitudes: Although the research is unclear whether an organization’s commitment to sustainability leads to higher employee retention, it does have posi- tive effects on employee commitment and job satisfaction.

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

$ Employee sustainability goal attainment: Including sustainability targets in evalua- tion and compensation systems can lead to greater attention to and achievement of those goals.

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

$ Employee sustainability behaviors: Supervisory and organizational support can lead to more sustainability behaviors in employees.

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44 PART 1 • SETTING THE STAGE

Numerous companies are working toward becoming eco-friendly. In 2016, approximately 81 percent of the S&P 500 Index companies reported having an active sustainability program in place, up from 20 percent in 2011.113 For instance, Unilever has placed sustainability at the core of its business. The company promised by 2020 to double its sales even as it cuts its environ- mental footprint in half and sources all its agricultural products in ways that don’t degrade the Earth.114 Target’s waste-reduction efforts have cut waste by 70 percent. Home Depot attempts to make sure that wood and lumber sold in its stores come from sustainable forests. Corporate environmental responsibility for McDonald’s focuses on energy efficiency, sustainable packing and waste management, and green restaurant design.115 McDonald’s has eliminated the use of containers made with ozone-depleting chlorofluorocarbons, cut down on the amount and type of packaging it uses, and implemented a program of purchasing goods made from recycled materials. Walmart is working on sustainable initiatives. Solar panels are being installed in all the retailer’s super centers with unused energy being sold back into the energy grid, a cost-saving move for the community.116

Increasingly, environmentally sound and cost-cutting operating procedures are being included in firms’ business plans not only for their own employees, products, and facilities, but also for sup- pliers and trade partners. Walmart Stores Inc. has initiated and promoted sustainability not only in its own stores and production facilities, but also for its U.S. and global suppliers.117 Frito-Lay, which operates the world’s seventh-largest private delivery fleet, has put 176 all-electric box trucks on the road in places such as California, Texas, and the Pacific Northwest. The trucks are expected to cut diesel consumption by 500,000 gallons a year while limiting greenhouse emissions by 75 percent compared with combustion engines. The trucks will also cut annual maintenance costs by as much as $700,000.118 Coca-Cola Enterprises Corporate Responsibility and Sustainability Report stated that they have taken steps to reduce the number of calories per liter by 10 percent by 2020.119

PPG Industries recently issued a corporate sustainability report that provides information about the company’s financial performance, environmental metrics such as greenhouse gas emis- sions and energy use, safety statistics, stakeholder engagement, philanthropic activities, and awards and recognition. In the report, Charles E. Bunch, PPG chairman and CEO, said, “Sustainability is business as usual at PPG. An underlying principle for the company since its founding in 1883, a commitment to sustainability has been crucial to our long-term success.”120 Leading up to 2020, PPG will strive to reduce environmental impact, improve employees’ safety, health and well-being and encourage and report employee charitable donations and volunteerism.121 Dow Chemical’s way of thinking regarding sustainability is, “If you can’t do it better, why do it?” This philosophy is at the very heart of sustainability at Dow. Every decision is made with the future in mind.122

Institutional investors managing more than $1.6 trillion in assets are starting to put pressure on the world’s 30 largest stock exchanges to force companies to improve their sustainability reporting. Twenty-four institutional shareholders said they want it to be easier to judge the envi- ronmental, social, and governance risks of the firms in which they invest.123

Sustainability has also become extremely popular for companies operating in the global envi- ronment. Recently, Danone’s German division switched to a plastic made from plants (not oil) for its Activia yogurt packaging sold in Germany.124 Coca-Cola Enterprises in Great Britain has cut its carbon emissions by 470,000 tons, which is about a third of its 2020 target. It is also recycling 99 percent of the factory waste it produces, with five out of six of its production sites sending zero waste to landfills.125 Global polystyrene leader Styron LLC has more than 2,000 employees at 20 plants worldwide with annual sales of $5 billion. It begins each corporate meeting with the topic of sustainability. Employees’ bonuses are tied in to meeting sustainability goals. Recently, Styron introduced a recycled-content grade of polycarbonate at the Chinaplas trade show in Guangzhou, China.126 Renault partnered with Veolia Environment to build the world’s first zero-emissions, 100-percent renewable energy-reliant car manufacturing plant in Morocco.127

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

2.5 Describe a social audit.

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

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CHAPTER 2 • BuSINESS ETHICS, CoRPoRATE SoCIAl RESPoNSIBIlITy, ANd SuSTAINABIlITy 45

PREPARING FOR EXAMS/QUIZZES

Chapter Summary by Learning Objectives 1. Discuss what ethics means and the sources of ethical

A code of ethics establishes the rules that the organi- zation lives by. Only a few companies have made ethics

and compliance a process for determining how employees are compensated.

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

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

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46 PART 1 • SETTING THE STAGE

PREPARING FOR MY CAREER

P I A Personal Inventory Assessment An additional Personal Inventory Assessment can be found on MyLab Management.

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management to complete the problems marked with this icon .

Questions for Review 2-1. What are ethics and business ethics? 2-2. What are some sources of ethical guidance? 2-3. What laws have been passed to legislate ethics? 2-4. Why is it important to have a code of ethics? 2-5. Regarding business ethics, what does the statement

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

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

2-8. What is corporate social responsibility? 2-9. What does corporate sustainability mean?

2-10. What are some of the practices companies can use to promote sustainability?

Key Terms ethics 29 code of ethics 35 human resource ethics 36

corporate social responsibility (CSR) 39

corporate sustainability 39 social audit 44

E T H I C S D I L E M M A

A Selection Quandary You are being promoted to a new assignment

to Randy if the feelings of the other workers kept him from getting a deserved promotion. At the same time, you feel that your primary responsibility should be to maintain the productivity of the work unit. If your former division fell apart after your departure, it would hurt your reputation, not to mention the company. 2-11. What would you do? 2-12. What factor(s) in this ethics dilemma might influence a person

to make a less-than-ethical decision?

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CHAPTER 2 • BuSINESS ETHICS, CoRPoRATE SoCIAl RESPoNSIBIlITy, ANd SuSTAINABIlITy 47

HRM by the Numbers Paying the Price for Underpaying Workers

An additional HRM by the Numbers exercise can be found on MyLab Management.

HR professionals should ensure that workers are paid for their work on a timely basis. Sometimes, companies pay workers less than what they should and there are various possible reasons such as intent to save money or in error. Either way, paying employ- ees lesser amounts than owed may violate the law. For instance, the Fair Labor Standards Act (FLSA), which we will discuss in Chapter 3, requires employers to pay eligible workers a higher pay for overtime work. Specifically, the overtime pay rate equals 1.5 times the regular hourly pay rate for each additional hour exceeding 40 in a work week.

1. Group 1: 225 workers. Each worker earns a regular hourly pay rate of $18.00. For each of the past 15 work weeks, every- one worked 45 hours.

2. Group 2: 310 workers. Each worker earns a regular hourly pay rate of $21.00. For each of the past 20 work weeks, every- one worked 47 hours.

Every worker received regular pay for all their hours worked, but they did not receive an additional overtime pay amount.

Questions 2-13. Calculate the hourly overtime pay rate for each worker in (a) group 1 and (b) group 2. 2-14. How much money does the company owe all the workers in (a) group 1 over 15 weeks and (b) group 2 over 20 weeks? 2-15. How much money did the company save by not paying all the workers (groups 1 and 2 combined) overtime pay?

Action checklist for managers and HR—responding to allegations of unethical behavior HR takes the lead

Work with managers to ensure that they understand the company’s code of ethics and communicate the procedures for addressing instances of potential ethical violations.

Guide managers through the process of handling employees who are suspected of committing ethical violations.

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48 PART 1 • SETTING THE STAGE

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

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

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

Questions 2-18. From an ethical standpoint, how would you evaluate the mer-

its of Mr. Garbo’s employing Amber? Discuss. 2-19. Now that she is employed, what course would you follow to

address her on-the-job behavior? 2-20. It may be that Mr. Garbo viewed the hiring of Amber as strictly

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

I N C I D E N T 2 Illegal Hiring The Foreign Corrupt Practices Act (FCPA) prohibits U.S. companies from bribing foreign officials; yet, the number of violations each year is stag- gering. Some violations center on the use of unethical HR practices. For example, the banking industry has been investigated for its internship and full-time employment hiring practices. The Bank of New York Mel- lon Corp. (BNY Mellon) gave internships to family members of foreign government officials. The bank’s leadership intended to maintain or increase business with a Middle Eastern sovereign wealth fund. Intern- ship programs are legal and BNY Mellon has a legitimate internship program, but these internships were awarded outside the accepted pro- cedures and criteria used in its program. The U.S. SEC issued a cease- and-desist order, stating that “Delivering them [internships] ‘was seen

by certain relevant [bank] employees as a way to influence the officials’ decisions.”129 This is the first cease-and-desist order of which internship hiring was the subject. Phillip Bezanson, a Bracewell & Giuliani Law LLP (firm) partner stated that “the concept of ‘anything of value’ under the FCPA can be ‘really abstract.’. . .”130 In the end, the bank agreed to pay a $5 million penalty, give up $8.3 million, and pay $1.5 million in interest.131

2-21. What would you have done in response to learning about these facts?

2-22. What factors in this situation might influence a company to make less-than-ethical decisions?

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management for Auto-graded writing questions as well as the following Assisted-graded writing questions:

2-23. Why should a firm want to create an ethical culture?

2-24. Why is everyone not on board about corporate social responsibility?

As a group, identify a company that has been in the news for committing ethical violations, exhibiting poor social responsibil- ity, or engaging in practices that harmed the environment (sustainability). Consider those issues. In addition, review the company’s position on ethics, social responsibility, and sustainability (perhaps from its website). 2-16. What are the main issues pertaining to lapses in ethical practice, failure to be socially responsible, or harmful environ-

mental practices that were reported in the news about this company? 2-17. How does the company’s stated position on ethics, social responsibility, and sustainability (found on the website) differ

from what you have read in the news? Explain.

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CHAPTER 2 • BuSINESS ETHICS, CoRPoRATE SoCIAl RESPoNSIBIlITy, ANd SuSTAINABIlITy 49

Endnotes 1 Kyle Scott, “Business Ethics: Do What’s Right,

or What’s Right Now?” Supervision 72 (July 2011): 8–9.

2 Richard M. Steinberg, “Does Integrity and Ethi- cal Behavior Pay Off?” Compliance Week 10 (June 2013): 44–45.

3 William Boston, Arian Campo-Flores, and Aruna Viswanatha, “FBI Arrests Volkswagen Executive in Emissions Scandal,” The Wall Street Journal online (January 9, 2017). Accessed January 10, 2017, at www.wsj.com; Aruna Viswanatha and Mike Spector, “VW Emissions Cheating Ran Deep and Wide, State Alleges,” The Wall Street Journal online (July 19, 2016). Accessed Janu- ary 10, 2017, at www.wsj.com.

4 Winthrop Quigley, “VW Case Shows Need for Ethics in Cost-Benefit Toolkit,” Albuquerque Journal online (October 15, 2015). Accessed December 1, 2016, at www.abqjournal.com; J. Plungis and D. Hull, “VW’s Emissions Cheating Found by Curious Clean-Air Group,” Bloomberg Business online (September 19, 2015). Accessed January 10, 2017, at www.bloomberg.com.

5 “6 VW Execs Indicted as Carmaker Agrees to $4.3 billion Diesel Cheat Settlement,” Fortune online (January 12, 2017). Accessed January 15, 2017, at www.fortune.com.

6 “Investors Are Looking Closely at Corporate Ethics,” Corporate Board 28 (September 2007): 28.

7 Ben W. Heineman, Jr., “Avoiding Integrity Land Mines,” Harvard Business Review 85 (April 2007): 100–108.

8 Steve Steckler, “The Leadership Challenges Facing HR: Top CHROs Share Learnings and Advice on What’s Next,” People & Strategy 33 (2010): 14–21.

9 Becky Yerak, “Ex-United CEO Got $36.8 Mil- lion Severance Package,” Chicago Tribune online (May 2, 2016). Accessed January 10, 2017, at www.chicagotribune.com.

10 Mary C. Gentile, “Keeping Your Colleagues Honest,” Harvard Business Review 88 (March 2010): 114–117.

11 T. L. Stanley, “Ethics in Action,” Supervision 69 (April 2008): 14–16.

12 Quoted in Robert Bolt, A Man for All Seasons. (New York: Random House) 1962.

13 Bill Streeter, “Regulation Is Not Ethics,” ABA Banking Journal 104 (January 2012): 6.

14 Ikujiro Nonaka and Hirotaka Takeuchi, “The Wise Leader,” Harvard Business Review 89 (May 2011): 58–67.

15 Kenneth D. Lewis, “The Responsibility of the CEO: Providing Ethical and Moral Leader- ship,” Vital Speeches of the Day 69 (October 15, 2002): 6–9.

16 Sheryl L. Hopkins, “How Effective Are Ethics Codes and Programs?” Financial Executive 29 (March 2013): 42–45.

17 Patrick Moran, “Executive Perspective: What We’ve Learned from Sarbanes-Oxley,” Pennsylvania CPA Journal 84 (Summer 2013): 32–35.

18 Thomas M. Behmer, “Sarbanes-Oxley Fails on Auditor Independence,” Accounting Today 27 (January 2013): 13–14.

19 Cathleen Flahardy, “SOX Gives DOL Power to Reinstate Whistleblowers,” Corporate Legal Times 15 (August 2005): 24–26.

20 Melissa Klein Aguilar, “Questions Arise on Timely Ethics Disclosure,” Compliance Week 7 (March 2010): 58–59.

21 Howard Stock, “Ethics Trump Rules, Levitt Says,” Investor Relations Business (April 7, 2003): 1.

22 Paul Schneider, “Dodd–Frank Financial Reform Legislation Addresses Executive Compensa- tion,” Journal of Financial Service Professionals 65 (January 2011): 27–31.

23 Dave Rebbitt, “The Dissenting Voice,” Profes- sional Safety 58 (April 2013): 58–61.

24 Jonathan Lawner and Denise Dickins, “Will There Be Whistleblowers?” Regulation 34 (Summer 2011): 36–40.

25 “IRS Whistleblower Program,” Fiscal Year 2015 Annual Report to Congress (Publication 5241).

26 Ibid. 27 “2016 Annual Report to Congress on the Dodd-

Frank Whistleblower Program,” U.S. Securities and Exchange Commission (2016). Accessed January 3, 2017, at www.sec.gov/whistleblower/ reportspubs/annual-reports/owb-annual- report-2016.pdf.

28 Eileen Z. Taylor and Jordan A. Thomas, “Enhanced Protections for Whistleblowers under the Dodd-Frank Act,” CPA Journal 83 (January 2013): 66–71.

29 Curtis C. Verschoor, “New Whistleblower Rules Broaden Opportunities,” Strategic Finance 93 (September 2011): 13–69.

30 Ibid. 31 “Whistleblower Gets $22 Million from SEC

in Second-Biggest Award,” (August 30, 2016). Bloomberg Web site. Accessed January 10, 2017, at www.bloomberg.com.

32 Anthony M. Alexis, Marcia E. Goodman, and Scott A. Clafee, “New Whistleblower Provi- sions Provide Bounty Incentives and Greatly Expanded Protections,” Insights: The Corporate & Securities Law Advisor 24 (September 2010): 45–50.

33 “Companies Anticipate an Increase in Whistle- blower Claims,” Corporate Board 32 (January/ February 2012): 28–29.

34 “Whistleblower Claims in Dodd–Frank Era Expected,” Financial Executive 28 (January/ February 2012): 11.

35 Jason C. Schwartz and Porter N. Wilkinson, “2011 Year-End Update on Dodd–Frank and SOX Employee Whistleblower Provisions,” Insights: The Corporate & Securities Law Advi- sor 26 (January 2012): 15–22.

36 Michael Washburn, “Former SEC Counsel: Whistleblower Program Shortcomings,” Inter- national Financial Law Review (February 2013): 22.

37 Shele Bannon, Kelly Ford, and Linda Meltzer, “How to Instill a Strong Ethical Culture,” CPA Journal 80 (July 2010): 56–58.

38 Jean Francois Manzoni, “Nurturing a High Integrity Culture,” Rotman Magazine (Winter 2013): 22–27.

39 Janice Block, “Ethical Culture,” Inside Counsel 24 (April 2013): 10.

40 “The Volkswagen Group Code of Conduct,” (not dated). Accessed January 15, 2017, at http://en.volkswagen.com/content/medialib/ vwd4/de/Volkswagen/Nachhaltigkeit/service/ download/corporate_governance/Code_of_ Conduct/_jcr_content/renditions/rendition .file/the-volkswagen-group-code-of-conduct .pdf.

41 Eric Krell, “How to Conduct an Ethics Audit,” HR Magazine 55 (April 2010): 48–51.

42 Steve Watkins, “Build Top Ethical Culture,” Investor’s Business Daily (March 30, 2012): 3.

43 “High Levels of Corporate Stress, Flawed Remuneration Policies, Excessive Reliance on Takeovers, and Lax Financial Discipline May Indicate Poor Corporate Culture—New Report Concludes,” The Governance Institute (press release, March 7, 2016). Accessed January 13, 2017, at www.ibe.org.uk/userassets/pressre- leases/icgn_ibe_icsa_pressrelease.pdf.

44 Patricia Harned, “Beyond Tone at the Top,” Boardroom Briefing 7 (Fall 2010): 39–40.

45 Dori Meinert, “Strong Ethical Culture Helps Bottom Line,” HR Magazine 55 (December 2010): 21.

46 Curtis C. Verschoor, “Top-Management Exam- ple and Peer Pressures Bring Benefits,” Strategic Finance 92 (September 2010): 15–63.

47 “2016 Compliance and Ethics Program Objec- tives Survey,” The Society of Corporate Compliance and Ethics and the Health Care Compliance Association (July 2016). Accessed January 13, 2017, at www.corporatecompliance. org.

48 David De Cremer, “6 Traits That Predict Ethical Behavior at Work,” Harvard Business Review online (December 22, 2016). Accessed January 13, 2017, at www.hbr.org.

49 Richard McGill Murphy, “Why Doing Good Is Good for Business,” Fortune 161 (February 8, 2010): 90–95.

50 “Ethics as Recruiting Tool,” Journal of Accoun- tancy 207 (January 2009): 21.

51 Ron Carucci, “Why Ethical People Make Unethical Choices,” Harvard Business Review online (December 16, 2016). Accessed January 13, 2017, at www.hbr.org.

52 Ben Dipietro, “The Morning Risk Report: Report Details ‘Right Way’ to Teach Eth- ics,” The Wall Street Journal online (April 13, 2016). Accessed January 13, 2017, at www.wsj.com.

53 Christopher Bauer, “Baking Ethics into Com- pany Culture,” Financial Executive 25 (May 2009): 18–21.

54 Jaclyn Jaeger, “The ROI of a Strong Ethical Culture,” Compliance Week 10 (February 2013): 34–36.

55 Society for Human Resource Management, “SHRM Code of Ethics.” Accessed February 3, 2014, at www.shrm.org/about/Pages/code-of- ethics.aspx.

56 Richard Teitelbaum, “Accountants, Auditors to Get a New Ethics Rule Book,” The Wall Street

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http://www.abqjournal.com

http://www.hbr.org./

http://www.sec.gov/whistleblower/reportspubs/annual%E2%80%90reports/owb%E2%80%90annual%E2%80%90report%E2%80%902016.pdf

http://www.chicagotribune.com./

http://www.fortune.com./

http://www.shrm.org/about/Pages/code%E2%80%90of%E2%80%90ethics.aspx

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http://www.corporatecompliance.org./

http://www.ibe.org.uk/userassets/pressreleases/icgn_ibe_icsa_pressrelease.pdf

http://www.bloomberg.com./

http://www.wsj.com./

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50 PART 1 • SETTING THE STAGE

Journal online (July 11, 2016). Accessed Janu- ary 10, 2017, at www.wsj.com.

57 Stephen Dockery, “Johnson Controls Settles China Corruption Case with SEC,” The Wall Street Journal online (July 11, 2016). Accessed January 10, 2017, at www.wsj.com.

58 “Fidelity Fires Hong Kong Managers,” Fund Action (February 22, 2010): 76.

59 Emily Glazer, Rachel Louise Ensign, and Nick Timiraos, “Romantic Relationships with Fannie Mae CEO Prompted Firing of Fifth Third Law- yer,” The Wall Street Journal online (August 10, 2016). Accessed January 13, 2017, at www.wsj. com.

60 Ben Dipietro, “What Matters More: Focusing on Rules or Creating Ethical Culture?” The Wall Street Journal online (March 15, 2016). Accessed January 10, 2017, at www.wsj.com.

61 Ibid. 62 Kathryn Mayer, “HR Is the ‘Conscience’ of

Workplace Culture,” BenefitsPro (Web site, June 29, 2015). Accessed January 13, 2017, at www. benefitspro.com.

63 “Competencies Senior HR Pros Need Now, in Five Years,” HR Focus 87 (June 2010): 12–13.

64 Ken Sloan and Joanne H. Gavin, “Human Resource Management: Meeting the Ethi- cal Obligations of the Function,” Business & Society Review 115 (Spring 2010): 57–74.

65 Peter Rudegeair, “Los Angeles Sues Wells Fargo Over Sales Tactics,” The Wall Street Journal online (May 5, 2015). Accessed January 7, 2017, at www.wsj.com.

66 James Rufus Koren, “Wells Fargo to Pay $185 Million Settlement for ‘Outrageous’ Sales Culture,” LA Times online (September 8, 2016). Accessed January 6, 2017, at www.latimes.com.

67 Emily Glazer, “Wells Fargo to Roll Out New Compensation Plan to Replace Sales Goals,” The Wall Street Journal online (January 6, 2017). Accessed January 6, 2017, at www.wsj. com.

68 Darnell Lattel, “The Slippery Slope,” T + D 66 (March 2012): 22.

69 Sven Erik Holmes, “Under Pressure: Main- taining an Effective Ethics and Compliance Program,” Directorship 35 (October/November 2009): 72.

70 “Few Tie Executive Pay or Bonuses to Compli- ance,” Compliance Week 6 (July 2009): 10.

71 S. Steffee, “Weak Link between Business Ethics and Executive Compensation,” Internal Auditor 66 (August 2009): 16.

72 Patricia J. Harned, “Encourage Ethical Behavior as Economy Recovers,” HR Specialist: Compen- sation & Benefits 5 (January 2010): 5.

73 Max H. Bazerman and Ann E. Tenbrunsel, “Eth- ical Breakdowns,” Harvard Business Review 89 (April 2011): 58–65.

74 National Business Ethics Survey of the U.S. Workforce, 2013, Ethics Resource Center, www. ethics.org/nbes, 2014.

75 Luis Ramos, “Outside-the-Box Ethics,” Leader- ship Excellence 26 (April 2009): 19.

76 Craig Mindrum, “Imitating Virtuous Behaviors,” Chief Learning Officer 12 (April 2013): 34–37.

77 Karen Kroll, “Ethics & Compliance Training for Hourly Workers,” Compliance Week 10 (June 2013): 42–66.

78 Ben Dipietro, “Survey Roundup: Companies Lagging on Training Directors,” The Wall Street

Journal online (July 29, 2016). Accessed Janu- ary 13, 2017, at www.wsj.com.

79 Jerry Maginnis and Joseph P. Charles, “Build a Strong Ethical Culture,” Pennsylvania CPA Journal 80 (Summer 2009): 1–2.

80 Cynthia Kincaid, “Corporate Ethics Training: The Right Stuff,” Training 46 (May 2009): 35.

81 LRN Corporation, “Who We Are.” Accessed February 21, 2012, at www.lrn.com/ who-we-are.

82 Ron Miller, “It’s a Small World After All,” EContent 31 (January/February 2008): 26–31.

83 “2016 Cone Communications: Employee Engagement Study,” (2016), Cone Communica- tions. Accessed December 20, 2016 at www. conecomm.com/research-blog/2016-employee- engagement-study.

84 Brittaney Kiefer, “CSR Moves from Planting Trees to Credible Business Strategies,” PRWeek 16 (February 2013): 12.

85 “2016 Cone Communications: Employee Engagement Study,” (2016), Cone Communica- tions. Accessed December 20, 2016 at www. conecomm.com/research-blog/2016-employee- engagement-study.

86 “The Results for the 2017 Global 100 Most Sustainable Corporations in the World Index,” Corporate Knights (Web site).” Accessed January 27, 2017, www.corporateknights.com/ reports/2017-global-100/.

87 Nguyen Thi Hong Ngoc, “Being Socially Responsible and Environmentally Friendly Improves the Corporate Competitiveness and Profitability?” Advances in Management 4 (March 2011): 21–25.

88 Paul Shum and Sharon Yam, “Ethics and Law: Guiding the Invisible Hand to Correct Cor- porate Social Responsibility Externalities,” Journal of Business Ethics 98 (February 2011): 549–571.

89 Mikhail Reider-Gordon, “Understanding Foreign States’ Mandatory Corporate Social Responsibility Reporting,” Litigation 39 (Winter 2013): 61–63.

90 Simon Zadek, “Responsibility Isn’t a Blame Game,” Fortune (Europe) 152 (October 3, 2005): 70–73.

91 Rachel Feintzeig, “Firms, Workers Boost Their Giving,” The Wall Street Journal online (June 8, 2016). Accessed January 13, 2017, at www.wsj. com.

92 John S. McClenahen, “Defining Social Respon- sibility,” Industry Week 254 (March 2005): 64–65.

93 “2015 Global Sustainability Report,” Starbucks Corporation (Web site), Accessed January 14, 2017, at www.starbucks.com/responsibility/ global-report.

94 Fisk Johnson, “SC Johnson’s CEO on Doing the Right Thing, Even When It Hurts Busi- ness,” Harvard Business Review online (April 2015). Accessed January 13, 2017, at www. hbr.org.

95 Z. Jill Barclift, “Corporate Social Responsibil- ity and Financial Institutions: Beyond Dodd– Frank,” Banking & Financial Services Policy Report 31 (January 2012): 13–19.

96 Aneel Karnani, “Doing Well by Doing Good: The Grand Illusion,” California Management Review 53 (Winter 2011): 69–86.

97 Rebecca Coons, “Corporate Social Responsibility: Pursuing the Triple Bottom Line,” Chemical Week 175 (May 27, 2013): 21–23.

98 V. Sivarama Krishnan, “In Defense of Social Responsibility of Business,” Journal of Business & Ethics (2011): 31–37.

99 “Milton Friedman Goes on Tour,” Economist 398 (January 29, 2011): 63.

100 Ronald J. Alsop “Cultural Awareness,” Work- force Management 90 (July 2011): 42.

101 “Corporate Social Responsibility Heads for Oblivion,” Trends Magazine 94 (February 2011): 10–14.

102 “Corporate Social Responsibility Heads for Oblivion,” Trends Magazine 94 (February 2011): 10–14.

103 Adam Werbach, “Learning to Be Sustainable,” Chief Learning Officer 10 (May 2011): 46–49.

104 Lilli Monolis, “Sustainability: It Will Change Your Business . . . If It Hasn’t Already,” Plastics Technology 58 (January 2012): 34–63.

105 “The Results for the 2017 Global 100 Most Sustainable Corporations in the World Index,” Corporate Knights (Web site).” Accessed January 27, 2017, www.corporateknights.com/ reports/2017-global-100/.

106 “Johnson & Johnson: Sustainability Is Mission- Critical,” Site Selection 57 (January/February 2012): 42.

107 Alexandra R. Lajoux and Cheryl Soltis Martel, “Sustainability Rising,” NACD Directorship 39 (March/April 2013): 24–35.

108 “Currents of Change: The KPMG Survey of Corporate Responsibility Reporting,” (2015). KPMG. Accessed December 1, 2016, at www. kpmg.com.

109 White House Announces Additional Commit- ments to the American Business Act on Climate Package,” White House. Accessed December 1, 2015, at www.whitehouse.gov.

110 “CSR’s Mainstream Shift: 81 Percent of Lead- ing Companies Published Corporate Sustain- ability Reports in 2015,” Bulldog Reporter (Web site, March 16, 2016). Accessed January 13, 2017, at www.bulldogreporter.com/csrs- mainstream-shift-81-of-leading-companies-pub- lished-corporate-sustainability-reports-in-2015/.

111 Nguyen Thi Hong Ngoc, “Profitability?” Advances in Management 4 (March 2011): 21–25.

112 Michael Laff, “Triple Bottom Line,” T + D 63 (February 2009): 34–39.

113 “CSR’s Mainstream Shift: 81 Percent of Leading Companies Published Corporate Sustainability Reports in 2015,” Bulldog Reporter (Web site, March 16, 2016). Accessed January 13, 2017, at www.bulldogreporter. com/csrs-mainstream-shift-81-of-leading- companies- published-corporate-sustainability- reports-in-2015/.

114 Marc Gunther, “Unilever’s CEO Has a Green Thumb,” Fortune 167 July 10, 2013): 124.

115 Jaclyn Jaeger, “Choosing Among a Vast Array of CSR Initiatives,” Compliance Week 6 (Octo- ber 2009): 60–70.

116 “Social Responsibility: An Ongoing Mission for a Good Corporate Citizen,” Nation’s Restaurant News (April 11, 2005): 60–66.

117 Sean Milmo, “LCA Plays Key Role for Sustain- ability,” ICIS Chemical Business 280 (October 3, 2011): 13.

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http://www.bulldogreporter.com/csrs%E2%80%90mainstream%E2%80%90shift%E2%80%9081%E2%80%90of%E2%80%90leading%E2%80%90companies%E2%80%90%E2%80%90published%E2%80%90corporate%E2%80%90sustainability%E2%80%90reports%E2%80%90in%E2%80%902015/

http://www.bulldogreporter.com/csrs%E2%80%90mainstream%E2%80%90shift%E2%80%9081%E2%80%90of%E2%80%90leading%E2%80%90companies%E2%80%90published%E2%80%90corporate%E2%80%90sustainability%E2%80%90reports%E2%80%90in%E2%80%902015/

http://www.whitehouse.gov/

http://www.corporateknights.com/reports/2017%E2%80%90global%E2%80%90100/

http://www.wsj.com./

http://www.corporateknights.com/reports/2017%E2%80%90global%E2%80%90100/

http://www.conecomm.com/research%E2%80%90blog/2016%E2%80%90employee%E2%80%90engagement%E2%80%90study

http://www.lrn.com/who%E2%80%90we%E2%80%90are

http://www.wsj.com./

http://www.ethics.org/nbes

http://www.wsj.com./

CHAPTER 2 • BuSINESS ETHICS, CoRPoRATE SoCIAl RESPoNSIBIlITy, ANd SuSTAINABIlITy 51

118 “Institutional Investors Push for Increased Cor- porate Sustainability Reporting,” Business & the Environment with ISO 14000 Updates 22 (April 2011): 5–6.

119 “Coca-Cola Enterprises Corporate Respon- sibility & Sustainability Report 2015/2016,” Accessed January 13, 2017, at www.coca- colacompany.com/stories/sustainability-reports.

120 “Corporate Sustainability,” Industry Week 260 (February 2011): 49.

121 “PPG Launches New Sustainability Framework, Issues 2012 Sustainability Report,” Paintindia 63 (May 2013): 145.

122 “Sustainability by the Numbers,” Business & the Environment with ISO 14000 Updates 22 (July 2011): 13–14.

123 “PPG Issues 2010 Corporate Sustainability Report,” Paintindia 61 (May 2011): 128–130.

124 Jim Carper, “Danone Uses Plant-based Packag- ing for Activia Yogurt in Germany,” Dairy Foods 112 (August 2011): 10–11.

125 “Coca-Cola: Manufacturers Will Never Win the Battle of the Biodegradable Bottle,” Food Manufacture 86 (August 2011): 7.

126 Frank Esposito, “Styron’s Sustainability Goals, Progress Detailed in Report,” Plastics News 23 (July 18, 2011): 4.

127 Ann Moline, “Not Your Father’s Recycling Program,” Site Selection 57 (January/February 2012): 41–45.

128 John Peloza, “Using Corporate Social Respon- sibility as Insurance for Financial Performance,”

California Management Review 48 (Winter 2006): 52–72.

129 S. Rubenfeld, “Bank of New York Mel- lon Settles SEC Bribery Charges,” The Wall Street Journal online, www.wsj.com, August 18, 2015.

130 S. Rubenfeld, “The Morning Risk Report: Internships are Bribes in BNY Mellon Case,” The Wall Street Journal online, www.wsj.com, August 19, 2015.

131 S. Rubenfeld, “Bank of New York Mel- lon Settles SEC Bribery Charges,” The Wall Street Journal online, www.wsj.com, August 18, 2015.

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Equal Employment Opportunity, Affirmative Action, and Workforce Diversity

MyLab Management Improve Your Grade!

If your professor is using MyLab Management, visit www.pearson.com/mylab/management for videos, simulations, and writing exercises.

LEARNING OBJECTIVES After completing this chapter, students should be able to:

3.1 Explain the concept of equal employment opportunity (EEO) and identify the federal laws affecting EEO.

3.2 Discuss who is responsible for ensuring equal employment opportunity.

3.3 Define the types of illegal employment discrimination and discuss affirmative action.

3.4 Explain the Uniform Guidelines related to various types of illegal employment

discrimination, including sexual harassment, national origin, religion, and caregiver (family responsibility) discrimination.

3.5 Describe the concept of diversity and diversity management.

3.6 Explain the various elements of a diverse workforce.

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

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LEARNING OBJECTIVES After completing this chapter, students should be able to:

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

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

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

affirmative action Refers to the expectation and program requirements that companies make a positive effort to recruit, hire, train, and promote employees from groups who are underrepresented in the labor force.

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

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

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

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

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

Numerous federal laws have been passed that have had an impact on EEO. The passage of these laws ref lects society’s attitude toward the changes that should be made to give everyone an equal opportunity for employment. The most significant of these laws will be described in the following sections after clarifying the sources of legislation based on the unit of govern- ment—federal government, state government, and local government. The federal government enacts and passes laws that apply throughout the entire United States. State government (for example, the states of Illinois and Louisiana) enacts legislation that applies throughout its jurisdiction within the state border. Local government may oversee the activities of a county or municipality within the state (e.g., Suffolk County in Massachusetts or New York City in New York). Our focus will be on federal laws, and we will make reference to state and local laws as necessary.

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

Title VII of the Civil Rights Act of 1964, Amended in 1972 The statute that has had the greatest impact on EEO is Title VII of the Civil Rights Act of 1964, as amended by the Equal Employment Act of 1972. Under Title VII, it is illegal for an employer to discriminate in hiring, firing, promoting, compensating, or in terms, conditions, or privileges of employment based on race, color, sex, religion, or national origin. The act also forbids retali- ation against an employee who has participated in an investigation, proceeding, or hearing. For instance, Merrill Lynch & Co. paid $160 million to settle an employment discrimination lawsuit filed by black broker George McReynolds on behalf of 700 black brokers who worked for Mer- rill (McReynolds, et al. v. Merrill Lynch & Co). McReynolds claimed that the company gave white brokers more lucrative accounts while also denying black employees equal pay and career advancement opportunities.

3.1 Explain the concept of equal employment opportunity (EEO) and identify the federal laws affecting EEO.

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Since the passage of this law, the Equal Employment Opportunity Commission (EEOC, discussed shortly), broadened its interpretation of sex discrimination and “enforces Title VII’s prohibition of sex discrimination as forbidding any employment discrimination based on sexual orientation or gender identity.”1 In recent years, the EEOC has filed lawsuits in various courts tackling an assortment of LGBT discrimination-related issues including sexual orientation and transgender employees. For example, in EEOC v. Pallet Companies d/b/a IFCO Sys. North Am., Inc., the EEOC alleged that Pallet Companies illegally terminated a lesbian employee based on sexual orientation after she complained about harassment. Discrimination cases involving trans- gender employees are becoming increasingly common. For instance, in EEOC v. Lakeland Eye Clinic, P.A., the EEOC alleged that Lakeland Eye Clinic discriminated based on sex because it fired an employee who was transitioning from male to female and did not conform to gender-based expectations. In both cases, the employees’ job performance was satisfactory. The companies in each case settled the claims out of court. Issues such as these can present challenges in terms of how we perceive ourselves and those around us. The following Watch It video looks at ways in which managers may react to an employee’s gender transitioning.

Watch It 1 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled TLM-Workforce Diversity and to respond to questions.

Title VII covers employers engaged in or affecting interstate commerce who have 15 or more employees for each working day in each of 20 calendar weeks in the current or preceding calendar year. Also, included in the definition of employers are state and local governments, schools, col- leges, unions, and private employment agencies with 15 or more employees. All private employers who are subject to the Civil Rights Act of 1964 as amended with 100 employees or more must annually submit an EEO-1 report (see Figure 3-1). The EEO-1 reports information about the number of employees by job category (e.g., professional employees), by sex and race or ethnicity, and pay data and hours worked. Just as this book went to press, the requirements of reporting pay data and hours worked were suspended, at least for a time.

Three notable exceptions to discrimination as covered by Title VII are bona fide occu- pational qualifications (BFOQs), seniority and merit systems, and testing and educational requirements. According to the act, it is not an unlawful employment practice for an employer to hire and employ employees based on his or her religion, sex, or national origin in those certain instances where religion, sex, or national origin is a BFOQ reasonably necessary to the normal operation of the business or enterprise. For example, religious institutions, such as churches or synagogues, may legally refuse to hire teachers whose religious conviction is different from that of the hiring institution. Likewise, a maximum-security correctional institu- tion housing only male inmates may decline to hire females as security guards. The concept of BFOQ was designed to be narrowly, not broadly, interpreted and has been so interpreted by the courts in many cases. For instance, historically women sales representatives were barred from working in a male clothing store because it was thought that men would not purchase from them. This stereotype has certainly been overcome because men regularly see female salespersons working in men’s clothing stores. The burden of proving necessity rests entirely on the employer.

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

Finally, in the matter of testing and educational requirements, Title VII states that it is not, “an unlawful employment practice for an employer to give, and to act upon, the results of any professionally developed ability test if such test, its administration, or action upon the results is not designed, intended or used to discriminate because of race, color, religion, sex, or national

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56 PART 1 • SETTING THE STAGE

origin.” Employment testing and educational requirements must be job related, and when adverse impact is shown, the burden of proof is on the employer to establish that a demonstrable relation- ship exists between actual job performance and the test or educational requirement. For instance, the EEOC charged retailer Target Corporation for illegal discrimination based on race and sex. It claimed that the company’s hiring techniques disproportionately screened out racial minority and female applicants for professional positions.2 Target chose to discontinue using the hiring practices in question and agreed to conduct validation studies to establish whether the practices were related to job performance and whether the practices have potential to disproportionately exclude qualified applicants based on race, ethnicity, and gender.

The Civil Rights Act of 1964 also created the Equal Employment Opportunity Commis- sion (EEOC) and assigned enforcement of Title VII to this agency. Consisting of five members appointed by the president, the EEOC is empowered to investigate, conciliate, and litigate charges of discrimination arising under provisions of Title VII. In addition, the commission has the respon- sibility of issuing procedural regulations and interpretations of Title VII and the other statutes it enforces. The most significant regulation issued by EEOC is the Uniform Guidelines on Employee Selection Procedures. The EEOC enforces other EEO laws, with exceptions noted when those laws are discussed next.

FIGURE 3-1 Equal Employment Opportunity Employer Information Report

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Equal Pay Act of 1963, Amended in 1972 Passed as an amendment to the Fair Labor Standards Act, the Equal Pay Act (EPA) of 1963 pro- hibits an employer from paying women less money than men if both employees do work that is substantially the same. The EPA was passed largely to overcome the outdated belief that a man should be paid more than a woman because he was the primary breadwinner. The pay gap has declined through the years; however, one still exists as indicated in the FYI feature.

The EPA covers work within the same physical place of business. For example, an employer could pay a female more in San Francisco than a male working in the same position in Slippery Rock, Pennsylvania, even if the jobs were substantially the same, because of the cost-of-living

☛ F Y I The gender wage gap is substantial:

$ All women working full time earn 79 percent of similar men’s earnings. $ Hispanic women earn 55 percent of white men’s earnings. $ African-American women earn 60 percent of white men’s earnings. $ Asian women earn 84 percent of white men’s earnings.3

FIGURE 3-1 (Continued)

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58 PART 1 • SETTING THE STAGE

difference. A key point to remember is that the pay difference must be substantial and that small pay differences might be acceptable. Four exceptions that permit unequal pay for equal work include:

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

More recently, new approaches to minimize the pay gap between women and men performing comparable work are being undertaken. For instance, Massachusetts’ Pay Equity Act prohibits companies from inquiring about an applicant’s pay history on job applications, interviews, and during pay negotiations. Companies are also prohibited from asking previous employers to verify pay amount prior to making a job offer. This law does have the potential to reduce the pay gap. For example, let’s say that an employer’s policy is to offer a salary that is 10 percent higher than the applicant’s previous salary. And, for this illustration, a female applicant making $50,000 would receive a salary offer of $55,000 under the company’s policy. A male applicant whose current sal- ary is $75,000 would receive a salary offer of $82,500, thus, perpetuating the pay gap. Prohibiting questions about salary history helps companies to focus on the market value of the job.

Some companies voluntarily attempt to reduce the pay gap by prohibiting salary negotiations. These actions are based on the belief that most men are presumably better negotiators than women. One such company known for prohibiting salary negotiations is Reddit. In the following Watch It video, (former) CEO Ellen Pao further discusses the rationale for choosing not to negotiate job offers with applicants.

Watch It 2 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Reddit’s Ellen Pao Bans Salary Negotiations and to respond to questions.

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

Lilly Ledbetter Fair Pay Act of 2009 Lilly Ledbetter worked as a supervisor for Goodyear Tire from 1979 until 1998. Just before retire- ment, she received information that compared her salary with salaries of male coworkers. She was earning $3,727 monthly compared with 15 male coworkers who earned between $4,286 and $5,236. She sued, claiming pay discrimination under Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963.4 In the 2007 Supreme Court case of Ledbetter v. Goodyear Tire & Rubber Co., Inc., the Court said that discrimination charges must be filed within 180 days after the allegedly discriminatory pay decision. Lilly Ledbetter had worked for Goodyear for many years but she did not realize until she was close to retirement that she was being discriminated against because of pay. Because she did not file a discrimination charge within 180 days of her employ- ment, the Supreme Court ruled against her. To reverse the Ledbetter decision, the Lilly Ledbetter Fair Pay Act was passed by Congress and signed into law in 2009. The law creates a rolling or open time frame for filing wage discrimination claims. Each paycheck that unfairly pays a worker less than it should is a discriminatory act. The act gives the worker a fresh 180-day period (300 days in some states) to file a charge of discrimination with the EEOC.

Pregnancy Discrimination Act of 1978 Prior to the passage of the Pregnancy Discrimination Act (PDA), most pregnant women did not receive the same protections afforded to others under Title VII. Many women argued that pregnancy should be specified as a protected class in Title VII. Efforts to amend Title VII were

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met with resistance by lawmakers, particularly following the Supreme Court decision in 1976. In General Electric v. Gilbert, the court ruled that excluding pregnancy as a condition qualifying for coverage under a disability plan did not constitute sex discrimination. Excluding pregnancy divided employees into two groups, one that was exclusively women and the other that included both women and men; thus, the distinction was not mainly sex-based. Members of the feminist movement and civil rights activists refused to accept this ruling, pressuring Congress to amend Title VII and overturn the Gilbert decision. Their efforts were successful. In 1978, Congress passed the PDA.

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

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

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

The Civil Rights Act of 1991 had the following purposes:

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

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

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

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

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

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

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

Regarding burden of proof, a complaining party must show that an employment practice causes a disparate impact based on race, color, religion, sex, or national origin. It must also be

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60 PART 1 • SETTING THE STAGE

shown that the company is unable to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity. The act also extends the coverage of the Civil Rights Act of 1964 to extraterritorial employment. However, the act does not apply to U.S. companies operating in other countries if compliance, “would cause such employer, or a corporation controlled by such employer, to violate the laws of the country in which such work- place is located.”5 The act also extends the nondiscrimination principles to Congress and other government agencies, such as the General Accounting Office.

Age Discrimination in Employment Act of 1967, Amended in 1978, 1986, and 1990 Older workers were often discriminated against by employers based on the belief that they were less able to perform as well as younger workers. Also, many companies avoided hiring older workers because they expected to receive a lower return on investment from training. Statistically speaking, older workers will have fewer years remaining on the job than younger workers. In 2015, the median age of the labor force was 42.3 years, and nearly 55 percent of them were at least 40 years old.6 The number of older individuals will increase for many years to come, particularly among individuals at least 55 years of age.7

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

The Older Workers Benefit Protection Act—the 1990 amendment to the ADEA—focused on employer benefits practices. When employers require that all employees contribute toward coverage of benefits, under circumstances, they can also require older employees to pay more for health care, disability, or life insurance than younger employees. This is the case because these benefits generally become costlier with age (e.g., older workers may be more likely to incur seri- ous illnesses, thus, insurance companies may charge employers higher rates). However, an older employee may not be required to pay more for the benefit as a condition of employment. Where the premium has increased for an older employee, the employer must provide three options to older workers. First, the employee has the option of withdrawing from the benefit plan altogether. Second, the employee has the option of reducing his or her benefit coverage to keep the same cost. Third, an older employee may be offered the option of paying more for the benefit to avoid otherwise justified reductions in coverage.

The EEOC is responsible for administering the ADEA. This act pertains to employers who have 20 or more employees for 20 or more calendar weeks (either in the current or preceding calendar year); unions with 25 or more members; employment agencies; and federal, state, and local government subunits.

Enforcement begins when a charge is filed, but the EEOC can review compliance even if no charge is filed. The ADEA differs from Title VII of the Civil Rights Act because it provides for a trial by jury and carries possible criminal penalty for violation of the act. The trial-by-jury provi- sion is important because juries are thought to have great sympathy for older people who may have been discriminated against. The criminal penalty provision means that a person may receive more than lost wages if discrimination is proved. Further, an employer found to have wilfully violated the ADEA can be liable to the victimized person for “liquidated damages” or double damages.8 The 1978 amendment also makes class action suits possible.

Age Can Actually Be a Bona Fide Occupational Qualification Age can be a BFOQ when it is reasonably necessary to the essence of the business, and the employer has a rational or factual basis for believing that all, or substantially all, people within an age class would not be able to perform satisfactorily. Courts have continued to rule that the Federal

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Aviation Administration adequately explained its long-standing rule that it can force commercial pilots to retire at age 60. The age 60 rule was first imposed in 1959 and was long controversial. However, in 2007, the retirement age for commercial pilots was raised to 65.

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

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

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

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

Vietnam Era Veteran’s Readjustment Assistance Act of 1974 The Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) requires covered federal government contractors and subcontractors to take affirmative action to employ and advance in employment specified categories of veterans protected by the act and prohibits discrimina- tion against such veterans. In addition, VEVRAA requires contractors and subcontractors to list their employment openings with the appropriate employment service delivery system and that covered veterans receive priority in referral to such openings. Further, VEVRAA requires fed- eral contractors and subcontractors to compile and submit annually a report on the number of current employees who are covered veterans. The affirmative action and mandatory job-listing provisions of VEVRAA are enforced by the Employment Standards Administration’s Office of Federal Contract Compliance Programs (OFCCP) within the U.S. Department of Labor (DOL). DOL’s Veterans’ Employment and Training Service (VETS) administers the veterans’ employment reporting requirement.

Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as Amended Under VEVRAA, federal contractors and subcontractors are required to take affirmative action in hiring covered veterans. VEVRAA prohibits federal contractors from discriminating against specified categories of veterans and requires them to take affirmative action to recruit, employ, and promote protected veterans. Contractors with 50 or more employees (and $100,000 in federal contracts made on or after December 1, 2003) must maintain a written affirmative action plan.9 As originally passed, only covered honorably discharged persons who served more than 18 days on active duty between August 5, 1964, and May 7, 1975. Now the definition of “protected” or “covered” veteran has been expanded to include those who have served in a campaign or expedi- tion for which a campaign badge was issued.10 This includes campaigns such as current engage- ments in the Middle East.

HR Web Wisdom

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

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

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62 PART 1 • SETTING THE STAGE

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

Americans with Disabilities Act of 1990 The U.S. Bureau of Labor Statistics estimated that approximately 9.8 million disabled individuals were employed.11 The Americans with Disabilities Act (ADA) prohibits discrimination against qualified individuals with disabilities. The ADA prohibits discrimination in all employment prac- tices, including job application procedures, hiring, firing, advancement, compensation, training, and other terms, conditions, and privileges of employment. It applies to recruitment, advertising, tenure, layoffs, leaves, benefits, and all other employment-related activities. The employment provisions apply to private employers, state and local governments, employment agencies, and labor unions. Persons discriminated against because they have a known association or relationship with a disabled individual are also protected. Employers with 15 or more employees are covered. The ADA defines an individual with a disability as a person who has, or is regarded as having, a physical or mental impairment that substantially limits one or more major life activities and has a record of such an impairment or is regarded as having such an impairment.

Americans with Disabilities Act Amendments Act of 2008 The Americans with Disabilities Act Amendments Act (ADAAA) brings millions more people within the ADA’s protection. The ADAAA expands the definition of “disability,” so that many more applicants and employees are eligible for reasonable accommodations.12 The ADAAA broadened the ADA’s definition of disability by expanding the term “major life activities,” doing away with the “substantially limited” requirement (previously mentioned) for those regarded as having a disability, and overturning two U.S. Supreme Court decisions that interpreted the ADA’s definition of disability narrowly.

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

Questions about possible weight discrimination under this law have been raised, and it is not surprising. Obesity in the United States is on the rise. Overall, 38 percent of adults are obese and 17 percent of teenagers are as well.13 Federal court rulings and the EEOC do not consider “regular” obesity as a disability; however, morbid obesity is. The EEOC generally considers an individual to be morbidly obese when body weight is at least double the normal amount and substantially limits the person’s ability to walk, stand, kneel, stoop, and breathe. This guideline is not set in stone because a lesser overweight person could have these limitations. Also, employers should not discriminate against obese applicants or employees simply because they believe they cannot perform their jobs. According to EEOC General Counsel David Lopez, “All people with

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a disability who are qualified for their position are protected from unlawful discrimination.”14 He went on to say that, “Severe obesity is no exception. It is important for employers to realize that stereotypes, myths, and biases about that condition should not be the basis for employment decisions.” Employers would be prudent to consider requests for reasonable accommodation for obesity just as they would for other types of disabilities.

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

Uniformed Services Employment and Reemployment Rights Act of 1994 The Uniformed Services Employment and Reemployment Rights Act (USERRA) provides pro- tection to Reserve and National Guard members. Under the USERRA, those workers are entitled to return to their civilian employment after completing their military service. The USERRA is intended to eliminate or minimize employment disadvantages to civilian careers that can result from service in the uniformed services. The USERRA was enacted to protect the reemployment benefits and nondiscrimination rights of individuals who voluntarily or involuntarily take a leave of absence from employment to serve in the military. As a rule, a returning employee is entitled to reemployment in the same job or position that he or she would have attained with reasonable certainty if not for the absence to serve in the military. Known as the escalator principle, this requirement is designed to ensure that a returning employee is not penalized (by losing a pay raise, promotion, etc.) for the time spent on active duty, not exceeding five years. To accomplish this, organizations should track factors ranging from compensation to promotions that employees would have received had they not been on military leave.15 There are no special rights under USERRA for temporary workers or the new hires taking over the Reserve or National Guide members’ jobs.

The Veterans Opportunity to Work (VOW) Act passed in 2011 amended the USERRA. It is now easier for employees to sue employers based on hostile work environment claims related to an employee’s military status. In 2015, 39.6 percent of USERRA cases contained allegations of discrimination based on past, present or future military service or status, and 18.7 percent involved allegations of improper reinstatement into civilian jobs following military service.16 USERRA is administered by the U.S. Department of Labor.

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

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

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

State and Local Laws Numerous state and local laws also affect EEO. Many states and some cities have passed fair employment practice laws prohibiting discrimination on the basis of race, color, religion, sex, or national origin. Even prior to federal legislation, several states had antidiscrimination legislation relating to age and gender. For instance, New York protected individuals between the ages of 18 and 65 prior to the passing of the ADEA, and California had no upper limit on protected age. San

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Francisco has voted to ban weight discrimination. The Board of Supervisors added body size to city laws that already bar discrimination based on race, color, religion, age, ancestry, sex, sexual orientation, disability, place of birth, or gender identity. The state of California has a law that requires sexual harassment prevention training. Recently, New York City passed a law designed to protect unemployed job seekers from discrimination by employers.17 When EEOC regulations conflict with state or local civil rights regulations, the legislation more favorable to women and minorities applies. Of late, state laws have addressed drug and alcohol testing, EEO, human traf- ficking, immigration, time off, wages paid, and worker privacy.18

Who’s Responsible for Ensuring Equal Employment Opportunity? The main groups that take responsibility for establishing and supporting EEO include the govern- ment (EEOC and OFCCP) and employers.

3.2 Discuss who is responsible for ensuring equal employment opportunity.

☛ F Y I There were 91,503 charges of illegal discrimination in fiscal year 2016, of which are:

$ Retaliation: 45.9 percent $ Race: 35.3 percent $ Disability: 30.7 percent $ Sex: 29.4 percent $ Age: 22.8 percent $ National Origin: 10.8 percent $ Religion: 4.2 percent $ Color: 3.4 percent $ Equal Pay Act: 1.2 percent $ Genetic Information Non-Discrimination Act: 0.3 percent19

Equal Employment Opportunity Commission Title VII of the Civil Rights Act, as amended, created the EEOC, which is charged with admin- istering most of the aforementioned laws. Under Title VII, filing a discrimination charge initiates EEOC action. The EEOC continually receives complaints. As shown in the FYI, employees filed 91,503 workplace discrimination charges in 2016. In 2016, the EEOC obtained approximately $52.2 million in monetary relief for thousands of discrimination victims as well as significant nonmonetary remedies from employers.20

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

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

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

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Office of Federal Contract Compliance Programs The purpose of the OFCCP is to enforce the requirements of affirmative action and EEO required of those who do business with the federal government. The OFCCP is an agency within the U.S. DOL. According to the U.S. DOL, the OFCCP uses the following enforcement procedures:21

$ Offers technical assistance to federal contractors and subcontractors to help them under- stand the regulatory requirements and review process.

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

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

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

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

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

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

Employers Much has occurred since the first piece of EEO legislation was enacted approximately 50 years ago, and the basic hiring standards to avoid are largely understood by those in the workforce. In a perfect world, discrimination, retaliation, and harassment would not exist. However, despite a company’s best efforts to treat employees fairly, suits are still brought and won because of

HR Web Wisdom

EEOC www.eeoc.gov

The home page for the Equal Employment Opportunity Commission.

FIGURE 3-2 EEOC Procedure Once a Charge Is Filed

Steps in Handling a discrimination Case

Charge filed

Attempt at a No-fault Settlement

Investigation by the EEoC

Issue a Probable Cause or a No Probable Cause Statement

Attempt at Conciliation

Recommendations for or Against litigation

Recommendation Against litigation — Right to Sue

Notice Issued to Charging Party

Recommendation for litigation — EEoC

Initiates Action

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66 PART 1 • SETTING THE STAGE

mistakes in adherence to these standards.22 Perhaps, it was only a temporary lapse where a man- ager knowingly decides to hire a less-qualified friend over a qualified member of a protected group. Or the manager may sincerely believe that he or she has the best intention of abiding by the law but still makes a mistake perhaps because of some complexity in the law.

To limit the prospect of an EEO lawsuit, an organization can do a few things. First, and fore- most, it must have and enforce a strong EEO policy against discrimination. This policy must begin with top management and filter down to everyone in the organization. This policy should clearly spell out what standards are to be avoided. It should also conspicuously describe the complaint procedure and the various avenues that can be followed if the person in charge is the cause of the complaint. Certainly, the policy should provide a strong anti-retaliation clause. Workers need to believe that a complaint will result in immediate and appropriate action.

Even with a policy such as the one described, there may still be breakdowns. When they do occur, it becomes an opportunity to train employers how to handle an employee-relations prob- lem better the next time. By taking the high road in the solution of a suit, it provides a means of reinforcing the seriousness of the nondiscrimination policy.23

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

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

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

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

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

Types of Unlawful Employment Discrimination Unlawful employment discrimination, as established through various Supreme Court decisions, can be divided into two broad categories: disparate treatment and adverse impact. We will review each type next.

DISPARATE TREATMENT Disparate treatment means that an employer treats some employees less favorably than others because of race, religion, color, sex, national origin, or age. It is the most easily understood form of discrimination.

For example, males are treated differently from females; Caucasians are treated differently from non-Caucasians. The crux of disparate treatment is different treatment based on some non-allowable

3.3 Define the types of illegal employment discrimination and discuss affirmative action.

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

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

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criterion. It may be thought of as intentional discrimination. Common forms of disparate treat- ment include selection rules with a racial, sexual, or other premise; prejudicial action; unequal treatment on an individual basis; and different hiring standards for different groups. McDonald v. Santa Fe Trail Transportation Company offers an example of disparate treatment. Three of the company’s employees, two white people and one black person, had allegedly misappropriated 60 gallons of antifreeze. Santa Fe took disciplinary action against the workers by terminating the two white employees, but not the black employee. The discharged white workers filed suit against the company, charging that their termination violated both Title VII and the Civil Rights Act of 1866. The Supreme Court agreed with the plaintiffs that they had been the recipients of unequal treatment based on their race. Central to disparate treatment is the matter of proof. The plaintiff must first be able to establish a prima facie case (i.e., the appearance of possible illegal discrimination), and second, can establish that the employer was acting based on a discriminatory motive.

ADVERSE IMPACT Before the issuance of the Uniform Guidelines, the only way to prove job- relatedness was to validate each test. The Uniform Guidelines do not require validation in all cases. Essentially, it is required only in instances in which the test or other selection device produces an adverse impact on a minority group. Adverse impact takes place when an employment decision, practice or policy has a disproportionately negative effect on a protected group. Oftentimes, it may be thought of as unintentional discrimination. According to the Uniform Guidelines, adverse impact is said to occur if, “a substantially different rate of selection in hiring, promotion or other employment decision which works to the disadvantage of members of a race, sex or ethnic group” is evident.24 In practical terms, adverse impact may have occurred when women and minorities are not hired at the rate of at least 80 percent of the best-achieving group. This formula has also been called the “four-fifths” or “80 percent” rule, which is a guideline subject to interpretation by the EEOC.

Under the Uniform Guidelines, adverse impact has been described in terms of selection rates, the selection rate being the number of qualified applicants hired or promoted, divided by the total number of applicants in a particular group. The groups identified for analysis under the guidelines are (1) African Americans, (2) American Indians (including Alaskan natives), (3) Asians, (4) Hispanics, (5) Caucasian, (6) women, and (7) men.

The following formula is used to compute adverse impact for ethnic or racial group (numbers 1 through 4):

Selection rate for ethnic or racial minority applicants

Selection rate for Caucasian applicants = Assessment of possible adverse impact

For sex (group 6):

Selection rate for female applicants

Selection rate for male applicants = Assessment of possible adverse impact

The selection rate for the female or ethnic or racial minority group is determined by dividing the number of members of females, members of an ethnic group, or members of a racial group hired in a period by the number of applicants in the same group for the same period. The selection rate for the male or Caucasian group is determined by dividing the number of males or Caucasians hired in a period by the number of applicants in the same group for the same period.

Using the formula, let us determine whether there has been adverse impact in the following case. During 2017, 400 people were hired to fill as many vacant positions. Of the total number hired, 300 were Caucasian and 100 were African American. There were 1,500 applicants for these jobs, of whom 1,000 were Caucasian and 500 were African American. The selection rate for African Americans equals 0.2 (that is, 100/500). The selection rate for Caucasians is 0.3 (that is, 300/1,000). Using the adverse impact formula, you have:

100/500 300/1,000

= 0.2 0.3

= 66.67,

Thus, adverse impact likely exists because the ratio falls below the 80 percent guideline. Therefore, firms must monitor their recruitment efforts carefully. Obviously, firms should

attempt to recruit qualified individuals because once in the applicant pool, they will be used in computing whether adverse impact is evident.

adverse impact takes place when an employment decision, practice or policy has a disproportionately negative effect on a protected group. Oftentimes, it may be thought of as unintentional discrimination.

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If adverse impact is shown, employers have two avenues available to them if they still desire to use a particular selection standard. First, the employer may validate a selection device by showing that it is indeed a predictor of success. For instance, the employer may be able to show a strong relationship between the selection device and job performance, and that if it did not use this procedure, the firm’s training costs would become prohibitive. If the device has proved to be a predictor of job performance, business necessity has been established.

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

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

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

President Richard M. Nixon issued EO 11478 in 1969. It covers the federal civilian work- force. This EO prohibits discrimination in employment based on race, color, religion, sex, national origin, handicap, and age. And it requires all federal government departments and agencies to take affirmative steps to promote employment opportunities for those classes it covered. In 1998, President Bill Clinton amended EO 11478 with EO 13087, which adds sexual orientation to the list of protected classes. These EOs are enforced by the DOL through the OFCCP. Recently the VEVRAA and the Rehabilitation Act have received additional attention from the OFCCP.25

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

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

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

An AAP may be voluntarily implemented by an organization. In such an event, goals are established and actions taken to hire and move minorities and women up in the organization. In other situations, an AAP may be mandated by the OFCCP. The degree of control the OFCCP will impose depends on the size of the contract, with contracts of $10,000 or less not covered. The first level of control involves contracts that exceed $10,000 but are less than $50,000. The second level of control occurs if the contractor (1) has 50 or more employees; (2) has a contract of $50,000 or more; (3) has contracts that, in any 12-month period, total $50,000 or more or reasonably may be

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

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

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

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

Recently every 25th supply and service federal contractor selected for a compliance evalua- tion by the OFCCP is subjected to a full compliance review that includes on-site visits by compli- ance officers, even though there are no indicators of potential discrimination or other violations. The “active case enforcement” directive also provides that the OFCCP will perform a full desk audit in every compliance evaluation to comprehensively analyze a contractor’s written AAPs.26 Before this decision, only 25 compliance reviews were made per year.27

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

The OFCCP is specific about what should be included in an AAP. A policy statement must be developed that reflects the CEO’s attitude regarding EEO, assigns overall responsibility for preparing and implementing the AAP, and provides for reporting and monitoring procedures. The policy should state that the firm intends to recruit, hire, train, and promote persons in all job titles without regard to race, color, religion, gender, or national origin, except where gender is a BFOQ. Recently protected military veterans and individuals with disabilities have been included in affir- mative action. The policy should guarantee that all human resource actions involving areas such as compensation, benefits, transfers, layoffs, return from layoffs, company-sponsored training, education, tuition assistance, and social and recreational programs will be administered without regard to race, color, religion, gender, or national origin.

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

2. The volume and nature of complaints filed by employees or applicants against the contractor. 3. Whether the contractor is in a growth industry. 4. The level of employment or promotional opportunities resulting from the expansion of, or turnover

in, the contractor’s workforce. 5. The employment opportunities likely to result from the contract in issue. 6. Whether resources are available to conduct the review.

TABLE 3-1

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

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

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

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

Uniform Guidelines on Preventing Specific Illegal Employment Discrimination Since the Uniform Guidelines were published in 1978, they have been modified several times. Some of these changes reflect Supreme Court decisions; others clarify implementation procedures. The five major changes discussed are the Guidelines on Sexual Harassment, Guidelines on Discrimi- nation because of National Origin, Guidelines on Discrimination because of Religion, Guidelines on Caregiver (Family Responsibility) Discrimination, and Discrimination because of Disability.

3.4 Explain the Uniform Guide- lines related to various types of illegal employment discrimina- tion, including sexual harass- ment, national origin, religion, and caregiver (family responsibil- ity) discrimination.

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

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

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

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

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

advertising.

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

TABLE 3-2

Techniques to Improve Recruitment of Minorities and Women

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

According to these guidelines, employers are totally liable for the acts of their supervisors, regardless of whether the employer is aware of the sexual harassment act. In Faragher v. City of Boca Raton and Burlington Industries, Inc. v. Ellerth, the Supreme Court held that an employer is strictly liable, meaning that it has absolutely no defense, when sexual harassment by a supervisor involves a tangible employment action. Courts expect employers to carefully train supervisors so they do not engage in any type of behavior that could be construed as sexual harassment. In addi- tion, all employees should be trained to understand their rights and responsibilities.28

As is the case for the Civil Rights Act of 1964, retaliation is forbidden against an employee who has participated in an investigation, proceeding, or hearing. Recently Z Foods, Inc. entered into a consent judgment requiring it to pay more than $1.47 million to settle an employment discrimination lawsuit filed by EEOC. The EEOC had charged Z Foods with subjecting several female farmworkers to sexual harassment. The harassment took the form of basing promotions and employment on sexual favors, continuous sexual advances, stalking female employees and unwanted physical touching and leering. Several male and female employees who reported the exploitation were retaliated against and fired soon after airing their objections. Melissa Barrios, director of EEOC’s Fresno Local Office, stated, “Workers have the right to voice their concerns about a sexually hostile work environment without fearing repercussions from their employer. With this ruling, the court sends the message that employers who ignore or punish employees for complaining of harassment leave themselves open to greater liability.”29

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

Firms are responsible for developing programs and policies to prevent sexual harassment in the workplace. Managers must be trained to know what to do when there is a complaint. They must investigate all formal and informal complaints alleging sexual harassment.30 Failure to do so constitutes a violation of Title VII, as interpreted by the EEOC. To prevail in court, companies must have clear procedures for handling sexual harassment complaints. If the sexual harassment complaint appears legitimate, the company must take immediate and appropriate action.31 How- ever, this does not mean that everyone who is guilty of sexual harassment must be fired. A single incident does not mean that sexual harassment exists unless the employer ignores the incident and lets the situation worsen.32

Unwelcome sexual advances, requests for sexual favors, and verbal or physical conduct of a sexual nature that occur under any of the following situations: 1. When submission to such conduct is made either explicitly or implicitly a term or condition of an

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

decisions affecting such individual. 3. When such conduct has the purpose or effect of unreasonably interfering with an individual’s work

performance or creating an intimidating, hostile, or offensive working environment.

TABLE 3-3

EEOC Definition of Sexual Harassment

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72 PART 1 • SETTING THE STAGE

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

Duane Reade, the New York/New Jersey drug store chain, agreed to settle an EEOC lawsuit for $240,000 for allowing the work environment at one of its New York stores to become hostile. The store manager frequently made vulgar remarks about women’s anatomy, sexually proposi- tioned female employees, made lewd comments about them during pregnancies, assigned pregnant women the least desirable store tasks, and sometimes grabbed female employees’ buttocks while they worked.33 Unchecked sexual harassment can be financially crippling. In a recent case, a jury awarded the plaintiff $95 million, including $80 million in punitive damages.34

Males are not precluded from sexual harassment. In 2016, 16.6 percent of charges alleging sexual harassment were filed by men.35 Recently, the Ninth U.S. Circuit Court of Appeals held that a female coworker’s “relentless” pursuit of a male employee could form the basis of a sexu- ally hostile environment claim, even without any physical conduct of a sexual nature. The Ninth Circuit pointed out that under Title VII of the Civil Rights Act of 1964, “[b]oth sexes are protected from discrimination.”36

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

Guidelines on Discrimination Because of National Origin Both EEOC and the courts have interpreted national origin protection under Title VII as extending far beyond discrimination against individuals who came from, or whose forebears came from, a particular country. National origin protection also covers (1) marriage or association with a person of a specific national origin; (2) membership in, or association with, an organization identified with, or seeking to promote the interests of national groups; (3) attendance at, or participation in, schools, churches, temples, or mosques generally used by persons of a national origin group; and (4) use of an individual’s or spouse’s name that is associated with a national origin group. As Table 3-4 shows, the EEOC has identified certain selection procedures that may be discriminatory.

Harassment on the basis of national origin is a violation of Title VII. Employers have a duty to maintain a working environment free from such harassment. Ethnic slurs and other verbal or physical conduct relating to an individual’s national origin constitute harassment when this conduct (1) has the purpose or effect of creating an intimidating, hostile, or offensive working

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

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

TABLE 3-4

Selection Procedures That May Be Discriminatory with Regard to National Origin

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environment; (2) has the purpose or effect of unreasonably interfering with an individual’s work performance; or (3) otherwise adversely affects an individual’s employment opportunity.

Of interest regarding national origin is the English-only rule. Courts have generally ruled in the employer’s favor if the rule would promote safety and product quality and stop harassment. For example, suppose a company has a rule that only English must be spoken except during breaks. That rule must be justified by a compelling business necessity. In Garcia v. Spun Steak, the Ninth Circuit Court of Appeals (the Supreme Court refused to review) concluded that the rule did not necessarily violate Title VII. Spun Steak’s management implemented the policy after some work- ers complained they were being harassed and insulted in a language they could not understand. The rule allowed workers to speak Spanish during breaks and lunch periods. A recent ruling supported the job-related aspect of the English-only rule. In Montes v. Vail Clinic, Inc., the Tenth Circuit Court agreed with the English-only rule prohibiting housekeepers from speaking Spanish while working in the operating room. However, English-only policies that are not job related have been challenged and eliminated. The EEOC settled a Title VII lawsuit against a company that enforced an English-only rule solely against Hispanics. “What was strange was that the rule was only tar- geted at Hispanics. Tagalog, a Spanish language spoken in the Philippines, was openly spoken,” said Anna Park, the EEOC’s regional attorney in Los Angeles. “This was very troublesome.”37

Guidelines on Discrimination Because of Religion The number of religion-related discrimination complaints filed with the EEOC continues to increase. According to the Supreme Court’s decision in TWA v. Hardison, employers have an obligation to accommodate sincerely held religious practices if the requested accommodation does not create more than a minimum cost to the employer.38 Courts generally do not require employers to hire additional employees just to cover for another employee who needs a religious accommodation. Consideration is given to identifiable costs in relation to the size and operat- ing costs of the employer and the number of individuals who need the accommodation. These guidelines recognize that regular payment of premium wages constitutes undue hardship, whereas these payments on an infrequent or temporary basis do not. Undue hardship would also exist if an accommodation required a firm to vary from its bona fide seniority system.

The most common claims filed under the religious accommodation provisions involve employees objecting to either Sabbath employment or membership in or financial support of labor unions. These guidelines identify several means of accommodating religious practices that prohibit working on certain days. Some of the methods suggested included voluntary substitutes, flexible scheduling, lateral transfer, and change of job assignments. Basically, employers that refuse to accommodate an employee’s religious practice may need to provide evidence that doing so would constitute an undue burden.39 However, if making an accommodation places a true hardship on the company, the accommodation does not have to be given.40 That was not the case for clothing retailer Abercrombie & Fitch, which refused to hire a Muslim woman because of her religious practice of wearing a hijab. The company chose not to hire her because she did not conform to the company’s “look policy.” In EEOC v. Abercrombie & Fitch, the U.S. Supreme Court ruled that an employer may not refuse to hire an applicant if the employer was driven by sidestepping the need to accommodate a religious practice. In this case, the employer “failed to accommodate her religious beliefs by not making an exception to its “look policy” prohibiting head coverings.”41

Some collective bargaining agreements include a provision that each employee must join the union or pay the union a sum equivalent to dues. When an employee’s religious beliefs prevent compliance, the union should accommodate the employee by permitting that person to make an equivalent donation to a charitable organization.

☛ F Y I Almost everyone will assume a caregiver role at some point:

$ Sixty percent of workers have or will provide unpaid care to an adult or child with special needs. $ Nearly 50 million employees have children under the age of 18. $ Fifty-three percent of individuals who are not working choose not to work because of family

responsibilities.42

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

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

Caregiver discrimination has become the new battleground in employment claims.43 Examples of possible caregiver discrimination violations include treating male caregivers more favorably than female caregivers; reassigning a woman to less desirable projects based on the assumption that, as a new mother, she will be less committed to her job; or lowering subjective evaluations of a female employee’s work performance after she becomes the primary caregiver of her grandchildren, despite the absence of an actual decline in work performance.44 Sometimes, it, “occurs when an employee suffers an adverse action that affects the terms and conditions of her employment based on unexamined biases about how women with family caregiving responsibilities will or should act.”45

For instance, in EEOC v. Denver Hotel Management Company, Inc., an employer suppos- edly told a female employee that she was denied consideration for a promotion because she “had a full-time job at home with her children.”46 According to the EEOC, the employee was never asked if she would be willing to relocate or work extended hours. Instead, the company’s leader- ship assumed that the employee would be unwilling to relocate or work extended hours because the complainant was the mother and primary caregiver for small children. The EEOC concluded that the company discriminated against this female employee based on stereotypical views of a woman’s caregiver status, calling it a form of sex discrimination prohibited by Title VII of the Civil Rights Act of 1964.

In recent years, employees have been filing more and more caregiver discrimination lawsuits. In the last decade alone, there has been a 267 percent increase.47 Most cases share a common ele- ment—the employee alleges that the caregiving responsibilities cause the alleged discriminatory action by the employer. Employees win 67 percent of the cases that go to trial, which is higher than other federal discrimination cases combined.48 The challenge for employers is to develop the right mix of flexibility and fairness in work scheduling, leave policies, dependent-care assistance, and benefits. This will promote positive employee relations, recruit and retain a diverse and well- qualified workforce, address and resolve job-related issues, and defend against claims of unfair or unlawful conduct. It will be ever more important for HR professionals to ensure flexibility in family responsibilities policies and educate line managers about policy guidelines. More and more employees will benefit from their employer’s flexibility.

Discrimination Because of Disability The ADA prohibits discrimination in employment because of one’s disability and requires that employers provide an employee or job applicant with a reasonable accommodation unless doing so would cause significant difficulty or expense for the employer. For example, drug store chain Walgreens agreed to pay $180,000 to settle a disability discrimination lawsuit filed by the EEOC. The EEOC had charged that Walgreens unlawfully fired a qualified employee because of her dis- ability after she ate a bag of chips prior to paying for it. The employee later explained that she was trying to stabilize her blood sugar during a hypoglycemic attack. Still, Walgreens denied a reason- able accommodation to a diabetic employee. EEOC San Francisco Regional Attorney William R. Tamayo said that, “People may think this case revolves around theft, but the real issue is how a company responded to a valued 18-year employee, whom it knew for 13 years to be diabetic, and who attempted to pay for the chips after she recovered from her hypoglycemic attack.”49

The EEOC guidelines on pre-employment inquiries and tests regarding disabilities prohibit inquiries and medical examinations intended to gain information about applicants’ disabilities

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

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before a conditional job offer. In the Supreme Court case of Leonel v. American Airlines, the Court ruled that the airline violated the ADA’s required sequence for pre-hire medical inquiries/ examinations by making medical inquiries and requiring individuals to take medical examinations before completing and making its hiring decisions.

The guiding principle is to ask only about potential employees’ ability to do the job, and not about their disabilities. Lawful inquiries include those regarding performance of specific functions or possession of training appropriate to the job, whereas illegal inquiries include those that ask about previous medical conditions or extent of prior drug use. The ADA does not protect people currently using illegal drugs. It does protect those in rehabilitation programs who are not currently using illegal drugs, those who have been rehabilitated, and those erroneously labeled as drug users. Coverage under the ADA continues to evolve as evidenced with the passing of the American with Disabilities Act Amendments Act of 2008.

Diversity and Diversity Management In decades past, diversity was primarily concerned with race and gender.50 Today, the defini- tion is quite different. As we defined in the chapter introduction, diversity refers to any actual or perceived difference among people: age, race, religion, functional specialty, profession, sexual orientation, gender identity, geographic origin, lifestyle, tenure with the organization or position, and any other perceived difference. Further, as companies have become more global, the work group itself has become more diverse.51 The challenge for managers is to recognize that people with characteristics that are common but are different from those in the mainstream, often think, act, learn, and communicate differently. Diversity is more than equal employment and affirmative action; the actual definition is constantly changing and expanding.

Diversity management is ensuring that factors are in place to provide for and encourage the continued development of a diverse workforce by combining these actual and perceived differ- ences among workers to achieve maximum productivity. Because every person, culture, and busi- ness situation is unique, there are no simple rules for managing diversity; but diversity experts say that employers need to develop patience, open-mindedness, acceptance, and cultural awareness. Diversity management focuses on the principle that all workers regardless of any factor are entitled to the same privileges and opportunities.52 According to R. Roosevelt Thomas Jr., former president of the American Institute for Managing Diversity, “diversity and diversity management are about managing and engaging people who are different and similar, all for the benefit of the organization and its goals.”53 In his book, The Future and the Work Ahead of Us, Harris Sussman writes, “Diversity is about our relatedness, our connectedness, our interactions, where the lines cross.”54

If organizations want to remain competitive in the marketplace, diversity should be a part of the strategic goal. Credit card giant MasterCard employs more than 11,000. It has a complex diversity program that includes a diversity advisory board, diversity networks, diversity recruit- ing, accountability mechanisms, scorecards, mandatory training, and a diversity officer. Donna Johnson, chief diversity officer, maintains that, “The diversity in thoughts and experiences of our people drives real business impact and makes meaningful contributions to society.”55

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

3.5 Describe the concept of diversity and diversity management.

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

Try It! If your instructor has assigned this, go to www.pearson.com/mylab/management to complete the HR and Diversity simulation and test your application of these concepts when faced with real-world decisions.

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76 PART 1 • SETTING THE STAGE

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

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

Managers need to be sensitive to the needs of working parents. Many women who formerly remained at home to care for children and the household now need and want to work outside the home. In fact, according to the U.S. Bureau of Labor Statistics data, just more than 70 percent of U.S. women with school-age children work.56 If this valuable segment of the workforce is to be effectively used, organizations must fully recognize the importance of addressing work–family issues. Businesses are seeing that providing child-care services and workplace flexibility may influence workers’ choice of employers. Companies that were chosen in Working Mother maga- zine’s 100 best companies to work for placed greater emphasis on work–life balance, telecom- muting, and flextime. The number of single-parent men has also increased, thus making the same work friendly issues important. According to the U.S. Bureau of the Census, in 2016 single fathers headed 7 percent of households with minor children, up from 1 percent in 1970.57

Women in Business Numerous factors have contributed to the growth and development of the U.S. labor force. However, nothing has been more prominent than the rise in the number of women in the labor force. More and more women are entering the labor force in high-paying, professional jobs and women dominate the health-care sector, which is one of the fastest-growing categories. In 2010, for the first time ever, women made up the majority of the U.S. workforce. Women-owned businesses now account for 38 percent of all enterprises in the market today. The American Express Open State of Women- Owned Businesses Report shows the number of women-owned firms from 2007 to 2016 increased by 45 percent.58 The report further indicates that among women of color, Latinas show the highest growth in the number of firms, Asian American women led in employment and revenue growth. Another study revealed that gender-diverse companies are 15 percent more likely to perform better than their peers and ethnically diverse companies are 35 percent more likely to do the same.59

Professional women are entering the workforce at the same rates as men. However, many opt out of the corporate life. Perhaps this is one of the reasons that women hold only 27 of the 500 CEO positions in Fortune’s 2016 list of the largest U.S. companies.60 But this does not mean that they are opting out of business careers. Instead, they are making their own career paths that allow them to combine work and life on their own terms. Thus, organizations are losing talented employees in whom they have made substantial investments. Numerous companies are working diligently keep professional women in the workforce although more work needs to be done.61

Women who chose to pursue advancement within corporations find it difficult to advance to the highest executive-level positions. A survey of 132 global companies revealed that women are underrepresented in senior management positions and C-level positions. Women accounted for 45 percent of entry-level professional jobs; however, only 32 percent were senior managers or directors, and fewer (17 percent) held positions in the C-suite.62

This phenomenon is often referred to as the glass ceiling. The glass ceiling is the invisible barrier in organizations that impedes women and minorities from career advancement. The Civil Rights Act of 1991 established a Glass Ceiling Commission to study the way businesses fill man- agement and decision-making positions, the developmental and skill-enhancing practices used to foster the necessary qualifications for advancement to such positions, and the compensation pro- grams and reward structures currently used in the workplace. It was also to study the limited progress made by minorities and women. One African-American female executive described the situation for minority females as more challenging than a glass ceiling. Annalisa Adams-Qualtiere said, “When I hear ‘glass ceiling,’ I think that’s great, you can break through glass. When it is concrete, you need a door and there need to be people on the other side of that door.”63 As you will learn in the following Watch It video, the challenges women face are particularly noteworthy in male-dominated professions.

3.6 Explain the various elements of a diverse workforce.

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

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Mothers Returning to the Workforce (on Ramping) Today, many recruiters are focusing on educated women who have taken career breaks as a significant source of potential talent (on ramping).64 To get them to return, companies are going beyond federal law and giving mothers a year or more for maternity leave. Other businesses are specifically trying to recruit them to return to the labor force.

Although some companies are recruiting these women, other employers have programs that help their employees leave and later return. IBM has a program that allows employees to take up to three years off. Typically, working mothers who use the program take a year or more off, and then they use the remainder of their leave to re-enter work on a part-time basis. After the three years are up, they have the option of returning either full- or part-time. IBM surveyed employees who had taken the leave and found that 59 percent would have left the company if the program had not been available. “We didn’t want a situation where women had to opt out,” says Maria Ferris, manager of work–life and women’s initiatives at IBM. “We’ve invested in them, trained them. We want to retain them.”65

A concept called returnships is being used to let organizations try-out professionals who are resuming their careers. It provides a vehicle for relaunching a career after a break (most often for full-time parenting). Essentially it is an internship for experienced workers who have been out of work for a while whose résumés might scare recruiters away.66

Dual-Career Families The increasing number of dual-career families—in which both spouses or partners have jobs and family responsibilities—presents both challenges and opportunities for organizations. Most chil- dren growing up today have both parents working outside the home. In the twenty-first century the proportion of U.S. households with only a male wage earner is less than 20 percent.67 This fact stands in contrast to the 1950s when most households consisted of a male breadwinner mar- ried to a traditional housewife.

Today, employees have turned down relocations because of spouses’ jobs and concerns about their children. Of the top three reasons employees turn down assignments, family or spouse’s career is cited almost twice as often as concern with the employee’s career or compensation.68 Thus, firms are developing polices to assist the spouse of an employee who is transferred. Some are helping in finding a position for the spouse of a transferred employee. However, companies may need to learn more about how to handle dual-career couples in a global environment. If com- panies make the willingness to locate globally a requirement for promotion, many in this group will reject the offer, thereby reducing the size of the labor pool.

Ethnicity and Race According to the U.S. Bureau of Labor Statistics, the percentage of the U.S. labor force made up of white employees will decline while growth is expected for other racial groups.69 These include Hispanics, African Americans, and Asians. Unfortunately, at times, these individuals may be sub- ject to stereotyping. They may encounter misunderstandings and expectations based on ethnic or cultural differences. Members of ethnic or racial groups are socialized within their culture. Peo- ple’s attitudes are influenced by the ancestral and cultural experiences of their childhood. Many are socialized as members of two cultural groups—the dominant culture and their racial or ethnic culture. Ella Bell refers to this dual membership as biculturalism. In her study of black women, Bell identifies the stress of coping with membership in two cultures simultaneously as bicultural stress. She indicates that role conflict (competing roles from two cultures) and role overload (too many expectations to comfortably fulfill) are common characteristics of bicultural stress. Although these issues can be applied to other minority groups, they are particularly intense for women of color because this group experiences dynamics affecting both minorities and women.70

Socialization in one’s culture of origin can lead to misunderstandings in the workplace. This is particularly true when the manager relies solely on the cultural norms of the majority group.

dual-career family A situation in which both spouses or partners have jobs and family responsibilities.

HR Web Wisdom

Bureau of Labor Statistics www.bls.gov/

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

Watch It 3 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Woman on Track to Become First NFL Rep and to respond to questions.

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78 PART 1 • SETTING THE STAGE

According to norms within U.S. culture it is acceptable, even considered positive, to publicly praise an individual for a job well done. However, in cultures that place primary value on group harmony and collective achievement, this method of rewarding an employee may cause emotional discomfort. Some employees feel that, if praised publicly, they will lose face within their group.

Try It! If your instructor has assigned this, go to www.pearson.com/mylab/management to com- plete the Diversity simulation and test your application of these concepts when faced with real-world decisions.

Older Workers Today, employees age 40 and older represent about 55 percent of the U.S. workforce.71 In 2011, the first baby boomers turned 65, and approximately 10,000 more will continue to do so every day for the next 20 years. In recent years, many boomers deferred retirement because of a falter- ing economy and concerns about the viability of the Social Security retirement program.72 As the economy improves, plans must be in place to handle a rapid departure of boomers from the workforce. Even so, many boomers will resist retirement, some because they feel healthy enough to continue work and others because their retirement income was hit hard by the economy. The U.S. Bureau of Labor Statistics estimates that nearly 13.5 million workers 65 and older will be working in 2024, up from about 8 million today.73

Many companies try to keep the worker older than 55. This may be the result, in part, of legal concerns based on the ADEA, discussed previously in this chapter, which protects workers 40 and older against discrimination. However, a large part of this movement is the desire to keep the experienced workers on board because they are often more productive than younger work- ers. Employing older workers may boost overall workplace productivity. In one study, research- ers found that, “An older worker’s experience increases not only his own productivity but also the productivity of working with him.”74 Other companies actively recruit older workers. For instance, Barclays Bank expanded its internship program to include workers older than age 50. Mike Thompson, head of apprenticeships at Barclays, said, “We see real benefit in employing a workforce that reflects the diversity of our customer base.”75 He went on to explain that, “indi- viduals who have had previous careers and greater life experience can have empathy and are able to really understand and support our customers.”

People with Disabilities According to the U.S. Bureau of Labor Statistics, approximately 20 percent of the labor force possesses one or more disabilities.76 Common disabilities include limited hearing or sight, limited mobility, mental or emotional deficiencies, and various nerve disorders. Such disabilities limit the amount or kind of work a person can do or make its achievement unusually difficult. In jobs for which they are qualified, however, disabled workers do as well as unimpaired workers in terms of productivity, attendance, and average tenure. In fact, in certain high-turnover occupations, disabled workers have lower turnover rates. A DOL survey found that many large businesses are hiring people with disabilities and discovering that costs for accommodations differ very little from those for the general employee population. In fact, the typical one-time expenditure is about $500, according the U.S. DOL’s Office of Disability Employment Policy.77 Further, once an employer hires one person with a disability, it is much more likely to hire other people with disabilities. Starbucks Coffee actively hires individuals with disabilities, providing a range of accommoda- tions. For instance, the company makes iPads available in stores with deaf partners (employees) to provide immediate video remote interpreting as needed.78

Immigrants Large numbers of immigrants from Asia and Latin America have settled in many parts of the United States. The U.S. Bureau of Labor Statistics estimates that 26.3 million foreign-born indi- viduals are in the U.S. workforce, representing 24.1 percent of the total.79 Some are highly skilled and well educated and others are only minimally qualified and have little education. Overall,

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the weekly earnings of foreign-born workers are substantially lower than for native-born work- ers—$681 versus $837. Despite these differences, they have one thing in common: an eagerness to work. For instance, the labor force participation rate of foreign-born men was recently 78.2 percent, which is higher than the 67.3 percent participation rate for native-born men. They have brought with them attitudes, values, and mores to their home country cultures.

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

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

Foreign Workers In 2017, the H-1B employment visa brings in approximately 80,000 skilled foreign workers annu- ally, including some 20,000 researchers and academicians not subject to the annual visa cap set by Congress. Of those 80,000, the majority are distributed to employers through a lottery system each April held by U.S. Citizenship and Immigration Services, an arm of the U.S. Department of Homeland Security. However, the exact number of H-1B visa holders is difficult to determine. A three-year initial visa can be renewed for another three years, and if a worker is on track for a green card, H-1B status can be renewed annually.

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

Young Persons, Some with Limited Education or Skills A lower labor force participation rate for young people is being experienced for all those younger than 24 years of age and not merely young persons with limited education and skills, as was so often the case in the past. The recent recession denied many young workers the opportunity of entering the workforce, so a large number decided to gain additional education to be more competitive.80

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

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

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Baby Boomers, Gen X, Gen Y, and Gen Z Never in the history of the United States has so many different generations with such different views and attitudes been asked to work together. There have been tremendous changes since the boomers first entered the workplace. Each generation has its unique culture that has shaped its nature. Although generalizations about a group are risky, the following discussion may provide additional insight into each group. The discussion begins with baby boomers fully realizing that there remain some members of the Silent Generation in the workforce, those born during the Great Depression and World War II.81

BABY BOOMERS Baby boomers were born just after World War II through the mid-1960s. Corporate downsizing in the 1980s and 1990s cast aside millions of baby boomers. Companies now want to keep the boomers. Employers seek out boomers because they bring a wealth of skills and experience to the workplace, as well as have low turnover rates and high engagement levels. Companies today place considerable value on their skill, experience, and a strong work ethic, characteristics that many boomers possess.82

GENERATION X Generation X is the label affixed to the approximately 41 million U.S. workers born between the mid-1960s and late 1970s. Many organizations have a growing cadre of Generation X employees who possess lots of energy and promise. Ranjan Dutta, a director at PwC Saratoga said, “Gen X workers will be the largest part of the workforce for years to come, and increasingly make up senior leadership ranks in organizations.”83 They are one of the most widely misunderstood phenomena facing management today. Generation Xers differ from previous generations in some significant ways, including their natural affinity for technology and their entrepreneurial spirit. Job instability and the breakdown of traditional employer–employee relationships brought a realization to Generation Xers that it is necessary to approach the world of work differently from past generations.

Generation Xers recognize that their careers cannot be founded securely on a relationship with any one employer. They are skeptical, particularly when it comes to the business world and job security. They worry about their jobs being outsourced and how they are going to pay for their children’s education. They think of themselves more as free agents in a mobile workforce and expect to build career security, not job security, by acquiring marketable skills and expertise. Gen Xers are focused on gaining transferrable skills so that they can be ready should they no longer have a job.84 They are not afraid of changing jobs quite often. The surest way to gain Gen Xers’ loyalty is to help them develop career security. When a company helps them expand their knowledge and skills, it is preparing them for the job market. Gen Xers will often want to stay on board to learn those very skills.

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

Generation X Label affixed to the approximately 41 million U.S. workers born between the mid-1960s and late 1970s.

If your professor has assigned this, go to www.pearson.com/mylab/management to complete the HR Bloopers exercise and test your ap- plication of these concepts when faced with real-world decisions.

H R B L O O P E R S

Affirmative Action and Workforce Diversity Anne Johnson is a newly hired human

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

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

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GENERATION Y Generation Y comprises people born between the late 1970s and mid-1990s. Estimates are that Gen Yers (or Millennials) account for approximately half of all employees in the United States.85 They have never wound a watch, dialed a rotary phone, or plunked the keys of a manual typewriter. But without a thought, they download music from the Internet and insert pictures of events on Facebook. Kevin C. Carlson, CEO of Brill Street + Company said, “They may not have lots of experience in the traditional sense, but they’ve grown up with technology and social media, which are skills many companies look for today.”86 They cannot imagine how the world ever got along without computers. These individuals are the leading edge of a generation that promises to be the richest, smartest, and savviest ever. They are well educated, well versed in technology, and bursting with confidence.87 Generation Yers—often referred to as the echo boomers, Millennials, and Nexters—are the coddled, confident offspring of post–World War II baby boomers. Generation Y individuals are a most privileged generation, who came of age during the hottest domestic economy in memory.

Gen Yers tend to have a strong sense of morality and civic-mindedness.88 They are more ethnically diverse than previous generations, and nearly one-third of them have been raised in single-parent households. They want a workplace that is both fun and rewarding. They want jobs where there is a balance between work and family. They want jobs that conform to their interests and do not accept the way things have been done in the past. Generation Y employees want flex- ible working hours, which is a benefit that they are very enthusiastic about. They also tend to have more of a sense of entitlement not found in other generation of workers. However, Gen Yers’ childhoods have been short-lived because they have been exposed to some of the worst things in life: schoolyard shootings, drug use, terrorism, sex scandals, and war.

GENERATION Z OR DIGITAL NATIVES After Generation Y came Generation Z or Digital Natives, the Internet-assimilated children born between 1995 and 2009. Gen Zers are more worldly, high- tech, and confident in their ability to multitask; they tend to have short attention spans and desire speed over accuracy; and they enjoy media that provides live social interaction.89 They tend to use social networks to avoid the complications of dealing with face-to-face situations. In a recent survey, almost 25 percent of respondents found their relationship with their significant other was over by first seeing it on Facebook.90 Digital Natives do not trust politicians, social institutions, the media, or corporations. Rather, they rely largely on themselves and their peers to decide what to think, what to do, and what to buy. The main thrust of the book 2018: Digital Natives Grow Up and Rule the World was that, “Digital natives are protagonists for massive technology adoption and a consequent adaption of human behavior.”91 Two Gen Z children sitting in the back seat of the family car may now be texting each other instead of speaking with each other.

GENERATION ALPHA Some have suggested that the next generation, born from 2010 forward, will be called Generation Alpha. Although Generation Z is often referred to as the twenty-first- century generation, Generation Alpha will be the first true millennial generation, as they will be the first born into the 21st century.

Multigenerational Diversity Four generations are now participating in the workforce and each has different defining character- istics and nicknames. The concept of generational differences as a legitimate workplace diversity issue has gained increasing recognition. Baby boomers are remaining on the job longer because of the economy and often find themselves working with Generation Y employees. Traditionally, discussions of workplace diversity tended to focus on topics of race, ethnicity, gender, sexual ori- entation, and disability. Shirley A. Davis, SHRM’s director of diversity and inclusion initiatives, said, “In all parts of the world, there is another category of diversity that cannot be overlooked: multigenerational diversity.”92 Today, there are greater numbers of workers from each segment that bring both new opportunities and challenges. At times, there are significant differences in communication style which has the potential to harm communication. Dana Brownlee, president of corporate training firm Professionalism Matters in Atlanta, Georgia said, “Typically the older generations prefer talking face-to-face or on the phone, and the younger generations tend toward text-based messages like email and instant message.”93 If organizations want to thrive in this competitive environment of global talent management, they need employees and managers who are aware of and skilled in dealing with the different generations that make up the workforce.

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

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

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82 PART 1 • SETTING THE STAGE

Lesbian, Gay, Bisexual, and Transgender Employees There has been an increased focus in the political and workforce arena with regard to lesbian, gay, bisexual, and transgender (LGBT) employees. In addressing the United Nations General Assembly, President Barack Obama said, “No country should deny people their rights to freedom of speech and freedom of religion, but also no country should deny people their rights because of who they love, which is why we must stand up for the rights of gays and lesbians everywhere.”95 President Obama also decided that the 1996 Defense of Marriage Act that bars federal recognition of same-sex marriages was unconstitutional and told the Justice Department to stop defending the law in court, bringing harsh criticism from many congressional members.96 This became a moot point because in 2013, the Supreme Court in its landmark decision (United States vs. Windsor) struck down Section 3 of the act, which prohibited federal recognition of state-sanctioned, same- sex marriages.97 Then, in 2015, the Supreme Court ruled that same-sex marriage is protected under the Due Process and Equal Protection Clauses of the Fourteenth Amendment, which means that same-sex marriages performed out-of-state must be recognized in other states (Obergefell v. Hodges). In the same year, the Family and Medical Leave Act, (FMLA) was amended to recognize eligible employees in legal same-sex marriages, enabling them to take FMLA leave to care for their spouse or family member, regardless of where they live.

Many companies have policies supporting LGBT employees perhaps because of legal require- ments. Other firms have policies to recruit and retain qualified employees no matter their sexual orientation.98 Over the last decade, corporations have increasingly created a more-welcoming environment for LGBT employees. An estimated 89 percent of Fortune 500 firms now ban dis- crimination on the basis of sexual orientation, up from 61 percent in 2002, and approximately 66 percent also ban discrimination against transsexuals, compared with 3 percent in 2002.99 Nonethe- less, surveys show that many LGBT employees still view their sexual orientation as a hindrance on the job, and approximately 48 percent of those surveyed remain “closeted” at work.100 However, by 2013, 59 percent of gay workers reported they were “out” at work, a 7 point increase from the previous year.101

☛ F Y I Eighty-four percent of employees who work for LGBT-inclusive companies say that:

$ They are proud to work there. $ They are more likely to “go the extra” mile for company success.94

PREPARING FOR EXAM/QUIZZES

Chapter Summary by Learning Objectives 1. Explain the concept of equal employment opportunity

(EEO) and identify the federal laws affecting EEO. Equal employment opportunity (EEO) refers to the prin- ciples and the set of laws and policies that requires all individuals’ rights to equal opportunity in the workplace, regardless of race, color, sex, religion, national origin, age, or disability. Major laws include the Civil Rights Act of 1866; Equal Pay Act (EPA) of 1963, amended in 1972; Lilly Ledbetter Fair Pay Act of 2009; Title VII of the Civil Rights Act of 1964, amended in 1972; Preg- nancy Discrimination Act of 1978; Civil Rights Act of 1991; Age Discrimination in Employment Act (ADEA) of 1967, amended in 1978, 1986, and 1990; Rehabilita- tion Act of 1973; Americans with Disabilities Act (ADA) of 1990; Americans with Disabilities Act Amendments

Act (ADAAA) of 2008; Immigration Reform and Control Act (IRCA) of 1986; the Uniformed Services Employ- ment and Reemployment Rights Act (USERRA) of 1994; the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) of 1974, as amended, and the Genetic Infor- mation Nondiscrimination Act (GINA) of 2008.

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

3. Define the types of illegal employment discrimination and discuss affirmative action. With disparate treatment,

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Key Terms equal employment opportunity

(EEO) 53 Affirmative Action 53 Diversity 53 Uniform Guidelines 68 disparate treatment 66

adverse impact 67 executive order (EO) 68 affirmative action program (AAP) 68 caregiver (family responsibility)

discrimination 74 diversity management 75

glass ceiling 76 dual-career family 77 baby boomers 80 Generation X 80 Generation Y 81 Generation Z or Digital Natives 81

an employer treats some people less favorably than oth- ers because of race, religion, sex, national origin, or age. Adverse impact occurs if women and minorities are not hired at the rate of at least 80 percent of the best-achieving group. Affirmative Action creates the expectation and pro- gram requirements that companies make a positive effort to recruit, hire, train, and promote employees from groups who are underrepresented in the labor force. An affirmative action program is an approach that an organization with government contracts develops to demonstrate that women or minorities are employed in proportion to their represen- tation in the firm’s relevant labor market.

4. Explain the Uniform Guidelines related to various types of illegal employment discrimination, including sexual harassment, national origin, religion, and caregiver (fam- ily responsibility) discrimination. The Uniform Guidelines adopted a single set of principles that were designed to assist employers, labor organizations, employment agen- cies, and licensing and certification boards to comply with requirements of federal law prohibiting employment prac- tices that discriminated on the basis of race, color, religion, sex, and national origin. Employers have an affirmative duty to maintain a workplace free from sexual harassment. Discrimination on the basis of national origin is the denial

of EEO because of an individual’s ancestors or place of birth or because an individual has the physical, cultural, or linguistic characteristics of a national origin group. Employers have an obligation to accommodate religious practices unless they can demonstrate a resulting hardship. Caregiver (family responsibility) discrimination is discrimi- nation against employees based on their obligations to care for family members.

5. Describe the concept of diversity and diversity management. Diversity refers to any perceived difference among people: age, race, religion, functional specialty, profession, sexual orientation, geographic origin, lifestyle, tenure with the organization, or position, and any other perceived difference. Diversity management is ensuring that factors are in place to provide for and encourage the continued development of a diverse workforce by melding these actual and perceived dif- ferences among workers to achieve maximum productivity.

6. Explain the various elements of a diverse workforce. The workforce may include single parents and working moth- ers, women in business, mothers returning to the workforce, dual-career families, workers of color, older workers, peo- ple with disabilities, immigrants, foreign workers, young persons (some with limited education or skills), and multi- generational workers.

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management to complete the problems marked with this icon .

Questions for Review 3-1. What are the components that combine to make up the

present diverse workforce? Briefly describe each. 3-2. Briefly describe the following laws:

(a) Civil Rights Act of 1866 (b) Equal Pay Act of 1963 (c) Lilly Ledbetter Fair Pay Act of 2009 (d) Title VII of the Civil Rights Act of 1964, as

amended in 1972 (e) Pregnancy Discrimination Act of 1978 (f) Civil Rights Act of 1991 (g) Age Discrimination in Employment Act of 1967, as

amended in 1978 and 1986

(h) Rehabilitation Act of 1973 (i) Americans with Disabilities Act of 1990 (j) Americans with Disabilities Act Amendments Act

of 2008 (k) Immigration Reform and Control Act of 1986 (l) Uniformed Services Employment and

Reemployment Rights Act of 1994 (m) Vietnam Era Veterans’ Readjustment Assistance Act

of 1974 (n) Genetic Information Nondiscrimination Act of 2008

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84 PART 1 • SETTING THE STAGE

PREPARING FOR MY CAREER

P I A Personal Inventory Assessment An additional Personal Inventory Assessment can be found on MyLab Management.

Intercultural Sensitivity Scale The workforce is increasingly more diverse than ever before. As an employee, you will work with people who differ from you in a variety of ways that we discussed in this chapter. Cultural differences are among those factors. This PIA will assess your level of cultural sensitivity.

HRM Is Everyone’s Business It is critical for HR professionals to have a working knowledge of legislative imperatives and organizational policies designed to oversee the development and implementation of HR practices. Together with the legal department, HR has the responsibility to educate managers and other decision makers in the organization as to what should and should not be done. While ultimately the administration of HR programs will be the responsibility of HR, managers must have enough awareness to make informed deci- sions which will both protect the company from certain liabilities as well as ensure the retention and engagement of employees critical to the success of the organization. The most successful managers are often quite adept at explaining these nuances and are respected by their employees for their concern with the factors that influence the employee experience.

3-3. Briefly discuss who is responsible for ensuring equal employment opportunity.

3-4. What are the significant U.S. Supreme Court deci- sions that have had an impact on EEO? On Affirmative Action?

3-5. What are the steps that the EEOC uses once a charge is filed?

3-6. What is the purpose of the Uniform Guidelines on Employee Selection Procedures?

3-7. What is the difference between disparate treatment and adverse impact?

3-8. How does the EEOC define sexual harassment? 3-9. How does the EEOC interpret the national origin

guidelines? 3-10. What are some guidelines to follow regarding religion-

related discrimination? 3-11. What is meant by the term caregiver discrimination? 3-12. What is the purpose of the OFCCP? 3-13. Define what the four-fifths rule is. 3-14. What is an affirmative action program? 3-15. Define diversity and diversity management.

E T H I C S D I L E M M A

How About Me? The number of older workers is expected to

grow for many years to come. The Age Discrimination in Employment Act prohibits employment discrimination against individuals age 40 and older. Yet, age discrimination continues to be prevalent in the workplace. For example, Maria has a limited training budget. She wants to invest in management development seminars for her well-performing super- visors. Maria has six high potential supervisors, but can only afford to send five. Ultimately, she selected five supervisors who graduated from

college six years ago at age 21. Maria excluded Jonathan from consider- ation even though he has been a stellar performer for the last 30 years. When Jonathan heard about the decision, he asked Maria, “How about me?” Maria was surprised by Jonathan’s question, saying, “I thought you were planning to retire within the next couple of years.” 3-16. What would you do? 3-17. What factor(s) in this ethics dilemma might influence a person

to make a less-than-ethical decision?

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HRM by the Numbers Detecting Adverse Impact

An additional HRM by the Numbers exercise can be found on MyLab Management.

Sex Total Applicants Selected Applicants Selection Rate

Female 750 375 Male 1,050 450 Total 1,800 825

3-18. Calculate (a) the selection rate for females and (b) the selection rate for males. 3-19. What is the ratio of the female selection rate to the male selection rate? 3-20. Based on your answer to question 3-19, is there evidence of possible adverse impact?

3-21. What are some of the features that shape diversity at your school? Explain your reasoning. 3-22. How would your student experience be different if your school’s student body was not diverse? Explain.

Action checklist for managers and HR—understanding and applying the legal landscape HR takes the lead

Conduct an audit to identify potential for disparate impact; disparate impact training is conducted to ensure that managers and other decision makers are aware of the pitfalls.

Consider private sector companies that hold government contracts to understand what additional standards may be placed on them because of their relationship with the federal government.

Make sure that the legislative necessities create a starting point for establishing company policy and not merely the justifica- tion for doing the bare minimum.

Managers take the lead Speak openly about the importance of mutual respect and lead by example. Identify employees who fall into a group addressed specifically by law or company policy (e.g., ADA) which may be a new experience for you to work with as a manager (e.g., in most jobs, you will have more experience working with minority employees than disabled employees or transgender employees).

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86 PART 1 • SETTING THE STAGE

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management for Auto-graded writing questions as well as the following Assisted-graded writing questions:

3-29. What is the purpose of the EEOC? 3-30. How do equal employment opportunity laws differ from diversity management?

I N C I D E N T 1 You’re Not a Good Employee Ricardo Balart, director of the recruiting for Sabena Company, asked four employees to evaluate the effectiveness of its employee orienta- tion program and make recommendations for improvement. Mr. Balart selected members from different departments: Committee chair Bill Jameson, director of the customer service department, Mary Hodge, manager of the accounts receivables department, Maria Diaz, newly hired staff member in the marketing department, and Enza Peroni, payroll clerk. (It just so happened that Ms. Hodge and Mr. Jameson were Baby Boomers, Ms. Diaz was a member of Generation X, and Ms. Peroni was a member of Generation Y.)

The committee got off to a rocky start, in part, because members disagreed about where and when to get the work done. Mr. Jameson called for a face-to-face meeting in the conference room and got the following reactions: Ms. Hodge asked for the time and place of the meeting as well as what she should prepare in advance of the meet- ing. Ms. Diaz and Ms. Peroni were of the same mind, disagreeing with the need to meet face-to-face. Ms. Diaz commented, “It’s difficult to anticipate whether I will be working in the office or from home on a particular day because my child care arrangements are unpredictable.” She went on to say, “Let’s get this done over e-mail.”

Mr. Jameson expressed frustration, saying, “The flexible approach to getting the work done is unacceptable! For years, we always completed our committee assignments together in the con- ference room.” He went a step further by asserting, “Young mothers should never be considered for positions of significant responsibility because they are unreliable and not serious about their work.” Ms. Diaz, visibly upset by Mr. Jameson’s comment, instructed him to review the company’s telecommuting policy. His response: “That policy does nothing other than permit young employees to work only when they feel like it and for women with children to work less than others.”

Questions 3-23. Do you agree with Mr. Jameson’s approach to addressing the

situation? Discuss. 3-24. What actions should Mr. Jameson have taken to avoid his cur-

rent predicament? 3-25. What might occur if Mr. Jameson tells Ms. Diaz’s supervisor

that she is an unreliable employee?

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

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

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

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

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

Questions 3-26. Explain why Supreme must submit an affirmative action

program. 3-27. Generally, what should the program be designed to

accomplish? 3-28. In conducting a utilization analysis, Michael discovers that

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

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CHAPTER 3 • EquAl EmPloymENT oPPoRTuNITy, AffIRmATIvE ACTIoN, ANd WoRkfoRCE dIvERSITy 87

Endnotes 1 “What You Should Know About EEOC and the

Enforcement Protections for LGBT Workers,” Equal Employment Opportunity Commission. Accessed January 24, 2017, at www.eeoc.gov/ eeoc/newsroom/wysk/enforcement_protec- tions_lgbt_workers.cfm.

2 “Target Corporation to Pay $2.8 Million to Resolve EEOC Discrimination Finding,” Equal Employment Opportunity press release (August 24, 2015). Accessed January 26, 2017, at www. eeoc.gov/eeoc/newsroom/release/8-24-15.cfm.

3 Jean Sahadi, “6 Things to Know about the Gen- der Pay Gap,” (April 12, 2016). CNN. Accessed December 20, 2016, at http://money.cnn.com.

4 Dick Weaver, “How Is Lilly Ledbetter Helping You Sell EPLI,” National Underwriter / P&C 115 (March 28, 2011): 26.

5 Tyler M. Paetkau, “When Does a Foreign Law Compel a U.S. Employer to Discriminate Against U.S. Expatriates?” A Modest Proposal for Reform,” Labor Law Journal 60 (Summer 2009): 92–103.

6 “Employment Status of the Civilian Noninstitu- tional Population by Age, Sex, and Race,” U.S. Bureau of Labor Statistics. Accessed January 26, 2017, at www.bls.gov/cps/demographics. htm#age.

7 Mitra Toossi, “Labor Force Projections to 2024: The Labor Force Is Growing, but Slowly,” Monthly Labor Review (December 2015): 1–33.

8 Reduction in Force Tainted by Willful Age Discrimination,” HR Magazine 58 (August 2013): 8.

9 “OFCCP Issues Proposed Revision of Veterans’ Affirmative Action Rules,” HR Focus 88 (June 2011): 12.

10 U.S. Department of Labor, “Compliance Assistance—Vietnam Era Veterans’ Readjust- ment Assistance Act of 1974, as amended,” U.S. Department of Labor, Accessed May 12, 2014, at www.dol.gov/ofccp/regs/compliance/ ca_vevraa.htm.

11 “Persons with a Disability: Labor Force Char- acteristics,” U.S. Bureau of Labor Statistics (USDL-16-1248, June 21, 2016). Accessed Jan- uary 24, 2017, at www.bls.gov; Give Employees with Disabilities an Assist,” HR Magazine 58 (August 2013): 79–82.

12 “EEOC’s Views on Accommodation under Amended ADA Discussed,” HR Focus 89 (Janu- ary 2012): 3–6.

13 Maggie Fox, “America’s Obesity Epidemic Hits a New High,” CNBC online (June 7, 2016). Accessed January 26, 2017, at www.cnbc. com/2016/06/07/americas-obesity-epidemic- hits-a-new-high.html.

14 “Resources for Human Development Settles EEOC Disability Suit for $125,000,” Equal Employment Opportunity Commission (April 10, 2012). Accessed January 27, 2017, at www. eeoc.gov/eeoc/newsroom/release/4-10-12a.cfm.

15 Common Pitfalls: The Devil Is in the Details,” HR Magazine 58 (February 2013): 26.

16 “FY 2015 Annual Report to Congress,” U.S. Department of Labor, Office of the Assistant Secretary for Veterans’ Employment and Train- ing (July 2016). Accessed January 27, 2017, at www.dol.gov/vets/programs/userra/USERRA_ Annual_FY2015.pdf.

17 New York City Outlaws Discrimination Against Unemployed Job Hunters,” HR Magazine 58 (August 2013): 14.

18 David P. Twomey, “Employee Retaliation Claims under the Supreme Court’s Burlington, Crawford and Thompson Decisions: Important Implications for Employers,” Labor Law Jour- nal 62 (Summer 2011): 57–66.

19 “Charge Statistics: FY 1997 Through FY 2016,” Equal Employment Opportunity Commission. Accessed January 23, 2017, at www.eeoc.gov/ eeoc/statistics/enforcement/charges.cfm.

20 “Charge Statistics: FY 1997 Through FY 2016,” Equal Employment Opportunity Commission. Accessed January 23, 2017, at www.eeoc.gov/ eeoc/statistics/enforcement/charges.cfm.

21 U.S. Department of Labor, “Office of Federal Contract Compliance Programs,” U.S. Depart- ment of Labor. Accessed January 23, 2017, at www.dol.gov/ofccp/aboutof.html.

22 Todd H. Girshon, “Jury or Nonjury Trials,” HR Magazine 57 (February 2012): 79–85.

23 Effective Responses to EEOC Charges,” HR Magazine 58 (October 2013): 73–75.

24 “Equal Employment Opportunity Commission. Part 1607—Uniform Guidelines on Employee Selection Procedures,” Code of Federal Regu- lations 29 C.F.R. §1607.16 (1978). Accessed January 26, 2017, at www.gpo.gov/fdsys/pkg/ CFR-2006-title29-vol4/xml/CFR-2006-title29- vol4-sec1607-16.xml.

25 Alissa A. Horvitz and Lance E. Gibbons, “Fed- eral Contractors Get New Scrutiny,” HR Maga- zine 56 (November 2011): 71–82.

26 “New Directive Calls for More Full Compliance Evaluations,” HR Focus 88 (April 2011): 4–5.

27 Nadine Vogel, “The OFCCP Ramps Up Enforcement,” Profiles in Diversity Journal 13 (January/February 2011): 18.

28 “Andrew Slobodien and Elizabeth Peters, “Beyond Harassment Prohibitions,” HR Maga- zine 57 (November 2012): 75–78.

29 “Federal Judge Awards $1,470,000 in EEOC Sexual Harassment and Retaliation Case Against Z Foods,” (July 22, 2016). Accessed January 27, 2017, at www.eeoc.gov/eeoc/newsroom/ release/7-22-16a.cfm.

30 “Preventing Workplace Sexual Harassment Should Be HR Priority, Attorney Tells Webinar,” HR Focus 89 (March 2012): 16.

31 David B. Ritter and Mari Kaluza, “Lesson from Walmart: How to Cut Risk when a Co-worker Harasses,” HR Specialist: Illinois Employment Law 5 (May 2011): 6.

32 “Delete Your Liability: Copy Xerox Response to Harassment Complaint,” HR Specialist: Employ- ment Law 40 (May 2011): 3.

33 “Duane Reade Settles Sex Harassment Law- suit,” HR Specialist: New York Employment Law 4 (August 2009): 5.

34 “Price of Supervisor Pleasuring Himself Over an Employee: $95 Million,” Legal Alert for Supervisors 6 (June 24, 2011): 4.

35 Equal Employment Opportunity Commission, “Charges Alleging Sex-Based Harassment: FY 2010—FY 2016, ” Equal Employment Oppor- tunity Commission. Accessed January 27, 2017, at www.eeoc.gov/eeoc/statistics/enforcement/ sexual_harassment_new.cfm.

36 Maria Greco Danaher, “Men Entitled to Title VII Protection,” HR Magazine 55 (December 2010): 93.

37 Allen Smith, “EEOC Settlement Reflects Chal- lenges of English-Only Policies,” HR Magazine 54 (June 2009): 26.

38 Tanya Marcum and Sandra J. Perry, “Dressed for Success: Can a Claim of Religious Discrimi- nation Be Successful?” Labor Law Journal 61 (Winter 2010): 184–191.

39 Orthopedic Manufacturer Settles Religious Bias Suit,” HR Specialist: North Carolina Employ- ment Law 7 (January 2013): 5.

40 Does Boss Have to Excuse Key Worker from Crucial Job Duty so Man Can Go to Church?” Alert for Supervisors 8 (March 1, 2013): 1–2.

41 “Abercrombie Resolves Religious Discrimina- tion Case Following Supreme Court Ruling in Favor of EEOC,” Equal Employment Oppor- tunity Commission (July 28, 2015). Accessed January 27, 2017, at www.eeoc.gov/eeoc/news- room/release/7-28-15.cfm.

42 “Employment Characteristics of Families Summary,” U.S. Bureau of Labor Statistics (April 22, 2016). Accessed January 20, 2017, at www.bls.gov; Cynthia Thomas Calvert, “Caregivers in the Workplace,” The Center for WorkLife Law (2016). Accessed January 28, 2017, at www.worklifelaw.org/pubs/FRDup- date2016.pdf.

43 Abigail Crouse, “Be Careful! Caregiver Dis- crimination Claims Are on the Rise,” HR Spe- cialist: Minnesota Employment Law 3 (April 2010): 6.

44 Gerald E. Calvasina, Richard V. Calvasina, and Eugene J. Calvasina, “Caregiver Responsibility Discrimination and the Equal Employment Oppor- tunity Commission (EEOC) Guidelines: Policy Issues for Employers,” Journal of Legal, Ethical & Regulatory Issues 13 (June 2010): 1–10.

45 Cynthia Thomas Calvert, “The New Sex Dis- crimination: Family Responsibilities,” Univer- sity of Maryland Law Journal of Race, Religion, and Class (Vol. 9, No. 1): 33-44.

46 “Denver Hotel Management Company to Pay $105,000 to Settle EEOC Sex Discrimination Suit,” Equal Employment Opportunity Com- mission (December 8, 2010). Accessed January 28, 2017, at www.eeoc.gov/eeoc/newsroom/ release/12-8-10.cfm.

47 Cynthia Thomas Calvert, “Caregivers in the Workplace.” The Center for WorkLife Law (2016). Accessed January 28, 2017, at www. worklifelaw.org/pubs/FRDupdate2016.pdf.

48 Ibid. 49 “America’s Largest Drug Store Chain to Pay

$180,000 to Settle EEOC Disability Discrimi- nation Suit,” Equal Employment Opportunity Commission (July 12, 2014), Accessed January 28, 2017, at www.eeoc.gov/eeoc/newsroom/ release/7-2-14b.cfm.

50 Marie Y. Philippe, “Corporate Diversity Train- ing: Is Yours Meeting 21st Century Needs?” Profiles in Diversity Journal 12 (January/Febru- ary 2010): 60.

51 Andrew L. Molinsky, Thomas H. Davenport, Bala Iyer, and Cathy Davidson, “3 Skills Every 21-Century Manager Needs,” Harvard Business Review 90 (January/February 2012): 139–143.

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http://www.eeoc.gov/eeoc/newsroom/release/7%E2%80%902%E2%80%9014b.cfm

http://www.worklifelaw.org/pubs/FRDupdate2016.pdf

http://www.eeoc.gov/eeoc/newsroom/release/12%E2%80%908%E2%80%9010.cfm

http://www.worklifelaw.org/pubs/FRDupdate2016.pdf

http://www.bls.gov/

http://www.eeoc.gov/eeoc/newsroom/release/7%E2%80%9028%E2%80%9015.cfm

http://www.eeoc.gov/eeoc/statistics/enforcement/sexual_harassment_new.cfm

http://www.eeoc.gov/eeoc/newsroom/release/7%E2%80%9022%E2%80%9016a.cfm

http://www.gpo.gov/fdsys/pkg/CFR%E2%80%902006%E2%80%90title29%E2%80%90vol4/xml/CFR%E2%80%902006%E2%80%90title29%E2%80%90vol4%E2%80%90sec1607%E2%80%9016.xml

http://www.dol.gov/ofccp/aboutof.html

http://www.eeoc.gov/eeoc/statistics/enforcement/charges.cfm

http://www.dol.gov/vets/programs/userra/USERRA_Annual_FY2015.pdf

http://www.eeoc.gov/eeoc/newsroom/release/4%E2%80%9010%E2%80%9012a.cfm

http://www.bls.gov/

http://www.dol.gov/ofccp/regs/compliance/ca_vevraa.htm

http://www.bls.gov/cps/demographics.htm#age.

http://money.cnn.com./

http://www.eeoc.gov/eeoc/newsroom/release/8%E2%80%9024%E2%80%9015.cfm

http://www.eeoc.gov/eeoc/newsroom/wysk/enforcement_protections_lgbt_workers.cfm

88 PART 1 • SETTING THE STAGE

52 Mike Brennan, “The Measuring Stick,” Chief Learning Officer 10 (August 2011): 22–25.

53 “R. Roosevelt Thomas,” T + D (May 2011): 66–67.

54 Pamela Arnold, “The Role of Diversity Management in the Global Talent Retention Race,” Profiles in Diversity Journal 13 (May/ June 2011): 16.

55 “No. 7 | MasterCard | DiversityInc Top 50,” DiversityInc online. Accessed January 25, 2017, at www.diversityinc.com/masterrcard/.

56 U.S. Bureau of Labor Statistics, “Women in the Labor Force: A Databook,” BLS Reports (Report 1059, December 2015). Accessed January 21, 2017, at www.bls.gov.

57 “Families by Presence of Own Children Under 18: 1950 to Present,” U.S. Bureau of the Census (Table FM-1). Accessed January 28, 2017, at www.census.gov/hhes/families/data/families. html.

58 “The 2016 State of Women-Owned Businesses Report,” American Express OPEN (2016). Accessed January 23, 2017, at http://www.wom- enable.com/content/userfiles/2016_State_of_ Women-Owned_Businesses_Executive_Report. pdf.

59 Josh Bersin, “Why Diversity and Inclusion Will Be a Top Priority for 2016,” Forbes (December 6, 2015). Access January 4, 2017, at www. forbes.com.

60 “Female CEO’s Are at Record Level in 2016, But It’s Still Only 5%,” CNN Money (Sep- tember 29, 2016). Accessed January 3, 2017, at money.cnn.com/2016/09/29/investing/ female-ceos-record-high/.

61 Saundra Stroope and Bonnie Hagemann, “Women, Water, + Leadership: Are We Mak- ing Progress?” T + D 65 (March 2011): 50–53.

62 “Women in the Workplace,” McKinsey & Company (September 2015). Accessed January 28, 2017, at www.mckinsey.com/ business-functions/organization/our-insights/ women-in-the-workplace.

63 Jo Piazza, “Women of Color Hit a ‘Concrete Ceiling’ in Business,” The Wall Street Journal online (September 27, 2016). Accessed Decem- ber 2, 2016, at www.wsj.com.

64 Jennifer Schramm, “On-Ramps Lead Back to Work,” HR Magazine 57 (September 2012): 120.

65 Kelley M. Butler, “Today’s Working Women Seek Mentors, Motherhood Transition,” Employee Benefit News 20 (April 2006): 17–19.

66 The 40-Year-Old Intern,” Harvard Business Review 90 (November 2012): 21–23.

67 U.S. Bureau of Labor Statistics, “Women in the Labor Force: A Databook,” BLS Reports (Report 1059, December 2015). Accessed January 30, 2017, at www.bls.gov.

68 Lorraine Bello and Galen Tinder, “Dual Career Implications on Workforce Mobility: The Evolu- tion of the Relocating Spouse/Partner,” Benefits

& Compensation Digest 46 (September 2009): 36–39.

69 Mitra Toossi, “Labor Force Projections to 2020: A More Slowly Growing Workforce,” Monthly Labor Review (January 2012): 43–64.

70 Ella Bell, “The Bicultural Life Experience of Career Oriented Black Women,” Journal of Organizational Behavior 11 (November 1990): 459–478.

71 “Employment Status of the Civilian Noninstitu- tional Population by Age, Sex, and Race,” U.S. Bureau of Labor Statistics. Accessed January 26, 2017, at www.bls.gov/cps/demographics.htm#age.

72 Companies Tweaking Policies and Practices for Older Workers,” HR Focus 90 (May 2013): 4–6.

73 U.S. Bureau of Labor Statistics, “Labor Force Projections to 2024: The Labor Force Participa- tion Rate Continues to Fall,” Monthly Labor Review (December 2015). Accessed January 26, 2017, at www.bls.gov.

74 Greg Ip, “For Economy, Aging Population Poses Double Whammy,” The Wall Street Journal online (August 3, 2016). Accessed January 5, 2017, at www.wsj.com.

75 Hunter Ruthven, “Barclays Shifts Perception by Rolling Out Apprenticeship Scheme for Those Over 50,” Real Business online (February 9, 2015). Accessed January 4, 2017, at http:// realbusiness.co.uk/current-affairs/2015/02/09/ barclays-shifts-perception-by-rolling-out- apprenticeship-scheme-for-those-over-50/.

76 U.S. Bureau of Labor Statistics, “Persons with a Disability: Labor Force Characteristics—2012,” (USDL 13-1141, June 12, 2013). Accessed May 12, 2014 at www.bls.gov.

77 Dori Meinert, “Opening Doors,” HR Magazine 57 (June 2012): 55–57.

78 Sarah Blahoveck, “Why Disabled Workers? 4 Powerful (and Inclusive) Companies Answer,” Huffington Post online (February 24, 2016). Accessed January 28, 2017, at www.huffing- tonpost.com; “Starbucks Recognized as a “Best Place to Work”,” Starbucks Newsroom (July 13, 2016). Accessed January 28, 2017, at https:// news.starbucks.com/starbucks-is-recognized-as- a-best-oace-to-work-for-disability.

79 “Foreign-Born Workers: Labor Force Character- istics – 2015,” U.S. Bureau of Labor Statistics (USDL-16-0989, May 19, 2016). Accessed January 29, 2017, at www.bls.com.

80 Jennifer Schramm, “Planning for Population Shifts,” HR Magazine 56 (February 2011): 80.

81 Beverly Kaye, “Four Generations,” Leadership Excellence 29 (January 2012): 20.

82 Amy Bladen Shatto, “In Practice Two Sides of the Retention Dilemma,” Chief Learning Officer 10 (August 2011): 34.

83 “Turnover, Globalization Among Emerging Challenges Facing HR,” HR Focus 88 (Septem- ber 2011): 10–11.

84 Adrienne Fox, “Talkin’ Bout My Generation,” HR Magazine 56 (May 2011): 26–27.

85 “Employment Status of The Civilian Noninstitu- tional Population by Age, Sex, And Race,” U.S. Bureau of Labor Statistics. Accessed January 28, 2017, at www.bls.gov/cps/cpsaat03.pdf.

86 Engaging Young Workers with Tailor Made Pro- grams,” Employee Benefit News 27 (June 2013): 19–21.

87 “How ‘Recession-Proof’ Will Millennial Work- ers Be?” HR Focus 86 (March 2009): 6–7.

88 “Winning Over the Next Generation of Lead- ers,” The 2016 Deloitte Millennial Survey. Accessed January 15, 2017, at www2.deloitte. com/content/dam/Deloitte/global/Documents/ About-Deloitte/gx-millenial-survey-2016-exec- summary.pdf.

89 Sharon Williams, “Welcome to Generation Z,” B&T Magazine 60 (December 10, 2010): 12.

90 Eric Lauzon, “Paradox: The Anti-Social Genera- tion,” Enterprise Innovation 7 (February/March 2011): 44.

91 Jerry Selitto, “Anyone Up for Some Time Travel?” Mortgage Banking 71 (March 2011): 22–23.

92 “The Multigenerational Workforce: Opportunity for Competitive Success,” HR Magazine 54 (March 2009): Special section 1–9.

93 How to Communicate in the New Multigen- erational Office,” Forbes.com (February 14, 2013): 26.

94 Sylvia Ann Hewlett and Kenji Yoshino, “LGBT- Inclusive Companies Are Better at 3 Big Things,” Harvard Business Review online, (Feb- ruary 2, 2016). Accessed December 20, 2016 at www.hbr.org.

95 Samantha Power, “We Must Stand Up for the Rights of Gays and Lesbians Everywhere,” Press Release (September 22, 2011). Accessed May 12, 2014 at www.whitehouse.gov.

96 Todd A. Solomon, Joseph S. Adams, and Brett R. Johnson, “How Conf licting Same-Sex Union Laws Are Impacting Employee Ben- efits,” Benefits Magazine 49 (January 2012): 14–21.

97 In Strongly Worded Decision, Supreme Court Finds Defense of Marriage Act Unconstitu- tional,” Forbes.com (July 26, 2013): 30.

98 Nadine Vogel, “Disability & LGBT—Similari- ties and Difference and How to Support Them in the Workplace,” Profiles in Diversity Journal 13 (March/April 2011): 124.

99 “LGBTQ Equality at the Fortune 500,” Human Rights Campaign, Accessed January 4, 2017, at www.hrc.org/resources/lgbt-equality-at-the- fortune-500; “Of Companies and Closets,” Economist 402 (February 11, 2012): 70.

100 Sylvia Ann Hewlett and Karen Sumberg, “For LGBT Workers, Being ‘Out’ Brings Advan- tages,” Harvard Business Review 89 (July/ August 2011): 28.

101 “‘Out’ Is In: Gay Workers Find Workplaces More Welcoming,” BusinessWeek.com (Febru- ary 13, 2013): 3.

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http://www.hrc.org/resources/lgbt%E2%80%90equality%E2%80%90at%E2%80%90the%E2%80%90fortune%E2%80%90500;

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http://forbes.com/

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https//news.starbucks.com/starbucks%E2%80%90is%E2%80%90recognized%E2%80%90as%E2%80%90a%E2%80%90best%E2%80%90oace%E2%80%90to%E2%80%90work%E2%80%90for%E2%80%90disability

http://www.huffingtonpost.com/

http://realbusiness.co.uk/current%E2%80%90affairs/2015/02/09/barclays%E2%80%90shifts%E2%80%90perception%E2%80%90by%E2%80%90rolling%E2%80%90out%E2%80%90apprenticeship%E2%80%90scheme%E2%80%90for%E2%80%90those%E2%80%90over%E2%80%9050/

http://money.cnn.com/2016/09/29/investing/female%E2%80%90ceos%E2%80%90record%E2%80%90high/

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Part Two Staffing Chapter 4

Strategic Planning, Human Resource Planning,

and Job Analysis

Chapter 5

Recruitment

Chapter 6

Selection

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Strategic Planning, Human Resource Planning, and Job Analysis4

MyLab Management Improve Your Grade!

If your professor is using MyLab Management, visit www.pearson.com/mylab/management for videos, simulations, and writing exercises.

LEARNING OBJECTIVES After completing this chapter, students should be able to:

4.1 Describe the HR strategic planning process.

4.2 Explain the human resource planning process.

4.3 Describe the job analysis process and methods.

4.4 Summarize the components of a job description.

4.5 Explain what competencies and competency modeling are.

4.6 Summarize job design concepts.

Learn It If your professor has chosen to assign this, go to www.pearson.com/mylab/management to see what you should particularly focus on and to take the Chapter 4 Warm-Up.

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http://www.pearson.com/mylab/management

The tools we describe in this chapter and in Chapters 5 and 6 provide human resources (HR) professionals with a foundation to harness the capability of a company’s human capital to its competitive advantage. Let’s consider a metaphor to bring the opening sentence to life. Take, for example, your favorite hit movie or television show. Many factors contribute to the show’s success, which we might measure as the size of enduring viewership and awards recognizing excellent talent. Among the most important are the story line, character development and scripts, and casting actors into roles.

From an HR standpoint, the story line can be thought of as a strategy to create a distinctive narrative that is unique from others, character development and scripts as job analysis and work flow, and casting requirements as HR planning. We take up these topics in this chapter.

HR Strategic Planning Process As discussed in Chapter 1, HR executives are now focusing their attention on how HR can help the organization achieve its business objectives through strategic planning, which is the process by which top management determines overall organizational purposes and objectives and how they are achieved. More specifically, strategic planning entails a series of judgments under uncertainty that companies direct toward achieving specific goals.1 Companies base strategy formulation on environmental scanning activities, which we discuss later. HR executives are increasingly highly involved in the strategic planning process. In the past they often waited until the strategic plan was formulated before becoming a part of the conversation.2

Strategic planning is an ongoing process that is constantly changing to find a competitive advantage. At times an organization may see the need to diversify and increase the variety of the goods that are made or sold. At other times, downsizing may be required in response to the external environment. Or the strategic plan may see integration, the unified control of many suc- cessive or similar operations, as their driving force. Strategic planning attempts to position the organization in terms of the external environment. For example, the so-called Great Recession in 2007-2009 showed weakness in the marketplace for some firms, which led to lower company

4.1 Describe the HR strategic planning process.

strategic planning Process by which top management determines overall organizational purposes and objectives and how they are achieved.

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92 PART 2 • STAFFING

valuations, increased business failures, and selling off their noncore business units. Forward- thinking companies found opportunities that were not available when business was booming, such as expanding their company through acquisition.3 Companies always need to look for ways to stay competitive, gain market share, and be the first to innovate a new product or service. For instance, automobile manufacturers have set their sights on building and selling affordable all-electric cars of similar or better quality than Tesla Motors’ vehicles.

Strategic planning at all levels of the organization can be divided into four steps: (1) deter- mination of the organizational mission; (2) assessment of the organization and its environment; (3) setting of specific objectives or direction; and (4) determination of strategies to accomplish those objectives (see Figure 4-1). The strategic planning process described here is basically a derivative of the strengths, weaknesses, opportunities, and threats (SWOT) framework that affects organizational performance, but it is less structured.

In strategic planning discussions, HR professionals’ primary focus must be on talent. We define human resource management (HRM) as the use of individuals to achieve organizational objectives. According to HRM expert Edward E. Lawler III, “Positioning the HR function and talent manage- ment to contribute to the overall effectiveness and financial performance of the organization is the best way the HR function can add value to corporations.”4 Focusing on recruiting, developing, and retaining talent provides the rationale for choosing various HR strategies and practices.

Mission Determination The first step in the strategic planning process is to determine the corporate mission. The mission is a company’s continuing purpose or reason for being. The corporate mission is the sum of the organization’s ongoing purpose. Arriving at a mission statement should involve answering questions such as: What are we in management attempting to do for whom? Should we maximize profit so shareholders will receive higher dividends or so share price will increase? Or should we emphasize stability of earnings so employees will remain secure? In the case of not-for-profit companies, is the focus on extending its humanitarian reach from tragic events in the United States to tragic events in other countries? Certainly, HR can provide valuable assistance in answering these questions.

There are many other mission possibilities. Mission determination also requires deciding on the principles on which management decisions will be based. Will the corporation be socially

mission Company’s continuing purpose or reason for being.

FIGURE 4-1 Strategic Planning Process

MISSION DETERMINATION decide what is to be accomplished (purpose)

determine principles that will guide the effort

OBJECTIVE SETTING

STRATEGY IMPLEMENTATION

STRATEGY SETTING Specifying and documenting corporate–level strategies and planning

Specifying corporate–level objectives that are: * Challenging, but attainable * measurable * Time specific * documented (written)

ENVIRONMENTAL ASSESSMENT External Internal

determining external conditions, threats, and opportunities determining competencies, strengths, and weaknesses within the organization

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CHAPTER 4 • STRATEGIC PlANNING, HumAN RESouRCE PlANNING, ANd Job ANAlySIS 93

responsible and environmentally friendly (sustainability)? Will the company be forthright in deal- ing with its various constituents such as its customers? The answers to these questions tend to become embedded in a corporate culture and help determine the organizational mission. Top management expects HR activities to be closely aligned to this mission and add value toward achieving these goals. The following is a part of General Mills’ corporate mission:

We serve the world by making food people love.5

General Mills also includes two additional objectives: environmental sustainability (Nourish- ing the Future) and community enhancement (Nourishing Communities). For instance, General Mills employees helped prepare and serve food, renovated buildings, and participated in activities to benefit impoverished children and teenagers in Brazil.

ENVIRONMENTAL ASSESSMENT Once the mission has been determined, the organization should assess its strengths and weaknesses in the internal environment and the threats and opportunities from the external environment (often referred as a SWOT analysis). Making strategic plans involves information flows from both the internal and the external environments. From inside comes information about organizational competencies, strengths, and weaknesses. Scanning the external environment allows organizational strategists to identify threats and opportunities, as well as constraints. In brief, the strategy would be to take advantage of the company’s strengths and minimize its weaknesses to grasp opportunities and avoid threats. For example, social networking company LinkedIn can capitalize on the following opportunities, which include the growing adoption of LinkedIn’s recruitment services among corporations, growing urbanization, changing attitudes toward employment, and increasing premium subscriptions.6

HR professionals can take advantage of LinkedIn technology and services by connecting to more candidates who subscribe to LinkedIn than would typically otherwise be the case for traditional recruitment methods such as career portals on corporate Web sites, campus hiring, recruitment agencies, and job boards. Also, HR professionals are in the best position to identify workforce strengths and weaknesses. Should the company be considering, for instance, a merger or acquisition, HR would be able to work with top management to determine whether the present workforce can be effectively integrated into the workforce of the merged company. For example, does the workforce of the merged company improve the overall value of the company, or is there only duplication of talent? Any reorganization affects people and HR professionals must be in the forefront of people-related matters.

There are always threats that counterbalance opportunities. For example, LinkedIn faces at least two significant future threats.7 Competitors such as Google and Facebook could challenge LinkedIn’s success by offering similar services to customers such as mixing social networking with recruitment services. In addition, although LinkedIn has established a presence in Latin America, South America, and Asia-Pacific regions, the growth in average revenue per customer will be much lower than in the United States because of lower purchasing power of countries in these international regions.

LinkedIn’s revenue challenges are relevant to the work of its HR professionals. Research and development (R&D) costs and sales and marketing costs are likely to rise. R&D costs increase when a company is enhancing current services or developing new ones. In addition, sales and marketing costs stand to increase when a company is expanding its reach to prospective customers. These activities are likely to translate into stepped up recruitment efforts for software engineers and sales professionals. As well, establishing competitive compensation and benefits programs stand to represent a significant challenge.

In the following Watch It video, learn about iRobot, which is best known for the iRobot Roomba® vacuum cleaning robot. This product helped to change how people view robots. iRobot continues to develop robotic products to change the way customers include robots in their daily life. This video will provide an appreciation of SWOT analysis.

Watch It 1 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled iRobot: Competitive Strategy of Home Robots and respond to questions.

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OBJECTIVE SETTING Objectives are the desired end results of any activity. Objectives should have four basic characteristics: (1) They should be expressed in writing; (2) they should be measurable; (3) they should be specific as to time; and (4) they should be challenging but attainable. Strategic objectives might be directed at factors such as profitability, customer satisfaction, financial returns, technological leadership, and operating efficiency. Objectives should be developed only after a cost–benefit analysis of each alternative is considered. Because HR professionals are in the people business, it is difficult to imagine any strategic objective that would not involve them in some manner, and the LinkedIn example illustrates this point.

STRATEGY SETTING Strategies can now be developed for accomplishing those objectives. Strategies should be developed to take advantage of the company’s strengths and minimize its weaknesses to grasp opportunities and avoid threats. HR professionals should be highly involved in these activities because the composition of the workforce will certainly influence the strategies chosen. For the sake of illustration, let’s consider two fundamental strategies: lowest cost and differentiation.

Lowest-cost strategy focuses on gaining competitive advantage by being the lowest-cost producer of a product or service within the marketplace, while selling the product or service at a price advantage relative to the industry average. Lowest-cost strategies require aggressive construction of efficient- scale facilities and vigorous pursuit of cost minimization in such areas as operations, marketing, and HR. For example, you won’t find many extras in clothes retailer Ross Stores. “We believe in “no frills”—no window displays, mannequins, fancy fixtures or decorations in our stores so we can pass more savings on to our customers.”8 Low overhead costs allow Ross to sell quality apparel and home items at 20 to 60 percent less than most department store prices, and the company is profitable.9

Companies adopt differentiation strategies to develop products or services that are unique from those of their competitors. Differentiation strategies lead to competitive advantage through building brand loyalty among devoted consumers. Brand-loyal consumers are less sensitive to price increases, which enables companies to invest in R&D initiatives to further differentiate themselves from competing companies. Differentiation strategy can take many forms, including design or brand image, technology, features, customer service, and price. Take retailer L.L. Bean for instance. The company allows customers to return merchandise at any time if not completely satisfied: “We make pieces that last, and if they don’t, we want to know about it. So, if it’s not working or fitting or standing up to its task, we’ll take it back. L.L. himself always said that he didn’t consider a sale complete ‘until goods are worn out and the customer still satisfied.”’10 Similarly, the Ritz-Carlton hotel established its Customer Loyalty Anticipation Satisfaction System, which is designed to fulfill, “even the unexpressed wishes and needs of our guests.”11 In addition, most Ritz-Carlton employees have the authority to spend up to $2,000 each day, per guest, to resolve any complaint.

In the following Watch It video, learn about the online retailer Zappos’ competitive strategy. In many retail sectors, the goal is product differentiation to create brand-loyal customers and generate pricing power. Companies achieve differentiation through formulating and implement- ing competitive strategies that define how organizations will compete in their businesses. Zappo’s strategy is to “be about the very best customer service.”

Watch It 2 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Zappos: Competitive Strategy and respond to questions.

☛ F Y I $ HR expert Edward E. Lawler III stated: “HR professionals are well positioned to facilitate the imple-

mentation of business strategies by ensuring that employees are working consistently with the mandates of strategic planning.”12

EMPLOYEE ROLES ASSOCIATED WITH COMPETITIVE STRATEGIES Common wisdom and experience tell us that HR professionals must decide which employee roles are instrumental to the attainment of competitive strategies. Knowledge of these required roles should enable HR professionals to implement HR practices that encourage enactment of these roles. For instance, HR professionals are responsible for designing and implementing practices that elicit strategy-consistent employee

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roles. As we’ve noted in the introduction, job analysis is a critical tool used by HR professionals to define employee jobs; thus, the role behavior that is expected of them.

For the lowest-cost strategy, the imperative is to reduce output costs per employee. The desired employee roles for attaining a lowest-cost strategy include repetitive and predictable behaviors, a relatively short-term focus, primarily autonomous or individual activity, high concern for quantity of output, and a primary concern for results.

The key employees’ roles for differentiation strategies include highly creative behavior, a rela- tively long-term focus, cooperative and interdependent behavior, and more risk taking. Compared with lowest-cost strategies, successful attainment of differentiation strategies depends on employee creativ- ity, openness to novel work approaches, and willingness to take risks. In addition, differentiation strate- gies require longer time frames to provide sufficient opportunity to yield the benefits of these behaviors.

STRATEGY IMPLEMENTATION Once the strategic planning process is complete, the strategy must be implemented. Some people argue that strategy implementation is the most difficult and important part of strategic management. No matter how creative and well formulated the strategic plan, the organization will not benefit if it is incorrectly implemented. Strategy implementation requires changes in the organization’s behavior, which can be brought about by changing one or more organizational dimensions, including management’s leadership style, organizational structure, information and control systems, production technology, and HR.13

LEADERSHIP A leader can get others to do what he or she wants them to do. Managers must influence organization members to adopt the behaviors needed for strategy implementation. Top-level managers seeking to implement a new strategy may find it useful to build coalitions and persuade others to go along with the strategic plan and its implementation. HR must take the leadership role in dealing with HR matters. Basically, leadership is used to encourage employees to adopt supportive behaviors, and when necessary, to accept the required new values and attitudes.

ORGANIZATIONAL STRUCTURE A company’s organizational structure is typically illustrated by its organizational chart. The form of structure needed is determined by the needs of the firm. It may be informal and highly changeable in small, uncomplicated businesses. By contrast, large, diverse, and complex organizations usually have a highly-formalized structure. But that should not mean the structure is so rigid that it does not change, perhaps even frequently. Newly formed high-tech companies are most likely to restructure or reorganize frequently, but even some of the largest Fortune 500 firms, such as General Motors and Chrysler, have experienced major reorganizations. Many variations of organizational structures are available for use today. HR should be in a good position to recommend the most effective structure needed by the organization.

INFORMATION AND CONTROL SYSTEMS Among the information and control systems are reward systems; incentives; objectives-oriented systems; budgets for allocating resources; information systems; and the organization’s rules, policies, and implementations. Certainly, HR should be a asset in developing and working with these systems. A proper mix of information and control systems must be developed to support the implementation of the strategic plan.

TECHNOLOGY The knowledge, tools, and equipment used to accomplish an organization’s assignments comprise its technology. The appropriate level of technology must be found for proper implementation of the strategic plan. Certainly, technology is revolutionizing how organizations operate today. This is the case for HR professionals.

HUMAN RESOURCES The HR functions must be properly aligned to successfully implement the strategic plan. HR will be central to understanding the future of an asset that is increasingly important to the organization—the intellectual and productive capacity of its workforce. A proper balance of HR must be developed to support strategy implementation. Once strategic planning has taken place, HR planning may be developed to help implement the strategic plan.

☛ F Y I According to the U.S. Bureau of Labor Statistics, in 2016:

$ 74.7 percent of all jobs required on-the-job training. $ 47.8 percent required prior work experience. $ 21.8 percent required a professional certification, license, or other pre-employment training.14

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Ironically, companies in the manufacturing sector are experiencing a shortage of qualified workers because the use of complex robotic and automated equipment has risen more quickly than the supply of individuals who possess the necessary skills to function in such environments.19

When employee requirements and availability have been analyzed, the firm can determine whether it will have a surplus or shortage of employees. Ways must be found to reduce the num- ber of employees if a surplus is projected. If a worker shortage is forecast, the firm must obtain the proper quantity and quality of workers from outside the organization. In this case, external recruitment and selection are required.

Because conditions in the external and internal environments can change quickly, the HR planning process must be continuous. Changing conditions could affect the entire organization, thereby requiring extensive modification to the forecasts. For instance, companies laid off millions of workers as business demand dropped precipitously. And, as the economy improved, plans were made to increase the size of the workforce.

Forecasting Human Resource Requirements Before HR requirements can be projected, demand for the firm’s goods or services must be fore- casted. This forecast is then converted into people requirements for the activities necessary to meet this demand. For a firm that manufactures personal computers, activities might be stated in terms of the number of units to be produced, number of sales calls to be made, number of vouchers to be processed, or a variety of other activities. For example, manufacturing 1,000 laptop computers each week might require 10,000 hours of work by assemblers during a 40-hour week. Dividing the 10,000 hours by the 40 hours in the workweek gives 250 assembly workers needed. Similar calculations are performed for the other jobs needed to produce and market the computers.

Several techniques for forecasting HR requirements are currently used. Some of the tech- niques are qualitative in nature, and others are quantitative.

ZERO-BASE FORECAST The zero-base forecast uses the organization’s current level of employment as the starting point for determining future staffing needs. Essentially, the same procedure is used for HR planning as for zero-base budgeting, whereby each budget must be justified again each year. If an employee retires, is fired, or leaves the firm for any reason, the position is not automatically filled. Instead, an analysis is made to determine whether the firm can justify filling it. Equal concern is shown for creating new positions when they appear to be needed. The key to zero-base forecasting is a thorough analysis of HR needs. Frequently, the position is not filled and the work is spread out among remaining employees, as often is the case with firms that downsize. Plans may also involve outsourcing or other approaches as an alternative to hiring.

availability forecast Determination of whether the firm will be able to secure employees with the necessary skills, and from what sources.

HR Web Wisdom

HR Planning Organization www.hrps.org

This is the Web site for the Human Resource People and Strategy organization.

zero-base forecast Forecasting method that uses the organization’s current level of employment as the starting point for determining future staffing needs.

Human Resource Planning Human resource planning (workforce planning) is the systematic process of matching the inter- nal and external supply of people with job openings anticipated in the organization over a specific period. Workforce planning has evolved from a knee-jerk planning undertaking to a fundamental strategic function. It includes business plan, HR data, and statistical analyses of those data. It is also incorporated into the business and financial planning process, so it provides a foundation for a plan that is aligned with the business strategy. As we discussed in Chapter 1, analyzing employ- ment data and business outcomes has empowered HR professionals to quantify its influence, and more HR professionals have gotten on board. In 2016, 51 percent of companies correlated business outcomes with HR programs, which is up from 38 percent just one year earlier.15

The HR planning process is illustrated in Figure 4-2. Note that strategic planning precedes HR planning. HR planning has two components: requirements and availability. A requirements forecast involves determining the number, skill, and location of employees the organization will need at future dates to meet its goals. For example, discount retailer Dollar General launched a campaign to hire 10,000 workers in one month because it was planning to open more than 900 stores.16 Since 2008, the company increased its staff by more than 70 percent.17 Require- ment forecasts also focus on seasonal hiring. For instance, UPS hired approximately 95,000 temporary workers for the holiday season when package delivery activity is at its peak.18

The determination of whether the firm will be able to secure employees with the necessary skills, and from what sources, is called an availability forecast. We can look to the manufacturing sector of the economy as an illustration. It’s true that many manufacturing jobs in the United States were eliminated because so many companies moved their operations to other countries where the cost of doing business is often lower. This shift in operations effectively increased the supply of available workers relative to job openings (demand for workers), leaving scores of workers unemployed.

4.2 Explain the human resource planning process.

human resource planning Systematic process of matching the internal and external supply of people with job openings anticipated in the organization over a specified period.

requirements forecast Determining the number, skill, and location of employees the organization will need at future dates to meet its goals.

FIGURE 4-2 The Human Resource Planning Process

Human Resource Planning

Forecasting Human Resource

Availability

Forecasting Human Resource

Requirements

Strategic Planning

INTERNAl ENVIRoNmENT

EXTERNAl ENVIRoNmENT

Comparing Requirements

and Availability

Surplus of

Workers

Restricted Hiring, Reduced Hours,

Early Retirement, layoffs, downsizing

demand =

Supply

No Action

Shortage of Workers

Recruitment

Selection

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Several techniques for forecasting HR requirements are currently used. Some of the tech- niques are qualitative in nature, and others are quantitative.

availability forecast Determination of whether the firm will be able to secure employees with the necessary skills, and from what sources.

HR Web Wisdom

HR Planning Organization www.hrps.org

This is the Web site for the Human Resource People and Strategy organization.

zero-base forecast Forecasting method that uses the organization’s current level of employment as the starting point for determining future staffing needs.

If your professor has assigned this, go to www.pearson.com/mylab/management to complete the HR Bloopers exercise and test your ap- plication of these concepts when faced with real-world decisions.

H R B L O O P E R S

Workforce Planning at Master Cleaners Master Cleaners provides residential cleaning

services through more than 100 cleaning employees throughout their geographic area. As the HR manager hired just more than a year ago, Jack Potts has worked hard to establish many of their HR practices. As the company’s first HR manager, Jack believes his primary responsibil- ity is to make sure administrative processes are in place. He has been attending senior leadership meetings regarding the organization’s strat- egy and knows there are some plans to expand into the commercial market. However, he hasn’t paid much attention to those discussions because there is just too much work to do to get HR processes estab- lished. Now he’s received a request from one of the cleaning managers

about hiring 25 new commercial cleaners and he’s worried about find- ing these new hires. The problem is that because the commercial clean- ers must work at night after the office buildings are closed for the day, his current recruiting strategy won’t necessarily work. Jack now must find experienced cleaners willing to work in the evening and that is a challenging task. Further, turnover is already high in the residential cleaning business. Exit interviews with employees who have quit sug- gest that they find the work tedious. Jack expresses his concerns about these staffing challenges to the cleaning manager. But the cleaning manager reminds him they have been talking about this expansion for a while and suggests that Jack should have been planning for this.

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98 PART 2 • STAFFING

BOTTOM-UP FORECAST In the bottom-up forecast, each successive level in the organization, starting with the lowest, forecasts its requirements, ultimately providing an aggregate forecast of employees needed.

It is based on the reasoning that the manager in each unit is most knowledgeable about employ- ment requirements. Beginning with the lowest-level work units in the organization, each unit man- ager makes an estimate of personnel needs for the period encompassed by the planning cycle. As the process moves upward in the company, each successively higher level of management in turn makes its own estimates of needs, incorporating the input from each of the immediately preceding levels. The result, ultimately, is an aggregate forecast of needs for the entire organization. This process is often highly interactive in that estimated requirements from the previous level are discussed, nego- tiated, and re-estimated with the next level of management as the forecast moves upward through the organization. The interactive aspect of managerial estimating is one of the advantages of this procedure because it forces managers to justify their anticipated staffing needs.

RELATIONSHIP BETWEEN VOLUME OF SALES AND NUMBER OF WORKERS REQUIRED Historically, one of the most useful predictors of employment levels is sales volume. The relationship between demand and the number of employees needed is a positive one. As you can see in Figure 4-3, a firm’s sales volume is depicted on the horizontal axis and the number of employees required is shown on the vertical axis. In this illustration, as sales decrease, so does the number of employees. Using such a method, managers can approximate the number of employees required at different demand levels. Quantitative methods such as regression analysis can be helpful in determining the number of workers needed.

Forecasting Human Resource Availability To forecast availability, the HR manager looks to both internal sources (current employees) and external sources (the labor market). The determination of whether the firm will be able to secure employees with the necessary skills, and from what sources, is an availability forecast. It helps to show whether the needed employees may be obtained from within the company, from outside the organization, or from a combination of the two sources. Another possibility is that the required skills are not immediately available from any feasible source. Consider the following example:

A large manufacturing firm on the West Coast was preparing to begin operations in a new plant. Analysts had already determined there was a large long-term demand for the new prod- uct. Financing was available and equipment was in place, but production did not begin for two years! Management had made a critical mistake: it had studied the demand side of HR, but not the supply side. There were not enough qualified workers in the local labor market to operate the new plant. New workers had to receive extensive training before they could move into the newly created jobs.

This illustration provides one more instance of the importance of HR involvement in strategic planning.

Shortage or Surplus of Workers Forecasted When firms are faced with a shortage of workers, organizations should intensify their efforts to recruit the necessary people to meet the needs of the firm. Some possible actions will be discussed next.

bottom-up forecast Forecasting method in which each successive level in the organization, starting with the lowest, forecasts its requirements, ultimately providing an aggregate forecast of employees needed.

FIGURE 4-3 Relationship of Sales Volume to Number of Employees

N u

m b

e r

o f

E m

p lo

ye e s

100

0 10 20 Sales (thousands)

30 40 50 60

200

300

400

500

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Information technology occupations are expected to grow rapidly from 2014 to 2024. The employment of information security analysts is expected to increase 18 percent during this period, which is faster than average for all occupations. According the U.S. Labor of Bureau of Statistics, multiple factors are contributing to increased demand for information security analysts:

Information security analysts plan and carry out security measures to protect an organiza- tion’s computer networks and systems. Their responsibilities are continually expanding as the number of cyberattacks increases. Demand for information security analysts is expected to be very high, as these analysts will be needed to create innovative solutions to prevent hackers from stealing critical information or causing problems for computer networks.20

Job openings by major occupational group are expected to vary widely from 2012 to 2022. Two factors contribute to the expected values: growth in a profession given demand (such as in the case of information security analysts) and company replacement needs, likely as employees retire or choose to work elsewhere. Figure 4-4 shows these projections for several occupational groups. The greatest growth in job openings is predicted to be in office and administrative sup- port followed by food preparation and related services. The lowest growth is expected in the legal profession as well as in farming, fishing, and forestry.

INNOVATIVE RECRUITING A shortage of personnel often means that new approaches to recruiting must be used. The organization may have to recruit different kinds of candidates, search in different geographic areas than in the past, and explore new recruitment methods. For instance, Ikea launched an innovative, cost-effective recruitment campaign in Australia. The company advertised job opportunities to its customers with a “Careers Instructions” sheet packed inside

FIGURE 4-4 Job openings by major occupational group, projected 2014–2024, in thousands of openings Source: Career Outlook (December 2015). Accessed February 17, 2017, at https://www.bls.gov/ careeroutlook/2015/article/ projections-occupation.htm.

Office and administrative support

Sales and related

Food preparation and serving related

Healthcare practitioners and technical

Transportation and material moving

Education, training, and library

Management

Construction and extraction

Business and financial operations

Personal care and service

Production

Healthcare support

Building and grounds cleaning and maintenance

Installation, maintenance, and repair

Computer and mathematical

Community and social service

Arts, design, entertainment, sports, and media

Architecture and engineering

Life, physical, and social science

Legal

Farming, fishing, and forestry

Protective service

Job openings

0 2,000,000 4,000,000 6,000,000

From growth

From replacement needs

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100 PART 2 • STAFFING

product boxes. Customers were instructed to apply for a job. The campaign was highly successful for generating nearly 4,300 quality applicants that yielded 280 new hires.21

In using innovative recruiting, businesses must attempt to determine who their prospective employees are and what motivates them. For example, given the physical and emotional demands of the nursing profession, many organizations offer f lexible work schedules, child care, and educational benefits. Other practices for other occupational groups may be required to attract employees to a firm, such as four-day workweeks (compressed workweeks), telecommuting, and part-time employment.

COMPENSATION INCENTIVES Firms competing for workers in a high-demand situation may have to rely on pay incentives. Premium pay is one obvious method, however, this approach may trigger a bidding war that the organization cannot sustain for an extended period. To offset the bidding war, some organizations use signing bonuses to entice individuals to join the firm. In 2016, 76 percent of companies surveyed use signing bonuses.22 Even the military uses signing bonuses. For example, the U.S. Army Corps offers a signing bonus up to $40,000 for translators who speak certain Middle-Eastern languages and enlist as translator aides in the U.S. Army.23

As more people shop online, places such as Amazon.com, Inc. and Ikea have added additional warehousing facilities to handle rising demand. The limited supply of candidates for warehouse jobs has led to significant pay increases as these companies compete for talent. Sometimes, higher hourly pay alone is not sufficient to staff these facilities. Radial, an operations management company that manages the operations of retailer warehouses and fulfillment centers, awards additional compensa- tion incentives, including attendance bonuses during the peak holiday season, gift cards, and monetary incentives for exceeding performance targets.24 The company pays individuals an extra dollar for every hour an employee meets or exceeds the performance target of picking items off the shelves.

ALTERNATIVES TO LAYOFFS Special training programs may be needed to prepare previously unemployable individuals for positions with a firm. Remedial skills and training are two types of programs that may enable companies to reassign employees to other positions within the company. For example, a small firm in Los Angeles expanded its market by hiring people with few, if any, qualifications. The firm was willing to spend the necessary time and money needed to provide even basic training.

When a comparison of requirements and availability indicates that a worker surplus will result, most companies look to alternatives to layoffs but downsizing may ultimately be required. At times, layoffs can be a necessary cost-cutting measure. However, there are counterproductive problems associated with layoffs, such as increased turnover, especially among the best, most productive workers, and the creation of anxiety among remaining staff, resulting in lower morale, reduced worker engagement, and decreased productivity. Therefore, whenever financially feasible, firms need to look for alternatives to layoff and retain as many workers as possible. We consider four of these alternatives.

First, some companies choose to implement a restricted hiring policy that reduces the workforce by not replacing employees who leave. There are basically three forms of freezes. A hard freeze means that no new workers are hired to replace a vacated position. A soft freeze means that the com- pany is only hiring to fill critical positions. New workers are hired only when the overall performance of the organization may be affected. For instance, President Donald J. Trump ordered a soft hiring freeze in most federal government agencies in 2017, excluding the military. A goal of this freeze was to save millions of dollars for working individuals whose income taxes fund much of federal govern- ment employment.25 At the same time, he authorized that the head of any executive department or agency may fill vacant jobs that are deemed necessary to promote national security or public safety. Still, many concerns have been raised about the soft freeze. For example, Bill Valdez, President of the Senior Executives Association, expressed concerns, “that the freeze, coupled with negative views of federal workers in recent years in Congress and the press, will have a chilling effect on the ability of the federal government to attract and recruit talent it needs . . . ”26 A new term, smart freeze has entered HR vocabulary. HR and managers evaluate every position to determine the ones the company could not survive without and those that are difficult to fill and continue to hire them. Some critics of the federal government’s hiring freeze argued for the need to adopt a smart freeze approach. Renee M. Johnson, President of the Federal Managers Association, said, “The American taxpayer would be better served with improvements to the workforce, not blind cuts. All federal agencies should be allowed to match hiring actions that align with essential mission and funding.”27

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Second, many companies are considering the use of voluntary severance packages to reduce workforce size and operating costs. Severance packages, also known as buyouts, refer to pay and benefits awarded to employees for a period after they leave the company. Oftentimes, buyouts include bonus payments that vary in amount based on salary and years of service. Recently, The Wall Street Journal offered an “enhanced voluntary severance benefit” to all news employees worldwide as an alternative to layoffs.28 Several newspaper companies have experienced precipitous drops in advertising revenue, subscription fees, and profits because many reputable news sources are avail- able free of charge on the internet.29 As readership drops, advertisers choose to spend their money elsewhere to capitalize on larger audiences. Poor business performance is not the only trigger for buyouts. For instance, online shoe and apparel retailer Zappos transformed its organization from one with multiple layers of management and individual decision making to a self-managed arrangement where there were no formal titles or reporting relationships.30 Instead, the company gave decision making power to flexible teams. Zappos CEO Tony Hsieh recognized that this change would not be a good fit for all employees. He decided to offer a voluntary buyout to anyone who wanted to leave the company. Nearly 20 percent of the workforce accepted the buyout.31

Third, early retirement is another way to reduce the number of workers. Some employees will be delighted to retire, but others will be somewhat reluctant. However, the latter may be willing to accept early retirement if the total retirement package is made sufficiently attractive. A tactic that is popular in the construction market is swapping employees. Some companies loan out staff to partner companies during slow times, while promising to hire back the workers when conditions improve. While the workers were away, they learned new skills and those left behind learned the skills to replace them.

Fourth, some companies permit an employee to go from full-time to 30 hours a week without losing health benefits.32 Some companies may offer job-sharing arrangements. This arrangement can enable organizations to retain top talent in lieu of layoffs while having minimal impact on the overall labor budget. For example, employee benefits can be fairly managed on a per-employee basis, as two 20-hour-a-week part timers may have comparably pro-rated, scaled back benefits. Other companies may reduce the workweek from five days to four thereby having a 20 percent reduction in wages. Some companies may offer an unpaid holiday option where instead of taking two weeks off, employees are being asked to take five, with three being unpaid.

The classic case of a firm that believes a no-layoff policy is best for continuous well-being of the firm is Cleveland’s Lincoln Electric, a manufacturer of arc welding equipment. Lincoln Elec- tric offers its Guaranteed Continuous Employment Plan, which provides covered employees with security against layoffs because of lack of work.33 The company has faithfully honored its com- mitment through the past 68 years (as of 2016, which was the latest available data) even through difficult economic climates.34 Since the 1930s, this $3 billion company has kept its promise to its U.S. employees to never lay them off for economic reasons. For decades, wages were 20 to 30 percent above industry averages. The firm believes that a stable workforce provides a long-term competitive advantage. In difficult times, hours are reduced, people are reassigned, and white- collar salaries are cut. If workers meet the firm’s performance standards, no one is laid off.

☛ F Y I One survey of organizations revealed that only 21 percent had identified their workforce needs six to 10 years into the future. 35

Succession Planning: A Component of Strategic Planning Succession planning is the process of ensuring that qualified persons are available to assume key managerial positions once the positions are vacant. Nothing could be as important to the strategic well-being of a company as ensuring that a qualified person is in place to lead the company both now and in the future. This succession planning definition includes untimely deaths, resignations, terminations, or the orderly retirements of key managerial personnel. The goal is to help ensure a smooth transition and operational efficiency, but the transition is often difficult. The Institute for Corporate Productivity (i4cp) paper “Succession Planning Highlight Report” found that succes- sion planning will be among the top five challenges executives face in the future.36 However, in another survey, more than half of United States and Canadian companies surveyed could not immediately name a successor to their organization’s chief executive officer.

succession planning Process of ensuring that qualified persons are available to assume key managerial positions once the positions are vacant.

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General Electric (GE) provides an example of a company with an excellent succession plan. At GE, the goal is same-day succession. When senior vice president Larry Johnston quit to become the CEO at Albertsons, the position was filled the same day. Bill Conaty, former senior vice president of HR at General Electric said, “We had candidates with two or three backups for all key positions—including the C-suite and all business units. And the board already knew who was lined up thanks to six-month reviews.”37 This process is in sharp contrast to the difficulty that Hewlett-Packard has experienced in the selection of a new CEO. HP has its third CEO in slightly more than a year38 and its eighth CEO since 1999.39 None of the former CEOs at HP had implemented a succession plan that would have at least identified internal candidates who were qualified to take over should the need arise.40 This form of disruption can be a serious drain on both morale and the financial well-being of the firm.

Should companies focus exclusively on internal or external candidates? Joseph L. Bower, author of The CEO Within, found that CEOs who were promoted from within the company are generally more successful than CEOs recruited from other companies. Still, the succession plan needs to consider both external and internal candidates. One approach for increasing the success of external hires is to have them serve in an executive role for a short period before promoting them to the CEO position.41

Because of the tremendous changes that will confront management this century, succession planning is taking on more importance than ever before. Deaths are not the only challenges that have created an increased focus on succession planning. For example, the premature firing of CEOs is no longer a rare event. CEOs are being terminated more quickly than in the past.

In recent years, succession planning is going much deeper into the workforce. A firm might have a good succession plan for top-level positions but few plans for the levels where all the work is performed. There is a movement away from traditional succession planning, which was focused only on top executives of the company. Succession management is now involving middle managers, where they are developed to help ensure that key roles below the C-suite have ready replacements.42

Companies that do not engage in succession planning now will eventually be forced to do it in the future. Members of the baby boom generation—born between 1946 and 1964—are mostly in their 50s and 60s. In 2024, this cohort will be ages 60 to 78.43 Although more people are working longer than ever before, companies will lose employees in leadership positions at an alarming rate. How can companies address this problem? It is in a company’s best interests to ensure that there is a transfer of knowledge from older employees to younger employees. Establishing men- toring programs may help. Also, companies should not abruptly lay off older workers, but rather to ensure that there is a smooth transition of leadership as they retire.44 Oftentimes, this goal can be accomplished with phased in retirement programs that permit full-time employees to gradually reduce their work hours over a few years.

Succession planning is often neglected in small businesses because it is generally thought of in terms of replacing CEOs and key executives within larger businesses. But, succession planning is just as, or more, important for small businesses. A problem, however, is that only 31 percent of small busi- ness owners say their businesses are extremely or very prepared for such an event.45 Without proper succession planning, the company could face economic and tax disasters. Often the small business owner’s argument against succession planning may be “we’re too small,” “we’re too new,” “we have good people in place,” or “I’m not going anywhere soon.”46 Many of today’s small businesses will not survive to the next generation of same family ownership. In fact, it is estimated that only 30 percent of businesses make it to the second generation, and just 10 percent survive to the third generation.47 Peter Handal, president, CEO, and chairman of Dale Carnegie Training, said, “The failure to establish a comprehensive succession plan is a leading cause of this phenomenon.”48

Job Analysis: Process and Methods Job analysis is the systematic process of determining the skills, duties, and knowledge required for performing jobs in an organization. With job analysis, the tasks needed to perform the job are identi- fied. Traditionally, it is an essential and pervasive HR technique and the starting point for other HR activities. In today’s rapidly changing work environment, the need for a sound job analysis system is critical. New jobs are being created, and old jobs are being redesigned or eliminated. A job analy- sis that was conducted only a few years ago may now be obsolete and must be redone. Some have even suggested that changes are occurring too fast to maintain an effective job analysis system.

4.3 Describe the job analysis process and methods.

job analysis Systematic process of determining the skills, duties, and knowledge required for performing jobs in an organization.

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A job consists of a group of tasks that must be performed for an organization to achieve its goals. A job may require the services of one person, such as that of the president, or the services of 75, as might be the case with machine operators in a large manufacturing firm. A position is the collection of tasks and responsibilities performed by one person; there is a position for every individual in an organization.

In a work group consisting of a supervisor, two senior analysts, and four analysts, there are three jobs and seven positions. A small company might have 25 jobs for its 75 employees, whereas in a large company 2,000 jobs may exist for 50,000 employees. In some firms, as few as 10 jobs may make up 90 percent of the workforce.

The purpose of job analysis is to obtain answers to six important questions:

1. What physical and mental tasks does the worker accomplish? 2. When is the job to be completed? 3. Where is the job to be accomplished? 4. How does the worker do the job? 5. Why is the job done? 6. What qualifications are needed to perform the job?

Job analysis provides a summary of a job’s duties and responsibilities, its relationship to other jobs, the knowledge and skills required, and working conditions under which it is performed. Job facts are gathered, analyzed, and recorded, as the job exists, not as the job should exist. Determin- ing how the job should exist is most often assigned to industrial engineers, methods analysts, or others. Job analysis is conducted after the job has been designed, the worker has been trained, and the job is being performed.

Job analysis is performed on three occasions: (1) when the organization is founded and a job analysis program is initiated for the first time; (2) when new jobs are created; and (3) when jobs are changed significantly because of new technologies, methods, procedures, or systems. Jobs also change when there is increased emphasis on teamwork in organizations, empowerment of employees, or other managerial interventions such as quality management systems. Job analysis is most often performed because of changes jobs. From job analysis information, both job descrip- tions and job specifications can be prepared.

The job description is a document that provides information regarding the essential tasks, duties, and responsibilities of the job. The minimum acceptable qualifications a person should possess to perform a job are contained in the job specification.49 Both types of documents will be discussed in greater detail later in this chapter.

Reasons for Conducting Job Analysis As Figure 4-5 shows, data derived from job analysis in the form of the job description/specifica- tion can have an impact on virtually every aspect of HR management. In practice, both the job description and job specification are combined into one document with the job specification presented after the job description.

job Group of tasks that must be performed for an organization to achieve its goals.

position Collection of tasks and responsibilities performed by one person.

job description Document that provides information regarding the essential tasks, duties, and responsibilities of a job.

job specification A document that outlines the minimum acceptable qualifications a person should possess to perform a job.

FIGURE 4-5 Job Analysis: A Basic Human Resource Management Tool

Job Analysis

Tasks Responsibilities

Job descriptions

Job Specifications

Knowledge Skills Abilities

• Staffing

• Training and Development

• Performance Appraisal

• Compensation

• Safety and Health

• Employee and Labor Relations

• Legal Considerations

duties

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STAFFING All areas of staffing would be haphazard if the organization did not know the qualifications needed to perform the various jobs. A major use of job analysis data is found in HR planning (as discussed earlier in this chapter). Merely knowing that the firm will need l,000 new employees to produce goods or services to satisfy sales demand is insufficient. Each job requires different knowledge, skills, and ability levels. Obviously, effective HR planning must take these job requirements into consideration. Also, lacking up-to-date job descriptions and specifications, a firm would have to recruit and select employees for jobs without having clear guidelines, a practice that could have disastrous consequences.

TRAINING AND DEVELOPMENT Job description information often proves beneficial in identifying training and development needs. If it suggests that the job requires a knowledge, skill, or ability, and the person filling the position does not possess all the qualifications required, training or development are probably in order. Training should be directed at assisting workers in performing duties specified in their present job descriptions or at developing skills for broader responsibilities.

PERFORMANCE APPRAISAL Most workers want to know what they are supposed to accomplish and good job descriptions provide that. Then, employees should be evaluated in terms of how well they accomplish the duties specified in their job descriptions and any other specific goals that may have been established. A manager who evaluates an employee on factors not clearly predetermined is left open to allegations of discrimination.

COMPENSATION In the area of compensation, it is helpful to know the relative value of a job to the company before a dollar value is placed on it. Jobs that require greater knowledge, skills, and abilities should be worth more to the firm. For example, the relative value of a job calling for a master’s degree normally would be higher than that of a job that requires a high school diploma. This might not be the case if the market value of the job requiring only a high school diploma was higher, however. Such a situation occurred in a major West Coast city many years ago. It came to light that city sanitation engineers (garbage collectors) were paid more than better-educated public schoolteachers.

SAFETY AND HEALTH Information derived from job analysis is also valuable in identifying safety and health considerations. For example, employers are required to inform workers when a job is hazardous. The job description/specification should reflect this condition. In addition, in certain hazardous jobs, workers may need specific information about the hazards to perform their jobs safely.

EMPLOYEE AND LABOR RELATIONS Job analysis information is also important in employee and labor relations. When employees are considered for promotion, transfer, or demotion, the job description provides a standard for evaluation and comparison of talent. Information obtained through job analysis can often lead to more objective human resource decisions.

LEGAL CONSIDERATIONS A properly prepared job analysis is particularly important for supporting the legality of employment practices. Before the equal employment opportunity movement in the early 1960s and 1970s, few firms had effective job analysis systems.50 But the need to validate basic job requirements hastened the growth in the use of job analysis to prepare job descriptions/ specifications. The importance of job analysis is well documented in the Uniform Guidelines on Employee Selection Procedures. 51 Job analysis data are needed to defend decisions involving termination, promotion, transfers, and demotions. Job analysis provides the basis for tying the HR functions together and the foundation for developing a sound HR program. Although the law does not require that companies use job analysis, a successful defense against claims of alleged violations of the following laws may depend on the appropriate use of job analysis:

$ Fair Labor Standards Act: Jobs are categorized as exempt or nonexempt, and job analysis is basic to this determination. Workers in nonexempt jobs must be paid time and a half when they work more than 40 hours per week. Overtime pay is not required for exempt employees.

$ Equal Pay Act: If jobs are not substantially different, employees performing them must receive similar pay. When pay differences exist, job descriptions can be used to show whether jobs are substantially equal in terms of skill, effort, responsibility, and working conditions.

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$ Civil Rights Act: HR management has focused on job analysis because selection methods need to be clearly job related. Job descriptions may provide the basis for an equitable com- pensation system and an adequate defense against unfair discrimination charges in initial selection, promotion, and all other areas of HR administration. When job analysis is not performed, defending certain qualifications established for the job is usually difficult. In the Griggs v. Duke Power Company case, the company stated that supervisors must have a high school diploma. However, the company could show no business necessity for this standard. Placing a selection standard in the job specification without having determined its necessity through job analysis makes the firm vulnerable in discrimination suits.

$ Occupational Safety and Health Act: Job descriptions are required to specify elements of the job that endanger health or are considered unsatisfactory or distasteful by much of the population. Showing the job description to the employee in advance is a good defense.

$ Americans with Disabilities Act (ADA)/ADA Amendments Act: Employers are required to make reasonable accommodations for workers with disabilities who can perform the essen- tial functions of a job and job analysis is needed to obtain this information. Key elements used to determine essential functions include physical skills, mental skills, job duties, and behavioral skills.52 The EEOC defines reasonable accommodation as any modification or adjustment to a job, an employment practice, or the work environment that makes it possi- ble for an individual with a disability to enjoy an equal employment opportunity. The ADA Amendments Act expands the definition of “disability” and many more applicants and employees are eligible for reasonable accommodations. Certainly, stating that every task in a job is essential sends a red flag to the EEOC.53

Job Analysis Methods Considerable information is needed for the successful accomplishment of job analysis. The job analyst identifies the job’s actual duties and responsibilities and gathers the other types of data such as work activities; worker-oriented activities; machines, tools, equipment, and work aids used; and personal requirements. This information is used to help determine the job skills needed. In addition, the job analyst looks at job-related tangibles and intangibles, such as the knowledge needed, the materials processed, and the goods made or services performed. Essential functions of the job are determined in this process.

Some job analysis systems identify job standards. Work measurement studies may be needed to determine how long it takes to perform a task. Regarding job content, the analyst studies the work schedule, financial and nonfinancial incentives, and physical working conditions. Education, training, and work experience pertinent to the job are identified. Because many jobs are often performed in conjunction with others, organizational and social contexts are also noted. Subjec- tive skills required, such as strong interpersonal skills, should be identified if the job requires the jobholder to be personable.

Job analysis has traditionally been conducted in several different ways because organizational needs and resources for conducting job analysis differ. Selection of a specific method should be based on the purposes for which the information is to be used (job evaluation, pay increases, development, and so on) and the approach that is most feasible for a organization. The historically most common methods of job analysis are discussed in the following sections.

QUESTIONNAIRES Questionnaires are typically quick and economical to use. The job analyst may administer a structured questionnaire to employees, who identify the tasks they perform. However, in some cases, employees may lack verbal skills, a condition that makes this method less useful. Also, some employees may tend to exaggerate the significance of their tasks, suggesting more responsibility than exists.

OBSERVATION When using the observation method, the job analyst watches the worker perform job tasks and records his or her observations. This method is used primarily to gather information on jobs emphasizing manual skills, such as those of a machine operator. It can also help the analyst identify interrelationships between physical and mental tasks. Observation alone is usually an insufficient means of conducting job analysis, however, particularly when mental skills are dominant in a job. Observing a financial analyst at work would not reveal much about the requirements of the job.

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INTERVIEWS An understanding of the job may also be gained through interviewing both the employee and the supervisor. Usually, the analyst interviews the employee first, helping him or her describe the duties performed. Then, the analyst normally contacts the supervisor for additional information, to check the accuracy of the information obtained from the employee, and to clarify certain points.

EMPLOYEE RECORDING In some instances, job analysis information is gathered by having employees describe their daily work activities in a diary or log. With this method, the problem of employees exaggerating job importance may have to be overcome. Even so, valuable understanding of highly specialized jobs, such as recreational therapist, may be obtained in this way.

COMBINATION OF METHODS Usually an analyst does not use one job analysis method exclusively. A combination of methods is often more appropriate. In analyzing clerical and administrative jobs, the analyst might use questionnaires supported by interviews and limited observation. In studying production jobs, interviews supplemented by extensive work observations may provide the necessary data. Basically, the analyst should use the combination of techniques needed for accurate job descriptions/specifications.

Over the years, attempts have been made to provide more systematic methods of conducting job analysis. Several of these approaches are discussed in Table 4-1.

The person who conducts job analysis is interested in gathering data on what is involved in performing a job. The people who participate in job analysis should include, at a minimum, the employee and the employee’s immediate supervisor. Large organizations may have one or more job analysts, but in small organizations line supervisors may be responsible for the task. Orga- nizations that lack the technical expertise may use outside consultants to perform job analysis.

Regardless of the approach taken, before conducting job analysis, the analyst should learn as much as possible about the job by reviewing organizational charts and talking with individu- als acquainted with the jobs to be studied. Before beginning, the supervisor should introduce the analyst to the employees and explain the purpose of the job analysis. Upon completion of the job

Functional Job Analysis

Functional job analysis (FJA) is a comprehensive job analysis approach that concentrates on the inter- actions among the work, the worker, and the organization. This approach is a modification of the job analysis schedule. It assesses specific job outputs and identifies job tasks in terms of task statements.

Position Analysis Questionnaire

The position analysis questionnaire (PAQ) is a structured job analysis questionnaire that uses a checklist approach to identify job elements. It focuses on general worker behaviors instead of tasks. Some 194 job descriptors relate to job-oriented elements. Advocates of the PAQ believe that its ability to identify job elements, behaviors required of job incumbents, and other job characteristics makes this procedure appli- cable to the analysis of virtually any type of job. Each job descriptor is evaluated on a specified scale such as extent of use, amount of time, importance of job, possibility of occurrence, and applicability.

Each job being studied is scored relative to the 32 job dimensions. The score derived represents a profile of the job; this can be compared with standard profiles to group jobs into known job families, that is, job of a similar nature. In essence, the PAQ identifies significant job behaviors and classifies jobs. Using the PAQ, job descriptions can be based on the relative importance and emphasis placed on various job elements. The PAQ has been called one of the most useful job analysis methods.

Management Position Description Questionnaire

The management position description questionnaire (MPDQ) is a method of job analysis designed for management positions; it uses a checklist to analyze jobs. The MPDQ has been used to determine the training needs of individuals who are slated to move into managerial positions. It has also been used to evaluate and set compensation rates for managerial jobs and to assign the jobs to job families.

Guidelines-Oriented Job Analysis

The guidelines-oriented job analysis (GOJA) responds to the legislation affecting staffing and involves a step-by-step procedure to define the work of a job classification. It is also used for developing selec- tion tools, such as application forms, and for documenting compliance with various legal requirements. The GOJA obtains the following types of information: (1) machines, tools, and equipment; (2) supervi- sion; (3) contacts; (4) duties; (5) knowledge, skills, and abilities; (6) physical and other requirements; and (7) differentiating requirements.

TABLE 4-1

Other Methods Available for Conducting Job Analysis

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analysis, two basic HR documents—job descriptions and job specifications—can be prepared. As previously mentioned, in practice, both the job description and job specification are combined into one document with the job specification presented after the job description.

Job Descriptions Information obtained through job analysis is crucial to the development of job descriptions. It is vitally important that job descriptions are both relevant and accurate.54 They should provide con- cise statements of what employees are expected to do on the job, how they do it, and the conditions under which the duties are performed. Concise job descriptions put an end to the possibility of hearing, “That’s not my job.” Among the items frequently included in a job description are these:

$ Major duties performed $ Percentage of time devoted to each duty $ Performance standards to be achieved $ Working conditions and possible hazards $ Number of employees performing the job, and to whom they report $ The machines and equipment used on the job

Having accurate job descriptions is the starting point for most HR tasks. Table 4-2 provides some suggestions for the proper language to be used in job descriptions.

The contents of the job description vary somewhat with the purpose for which it will be used. The next sections address the parts of a job description.

Job Identification The job identification section includes the job title, the department, the reporting relationship, and a job number or code. A good title will closely approximate the nature of the work content and will distinguish that job from others. Unfortunately, job titles are often misleading. An executive assistant in one organization may be little more than a highly paid clerk, whereas a person with the same title in another firm may practically run the company. For instance, one former student’s first job after graduation was with a major tire and rubber company as an assistant district service manager. Because the primary duties of the job were to unload tires from trucks, check tread wear, and stack tires in boxcars, a more appropriate title would probably have been tire checker and stacker.

Date of the Job Analysis The job analysis date is placed on the job description to aid in identifying job changes that would make the description obsolete. Some firms have found it useful to place an expiration date on the document. This practice ensures periodic review of job content and minimizes the number of obsolete job descriptions.

4.4 Summarize the components of a job description.

Keep each statement in the job description crisp and clear:

$ Structure your sentences in classic verb/object and explanatory phrases. Since the occupant of the job is your sentences’ implied subject, it may be eliminated. For example, a sentence pertaining to the description of a receptionist position might read, “Greets office visitors and personnel in a friendly and sincere manner.”

$ Always use the present tense of verbs. $ If necessary, use explanatory phrases telling why, how, where, or how often to add meaning and

clarity. For example, “Collects all employee time sheets on a biweekly basis for payroll purposes.” $ Omit any unnecessary articles such as “a,” “an,” “the,” or other words for an easy-to-understand

description. Using the above example, the statement could have read, “Greets all visitors and the of- fice personnel to the building in a friendly and a sincere manner.”

$ Use unbiased terminology. For example, use the ‘he/she’ approach or construct sentences in such a way that gender pronouns are not required.

$ Avoid using words which are subject to differing interpretations. Try not to use words such as “fre- quently,” “some,” “complex,” “occasional,” and “several.”

Source: www.sba.gov/content/writing-effective-job-descriptions

TABLE 4-2

Proper Language in the Job Description

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Job Summary The job summary provides a concise overview of the job. It is generally a short paragraph that states job content.

Duties Performed The body of the job description delineates the major duties to be performed. Usually, one sentence beginning with an action verb (such as receives, performs, establishes, or assembles) adequately explains each duty. Essential functions may be shown in a separate section to aid in complying with the Americans with Disabilities Act. An example of a job description/specification of a records clerk is shown in Figure 4-6.

Job Specification Job specifications should always reflect the minimum, not the ideal qualifications for a job. Sev- eral problems may result if specifications are inflated. First, if specifications are set too high, they might systematically eliminate minorities or women from consideration for jobs. Therefore, the organization runs the risk of being charged with discrimination. Second, compensation costs will increase because ideal candidates should be compensated more than candidates with lesser skills. Third, job vacancies will be harder to fill because ideal candidates are more difficult to find than minimally qualified candidates. Finally, including an unnecessary requirement in the job specifica- tion may keep qualified applicants out of the selection pool.55

Determining the appropriate qualifications for a job is undoubtedly the most difficult part of job analysis. It requires a great deal of probing on the part of the job analyst as well as a broad

Administrative Information Job Title: Records Clerk department: loan operations eports To: loan operation manager Job Number: 11

Date of Job Analysis January 3, 2018

Expiration Date January 2021

Job Summary Returns all consumer paid loan documents to customers. Supervises the daily activities of two clerks.

Essential Functions Performed Receives monthly files for accounts that have been paid in full and require the return of contracts, mortgage documents, auto titles, and other documents. Answers telephone and e-mail inquiries from customers or loan officers concerning documents. maintains file on temporary automobile titles until permanent title is received. Files permanent automobile titles, contracts, mortgage documents, and other documents in customer files daily. Supervises two file clerks who maintain correspondence and other general files. Performs file clerk duties as needed. Performs other duties, as required, on a temporary basis, to maintain section or depart- mental operations and services.

Job Specifications Education High school diploma preferred, but not required Experience Six months or more in a financial institution and familiarity with various loan documents Skills Required Working knowledge of microsoft Word and Excel Ability to enter data at a rate of 35 words per minute

FIGURE 4-6 Job Description/ Specification Example

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understanding of the skills needed to perform varieties of work. Items typically included in the job specification are factors that are job related, such as educational requirements, experience, and job-related personality traits and physical abilities. As previously mentioned, in practice, job specifications are often included as a major section of job descriptions.

After jobs have been analyzed and the descriptions written, the results should be reviewed with the supervisor and the worker to ensure that they are accurate, clear, and understandable. The courtesy of reviewing results with employees also helps to gain their acceptance.

☛ F Y I The Standard Occupational Classification:

$ Classifies all workers into one of 840 detailed occupations according to their occupational definition. $ Detailed occupations are combined to form 461 broad occupations, 97 minor groups, and 23 major

groups.56

13-1071 Human Resources Specialists

Perform activities in the human resource area. Includes employment specialists who screen, recruit, interview, and place workers. Excludes “Compensation, Benefits, and Job Analysis Specialists” (13-1141) and “Training and Development Specialists” (13-1151).

Illustrative examples: Staffing Coordinator, Personnel Recruiter, Human Resources Generalist

11-3111 Compensation and Benefits Managers

Plan, direct, or coordinate compensation and benefits activities of an organization. Job analysis and position description managers are included in “Human Resource Managers” (11-3121).

Illustrative examples: Wage and Salary Administrator, Employee Benefits Director, Compensation Director

13-1141 Compensation, Benefits, and Job Analysis Specialists

Conduct programs of compensation and benefits and job analysis for employer. May specialize in specific areas, such as position classification and pension programs.

Illustrative examples: Employee Benefits Specialist, Retirement Plan Specialist, Job Analyst

11-3131 Training and Development Managers

Plan, direct, or coordinate the training and development activities and staff of an organization.

Illustrative examples: Labor Training Manager, Employee Development Director, E-Learning Manager

17-2111 Health and Safety Engineers, Except Mining Safety Engineers and Inspectors

Promote worksite or product safety by applying knowledge of industrial processes, mechanics, chemistry, psychology, and industrial health and safety laws. Includes industrial product safety engineers.

Illustrative examples: Product Safety Engineer, Fire Protection Engineer, Industrial Safety Engineer

Source: www.bls.gov/soc.

TABLE 4-3

Representative SOC Descriptions for HR Professionals

Standard Occupational Classification (SOC) The U.S. Bureau of Labor Statistics created and updates the Standard Occupational Classification (SOC) system, which is used by federal statistical agencies to classify workers into occupational categories for the purpose of collecting, calculating, or disseminating data. Detailed occupations in the SOC with similar job duties, and in some cases skills, education, or training, are grouped together. The federal government updates job descriptions for all U.S. workers every 10 years. The SOC’s substantive structural changes are based on actual changes in the nature or organization of work activities being performed in the economy. The update also provides an opportunity for professional organizations and labor groups to seek recognition or a higher profile for their mem- bers’ occupations by gaining a separate listing or reclassification. Most current occupations will be unaffected, except perhaps for a change in the description’s wording. Some representative SOC descriptions for HR professionals may be seen in Table 4-3.57

HR Web Wisdom

Standard Occupational Classification (SOC) www.bls.gov/soc/2010/soc_ alph.htm

Provides an alphabetical list of SOC occupations.

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The Occupational Information Network (O*NET) The Occupational Information Network (O*NET) is a comprehensive database of worker attri- butes and job characteristics, which is administered by the U.S. Department of Labor’s Employ- ment and Training Administration and developed in collaboration with a variety of private and public companies. O*NET is comprehensive because it incorporates information about both jobs and workers. The O*NET Content Model lists six categories of job and worker information. Job information contains the components that relate to the actual work activities of a job (i.e., informa- tion that HR professionals should include in the summary and duties sections of job descriptions). Worker information represents characteristics of employees that contribute to successful job per- formance. Figure 4-7 shows the six categories of the O*NET Content Model. According to the creators of O*NET, the Content Model was developed using research on job and organizational analysis. It embodies a view that reflects the character of occupations (via job-oriented descrip- tors) and people (via worker-oriented descriptors). The Content Model also allows occupational information to be applied across jobs, sectors, or industries and within occupations.

O*NET is a flexible, easy-to-use database system that provides a common language for defin- ing and describing occupations. Its flexible design also captures rapidly changing job requirements. It provides the essential foundation for facilitating career counseling, education, employment, and training activities by providing information about knowledge, skills, abilities, interests, general work activities, and work context.58 Portions of the information included in an O*NET description for a Human Resources Specialist may be seen in Table 4-4. A particularly useful tool, available on the U.S. Department of Labor’s Career One Stop web site, enables you to prepare job descriptions using O*NET data (https://www.careeronestop.org/BusinessCenter/JDW/GettingStarted.aspx).

Competencies and Competency Modeling The term competency has become an increasingly important topic in HR practice because of the changing nature of work. Competencies build on the use of knowledge, skills, and abilities, which we describe with job analysis, to describe work. Competencies refer to an individual’s capability to orchestrate and apply combinations of knowledge, skills, and abilities consistently over time to perform work successfully in the required work situations. Traditionally, as we have seen, work has been described by many dimensions including knowledge, skills, and abilities; and, this infor- mation is reported in job descriptions. Indeed, although this is largely still the case, HR profes- sionals have embraced the ideas of competencies as the field has increasingly taken on strategic importance.

HR Web Wisdom

O*NET OnLine www.onetonline.org/

O*NET OnLine has detailed descriptions of the world of work for use by job seekers, workforce development and HR profession- als, students, researchers, and more!

4.5 Explain what competencies and competency modeling are.

competencies An individual’s capability to orchestrate and apply combinations of knowledge, skills, and abilities consistently over time to perform work successfully in the required work situations.

FIGURE 4-7 O*NET Content Model

Worker Requirements

Skills•Knowledge Education

Experience Requirements

Experience and Training Skills – Entry Requirement

licensing

Worker Characteristics

Abilities occupational Interests

Work Values Work Styles

Workforce Characteristics

labor market Information occupational outlook

Occupation-Specific Information

Job-oriented

Worker-oriented

Cross occupation

occupation Specific

Title•description Alternate Titles

Tasks Tools and Technology

occupational Requirements

Work Activities: General•Intermediate•detailed

organizational Context Work Context

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Tasks Prepare or maintain employment records related to events such as hiring, termination, leaves, transfers, or promotions, using human resources management system software.

Interpret and explain human resources policies, procedures, laws, standards, or regulations.

Hire employees and process hiring-related paperwork.

Inform job applicants of details such as duties and responsibilities, compensation, benefits, schedules, working conditions, or promotion opportunities.

Address employee relations issues, such as harassment allegations, work complaints, or other employee concerns.

Maintain current knowledge of Equal Employment Opportunity (EEO) and affirmative action guide- lines and laws, such as the Americans with Disabilities Act (ADA).

Knowledge Personnel and Human Resources—Knowledge of principles and procedures for personnel recruit- ment, selection, training, compensation and benefits, labor relations and negotiation, and personnel information systems.

English Language—Knowledge of the structure and content of the English language including the meaning and spelling of words, rules of composition, and grammar.

Clerical—Knowledge of administrative and clerical procedures and systems such as word process- ing, managing files and records, stenography and transcription, designing forms, and other office procedures and terminology.

Administration and Management—Knowledge of business and management principles involved in strategic planning, resource allocation, human resources modeling, leadership technique, production methods, and coordination of people and resources.

Skills Active Listening—Giving full attention to what other people are saying, taking time to understand the points being made, asking questions as appropriate, and not interrupting at inappropriate times.

Speaking—Talking to others to convey information effectively. Reading Comprehension—Understanding written sentences and paragraphs in work related documents.

Oral Comprehension—The ability to listen to and understand information and ideas presented through spoken words and sentences.

Oral Expression—The ability to communicate information and ideas in speaking so others will understand.

Written Comprehension—The ability to read and understand information and ideas presented in writing.

Source: http://online.onetcenter.org/

TABLE 4-4

Human Resources Specialist

Oftentimes, HR professionals’ identification of competencies is derived from an analysis of the overall strategic statements of companies. For example, GE emphasizes three strategic goals for corporate growth: Globalization, Product Services, and Six Sigma (quality improvement). GE’s top management relies on four core competencies to drive business success, which they call the four “Es”: high Energy, the ability to Energize others, Edge (i.e., the ability to make tough calls), and Execute (i.e., the ability to turn vision into results).

Apart from the work of many private consulting firms, the U.S. Department of Labor’s Employment and Training Administration developed a framework for describing competencies and for building competency models. Competency modeling specifies and defines all the compe- tencies necessary for success in a group of jobs that are set within an industry context. Figure 4-8 shows the basic framework for the Department of Labor’s competency model structure. According to the U.S. Department of Labor:

competency modeling Specifies and defines all the competencies necessary for success in a group of jobs that are set within an industry context.

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112 PART 2 • STAFFING

Foundational Competencies

At the base of the model, Tiers 1 through 3 represent competencies that provide the founda- tion for success in school and in the world of work. Foundational competencies are essential to a large number of occupations and industries. Employers have identified a link between foundational competencies and job performance and have also discovered that foundational competencies are a prerequisite for workers to learn industry-specific skills.

Industry-Related Competencies

The competencies shown on Tiers 4 and 5 are referred to as Industry Competencies and are specific to an industry or industry sector. Industry-wide technical competencies cut across industry subsectors making it possible to create career lattices where a worker can move eas- ily across industry subsectors. Rather than narrowly following a single occupational career ladder, this model supports the development of an agile workforce.

Occupation-Related Competencies

The competencies on Tiers 6, 7, 8, and 9 are referred to as Occupational Competencies. Occu- pational competency models are frequently developed to define performance in a workplace, to design competency-based curriculum, or to articulate the requirements for an occupational credential such as a license or certification.59

Figure 4-9 illustrates an example of a competency model for Solar Photovoltaic Installers who work in the renewable energy industry. The lower tiers, from personal effectiveness competencies through industry-sector technical competencies, apply to most jobs within the renewable energy industry. Hydroelectric production managers and wind engineers are examples of jobs within this industry. The top tiers, in this case, management competencies and occupation-specific competen- cies, apply to one or more, but not all, jobs within this industry. Figure 4-9 lists sample manage- ment competencies and occupation-specific competencies for the solar photovoltaic installer job. The U.S. Department of Labor’s Career One Stop Web site contains interactive tools for building competency models and career ladders (https://www.careeronestop.org/competencymodel/).

Job Design Concepts We previously said that new jobs were being created at a rapid pace. If this is so, jobs should be designed. Job design is the process of determining the specific tasks to be performed, the meth- ods used in performing these tasks, and how the job relates to other work in the organization. Several concepts related to job design will be discussed next. First, consider how Blackbird Guitars gets work done. Blackbird Guitars is a very small firm that requires employees to com- bine the tasks of multiple jobs. It is an excellent illustration of the importance of careful job design.

4.6 Summarize job design concepts.

job design Process of determining the specific tasks to be performed, the methods used in performing these tasks, and how the job relates to other work in an organization.

FIGURE 4-8 U.S. Department of Labor Competency Model Source: U.S. Department of Labor Employment and Training Administration, “Competency Model General Instructions,” CareerOneStop. Accessed February 10, 2017, at http://www.careeronestop. org/CompetencyModel/ CareerPathway/ CPWGenInstructions.aspx.

Occupation-Related Competencies

Tier 9 – management Competencies Tier 8 – occupation-Specific Requirements Tier 7 – occupation-Specific Technical Competencies Tier 6 – occupation-Specific Knowledge Competencies

Industry-Related Competencies

Tier 5 – Industry-Sector Technical Competencies Tier 4 – Industry-Wide Technical Competencies

Foundational Competencies

Tier 3 – Workplace Competencies Tier 2 – Academic Competencies Tier 1 – Personal Effectiveness Competencies

Occupation Related

Industry Related

Foundational

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JOB ENRICHMENT Strongly advocated by Frederick Herzberg, job enrichment consists of basic changes in the content and level of responsibility of a job to provide greater challenges to the worker. Job enrichment provides a vertical expansion of responsibilities.

The worker can derive a feeling of achievement, recognition, responsibility, and personal growth in performing the job. Although job enrichment programs do not always achieve positive results, they have often brought about improvements in job performance and in the level of worker satisfaction in many organizations. Today, job enrichment is moving toward the team level, as more teams become autonomous, or self-managed.

JOB ENLARGEMENT There is a clear distinction between job enrichment and job enlargement. Job enlargement is defined as increasing the number of tasks a worker performs, with all the tasks at the same level of responsibility.

Job enlargement, sometimes called cross-training, involves providing greater variety to the worker. For example, instead of knowing how to operate only one machine, a person is taught to operate two or even three, but no higher level of responsibility is required. Workers with broad skills may become increasingly important as fewer workers are needed because of tight budgets. Some employers have found that providing job enlargement opportunities improves employee engagement and prevents stagnation.60

JOB ROTATION Job rotation (cross-training) moves employees from one job to another to broaden their experience. Higher-level tasks often require this breadth of knowledge. Rotational

job enrichment Changes in the content and level of responsibility of a job to provide greater challenges to the worker.

job enlargement Increasing the number of tasks a worker performs, with all the tasks at the same level of responsibility.

job rotation Moves workers from one job to another to broaden their experience.

FIGURE 4-9 Renewable Energy Industry Competency Model Source: U.S. Department of Labor Employment and Training Administration, “Renewable Energy,” CareerOneStop. Accessed February 10, 2017, at www.careeronestop.org/ CompetencyModel/pyramid. aspx?RE=Y.

Integrity Professionalism

Personal Effectiveness Competencies

Initiative Dependability & Reliability Lifelong Learning

Interpersonal Skills

Science Basic

Computer Skills

Teamwork Business Funda- mentals

Fundamentals of Energy and Power

Biomass Solar Wind

Industry-Sector Technical Competencies

Geothermal Water Fuel Cells and

Hydrogen Energy

Energy Efficiency

Renewable Energy

Technologies

Industry-Wide Technical Competencies Quality Assurance

and Continuous

Improvement

Policies, Laws and

Regulations

Health, Safety, and

Security

Adaptability/ Flexibility

Mathematics Reading Writing Communication-

Listening & Speaking

Critical & Analytic Thinking

Information Literacy

Sustainable Practices

Checking, Examining &

Recording

Working with

Tools & Technology

Problem Solving & Decision Making

Planning, Organizing,

and Scheduling

Marketing & Customer

Focus

Management Competencies

Monitor Processes, Materials, or Surroundings

Organizing, Planning, and Prioritizing Work

Identify installation locations with proper orientation, area,

solar access, or structural integrity for photovoltaic (PV) arrays.

Install photovoltaic (PV) systems in accordance with codes and

standards using drawings, schematics, and instructions.

Occupation-Specific Requirements

Workplace Competencies

Academic Competencies

Watch It 3 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Blackbird Guitars: Managing HR Entrepreneurial Firms and respond to questions.

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114 PART 2 • STAFFING

training programs help employees understand a variety of jobs and their interrelationships, thereby improving productivity. Job rotation is often used by organizations to relieve boredom, stimulate better performance, reduce absenteeism, and provide additional flexibility in job assignments. Also, if the task to be accomplished is boring or distasteful, job rotation means that one person will not be stuck with it for all times.61 Individuals who know how to accomplish more than one task are more valuable both to themselves and to the firm. Staffing then becomes more flexible and these multiskilled workers are then more insulated from layoffs.62 If job rotation is to be effective, management must be sure to provide sufficient training so that everyone in the rotation can perform the task in a similar manner.63

REENGINEERING Reengineering is “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed.”64

Reengineering essentially involves the firm rethinking and redesigning its business system to become more competitive. It emphasizes the radical redesign of work in which companies organizes around process instead of by functional departments. Incremental change is not what is desired; instead, deep-seated changes are wanted that will alter entire operations at one time. Essentially, the firm must rethink and redesign its business system from the ground up.

Reengineering focuses on the overall aspects of job designs, organizational structures, and management systems. It stresses that work should be organized around outcomes as opposed to tasks or functions. Reengineering should never be confused with downsizing even though a workforce reduction often results from this strategy. Naturally, job design considerations are of paramount concern because as the process changes, so do essential elements of jobs. Through an initiative called Project Accelerate, Family Dollar reengineered its merchandising and supply chain processes to enable better performance by store teams. In doing so, it produced a new store layout that is easier and more convenient to shop.65

LG Electronics provides another example of how reengineering can work. LG management previously let each division deal with suppliers. That meant a procurement manager in Seoul did not know how much his counterpart at a flat-screen TV factory in Mexico paid for chips from the same company. Then Chief Executive Nam Yong decided to reengineer and rethink the company where managers seldom shared information. Today no one at LG can issue a purchase order with- out clearance from procurement engineering. By centralizing purchases, LG has cut more than $2 billion from its annual $30 billion purchases.66

reengineering Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service, and speed.

PREPARING FOR EXAM/QUIZZES

Chapter Summary by Learning Objectives 1. Describe the HR strategic planning process. If HR

is to be a strategic partner, HR executives must work with top management in achieving concrete plans and results. Strategic planning is the process by which top management determines overall organizational purposes and objectives and how they will be achieved. Strategic planning at all levels of the organization can be divided into four steps: (1) determination of the organizational mission; (2) assessment of the organization and its envi- ronment; (3) setting of specific objectives or direction; and (4) determination of strategies to accomplish those objectives.

2. Explain the human resource planning process. Human resource planning (sometimes called workforce planning) is the systematic process of matching the internal and external supply of people with job openings anticipated in the organization over a specified period.

3. Describe the job analysis process and methods. Job analysis is the systematic process of determining the skills, duties, and knowledge required for performing jobs in an organization. It is an essential and pervasive HR technique. Without a properly conducted job analysis, it would be difficult, if not impossible, to satisfactorily perform the other HR-related functions.

Work activities, worker-oriented activities, and the types of machines, tools, equipment, and work aids used in the job are important. This information is used to help determine the job skills needed. In addition, the job ana- lyst looks at job-related tangibles and intangibles.

The job analyst may administer a structured question- naire or witness the work being performed, or he or she may interview both the employee and the supervisor or ask them to describe their daily work activities in a diary or log. A combination of methods is often used.

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4. Summarize the components of a job description. Compo- nents include the job identification section, which includes the job title, department, reporting relationship, and a job number or code; the job analysis date; the job summary; and the body of the job description that delineates the major duties to be performed.

5. Explain what competencies and competency modeling are. The term competency has become an increasingly important topic in HR practice because of the changing nature of work. Competencies build on the use of knowledge, skills, and abilities, which we describe with job analysis, to describe work. Competencies refer to an individual’s capability to orchestrate and apply combinations of knowledge, skills, and abilities consistently over time to perform work successfully in the required work situation. A competency model speci- fies and defines all the competencies necessary for success in a group of jobs that are set within an industry context.

6. Summarize job design concepts. Job design is the pro- cess of determining the specific tasks to be performed, the methods used in performing the tasks, and how the job relates to other work in the organization. Job enrich- ment consists of basic changes in the content and level of responsibility of a job to provide greater challenge to the worker. Job enlargement is increasing the number of tasks a worker performs, with all the tasks at the same level of responsibility. Job rotation (sometimes called cross-train- ing) moves employees from one job to another to broaden their experience. Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed.

Key Terms strategic planning 91 mission 92 human resource planning 96 requirements forecast 96 availability forecast 96 zero-base forecast 97 bottom-up forecast 98

severance packages 101 succession planning 101 job analysis 102 job 103 position 103 job description 103 job specification 103

competencies 110 competency modeling 111 job design 112 job enrichment 113 job enlargement 113 job rotation 113 reengineering 114

Questions for Review 4-1. What are the steps involved in the strategic planning

process? 4-2. What are the steps involved in the HR planning process? 4-3. What are the HR forecasting techniques? 4-4. Distinguish between forecasting HR requirements and

availability. 4-5. What are the purposes of strategic planning? 4-6. What actions could a firm take if it forecasted a shortage

of workers? 4-7. What are some alternatives to layoffs?

4-8. Define succession planning. Why is it important? 4-9. What is the distinction between a job and a position?

Define job analysis. 4-10. When is job analysis performed? 4-11. What are the types of information required for job

analysis? 4-12. What are the methods used to conduct job analysis?

Describe each type. 4-13. What are the basic components of a job description?

Briefly describe each.

4-14. What is the purpose of the Standard Occupational Clas- sification (SOC)?

4-15. What is the purpose of the Occupational Information Network (O*NET)?

4-16. What is meant by the statement “With team design, there are no narrow jobs”?

4-17. Describe how effective job analysis can be used to satisfy each of the following statutes: (a) Fair Labor Standards Act (b) Equal Pay Act (c) Civil Rights Act (d) Occupational Safety and Health Act (e) Americans with Disabilities Act (ADA)/ADA

Amendments Act 4-18. Why is competency modeling an important practice? 4-19. Define each of the following:

(a) job design (b) job enrichment (c) job enlargement (d) job rotation (e) reengineering

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management to complete the problems marked with this icon .

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116 PART 2 • STAFFING

PREPARING FOR MY CAREER

P I A Personal Inventory Assessment An additional Personal Inventory Assessment can be found on MyLab Management.

Problem Solving, Creativity, and Innovation As you saw in this chapter, strategic decision making is conducted under conditions of uncertainty and requires the skills and ability to find solutions amidst the uncertainty. This PIA will assess your decision making approach under these circumstances.

HRM Is Everyone’s Business HR professionals should always stay abreast of current and anticipated changes in the labor market. These include knowing about the current and anticipated supply of well qualified individuals in pertinent occupations relative to business demand for them. Additional important information includes changes in skill requirements and compensation trends. HR possesses the responsibility to work with managers and other decision makers to ensure that they maintain appropriate staffing levels. While HR planning is ultimately the responsibility of the company’s HR leadership, managers must have enough awareness to participate in the planning process by making well-informed, proactive decisions about current and future departmental staffing requirements.

Action checklist for managers and HR—understanding and engaging in effective HR planning HR takes the lead

Work with managers to learn about their current and anticipated staffing needs. Understand the particulars of education, prior work experience, and unique skill sets required of new hires to perform their jobs effectively. Learn about the strengths and weaknesses of employees’ preparation to perform well.

HR planning should not be limited to considering the availability of qualified job candidates, it should also be about retention. HR professionals use information to develop actionable plans for designing and implementing onboarding programs, perfor- mance plans, and training opportunities to promote employee engagement and commitment.

Managers take the lead Based on current staffing levels and the mix of skill sets represented in the current workforce, consider additional anticipated staffing needs, including the time frame, number of employees, and job-relevant requirements such as prior work experience. Particularly communicate changes in job requirements and where there may currently be skills mismatches for current employees based on anticipated job modifications and changing technology.

Provide HR with draft job descriptions to communicate details about job duties, responsibilities for new hires and job specifications. Discuss the department’s budgetary resources available to provide competitive pay and benefits, and indicate where shortfalls may occur.

E T H I C S D I L E M M A

Which “Thinker” Should Go? Your company is a leading producer of

advanced microchips. You are the chief researcher in your firm’s think tank, which consists of eight people with various specialties. Your group has generated most of the ideas and product innovations that have kept the company an industry leader for 10 years. In fact, the think tank has been so successful that another one has been organized to support the company’s newest manufacturing operation on the West Coast. The individuals included in the new think tank have already been selected, but your boss has just assigned you the task of deciding who from your group of thinkers will head the new organization.

The person best qualified for the job is Tim Matherson. Tim is an MIT graduate, the informal team leader, and the individual who

personally spearheaded three of the team’s five most successful prod- uct advancements. However, if Tim receives the promotion, the void created by his leaving will be difficult to fill. On the other hand, the boss forced his nephew, Robert Jones, into your group. He is a sharp graduate of the local state university, but he is not a team player and he is always trying to push you around. You can either recommend Tim, illustrating that those who produce the most benefit, or you can recommend Robert, making the boss happy, getting rid of a problem, and, most important of all, keeping your best performer. 4-20. What would you do? 4-21. What factor(s) in this ethics dilemma might influence a person

to make a less than ethical decision?

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CHAPTER 4 • STRATEGIC PlANNING, HumAN RESouRCE PlANNING, ANd Job ANAlySIS 117

HRM by the Numbers Severance Pay at Miller Furniture

An additional HRM by the Numbers exercise can be found on MyLab Management.

Since its establishment in 1940, Miller Furniture, a family owned furniture retailer, has successfully honored its no layoff policy. Founders Robert and Frances Miller believed that the company’s success depended, in large part, on its dedicated work- force. In recent years, small family-owned furniture retailers have struggled to survive because large retail chains sell furniture at much lower prices. Recognizing this reality, the Miller family realizes that maintaining full staffing will lead to bankruptcy. Determined not to lay off employees, the Miller’s decided to offer buyouts to its workforce of 500 employees.

4-22. How many employees would remain if 30 percent of the total workforce accepted the buyout offer? 4-23. Employees who accept the buyout offer will receive 2 weeks of severance pay for each year of service. Of the total who

accepted the buyout (carefully consider your answer to Question 4-22), 20 percent completed 5 years of service, 40 percent completed 7 years of service, 20 percent completed 10 years of service, and 20 percent completed 15 years of service. How many total weeks of severance will Miller Furniture pay?

4-24. As part of the buyout package, the company will continue to pay its share of health insurance during the severance period. If Miller Furniture pays $100 per week for each employee to have health insurance, what is the total cost of health insurance based on the number of employees who have taken the buyout offer?

As noted earlier in the chapter, a SWOT analysis assesses an organization’s strengths, weaknesses, opportunities, and threats. As a group, select a company with which members are familiar. Conduct a brief SWOT analysis of this company.

4-25. Based on your analysis, which strengths, weaknesses, opportunities, and threats that you identified do you judge most important? Explain.

4-26. How might HR professionals help build upon the company’s strengths and capitalize on its opportunities? How might they help address some of the weaknesses and threats? Explain.

I N C I D E N T 1 Competitive Strategy at Buddy Dog Foods Buddy Dog Foods makes and sells dog food for puppies and adults. It has been a leader in the industry for more than 25 years. Until recently, the company has successfully pursued a low-cost strategy by selling a limited number of food recipes and holding down manufac- turing costs. However, Buddy Dog has lately been struggling to main- tain profitability because many new competitors offer low-cost food choices. Thus, the leadership team has decided it is time to change its strategic focus.

Buddy Dog’s extensive market research shows that niche dog food markets have emerged where pet owners are willing to pay more for hypoallergenic food made only with all-natural ingredients. There are only a few competitors in this market space, and most do not have Buddy Dog’s excellent reputation. The company’s leadership believes they can manufacture hypoallergenic dog food to dominate niche mar- kets. By distinguishing itself from the competition, Buddy Dog’s lead- ership believes they can create a sustainable competitive advantage.

Having considered market factors and its manufacturing capacity, Buddy Dog will shift from a current low-cost strategy to a differentia- tion strategy by manufacturing hypoallergenic dog food. Buddy Dog

must now make many tactical decisions in various functional areas of the company to support its new strategic approach. Its priority is to restructure the product development function. They will hire and retain talented veterinary nutritionists and food allergists. The company will also hire operations specialists. Finally, the leadership recognizes that job redesign will be needed and they must consider how to bring current employees up to speed. Clearly, Buddy Dog has a lot of work to do to ensure a successful implementation of its new strategic approach.

Questions 4-27. Strategic planning at all levels of the organization can be

divided into four steps. Which step in the strategic planning process led Buddy Dog Food’s management to change its focus?

4-28. Following Buddy Dog’s shift in competitive strategy, what must the company’s HR professionals consider?

4-29. What kinds of challenges could Buddy Dog face in the areas of recruitment, training, and compensation?

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118 PART 2 • STAFFING

Endnotes 1 Cynthia A. Lengnick-Hall and Mark L.

Lengnick-Hall, M. L, Interactive Human Resource Management and Strategic Planning (1990). New York: Quorum Books.

2 Juan Pablo Gonzalez and Dane Tyson, “How to Develop and HR Strategic Plan,” Workspan (May 2016): 25– 28.

3 Rory Cooper, “Smart HR Strategies in an Unpredictable Economy,” Maryland Banker (Third Quarter 2009): 8.

4 Edward E. Lawler III, “What Should HR Leaders Focus On In 2016?” Forbes (February 4, 2016). Accessed February 7, 2017, at www.forbes.com.

5 General Mills, Purpose, General Mills’ Corporate Mission Statement (2017). Accessed February 7, 2017, at www.generalmills.com/en/ Company/purpose.

6 Trefis Team, “LinkedIn: Opportunities & Threats (Part 1), Forbes (December 12, 2013). Accessed January 1, 2014, at www.forbes. com.

7 Trefis Team, “LinkedIn: Opportunities & Threats (Part 2), Forbes (December 18, 2013). Accessed January 1, 2014, at www.forbes.com.

8 From the Ross Stores website, “About Us,” www.rossstores.com/about-us, accessed February 6, 2017.

9 J. Bennett, “Ross Stores: Rare Winer Amid the Retail Rubble,” Barrons online, www.barrons. com, February 6, 2017.

10 From the L.L. Bean website, “100% Satisfaction Guarantee.” Accessed February 7, 2017, at www.llbean.com/llb/shop/513705?nav=sr&term =guarantee.

11 Micah Solomon, “What Steve Jobs Stole from Ritz-Carlton (and You Should Steal from Apple,” Inc. online (June 16, 2015). Accessed February 7, 2017, at www.inc.com.

12 Edward E. Lawler III, “HR Should Own Organizational Effectiveness,” Forbes online (February 11, 2014). Accessed December 29, 2016, at www.forbes.com.

13 J. R. Gallbraith and Robert K. Kazannian, Strategy Implementation: Structure, Systems, and Process, 2nd ed. (St. Paul, MN: West Publishing, 1986), 115.

14 U.S. Bureau of Labor Statistics, “Prior Work Experience Required for 47.8 Percent of All Civilian Jobs in 2016,” The Economics Daily online (February 3, 2017). Accessed February 10, 2017, at www.bls.gov.

15 “The New Organization: Different by Design,” Global Human Capital Trends 2016 (2016). Accessed December 20, 2016, www2.deloitte. com/us/en/pages/human-capital/articles/ introduction-human-capital-trends.html.

16 Tess Stynes, “Dollar General Seeks to Hire 10,000 Workers Within the Next Month,” The Wall Street Journal online (September 15, 2016). Accessed December 30, 2016, at www.wsj.com.

17 “Dollar General Will Add 10,000 Jobs This Year,” Times Free Press online (February 7, 2017). Accessed February 7, 2017, at www.timesfreepress.com/news/business/ aroundregion/story/2017/feb/07/dollar-general- will-add-10000-jobs-year/411521/.

18 “UPS to Hire 95,000 Seasonal Workers for Upcoming Holidays,” The Wall Street Journal

online (September 14, 2016). Accessed January 15, 2017, at www.wsj.com.

19 Anna Louie Sussman, “As Skill Requirements Increase, More Manufacturing Jobs Go Unfilled,” The Wall Street Journal online (September 1, 2016). Accessed January 6, 2017, at www.wsj.com.

20 U.S. Bureau of Labor Statistics, “ Information Security Analysts,” Occupational Outlook Handbook (2016-17 Edition). Accessed February 7, 2017, www.bls.gov/ooh/ computer-and-information-technology/ information-security-analysts.htm.

21 Y. Bahgat, “The Top 10 Most Innovative Recruitment Campaigns,” Zoomforth Blog, www.blog.zoomforth.com, May 18, 2015.

22 WorldatWork, “Bonus Programs and Practices,” A Report by WorldatWork (July 2016). Accessed January 31, 2017, at www. worldatwork.org/waw/adimLink?id=80398.

23 U.S. Army, “Bonuses,” (February 2017). Accessed February 7, 2017, at http:// myarmybenefits.us.army.mil/Home/ Benefit_ Library/Federal_Benefits_Page/Bonuses. html?serv=147.

24 Jennifer Smith, “Online Retailers’ New Ware- houses Heat Up Local Job Markets,” The Wall Street Journal online (April 9, 2017). Accessed May 25, 2017, at www.wsj.com.

25 Juliet Eilperin, “Trump Freezes Hiring of Many Federal Workers,” The Washington Post online (January 23, 2017). Accessed February 10, 2017, at www.washingtonpost.com.

26 Joe Davidson, “Federal Managers Say Trump’s Hiring Freeze Hurts Government,”

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management for Auto-graded writing questions as well as the following Assisted-graded writing questions:

4-30. Why is job analysis considered to be a basic HR tool?

4-33. Why does the HR manager need to be a strategic partner with top management?

I N C I D E N T 2 Who’s Flying the Plane? Many industries face a shortage of individuals to fill essential jobs. Among them is the commercial airline industry where a pilot short- age is expected to swell to 20,000 by 202267 and more than 30,000 by 2034.68 This trend weighs heavily on most airlines. Greg Muccio, a senior manager at Southwest Airlines Company lamented, “That is one of the things in my job I get to worry about every day and when I got to bed at night.”69 He sees an overall lack of interest in becoming a commercial pilot as a key problem; “That’s what puts us in the most jeopardy.”70

There are many factors that may be contributing to this lack of interest. Most commercial pilots spend the first several years work- ing for regional airlines where annual pay has been traditionally quite low—in the $20,000 range. Eventually, many of these airlines doubled starting pay. Still, raising pay has done little to move the needle. The cost of flight-training is quite high, surpassing the $100,000 mark after

factoring in the cost of tuition and living expenses. And, recent tighter government regulation requires substantially more flight hours and other experience, typically, at lower paying jobs, before they are eligible for co-pilot positions at commercial airlines. Undoubtedly, tightening regulations will make preparation for becoming a commercial pilot even more expensive.

Questions 4-30. What are some of the challenges facing the commercial airline

industry? Discuss. 4-31. Given the changing landscape for staffing commercial airlines

with qualified pilots, what are some considerations for the air- lines’ human resource management practices?

4-32. What role has recent government regulation played in this situation? Discuss.

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http://www.washingtonpost.com./

http://myarmybenefits.us.army.mil/Home/%E2%80%90Benefit_Library/Federal_Benefits_Page/Bonuses.html?serv=147.

http://www.timesfreepress.com/news/business/%E2%80%90aroundregion/story/2017/feb/07/dollar%E2%80%90general%E2%80%90will%E2%80%90add%E2%80%9010000%E2%80%90jobs%E2%80%90year/411521/

http://www.forbes.com./

http://www.inc.com./

http://www.llbean.com/llb/shop/513705?nav=sr&term=guarantee.

http://www.barrons.com/

http://www.forbes.com./

http://www.pearson.com/mylab/%E2%80%90management

http://www.wsj.com./

http://www.worldatwork.org/waw/adimLink?id=80398.

http://www.blog.zoomforth.com/

http://www.bls.gov/ooh/%E2%80%90computer%E2%80%90and%E2%80%90information%E2%80%90technology/%E2%80%90information%E2%80%90security%E2%80%90analysts.htm

http://www.wsj.com./

http://www2.deloitte.com/us/en/pages/human%E2%80%90capital/articles/%E2%80%90introduction%E2%80%90human%E2%80%90capital%E2%80%90trends.html

http://www.bls.gov./

http://www.rossstores.com/about%E2%80%90us

http://www.generalmills.com/en/Company/purpose

CHAPTER 4 • STRATEGIC PlANNING, HumAN RESouRCE PlANNING, ANd Job ANAlySIS 119

The Washington Post online (February 10, 2017). Accessed February 10, 2017, at www. washingtonpost.com.

27 Ibid. 28 Tom Kludt, “Wall Street Journal Seeks

‘Substantial Number’ of Buyouts,” CNN Money online (October 21, 2016). Accessed February 10, 2017, at http://money.cnn.com.

29 Anne Steele, “The Wall Street Journal Offers Buyouts to News Employees,” The Wall Street Journal online (October 21, 2016). Accessed February 10, 2017, at www.wsj.com.

30 Ethan Bernstein, John Bunch, Niko Canner, and Michael Lee, “Beyond the Holocracy Hype,” Harvard Business Review online (July-August 2016). Accessed February 11, 2017, at www. hbr.org.

31 Bourree Lam, “What Are So Many Zappos Employees Leaving?” The Atlantic online (January 15, 2016). Accessed February 11, 2017, at https://www.theatlantic.com.

32 Darryl Demos, “Flexible Staffing Meets Branch Needs,” CU360 35 (July 7, 2009): 4–5.

33 Lincoln Electric, “Why Lincoln Electric,” Accessed February 22, 2014, at http://www. lincolnelectric.com/en-us/company/careers/ Pages/lincoln-tradition.aspx.

34 Frank Koller, “2016 Ends at Lincoln Electric, No Layoffs for, Now, 68 Years and 83 Years of Amazing Profit-Sharing Bonuses,” Frank Koller’s Blog (December 9, 2016). Accessed February 10, 2017, at www.frankkoller. com/2016/12/2016-ends-at-lincoln-electric- no-layoffs-for-now-68-years-and-83-years-of- amazing-profit-sharing-bonuses/.

35 Heather Tinsley-Fix, “Succession Planning: Why It’s Critical Now,” Workspan (February 2017): 23–26.

36 Robert Kleinsorge, “Expanding the Role of Succession Planning,” T + D 64 (April 2010): 66–69.

37 Robert J. Grossman, “Rough Road to Succes- sion,” HR Magazine 56 (June 2011): 46–51.

38 Jeffrey Burt, “IBM, Apple, HP: Stark Contrasts in CEO Succession,” eWeek 28 (November 7, 2011): 10.

39 “‘HP Matters’ Says Incoming CEO Meg Whitman,” Channel Insider (September 23, 2011): 1–2.

40 A. G. Lafley and Noel M. Tichy, “The Art and Science of Finding the Right CEO,” Harvard Business Review 89 (October 2011): 66–74.

41 Joseph L. Bower, “More Insiders Are Becom- ing CEOs, and That’s a Good Thing,” Harvard

Business Review online (March 18, 2016). Accessed February 10, 2017, at www.hbr.org.

42 Victoria Luby and Jane Stevenson, “7 Tenets of a Good CEO Succession Process,” Harvard Business Review online (December 7, 2016). Accessed February 10, 2017, at www.hbr.org; Joe Shaheen, “Talent Acquisition as a Potent Tool of Succession Management,” Journal of Corporate Recruiting Leadership 5 (November 2010): 9–12.

43 Mitra Toossi, “Labor Force Projections to 2024: The Labor Force Is Growing, but Slowly,” Monthly Labor Review online (December 2015). Accessed February 15, 2017, at www.bls.gov/ opub/mlr/2015/article/labor-force-projections- to-2024-1.htm.

44 Heather Tinsley-Fix, “Succession Planning: Why It’s Critical Now,” Workspan (February 2017): 23–26.

45 “Business Owners Fall Short on Contingency Planning,” North Western Financial Review 196 (September 15, 2011): 22.

46 Sara LaForest and Tony Kubiac, “Understand- ing the Role of Succession Planning for Small Business Success,” Alaska Business Monthly 27 (June 2011): 26–28.

47 David Harvey, “A Family Affair,” Commercial Motor 216 (September 22, 2011): 48–49.

48 Joanne L. Stewart, “Train for the Future,” T + D 65 (July 2011): 54–57.

49 Jonathan A. Segal, “Hiring Days Are Here Again,” HR Magazine 56 (July 2011): 58–60.

50 Thomas A. Stetz, Scott B. Button, and W. Benjamin Poor, “New Tricks for an Old Dog: Visualizing Job Analysis Results,” Public Per- sonnel Management 38 (Spring 2009): 91–100.

51 Uniform Guidelines on Employee Selection Pro- cedures, Federal Register, Friday, August 25, 1978, Part IV.

52 “Get It in Writing: Creating Effective and Legal Job Descriptions,” HR Specialist: California Employment Law 4 (November 2010): 4.

53 “Is Every Function Really Essential? Be Flexible about Disabled Employees’ Duties,” HR Specialist: Illinois Employment Law 6 (January 2012): 3.

54 Laurie Burkhard, “Define Employees’ Roles and Responsibilities,” Advisor Today 104 (January 2009): 59–60.

55 Liz Ryan, “10 Ways to Fix Broken Corporate Recruiting Systems,” BusinessWeek.com (July 13, 2011): 3.

56 U.S. Bureau of Labor Statistics, “Alpha- betical List of SOC Occupations,” Standard

Occupational Classification. Accessed February 10, 2017, at www.bls.gov/soc/home.htm.

57 U.S. Bureau of Labor Statistics, “Alphabetical List of SOC Occupations,” Standard Occupa- tional Classification. Accessed February 10, 2017, at www.bls.gov/soc/2010/soc_alph.htm.

58 National Center for O*NET Development, O*Net OnLine. Accessed February 10, 2017, at http://online.onetcenter.org/.

59 U.S. Department of Labor, Employment and Training Administration, “Competency Model General Instructions.” CareerOne- Stop.Org. Accessed February 10, 2017, at www. careeronestop.org/CompetencyModel/ CareerPathway/CPWGenInstructions.aspx.

60 Yvette Lee, Shari Lau, and Patricia Graves, “Job Swapping, I-9 Forms, Travel Pay,” HR Magazine 56 (April 2011): 24–25.

61 Wendi Everton, “Keeping Your Best & Brightest Workers,” Nonprofit World 28 (November/ December 2010): 12–13.

62 “Training Budgets Bounce Back: Where to Spend,” HR Specialist 9 (March 2011): 1–5.

63 Jill Jusko, “When One Job Becomes Three,” Industry Week 260 (July 2011): 16–17.

64 Michael Hammer and James Champy, Reen- gineering the Corporation: A Manifesto for Business Revolution (New York: Harper Collins Publishers, 1993), 32.

65 “Initiatives Pay Dividends for Family Dollar,” MMR 28 (May 16, 2011): 94.

66 Moon Ihlaw and Kevin Cho, “Creative When No One’s Looking,” BusinessWeek (April 25, 2010): 37.

67 “The Coming U.S. Pilot Shortage Is Real,” Aviation Week online (February 16, 2015). Accessed February 11, 2017, at www. aviationweek.com.

68 Brian Prentice and Philippe Gouel, “Pilot Short- age Threatens to Slow U.S. Airline Growth,” Forbes online (January 28, 2016). Accessed February 11, 2017, at www.forbes.com.

69 Mary Schlangenstein and Michael Sasso, “Shrinking Pool of Future Pilots Keeps Major Airlines on Edge,” Bloomberg News online (June 29, 2016). Accessed February 11, 2017, at www.bloomberg.com.

70 Ibid.

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http://www.hbr.org

http://www.bloomberg.com./

http://www.forbes.com./

http://www.careeronestop.org/CompetencyModel/%E2%80%90CareerPathway/CPWGenInstructions.aspx

http://online.onetcenter.org/

http://businessweek.com/

http://www.hbr.org./

http://www.lincolnelectric.com/en%E2%80%90us/company/careers/Pages/lincoln%E2%80%90tradition.aspx

https//www.theatlantic.com

http://www.hbr.org./

http://money.cnn.com./

http://www.washingtonpost.com./

http://www.aviationweek.com./

http://www.bls.gov/soc/2010/soc_alph.htm

http://www.bls.gov/soc/home.htm

http://www.bls.gov/opub/mlr/2015/article/labor%E2%80%90force%E2%80%90projections%E2%80%90to%E2%80%902024%E2%80%901.htm

http://www.frankkoller.com/2016/12/2016%E2%80%90ends%E2%80%90at%E2%80%90lincoln%E2%80%90electric%E2%80%90no%E2%80%90layoffs%E2%80%90for%E2%80%90now%E2%80%9068%E2%80%90years%E2%80%90and%E2%80%9083%E2%80%90years%E2%80%90of%E2%80%90amazing%E2%80%90profit%E2%80%90sharing%E2%80%90bonuses/

http://www.wsj.com./

120

5.1 Define recruitment and describe the recruitment process.

5.2 Summarize the environment of recruitment.

5.3 Explain internal recruitment methods.

MyLab Management® Improve Your Grade!

If your professor is using MyLab Management, visit www.pearson.com/mylab/management for videos, simulations, and writing exercises.

Recruitment

LEARNING OBJECTIVES After completing this chapter, students should be able to:

5.4 Identify external recruitment sources.

5.5 Summarize external recruitment methods.

5.6 Describe alternatives to recruitment.

Learn It If your professor has chosen to assign this, go to www.pearson.com/mylab/management to see what you should particularly focus on and to take the Chapter 5 Warm-Up.

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121

Recruitment and the Recruitment Process Recruitment is the process of attracting individuals on a timely basis, in sufficient numbers, and with appropriate qualifications to apply for jobs with an organization. The firm may then select those applicants with qualifications most closely related to job descriptions. Finding the appropri- ate way of encouraging qualified candidates to apply for employment is extremely important, however, because recruiting costs can be expensive. Thus, a properly functioning recruiting pro- gram can have a major impact on the bottom line of a company.

The recruitment process is critical because employees quickly become either assets or liabili- ties based on how they contribute to the value of the company.1 How many times have we heard CEOs state, “Our employees are our most important asset”? Instead they should be saying, “The right employees are our most important asset.” Hiring the best people available has never been more critical than it is today because of the economy and global competition. A company’s ability to recruit and manage talent has become the measure for the overall health and longevity of the organization.2 It is estimated that just the cost of replacing an employee alone when a bad deci- sion is made is two to three times the employee’s annual salary.3 Therefore, it is crucial to have a finely tuned recruitment process if the selection process is to function properly.

When human resource planning indicates a need for employees, the firm may evaluate alter- natives to hiring (see Figure 5-1). Frequently, recruitment begins when a manager initiates an employee requisition, a document that specifies job title, department, the date the employee is needed for work, and other details. With this information, managers can refer to the appropriate job description to determine the qualifications the recruited person needs.

The next step in the recruitment process is to determine whether qualified employees are available within the firm (the internal source) or if it is necessary to look to external sources, such as colleges, universities, and other organizations. Because of the high cost of recruitment, organi- zations need to use the most productive recruitment sources and methods available.

recruitment Process of attracting individuals on a timely basis, in sufficient numbers, and with appropriate qualifications to apply for jobs with an organization.

employee requisition Document that specifies job title, department, the date the employee is needed for work, and other details.

5.1 Define recruitment and describe the recruitment process.

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122 PART 2 • STAFFING

Recruitment sources are where qualified candidates are located, such as colleges or competi- tors. Recruitment methods are the specific means used to attract potential employees to the firm, such as online recruiting.

Identifying productive sources of applicants and using suitable recruitment methods are essential to maximizing recruiting efficiency and effectiveness. When a firm identifies the sources of candidates, it uses appropriate methods for either internal or external recruitment to accom- plish recruitment objectives. A candidate responds to the firm’s recruitment efforts by submitting professional and personal data on either an application for employment or a résumé, depending on the company’s policy.

Companies may discover that some recruitment sources and methods are superior to others for locating and attracting potential talent. Smart recruiters want to post their job where the best prospects are likely to be. For instance, one large, heavy-equipment manufacturer determined that medium-sized, state-supported colleges and universities located in rural areas were good sources of potential managers. Far fewer companies advertise job openings in newspapers. Instead, recruit- ers are now placing their recruiting money in areas that are most productive, such as with the use of social media. To maximize recruiting effectiveness, using recruitment sources and methods tailored to specific needs is vitally important (a topic discussed later in this chapter).

Environment of Recruitment Like other human resource functions, the recruitment process does not occur in a vacuum. Factors external to the firm can significantly affect its recruitment efforts.

Labor Market Conditions Of importance to the success of recruitment is the demand for and supply of specific skills in the labor market. In general, a firm’s recruitment process is often simplified when the unemployment rate in an organization’s labor market is high. The number of unsolicited applicants is usually greater, and the increased size of the labor pool provides a better opportunity for attracting quali- fied applicants. However, if demand for a certain skill is high relative to supply, an extraordinary recruiting effort may be required. Further, the area where recruitment takes place often impacts the labor market conditions. Today, the labor market for many professional and technical positions is much broader and truly global particularly as new technologies take hold. For example, wind turbine technicians are in considerably high demand.4

Possessing a college degree used to be the passport to secure a good job.5 This largely remains to be the case when we consider unemployment rates and average weekly earnings by educational attainment. Figure 5-2 shows lower unemployment rates and higher average weekly earnings for progressively highly educational attainment. However, the type of degree

recruitment sources Where qualified candidates are located.

recruitment methods Specific means used to attract potential employees to the firm.

HR Web Wisdom

Social Network Recruiting www.linkedin.com

LinkedIn is an online social net- work Web site.

5.2 Summarize the environment of recruitment.

FIGURE 5-1 The Recruitment Process

Recruited Individuals

Recruitment

Human Resource Planning

INTERNAL ENVIRONmENT

EXTERNAL ENVIRONmENT

Internal Sources External Sources

Internal methods External methods

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CHAPTER 5 • RECRuITmENT 123

awarded may mean the difference between getting a job that does not require a college degree and obtaining a professional well-paying position.6 Also, many of the jobs available today do not require a college degree. Rather, skills to perform crafts such as welders, pipe fitters, painters, and machinists are needed. In fact, today there is a critical shortage of such skills, particularly in the construction industry.7

According to a recent McKinsey Global Institute report, 40 percent of full-time job open- ings in companies planning to hire remain unfilled for six months or longer because they cannot find qualified applicants.8 New technology may require that workers have a specialized degree even though one was unnecessary 10 years ago.9 There has been a “skill-based technology” change in the job market. According to CareerBuilder’s Brent Rasmussen, “Two in five employers (41 percent) reported that they continuously recruit throughout the year so that they have can- didates in their pipeline in case a position opens up down the road. The skills gap that exists for high-growth, specialized occupations will become even more pronounced in the years to come, prompting the need to place a greater emphasis on reskilling workers through formal education and on-the-job training.”10 Computers have automated many of the repetitive physical and mental tasks. Workers are now being recruited who can perform tasks that cannot be automated and are nonrepetitive and more sophisticated.11

Active or Passive Job Seekers The recruitment method that proves to be most successful will depend to an extent on whether the recruited individual is an active or passive job seeker. Active job seekers are individuals who are committed to finding another job whether presently employed or not. These individuals are usually easier to identify because their names have been placed in the job market. Their résumés are on job boards and friends, associates, or companies have been contacted directly to learn about job opportunities. Passive job seekers, on the other hand, are potential job candidates who are typi- cally employed, satisfied with their employer, and content in their current role. But if the right opportunity came along, they might like to learn more. These individuals want to move slower and will ask a lot of questions before making a job change. They are more hesitant to risk leaving a good job for a new challenge and increased risk. Inevitably, opinions differ regarding whether one type of job seeker turned out to be a better employee than the other. A prevalent view favors active job seekers. B/E Aerospace routinely considered both active and passive job seekers. Over time, they concluded that active job seekers were better employees and stayed longer than passive job seekers. B/E Aerospace HR Director Jonathan Turner reasoned, “Active candidates are already looking and fundamentally prepared to switch companies, locations, or careers.”12 He went on to say that passive candidates are, “more difficult to find, engage with, and motivate to make major life changes, which leads to longer times to fill.”

This chapter identifies numerous recruitment methods. Some are more useful in identifying active job seekers and others are better used in recruiting passive job seekers. Naturally, some will be directed at both groups.

active job seekers Individuals committed to finding another job whether presently employed or not.

passive job seekers Potential job candidates, who are typically employed, satisfied with their employer, and content in their current role but if the right opportunity came along, they might like to learn more.

FIGURE 5-2 Earnings and Unemployment Rates by Educational Attainment Source: Bureau of Labor Statistics, Current Population Survey

All workers: $860

Median usual weekly earning

Some college, no degree

Associate’s degree

Bachelor’s degree

master’s degree

Professional degree

Doctoral degree

High School diploma

Less than a high school diploma $493

$678

$738

$798

$1,137

$1,341

$1,730

$1,623

All workers: 4.3%

5.4%

8.0%

5.0%

3.8%

2.8%

2.4%

1.5%

1.7%

Unemployment rate

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124 PART 2 • STAFFING

Legal Considerations Legal matters also play a significant role in recruitment practices in the United States. This is not surprising because the candidate and the employer first make contact during the recruitment process. A poorly conceived recruiting process can do much to create problems in the selection process. Therefore, it is essential for organizations to emphasize nondiscriminatory practices at this stage.

The Office of Federal Contract Compliance Programs (OFCCP) has issued guidelines con- cerning the online recruiting policies of federal contractors and subcontractors. Companies must keep detailed records of each online job search. They must also identify what selection criteria were used and can explain why a person with protected status was not hired. Equal Employment Opportunity Commission (EEOC) guidelines suggest that companies with more than 100 employ- ees keep staffing records for a minimum of two years. The threshold coverage is 50 employees if dealing with the OFCCP.

A dramatic increase in firms using the Internet for recruiting has added to management’s challenge to comply with the OFCCP. Under the rule, there are four criteria to determine whether an individual is an Internet applicant:

$$ The job seeker has expressed interest through the Internet. Applicants have gone to the cor- porate career Web site and applied for a job that is listed.

$$ The employer considers the job seeker for employment in an open position. If the applicant does not meet specific qualifications spelled out in the job-specification section of the job description, the résumé does not have to be considered.

$$ The job seeker has indicated that he or she meets the position’s basic qualifications. If the position description calls for three years of work experience, and the individual has three years of experience in previous jobs, he or she would believe they meet the basic qualifications.

$$ The applicant has not indicated he or she is no longer interested in the position.14

Employers must keep records of all expressions of interest through the Internet, including online résumés and internal databases. Employers are also expected to obtain the gender, race, and ethnicity of each applicant, when possible. This information enables a compilation of demographic data, such as age, race, and gender, based on that applicant pool. This data is used to determine whether a company’s hiring practices are discriminatory.

Internal Recruitment Methods Management should be able to identify current employees who are capable of filling positions as they become available. Helpful tools used for internal recruitment include human resource databases, job postings and job bidding, and employee referrals.

Human Resource Databases Human resource databases permit organizations to determine whether current employees possess the qualifications for filling open positions. As a recruitment device, these databases have proven to be extremely valuable to organizations. Databases can be valuable in locating talent internally and supporting the concept of promotion from within.

Job Posting and Job Bidding Job posting is a procedure for informing employees that job openings exist. Job bidding is a procedure that permits employees who believe that they possess the required qualifications to apply for a posted job.

Hiring managers usually want to give internal candidates priority to improve employees’ attitudes and stimulate their interest in the company. The job posting and bidding procedures can

5.3 Explain internal recruitment methods.

job posting Procedure for informing employees that job openings exist.

job bidding Procedure that permits employees who believe that they possess the required qualifications to apply for a posted position.

☛ $F Y I A recent study revealed that 90 percent of recent hires were actively searching for a new job. Of these, 44 percent relied on online job alerts.13

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help minimize the commonly heard complaint that insiders never hear of a job opening until it is filled. Typically, vacant jobs are posted to internal candidates before external recruiting takes place. Several forums are available today to advise employees that a vacancy exists. In years past, jobs were literally posted on a bulletin board. Today, companies use the intranet, the Internet, or post the job on the company Web site or company Facebook page. Some companies send out e-mails and voice mail to selected managers and employees advising them that a vacancy exists.

Many organizations, including Whirlpool, BMW, Kellogg, Hyatt, and Hewlett-Packard, man- age internal candidates with Web-based applications. Employees create profiles that detail their skills and interests for their next ideal position and are notified when such a position exists. FedEx’s philosophy is that employees should be doing the kind of work they want to do. Its Web site helps candidates identify their ideal job. Using drop-down lists, it prompts them to enter data about desires, location, type of work, and so forth; it also asks them to describe their skills. When jobs open, managers have instant access to these electronic résumés in which the candidates have specified what they can and want to do.

Today, if a worker does not know about a vacancy, it is usually because he or she did not check the internal posting system regularly. Yet, even with an online system, a job posting and bid- ding system has some potential negative features. For one thing, an effective system requires the expenditure of time, effort, and money. Organizations need to be sure to treat internal candidates properly so they will not be discouraged or prompted to leave if they do not get the job. When bidders are unsuccessful, someone must explain to them why they were not selected. Management must choose the most qualified applicant or else the system will lack credibility. Still, complaints may occur, even in a well-designed and well-implemented system.

Employee Referrals Employee referrals involve an employee of the company recommending a friend or associate as a possible member of the company; this continues to be the way that top performers are identified. In many organizations, the use of employee referrals produces the most and best-qualified appli- cants. Organizations such as Southwest Airlines, Microsoft, Disney, and Ritz-Carlton typically employ many of their new hires exclusively through employee referrals. It is just human nature that employees do not want to recommend a person unless they believe they are going to fit in and be productive. Thus, it is a powerful recruiting tool. Because of this, many companies have strengthened their employee referral program. These organizations have found that their employ- ees can serve an important role in the recruitment process by actively soliciting applications from among their friends and associates.

employee referral An employee of the company recommends a friend or associate as a possible member of the company; this continues to be the way that top performers are identified.

If your professor has assigned this, go to www.pearson.com/mylab/management to complete the HR Bloopers exercise and test your ap- plication of these concepts when faced with real-world decisions.

H R B L O O P E R S

Recruiting Skilled Machinists Two months into her new position as Lead

Recruiter at New World Manufacturing, Emily Lang is starting to feel frustrated. Emily was promoted to the Lead Recruiter position after three years as a recruiter for the company’s management training pro- gram. In that position, Emily impressed upper management with her ability to fill the trainee positions quickly and cost-effectively. Emily’s expertise in using social media helped her develop an impressive pipe- line of talented candidates. Thus, she was promoted to a Lead Recruiter in the manufacturing division to help address their challenging staffing issues. The unemployment rate in the area is high and the company is having problems finding skilled machinists to staff their manufacturing

positions. Emily immediately put her expertise to work to attempt to build a solid pipeline of candidates for the multitude of entry level posi- tions in the factory. She started an online recruiting campaign including a LinkedIn and a Facebook page specifically for the division. She also started using the company Twitter account to spread the word about the open positions. Knowing that many of the applicants for these entry-level positions didn’t have résumés, she also created an easy to use online application on the company Web site. But her recruiting savvy doesn’t seem to be paying off. The manufacturing manager has informed her that there are still a dozen open positions and she doesn’t have any new applicants to share.

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126 PART 2 • STAFFING

Some firms give incentives to their employees for successful referrals. A WorldatWork Bonus Program Practices survey found that 63 percent of companies offer referral bonuses and an addi- tional 15 percent are considering one.15 Typically, the types of positions that a company would pay referral bonuses include professionals, technical, IT staff, and sales.16 Most often, bonuses range from $1,000 to $2,500 per successful referral, but, it is not unheard of to find substantially larger bonuses. For instance, Intel offers bonuses amounts as high as $4,000 for job candidate referrals that help the company meet its diversity objectives.17 Intel, like many technology companies, has come under criticism for not taking extra measures to recruit qualified women and minority candidates. In addition, it should be noted that employee referral practices have also proven valu- able for other professions.

☛ $F Y I The percentage of companies that use employee referral bonuses pay them after the new employee completes:

$$ At least 45 days: 23 percent $$ Between 1.5 and 3 months: 44 percent $$ Between 3 and 6 months: 28 percent $$ More than 6 months: 5 percent18

Typically, those who are referred by a present employee are more productive. Costs can be much lower than using advertising or agencies. Using referrals also reduces turnover among both new and existing employees because applicants come prescreened for culture fit. Small companies especially prefer to find candidates through referrals and networks of people they trust. Groupon, the online discounter, grew from 37 to 7,100 employees in 21 months. It acquires about 40 percent of new hires through employee referrals.19 A recent study found that referrals are twice as more likely to be interviewed than those who are not referred.20 Also, referrals are 40 percent more likely to be hired than those who are not referred.

Employee enlistment is a unique form of employee referral in which every employee becomes a company recruiter. This is different from merely asking employees to refer friends to the com- pany. The firm supplies employees with simple business cards that do not contain names or posi- tions. Instead, these cards have a message like, “We are always looking for great. For additional information, log on to our Web site.” Employees then distribute the cards wherever they go, at parties, sports events, family gatherings, picnics, or the park. The purpose is to let people know that the company does want people to apply. An interesting way of using e-mail in the recruitment process is to ask employees to put a footer in their e-mails reminding people that their company is hiring. It might say something like the following: “Note: We’re hiring amazing engineers, BD people, and a star Ops person. Refer a friend and get a fully paid trip to Hawaii for two.”21

Recruiters can often obtain referrals from new employees when they first join the firm. These new hires may provide leads regarding other candidates that have the skills and competences that the organization needs. Information from such candidates is often easy to obtain because the new hire is excited about joining the company and would like to have their friends and associates join them. Recruiters may simply ask, “Do you know anyone in your field who might like to work here?” A capable recruiter can then develop a list of good candidates with special skills who can be recruited.

A note of caution should be observed about the extensive use of employee referrals. The EEOC Compliance Manual explicitly warns that recruiting only at select colleges or relying on word-of-mouth recruiting, which includes employee referral programs, may generate applicant pools that do not reflect diversity in the labor market.

External Recruitment Sources At times, a firm must look beyond its own borders to find employees, particularly when expand- ing its workforce. External recruitment is needed to (1) fill entry-level jobs; (2) acquire skills not possessed by current employees; and (3) obtain employees with different backgrounds to provide a diversity of ideas. As Figure 5-3 shows, even with internal promotions, firms still must

5.4 Identify external recruitment sources.

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CHAPTER 5 • RECRuITmENT 127

fill entry-level jobs from the outside. Thus, after the president of a firm retires, a series of inter- nal promotions follows. Ultimately, however, the firm must recruit externally for the entry-level position of salary analyst. If an outside candidate was selected for the president’s position, the chain reaction of promotions from within would not have occurred. If no current employee has the desired qualifications, candidates may be attracted from many outside sources.

High Schools and Vocational Schools High schools and vocational schools play an important role in preparing individuals for the work- force. Approximately 39 percent of the jobs in the U.S. labor force require a high school diploma or equivalent.22 Understandably, organizations concerned with recruiting clerical and other entry- level employees often depend on high schools and vocational schools. Many of these institutions have outstanding training programs for specific occupational skills, such as home appliance repair and small engine mechanics. Some companies work with schools to ensure a constant supply of trained individuals with specific job skills. In some areas, companies even loan employees to schools to assist in the training programs.

Community Colleges Many community colleges are sensitive to the specific employment needs in their local labor markets and graduate highly sought-after students with marketable skills. Typically, community colleges have two-year programs designed for both a terminal education and preparation for a four-year university degree program. Many community colleges also have excellent mid-man- agement programs combined with training for specific trades. For example, San Juan College located in Farmington, New Mexico, has a well-respected veterinary technology program that is known nationwide. Career centers often provide a place for employers to contact students, thereby facilitating the recruitment process.

Colleges and Universities Colleges and universities represent a major recruitment source for potential professional, techni- cal, and management employees. Placement directors, faculty, and administrators can be helpful to organizations in their search for recruits. Establishing a relationship with faculty members is important because most professors are aware of their students’ academic performance and abilities. Because on-campus recruitment is mutually beneficial, both employers and universities should take steps to develop and maintain close relationships. It is important that the firm knows the school and the school knows the firm.

HR Web Wisdom

HR Internet Guides www.hr-guide.com

This Web site contains links to other Internet-based resources for topics such as recruitment, selection, and equal employment opportunity.

FIGURE 5-3 Internal Promotion and External Recruitment A. L. Weaver

Vice President, Human Resources

R. E. Lewis

manager, Human Resource

Development

m. L. Denney

manager, Employment

R. R. Jackson

manager, Compensation

J. Hicks

Salary Analyst

B. massenburg B.B.S., State university

External Recruit

Promotion

Promotion Retirement

G. L. Newman

President and Chief Executive

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128 PART 2 • STAFFING

Competitors in the Labor Market When recent experience is required, competitors and other firms in the same industry or geographic area may be the most important source of recruits. Another name for actively recruiting employees from competitors is called poaching. It has been estimated that poaching may account for 30 percent of the movement in labor.23 In fact, the most highly qualified applicants often come directly from competitors in the same labor market. Competitors and other firms serve as external sources of recruitment for high-quality talent. Even organizations that have policies of promotion from within actively recruit employees from competitors’ most productive workers. For example, tech companies are aggressively recruiting engineers, designers, computer scientists, and executives who could com- pete and adapt to the rapid changes that are occurring in the industry.24 This competition for specific skills has driven up pay for certain job skills. The competition for qualified applicants has been especially aggressive among workers involved in social media, mobile technology, and e-commerce even when the unemployment rate remained relatively high. With an improved economy, more organizations are susceptible to having employees lured away by competitors. In addition, manag- ers are likely to be facing even more challenges than ever before because of business, demographic trends, and poor leadership development practices within firms.25 John Sullivan, author of 1000 Ways to Recruit Top Talent, states two problems when competitors “steal” employees; “One, you have to replace the talent, and in a time of tight labor markets, that’s a very hard—and very expen- sive—endeavor.” He goes on to say, “And two, the talent is taking ideas with them to a competitor.”26

Smaller firms look for employees trained by larger organizations that have greater develop- mental resources. For instance, one optical firm believes that its own operation is not large enough to provide extensive training and development programs. Therefore, a person recruited by this firm for a significant management role is likely to have held at least two previous positions with a competitor. In the following Watch It video, Hanno Holm, Chief Operating Office of Rudi’s Organic Bakery, discusses how his small, dynamic, and fast-growing company searches for the right employees and how the process differs from large companies.

Watch It 1 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Rudi’s Bakery: Human Resource Management and respond to questions.

Former Employees At one time, when employees quit, their managers and peers tended to view them as being dis- loyal and ungrateful, and they were “punished” with no-return policies. A common attitude was that if you left your firm, you did not appreciate what the company had done for you. Those days are gone and often “goodbye” may not be forever. In fact, according to a recent survey, only 11 percent of human resources (HR) professionals said that they would not rehire departing workers if they wished to return.27 Today’s young workers are more likely to change jobs and later return to a former employer than their counterparts who entered the workforce 20 or 30 years ago, and smart employers try to get their best ex-employees to come back. The boomerang effect might happen because there was a strong bond with previous coworkers or the new job was not what the employee envisioned. Van Alstyne, HR manager for Staffing Plus, based in Haverford, Pennsyl- vania, said, “If employees depart on good terms, contact should be maintained through proactive networking efforts by the company. It keeps the door open for good employees to return.”28

The advantage of tracking former employees is that the firm knows their strengths and weak- nesses and the ex-employees know the company. Tracking, recruiting, and hiring a former employee can be a tremendous benefit and can encourage others to stay with the firm. It sends the message that things are not always greener on the other side of the fence. The large number of people who will change jobs during their lifetime means businesses would be foolish to lose touch with them.

Unemployed The unemployed often provide a valuable source of recruits. Qualified applicants join the unem- ployment rolls every day for various reasons. Companies may downsize their operations, go out of business, or merge with other firms, leaving qualified workers without jobs. Employees are also

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fired sometimes merely because of personality differences with their bosses. Frequently, employ- ees become frustrated with their jobs and quit. Even individuals who have been out of work for extended periods should not be overlooked. According to the U.S. Bureau of Labor Statistics, the total number of job openings in 2016 was 5.5 million,29 with more than 7.5 million unemployed workers.30 In January 2017, the unemployment rate was 4.9 percent. However, if discouraged workers and marginally attached workers are counted, the total unemployment rate rose to about 6.2 percent.31 Who are discouraged and marginally attached workers? Discouraged workers have given up looking for jobs, and marginally attached workers wanted and were available for work, and had looked for a job sometime in the prior 12 months. It should be noted that the unemploy- ment rate has dropped steadily from more than 10 percent since the Great Recession ended in 2009. While the unemployed represents a source of potential employees, the improved economy will leave companies with fewer choices.

Military Personnel Hiring former service members makes sense to a lot of employers because many of these indi- viduals have a proven work history, are f lexible and highly motivated. General Electric (GE) recognizes the value of military veterans as employees; “Your service made you a leader and a disciplined, strategic thinker with a level of loyalty that is unmatched.”32 Many other companies have discovered the benefits of recruiting military talent. For instance, Starbucks launched an initiative in 2003 to hire 10,000 veterans and their spouses by 2018. By early 2017, the company made great strides toward meeting its goal by having already hired 8,000 new employees.33 AT&T pledged to hire 20,000 veterans by 2020.34 These statistics show that many companies successfully recruit veterans; however, they do not remain for very long. A 2016 U.S. Chamber of Commerce Foundation survey revealed that 44 percent of veteran hires left their first post-military jobs within a year.35 According to Brian Stann, a former captain in the Marines and head of Hire Heroes USA, a nonprofit that helps veterans find jobs and prepare for the corporate world, “One of the biggest mistakes employers can make is not understanding how to take advantage of veterans’ skills” despite wanting to hire them.”36 Some companies are working diligently to retain veteran hires. For example, J.P. Morgan Chase & Co. instituted Pathfinder, an experimental project that pairs newly recruited veterans with a more established veteran to help them set goals, understand the differences between civilian and military cultures, and offer support. Besides active company campaigns, service members nationwide looking for jobs can consider visiting the HirePatriots. com web site. “We help citizens and businesses to thank our current military, veterans, and their spouses by posting their job opportunities on our free military job posting and search Web site,” said Mark Baird, president of Patriotic Hearts.37

Self-Employed Workers The self-employed worker may also be a good potential source. These individuals may be true entrepreneurs who are ingenious and creative. For many firms, these qualities are essential for continued competitiveness. Such individuals may constitute a source of applicants for any number of jobs requiring technical, professional, administrative, or entrepreneurial expertise within a firm.

Ex-Offenders Some organizations have found it beneficial to hire ex-offenders. A recent analysis by the National Employment Law Project shows that more than one in four U.S. adults has an arrest or conviction that would appear in a routine criminal background check.38 Studies estimate that as many as 60 to 75 percent of ex-offenders are unemployed.39 Many are nonviolent substance abusers who were locked up because of federal and state drug laws. This statistic is not surprising because of an increase in the use of criminal background checks in the employment process, and most employers indicate that they would “probably” or “definitely” not be willing to hire an applicant with a criminal record.40

As of this writing, 25 states and several U.S. cities and counties have Ban the Box laws or poli- cies that reduce unfair barriers to employment of people with criminal records.41 The box refers to the job application question that asks whether the person has a criminal history. Most of these laws ban including questions about an applicant’s criminal history. The ban the box laws require companies to do more than simply eliminate the question. Variations in the law are evident across

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the states, however, most include additional requirements such as placing limits on the scope or type of criminal record that can be considered. Angela Preston, vice president of compliance and general counsel at background screening firm EmployeeScreenIQ said, “No two versions of ban the box are the same, and they often conflict or overlap with existing anti-discrimination laws, the Fair Credit Reporting Act (FCRA), and others requiring or relating to background screening,”42 These differences are creating challenges for HR professionals, particularly for ones that have facilities in multiple states.

According to Multicultural Foodservice & Hospitality Alliance President Gerry Fernandez, “I’m aware of several chains that have programs to hire ex-offenders, though they do not want publicity. Who do you think works third shift, where they don’t come in contact with custom- ers?”43 In another example, supermarket retail consultant and restaurateur Howard Solganik has launched a program that puts ex-offenders to work helping area farmers increase the supply of local, seasonal produce to consumers. Solganik said, “My experience in the restaurant business exposed me to ex-offenders. I saw that most were hard workers and were grateful for the jobs they were given.”44

External Recruitment Methods The use of online and mobile recruiting methods has revolutionized the way companies recruit employees and job seekers search and apply for jobs. Using technology for recruitment provides HR professionals with additional choices besides traditional methods, which we review shortly.

Online and Mobile Recruiting Owen Williams, executive recruiting director at Macys Inc., provides an example of the power of mobile recruiting. During the three-block walk to his office, Owen regularly uses his mobile device and the mobile version of LinkedIn to post job listings and connect to potential candidates. Time is money for Owen because he personally fills more than 80 store manager and regional buyer positions a year. “It’s amazing what work I can get done in that walk,” he says.45

The world of recruiting via mobile technology is moving at lightning speed. When LinkedIn was new, recruiters saw mobile technology as a complement to the time-honored paper résumés and face-to-face interviews.46 As mobile apps have improved, many organizations are successfully using mobile devices in the recruiting process. Recruiters use mobile apps to post jobs, run text message–based recruiting campaigns, create online communities for potential new hires to learn about their companies, monitor social networks for news about industries they hire for, and keep in touch with staff and outside agencies. Their efforts have been paying off. One survey found that approximately 14.4 million U.S. workers have used social media to find employment, and 73 percent of companies surveyed have successfully hired job candidates using social media.47

The number of mobile apps for conducting job searches is on the rise. And, many of the newer apps are setting themselves apart from the pack. For instance, one innovative app follows the model of many dating sites where people are matched based on compatible interests and personality. For job searches, of course, the matches are based on work experience and other job- related qualifications. The following Watch It video describes a job search app that oftentimes is compared to dating sites such as Tinder where users swipe right if they “like” the potential match.

5.5 Summarize external recruit- ment methods.

Watch It 2 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Swipe Right for Employment: New App is Tinder for Job Seekers and re- spond to questions.

INTERNET RECRUITER The Internet recruiter, also called a cyber recruiter, is a person whose primary responsibility is to use the Internet in the recruitment process.

Most companies currently post jobs on their corporate career Web site. Individuals must be in place to monitor and coordinate these activities. The more companies recruit on the Internet, the greater the need for Internet recruiters. Currently, high-tech firms have the greatest needs.

Internet recruiter Person whose primary responsibility is to use the Internet in the recruitment process (also called cyber recruiter).

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VIRTUAL JOB FAIR A virtual job fair is an online recruiting method engaged in by a single employer or group of employers to attract many applicants. They are designed to be a first step in the recruitment process. Many recruiters have found that traditional job fairs where applicants and recruiters go to a physical location are ineffective. In addition to the time and expense of attending them in person, recruiters often find them wasteful because many people who stop by their booth do not possess the right skills.

At virtual job fairs, recruiters prescreen résumés, contact candidates who are a potential fit, and store e-mail addresses. If applicants pass the initial screening, they typically must complete a questionnaire, take a behavioral test, and do a telephone interview before meeting a recruiter in person. Virtual fairs usually last about five hours, though recruiters can receive résumés online for as long as a week after the event. In their virtual “booth,” recruiters often provide links to their online career site, obtained résumés from candidates, and interact with applicants in a live chat room.

CORPORATE CAREER WEB SITES Corporate career Web sites are job sites accessible from a company home page that list the company positions available and provide a way for applicants to apply for specific jobs. They have become a major resource for both job seekers and companies seeking new employees.

A career Web site should be relevant and engaging, informing the reader about the company and the specific position being advertised. It should be used as a selling device that promotes the company to prospective job candidates. Writing effective recruitment ads on the Internet is differ- ent from the short, one-inch-column ads in the Sunday newspaper. The Internet provides enough space to fully describe the job, location, and company. It provides an opportunity to convert con- sumers into great employees. A good Web site should provide a feeling of the kind of corporate culture that exists within the company.

WEBLOGS (BLOGS FOR SHORT) Weblogs, or blogs, have changed the ways in which individuals access information. Google or a blog search engine such as Technorati.com can be used. All a person must do is type in a key phrase like marketing jobs. The blogs themselves make it easy to find, with names like HRJobs.com and SalesJobs.com. Some employers and employment agencies have also discovered that blogging is a way to do detailed and stealthy background checks.

GENERAL-PURPOSE JOB BOARDS Firms use general-purpose job boards by typing in key job criteria, skills, and experience, and indicating their geographic location. Job seekers can search for jobs by category, experience, education, location, or any combination of categories. Many believe that the general-purpose big job boards are best for job seekers in professions that experience high turnover like sales but often are less effective for highly qualified applicants or those looking for work in smaller industries. We review some of the more visible services here.

CareerBuilder offers a vast online network to help job seekers connect with employers. CareerBuilder.com powers the career sites for more than 1,000 Web sites, including 300 newspa- pers and various other online portals.48

Facebook started out exclusively as a social media website. More recently, Facebook recog- nized an opportunity to extend its services to more subscribers. The company learned that many small businesses are struggling to hire as well as many people are willing to consider a better, higher paying job.49

Glassdoor is a job posting site and more. Subscribers have access to millions of employees’ reviews of their companies, CEO approval ratings, salary reports, interview reviews, and employee benefits reviews, office photos, and more.50 The company distinguishes itself from other sites by relying exclusively on employees’ input.

LinkedIn connects individuals who want to build their professional networks and stay abreast of the latest trends in business. This service also permits job postings. The company reported that it has more than 450 million subscribers from approximately 200 countries.51 Its success may be attributed in part to publishing the site in a multitude of languages including traditional Chinese, German, and Malay.

Monster Worldwide, Inc. is the parent company of Monster. It is a premier global online employment solution for people seeking jobs and the employers who need people. Information helpful to job seekers such as résumé tips, interview tips, salary information, and networking information is available on the site.

virtual job fair Online recruiting method engaged in by a single employer or group of employers to attract a large number of applicants.

corporate career Web sites Job sites accessible from a company home page that list available company positions and provide a way for applicants to apply for specific jobs.

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http://SalesJobs.com

http://HRJobs.com

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132 PART 2 • STAFFING

Twitter is a well-known social media site. Increasingly, companies are taking to Twitter to post job openings.52 Examples include package delivery service UPS, Google, Ernst & Young, Disney Parks, and PepsiCo.53

NACELINK NETWORK The NACElink Network, the result of an alliance among the National Association of Colleges and Employers, DirectEmployers Association, and Symplicity Corporation, is a national recruiting network and suite of Web-based recruiting and career services automation tools serving the needs of colleges, employers, and job candidates. Currently more than 900 colleges use the NACElink system. The system includes three components: job posting, résumé database, and interview scheduling. It is available to employers to post jobs and search for students and new graduates. DirectEmployers Association has also created an employment Web site for returning veterans that uses military codes to help veterans identify jobs in their fields.

.JOBS .Jobs is a network of employment Web sites where any company can list job openings for free. There are 40,000 sites, with all Web addresses ending in “.jobs.” The initiative is being backed by nearly 600 hundred companies such as Whirlpool and Disney Parks. Finding jobs on the sites is simple. Possible searches might include Nurse.jobs and Sales.jobs. For someone looking for a job in the Washington, D.C. area, there’s districtofcolumbia.jobs. It works for many professions and is available in every state and any U.S. city with more than 5,000 people.

ALLIANCEQ AllianceQ is a group of Fortune 500 companies, along with more than 3,000 small and medium-sized companies, that have collaborated to create a pool of job candidates. AllianceQ provides a way for candidates to be found by top employers.54 Those passed over by one company are invited to submit their résumés to the AllianceQ database. “It’s a no-brainer,” says Phil Hendrickson, a recruiting manager at member company Starbucks.55

NICHE SITES Niche sites are Web sites that cater to highly specialized job markets, such as a profession, industry, education, location, or any combination of these specialties. They continue to grow in popularity and are giving general-purpose job boards major competition.56 There seems to be a site for virtually everyone. A few catchy ones include:

$$ cfo.com (a comprehensive online resource center for senior finance executives) $$ dice.com (a leading provider of online recruiting services for technology professionals) $$ internships.com (employers who are exclusively looking for interns) $$ justtechjobs.com (focuses on the recruiting needs of the technology companies) $$ coolworks.com (find seasonal job or career in places such as Yellowstone, Yosemite, or

other national parks) $$ college.monster.com (job listings and résumé service that targets college students and

alumni) $$ Job.com (maintains sites specialized by geography) $$ HirePatriots.com (job listings for service members)

A niche site is also available for professors who desire to change jobs. Formerly, college and university professors went to the campus library and thumbed through the many pages of The Chronicle of Higher Education to hunt for a job. Now all they need to do is enter www.chronicle. com, The Chronicle of Higher Education Web site. All the jobs listed with the Chronicle are avail- able to view for free. Each position announcement has a hot link to a university home page where additional information can be obtained. The universities pay the fees.

CONTINGENT WORKERS’ SITES Contract workers are a part of the contingent workforce. Recruiting technology also serves the benefit of these workers. Sites are available to assist contingent workers. Specialized Web sites let workers advertise their skills, set their price, and pick an employer. Two such sites are:

$$ Freelance.com (a company that offers to clients the services of talented freelancers) $$ Guru.com (an online marketplace for freelance talent)

But who are contingent workers? According to the U.S. Bureau of Labor Statistics, contin- gent workers57 are those who do not have an implicit or explicit contract for ongoing employment. Persons who do not expect to continue in their jobs for such personal reasons as retirement or returning to school are not considered contingent workers, if they would have the option of

NACElink Network The result of an alliance among the National Association of Colleges and Employers, DirectEmployers Association, and Symplicity Corporation, it is a national recruiting network and suite of Web-based recruiting and career services automation tools serving the needs of colleges, employers, and job candidates.

.jobs Network of employment Web sites where any company can list job openings for free.

AllianceQ Group of Fortune 500 companies, along with more than 3,000 small and medium-sized companies, that have collaborated to create a pool of job candidates.

niche sites Web sites that cater to highly specialized job markets such as a profession, industry, education, location, or any combination of these specialties.

contingent workers Described as the “disposable American workforce” by a former secretary of labor, they have a nontraditional relationship with the worksite employer, and work as part-timers, temporaries, or independent contractors.

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http://cfo.com/

http://dice.com/

http://internships.com/

http://justtechjobs.com/

http://coolworks.com/

http://college.monster.com/

http://job.com/

http://hirepatriots.com/

http://freelance.com/

http://guru.com/

http://www.chronicle.com/

CHAPTER 5 • RECRuITmENT 133

continuing in the job were it not for these reasons. These individuals account for 40.2 percent of the U.S. labor force, which is up from 30.6 percent in 2005.58 Figure 5-4 details questions that determine whether workers expect their employment to continue, that is, whether their work arrangement is considered to be contingent.

Contingent workers are the human equivalents of just-in-time inventory. These workers per- mit maximum flexibility for the employer and lower labor costs. Historically, contingent workers have been called the bookends of recessions. They are the first to go when a recession begins and the last to be recalled when the economy gets better. However, toward the end of the recent reces- sion, many companies were reversing this trend and following the strategy of holding off on the hiring of regular full-time employees and choosing instead to use contingent workers. Companies are now using contingent workers as a continuing strategy in both good and bad times.59

After the recession ended in 2009, companies rethinking about the way work gets done. This brought a refocus on the use of contingent workers, who can be added or cut as demand requires. In fact, the pace of contingent job growth suggests a shift toward more use of temporary labor at the expense of permanent jobs.60 Garry Mathiason, vice chairman of Littler Mendelson in San Francisco, said, “In the future companies will likely make wider use of staffing methods like those practiced by the film industry. There, entire crews of contingent production workers are assembled for a movie then disbanded once it is finished.”61 A study by the Institute for Corporate Productivity (i4cp) found that high-performing organizations have increased their use

FIGURE 5-4 Questions that Determine Whether Workers Expect Their Employment to Continue Source: Polivka, A. E. (1996). Contingent and alternative work arrangements, defined. Monthly Labor Review, 119(10), p. 5.

Employment expected to continue

more than a year

8. What is the main reason you expect to

stay at your current job for less than a year?

9. If it were not for this reason, could you have kept working at the job you had

last week?

A year or less,and

responded “no” to7. How much longer do

you expect to work in your current job?

6. Is your job a year- round job or is it only

available during certain times of the

year?

5. Were you hired for a fixed period of time?

4. Were you hired to temporarily replace

another worker?

Yes

3. Are you working only until a specific

project is completed?

1. Some people are in temporary jobs that last only for a limited

time or until the completion of a project. Is your job temporary?

2. Provided the economy does not change and your

job performance is adequate, can you continue to work for

your current employer as long as you wish?

Yes

Year-round or certain times

A year or less, and responded “yes” to Q 3, 4, or 5 or “certain times” to Q6

Yes

Personal reason

Economic reason

Employment not expected to continue

Q 3, 4, 5, and “year round”

to Q6

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of contingent workers from traditional administrative positions to technical support, operations, and high-skilled professional positions, including engineering, legal, and finance.62 If the use of contingent workers is indeed the trend, the manner that human resource is practiced will experi- ence considerable change.

☛ $F Y I The U.S. General Accountability Office estimates that 40.2 of the U.S. labor force are contingent workers. Some of the more common categories of contingent workers are:

$$ Temporary employees: 1.3 percent $$ On-call workers: 3.5 percent $$ Contract company workers: 3.0 percent $$ Independent contractors: 12.9 percent $$ Self-employed workers: 3.3 percent $$ Standard part-time workers: 5 percent63

Traditional Methods Although online recruiting has greatly impacted how recruiting is accomplished, traditional meth- ods are still used.

MEDIA ADVERTISING Advertising communicates the firm’s employment needs to the public through media such as newspapers, trade journals, radio, television, and billboards found along highways. The firm’s previous experience with various media should suggest the most effective approach for specific types of jobs. Although few individuals base their decision to change jobs on advertising, ads create awareness, generate interest, and encourage a prospect to seek more information about the firm and the job opportunities that it provides. A traditional common form of advertising that provides broad coverage at a relatively low cost is the newspaper ad. Firms using the newspaper ad attempt to appeal to the self-interest of prospective employees, emphasizing the job’s unique qualities. Recently, the use of newspaper advertising has declined because other recruiting methods are more effective and less expensive.

Television media has sometimes been considered a way to broadcast information other than products and services. For instance, Super Bowl games often attract more than 100 million viewers and is a good way to promote products and services. In 2017, 84 Lumber Company, a building supply chain, purchased a 90-second advertising slot not only to advertise its products, but also to launch a national recruiting campaign. The company hoped that qualified individuals would apply for various jobs, including 400 management trainee positions to support the company’s planned growth.64

Certain media attract audiences that are more homogeneous in terms of employment skills, education, and orientation. Advertisements placed in publications such as the The Wall Street Journal relate primarily to managerial, professional, and technical positions. The readers of these publications are generally individuals qualified for many of the positions advertised. Focusing on a specific labor market minimizes the likelihood of receiving marginally qualified or even totally unqualified applicants. Like most professional publications, jobs that are adver- tised in the paper copy of the Journal are also available on the publication’s Web site. Journals specific to trades are also widely used. For example, Automotive News might have jobs related to the automobile industry and American Drycleaner likely will list jobs in the dry-cleaning business.

Qualified prospects who read job ads in newspapers and professional and trade journals may not be so dissatisfied with their present jobs that they will pursue opportunities advertised. Therefore, in high-demand situations, a firm needs to consider all available media resources such as radio, billboards, and television. These methods are likely more expensive than newspapers or journals, but in specific situations, they may prove successful. For instance, a regional medical center used billboards effectively to attract registered nurses. One large manufacturing firm had

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considerable success in advertising for production trainees by means of spot advertisements on the radio. A large electronics firm used television to attract experienced engineers when it opened a new facility and needed more engineers immediately. Thus, in situations where hiring needs are urgent, television and radio may provide good results. Broadcast messages can let people know that an organization is seeking recruits. A primary limitation is the amount of information they can transmit.

PRIVATE EMPLOYMENT AGENCIES Private employment agencies, often called “headhunters,” are best known for recruiting white-collar employees and offer an important service in bringing qualified applicants and open positions together.65 Firms and job hunters use private employment agencies for virtually every type position. Job seekers should carefully select the employment agency to use because there are both good and bad recruiters. Today, private employment agencies often specialize in filling a niche in the job market. Agencies should be selected based on knowledge of the industry and the specific position being sought.

Private employment agencies fees can range up to 35 percent of a person’s first year salary. The one-time fees that some agencies charge often turn off candidates, although many private employment agencies also deal with firms that pay the fees. Either way, the headhunter does not get paid until a person is placed. The recent recession has significantly impacted the use of private employment agencies, which has resulted in a general retrenchment of the industry.

PUBLIC EMPLOYMENT AGENCIES Public employment agencies are operated by each state but receive overall policy direction from the U.S. Employment Service. Public employment agencies have become increasingly involved in matching people with technical, professional, and managerial positions. They typically use computerized job-matching systems to aid in the recruitment process, and they provide their services without charge to either the employer or the prospective employee.

EXECUTIVE SEARCH FIRMS Executive search firms are used by some firms to locate experienced professionals and executives when other sources prove inadequate. The key benefit of executive search firms is the targeting of ideal candidates. In addition, the executive search firm can often find passive candidates, those not actively looking for a job.

An executive search firm’s representatives often visit the client’s offices and interview the company’s management. This enables them to gain a clear understanding of the company’s goals and the job qualifications required. After obtaining this information, they contact and interview potential candidates, check references, and refer the best-qualified person to the client for the selection decision. Search firms maintain databases of résumés for this process. Other sources used include networking contacts, files from previous searches, specialized directories, personal calls, previous clients, colleagues, and unsolicited résumés. The search firm’s task is to present candidates who are eminently qualified to do the job; it is the company’s decision whom to hire.

There are two types of executive search firms: contingency and retained. Contingency search firms receive fees only on successful placement of a candidate in a job opening. The search firm’s fee is generally a percentage of the individual’s compensation for the first year. The client pays expenses, as well as the fee. A contingency recruiter goes to work when there is an urgent need to fill a position, when an opening exists for a difficult position, or when a hiring executive wants to know about top-notch talent as those people surface, regardless of whether there is an opening.

Retained search firms are considered consultants to their client organizations, serving on an exclusive contractual basis, and typically recruit top business executives. With a retained search firm, the company typically gets a firmer commitment from their search firm, as well as more personalized attention, dedicated time, and customized searches.66

RECRUITERS Recruiters most commonly focus on technical and vocational schools, community colleges, colleges, and universities. The key contact for recruiters on college and university campuses is often the student placement director. This administrator is in an excellent position to arrange interviews with students possessing the qualifications desired by the firm. Placement

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136 PART 2 • STAFFING

services help organizations use their recruiters efficiently. They identify qualified candidates, schedule interviews, and provide suitable rooms for interviews.

The company recruiter plays a vital role in attracting applicants. The interviewee often perceives the recruiter’s actions as a ref lection of the character of the firm. If the recruiter is dull, the interviewee may think the company is dull; if the recruiter is apathetic, discourteous, or vulgar, the interviewee may well attribute these negative characteristics to the firm. Recruiters must always be aware of the image they present because it makes a lasting impression. Recruit- ment success comes down to good personal selling, appealing to the candidate’s priorities, and addressing his or her concerns. The recruiter should underscore the job’s opportunities and keep the lines of communication open.

A recent trend is the use of videoconferencing with equipment at both corporate headquarters and on college campuses. Recruiters can communicate with college career counselors and inter- view students through a videoconferencing system without leaving the office.

JOB FAIRS A job fair is a recruiting method engaged in by a single employer or group of employers to attract many applicants to one location for interviews.

From an employer’s viewpoint, a primary advantage of job fairs is the opportunity to meet many candidates in a short time. Conversely, applicants may have convenient access to several employers. As a recruitment method, job fairs offer the potential for a much lower cost per hire than traditional approaches. Job fairs are often organized by universities to assist their students in obtaining jobs. Here, employers from many organizations meet at a single point on the campus. The job fair is available from disciplines from across the university. Students and employers can meet here to ask and answer questions.

At times job fairs are tailored to recruit specific types of individuals. At a job fair in Tucson, Arizona, the event was designed to bring together senior citizens and companies looking to hire them, as well as offer assistance to those seeking to improve their job skills as a first step toward employment. The job fair attracted two dozen companies seeking to fill positions for everything from teachers’ aides to bank tellers to tour bus drivers and call-center staff.67 Job fairs are also held to bring together military service members and companies with openings to fill. Recently the Veterans Career Fair and Expo was held in Washington, D.C. Employers representing companies across the private sector, as well as several government agencies, were on site to discuss career and job opportunities to thousands of veterans from the mid-Atlantic region.68

INTERNSHIPS An internship is a special form of recruitment that involves placing a student in a temporary job with no obligation either by the company to hire the student permanently or by the student to accept a permanent position with the firm following graduation.

An internship typically involves a temporary job for the summer months or a part-time job during the school year. It may also take the form of working full-time one semester and going to school full-time the next. Recently nontraditional virtual internships are being used by businesses for students who would be required to commute long distances with Skype, e-mail, and confer- ence calls.69 Employers can try out future employees prior to making a job offer. If the trial period proves unsuccessful, there is no obligation on either side. Google has long been known for using the internship as a recruiting method. Google offers interns competitive pay and on-site perks that include free gourmet food, a gym, fitness classes, massage therapy, bike repair, dry cleaning, a hair stylist, oil changes, and car washes.70

During the internship, the student gets to view business practices firsthand. At the same time, the intern contributes to the firm by performing needed tasks. In addition to other benefits, internships provide opportunities for students to bridge the gap from business theory to practice. Through this relationship, a student can determine whether a company would be a desirable employer. Similarly, having a relatively lengthy time to observe the student’s job performance, the firm can make a better judgment regarding the person’s qualifications.

In today’s job market, just having a degree is often not enough to get a job offer; intern- ships are often the deciding factor in getting a good job or not. Students with internship and co-op experience are often able to find jobs easier, and they progress much further and faster in the business world than those without. Paid internships for college students have become even more valuable in recent years for both new graduates and companies. In a NACE 2015

job fair Recruiting method engaged in by a single employer or group of employers to attract many applicants to one location for interviews.

internship Special form of recruitment that involves placing a student in a temporary job with no obligation either by the company to hire the student permanently or by the student to accept a permanent position with the firm following graduation.

HR Web Wisdom

Internship Web Site www.internships.com

The world’s largest internship marketplace.

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Student Survey, more than half of the interns were paid, and 72 percent of students with a paid summer internship received at least one full-time job offer after graduation; the median starting salary for subsequent full-time jobs was about 55 percent higher than students with unpaid or no internship experience.71 Steve Canale, manager, global recruiting and staffing services, at General Electric Co., based in Fairfield, Connecticut, said, “If I had my budget slashed and only had $100 to spend, I’d spend it all on my internship program. They become my brand ambassadors.”72

PROFESSIONAL ASSOCIATIONS Virtually every professional group publishes a journal and has a Web site that is widely used by its members. Many professional associations in business areas including finance, marketing, accounting, and human resources provide recruitment and placement services for their members. Jobs advertised are placed in the journal in hard copy and advertised on the professional group’s Web site. The Society for Human Resource Management (SHRM), for example, operates a job referral service for members seeking new positions and employers with positions to fill.

UNSOLICITED APPLICANTS A company must have a positive image or employer brand to attract unsolicited applicants. If an organization has the reputation of being a good place to work, it may be able to attract qualified prospects even without extensive recruitment efforts. Acting on their own initiative, well-qualified workers may seek out a specific company to apply for a job. Unsolicited applicants who apply because they are favorably impressed with the firm’s reputation often prove to be valuable employees. In the Internet age, applicants can go to the firm’s corporate career Web site and walk in by making an application online.

OPEN HOUSES Open houses pair potential hires and recruiters in a warm, casual environment that encourages on-the-spot job offers. Open houses are cheaper and faster than hiring through recruitment agencies, and they are also more popular than job fairs. There are pros and cons to holding a truly open house. If the event is open, it may draw a large turnout, but it also may attract many unqualified candidates. Some companies prefer to control the types of candidates they host, and so they conduct invitation-only sessions. In this scenario, someone screens résumés in response to ads, then invites only preselected candidates. Open house advertising may be through both conventional media and the Internet, where a firm might feature its open house on its home page.

EVENT RECRUITING Event recruiting involves having recruiters go to events being attended by individuals the company is seeking. Cisco Systems pioneered event recruiting as a recruitment approach. In the case of programmers in the Silicon Valley, the choice spots have been marathons and bike races. Companies that participate in these events become involved in some way that promotes their name and cause. For example, they might sponsor or cosponsor an event, pass out refreshments, and give away prizes. Individuals get to know that the company is recruiting and the types of workers it is seeking. Event recruiting gives a company the opportunity to reflect its image.

SIGN-ON BONUSES Employers use sign-on bonuses to attract top talent, particularly in high- demand fields such as health care, sales, marketing, and accounting. Bonuses allow a firm to pay a premium to attract individuals without dramatically upsetting its salary scale. Even as Wall Street continued to lay off workers, some firms were offering sign-on bonuses for top management talent. NACE’s Job Outlook 2016 survey revealed that 51.8 percent of employers planned to offer signing bonuses to college graduates. Signing bonuses are most commonly found in the utilities, food and beverage manufacturing, finance, insurance and real estate, and pharmaceutical manufacturing industries.73

COMPETITIVE GAMES Many companies in the software industry use public competitions to identify talented prospects.74 For instance, Google established Code Jam, which is an international programming competition. The competition began in 2003 as a means to identify top engineering talent for potential employment at Google. The competition consists of a set of algorithmic problems that must be solved in a fixed amount of time. Competitors may use any programming language and development environment to obtain their solutions.

event recruiting Recruiters going to events being attended by individuals the company is seeking.

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Tailoring Recruitment Methods to Sources Because each organization is unique, so are the needed types and qualifications of workers to fill positions. Thus, to be successful, a firm must tailor its recruitment sources and methods to its specific needs.

Suppose, for example, that a large firm has an immediate need for an experienced infor- mation technology manager and no one within the firm has these qualifications. Figure 5-5 shows a matrix that depicts sources and methods of recruitment for such a manager. Managers must first identify the source (where prospective employees are located) before choosing the methods (how to attract them). It is likely that other firms, possibly competitors, employ such individuals. After considering the recruitment source, the recruiter must then choose the method (or methods) of recruitment that offers the best prospects for attracting qualified candidates. Perhaps it would be appropriate to advertise the job in the classified section of The Wall Street Journal and use online recruiting. Alternatively, an executive search firm, such as Korn Ferry International, may serve as a viable option. In addition, the recruiter may attend meetings of professional information technology associations, such as the Association of Information Technology Professionals. One or more of these methods will likely yield a pool of qualified applicants.

In another scenario, consider a firm’s need for 20 entry-level machine operators, whom the firm is willing to train. High schools and vocational schools would probably be good recruitment sources. Methods of recruitment might include newspaper ads, public employment agencies, recruiters, visiting vocational schools, and employee referrals.

Alternatives to Recruitment Even when HR planning indicates a need for additional employees, a firm may decide against increasing the size of its workforce. Recruitment and selection costs are significant when you consider all the related expenses. Estimates vary. For instance, the cost of replacing a person mak- ing $50,000 per year can easily reach $75,000.75 Therefore, a firm should consider alternatives carefully before engaging in recruitment.

5.6 Describe alternatives to recruitment.

FIGURE 5-5 Methods and Sources of Recruitment for an Information Technology Manager

High/ Vocational schools

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military personnel

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Promotion Policies Promotion from within (PFW) is the policy of filling vacancies above entry-level positions with current employees. An organization’s promotion policy can have a significant impact on recruitment. A firm can stress a policy of promoting from within its own ranks or one in which positions are generally filled from outside the organization. Depending on specific circum- stances, either approach may have merit, but usually a combination of the two approaches proves best.

When an organization emphasizes PFW, its workers have an incentive to strive for advance- ment. When employees see coworkers promoted, they become more aware of their own opportu- nities. General Motors and Cisco fill approximately 60 to 80 percent of their senior management positions internally.76 As another example, employees with Royal Caribbean Cruises can progress over time based on performance from an entry-level position such as assistant cabin steward to an officer position. Motivation provided by PFW often improves employee morale. PFW also communicates to the workers that the firm wants them to succeed.

Another advantage of internal recruitment is that the organization is usually aware of its employees’ capabilities. Internal candidates have knowledge of the firm, its policies, and its peo- ple.77 An employee’s present job performance, by itself, may not be a reliable criterion for pro- motion. Nevertheless, management will know many of the employee’s personal and job-related qualities. The employee has a track record, as opposed to being an unknown entity. Also, the company’s investment in the individual may yield a higher return.

It is unlikely, however, that a firm can, or would even desire to, adhere rigidly to a practice of PFW. A strictly applied PFW policy eventually leads to inbreeding, a lack of cross-fertilization, and a lack of creativity. Although seldom achieved, a good goal would be to fill 80 percent of openings above entry-level positions from within. Frequently, new blood provides new ideas and innovation that must take place for firms to remain competitive. In such cases, even organiza- tions with PFW policies may opt to look outside the organization for new talent. In any event, a promotion policy that first considers insiders is great for employee morale and motivation, which is beneficial to the organization.

In the following Watch It video, learn about the online fashion retailer Hautelook, which is growing quickly and needs to recruit new employees at a rapid rate. Hautelook prefers most of all to promote internal job candidates, but also to employ applicants who are most familiar with the company: ideally, previous customers. The company’s methods for recruiting job applicants as well as finding the best potential employees from among its applicants are discussed.

promotion from within (PFW) Policy of filling vacancies above entry-level positions with current employees.

Watch It 3 If your instructor has assigned this, go to www.pearson.com/mylab/management to watch a video titled Hautelook: Recruiting and respond to questions.

Overtime Perhaps the most commonly used alternative to recruitment, especially in meeting short-term fluctuations in work volume, is overtime. Overtime may help both employer and employee. The employer benefits by avoiding recruitment, selection, and training costs. The employees gain from increased income during the overtime period.

There are potential problems with overtime, however. Some managers believe that when employees work for unusually long periods, the company pays more and receives less in return. Employees may become fatigued and lack the energy to perform at a normal rate. Two additional possible problems relate to the use of prolonged overtime. Consciously or not, employees may pace themselves to ensure overtime. They may also become accustomed to the added income resulting from overtime pay. Employees may even elevate their standard of living to the level permitted by this additional income. Then, when a firm tightens its belt and overtime is limited, employee morale may deteriorate along with the pay.

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140 PART 2 • STAFFING

PREPARING FOR EXAM/QUIZZES

Chapter Summary By Learning Objectives 1. Define recruitment and describe the recruitment

process. Recruitment is the process of attracting individu- als on a timely basis, in sufficient numbers, and with appropriate qualifications to apply for jobs with an orga- nization. Recruitment frequently begins when a manager initiates an employee requisition. Next, the firm deter- mines whether qualified employees are available from within (the internal source) or must be recruited externally from sources such as colleges, universities, and other firms. Sources and methods are then identified.

2. Summarize the environment of recruitment. Of impor- tance to the success of recruitment is the demand for and supply of specific skills in the labor market. The recruit- ment method that proves to be most successful will depend to an extent on whether the recruited individual is an active or passive job seeker. Legal matters also play a significant role in recruitment practices in the United States. This is not surprising because the candidate and the employer first make contact during the recruitment process. A poorly con- ceived recruiting process can do much to create problems in the selection process. Therefore, it is essential for orga- nizations to emphasize nondiscriminatory practices at this stage. The Office of Federal Contract Compliance Programs (OFCCP) has issued guidelines concerning the online recruiting policies of federal contractors and subcontractors.

3. Explain internal recruitment methods. Human resource databases permit organizations to determine whether cur- rent employees possess the qualifications for filling open positions. Job posting is a method of internal recruitment that is used to communicate the fact that job openings exist. Job bidding is a system that permits individuals in an orga- nization to apply for a specific job within the organization.

Employee referrals involves an employee of the company recommending to management a friend or associate as a possible member of the company and continues to be the way that top performers are identified.

4. Identify external recruitment sources. External sources of recruitment include high schools and vocational schools, community colleges, colleges and universities, competitors and other firms, the unemployed, older individuals, military personnel, self-employed workers, and ex-offenders.

5. Summarize external recruitment methods. The world of recruiting via mobile technology is moving at lightning speed. More and more people are adopting mobile technol- ogy, and many organizations are trying to figure out how to start using mobile devices in the recruiting process. Some online methods include Internet recruiter, virtual job fairs, corporate career Web sites, blogs, general-purpose job boards, NACElink Network, .jobs, AllianceQ, niche sites, and contract workers’ sites. Traditional external recruitment methods include media advertising, private employment agencies, public employment agencies, recruiters, job fairs, internships, executive search firms, professional associa- tions, unsolicited applicants, open houses, event recruiting, sign-on bonuses, and high-tech competition. Recruitment must be tailored to the needs of each firm. In addition, recruitment sources and methods often vary according to the type of position being filled.

6. Describe alternatives to recruitment. Even when HR plan- ning indicates a need for additional employees, a firm may decide against increasing the size of its workforce. Recruit- ment and selection costs are significant when you consider all the related expenses. Alternatives include promotion policies, overtime, and onshoring.

Key Terms recruitment 121 employee requisition 121 recruitment sources 122 recruitment methods 140 active job seekers 123 passive job seekers 123 job posting 124 job bidding 124

employee referral 125 Internet recruiter 130 virtual job fair 131 corporate career Web sites 131 NACElink Network 132 .jobs 132 AllianceQ 132 niche sites 132

contingent workers 132 job fair 136 internship 136 event recruiting 137 promotion from within (PFW) 139 onshoring 140

Onshoring Onshoring involves moving jobs not to another country but to lower-cost U.S. cities. Some com- panies might like to offshore their jobs but the government may require onshore handling of certain financial, health, and defense data. This requirement often represents more than 15 percent of all IT service work. As an example, one global company opened a midwestern U.S. facility with more than 1,000 IT service employees. Wages at the facility were 35 percent lower than at headquarters, and the company also received $50 million in government incentives.78

onshoring Moving jobs not to another country but to lower-cost U.S. cities.

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Questions for Review 5-1. Define recruitment. 5-2. What are factors external to the organization that can

significantly affect the firm’s recruitment efforts? 5-3. How has social media emerged as an important force in

recruiting? 5-4. What are the steps involved in the recruitment process? 5-5. Distinguish between recruitment sources and recruit-

ment methods. 5-6. What are some internal recruitment methods? 5-7. Why is employee referral so important in the recruit-

ment process?

5-8. What external methods of recruitment are available? 5-9. What external sources of recruitment are available? 5-10. What might be some advantages of using mobile

recruiting? 5-11. What online recruitment methods are available? 5-12. What are the typical alternatives to recruitment that a

firm may use? 5-13. What is meant by the policy of promotion from within?

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management to complete the problems marked with this icon .

PREPARING FOR MY CAREER

E T H I C S D I L E M M A

Unfair Advantage? You are the vice-president of human resources

for a high-tech company that is competing for a major government project. You believe that one of your key competitors is ahead of you in project development and you would like to recruit some of its engineers who are knowledgeable about the project. You receive an anonymous e-mail that includes the names and phone numbers of key people involved in your competitor’s project. If you use the information and

can hire some of the competitor’s key people, your company has a chance to beat the competitor and you will become a hero. If you do not use the information, your company may lose a great deal of money. 5-14. What would you do? 5-15. What factor(s) in this ethics dilemma might influence a person

to make a less than ethical decision?

HRM Is Everyone’s Business One of the goals of how HR professionals and managers conduct HR planning is to identify current and future staffing needs. HR professionals and managers use that information to formulate recruitment plans that will help generate a pool of qualified external and internal candidates. Recruitment must be tailored to the needs of each firm and the types of positions being filled. Successful recruitment requires collaboration between HR professionals and managers who bring different perspectives to com- pleting the task.

Action checklist for managers and HR—understanding and applying recruitment sources and methods HR takes the lead

Write new or modify existing job descriptions to ensure that the job duties and applicant requirements match and are clearly stated. Discuss whether it makes sense to recruit internally or externally and the pros and cons of each approach.

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142 PART 2 • STAFFING

HRM by the Numbers Recruitment Source Cost Effectiveness

An additional HRM by the Numbers exercise can be found on MyLab Management.

HR professionals regularly stay abreast of recruitment costs and the number of new hires associated with each recruitment source. Below is a listing of this information.

Recruitment Source Cost Number of New Hires

Employment Agency Fees $250,000 30 Employee Referral Bonuses 5,000 5 Career Website Subscription Fees 10,000 15 Newspaper Advertising (online and print) 125,000 45

Questions 5-16. How much did recruitment cost based on all the sources listed in the table? 5-17. Calculate the cost per hire for each recruitment source. 5-18. Which of the sources is most cost effective?

As a group, think about a job you could imagine getting five years after graduation. Also, think about the main objectives of the job and the kinds of knowledge and skills you believe are necessary to perform the job well. 5-19. What is the most likely recruitment source of candidates for this job? Explain. 5-20. What is the most likely recruitment method for identifying qualified applicants for this job? Explain.

I N C I D E N T 1 A Problem Ad? Dorothy Bryant was the new recruiting supervisor for International Man- ufacturing Company in Salt Lake City, Utah. One of Dorothy’s first assign- ments was to recruit two software design engineers for International. Design engineers are hard to recruit because of the difficulty of their training and the high demand for them. After considering various recruit- ment alternatives, Dorothy placed the following ad in a local newspaper with a circulation more than 1,000,000:

Employment Opportunity for Software Design Engineers

2 positions available for engineers desiring career in growth industry.

Prefer recent college graduates with good appearance.

Ask managers to identify external sources of potential employees such as professional associations, college or universities with excellent reputations for preparing prospective employees, and job search websites; and, suggest additional methods to round out a comprehensive recruitment plan.

Discuss the relevant legal requirements that must be taken into consideration when recruiting prospective employees.

Managers take the lead Inform HR about staffing needs and prepare employee requisitions. Emphasize job-relevant skills and abilities of importance such as software knowledge, project management skills, or leadership.

Share with HR whether the company already employs qualified individuals for the new job and consider possible external sources.

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CHAPTER 5 • RECRuITmENT 143

I N C I D E N T 2 I Am Qualified, Why Not Me? Five years ago, when Bobby Bret joined Crystal Productions as a junior accountant, he felt that he was on his way up. He had just graduated with a B + average from college where he was well liked by his peers and by the faculty, and had been an officer in several student organizations. Bobby had shown a natural ability to get along with people as well as to get things done. He remembered what Roger Friedman, the controller at Crystal, had told him when he was hired, “I think you will do well here, Bobby. You’ve come highly recommended. You are the kind of guy that can expect to move right on up the ladder.”

Bobby felt that he had done a good job at Crystal, and everybody seemed to like him. In addition, his performance appraisals had been excellent. However, after five years he was still a junior accountant. He had applied for two senior accountant positions that had opened, but they were both filled by people hired from outside the firm. When the accounting supervisor’s job came open two years ago, Bobby had not applied. He was surprised when his new boss turned out to be a hotshot graduate of State University whose only experience was three years with a large accounting firm. Bobby had hoped that

Ron Greene, a senior accountant he particularly respected, would get the job.

On the fifth anniversary of his employment at Crystal, Bobby decided it was time to do something. He made an appointment with the controller. At that meeting, Bobby explained to Mr. Friedman that he had worked hard to obtain a promotion and shared his frustration about having been in the same job for so long. “Well,” said Mr. Fried- man, “you don’t think that you were all that much better qualified than the people that we have hired, do you?” “No,” said Bobby, “but I think I could have handled the senior accountant job. Of course, the people you have hired are doing a great job too.” The controller responded, “We just look at the qualifications of all the applicants for each job, and considering everything, try to make a reasonable decision.”

Questions 5-24. Do you believe that Bobby has a legitimate complaint? Explain. 5-25. Explain the benefits of a promotion from within policy. Would

such a policy be appropriate for Crystal?

MyLab Management If your instructor is using MyLab Management, go to www.pearson.com/mylab/ management for Auto-graded writing questions as well as the following Assisted-graded writing questions:

5-26. Why might a firm want to use contingent workers as opposed to full-time employees? 5-27. Why is it important to match sources and methods of recruitment?

Good credit rating

Apply Today! Send your résumé,

in confidence, to: D. A. Bryant

International manufacturing Co., P.O. Box 1515

Salt Lake City, uT 84115

More than 300 applications arrived in the first week, and Dorothy was elated. When she reviewed the applicants, however, it appeared that few people possessed the desired qualifications for the job.

Questions 5-21. Dorothy overlooked some of the proper recruiting practices,

which resulted in an excessive number of unqualified people applying. What are they?

5-22. Are there any hiring standards that should be avoided? Identify them and explain why they should be avoided.

5-23. What recruitment sources and methods might have been used to have generated a better applicant pool for the two software design engineer positions for International Manufacturing? Defend your recommendations.

Endnotes 1 Matthew Beecher, “Only Assets Need

Apply,” HR Magazine 56 (November 2011): 84–85.

2 Anonymous, “For Incoming Executives: Defin- ing and Delivering Your Talent Agenda,” Risk & Compliance Journal (January 13, 2014). Accessed February 1, 2014, at http://deloitte. wsj.com/riskandcompliance/2014/01/13/for- incoming-executives-defining-and-delivering- your-talent-agenda.

3 Julie Kantor, “High Turnover Costs Way More Than You Think,” Huffington Post online (Feb- ruary 11, 2016). Accessed February 13, 2017, at www.huffingtonpost.com.

4 U.S. Bureau of Labor Statistics, “Wind Turbine Technicians,” Occupational Outlook Handbook 2016-17. Accessed February 13, 2017, at www. bls.gov.

5 Dylan Matthews, “The Tuition is too Damn High Part II: Why College is Still Worth It,”

Washington Post (August 27, 2013). Accessed February 5, 2014, at www.washingtonpost.com.

6 Elka Torpey and Audrey Watson, “Education Level and Jobs: Opportunities by State,” Career Outlook online (September 2014), U.S. Bureau of Labor Statistics. Accessed January 10, 2017, at www.bls.gov; Hope Yen, “New Study Shows the Value of a College Education,” Boston Globe (February 11, 2014). Accessed February 12, 2014, at www.bostonglobe.com.

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http://www.bostonglobe.com/

http://www.washingtonpost.com/

http://www.huffingtonpost.com/

http://deloitte.wsj.com/riskandcompliance/2014/01/13/for%E2%80%90incoming%E2%80%90executives%E2%80%90defining%E2%80%90and%E2%80%90delivering%E2%80%90your%E2%80%90talent%E2%80%90agenda

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144 PART 2 • STAFFING

7 Alexia Elejalde-Ruiz, “Construction Contractors Warn of a Labor Shortage as Building Booms,” Chicago Tribune online (May 31, 2016). Accessed January 31, 2017, at www.chicagotri- bune.com.

8 James E. Leemann, “The Jobs Are Out There,” Industrial Safety & Hygiene News 46 (January 2012): 18–20.

9 Stephen Whitaker and Mary Zenker, “Are Underemployed Graduates Displacing Non- graduates?” Economic Trends (July 2011): 21–23.

10 Constantine Von Hoffman, “Many Jobs Go Unfilled for over 3 Months,” CBS News Money- Watch (July 18, 2013). Accessed February 18, 2014, at www.cbsnews.com.

11 Anthony P. Carnevale, “Old Jobs, New Jobs: Here’s the Difference,” HR Magazine 57 (Janu- ary 2012): 25.

12 Rachel Emma Silverman, “Companies Are Chasing the Wrong Hires,” The Wall Street Jour- nal online (June 10, 2015). Accessed February 5, 2017, at http://blogs.wsj.com.

13 Rachel Emma Silverman, “Companies Are Chasing the Wrong Hires,” The Wall Street Jour- nal online (June 10, 2015). Accessed February 5, 2017, at http://blogs.wsj.com.

14 U.S. Department of Labor, Office of Federal Contract Compliance Programs “Internet Appli- cant Recordkeeping Rule.” Accessed February 13, 2017, at www.dol.gov/ofccp/regs/compli- ance/faqs/iappfaqs.htm\#Q1GI.

15 WorldatWork, Bonus Programs and Practices (July 2016). Accessed May 22, 2017, at www. worldatwork.org/adimLink?id=80398.

16 “Study Finds Bonus Pay Geared to Attract, Not Retain, Talent,” Report on Salary Surveys 9 (March 2009): 1–7.

17 Cat Zakrzewski, “Intel Doubles Up on Hiring Women and Minorities,” The Wall Street Journal online (August 3, 2015). Accessed February 3, 2017, at www.wsj.com.

18 “Bonus Programs and Practices,” Worldat- Work report, July 2016. Accessed January 5, 2017, at www.worldatwork.org/waw/ adimLink?id=80398.

19 Vickie Elmer, “Hiring without a Net: Groupon’s Recruiter Speaks,” Fortune 164 (July 25, 2011): 34.

20 Nelson D. Schwartz, “In Hiring a Friend in Need is a Prospect, Indeed. New York Times (January 27, 2013). Accessed February 3, 2014, at www.nytimes.com.

21 Auren Hoffman, “Seeking Great Candidates Online,” BusinessWeek Online (December 10, 2009): 1.

22 Elka Torpey and Audrey Watson, “Education Level and Jobs: Opportunities by State,” Career Outlook online (September 2014), U.S. Bureau of Labor Statistics. Accessed January 10, 2017, at www.bls.gov.

23 Alice Andore, “The Value of Poaching,” HR Magazine 57 (April 2012): 36–37.

24 John Helyar and Douglas MacMillan, “In Tech, Poaching Is the Sincerest Form of Flattery,” Bloomberg Businessweek (March 7, 2011): 17–18.

25 Rebecca Knight, “When the Competition Is Trying to Poach Your Top Employee,” Harvard Business Review online (September 29, 2015). Accessed February 3, 2017, at www.hbr.org.

26 Ibid. 27 “Technology Talent Poaching to Get More

Aggressive in 2011,” Channel Insider (March 3, 2011): 1.

28 Michael A. Tucker, “Don’t Say Goodbye,” HR Magazine 56 (August 2011): 71–73.

29 U.S. Bureau of Labor Statistics, “Job Openings and Labor Turnover–December 2016” (USDL 17-0179, February 7, 2017). Accessed February 14, 2017, at www.bls.gov.

30 U.S. Bureau of Labor Statistics, “The Employ- ment Situation–January 2017” (USDL 17-0141, February 3, 2017). Accessed February 14, 2017, at www.bls.gov.

31 Ibid. 32 “Careers for Veterans,” General Electric

Careers Web site. Accessed February 14, 2017, at www.ge.com/careers/culture/us-veterans.

33 “Starbucks Hiring Efforts for Military, Youth and Refugees,” Starbucks’ New Room online (January 31, 2017). Accessed February 14, 2017, at https://news.starbucks.com/news/ starbucks-hiring-initiatives.

34 “Careers for Veterans,” AT&T Careers Web site. Accessed February 14, 2017, at http://att.jobs/ doing-great-things/military.

35 “Veterans in the Workplace,” U.S. Chamber of Commerce Foundation (November 2016). Accessed May 25, 2017, at www.uschamber- foundation.org.

36 Vanessa Fuhrmans, “Hiring Veterans Is Easy, Keeping Them Is Hard,” The Wall Street Journal online (March 29, 2017). Accessed May 25, 2017, at www.wsj.com.

37 Agency Group 09, “America Supports You: Group Helps Troops, Families Find Jobs,” FDCH Regulatory Intelligence Database (January 30, 2008): Department of Defense, 703-695-0192.

38 Eric Krell, “Criminal Background,” HR Maga- zine 57 (February 2012): 45–54.

39 National Institute of Justice, Research on Re- Entry and Employment, April 3, 2013. Accessed January 15, 2014, at www.nij.gov.

40 U.S. Equal Employment Opportunity Commis- sion, “Arrest and Conviction Records as a Bar- rier to Employment,” (July 26, 2011). Written Statement for Amy Solomon. Accessed Febru- ary 18, 2014, at www.eeoc.gov.

41 Michelle Natividad Rodriguez and Beth Avery, “Ban the Box: U.S. Cities, Counties, and States Adopt Fair Hiring Policies,” National Employ- ment Law Project (February 1, 2017). Accessed February 14, 2017, at www.nelp.org/publica- tion/ban-the-box-fair-chance-hiring-state-and- local-guide/.

42 Roy Mauer, “Ban-the-Box Movement Goes Viral,” Society for Human Resource Manage- ment online. Accessed February 14, 2017, at www.shrm.org/resourcesandtools/hr-topics/ risk-management/pages/ban-the-box-movement- viral.aspx.

43 David Farkas, “Employee Search,” Chain Leader 13 (June 2008): 44–45.

44 Roseanne Harper, “CSA Offers Second Chance,” Supermarket News 57 (September 14, 2009): 30.

45 Michelle V. Rafter, “Goin’ Mobile In,” Work- force Management 90 (February 2011): 26–28.

46 Nicole Fallon Taylor, “Hiring in the Digital Age: What’s Next for Recruiting?” Business

News Daily online (January 11, 2016). Accessed January 31, 2017, at www.businessnewsdaily. com/6975-future-of-recruiting.html.

47 Abha Bhattarai, “Facebook Wants to Help You Find a Job—Even If You’re Not Looking for One,” The Washington Post online (February 16, 2017). Accessed February 17, 2017, at www. washingtonpost.com.

48 CareerBuilder.com, “About Us.” Accessed February 17, 2017, at www.careerbuilder.com/ share/AboutUs/.

49 Jack Constine, “Facebook’s New Job Open- ing Posts Poach Business from LinkedIn,” TechCrunch Web site. Accessed February 17, 2017, at https://techcrunch.com/2017/02/15/ facebook-jobs/.

50 Glassdoor.com, “About Us.” Accessed Febru- ary 17, 2017, at www.glassdoor.com/about/ index_input.htm.

51 LinkedIn.com, “About LinkedIn.” Accessed February 17, 2017, at https://press.linkedin.com/ about-linkedin.

52 Marci Reynolds, “Twitter: The Newest Job Board?” Accessed February 15, 2017, at www. job-hunt.org/social-networking/twitter-job- board.shtml.

53 “How Disney and 5 Other Top Employers Use Twitter to Recruit,” The Under Cover Recruiter Web site. Accessed February 5, 2017, at http:// theundercoverrecruiter.com/how-disney-and- 5-other-top-employers-use-twitter-to-recruit/.

54 “AllianceQ Fortune 500 Company Recruiting: A Different Recruiting Model.” (July 13, 2011). Accessed May 20, 2014 at http://jobsearch. about.com/od/jobsdatabases/a/allianceq.htm.

55 “This Résumé Pool Is Deepening Fast,” Busi- nessWeek (July 13, 2009): 72.

56 Deborah Silver, “Niche Sites Gain Monster- Sized Following,” Workforce Management 90 (March 2011): 10–11.

57 U.S. Bureau of Labor Statistics. (2005). Work- ers on Flexible and Shift Schedules, May 2004. USDL: 05-1198. Accessed January 19, 2014, at www.bls.gov.

58 U.S. Government Accountability Office, “Contingent Workforce: Size, Characteristics, Earnings, and Benefits,” Report: GAO-15-168R (April 20, 2015). Accessed February 1, 2017, at www.gao.gov/assets/670/669766.pdf.

59 Robert J. Grossman, “Strategic Temptations,” HR Magazine 57 (March 2012): 24–31.

60 Daniel N. Janich, “Without Proper Planning, Contingent Workers Pose Serious Legal Risks to Employer Benefit Plans,” Employee Benefit Plan Review 66 (July 2011): 8–11.

61 Irwin Speizer, “An On-Demand Workforce,” Workforce Management 88 (October 19, 2009): 45–49.

62 “Temporary Workforce Stronger Than Ever,” T + D 65 (May 2011): 21.

63 U.S. Government Accountability Office, “Contingent Workforce: Size, Characteristics, Earnings, and Benefits,” Report: GAO-15-168R (April 20, 2015). Accessed February 1, 2017, at www.gao.gov/assets/670/669766.pdf.

64 Joshua Jamerson, “Super Bowl Ad to Kick Off Hiring Spree,” The Wall Street Journal online (January 31, 2017). Accessed February 1, 2017, at www.wsj.com.

65 Chris McCarthy, “The Art of Headhunting,” Accountancy 147 (June 2011): 60.

M05_MART9724_15_SE_C05.indd 144 9/27/17 6:57 PM

http://LinkedIn.com

http://Glassdoor.com

http://CareerBuilder.com

http://jobsearch.about.com/od/jobsdatabases/a/allianceq.htm

http://theundercoverrecruiter.com/how%E2%80%90disney%E2%80%90and%E2%80%905%E2%80%90other%E2%80%90top%E2%80%90employers%E2%80%90use%E2%80%90twitter%E2%80%90to%E2%80%90recruit/

http://www.jobhunt.org/social%E2%80%90networking/twitter%E2%80%90job%E2%80%90board.shtml

https//press.linkedin.com/about%E2%80%90linkedin

http://www.glassdoor.com/about/index_input.htm

http://www.careerbuilder.com/share/AboutUs/

http://www.washingtonpost.com/