paper

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Human Resource Management

Linking Strategy to Practice

Greg L. Stewart

Kenneth G. Brown

THIRD EDITION

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VICE PRESIDENT & EXECUTIVE PUBLISHER George Hoffman EXECUTIVE EDITOR Lisé Johnson PROJECT EDITOR Brian Baker EDITORIAL ASSISTANT Jacqueline Hughes ASSOCIATE DIRECTOR OF MARKETING Amy Scholz MARKETING MANAGER Kelly Simmons DESIGN DIRECTOR Harry Nolan PRODUCT DESIGNER Allison Morris ASSOCIATE PRODUCTION MANAGER Joyce Poh PRODUCTION EDITOR Eugenia Lee COVER DESIGNER Wendy Lai

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Copyright © 2014, 2011 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030- 5774, (201)748-6011, fax (201)748-6008, website http://www.wiley.com/go/permissions. Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year. These copies are licensed and may not be sold or transferred to a third party. Upon completion of the review period, please return the evaluation copy to Wiley. Return instructions and a free of charge return mailing label are available at www.wiley.com/go/returnlabel. If you have chosen to adopt this textbook for use in your course, please accept this book as your complimentary desk copy. Outside of the United States, please contact your local sales representative. To order books or for customer service please, call 1-800-CALL WILEY (225-5945).

ISBN-13 978-1118-58280-0 (paperback)

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

To Lisa, Brandon, Ryan, Jason, and Analisa—GLS

For my Mom—KGB

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GREG L. STEWART, PH.D. Greg L. Stewart is the Henry B. Tippie Research Professor of Management and Organizations in the Henry B. Tippie College of Business at the University of Iowa. He received his Ph.D. in human resource management from Arizona State University and has been a faculty member at Vanderbilt University and Brigham Young University. His research has been published in top academic journals, including Journal of Applied Psychology, Personnel Psychology, Academy of Management Journal, Organizational Dynamics, and Organization Science. He served as an Associate Editor for Journal of Management. He has taught human resource management courses to undergraduate, MBA, and Executive MBA students, including international programs in Hong Kong, Italy, and India. He has received numerous teaching awards including GREAT Instructor of the Year for Executive MBA, the Dean’s Award for Teaching Excellence, and MBA Professor of the Year at the Consortium Institute of Management and Business Analysis (CIMBA). He has worked with a variety of large and small organizations including Eli Lilly, LG Electronics, Newton Manufacturing, and the National Federation of Independent Business. He is currently involved in a number of projects working to improve the delivery of healthcare within the Veterans Health Administration.

KENNETH G. BROWN, SPHR, PH.D. Kenneth G. Brown is a Professor and Tippie Research Fellow in the Henry B. Tippie College of Business at the University of Iowa. He also serves by courtesy appointment as a Professor of Educational Policy and Leadership Studies. He received his Ph.D. in industrial and organizational psychology from Michigan State University and his B.S. from the University of Maryland, and he is certi- fied as a senior professional in human resource management (SPHR). He has taught courses in training and career development, organizational behavior, and general management to undergraduate, MBA, and Ph.D. students. He is the recipient of numerous teaching awards, including the Student’s Choice for Faculty Excellence Award, the Dean’s Teaching Award, the Collegiate Teaching Award, the James N. Murray Faculty Award for outstanding teach- ing and assistance to students, and the President and Provost Award for Teaching Excellence. His work using experiential learning was recognized as a finalist for the inaugural Academy of Management Human Resources Division Innovative Teaching Award in 2006 and for the 2007 Iowa Campus Compact Faculty Award. He has published articles in human resource man- agement and organizational behavior for both academic and applied audi- ences. His academic work appears in such top journals as Journal of Applied Psychology, Personnel Psychology, and Organizational Behavior and Human Decision Processes. His applied work has been published by the American Society of Training and Development in T&D magazine and by the UK-based Chartered Institute of Personnel and Development. His consulting clients have included the Ford Motor Company, Rosetta Stone, the Society of Human Resource

iii

About the Authors

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Management, Toyota Motor Credit Corporation, the University of Iowa, and numerous local non-profit organizations. From 2012 to 2014, Brown serves as the editor-in-chief of the Academy of Management Learning and Education, a premiere journal of research on helping students acquire management knowledge and skill. From 2014–2016, Brown also serves as a Director of the HR Certification Institute, the worldwide leader in certifying HR competency.

iv About the Authors

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WHY LINK HUMAN RESOURCE PRACTICE TO STRATEGY?

v

The last decade has been an interesting period of change and survival for businesses. The worst economic recession in over 50 years forced many com- panies to rethink the way they did business. More recently, recovery from the recession has presented organizations with a number of different opportuni- ties and threats. Only the best companies survive and thrive in such trying times. But what makes some companies more successful than others? What gives organizations an advantage over their competitors? One answer empha- sizes the benefit of having the right people as members of the organization. It is often said that “the people make the place,” which tells us that employees are the most important asset of any organization. Practices that help obtain and motivate employees are the core focus of human resource management, which is the field of study presented in this textbook.

As you read this book, we hope you will agree that human resource man- agement is an exciting field of study. In order to make ideas and concepts come to life, we include a number of examples from real companies that illustrate how effective human resource management is helping companies achieve success. Each chapter explains how an organization can increase its effectiveness by improving its processes for hiring and motivating top- performing employees. We also specifically link human resource practices to competitive strategies. This linkage is critical, as it shows how a company can use human resource management to gain a competitive advantage over other companies.

The field of human resource management has evolved a great deal during the past 20 years. Today, many practitioners and researchers argue that human resource management should extend beyond its traditional focus on legal compliance and adopt a more strategic perspective for managing employees. Perhaps more importantly, successful organizations are taking a more stra- tegic approach to managing people. Many human resource textbooks have added material to reflect some of this change, but most books still lack a con- sistent strategic framework—even though this framework is rapidly becoming the norm within the field.

We have written Human Resource Management: Linking Strategy to Practice, Third Edition, in order to more fully develop and integrate the strategic per- spective. Throughout the book, we emphasize the theme that organizations excel when they have consistent human resource practices that align with their

Preface

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vi Preface

WHAT IS NEW IN THIS EDITION?

strategic direction. We begin by establishing a strategic framework that illus- trates how different approaches to human resource management fit with basic competitive strategies. We then integrate this strategic perspective into our discussion of traditional human resource practices, such as work design, staff- ing, performance management, training, compensation, and labor relations. At the same time, we clearly illustrate how these specific human resource prac- tices help increase organizational effectiveness.

The practice of human resource management continues to evolve and improve. New research is being published at a rapid pace, and organizations are constantly innovating. This third edition of Human Resource Management: Linking Strategy to Practice reflects these changes. We have combed through research studies conducted since the first and second editions to identify and include new and updated ideas. This edition contains a number of “How Do We Know?” features that describe recently published research that informs our understanding of human resource management. We have also updated our case examples to reflect innovative ideas being carried out in contempo- rary organizations. These additions to the third edition ensure that students are exposed to the latest ideas and innovative thinking.

One particular area of change in the revision concerns updated material related to finding balance between work and family demands. Both academic studies and organizational practices provide new insights for organizations seeking to help organizations reduce conflict between these important, yet sometimes competing, aspects of life. In particular, Chapter 4 provides an array of concepts and illustrations explaining how companies benefit from making work more family friendly. New laws and government practices, such as the Affordable Care Act (Obamacare), also present new challenges and opportunities for businesses. Many of the critical issues that organizations will face as they implement these new policies are discussed in the section of Chapter 12 that describes how health insurance is becoming a legally required rather than discretionary benefit.

We continue to emphasize the impact of globalization. The importance of thinking globally is emphasized in each chapter with specific examples of ways that human resource practices are similar and different across national boundaries.

The revision also continues to emphasize the strategic approach. New research supporting the benefits of aligning human resource practice with organizational strategy is included. Company illustrations are also used to describe how many of the companies that have performed well during the economic downturn did so largely because of their human resource strengths. In this way, the third edition continues our unique approach to integrating strategy and practice.

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Preface vii

A book designed around a strategic framework, such as the guiding model presented in Chapters 1 and 2, helps students not only to develop a set of human resource tools but also to know when each tool is most appropriate. The overall objective of Human Resource Management: Linking Strategy to Practice is thus to provide students with both an understanding of traditional human resource concepts and a framework for making decisions about when specific practices can be most beneficial. This link between strategy and practice is necessary for students to be able to correctly apply human resource tools to improve organizations.

The strategic perspective is critical for students because most people enrolled in an introductory course will not spend their careers working as human resource professionals. A majority will, however, work someday as managers with the charge to lead and direct others. Understanding the stra- tegic benefits of good human resource management can help future manag- ers better secure and motivate talented employees. The strategic perspective also provides a valuable framework for the future study of those students who do choose to become human resource professionals. Information from addi- tional courses that provide more in-depth coverage of topics such as staffing, training, and compensation will easily fit within the strategic orientation of this book and provide guidance for knowing when to use specific tools.

HOW CAN STUDENTS BENEFIT FROM A STRATEGIC PERSPECTIVE?

HOW IS THIS BOOK ORGANIZED?

Human Resource Management: Linking Strategy to Practice is organized to provide coverage of both strategic topics and specific practices, as illustrated in the accompanying schematic. We open the book in Chapter 1 by examining the value of aligning human resource practices with organizational strategies. Chapter 2 describes the strategic perspective in more detail. It discusses vari- ous ways organizations try to be more effective than their competitors, and it illustrates how human resource management can help organizations carry out their strategies. Chapter 3 discusses legal and safety issues. Laws and regu- lations drive many human resource practices, and knowledge of these legal realities is necessary for understanding several issues related to securing and motivating employees. Chapters 2 and 3 thus provide information that estab- lishes a strategic perspective and provides a context for much of the material in later chapters.

Chapters 4 through 7 focus on the process of securing employees. Chapter 4 describes work design, which creates job descriptions that clarify who does what. The work design process also identifies the characteristics of people most likely to carry out tasks successfully. The result is a type of shopping list that defines the types of people most likely to succeed in specific jobs and

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viii Preface

organizations. Chapters 5 and 6 build on this information by discussing how to locate and identify people who have these characteristics. Chapter 5 gives details about recruiting and illustrates methods for attracting people to apply for jobs with the organization. Faced with a pool of applicants, the organization must decide which of them to hire. Chapter 6 devel- ops several selection methods useful in carry- ing out this task. Chapter 7 then explains ways of keeping good employees, as well as remov- ing low performers. Taken together, Chapters 4 through 7 provide information that helps guide efforts to get the right people doing the right tasks. These chapters combine a strate- gic perspective of securing employees with a review of specific activities associated with recruiting, hiring, and retaining workers.

Once the right people have been placed in the right jobs, the next step is to maxi- mize their performance. Chapters 8 through 13 focus on this process. Chapter 8 describes performance management, which provides methods for measuring what individuals con- tribute to the organization. Performance assessments are used to create feedback that teaches employees how to improve. Chapter

9 discusses the training process. Chapter 10 emphasizes career development and offers guidance for planning how employees can continue to contribute to the organization over the long term. Through training, people learn new things and become more valuable employees. Chapters 11 and 12 focus on compensation and illustrate how pay and benefits can increase motivation. Chapter 13 emphasizes the need for good labor relations and discusses meth- ods for working with labor unions and treating employees fairly. In sum, this set of chapters provides information about developing skills and increasing motivation to ensure that employees are reaching peak performance. The overall emphasis is on ensuring that employees have the skills and motivation necessary to carry out the organization’s strategy for competing with other firms.

The final chapter, Chapter 14, describes strategic alignment. The human resource practices of successful organizations align with organizational strate- gies for doing things better than competitors. Good human resource practices also work together. Staffing practices, for example, combine with compensa- tion practices to help the organization hire and motivate people with certain characteristics. Performance management measures areas where people need to improve, and training teaches them how to improve. The final chapter thus presents the big picture by illustrating how different pieces of human resource management fit together to create successful organizations.

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Each chapter opens with a real-life scenario describing a decision faced by an individual employee, manager, or human resource professional. These sce- narios, labeled “A Manager’s Perspective,” highlight the importance of strate- gic decision making and help students see exactly how the chapter material is relevant to their future careers. Each scenario ends with five thought ques- tions designed to get students thinking about core concepts from the upcoming chapter. A section labeled “A Manager’s Perspective Revisited” at the end of each chapter pro- vides answers to the thought questions and once again emphasizes how the material cov- ered in the chapter can help students build successful careers.

We have developed a number of pedagogical features for Human Resource Management: Linking Strategy to Practice, Third Edition, to support the strategic framework and enhance student interest and learning.

A M A N AG E R ’ S P E R S P E C T I V E A N D A M A N AG E R ’ S P E R S P E C T I V E R E V I S I T E D

Key Features

ix

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x Key Features

Research is an important part of the field of human resources. Each chapter therefore includes a number of features describing specific research studies. These features—labeled “How Do We Know?”—use nontechnical language to summarize research studies that have been published in scholarly journals. Each concludes with a “Bottom Line” summary that shows how the findings of the study contribute to our under- standing of effective human resource management. These research sum- maries help students understand how knowledge is generated and help them see the science behind many of the principles discussed throughout the textbook.

H OW D O W E K N OW ?

The opening section of each chapter includes a discussion that illustrates how a specific company has used the concepts discussed in the chapter to increase effectiveness. Trader Joe’s, Southwest Airlines, Marriott, and General Electric are just a few of the firms included in these in-depth examinations of stra- tegic HR. Each of the company descriptions ends with a “Building Strength Through HR” feature that clearly summarizes how the firm has used specific human resource practices to become more effective and competitive.

Additional “Building Strength Through HR” features appear throughout each chapter. These brief cases illustrate how specific companies have benefited from implementing particular human resource practices—for example, how Leicester Royal Infirmary, a large teach- ing hospital in England, improved effi- ciency and patient satisfaction through work redesign and how LG Electronics created a global instructional program to connect company vision and values with leadership development practices. These discussions clearly illustrate how effective human resource practices have translated into success for a num- ber of organizations. The inclusion of foreign-based firms points up the fact that the usefulness of strategic HR crosses international boundaries.

B U I L D I N G S T R E N GT H T H R O U G H H R

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Key Features xi

T E C H N O L O G Y I N H R

Technological change has had a per- vasive influence on every aspect of management, and human resource man- agement is no exception. “Technology in HR” features describe how techno- logical advances are affecting the field of human resource management. The information included in this feature illustrates how the Internet and other forms of electronic communication are affecting human resource practices in areas such as employee selection, train- ing, and compensation. These discus- sions show students how advancements in technology are being incorporated to increase the effectiveness of human resource management.

A number of features included in each chapter help students focus on and learn key concepts.

Learning Objectives. A list of learning objectives opens each chapter and pre- pares readers for the key concepts to be discussed.

Key Terms and Definitions. Key terms shown in boldface in the chapter text and linked to margin definitions highlight critical concepts and pro- vide an opportunity for review.

. Each major section concludes with review questions that focus students’ atten- tion on major topics.

. Each chap- ter ends with a summary of key con- cepts linked to the chapter’s learning objectives and major sections.

. End-of-chapter discussion questions revisit major top- ics, providing readers with an oppor- tunity not only for review but also for critical thinking and interpretation.

R E C A L L F E AT U R E S

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xii Key Features

E N D - O F - C H A P T E R A P P L I C AT I O N E X E R C I S E S

Knowledge is most useful when it can be applied to solve real problems. We end each chapter with cases and experiential exercises that help students begin the process of applying the concepts to solve actual problems associated with effective human resource management.

. An example case illustrates how a specific company imple- ments the human resource practice discussed in the chapter.

. A discussion case provides background information about a fictional company that can serve as the launching point for a class discussion.

An experiential exercise describes an activity that a student can complete, often online, to actively learn more about the topic discussed in the chapter.

An interactive experiential exercise pro- vides a link to the companion website where students can go to participate in a role-play that tests their knowl- edge of the basic concepts discussed in the chapter.

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Several supplements have been designed to make both teaching and learning easier and more interesting for users of Human Resource Management: Linking Strategy to Practice, Third Edition. We are especially grateful to the following people for helping us to provide such a comprehensive teaching and learning package: Dyanne J. Ferk, University of Illinois–Springfield; Marcia Marriott, Monroe Community College and Rochester Institute of Technology.

Companion Website

The companion website for Human Resource Management: Linking Strategy to Practice, Third Edition, contains a myriad of tools and links to aid both teaching and learning, including nearly all of the resources described in this section. To access the site, go to www.wiley.com/college/stewart.

Instructor’s Resource Manual

The includes an introduction with sample syllabi, chapter outlines, chapter objectives, teaching notes on how to integrate and assign special features, and suggested answers for all quiz and test questions found in the text. The also includes additional dis- cussion questions and assignments that relate specifically to the cases, as well as case notes, self-assessments, and team exercises.

Test Bank

The robust test bank consists of over 100 true/false, multiple-choice, and short-answer questions per chapter. Furthermore, it is specifically designed so that questions vary in degree of difficulty, from straightforward recall to chal- lenging, to offer instructors the most flexibility when designing their exams. Adding still more flexibility is the , which requires a PC running Windows. The computerized test bank, which contains all the ques- tions from the manual version, includes a test-generating program that allows instructors to customize their exams.

PowerPoint Presentations

This resource provides another visual enhancement and learning aid for stu- dents, as well as additional talking points for instructors. This set of interactive PowerPoint slides includes lecture notes to accompany each slide.

Personal Response System

Personal Response System questions (PRS or “clicker” content) were designed for each chapter in order to spark additional discussion and debate in the classroom. For more information on PRS, please contact your local Wiley sales representative.

Supplements

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xiv Supplements

Web Quizzes

Online quizzes, available on the student portion of the Human Resource Management: Linking Strategy to Practice, Third Edition, companion website, include questions varying in level of difficulty, designed to help students eval- uate their individual progress through a chapter. Each chapter’s quiz includes 10 questions, including true/false and multiple-choice questions. These review questions, developed in conjunction with the test bank, were created to provide the most effective and efficient testing system. Within this system, students have the opportunity to “practice” the type of knowledge they’ll be expected to demonstrate on the exam.

Pre- and Post-Lecture Quizzes

The pre- and post-lecture quizzes, found on the student companion website, consist of 10 to 15 questions (multiple-choice and true/false) per chapter, varying in level of detail and difficulty, but all focusing on that chapter’s key terms and concepts. This resource allows instructors to quickly and easily eval- uate their students’ progress by monitoring their comprehension of the mate- rial from before the lecture to after it.

Videos

A set of short video clips from CBS News provides an excellent starting point for lectures or for general classroom discussion. Teaching notes, including clip introductions and assessment questions, are included for class discussion or assignment.

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This book could not have happened without contributions from an outstanding team. We thank Lisé Johnson for her outstanding efforts to make this third edition a reality. Brian Baker guided us, kept us on task, and answered numerous questions throughout the process. Eugenia Lee provided superb production and editorial help. We also thank Judy Joseph, Jayme Heffler, Leslie Kraham, Joan Kalkut, and Beverly Peavler for their assistance with many features of earlier editions of this book.

Our efforts have also been aided by a number of outstanding colleagues who have read different manuscript versions and provided valuable input. Their feedback has improved our coverage of topics and helped us identify areas of weakness. These colleagues include

Muriel Anderson, Vondra Armstrong, Tim Barnett, Myrtle Bell,

Jerry Bennett, Stephen Betts, Thomas Bock

Walter Bogumil, Angela Boston, H. Michael Boyd, Gene Brady, Lynda Brown, April Cobb,

Patrick Coughlin, Ralph Covino, Craig Cowles, Carol Cumber, Tammy Davis, Diana Deadrick,

Paula Donson, Karen Eastwood, Dyanne Ferk, Bill Ferris,

Mary Gowan, Brooke Hargreaves-Heald, John Hendon, University

Kim Hester, John Hulsebus, Samira Hussein,

Jennie Johnson, Roy Johnson, Kathleen Jones, Deborah Kelly, Mukta Kulkarni,

Wendall Lawther, Dane Loflin, Lucy McClurg, Margie McInerney, Jon Monat,

Byron Morgan, Darlene Motley, Robert Dorothy Mulcahy, James Myers,

Rebecca Neilson, Kay Nicols, Texas Laura Parks, Sue Pogue, Tennessee Tech

John Poirier, Alexander P. Portnyagin, Richard Posthuma,

Gary Potts, Ross Prizzia, Herve Queneau, Gail Sammons,

John Shaw, Carol Spector, University Howard Stanger, Gary Stroud,

Abe D. Tawil, Linda Urbanski, Phillip Varca, Steve Warner, Paige Wolf, George

Laura Wolfe, Michael Wolfe, University and Ryan Zimmerman,

Acknowledgments

xv

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xvi

PART 1 Seeing People as a Strategic Resource 1

Chapter 1 Creating Value Through Human Resources 2 Chapter 2 Making Human Resource Management Strategic 38 Chapter 3 Ensuring Equal Employment Opportunity and Safety 76

PART 2 Securing Effective Employees 119

Chapter 4 Designing Productive and Satisfying Work 120 Chapter 5 Recruiting Talented Employees 160 Chapter 6 Selecting Employees Who Fit 202 Chapter 7 Managing Employee Retention and Separation 250

PART 3 Improving Employee Performance 291

Chapter 8 Measuring Performance and Providing Feedback 292 Chapter 9 Training for Improved Performance 334 Chapter 10 Developing Employees and Their Careers 378

PART 4 Motivating and Managing Employees 413

Chapter 11 Motivating Employees Through Compensation 414 Chapter 12 Designing Compensation and Benefit Packages 456 Chapter 13 Working Effectively with Labor 496 Chapter 14 Aligning Strategy with Practice 536

APPENDICES (available online at www.wiley.com/college/stewart)

Appendix A Occupational Outlook for HR Managers and Specialists Appendix B HR Certification Institute Body of Knowledge Appendix C HR People & Strategy Pillars of Knowledge Appendix D Organizations of Interest to HR Students and Professionals Appendix E Journals Useful to HR Students and Professionals

Glossary 569 Name and Company Index 579 Subject Index 595 Appendix Summary 611

Brief Contents

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A Manager’s Perspective 2

How Can Human Resource Management Make an Organization Effective? 4

How Is Organizational Success Determined? 6 Success in Life-Cycle Stages 6

Success from Stakeholder Perspectives 9

The Chain of Success 12

What Does Human Resource Management Provide to an Organization? 13

Core Human Resource Functions 13 Spreading Knowledge about Human Resource Practices 16

What Do Human Resource Specialists Do? 17 Human Resource Roles 18 Human Resource Competencies 22

How Will Current Trends Affect Human Resource Management? 24

Population Trends 25 Labor Force Trends 25 Employment Trends 26 Trends in Education and Training 27 Globalizations Trends 27

How Do Strategic and Functional Perspectives Combine to Direct Human Resource Practices? 28

A Manager’s Perspective Revisited 30

Summary/Key Terms/Discussion Questions 30

Contents

Chapter 1 Creating Value Through Human Resources

PART 1 Seeing People as a Strategic Resource

WHAT DO YOU THINK? 3

BUILDING STRENGTH THROUGH HR: Trader Joe’s 5

HOW DO WE KNOW? Does Effective Human Resource Management Increase Organizational Success? 8

HOW DO WE KNOW? Why Are Some Organizations More Effective than Others? 11

TECHNOLOGY IN HR: Using Web-Based Information to Manage People 15

BUILDING STRENGTH THROUGH HR: Edwards Lifesciences 21

BUILDING STRENGTH THROUGH HR: McDonald’s 23

xvii

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xviii Contents

Chapter 2 Making Human Resource Management Strategic

A Manager’s Perspective 38

How Can a Strategic Approach to Human Resources Improve an Organization? 40

How Is Strategy Formulated? 42 Gathering Information 43 Analyzing Information and Making Decisions 46

What Are Common Competitive Business Strategies? 48

Cost Leadership Strategy 49 Differentiation Strategy 50 Combination Strategy 51

What Are Basic Approaches to Human Resource Strategy? 52

The Universalistic Approach 53 The Contingency Approach 56

What Are Common Human Resource Strategies? 60 Internal/Cost HR Strategy: The Loyal Soldier 60 External/Cost HR Strategy: The Bargain Laborer 61 Internal/Differentiation HR Strategy: The Committed Expert 62 External/Differentiation HR Strategy: The Free Agent 62

EXAMPLE CASE: Zappos 33

DISCUSSION CASE: Curt’s Cowboy Corner 35

EXPERIENTIAL EXERCISE: Visit the SHRM Website 36

INTERACTIVE EXPERIENTIAL EXERCISE: Building an HR Department at Mega Manufacturing 36

WHAT DO YOU THINK? 39

BUILDING STRENGTH THROUGH HR: Southwest Airlines 42

TECHNOLOGY IN HR: Twitter as an Opportunity for Business 45

HOW DO WE KNOW? What Differentiates Fast-Food Restaurants? 51

HOW DO WE KNOW? Do Good Human Resource Practices Improve Performance? 55

BUILDING STRENGTH THROUGH HR: Fenmarc Produce Ltd 58

Cases 33

Exercises 36

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Contents xix

WHAT DO YOU THINK? 77

BUILDING STRENGTH THROUGH HR: Responding to Discrimination Claims 79

HOW DO WE KNOW? Do Courts Give Companies Credit for Good HR Practices? 85

HOW DO WE KNOW? Who Is Most Likely to Unfairly Discriminate? 87

TECHNOLOGY IN HR: Legal Issues with Internet and Email Use 89

Chapter 3 Ensuring Equal Employment Opportunity and Safety

A Manager’s Perspective 76

Why Is It Important to Understand Legal and Safety Issues? 78

What Is the Main Law Relating to Discrimination and Employment? 79.

Title VII of the Civil Rights Act of 1964 81 The Civil Rights Act of 1991 88 Application of U.S. Laws to International Employers 90

What Are Other Important Employment Laws? 92 The Age Discrimination in Employment Act 92 The Americans with Disabilities Act 94 The Equal Pay Act 96 The Family and Medical Leave Act 97

HOW DO WE KNOW? Do Human Resource Practices Influence Customer Service? 65

EXAMPLE CASE: United Parcel Service 69

DISCUSSION CASE: Mountain Bank 70

EXPERIENTIAL EXERCISE: Explore Company Websites 72

INTERACTIVE EXPERIENTIAL EXERCISE: HR Strategy in Action: Selling the HR Function at Mega Manufacturing 72

How Do Human Resource Strategies Align with Competitive Business Strategies? 63

Research Supporting the Contingency Perspective 64 Putting it all Together 66

A Manager’s Perspective Revisited 66

Summary/Key Terms/Discussion Questions 67

Cases 69

Exercises 72

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xx Contents

WHAT DO YOU THINK? 121

BUILDING STRENGTH THROUGH HR: W. L. Gore & Associates 123

HOW DO WE KNOW? Do Empowered Teams Have Higher Performance? 125

Chapter 4 Designing Productive and Satisfying Work

PART 2 Securing Effective Employees

A Manager’s Perspective 120

How Can Strategic Design of Work Tasks Improve an Organization? 122

How Is Work Design Strategic? 124 Developing Autonomy 124 Developing Interdependence 126 Linking Autonomy and Interdependence to HR Strategy 127

How Can Organizations Increase Diversity? 98 Executive Order 11246 100 Restrictions on Affirmative Action Plans 101 Affirmative Action Plans Today 101

What Are the Major Laws Relating to Occupational Safety? 102

Occupational Safety and Health Act 103 Workers’ Compensation 105

What Specific Practices Increase Fairness and Safety? 107

Employees 107 Leadership 108

A Manager’s Perspective Revisited 110

Summary/Key Terms/Discussion Questions 111

Cases 113

Exercises 115

BUILDING STRENGTH THROUGH HR: PepsiCo 99

BUILDING STRENGTH THROUGH HR: Union Pacific Corporation 106

HOW DO WE KNOW? What Can Organizations Do to Promote Safety? 109

EXAMPLE CASE: Xerox 113

DISCUSSION CASE: Jones Feed and Seed 114

EXPERIENTIAL EXERCISE: Locating Government Resources on the Web 115

INTERACTIVE EXPERIENTIAL EXERCISE: The Legal Side of HR: Handling Equal Employment Issues at Mega Manufacturing 115

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Contents xxi

Chapter 5 Recruiting Talented Employees

A Manager’s Perspective 160

How Can Strategic Recruiting Make an Organization Effective? 162

How Are Employee Jobs Determined? 128 The Job Analysis Process 128 Specific Methods of Collecting Job Analysis Information 133 How Is Job Description Information Made Useful? 136 Job Analysis and Legal Issues 137 Competency Modeling 138

How Do We Determine the Tasks Associated with Each Job? 140

Mechanistic Approach 141 Motivational Approach 142 Perceptual Approach 144 Biological Approach 144 Combining Work Design Approaches 145

How Can Work Be Designed to Improve Family Life? 145

Flexible Work Scheduling 147 Alternative Work Locations 148

A Manager’s Perspective Revisited 150

Summary/Key Terms/Discussion Questions 151

Cases 153

Exercises 156

BUILDING STRENGTH THROUGH HR: Purolator 129

BUILDING STRENGTH THROUGH HR: Leicester Royal Infirmary 141

HOW DO WE KNOW? Do Employees Work Harder When They Think Their Tasks Matter? 143

BUILDING STRENGTH THROUGH HR: International Business Machines Corporation 147

TECHNOLOGY IN HR: Potential Problems With Working From Home 149

EXAMPLE CASE: Coney Island Hospital 153

DISCUSSION CASE: Josh’s Toy Manufacturing 155

EXPERIENTIAL EXERCISE: Assessing the Accuracy of Job Descriptions 156

INTERACTIVE EXPERIENTIAL EXERCISE: Job Design: Creating New Positions at Graphics Design, Inc. 156

WHAT DO YOU THINK? 161

BUILDING STRENGTH THROUGH HR: Google 163

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xxii Contents

How Is Employee Recruiting Strategic? 164 Broad Versus Targeted Skill Scope 164 Internal Versus External Sourcing 166 Realistic Versus Idealistic Messaging 168

How Does Human Resource Planning Facilitate Recruiting? 170

The Planning Process 170 Batch and Flow Approaches 174 Centralization of Processes 174

Who Searches for Jobs? 175 New Workforce Entrants 176 Unemployed Workers 177 Workers Currently Employed 178

What Characteristics Make an Organization Attractive? 179

Generally Attractive Characteristics 180 Fit Between People and Organizations 182

What Are Common Recruiting Sources? 183 Job Posting 183 Employee Referrals 183 Print Advertising 185 Electronic Advertising 185 Employment Agencies 186 Campus Recruiting 189

How Is Recruiting Effectiveness Determined? 190 Common Measures 190 Differences among Recruiting Sources 191

A Manager’s Perspective Revisited 192

Summary/Key Terms/Discussion Questions 193

Cases 195

Exercises 198

HOW DO WE KNOW? Why Do Realistic Job Previews Reduce Employee Turnover? 169

BUILDING STRENGTH THROUGH HR: WellPoint Health Networks 172

HOW DO WE KNOW? Who Succeeds in a Job Search? 177

HOW DO WE KNOW? Are Early Job Offers Better? 181

TECHNOLOGY IN HR: Staying in Touch with Recruits 187

EXAMPLE CASE: MITRE 195

DISCUSSION CASE: Friendly Financial Works 197

EXPERIENTIAL EXERCISE: Learning about Your Career Center 198

INTERACTIVE EXPERIENTIAL EXERCISE: Strategic Recruitment: Finding the Right People for Graphics Design, Inc. 198

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Contents xxiii

WHAT DO YOU THINK? 203

BUILDING STRENGTH THROUGH HR: United States Marine Corps 205

HOW DO WE KNOW? Which Type of Fit Is Most Important? 209

HOW DO WE KNOW? Is It Better to Be Smart or Beautiful? 221

TECHNOLOGY IN HR: Administering Tests on the Internet 225

BUILDING STRENGTH THROUGH HR: Target 229

HOW DO WE KNOW? Does It Matter How You Shake Hands in an Interview? 233

EXAMPLE CASE: Outback Steakhouse 240

DISCUSSION CASE: Stringtown Iron Works 241

A Manager’s Perspective 202

How Can Strategic Employee Selection Improve an Organization? 204

How Is Employee Selection Strategic? 205 Aligning Talent and HR Strategy 205 Making Strategic Selection Decisions 208

What Makes a Selection Method Good? 211 Reliability 211 Validity 213 Utility 215 Legality and Fairness 217 Acceptability 218

What Selection Methods Are Commonly Used? 219 Testing 219 Information Gathering 228 Interviewing 232

How Are Final Selection Decisions Made? 235 Predictor Weighting Approach 236 Minimum Cutoffs Approach 236 Multiple Hurdles Approach 237 Banding Approach 237

A Manager’s Perspective Revisited 238

Summary/Key Terms/Discussion Questions 238

Cases 240

Chapter 6 Selecting Employees Who Fit

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xxiv Contents

Chapter 7 Managing Employee Retention and Separation

A Manager’s Perspective 250

How Can Strategic Employee Retention and Separation Make an Organization Effective? 252

How Are Employee Retention and Separation Strategic? 254

Strategic Emphasis on Employee Retention 254 Strategic Emphasis on Employee Separation 255

How Can Undesirable Employee Turnover Be Reduced? 256

Recognizing Paths to Voluntary Turnover 257 Understanding Decisions to Quit 259 Organizational Practices that Reduce Turnover 262

How Do Layoffs Affect Individuals and Organizations? 269

The Effect of Layoffs on Organizations 269 The Effects of Layoffs on Individuals 270 Reducing the Negative Impact of Layoffs 272

What Are Common Steps in Disciplining Employees? 274

Principles of Due Process 275 The Process of Progressive Discipline 275

EXPERIENTIAL EXERCISE: Learning through Interviewing 242

INTERACTIVE EXPERIENTIAL EXERCISE: Employee Selection: Choosing the Best of the Best for Graphics Design, Inc. 243

WHAT DO YOU THINK? 251

BUILDING STRENGTH THROUGH HR: SAS Institute, Inc. 254

BUILDING STRENGTH THROUGH HR: Convergys Corporation 259

TECHNOLOGY IN HR: Computerized Orientation Programs 265

BUILDING STRENGTH THROUGH HR: FreshDirect 266

HOW DO WE KNOW? Are Coworkers Contagious? 267

HOW DO WE KNOW? Do Managers Think Discipline Is Fair? 277

Exercises 242

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Contents xxv

WHAT DO YOU THINK? 293

BUILDING STRENGTH THROUGH HR: General Electric 296

TECHNOLOGY IN HR: Monitoring Electronic Activity 303

HOW DO WE KNOW? Who Is Most Likely to Provide Error-Free Ratings? 307

A Manager’s Perspective 292

How Can Performance Management Make an Organization Effective? 294

How Is Performance Management Strategic? 296 Emphasizing Either Merit or Parity 296 Linking Merit and Parity Systems to HR Strategy 297

What Is Performance? 299 Task Performance 299 Citizenship Performance 300 Counterproductive Performance 301

How Is Performance Measured? 302 Contamination and Deficiency as Sources of Inaccuracy 304 General Types of Performance Measures 304 Common Problems with Performance Measures 306 Rating Formats 311

Chapter 8 Measuring Performance and Providing Feedback

PART 3 Improving Employee Performance

How Should Employee Dismissals Be Carried Out? 277

Outplacement Services 278 The Dismissal Meeting 278

A Manager’s Perspective Revisited 279

Summary/Key Terms/Discussion Questions 280

Cases 282

Exercises 284

EXAMPLE CASE: Apparel Inc. 282

DISCUSSION CASE: County General Hospital 283

EXPERIENTIAL EXERCISE: Learning about Discipline Procedures 284

INTERACTIVE EXPERIENTIAL EXERCISE: Turnover: Dealing with the Good, the Bad, and the Ugly at Global Telecommunications 285

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xxvi Contents

Chapter 9 Training for Improved Performance

HOW DO WE KNOW? Is Performance Management the Same Around the World? 315

TECHNOLOGY IN HR: Feedback Through Twitter and Facebook 317

BUILDING STRENGTH THROUGH HR: Whirlpool Corporation 318

EXAMPLE CASE: Medical Center 326

DISCUSSION CASE: Reliable Underwriters 327

EXPERIENTIAL EXERCISE: Assessing Performance in Sports 328

INTERACTIVE EXPERIENTIAL EXERCISE: Performance Appraisal: Delivering Positive and Negative Feedback at Global Telecommunications 328

A Manager’s Perspective 334

How Can Strategic Employee Training Improve an Organization? 336

How Is Employee Training Strategic? 339 Differentiation versus Cost Leadership Strategy 339 Internal Versus External Labor Orientation 341

What Are Key Principles for Getting Benefits from Training? 342

Partnership 343 Systematic Process 344

WHAT DO YOU THINK? 335

BUILDING STRENGTH THROUGH HR: Rockwell Collins 338

BUILDING STRENGTH THROUGH HR: Apple 340

Who Should Measure Performance? 313 Multisource Performance Ratings 313 Rating Source Differences 314

How Should Feedback Be Provided? 316 Providing Positive and Negative Feedback 318 Effectively Communicating Methods for Improvement 319 Reducing Negative Emotional Responses 321 Building High Expectations 322

A Manager’s Perspective Revisited 322

Summary/Key Terms/Discussion Questions 323

Cases 326

Exercises 328

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Contents xxvii

WHAT DO YOU THINK? 379

BUILDING STRENGTH THROUGH HR: Aflac 381

Chapter 10 Developing Employees and Their Careers

A Manager’s Perspective 378

How Can Strategic Employee Development Make an Organization Effective? 380

How Is Employee Development Strategic? 382 External Versus Internal Labor Orientation 382 Differentiation Versus Cost Strategy 383

How Are Training Needs Determined? 345 Proactive Needs Assessment 345 Reactive Needs Assessment 349 Prioritizing and Creating Objectives 351

How Is Effective Training Designed and Delivered? 353

Content 354 Training Methods 355 Training Media 359 Transfer-Enhancement Techniques 362 Putting It All Together 364

How Do Organizations Determine Whether Training Is Effective? 365

Purpose 365 Outcomes 367 Design 369 Results 369

A Manager’s Perspective Revisited 370

Summary/Key Terms/Discussion Questions 371

Cases 372

Exercises 375

HOW DO WE KNOW? Is There One Best Way to Train for Computer Skills? 359

TECHNOLOGY IN HR: Benefits and Drawbacks of e-Learning 360

HOW DO WE KNOW? How Can Transfer Be Enhanced? 365

EXAMPLE CASE: Northwestern Memorial Hospital 372

DISCUSSION CASE: Hypothetical Telecommunications 374

EXPERIENTIAL EXERCISE: Finding an Off-the-Shelf Training Product 375

INTERACTIVE EXPERIENTIAL EXERCISE: The Art of Training: Finding the Right Program for Global Telecommunications 375

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xxviii Contents

What Are Careers Like Today? 384

How Can Organizations Help Employees Develop? 386

Formal Education 386 Assessments and Feedback 387 Work Experiences 391 Developmental Relationships 393

How Do Organizations Integrate Development Efforts? 395

Competency Model 395 Career Development Process 396 Technology 398

What Are Some Important Career Development Challenges? 399

Orienting New Employees 399 Reducing Burnout 400 Helping Employees Balance Work with Personal Lives 401 Developing a Diverse Workforce 402 Managing International Assignments 402

A Manager’s Perspective Revisited 404

Summary/Key Terms/Discussion Questions 405 Cases 407

Exercises 409

HOW DO WE KNOW? Can a Feedback Program Really Improve Performance? 391

HOW DO WE KNOW? How Do We Maximize the Return on Mentoring? 395

BUILDING STRENGTH THROUGH HR: LG Electronics 397

TECHNOLOGY IN HR: National Aeronautics and Space Administration (NASA) 398

EXAMPLE CASE: Expanding into Switzerland 407

DISCUSSION CASE: First Day on the Job 409

EXPERIENTIAL EXERCISE: Creating a Personal Development Plan 409

INTERACTIVE EXPERIENTIAL EXERCISE: Career Development: Building a Workforce for Long-Term Success at Global Telecommunications 410

Chapter 11 Motivating Employees Through Compensation

PART 4 Motivating and Managing Employees

A Manager’s Perspective 414

How Can Strategic Employee Compensation Make an Organization Effective? 416

WHAT DO YOU THINK? 415

BUILDING STRENGTH THROUGH HR: Marriott International, Inc. 418

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Contents xxix

How Is Employee Compensation Strategic? 418 External Versus Internal Labor 419 Differentiation Versus Cost Strategy 419 Aligning Compensation with HR Strategy 420

How Does Compensation Motivate People? 422 Theories of Motivation 423 Linking Motivation with Strategy 429

How Is Compensation Level Determined? 432 Pay Surveys 432 Pay-Level Strategies 436 Linking Compensation Level and Strategy 437

How Is Compensation Structure Determined? 438 Job-Based Pay 438 Skill-Based Pay 441 Linking Compensation Structure to Strategy 442

How Do Government Regulations Influence Compensation? 443

Fair Labor Standards Act 443 State and Local Regulations 447

A Manager’s Perspective Revisited 447

Summary/Key Terms/Discussion Questions 448

Cases 451

Exercises 453

Chapter 12 Designing Compensation and Benefit Packages

A Manager’s Perspective 456

How Can a Strategic Compensation Package Make an Organization Effective? 458

HOW DO WE KNOW? Do Contingent Rewards Really Improve Performance? 424

TECHNOLOGY IN HR: Be Careful When Obtaining Information 434

BUILDING STRENGTH THROUGH HR: The Container Store 437

HOW DO WE KNOW? Do People Lose Sleep Over Pay? 445

EXAMPLE CASE: Delphi Corporation 451

DISCUSSION CASE: Joe’s Hamburger Grill 451

EXPERIENTIAL EXERCISE: Conduct a Pay Survey Using BLS Data 453

INTERACTIVE EXPERIENSTIAL EXERCISE: How Much to Pay: Finding the Right Balance at SuperFoods 453

WHAT DO YOU THINK? 457

BUILDING STRENGTH THROUGH HR: IKEA 459

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xxx Contents

How Do Compensation Packages Align with Strategy? 460

At-Risk Compensation 460 Line of Sight 461 Common Elements of Compensation Packages 463

What Are Common Approaches to Base Pay? 464

What Are Common Employee Benefit Plans? 466 Legally Required Benefits 467 Discretionary Benefits 471 Flexible Benefit Programs 474

What Are Common Individual Incentives? 476 Piece-Rate Incentives 476 Commissions 477 Merit Pay Increases 479 Merit Bonuses 480

What Are Common Group and Organizational Incentives? 481

Team Bonuses and Incentives 481 Gainsharing 483 Profit Sharing 484 Stock Plans 485

How Do Strategic Decisions Influence a Compensation Package? 486

A Manager’s Perspective Revisited 488

Summary/Key Terms/Discussion Questions 489

Cases 491

Exercises 493

BUILDING STRENGTH THROUGH HR: Strategically Managing Compensation During a Recession 462

BUILDING STRENGTH THROUGH HR: Netflix 465

BUILDING STRENGTH THROUGH HR: Burton Snowboards 475

TECHNOLOGY IN HR: Enterprise Incentive Management 478

HOW DO WE KNOW? Does How Much You Make Depend on How Much You Weigh? 479

BUILDING STRENGTH THROUGH HR: Deere & Company 482

EXAMPLE CASE: Best Buy 491

DISCUSSION CASE: Collegiate Promotions 492

EXPERIENTIAL EXERCISE: Learning Through Interviewing 493

INTERACTIVE EXPERIENTIAL EXERCISE: Is It All about Base Salary? Explaining Compensation Issues at SuperFoods 494

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Contents xxxi

Chapter 13 Working Effectively with Labor

A Manager’s Perspective 496

How Can Good Labor Relations Make an Organization Effective? 498

How Are Labor Relations Strategic? 500

How Has Organized Labor Evolved over Time? 504 The Influence of Government Regulations 504 Current Trends in Organized Labor 508 International Differences in Organized Labor 510 The Effect of Labor Unions on Nonunion Workers 513

How Do Workers Become Part of a Union? 514 Union Organizing Campaigns 514 Decertification Campaigns 516 Factors Influencing Union Campaigns 517

What Happens During Labor Negotiations and Collective Bargaining? 518

Bargaining Topics 518 Work Stoppages 519 The Bargaining Atmosphere 520 Interest-Based Negotiation 523

What Is the Grievance Process? 525 Grievance Procedures 525 Determinants of Grievance Filing 526 Grievance Mediation 526

A Manager’s Perspective Revisited 527

Summary/Key Terms/Discussion Questions 527

Cases 529

WHAT DO YOU THINK? 497

BUILDING STRENGTH THROUGH HR: Kaiser Permanente 500

BUILDING STRENGTH THROUGH HR: MidState Medical Center 503

HOW DO WE KNOW? Can Unions Make Life Better for Childcare Workers? 511

TECHNOLOGY IN HR: Replacing Laborers with Computers 519

HOW DO WE KNOW? Does Cooperating with Unions Help Organizations Succeed? 522

EXAMPLE CASE: Energy Co. 529

DISCUSSION CASE: Teaching Assistants at State University 531

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xxxii Contents

WHAT DO YOU THINK? 537

BUILDING STRENGTH THROUGH HR: Walt Disney World 540

HOW DO WE KNOW? What Happens When Organizations Send Mixed Signals about the Value of Employees? 543

BUILDING STRENGTH THROUGH HR: U.S. Navy 547

HOW DO WE KNOW? Does Working in a Foreign Country Require More Skill? 556

BUILDING STRENGTH THROUGH HR: Ford Motor Company 559

Chapter 14 Aligning Strategy with Practice

A Manager’s Perspective 536

How Can Alignment of HR Practices Make an Organization Effective? 538

What Are Two Basic Forms of Strategic Alignment? 541

How Do HR Practices Align with One Another? 543 External/Cost: Alignment for Bargain Laborers 544 Internal/Cost: Alignment for Loyal Soldiers 546 Internal/Differentiation: Alignment for Committed Experts 549 External/Differentiation: Alignment for Free Agents 552

What Are Some Other HR Issues? 554 Variations of Basic Strategies 555 HR as an Input to Competitive Strategy 556 The Role of HR in Small Businesses 557

What Might the Future of HR Look Like? 558 Volatile Economic Conditions 559 Increased Emphasis on Sustainabilty 560 Growth of Social Networking 560 Balancing of Work and Family 560 Adaptation of Healthcare Legislation 560

A Manager’s Perspective Revisited 561

Summary/Key Terms/Discussion Questions 562

EXPERIENTIAL EXERCISE: Investigating the Labor–Management Partnership 532

INTERACTIVE EXPERIENTIAL EXERCISE: Unions: Negotiating a New Labor Contract for Mega Manufacturing 533

Exercises 532

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Contents xxxiii

APPENDICES (available online at www.wiley.com/college/stewart)

Appendix A Occupational Outlook for HR Managers and Specialists Appendix B HR Certification Institute Bodies of Knowledge Appendix C HR People & Strategy Pillars of Knowledge Appendix D Organizations of Interest to HR Students and Professionals Appendix E Journals Useful to HR Students and Professionals

Glossary 569

Name and Company Index 579

Subject Index 595

Appendix Summary 611

Cases 564

Exercises 566

EXAMPLE CASE: Portman Ritz-Carlton in Shanghai, China 564

DISCUSSION CASE: Technology Consultants 565

EXPERIENTIAL EXERCISE: Learning about Company Cultures 566

INTERACTIVE EXPERIENTIAL EXERCISE: A Final Journey: Communicating the Strategic Importance of HR 566

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Par t 1 Seeing People as a Strategic Resource

Chapter 1 Creating Value Through Human Resources

Chapter 2 Making Human Resource Management Strategic

Chapter 3 Ensuring Equal Employment Opportunity and Safety

AFP/Getty Images Ned Dishman/NBAE/Getty Images Bloomberg/Getty Images

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C h a p t e r 1

Creating Value Through Human Resources

A M A N A G E R ’ S P E R S P E C T I V E

MIGUEL DISCONNECTS HIS PHONE AND BREATHES A SIGH OF RELIEF. THE JOB OFFER IS EVERYTHING HE HOPED IT WOULD BE. HE IS PRETTY CERTAIN HE WILL ACCEPT THE AUDITOR POSITION IN A

COUPLE OF DAYS, BUT HE WANTS TO DO A LITTLE MORE RESEARCH FIRST. TWO YEARS AGO MIGUEL TOOK HIS FIRST ACCOUNTING CLASS AND INSTANTLY

KNEW WHAT HE WANTED TO DO FOR A CAREER. HE LOVES THE STRUCTURE AND LOGIC OF ACCOUNTING. PUTTING ALL THE NUMBERS IN THE RIGHT PLACE AND MAKING SURE THEY ADD UP GIVES HIM A

SENSE OF ACCOMPLISHMENT. NOW HE JUST NEEDS TO BE SURE THAT HE IS JOINING THE RIGHT FIRM.

As Miguel reflects back on his day of interviews with the firm, he recalls a number of insightful conversations. One thing that impresses him is the firm’s strong reputation for excellence. In the last few years, he has seen many of his friends lose their jobs. Seeing their pain has steered Miguel toward business organizations that he feels are unlikely to have financial difficulties. He knows that profitability is one key to success. But why is the firm that is offering him a position so

profitable? Of course, much of it has to do with the firm’s excellent operating procedures. From everything he has learned, the firm is simply superior at meeting customer needs. According to some of the managers who interviewed him, being profitable helps the firm invest more money to improve working conditions. The firm also has a strong reputation for helping people in the commu- nity, which is very important to Miguel.

Something that really attracts Miguel to the company is how they treated him during the job interviews. Sarah, a human resource staff member, told Miguel that he has already progressed far- ther than 90 percent of job applicants. Sarah also described how the company focuses on finding and keeping only the best employees. This makes Miguel feel good and leads him to believe he will have competent coworkers. The firm seems to have good human resource practices. It offers numerous train- ing opportunities and pays above-market wages. Insurance benefits are much better than most

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THE BIG PICTURE Human Resource Management Practices Help Successful Organizations Meet the Needs of Employees, Customers, Owners, and Society.

competitors’. According to Sarah, the firm also emphasizes internal promotions, making it likely that Miguel will have an opportunity to become a manager.

The firm also seems to have a strategic plan for dealing with important changes that are likely to occur both in the marketplace and among future employees. Cutting-edge technology allows the firm to keep up with constantly changing account- ing rules and procedures. Now that he has received an offer, Miguel plans to discuss things with his parents and a friend who works for the firm. Unless something changes his mind, he plans to take the offer and is convinced that he has the potential for a great career with the firm.

WHAT DO YOU THINK? Suppose you are listening to a conversation between Miguel and his parents. His parents make the following statements as they and Miguel discuss his decision about the job offer. Which of the statements do you think are true?

Companies with good human resource practices have more satisfied workers.

Companies with happy employees are more profitable.

Companies lose money when they try to be good social and environmental citizens.

Having a successful career in the future workplace will require young employees to work effectively with older people.

Human resource specialists can provide critical information and support that helps make life better for employees.

?

T OR F

T OR F

T OR F

T OR F

T OR F

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4 Chapter 1 Creating Value Through Human Resources

Human resource management focuses on people in organizations. Of course, people are a major component of any organization, so it follows that organiza- tions with more productive employees tend to be more successful. Employee productivity increases when organizations hire and motivate employees effectively. In addition, good human resource practices create more satisfied employees, who in turn work harder to satisfy customers.1

One prosperous organization that traces much of its success to effective management of people is Trader Joe’s. The chain now includes over 365 stores in more than 30 different states, but it began in the 1960s as three convenience stores seeking to survive the introduction of 7-Eleven. Seeing the difficulty of competing head-to-head with 7-Eleven, the founder—Joe Coulombe—decided to change Trader Joe’s to a specialty store selling unique products. Trader Joe’s has since become well known for providing foods and beverages that cannot be found in other stores. Products, which usually carry the store’s own label, include gourmet and specialty foods such as soy ice- cream cookies, black rice, and stuffed salmon.2

Keeping prices low is one key to success for Trader Joe’s. However, cus- tomers describe their shopping experience as something more than a simple hunt for bargains. Trader Joe’s works hard to attract educated customers who develop a loyal relationship with the company. Many of these customers say they have fun shopping at Trader Joe’s. They look forward to searching store aisles and finding interesting products. They also enjoy their interactions with helpful store employees dressed in casual Hawaiian shirts. The real key to suc- cess for Trader Joe’s, then, seems to be finding and keeping great employees.3

What does Trader Joe’s do to develop and maintain a productive work- force? Flexible job design certainly plays a role. Employees have a great deal of autonomy in determining how the store can best serve customers. Every employee is encouraged to sample products and make recommendations. Employees are free to tell customers when they don’t like something. Workers at Trader Joe’s are not limited to performing certain tasks but help out wher- ever they are needed. Managers, for example, often sweep floors and stock shelves.4

Human resource management The field of study and practice that focuses on people in organizations.

How Can Human Resource Management Make an Organization Effective?

After reading this chapter you should be able to:

Explain how human resource management, from the organizational life-cycle and stakeholder perspectives, can facilitate organizational success.

List the core functions of human resource management.

Explain what human resource professionals do to help create successful organizations.

Identify important labor trends that are affecting organizations and their human resource practices.

Explain how effective human resource management requires a combination of strategic and functional perspectives.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

LEARNING OBJECTIVE 5

L E A R N I N G O B J E C T I V E S

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How Can Human Resource Management Make an Organization Effective? 5

Of course, not everyone would fit equally well into the job environ- ment at Trader Joe’s. Employee selection focuses on hiring people with personalities that fit the productive and creative culture. Trader Joe’s looks for employees who are upbeat, outgoing, and motivated by chal- lenge. Employees also need a good sense of humor and a strong customer orientation.

Convincing people to take jobs with Trader Joe’s does not seem to be dif- ficult. The store has a reputation as a desirable place to work, and a large number of people apply whenever job openings are advertised.5 One reason people like to work at Trader Joe’s is the company’s compensation practices. Employees are paid substantially more than they could make doing similar jobs in other companies. Full-time crew members begin at salaries around $50,000. They receive health insurance and participate in an excellent retire- ment savings program, including a plan that contributes over 15 percent of gross income to a tax-deferred retirement account. Excellent pay not only helps get people interested in working at Trader Joe’s but also helps ensure that employees will stay with the company. Managers are almost always pro- moted from within the company, and few employees leave to work elsewhere.6

Both employees and customers see Trader Joe’s as a successful company. It is a profitable company, with annual sales exceeding $8 billion. More impor- tant, Trader Joe’s generates twice as many dollars in sales per square foot of store space as competitors such as Whole Foods. This profitability has helped the company expand the number of stores without taking on debt. Profits grew tenfold over a 10-year period.7

The success of Trader Joe’s clearly illustrates how a company can thrive in difficult and changing times. Rather than giving up to a formidable competi- tor, Joe Coulombe identified an unmet need and created an organization to fill that need. Human resource practices at Trader Joe’s help attract and moti- vate employees who provide great customer service. Doing things differently from the competition, and doing them better, has created a culture where people like to go to work. Happy employees make shoppers happy.

TRADER JOE’S Trader Joe’s is a privately owned chain of about 365 specialty grocery and wine stores. Human resource management at Trader Joe’s builds competitive strength by

Designing work to give people autonomy to complete tasks in creative ways. Identifying and hiring people who have fun, outgoing personalities. Providing high pay and excellent benefits to attract the best workers. Matching human resource practices with a competitive strategy of providing unique products.

Building Strength Through HR

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6 Chapter 1 Creating Value Through Human Resources

As you begin studying human resource management, it is important to think about what you want to gain from your efforts. How can understanding human resource management better prepare you for success in your upcoming career? The most basic answer is that human resource skills will help you hire, manage, and motivate employees more effectively. Clearly, human resource skills are useful not only to human resource professionals but also to everyone who has responsibility for leading and managing others. Furthermore, even if you don’t plan to work either as a human resource specialist or as a man- ager, learning the concepts of human resource management will help you to understand why the places where you work do much of what they do.

The goal of human resource management is, of course, to make organi- zations more effective. Thus, a starting point for learning about the field of human resource management is to explore the concept of organizational suc- cess. We know that some organizations are more successful than others. Can differences in human resource management explain why?

Most observers agree that Trader Joe’s is a successful organization. This is supported by top rankings from publications such as Consumer Reports. But what exactly does it mean to say an organization is successful? Does it mean the organization makes a lot of money? Does it mean the organization makes the world a better place? Perhaps success is meeting the demands of differ- ent stakeholders, such as Trader Joe’s recent agreement with a farmworker organization concerning employee fair treatment as part of tomato-growing practices.8 Maybe success simply means the organization has been around for a long time. Because organizational success has many faces, each of these perspectives is partly true. Different viewpoints capture different meanings of success. Here, we briefly examine the meaning of organizational success from two perspectives—the life-cycle model and the stakeholder perspective—and consider how human resource management plays a role in making organiza- tions effective from each viewpoint.

SUCCESS IN LIFE-CYCLE STAGES Think about success for you as an individual. Being successful now doesn’t guarantee you will be successful in 10 years. Having just enough money to buy pizza and books may equal success when you are 20, for example, but probably isn’t enough when you are 40. Similarly, the life-cycle approach to organiza- tional success suggests that measures of effectiveness change as an organiza- tion grows. Twenty-five years ago, Trader Joe’s was successful simply because it didn’t close when 7-Eleven entered the market. Success today depends on expansion into a national chain.

At the heart of this model of success is the organizational life cycle, a series of stages through which an organization moves during its lifetime. Stages of growth begin when the organization is founded and end when it ceases to exist. Since goals and objectives change as the organization moves from stage to stage, the nature and meaning of success also change. Here, we examine four common stages in the organizational life cycle: the entrepreneurial stage, the communal stage, the formalization stage, and the elaboration stage.9 As

Organizational life cycle Stages through which an organization moves after its founding.

How Is Organizational Success Determined?

LEARNING OBJECTIVE 1

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How Is Organizational Success Determined? 7

you will see, human resource management plays an important role in every stage. Table 1.1 summarizes key differences across the stages.

Entrepreneurial Stage An organization enters the entrepreneurial stage when it is first created. This stage is a lot like infancy for human beings. The main goal is survival and growth. Organizations in the entrepreneurial stage need to develop an iden- tity and obtain resources. Success during this stage is often measured sim- ply in terms of staying alive. Organizations that survive are successful. The early history of the Internet company Yahoo! is a good example. Yahoo! wasn’t profitable in the beginning, but it showed innovation and growth when many competitors were going out of business.

Effective human resource management is very important for the survival and growth of newly formed organizations. Organizations must find and hire a sufficient number of high-quality employees. They must also develop basic plans for measuring performance and paying people.

A typical organization employs one human resource specialist for every 100 employees.10 This means that organizations in the entrepreneurial stage of development are typically too small to have a full-time, dedicated human resource staff. As a result, it is likely that owners and managers of firms with relatively few employees perform many human resource duties themselves or hire outside consultants to do this work.

Given the importance of human resources for entrepreneurial organizations, it is not surprising that firms with better-developed plans and methods of obtain- ing and paying employees are more likely to survive. For instance, one study found that new organizations lacking clear human resource and pay plans have just a 34 percent chance of surviving the first five years. Firms with good human resource plans, in contrast, have a 92 percent chance of survival.11 Organizations with better plans for hiring and motivating workers are thus more likely to survive— and survival is a key indicator of success during the entrepreneurial stage.

Communal Stage Organizations that survive the entrepreneurial stage enter the communal stage, which is marked by expansion, innovation, and cooperation. This stage is much like the teenage years for human beings. The main objective is to gain a unique identity and overcome internal conflict. Learning who you are and improving your skills are the essence of life during these years. Similarly, orga- nizations in the communal stage focus on developing and improving processes

Entrepreneurial stage First stage in the organizational life cycle; focuses on survival.

Communal stage Second stage in the organizational life cycle; focuses on expansion and innovation.

Stage Goal Human Resource Contribution

Entrepreneurial Survival and growth Need to hire and maintain employees; emphasis on creat- ing plans for measuring performance and deciding pay

Communal Develop identity and overcome conflict

Need to develop clear communication channels; emphasis on building strong loyalty among employees

Formalization Efficient production Need to create formalized practices for hiring, training, and compensating; emphasis on continual improvement of employee skills and motivation

Elaboration Adaptation and renewal

Need to alter practices to meet changing demands; emphasis on new ways of organizing work tasks

Table 1.1 Human Resources Across the Organizational Life Cycle

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8 Chapter 1 Creating Value Through Human Resources

for effectively producing goods and services. Members of the organization begin to feel a sense of commitment. Survival is still important, but organi- zational success is measured increasingly by the extent to which employees feel a sense of cohesion or belonging. It is important for employees to build strong feelings of attachment to coworkers and to the mission of the organiza- tion. Such attachment is an important part of success at Trader Joe’s, where employees feel connected. The company’s managers listen to employees, which encourages employees to communicate effectively with customers.12

Organizations with effective human resource management practices in the communal stage continue to hire good employees and provide training. They also communicate well with employees. Employees, aware of these activities, develop a feeling that the organization is committed to taking care of them. Such feelings increase job satisfaction and feelings of empowerment, so that organizations with better human resource practices have happier employees who are more committed to making the organization successful and helping others.13 Employees are also less likely to leave organizations with good human resource practices. The accompanying “How Do We Know?” feature describes a study that demonstrates how effective human resource practices in call centers increase the likelihood of retaining workers, which in turn increases profitability.

DOES EFFECTIVE HUMAN RESOURCE MANAGEMENT INCREASE ORGANIZATIONAL SUCCESS? Have you phoned a company’s call center in the past to ask a question or complain about a product or service? Perhaps a call center representative has phoned you to try to sell you something. Many com- panies have call centers, and some centers employ thousands of people. As you can probably imag- ine, working in a call center is not always fun, and employees frequently quit shortly after being hired.

An important question therefore is whether good human resource practices can improve work in call centers. Rosemary Batt conducted a study to learn about the effect of human resource practices on organizational performance in call centers. She asked call center managers about the skill level of employees, the amount of freedom employees had to choose how to do their work, and human resource incentives. She also measured employee quit rates and sales growth.

The study found higher sales growth in call cen- ters with better human resource practices. Higher- performing centers had ongoing training, more employees working full-time rather than part-time, and more elaborate performance management

systems. Better centers allowed employees to exer- cise greater control in determining things like work pace, scheduling, and technology design. Much of the effect of the human resource practices on performance came through employee retention. Fewer employees left call centers that had better practices, which in turn helped these centers to experience increased sales growth.

The Bottom Line. Organizations are more successful when they have good human resource practices. Success comes from having a stable work- force, which develops when fewer people leave the organization. People are less likely to leave when they have freedom to make choices about how to do their work. They also stay longer when they have full-time jobs that pay them well. Professor Batt thus concluded that good human resource prac- tices lead to lower quit rates, which in turn increase growth in customer sales.

Source: Rosemary Batt, “Managing Customer Services: Human Resource Practices, Quit Rates, and Sales Growth,” Academy of Management Journal 45, no. 3 (2002): 587–597.

How Do We Know?

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How Is Organizational Success Determined? 9

Formalization Stage The formalization stage occurs as organizations become stable and develop clear practices and procedures for doing work. In humans, the formalization stage often begins just after graduation from college, when people tend to set- tle into stable jobs. Organizations in the formalization stage focus on improv- ing efficiency and finding better ways to accomplish tasks. They develop clear goals for guiding their efforts. Making goods and services as efficiently as pos- sible becomes a key goal. Making a good profit is also important.

Effective management of people is beneficial for increasing efficiency and goal accomplishment in this stage. Organizations with formalized human resource practices that develop employee skills and motivate workers gener- ate more sales per employee.14 IBM represents a company in this stage. IBM has been in existence 100 years and currently employs over 430,000 people. Keeping in touch with so many employees is difficult. However, IBM has a database that contains a profile for every employee. The profile lists each employee’s skills. Maintaining such a database takes a great deal of effort, but cost savings from improved matching of employees and jobs has saved IBM $1.4 billion. Effective formalization of human resource practices has thus improved the efficiency and profitability of IBM.15

Elaboration Stage The elaboration stage occurs when organizations need to adapt and renew. This stage is similar to middle age for human beings. Success often depends on redefining objectives and identifying new opportunities. People in this stage sometimes go through midlife crises, perhaps changing occupations and developing new hobbies. Organizations in the elaboration stage, like middle- aged people, have existed for some time, but shifting trends and preferences require them to change. For example, years ago Hallmark became successful as a producer of greeting cards, but changes in technology have forced the company to innovate and adapt to produce electronic greetings and family- based media.

Good human resource management is critical for successful adaptation. In fact, one survey found change management to be the most important skill that human resource professionals can contribute to an organization.16

An example of an organization in this stage is Crouse Hospital in Syracuse, New York. At one point the company had a net loss of $15 million. About half of the hospital’s employees were quitting each year. Hospital leaders took note and began to involve employees in an effort to change the cul- ture of the organization. Numerous employee groups met and made sug- gestions. Employee efforts to turn around hospital performance took time but were successful. Financial problems were reversed to a net profit, and the employee quit rate dropped to 18 percent. Overall job satisfaction has increased to 96 percent.17 Improved human resource management thus helped move Crouse Hospital from the elaboration stage back to the formal- ization stage.

SUCCESS FROM STAKEHOLDER PERSPECTIVES A second approach for assessing organizational effectiveness is the stake- holder perspective. According to this view, organizations are successful to the extent that they meet the needs of their stakeholders. Stakeholders are defined as individuals or groups of people who can affect or who are affected

Formalization stage Third stage in the organizational life cycle; focuses on establishing clear practices and procedures for carrying out work.

Elaboration stage Final stage in the organizational life cycle; focuses on reinvention and adaptation to change.

Stakeholders Individuals or groups who are affected by or who affect an organization.

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10 Chapter 1 Creating Value Through Human Resources

by an organization.18 This definition is quite broad, since almost every living person could in some way potentially affect or be affected by an organiza- tion. Fortunately, research suggests that employees, customers, and owners (shareholders) are the primary stakeholders. Their participation is crucial for the survival of the organization.19 Society as a collective group is also seen by many as an important stakeholder.

Employees Employees make up an important group of stakeholders. Because employ- ees complete tasks to make goods and services, they obviously influence the organization’s ability to achieve its objectives. Their lives are also obviously influenced by the organization. Meeting the needs of employees is a critical component of organizational success.

Many human resource practices protect the interests of employees. For instance, the human resource department often plays a major role in ensur- ing that the organization complies with employment and safety laws. A num- ber of these laws are designed to make sure the organization treats employees fairly. Helping design work tasks to make them more enjoyable is another way human resource management makes life better for employees. Human resource professionals help individuals plan and advance their careers, which keeps employees happy and reduces the chance that they will leave for jobs in other organizations. Thus, good human resource practices reduce employee turnover, which happens when employees quit and take jobs elsewhere.20 Low turnover is a strong sign that employees’ needs are being met. Simply put, people are less likely to look for new work opportunities when they are sat- isfied with their current jobs.21 As you can imagine, most companies prefer employee turnover to be low.

Customers Customers are another important group of stakeholders. An organization obviously will have trouble achieving its goals if customers don’t buy its goods or services, so the influence of customers on the organization is immense. The goods and services available to customers can also affect their lives both positively and negatively.

Research evidence strongly supports the notion that good human resource management improves customer satisfaction, largely through customers’ interactions with employees. Employees tend to treat customers the same way they believe managers treat them. If employees feel the organization values them and treats them with respect, they reproduce these good attitudes and behaviors in their interactions with customers. If they believe management doesn’t care about them, they are less likely to be positive and helpful to cus- tomers.22 For example, one study of hairstylists found that those who were most satisfied with their jobs were helpful to clients and coworkers and in turn had more satisfied customers.23 Human resource practices that demonstrate care and concern for employees thus translate into increased customer sat- isfaction. Hiring and keeping skilled employees can also improve customer satisfaction. Just think of an experience you have had shopping for something like a new computer. Getting information from a knowledgeable employee is much more satisfying than trying to get information from someone who knows less than you do.

Employee turnover The process in which employees leave the organization and are replaced by other employees.

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How Is Organizational Success Determined? 11

Owners A third group of important stakeholders is made up of owners, including stockholders. Owners influence organizations by determining who leads and makes decisions. In most cases their chief concern is the organization’s prof- its, and the extent to which the organization returns profits and provides them with money influences them in many ways.

A great deal of research has linked human resource practices to organiza- tional profits. As discussed in the “How Do We Know?” feature, this research illustrates how good human resource management makes a difference. Organizations are more profitable when they ensure high levels of employee skill by properly designing jobs, carefully selecting employees, and providing useful training. Effective practices also motivate employees by carefully mea- suring performance, making fair promotion decisions, and linking pay to per- formance.24 In short, employees who have better skills, are well paid, and feel their jobs are secure have higher individual performance, which translates into desirable organizational improvements like growth in sales.25

Society Society represents the broader community in which the organization oper- ates. Although further removed from the organization than the stakeholder

WHY ARE SOME ORGANIZATIONS MORE EFFECTIVE THAN OTHERS? Human resource specialists often claim that differ- ences in employee skill and ability represent a pri- mary source of competitive advantage for firms. In short, having skilled and knowledgeable employees is seen as a valuable resource that firms can draw on to outperform competitors. Of course, there are many other things, such as firm strategy and eco- nomic conditions, that affect organizational per- formance. An important research question is thus whether organizations with better employees— those that have greater human capital—are indeed more effective than their competitors. Russell Crook, Samuel Todd, James Combs, David Woehr, and David Ketchen sought a clear answer to this question by summarizing the results of 66 different existing studies.

Human capital was scored as higher when employees have more work experience, higher levels of education, more desirable traits such as greater intelligence, and more knowledge of work processes. Organizational performance was

captured through financial measures such as prof- itability and return on assets. As predicted, orga- nizations with greater human capital were found to have higher profitability. The relationship was strongest when specific measures of human capital were used, suggesting that effective organizations develop and utilize employee skills and knowledge that are unique to them and not easily transferred to other organizations.

The Bottom Line. Having high-quality employ- ees is a key to organizational success. Hiring and retaining the best employees pays off. The research- ers thus conclude that organizations should empha- size acquiring and retaining the best and brightest workers.

Source: T. Russell Crook, Samuel Y. Todd, James G. Combs, David J. Woehr, and David J. Ketchen, Jr., “Does Human Capital Matter? A Meta-Analysis of the Relationship Between Human Capital and Firm Performance,” Journal of Applied Psychology 96 (2011): 443–456.

How Do We Know?

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12 Chapter 1 Creating Value Through Human Resources

groups discussed so far, society still serves as an important stakeholder. On the one hand, organizations affect society through their environmental practices, as well as their support of community charities and other such activities. On the other hand, various political and social forces can strongly influence orga- nizations. For example, think about how changes in attitudes toward conser- vation and large automobiles affect the U.S. automobile industry.

Interestingly, organizations that are better community citizens are gener- ally more profitable than organizations that ignore environmental and social concerns. Although there are exceptions, expending effort to do things such as protect the environment and improve local communities usually leads to improved financial performance for organizations.26 In addition, effective human resource management within the organization results in other ben- efits to society. It provides employees with open channels of communication, which can reduce instances of unethical corporate behavior. Skilled and moti- vated employees also produce goods and services that help make the world a better place. Taking care of people at work can thus translate into important benefits for society as a whole.

THE CHAIN OF SUCCESS Successful firms must meet the needs of each group of stakeholders, and these needs vary from group to group.27 Fortunately, meeting the needs of one group can often help meet the needs of others. First, effective human resource management acquires high-quality employees, motivates them to maximize performance, and helps meet their psychological and social needs. This leads to long-term relationships with skilled and happy employ- ees. Effective employees provide good customer service, which results in repeat business. Better customer service leads to improved financial perfor- mance that ensures profitability and success. Increased profitability allows organizations to spend money on improving human resource practices, which loops back and continues the chain of success. Properly managing people is therefore a critical part of the chain of success, which is shown in Figure 1.1 and summarizes the relationship among employee, owner, and customer interests. Obtaining and keeping excellent employees gives an organization an advantage in meeting customer needs, which trans- lates into profitability and thereby provides organizations with resources to further improve human resource practices. This cycle of success was sup- ported by a study that concluded that companies rated by Fortune as “The 100 Best Companies to Work for in America” are more profitable than their competitors.28

Figure 1.1 The Chain of Success.

HUMAN RESOURCE MANAGEMENT

EFFECTIVE EMPLOYEES

CUSTOMER SERVICE

Greater resources for improving human resource practices

FINANCIAL PERFORMANCE

Acquiring Employees erformance oyee Needs

y Workers Workers

erm Workers

ong Relationships epeat Business

rvival and Growth ofitability

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What Does Human Resource Management Provide to an Organization? 13

? CONCEPT CHECK 1. What are the four stages of the organizational life cycle, and

what is the main goal of each stage? 2. How does human resource management contribute to success

at each stage? 3. What four primary groups make up an organization’s key

stakeholders?

What Does Human Resource Management Provide to an Organization?

LEARNING OBJECTIVE 2

Anyone who has applied for a job with a moderately large organization has probably interacted with a human resource department. But human resource functions go far beyond processing employment applications. From an overall strategic perspective, effective human resource management builds human capital that in turn increases organizational performance. In this section, we thus look at a number of activities that human resource professionals carry out in their role of managing the organization’s employees.

CORE HUMAN RESOURCE FUNCTIONS Core human resource functions can be summarized as people management activities. As shown in Table 1.2, these activities represent the primary purpose for having a human resource department. The Society for Human Resource Management (SHRM) and its affiliated Certification Institute have identified

Table 1.2 Core Human Resource Functions

Source: Information from Society for Human Resource Management (SHRM) and affiliated Certification Institute. See the PHR and SPHR Body of Knowledge at http://www.hrci.org/ uploadedfiles/Content/Resource_Library/Certification_Handbooks_and_Other_Publications/ PHR-SPHR%20BOK.pdf/

Function Description

Business Management and Strategy Working with other parts of the organization to establish goals and provide high-quality goods and services

Workforce Planning and Employment Identifying jobs that capture employee tasks; recruiting and selecting desirable employees

Human Resource Development Measuring employee performance; teaching employees new knowledge, skills, and abilities

Compensation and Benefits Paying employees fairly; administering benefits such as insurance

Employee and Labor Relations Establishing and managing relationships between the company and employees; working with labor unions

Risk Management Establishing procedures to provide a safe and secure working environment

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14 Chapter 1 Creating Value Through Human Resources

six broad functional areas of human resource management. These functions are business management and strategy, workforce planning and employment, human resource development, compensation and benefits, employee and labor relations, and risk management.29

Business management and strategy focuses on planning how the organization will produce and market goods and services. Strategic tactics guide efforts to do things better than competitors. For instance, an electronics manufacturer might decide to open a new plant that can produce parts less expensively. A hotel might initiate a marketing campaign to attract higher-paying customers. A healthcare provider may decide to structure work around teams of doctors, nurses, and cleri- cal workers. Input from several different sources, including human resource spe- cialists, guides these strategic plans. For the company opening a new plant, human resource data can help determine whether employees have the skills needed to carry out the new processes. For the hotel, human resource data can identify training needs that could result from focusing on a different type of customer. For the healthcare provider, data could help determine new skills that team mem- bers might need to learn. Effective strategic practice also requires ongoing mea- surement to assess the value that human resource management provides to the organization. Making and carrying out strategy is thus an important function that the human resource department shares with other departments throughout the organization. Human resource management also plays an important role in carry- ing out strategies of global companies. Employee expectations for compensation and benefits vary greatly from country to country. Human resource departments provide valuable assistance that guides organizations as they adapt their policies and practices to fit with local cultures and laws.30

Another important human resource function is getting people into jobs. Workforce planning and employment consists of designing jobs and then plac- ing people in them. This function generates information about tasks that need to be done and about the knowledge and skills people must have in order to do those tasks. People with the necessary talents are then recruited and hired from outside the organization or are promoted from within. Once on board, new employees are oriented to company policies and procedures. In some organizations, the human resource department carries out the entire process of planning and hiring. These human resource specialists do everything from placing employment advertisements to conducting interviews to making final selection decisions. In other organizations, the human resource department acts more like a consulting agency. Line managers do the actual recruiting and hiring, while human resource specialists provide assistance. Regardless of who does what, the human resource department is almost always a major player in recruiting and hiring activities.

The human resource development function ensures that employees learn the knowledge, skills, and abilities required for current and future performance. Surveys and assessments provide information about areas where training might be needed. Individual employees receive performance appraisals and develop individualized plans for improvement. The human resource department also uses assessment information to design formal training and development pro- grams. For example, a survey about computer skills may highlight the need for classes to teach people how to use specific software. In many cases, human resource specialists carry out training in such areas as communication skills and organizational policies. The human resource department also coordinates programs designed to accomplish goals such as increasing employee diversity and helping employees balance work and family concerns.

Business management and strategy The human resource function concerned with strategic planning, change processes, and evaluating organizational effectiveness.

Workforce planning and employment The human resource function concerned with designing jobs and successfully placing people in those jobs.

Human resource development The human resource function concerned with helping employees learn knowledge and skills.

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What Does Human Resource Management Provide to an Organization? 15

Human resource departments typically carry out the function of compen- sation and benefits by managing salary and insurance plans. Compensation practices include finding and analyzing information to determine how much to pay each employee. Identifying and pursuing methods of using pay to increase employee motivation is an important contribution of human resource management. Most human resource departments also take pri- mary responsibility for payroll activities such as preparing and distributing paychecks. Administering benefits, especially health insurance, can be quite complicated and usually requires a number of technical contributions from human resource professionals. Compliance with numerous laws and regula- tions concerning compensation also calls for specialized knowledge, which usually comes from the human resource department. As described in the Technology in HR feature, Web-based information can help human resource departments communicate critical compensation and benefit policies.

Compensation and benefits The human resource function concerned with managing employee pay and benefits.

USING WEB-BASED INFORMATION TO MANAGE PEOPLE An important question is whether technology can help human resource departments better serve the needs of managers and employees. The answer is a clear yes. Evidence shows that the various functions of human resource management benefit substan- tially from adopting appropriate technologies.

Some forms of technology are common. For instance, approximately 89 percent of organizations now use some type of self-service interface to help managers and employees solve human resource problems. An organization may use a Web-based Internet site to provide information about employee benefits, compensation agreements, organizational policies, and the like. Encouraging members of the organization to go to these sites for information reduces the need for face-to-face conversations and thereby reduces administrative costs.

Other forms of technology are not yet as wide- spread. Recent trends, however, suggest that cut- ting-edge firms are using technology to better link human resource practices to organizational strat- egy. In particular, technologies are being developed to improve methods of measuring productivity. In addition, information about individual employ- ees is being incorporated into extensive databases that help organizations take advantage of the wide array of skills that employees have to offer. Being able to locate information about the skills of indi- vidual employees makes workforce planning easier

and more effective. Many technologically advanced organizations are also creating Web-based learning tools to help with human resource development.

Of course, organizations may face obstacles as they implement new technologies. One problem with Web-based information systems, for example, is that poorly designed user interfaces can make them so difficult to use that people avoid them. Another problem is that tools developed for U.S. employees are often difficult to adapt to employ- ees in other countries. Nevertheless, companies that effectively use technology to manage people tend to be more effective than companies that lag behind.

Source: Information from “HR Technology Trends to Watch in 2007,” HR Focus 84, no. 1 (2007): 1–15.

Technology in HR

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16 Chapter 1 Creating Value Through Human Resources

Good relationships between managers and employees improve organiza- tional effectiveness. Building and maintaining effective working conditions and relationships are tasks associated with the employee and labor relations function. In organizations whose employees are represented by labor unions, much of this function is directed toward working with the unions. The human resource department plays a major role in negotiating terms of union con- tracts, which define not only pay levels but also work rules and procedures. Human resource specialists also coordinate procedures for filing and resolv- ing employee grievances. When labor unions are not present, the human resource department works directly with managers and employees to ensure fair treatment of workers. The department may oversee disciplinary actions and provide communication channels so that employees can safely register complaints about such things as sexual harassment. Carrying out the employee and labor relations function thus provides critical support for both the organi- zation and individual employees.

The function of risk management promotes the physical and mental well- being of people in the workplace. Because important laws govern workplace health and safety, carrying out this function requires specialized knowledge of government regulations. Human resource departments often take the lead in developing plans for reducing accidents. They make policies to pro- tect employee rights of privacy. They also establish procedures to make sure that employees wear proper safety equipment. In many instances, the human resource department plans and coordinates the organization’s response to natural disasters, such as hurricanes and earthquakes. Reducing workplace violence is also part of the risk-management function.

SPREADING KNOWLEDGE ABOUT HUMAN RESOURCE PRACTICES Many of the core human resource functions just discussed require cooperation between the human resource department and other parts of the organization. Human resource inputs about workforce planning, for example, must be coor- dinated with operational plans for increasing or decreasing production. Efforts to develop new employee skills also must be coordinated with strategic and mar- keting plans. Such cooperative efforts are important, and the value of people management increases when leaders throughout the organization know what human resource specialists bring to the table. An important aspect of spreading knowledge is thus to help managers and others throughout the organization know the special capabilities that human resource specialists provide.

Another potentially important contribution of human resources is to teach organizational leaders effective practices for attracting and keeping talented workers. In this sense, human resource specialists function like internal consul- tants and teachers. They help managers learn and improve methods for hiring employees, assessing training needs, and making pay decisions. This function goes beyond simply informing managers about what human resource specialists can do. The emphasis is on helping the managers themselves develop better human resource skills. Human resource departments thus have an important responsibility for training managers throughout the organization.

An important part of spreading knowledge involves overcoming com- mon misconceptions about human resources. Many organizational leaders believe that good human resource management is “common sense.” They think, in other words, that hiring and motivating workers requires no special

Employee and labor relations The human resource function concerned with building and maintaining good relationships with employees and labor unions.

Risk management The human resource function concerned with providing a safe and secure working environment, as well as protecting the organization from liability.

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What Do Human Resource Specialists Do? 17

knowledge. But people who hold this view are mistaken. Managers generally are unfamiliar with many practices that provide clear direction for improving job performance. For instance, many managers resist using employment tests to select employees, even though evidence strongly shows that such tests can help them to make better hiring decisions.

Of course, human resource specialists must have knowledge before they can share it. Unfortunately, even professionals working within human resource departments often have misconceptions about good practices. This is shown by a survey that asked human resource leaders a number of questions about specific employment, staffing, and compensation practices. On average, these professionals knew the correct answer only about 60 percent of the time. Those with higher scores had been promoted more often, had received cer- tification as human resource professionals, and read academic studies more frequently.31 Simply reading trade journals and popular magazines may not be enough to learn cutting-edge practices. Many of the most important research findings do not make their way into publications written for practicing manag- ers.32 Overall, researchers in the field of human resource management need to do a better job of communicating their findings, and practitioners need to better test and implement best practices.

Another aspect of spreading human resource knowledge is building rela- tionships of trust. Human resource departments need to provide managers with solutions to problems. Managers are more likely to believe and act on information from the human resource department when they see that it helps them. Human resource professionals earn managers’ trust by listening to and understanding their problems and then providing solutions that work.33 This requires people working in the human resource department to be capable of doing a wide array of things that help managers do their jobs better.

? CONCEPT CHECK 1. What are the six core human resource functions? 2. Why is it important for human resource professionals to

educate others in their organizations about human resource functions?

What Do Human Resource Specialists Do?

LEARNING OBJECTIVE 3

We have looked at some ways human resource management helps organiza- tions and have explored some of the functions that human resource depart- ments carry out. We can gain additional insight into the field by looking at the people who work in human resources. An example of someone who works in human resource management is Jen Martens, who works at University of Nevada–Las Vegas (UNLV). UNLV is a state-supported, nonprofit organiza- tion with nearly 28,000 students and 3,000 employees.34 Just like any other large organization, UNLV must recruit and hire many employees every year.

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18 Chapter 1 Creating Value Through Human Resources

Jen Martens assists in this process through her work as manager of employ- ment. Her work includes managing employee recruitment programs, teach- ing managers how to hire effective employees, and assuring compliance with government regulations. Jen also leads other human resource specialists who do things like write job postings and develop interview questions.

Human resource professionals like Jen Martens, who is a certified Professional in Human Resources (PHR), work by themselves and with manag- ers to “plan, direct, and coordinate human resource activities of an organiza- tion to maximize the strategic use of human resources and maintain functions such as employee compensation, recruitment, personnel policies, and regula- tory compliance.”35 A more specific list of tasks is provided in Table 1.3.

The list in Table 1.3 is helpful, but it does not cover important ways human resource departments provide strategic contributions. Frameworks for captur- ing this more strategic contribution emphasize roles and competencies. Let’s look more closely at these two areas.

HUMAN RESOURCE ROLES Human resource roles involve people and processes. Part of the human resource professional’s role is spending time interacting with employees indi- vidually. For instance, employees usually contact an organization’s human resource department with questions about retirement benefits, health con- cerns, and harassment policies. Another part of the human resource role focuses on developing organizational processes aimed at hiring and motivat- ing talented workers. Human resource specialists contribute in these roles through activities such as placing recruiting advertisements, helping develop compensation plans, and creating performance measures.

We can also look at human resource roles by contrasting long-term and short-term contributions. Short-term activities generally involve day-to-day

Administer compensation, benefits, and performance management systems and safety and recreation programs.

Identify staff vacancies and recruit, interview, and select applicants.

Allocate human resources, ensuring appropriate matches between personnel.

Provide current and prospective employees with information about policies, job duties, working conditions, wages, opportunities for promotion, and employee benefits.

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

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

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

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

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

Table 1.3 Typical Human Resource Specialist Tasks

Source: The National O*Net Consortium at http://online.onetcenter.org/.

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What Do Human Resource Specialists Do? 19

projects and focus on conducting surveys, maintaining databases, and counseling employees. Long-term activi- ties are more strategic in nature and include developing organizational strategies, managing change processes, and planning ways to create new skills.

Combining the people and process dimension with the long-term and short-term dimension results in the grid shown in Figure 1.2. The figure identifies four critical roles for human resource professionals: functional expert, employee advocate, strategic partner, and human capital developer.36 Understanding these four roles provides insight into the actual activities of human resource specialists.

Functional Expert The role of functional expert is the most basic human resource role. Most of the activities listed in Table 1.3 fit this role, and many of the chapters in this book examine aspects of this role in more detail. The functional expert role focuses on providing technical expertise related to hiring and motivating employees. In this role, an effective human resource specialist helps build systems and practices to ensure that an organization is using state-of-the-art methods to manage people. This might include creating a testing program to screen potential employees or develop- ing a compensation plan that pays employees more when they produce excep- tional results. Human resource specialists also serve as consultants who teach managers ways to improve their interactions with employees. For example, the human resource department might offer managers training in such things as giving appropriate feedback and asking better interview questions.

One such functional expert is Dana Winkowitsch, who works for Johnson County in Iowa. Dana works as a human resources coordinator and spends a lot of her time answering questions and responding to requests from depart- ment heads and elected officials. She conducts orientation sessions to provide safety training, explain benefit programs, and help new employees complete paperwork. She leads the county safety committee and coordinates efforts to investigate accidents and maintain logs of work-related illnesses. Her duties include verifying payroll forms for accuracy and using the information data- base to create new employee positions. Because Johnson County only has a handful of human resource employees, Dana works mostly as a human resource generalist.

An organization can gain an advantage over its competitors when its human resource staff members are true functional experts. Experts help make sure that the best employees are hired and then trained to maintain high levels of skill and ability. Experts also increase employees’ motivation by helping to ensure that each employee’s contribution to the organization is accurately measured and rewarded. Performance in the functional expert role therefore represents a primary way human resource specialists such as Dana Winkowitsch can contribute something to the organization that other managers and employees cannot contribute.

Employee Advocate Human resource professionals in the employee advocate role listen to employ- ees and provide them with the resources they need to be effective. They look

Functional expert role A human resource role concerned with providing technical expertise related to functions such as hiring, training, and compensating employees.

Employee advocate role A human resource role concerned with looking out for the interests of employees and ensuring that they are treated fairly.

Figure 1.2 Human Resource Roles. Source: Figure based on information from Dave Ulrich, Human Resource Champions: (Boston: Harvard Business Press, 1997); and Dave Ulrich and Wayne Brockbank, The HR Value Proposition (Boston: Harvard Business Press, 2005).

Strategic Partner

Functional Expert

Human Capital Developer

Employee Advocate

Processes People

Short- term

Long- term

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20 Chapter 1 Creating Value Through Human Resources

out for the interests of employees and often serve as advocates to make sure management treats employees fairly. Sometimes, too, they help employees who are experiencing personal problems. For instance, human resource pro- fessionals may help employees obtain medical care, attend funeral services for family members of employees, and help employees’ spouses find work.37

Showing genuine interest in employees communicates how much an organi- zation cares about its employees. As a result, loyalty and motivation increase, and employees feel a stronger obligation to work hard.

Another important part of being an employee advocate is making sure the interests of employees are recognized when decisions are made. In the event of layoffs, human resource leaders can help ensure that these actions are carried out in ways that minimize the hurt for individuals. In their advocacy role, human resource leaders are often seen as the organization’s conscience. By ensuring that employees are properly informed about orga- nizational policies and procedures, they can play an important role in pre- venting members of the organization from engaging in unethical conduct. They do this by pointing out implications of decisions and asking leaders throughout the organization to think about the effect of decisions on indi- vidual employees. They also help develop and enforce policies that protect employees from being taken advantage of by more powerful supervisors. True leadership also requires human resource professionals to display high ethics in their own actions.

Strategic Partner In the increasingly important strategic partner role, human resource spe- cialists work with other organizational leaders to put company strategy into action. True partners go beyond providing support to other leaders and expertise in human resource practices. An example of a strategic partner is Tracy Hulsebus, who works as the human resource manager for contingent staffing at the international media company Pearson. Tracy is the business partner for operations as well as other groups. She is responsible for develop- ing strategy and goals to meet business partner objectives, identifying inter- nal and external risks, and providing appropriate solutions. She manages a team of nine professionals who handle hiring, on-boarding, and employee relations for the contingent workforce at Pearson. To be strategic partners, human resource professionals like Tracy need to know about other business activities, such as finance, accounting, and marketing. They must also know a great deal about the organization’s products and services. Finally, they must know how these activities, products, and services fit with the company’s stra- tegic objectives. With this knowledge, human resource partners can provide important input to help guide organizational decisions and actions. An exam- ple of a company where this human resource role is carried out effectively is Edwards Lifesciences, which is described in the accompanying “Building Strength Through HR” feature. Top-level managers at Edwards Lifesciences work closely with human resource professionals to make sure that employees are organized in a way that helps the company achieve its strategic objectives.

One particularly important aspect of the strategic partner role involves managing change. With organizations changing continually, the people within them must continually adapt to shifting conditions. The ability to apply concepts related to psychological reactions, power and influence, motivation, and group dynamics can help human resource professionals take a leadership role in facilitating change.

Strategic partner role A human resource role concerned with providing inputs that help an organization put its competitive strategy into action.

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What Do Human Resource Specialists Do? 21

Building Strength Through HR

EDWARDS LIFESCIENCES Edwards Lifesciences is a maker of cardiovascular medical devices. The company that now employs nearly 8,000 people was spun off from the larger Baxter International in 2000. Since 2000 the stock price has risen from $14 to $92 per share. During the down economy, Edwards Lifesciences experi- enced stock returns approximately five times the average return, and the company is ranked #8 by Forbes for innovation. Leaders in the organiza- tion credit much of this success to effective human resource management.

Success through human resource management begins with the CEO, Michael Mussallem. He spends about 20 percent of his time working on hir- ing and developing employees. He is described as a person who cares about relationships and treats others with respect. Even though he is a busy CEO, he will often pick up the telephone and talk to peo- ple who are being recruited for key positions. He also meets each year with leaders to conduct talent reviews that assess how well the company is doing in terms of utilizing key personnel to meet strategic objectives. Employee recruitment and job planning are included on every agenda for top-management meetings.

As part of the focus on maximizing human resource effectiveness, Edwards Lifesciences has identified approximately 75 key positions within the company. The key positions are not all at the top of the organization but represent numerous areas where work is critical to meeting strategic objectives. Training is used to ensure that one or two current employees are ready to take over a key

job if someone gets promoted or quits. This helps ensure that about 70 percent of job openings are filled within the company.

Edwards Lifesciences competes with other com- panies by providing customers with top-quality products. Creativity and excellence are required from employees. The company thus relies on the acquisition, development, and retention of top- notch employees to fill key positions. These efforts have paid off as the company has seen great success even in times of economic difficulty.

Source: Information from Gian Ruiz, “Edwards Lifesciences: The Cardiovascular Device Maker Pinpoints and Tracks Mission-Critical Jobs to Stay ahead of Business Needs and Build a Deep Bench of Important Talent,” Workforce Management, March 26, 2007, p.24; Tony Bingham and Pat Galagan, “Finding the Right Talent for Critical Jobs,” T + D 61 No. 2 (2007): 30–36; http://www.forbes.com/companies/ edwards-lifesciences/.

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Human Capital Developer Organizations are only successful when they learn faster than their competi- tors. The human capital developer role focuses on helping employees improve their skills. Sometimes facilitating learning requires human resource special- ists to work as trainers who teach formal classes. Other times, the developer role requires sitting down with individuals and helping them make individu- alized plans for the future. In both cases, the objective is to make sure that employees continue to learn and improve.

Like the strategic partner role, the human capital developer role is becoming increasingly important in today’s organizations. Rapid changes in

Human capital developer role A human resource role concerned with facilitating learning and skill development.

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22 Chapter 1 Creating Value Through Human Resources

technology necessitate frequent changes in work processes, which require new inputs from employ- ees. Employees who do not learn new skills become less capable of helping the organization meet the needs of customers. The human capital developer role thus adds value to the organization by helping employees build and maintain cutting-edge skills.

HUMAN RESOURCE COMPETENCIES Another way of understanding what human resource professionals do is to examine the competencies they need. Competencies represent characteristics and capabilities that human resource professionals need to succeed in their work assignments. To fill their various roles, human resource specialists need competencies in many areas. One recent model suggests that human resource professionals need six basic competencies. These competencies are

shown in Figure 1.3 and include strategic positioner, credible activist, capabil- ity builder, change champion, HR innovator and integrator, and technology proponent.38

Strategic Positioner In today’s global business environment human resource specialists must increasingly demonstrate the strategic positioner competency, which means they must know the language of business and be able to converse with other organizational leaders. Specific areas of expertise include finance and strat- egy. Knowledge about stakeholders such as customers and investors is also required. Truly effective human resource specialists go even further to antici- pate and plan for future trends in technology, politics, and workforce demo- graphics. This requires a clear vision of the future, as well as an understanding of what the organization must do in order to perform at a high level. This competency is particularly important for the strategic partner role, which requires human resource specialists to be key contributors in determining what makes the organization superior to competitors.

Credible Activist Credible activists must be proactive and constantly seek opportunities to influence others. They meet their obligations and follow through on com- mitments. The interpersonal relationships these leaders develop make oth- ers more willing to follow them. One key for effective influence is taking an interest in others and the greater good rather than pursuing selfish interests. Effective written and oral communication are also part of this competency.

Capability Builder The capability builder competency focuses on knowing an organization’s strengths and weaknesses. Human resource professionals must understand what an organization can do better than its competitors, and then steer activ- ity to maximize unique capabilities. They help focus energy on the things that really matter. Part of this comes from being familiar with the core values of

Competencies Characteristics and capabilities that human resource professionals need to succeed in their work assignments.

Strategic positioner Knowledge and skills associated with accurately placing an organization in its business context through understanding finance, strategy, stakeholders, and competitive context.

Credible activist Knowledge and skills for influencing others through acting with integrity, sharing information, and building trust.

Capability builder Knowledge and skills related to understanding what the organization is capable of doing successfully.

FIGURE 1.3 Human Resource Competencies. Source: Content adapted from Dave Ulrich, Jon Younger, Wayne Brockbank, and Mike Ulrich, HR From the Outside In: Six Competencies For the Future of Human Resources (New York: McGraw-Hill, 2012).

Strategic Positioner

Credible Activist

HR Innovator

& Integrator

Change Champion

Capability Builder

Change Champion

  Human

Resource Competencies 

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What Do Human Resource Specialists Do? 23

the organization. Mastery of this competency helps connect employees to the mission and goals of the organization. As described in the Building Strength Through HR feature, these efforts to develop capable employees help compa- nies succeed.

Change Champion Effective organizations are constantly adapting and adjusting. The change champion competency encompasses skills and abilities needed to facilitate

Change champion Knowledge and skills necessary to initiate and carry out change.

Building Strength Through HR

MCDONALD’S McDonald’s has 34,000 restaurants located in 119 different countries. Chances are pretty good that you know someone who either works or has worked at McDonald’s, as one in eight people have worked for the restaurant at some point in time. Today over 1.7 million people work for McDonald’s. These employees have helped make McDonald’s one of the most successful companies of all time. Annual revenue is over $27 billion each year, and net income exceeds $5 billion. McDonald’s has increased shareholder dividends for 25 consecutive years.

A key to success at McDonald’s is employee recruiting. Finding enough employees to fill jobs is a constant task. McDonald’s focuses specifically on hiring students. Relationships with school principals, coaches, and counselors help steer stu- dents toward jobs at McDonald’s. Flexible work schedules help balance work with social interests. McDonald’s also focuses on hiring people with physical and mental disabilities. These and other recruiting practices allow McDonald’s to maintain a steady flow of job applicants who are willing to work in entry-level positions, which helps minimize overall labor costs.

Once employees are hired, McDonald’s helps them feel a connection to the company and coworkers. One method of building connections is StationM, which is a private networking site simi- lar to Facebook and MySpace. Hourly employees can use the site to post comments, share photos, and participate in contests. This technology creates bonds and helps young employees feel a connec- tion that builds loyalty.

McDonald’s also emphasizes skill develop- ment. The company actually runs a Hamburger University, where many managers receive extensive training. Although many companies cut training during tough economic times, McDonald’s does not. Effective training helps explain why most man- agers began their careers as cashiers and cooks. Once they become managers, fewer quit than at competitors.

Overall, McDonald’s successfully manages a very large number of employees. Its business results clearly show that more effective human resource management equates with improved performance. Restaurants with the highest levels of employee satisfaction and commitment have the high- est customer satisfaction. They are also the most profitable.

Sources: Diana Thomas, “McDonald’s Continues to Invest in Talent,” T + D 63, No. 11 (2009): 15; Amy Garber, “McD Takes HR Strides to Cement Worker Loyalty,” Nation’s Restaurant News, March 7, 2005; Anonymous, “Human Resources: A Challenge Best Addressed One Unit at a Time,” Nation’s Restaurant News (2005): 100–101; stationM.com.

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24 Chapter 1 Creating Value Through Human Resources

? CONCEPT CHECK 1. What are the four critical human resource roles, and what

are some key features of each? 2. What is a competency, and what six competencies do human

resource professionals need to develop?

learning and growth. A first step in proactive change leadership is helping develop a sense of dissatisfaction with the status quo. Employees and leaders need to feel urgency to improve. This requires human resource professionals to guide the use of resources such as time, money, and information. Effort must also be put forth to ensure that new patterns of behavior continue once change has occurred. Change management thus requires true leadership.

HR Innovator and Integrator HR innovator and integrator competencies are closely aligned with the func- tional expert role. Human resource professionals display this competency when they use research-based principles to help them establish effective pro- cesses for hiring and motivating employees. Human resource specialists must know how to properly divide work duties, create reporting relationships, and design motivating jobs. They also need to know about staffing procedures that help attract, select, and promote the right people. Of course, they must carry out these activities in ways that help the organization take advantage of its unique capabilities and effectively pursue its strategy. Each of the human resource practices benefits from being in alignment with other practices to develop a synergistic method of managing and leading employees.

Technology Proponent Modern organizations require the management of massive amounts of infor- mation, which is aided by the technology proponent competency. Effective human resource specialists not only use technology themselves but also facili- tate use by others. Understanding computing resources and software packages ensures that human resource specialists organize and retrieve information about employees. They also use technology to connect people to one another, which often comes through effective use of social media.

HR innovator and integrator Knowledge and skills that ensure HR practices such as work design, staffing, and compensation are aligned in ways that facilitate organizational success.

Technology proponent Knowledge and skills used to help organizations effectively adopt technology to manage information and connect individuals.

We’ve already seen that the ability to manage change is a key aspect of human resource management. The labor market is one important area in which changes can influence the organization’s human resource prac- tices. Of course, nobody can predict the future with perfect accuracy, but a

How Will Current Trends Affect Human Resource Management?

LEARNING OBJECTIVE 4

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How Will Current Trends Affect Human Resource Management? 25

review of trends in the labor market suggests some areas of expected change. In response, organizations and their human resource practices may need to change as well. One good source of information about labor market trends is the Bureau of Labor Statistics (BLS), an agency within the U.S. Department of Labor. BLS surveys and analyses predict particularly important trends related to changes in population, the labor force, employment opportunities, and education and training.39 One such trend is an increasing move toward glo- balization and multinational corporations.

POPULATION TRENDS How much will the U.S. population grow in the coming years? Will the proportion of young people in the population get bigger or smaller? What about the balance of minority groups? Each of these questions focuses on U.S. population trends, which are general movements over time in the num- ber and characteristics of people living in the United States. Organizations are interested in population trends for two main reasons: to help them determine how the demand for their goods and services might change and to provide insight into the number and type of workers that are likely to be available in the future.

The U.S. population grew 11.9 percent over the past ten years, and current projections indicate that the country’s total population will grow by about 10.6 percent during the next decade. The rate of growth is thus expected to be somewhat lower than in the past. We might conclude, then, that the demand for goods and services will increase, more jobs will be created, and a growing number of workers will enter the workforce during this period. Like the rate of population growth, however, the rates of growth in these areas will be somewhat lower than in the past.

The balance between young and old people in the U.S. population is also changing. By 2018 the number of people between the ages of 16 and 24 will stay about the same, the number between 25 and 34 years old will grow. Those between 45 and 54 will shrink, and the number older than 55 will increase by almost 30 percent. Demand for goods and services desired by older people should thus increase considerably. The workforce will also become older, with more people near the ends of their careers. As a result, attracting and moti- vating older workers will become a more important task for human resource departments.

LABOR FORCE TRENDS Of course, not everybody in the population works. Labor force trends focus not on the population as a whole but on the number and characteristics of people who will be working or looking for work. Racial proportions will also continue to change. The percentage of non-Hispanic white employees is expected to decrease from approximately 70 to 65 percent of the workforce, whereas the percentage of Hispanic workers will increase from about 15 to 19 percent of the workforce. Another important trend concerns women in the workforce. The number of female employees is expected to continue grow- ing slightly faster (7 percent growth) than the number of male employees (6 percent growth).

Population trends Demographic trends related to the characteristics of people in a certain population.

Labor force trends Trends concerning the number and types of people who are working or looking for work.

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26 Chapter 1 Creating Value Through Human Resources

Attracting and keeping minority and female employees will become increas- ingly important. We might thus expect to see more programs that offer conve- nience to working mothers, such as flexible working hours and on-site daycare. Organizations will also need to find better ways to meet the needs of minority workers. One such approach is to create ongoing groups of people with under- represented backgrounds and needs who can meet together and discuss issues. These groups can also provide important feedback and suggestions to help leaders understand the unique perspectives of minority workers. As shown in Figure 1.4, the population trend for age will also result in a greater proportion of older workers by 2020. Integrating diverse workers will thus be increasingly critical.

EMPLOYMENT TRENDS Nobody wants to work in a company or an industry without a future. Therefore, an important question that arises is, Where will the jobs be in the years to come? Employment opportunity trends identify the type of work opportunities that will likely be available in the future. One ongoing trend that is expected to continue is the shift from goods-producing to service-providing employment. Most new jobs will be in areas that produce services. Figure 1.5 provides an overview of industies where jobs are expected to be created over the next decade. The fastest-growing industries will be health services, professional services, and education. The need for healthcare services will continue to increase as the population ages, and the demand for childcare will grow as more women enter the workforce.40

Organizations in growing industries often find it difficult to attract and retain enough high-quality workers. Good human resource management is particularly beneficial in these organizations because it helps them win the war for talent. Effective recruiting, hiring, and compensation are therefore expected to be particularly critical for high-growth occupations such as nurses, computer programmers, and teachers. The outlook is bright for occupations such as health aide and medical secretary, but it is rather bleak for production workers who make and assemble goods such as clothing.

Employment opportunity trends Trends concerning the types of jobs that will be available in the future.

Figure 1.4 Labor Force by Age. Source: http://bls.gov/ooh/About/Projections- Overview.htm#educationandtraining.

16 to 24 25 to 34 35 to 44

13.6

21.8 21.7 21.4 23.4

19.5

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20.1 22.2

11.2

Age group

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5

0

15

10

25

20

30

45 to 54 55 years and older

2020 (Projected)

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How Will Current Trends Affect Human Resource Management? 27

TRENDS IN EDUCATION AND TRAINING Education and training trends tell us something about what competencies people will need to perform jobs in the future and how organizations can better focus their recruitment efforts. Growth is expected for a number of jobs that require advanced education. Indeed, the growth of jobs requiring doctoral or profes- sional degrees is expected to be above 20 percent, whereas the growth of jobs requiring a high school diploma or less are expected to be below 15 percent. Yet, even with higher growth in jobs that require more education, approximately 60 percent of new jobs will still require only a high school diploma or less.

Training sometimes comes on the job rather than from formal education, and some jobs in high-growth areas will require this sort of training. Healthcare aides, who perform tasks in areas such as physical therapy, home care, and social services, represent such jobs. Organizations that need employees with these skills must develop on-the-job training programs that will ensure that new employees learn the necessary knowledge and skills.

GLOBALIZATION TRENDS Globalization trends influence human resource management at many companies. Globalization refers to a process in which companies move beyond their national borders to do business in other countries. For global companies, the entire world represents not only their marketplace but also their place of production.

Education and training trends Trends concerning the knowledge and skills workers will need in the future.

Globalization trends Trends concerning the process by which companies move from doing business within one country to doing business in many countries.

Figure 1.5 Trends In Service Industry Jobs between 2010 and 2020. Source: http://bls.gov/ooh/About/Projections-Overview.htm#educationandtraining.

–1,000 0 1,000

Thousands of jobs

2,000 3,000 4,000 5,000 6,000

Utilities

Management of companies and enterprises

Information

Government

Real estate and rental and leasing

Art, entertainment, and recreation

Finance and insurance

Wholesale trade

Other services (except public administration)

Transportation and warehousing

Accommodation and food services

Administrative and support and waste management and remediation services

Retail trade

Educational services

Professional, scientific, and technical services

Healthcare and social assistance

103

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140

180

275

341

505

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822

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1,769

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28 Chapter 1 Creating Value Through Human Resources

International trade is growing at nearly 10 percent per year, a sure indicator of globalization as an important force.41 Numerous large corporations have opera- tions in countries scattered across the globe; even many small companies are pur- chasing goods and seeking sales from people living in more than one country.

The globalization trend appears to be beneficial for organizations, as com- panies on average are more profitable when greater portions of their sales, assets, and employees are foreign.42 Nevertheless, having operations in more than one country does increase the complexity of human resource activities. Fairly compensating employees who work in foreign countries, for example, requires a great deal of expertise. Legal issues across various countries can also make it impossible to adopt standardized practices. Developing an inter- national perspective for managing people is thus crucial as organizations con- tinue to develop in multiple locations throughout the world.

? CONCEPT CHECK 1. How are current population trends and labor force trends

likely to affect organizations and their human resource practices in the future?

2. What do employment opportunity trends tell us? 3. How does globalization complicate human resource

management?

This chapter provides a broad introduction to human resource manage- ment, a field that focuses on people in organizations. Through good human resource practices, organizations can become more successful in a number of ways. The human resource management field has changed somewhat in recent years. Historically, it has emphasized functional skills, which represent day-to-day activities such as developing specific hiring methods, conducting pay surveys, and providing training. Today, however, it also requires strategic skills, which represent broader aspects of business and include activities such as planning and change management. Successful organizations require lead- ers and human resource professionals to pay attention to both strategic objec- tives and taking care of people.43

Accordingly, this textbook integrates the functional and strategic perspec- tives. The overall outline of the book is shown in Figure 1.6. Specifically, chapters are built around a strategic framework that illustrates how human resource decisions and practices fit with organizational strategy. Most chapters also discuss a key functional area.

As shown in the figure, an organization’s competitive business strategy, along with legal and safety issues, influences the organization’s choice of a human resource strategy. In turn, the human resource strategy chosen shapes

How Do Strategic and Functional Perspectives Combine to Direct Human Resource Practices?

LEARNING OBJECTIVE 5

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How Do Strategic and Functional Perspectives Combine to Direct Human Resource Practices? 29

SECURING EMPLOYEES MAXIMIZING PERFORMANCE

Managing Employee Retention and Separation

CHAPTER 7

Designing Productive and Satisfying Work

CHAPTER 4

Recruiting Talented Employees CHAPTER 5

Selecting Employees Who Fit

CHAPTER 6

Training for Improved Performance CHAPTER 9

Developing Employees and Their Careers CHAPTER 10

Motivating Employees Through Compensation

CHAPTER 11

Designing Compensation and Benefit Packages

CHAPTER 12

Working Effectively with Labor

CHAPTER 13

Measuring Performance and Providing Feedback

CHAPTER 8

Making Human Resource Management Strategies

CHAPTER 2

Aligning Strategy with Practice CHAPTER 14

Ensuring Equal Employment Opportunity

and Safety CHAPTER 3

Creating Value Through Human Resources

CHAPTER 1

Figure 1.6 Framework and Chapter Outline Illustrating How Human Resource Management Practice Links to Strategy.

the specific activities the organization uses to secure and motivate employees. Activities aimed at securing employees include work design, recruiting, selec- tion, and retention; these are discussed in Chapters 4 through 7. Activities that relate to motivating workers, which include performance management, career development, training, compensation, and labor relations, are dis- cussed in Chapters 8 through 13. All these activities must be coordinated with each other as well as with the overall human resource strategy. The impor- tance of coordination is discussed in Chapter 14.

Human resource management is an exciting field that provides critical benefits to organizations. Studying human resource management can help you develop knowledge and skills that will make you more effective through- out your career. Even if you don’t become a human resource specialist, know- ing why human resource specialists do what they do will enable you to work more cooperatively with them. Furthermore, knowing about methods for hir- ing and motivating others can provide you with important leadership skills. As you grow into leadership positions, you will be better equipped to meet the needs of others. Gaining knowledge about human resources will also make you a better strategic planner, enabling you to see how the needs of people and programs can be integrated to promote high performance. Taking a course in human resource management and reading this text can thus be important in determining your future success.

? CONCEPT CHECK 1. How do the functional perspective and the strategic perspec-

tive combine to create success?

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30 Chapter 1 Creating Value Through Human Resources

IN THE MANAGER’S PERSPECTIVE THAT OPENED THE CHAPTER, MIGUEL WAS EXCITED ABOUT THE PROSPECTS OF ACCEPTING A JOB OFFER. HE FELT LIKE THE FIRM WAS SUCCESSFUL AND THAT IT WOULD PROVIDE HIM WITH A BRIGHT FUTURE. FOLLOWING ARE THE ANSWERS TO THE “WHAT DO YOU THINK?” QUIZ THAT FOLLOWED THE CASE. WERE YOU ABLE TO CORRECTLY IDENTIFY THE TRUE STATEMENTS? COULD YOU DO BETTER NOW?

1. Companies with good human resource practices have

more satisfied workers. TRUE. Companies who treat employees well have more satisfied workers, who in

turn provide better customer service.

2. Companies with happy employees are more profitable.

TRUE. High employee satisfaction has been consis- tently linked to good organizational performance.

3. Companies lose money when they try to be good

social and environmental citizens. FALSE. More socially responsible companies actually have higher

profits on average.

4. Having a successful career in the future workplace

will require young employees to work effectively

with older people.

TRUE. Trends suggest that the workforce will

get older over the next

few years as the percent-

age of people aged 55 to

64 increases.

5. Human resource specialists can provide critical

information and support that help make life better

for employees. TRUE. The employee advocate role is an important part of the contribution made by human

resource specialists.

Miguel is wise to think about a company’s human resource

practices before deciding whether to accept a job offer.

Effective human resource management is a key determinant

of employee satisfaction and is an important part of organi-

zational success. Joining a company with effective human

resource practices will mean that Miguel is more likely to

enjoy his work—and that his new employer is likely to be

around for all the years that Miguel wants to work there.

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The contribution of human resources to success can vary across an organization’s life cycle. In the entrepreneurial stage, survival equals success. Human resource management helps the organiza- tion find employees. Success during the commu- nal stage is marked by expansion and innovation. Building a sense of belonging and satisfying the needs of employees are critical. During the formal- ization stage, success comes from developing clear

and efficient procedures. Human resource manage- ment builds structured programs that provide con- sistent procedures. An organization must change and adapt in the elaboration stage. This change is facilitated by hiring and rewarding people who have new ideas and different ways of doing things.

The stakeholder perspective focuses on people who affect and are affected by an organization. Human resource practices protect the interests of employees, and organizations with good practices experience lower employee turnover. Skilled and motivated employees effectively meet the needs of customers. Organizations with more effective human

SUMMARY

How is organizational success determined?

LEARNING OBJECTIVE 1

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Summary 31

What does human resource management provide to an organization?

LEARNING OBJECTIVE 2

Human resource departments provide organiza- tions with a number of key functions. In the function of business management and strategy, the human resource department works with other parts of the organization to plan effective methods of delivering goods and services. The function of workforce plan- ning and employment determines who will do what tasks and recruits and selects people into jobs. The function of human resource development focuses on measuring the contributions of employees and teaching them new knowledge and skills. In the function of compensation and benefits, the human resource department plays an important role in mak- ing sure that employees are paid fairly and receive the proper insurance benefits. A fifth function is employee and labor relations, which captures efforts to work with labor unions and to ensure fair treat- ment of workers. The final human resource function is risk management.

resource management practices have higher profits. Better human resource management can also ben- efit society as a whole by protecting the environment and helping disadvantaged people.

Human resource specialists add value to an orga- nization through a number of different roles. In the functional expert role, they build systems and practices that help the organization better manage people. Human resource specialists con- tribute knowledge and skills that many other orga- nizational members do not have. The employee advocate role provides an opportunity for meet- ing the needs of individual employees. Specialists filling this role listen to employee concerns and try to help them solve problems. The human resource perspective is integrated into other parts of the organization through the strategic partner role. The role of human capital developer facili- tates learning and makes sure that employees in the organization continue to develop new knowl- edge and skills.

What do human resource specialists do?

LEARNING OBJECTIVE 3

Performing the human resource roles requires competency in six different areas. One area is strate- gic positioning. Effective human resource specialists understand business issues such as finance, strategy, stakeholders, and competitive context. The second competency relates to becoming a credible activ- ist who can successfully influence others. The third competency focuses on being a capability builder, which occurs when human resource specialists help the organization understand and leverage its unique strengths. The fourth competency emphasizes becom- ing a change champion. The fifth competency is most closely related to traditional HR skills and emphasizes the proper alignment of staffing and motivation pro- cesses. Being a technology proponent encompasses the final competency, which emphasizes the impor- tance of embracing the use of new tools for managing information and connecting people.

The U.S. population will increase, though at a lower rate than in the past, and will get older. As the pop- ulation ages, the demand for products and services purchased by older people, such as healthcare, will grow. Older workers will also make up a greater percentage of the workforce. The proportion of Hispanic workers and women in the workforce will increase as well. Human resource depart- ments will thus benefit from finding ways to meet the needs of older people, women, and members of minority groups. Job growth is expected in the fields of healthcare and social assistance services. Globalization will require human resource depart- ments to create processes that effectively manage people working in various foreign countries.

How will current trends affect organizations and human resource management?

LEARNING OBJECTIVE 4

How do strategic and functional perspectives combine to direct human resource practices?

LEARNING OBJECTIVE 5

In order to be truly effective, human resource man- agement must combine strategic planning with day-to-day functional activities. Specific areas where this combination can take place include improving methods for securing employees and then maxi- mizing their performance.

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32 Chapter 1 Creating Value Through Human Resources

Business management and strategy 14 Capability builder competencies 22 Change champion competencies 23 Communal stage 7 Compensation and benefits 15 Competencies 22 Credible activist competencies 22 Education and training trends 27 Elaboration stage 9 Employee advocate role 19 Employee and labor relations 16 Employee turnover 10 Employment opportunity trends 26 Entrepreneurial stage 7 Formalization stage 9

Functional expert role 19 Globalization trends 27 HR innovator and integrator competencies 24 Human capital developer role 21 Human resource development 14 Human resource management 4 Labor force trends 25 Organizational life cycle 6 Population trends 25 Risk management 16 Stakeholders 9 Strategic partner role 20 Strategic positioner competencies 22 Technology proponent competencies 24 Workforce planning and employment 14

KEY TERMS

1. Why might a newly formed organization be considered successful even if it is losing money?

2. Think of stores where you shop. Do employees of some stores seem happier than employees of other stores? What human resource prac- tices might explain differences in employee happiness?

3. How can socially responsible organiza- tions have high profits even though they spend money on things like environmental protection?

4. Why do managers and human resource spe- cialists often do poorly on tests about the best ways of hiring and paying employees?

5. What are some specific things that can be done to teach company leaders how human

resource management can contribute to orga- nizational success?

6. Which human resource role do you think is most important? employee advocate? func- tional expert? strategic partner? human capital developer? Explain your answer.

7. Why do you think change is so difficult for organizations? What can human resource spe- cialists do to make change easier?

8. What are some challenges you might face if you join an organization with a lot of older workers?

9. What are some things an organization could do to better meet the needs of women and members of minority groups?

10.How do you think the field of human resource management will change in the next 10 years?

DISCUSSION QUESTIONS

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Example Case 33

EXAMPLE CASE Zappos

Keeping employees happy at Zappos.com takes a little weirdness and a willing- ness to make work fun. You may not expect a woman whose footwear of choice is tennis shoes to work at one of the world’s largest online shoe companies, but for senior HR manager Hollie Delaney, PHR, Zappos.com Inc. is a comfy fit.

Staff members in six HR functions report to Delaney at this intense, high- energy company where a worker might spring onto a table during a meeting and perform an impromptu break dance, and the computer log-on requires identifying the photo of a randomly selected employee. Conference rooms at corporate headquarters in Henderson, Nevada, are named after casinos in a nod to the famed Strip 6.7 miles away. In fact, the company plans to relocate to downtown Las Vegas sometime in 2012 or 2013. Job applicants at the 24/7 operation are interviewed in a room resembling a talk show set, and employees have been asked to submit creative ideas in various scenarios such as coming up with their own designs for Steve Madden creations. During annual Bald & Blue Day, CEO Tony Hsieh and other employees volunteer to shave their heads or dye their hair blue.

HR Magazine talked to Delaney about her career and how Zappos delivers happiness to its customers—and its 3,000 employees.

Question: Before Zappos, you worked in HR at a casino. What was that like?

It was big and impersonal, with thousands of employees and so many rules between unions and nonunions. There was a rule for everything—even that I had to wear pantyhose if I worked in HR. It made it difficult to be yourself. At the time, I thought HR was not for me.

Question: Describe your Zappos job interview. During the phone interview, I described myself as “fun but a little weird.”

The interviewer said “Wow, that’s one of our core values.” I met everyone in HR and interviewed with 10 managers, including Tony. He was sitting in a cubicle alongside other employees; I didn’t know he was the CEO at first. I started crying while telling him about my “miracle baby” and thought I’d blown the job interview.

Question: During on-boarding, Zappos offers new hires $3,000 to leave if they don’t think they and the company are a good fit. Were you tempted?

It was $1,000 when I started, but no. Everybody here was so happy. They were so invested in this company. You could see it, and you could feel it. I was floored. I was skeptical, but I knew there had to be something special here for people to behave that way.

Question: How can you tell if a candidate is a good fit? When people tour our company, they’re kind of shellshocked. Some can-

not get over the fact that people aren’t in offices and it’s so loud. Or, they want to work 9 to 5 and call it a day. Our environment is not the ideal place to meet those types of expectations. A state of consistent change, the open environ- ment, and team aspect do not work for everyone. We move around a lot; you get to build relationships with people you haven’t met before. You can be in senior management in four to seven years. In our call center, employees bid for different shifts every six months. You can wear pajamas or bunny ears to a meeting and be taken seriously—actually, they’re more responsive to you.

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34 Chapter 1 Creating Value Through Human Resources

The recruiting team interviews candidates for culture fit and a willingness to change and to learn. They notice how applicants interact at lunch. Do they talk with others or just the person they think makes the hiring decision? Our shuttle drivers tell us what candidates say during the ride back to their hotels.

Question: When did you know you had embraced the culture? It took me about a year to change from focusing on the 10 percent of

employees who cause problems to the 90 percent who do not. I remember Tony wanted to let all employees give out one $50 monthly bonus to any employee they chose. My traditional HR response was “You’re insane.” I thought people would give it to their friends, but some didn’t even give it out at all: They were waiting for people to “wow” them the same way they were expected to wow customers. I didn’t have any skepticism left by the time we started the Wishez Program in 2010. Employees’ wishes have ranged from asking for homemade frosted sugar cookies to wanting to jump off the Stratosphere Hotel. One worker’s wish for a car was granted when an employee bought a new car and gave him his old vehicle.

Question: I understand you wrestled with staying in HR at Zappos. What happened?

I’d been here nearly two years. People did not like HR when I started. It had the stigma of being the Debbie Downer Department, the rules enforcer. No one wants to be a part of that. HR was in a transitional period. We didn’t have a Zappos identity. I felt like an outsider looking in. Headhunters started calling me. I wasn’t sure what I wanted to do, where I stood with the company. I realized when I was talking to the life coach on staff that I had a huge oppor- tunity to do something awesome at this awesome company. We started asking different managers what they needed from HR. An HR generalist started sit- ting in each department for eight months. Now, they include us in termina- tion discussions. We are invited to teams’ happy hours. We work with them to be part of the good things they do and not just the “You’re getting written up” conversations. Zappos’ ZCON team, which moved to HR from merchandising in January and handles areas such as reception, shuttle services, travel, and concierge services, is bringing a new face to HR. I’m having fun now. I could never go back to a traditional HR job. Here, our job is to educate employees. I’m more of a teacher, not a policeman. Our job is to protect the culture. If HR says “no,” it doesn’t mean no. You have to know all the rules of HR but be able to throw them out. If it’s a rule, is it a good rule?

QUESTIONS 1. Does Zappos sound like a place you would want to work? Why? 2. Do you think it makes sense to offer new employees a $3,000 incentive to

quit? 3. How do you think the role of HR might change as Zappos matures as a

company? 4. How does the role of HR at Zappos differ from typical companies such as

the casinos referenced in the article?

Source: Originally published as “Delivering HR at Zappos” by Kathy Guchiek c 2011, Society for Human Resource Management, Alexandria, VA. Used with permission. All rights reserved.

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Discussion Case 35

DISCUSSION CASE Curt’s Cowboy Corner

Curt’s Cowboy Corner is a chain of 15 stores that sells cowboy boots and western clothing. Curt opened the first store 10 years ago in a small Rocky Mountain town and quickly gained a following of loyal customers. Based on input from customers and friends, Curt decided to expand his business and began opening new stores in nearby towns. He plans to open 10 more stores in the next few years.

Each of Curt’s stores has a manager, three full-time sales representatives, and five or six part-time employees. In the early days, Curt worked closely with each store manager to plan day-to-day operations, helping to make all hiring decisions. He and a secretary also spent many days each month working on payroll. Lately, however, Curt has found that he does not have enough time to interview job candidates and handle several other of his customary tasks. He thinks this might be one reason some of the newer employees aren’t working out so well. In addition, last month, he was two days late completing the pay- roll, thereby creating numerous problems for employees. Curt knows that he needs to do a better job of delegating tasks. Another of his concerns focuses on the potential liabilities of having a growing workforce. One employee recently told him that she felt uncomfortable about some sexual comments her boss had made to her. Curt spent several hours talking to both the employee and her boss, and although he feels pretty good about how he handled the situa- tion, he acknowledges that he does not have the requisite knowledge or skill to resolve such matters.

Curt’s brother, who owns a number of automobile dealerships in a distant city, has encouraged Curt to hire a human resource professional. But Curt has been reluctant to hire staff members who do not spend time selling in stores. His philosophy has always been that staff members who don’t make sales are an expense without much return. At the same time Curt knows that he must do something or else things will get worse. If he is able to grow the business as he plans, he will soon have nearly 100 full-time employees.

QUESTIONS 1. What are some specific tasks that a human resource specialist could do for

Curt? 2. Are there any financial benefits that might come from hiring a human

resource specialist? 3. How might labor trends affect Curt’s ability to continue expanding his

stores? 4. What benefits and problems might result if Curt hires a human resource

specialist to provide support to all stores? Would it be better to simply delegate all human resource activities to each store manager?

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36 Chapter 1 Creating Value Through Human Resources

ENDNOTES 1. Michael Riketta, “The Causal Relation Between Job

Attitudes and Performance: A Meta-Analysis of Panel Studies,” Journal of Applied Psychology 93 (2008): 472–481; Ingrid Smithey Fulmer, Barry Gerhart, and Kimberly S. Scott, “Are the 100 Best Better? An Empirical Investigation of the Relationship Between Being a ‘Great Place to Work’ and Firm Performance,” Personnel Psychology 56 (2003): 965–993; Benjamin Schneider and David E. Bowen, “Employee and Customer Perceptions of Service in Banks: Replication and Extension,” Journal of Applied Psychology 70 (1985): 423–433.

2. John A. Byrne, “Lessons from Our Customer Champions,” Fast Company 87 (October 2004):16; “Trader Joe’s Targets ‘Educated’ Buyer,” Seattle Post-Intelligencer, August 30, 2003; Stan Abraham, “Dan Bane, CEO of Trader Joe’s,” Strategy & Leadership 30, no. 6 (2002): 30–32.

3. Irwin Speitzer, “The Grocery Chain That Shouldn’t Be,” Fast Company 79 (February 2004): 31. Abraham, “Dan Bane,” 30–32.

4. Jena McGregor, “Leading Listener: Trader Joe’s,” Fast Company 87 (October 2004): 82–83; Len Lewis,

excerpts from Trader Joe’s Adventure, (Chicago: Dearborn Trade Publishing, 2005). Reported in “Fostering a Loyal Work force at Trader Joe’s,” Workforce Management Online, June 2005, www.workfo- cre.com/archive/feature/24/06/51/index.php.

5. http://company.monster.com/trader; Lewis, Trader Joe’s Adventure.

6. Lewis, Trader Joe’s Adventure; Beth Kowitt, “Inside the Secret World of Trader Joe’s,” Fortune International 162, no. 4 (2010): 32–39.

7. Larry Armstrong, “Trader Joe’s: The Trendy American Cousin,” BusinessWeek, 3880 (April 26, 2004): 62; Kowitt, “Inside the Secret World of Trader Joe’s,” 32–39.

8. http://www.traderjoes.com/about/customer-updates- responses.asp?i=60

9. Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33–51; I. M. Jawahar and Gary L. McLaughlin, “Toward a Descriptive Stakeholder Theory: An Organizational Life Cycle Approach,” Academy of Management Review 26 (2001): 397–414.

The Society for Human Resource Management (SHRM) is a professional association devoted to human resource management. Visit the SHRM website at shrm.org and learn about the human resources field. Look for information related to the following questions: 1. How many members are there in SHRM? 2. What types of careers are available in the field

of human resource management?

3. What is the SHRM Code of Ethics, and how does it guide the efforts of human resource specialists?

4. What kind of resources does SHRM offer to help people learn new skills?

5. What are chapter/member groups? Who can join?

6. What are some current news issues that relate to human resource management?

EXPERIENTIAL EXERCISE Visit the SHRM Website

Access the companion website to test your knowledge by completing a Mega Manufacturing role-playing exercise. In this exercise, you’re an HR consultant and will be assisting a small but established company (Mega Manufacturing) who will be going through sig- nificant expansion due to a new government contract. With the growth, the owner knows that it will be a good idea to add a dedicated HR person to his management team and wants you to help. As he’s talking about the beliefs and vision of the company, you consider the organizational life cycle model, core HR functions, and critical HR roles. He then asks for your suggestions, and you realize that this assignment may be a great opportunity to align this new HR department with the strategy of the company.

INTERACTIVE EXPERIENTIAL EXERCISE

Building an HR Department at Mega Manufacturing http://www.wiley.com/college/sc/stewart

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Endnotes 37

10. BNA, Inc. HR Department Benchmarks and Analysis™: (Washington, DC: Bureau of National Affairs, 2004).

11. Theresa M. Welbourne and Alice O. Andrews, “Predicting the Performance of Initial Public Offerings: Should Human Resource Management Be in the Equation?” Academy of Management Journal 39 (1996): 891–919.

12. Speitzer, “The Grocery Chain That Shouldn’t Be,” 31. 13. Jake G. Messersmith, Pankaj C. Patel, David P. Lepak,

and Julian S. Gould-Williams, “Unlocking the Black Box: Exploring the Link Between High-Performance Work Systems and Performance,” Journal of Applied Psychology 96 (2011): 1105–1118.

14. Mark A. Huselid, “The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance,” Academy of Management Journal 38 (1995): 635–672.

15. Jeremy Smerd, “IBM: Optimas Award Winner for Financial Impact,” Workforce Management, October 20, 2008, 22.

16. Dave Ulrich, Wayne Brockbank, Arthur K. Yeung, and Dale G. Lake, “Human Resource Competencies: An Empirical Assessment,” Human Resource Management 34 (1995): 473–495.

17. Patrick J. Keger, “Crouse Hospital: Optimas Award for General Excellence,” Workforce Management, October 20, 2008, 16–17; http://www.crouse.org/careers/.

18. R. Edward Freeman, Strategic Management: A Stakeholder Perspective (Marshfield, MA: Pittman Publishing, 1984).

19. Max B. E. Clarkson, “A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance,” Academy of Management Review 20 (1995): 92–117.

20. Huselid, “The Impact of Human Resource Management Practices,” 635–672; Rosemary Batt, “Managing Customer Services: Human Resource Practices, Quit Rates, and Sales Growth,” Academy of Management Journal 45, no. 3 (2002): 587–597.

21. Peter W. Hom and Angelo J. Kinicki, “Toward a Greater Understanding of How Dissatisfaction Drives Employee Turnover,” Academy of Management Journal 44 (2001): 975–987; Rodger W. Griffeth, Peter W. Hom, and Stefan Gaertner, “A Meta-Analysis of Antecedents and Correlates of Employee Turnover: Update, Moderator Tests, and Research Implications for the Next Millennium,” Journal of Management 26 (2000): 463–488. Schneider and Bowen, “Employee and Customer Perceptions,” 423–433.

22. Huselid, “The Impact of Human Resource Management Practices,” 635–672.

23. Stephanie C. Payne and Sheila Simsarian Webber, “Effects of Service Provider Attitudes and Employment Status on Citizenship Behaviors and Customers’ Attitudes and Loyalty Behavior,” Journal of Applied Psychology 91 (2006): 365–378.

24. Batt, “Managing Customer Services,” 587–597. 25. Mahesh Subramony, Nicole Krause, Jacqueline Norton,

and Gary N. Burns, “The Relationship between Human Resource Investments and Organizational Performance: A Firm-Level Examination of Equilibrium Theory,” Journal of Applied Psychology 93 (2008): 778–788.

26. Mark Orlitzky, Frank L. Schmidt, and Sara L Rynes, “Corporate Social and Financial Performance: A Meta- Analysis,” Organization Studies 24 (2003): 403–441; W. Gary Simpson and Theodore Kohers, “The Link Between Corporate Social and Financial Performance: Evidence from the Banking Industry,” Journal of Business Ethics 35 (2002): 97–109; Bernadette M. Ruf, Krishnamurty Muralidhar, Robert M. Brown, Jay J. Janney, and Karen Paul, “An Empirical Investigation Between Change in Corporate Social Performance and Financial Performance: A Stakeholder Theory Perspective,” Journal of Business Ethics 32 (2001): 143–156.

27. Pedro Lorca and Julita Garcia-Biez, “The Relation between Firm Survival and the Achievement of Balance among Its Stakeholders: An Analysis,” International Journal of Management 21 (2004): 93–99.

28. Ingrid Smithey Fulmer, Barry Gerhart, and Kimberly S. Scott, “Are the 100 Best Better? An Empirical Investigation of the Relationship Between Being a ‘Great Place to Work’ and Firm Performance,” Personnel Psychology 56 (2003): 965–993.

29. http://www.hrci.org/uploadedfiles/Content/ Resource_Library/Certification_Handbooks_and_ Other_Publications/PHR-SPHR%20BOK.pdf

30. Judy Greenwald, “Multicountry Benefits Require Delicate Touch,” Business Insurance 40, no. 50. (2006): 12–13.

31. Sara L. Rynes, Amy E. Colbert, and Kenneth G. Brown, “HR Professionals’ Beliefs about Human Resource Practices: Correspondence between Research and Practice,” Human Resource Management 41 (2002): 149–174.

32. Sara L. Rynes, Tamara L. Giluk, and Kenneth G. Brown, “The Very Separate Worlds of Academic and Practitioner Periodicals in Human Resource Management: Implications for Evidence-Based Management,” Academy of Management Journal 50 (2007): 987–1008.

33. Dave Ulrich and Wayne Brockbank, The HR Value Proposition (Boston: Harvard Business Press, 2005).

34. http://www.unlv.edu/main/highlights.html. 35. Occupational Information Network, O*net

Online see http://online.onetcenter.org/link/ summary/11–3040.00

36. Ulrich and Brockbank, The HR Value Proposition. 37. Susan Quinn, “Putting the Human Back into Human

Resources,” Public Management 80, no. 9 (1998): 23–28. 38. Dave Ulrich, Jon Younger, Wayne Brockbank, and Mike

Ulrich, HR from the Outside In: Six Competencies for the Future of Human Resources (New York: McGraw Hill, 2012).

39. Statistics taken from U.S. Department of Labor Bureau of Labor Statistics website, http://bls.gov/ooh/About/ Projections-Overview.htm.

40. Ibid. 41. A. T. Kearney, Inc. “The Globalization Index,” Foreign

Policy 157 (2006): 75–81. 42. Sally Sledge, “Globalization and Performance in the

New Millennium: A Look at Firms from Developed and Developing Nations,” Journal of American Academy of Business 10, no. 2 (2007): 51–57.

43. Mathis Schulte, Cheri Ostroff, Svetlana Shmulyian, and Angelo Kinicki, “Organizational Climate Configurations: Relationships to Collective Attitudes, Customer Satisfaction, and Financial Performance,” Journal of Applied Psychology 94 (2009): 618–634.

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C h a p t e r 2

Making Human Resource Management

Strategic

A M A N A G E R ’ S P E R S P E C T I V E

ELIZABETH CLOSES HER OFFICE DOOR AND BEGINS THINKING ABOUT THE SMALL CHAIN OF CONVENIENCE

STORES SHE PURCHASED LAST MONTH. THE PREVIOUS OWNER WORKED HARD AND SUCCESSFULLY GREW FROM A

SINGLE STORE TO THE CURRENT FOUR OUTLETS. ELIZABETH WAS EXCITED WHEN SHE LEARNED THAT HE HAD ACCEPTED

HER BID TO PURCHASE THE STORES. HOWEVER, NOW THAT THE DEAL HAS CLOSED, SHE KNOWS SHE NEEDS TO MAKE SOME CHANGES. THE STORES ARE ALL LOCATED IN DESIRABLE LOCATIONS AND ARE CURRENTLY PROFITABLE, BUT SHE HAS ALREADY FOUND IT DIFFICULT TO WORK

WITH SOME OF HER MANAGERS. THE LACK OF QUALITY EMPLOYEES HAS REQUIRED HER TO SPEND SEVERAL HOURS

DOING MANAGERIAL DUTIES IN TWO OF THE STORES. ELIZABETH HAS ALSO HEARD RUMORS THAT A LARGE

NATIONAL CHAIN IS THINKING OF EXPANDING INTO HER

TERRITORY. EVEN IF THE COMPETITOR DOES NOT EXPAND, SHE IS CONVINCED THAT THE STORES WILL FAIL UNLESS

SHE MAKES SOME CRITICAL DECISIONS AND DEVELOPS A

BETTER STRATEGIC PLAN. Elizabeth knows that effective human resource

management must be a big part of her strategic plan. She honestly believes that making employees

happy is the key to mak- ing customers happy. Obviously, raising wages would make employees happy; yet, Elizabeth also understands that her choices are constrained by a need to produce profit. Paying too much in wages could result in losses that threaten her ability to keep the stores open. An even bigger issue is thus her need to develop a plan for ensuring loyal cus- tomers and earnings sufficient to cover her business expenditures.

Elizabeth remembers a few years back when she attended an educational retreat and took a strate- gic management course that focused on different ways businesses compete with each other to deliver services and goods. She doesn’t think her stores cur- rently have a clear strategy. Do people shop at her stores because she sells products that are superior to those sold by other stores? Perhaps customers are loyal only because prices are cheaper. As she reflects on these questions, Elizabeth realizes that she doesn’t really have a plan for how she will compete with other stores, particularly a large national chain.

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THE BIG PICTURE Human Resource Management Is Most Successful When Aligned with an Organization’s Competitive Business Strategy

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She wonders if her human resource decisions might need to be different depending on her strategy.

The previous store owner emphasized develop- ing loyalty and trying to make sure that employees stayed at the stores for long periods of time. She thinks this approach offers a lot of benefits. But she sometimes wonders if it would help to bring in more new people. What about diversity? Can her stores benefit from new skills and ways of thinking? Given the current economy and relatively high rate of unemployment, Elizabeth is quite certain that she would be able to identify and hire some very good new employees. Would now be a good time to bring in some outside talent?

As she thinks about her decisions, Elizabeth reminds herself that this is a big opportunity. She is excited by the prospect of making a difference and helping her new stores rise to even greater heights.

WHAT DO YOU THINK? Suppose Elizabeth hears the following comments during a meeting with some friends who are entrepreneurs. Which of the statements do you think are true?

Having good employees is more important than having good production equipment.

Much of the workforce lacks needed skills, so high-quality employees are difficult to find and retain.

The most effective way for an organiza- tion to compete with other organizations is to produce similar goods and services at lower prices.

Organizations are most effective when they develop a highly committed workforce.

An organization seeking to produce the highest-quality products should have dif- ferent human resource practices from an organization seeking to produce inexpen- sive products.

?

T OR F

T OR F

T OR F

T OR F

T OR F

39

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40 Chapter 2 Making Human Resource Management Strategic

Suppose someone gave you $10,000 to invest in a single company, with the con- dition that you must leave the money invested in the same company for the next 30 years. At the end of 30 years, you get to keep all the profits from the invest- ment. What company would you choose? Would it be a technology-focused company like Microsoft? How about a global leader like Coca-Cola? Maybe a large company with numerous products, such as General Electric? What would be the most important factors to consider when making this choice?

As discussed in Chapter 1, profitability is an important part of organiza- tional effectiveness and a factor you would certainly want to consider in choos- ing an investment. In fact, business researchers and stock analysts spend a lot of time trying to learn why some companies are consistently more profitable than others. One possible explanation is that highly profitable companies are simply in desirable industries. Perhaps it is just easier to earn profits doing some types of work. Another potential explanation is that profitable compa- nies have better technological capabilities—better equipment and processes. Still another possibility is that highly profitable companies are just bigger. Their large size might provide them with more power and resources, mak- ing it easier to produce goods and services. Yet none of these theories really explains why some companies are more profitable than others. In any indus- try, and at any size, some companies do well, and others do not.

Research suggests that a major key for long-term profitability is a clear strategy for being better than competitors, along with a highly effective work- force that carries out that strategy.1 A good example is Southwest Airlines. The combination of a clear strategy and high-quality workforce allowed Southwest Airlines to earn the highest stock return of any company over a 30-year period.2

Southwest started out as a small company with three airplanes. Government regulations prohibited it from flying to states not bordering Texas. In the ensuing years Southwest Airlines has been consistently profitable, even at a time when other airlines have consistently lost money and many have faced bankruptcy. Just think about it. If you had been able to invest your $10,000 in

After reading this chapter you should be able to:

Describe the strategy formulation process.

Describe two generic competitive business strategies that organizations use.

Explain the universalistic and contingency approaches to human resource strategy, including key characteristics of the commitment strategy.

Describe four human resource strategies that organizations commonly use.

Explain how human resource strategies and competitive business strategies are aligned.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

LEARNING OBJECTIVE 5

L E A R N I N G O B J E C T I V E S

How Can a Strategic Approach to Human Resources Improve an Organization?

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How Can a Strategic Approach to Human Resources Improve an Organization? 41

Southwest Airlines over a recent 30-year period, that investment would have grown to over $10.2 million.

As mentioned, one element of Southwest’s success is its clear strategic direction. What are the elements of the company’s strategy? First, it has a clear strategy of offering low fares. Unlike other major airlines, Southwest does not use a complicated price structure whereby some passengers pay much more than others. Instead, it aims to have the lowest available fare. The fact that other airlines are forced to substantially cut their fares once Southwest enters a market indicates how successful Southwest’s low-fare strategy is.3

Unfortunately for competitors, their costs to fly passengers are as much as 70 percent higher than Southwest’s costs.4 Why? Southwest is simply more effi- cient. This makes it possible for Southwest to earn profits while selling tickets at prices that would represent losses for other airlines.

What makes Southwest so much more efficient than other airlines? The company gets more productivity out of its employees. Southwest needs only about one-third as many employees as its competitors to fly the same number of customers.5 How can it do this? The secret seems to be best captured by the company’s founder, Herb Kelleher, who has said that Southwest’s order of top priorities is employees, customers, and then shareholders.6 In short, Southwest Airlines uses human resource practices to find and keep a large number of loyal employees who concentrate on reducing costs.

One way that Southwest reduces cost is by encouraging each employee to pitch in and help finish tasks, even if those tasks are not part of that person’s normal job. For instance, flight attendants help clean airplane cabins, and pilots help move luggage. This practice greatly reduces the time that a plane is on the ground between flights.7 Southwest has also developed a culture that makes it fun to work there. The company receives as many as 100 job appli- cations for each open position.8 Southwest is thus in the position of being able to hire only the very best employees. In particular, it focuses on hiring people who have the right attitude and who are willing to work hard to meet customer needs.9 The company also pays well and was one of the first airline companies to share profits with employees.

The pattern of long-term success doesn’t, however, prevent Southwest Airlines from continually facing strategic challenges. Herb Kelleher was followed as CEO by James Parker, who led the company through three somewhat troubling years. First, terrorist attacks and rising fuel costs made it increasingly difficult for air- lines to earn profits. Then employees demanded higher wages, with negotiations frequently creating conflict between managers and employees.10 Nevertheless, Southwest continued to outperform its competitors and return profits.11 Gary Kelly, who took over in 2004 after Parker’s retirement, makes it clear that he will not deviate from Southwest’s core strategy: to be the airline with the lowest fares and the lowest cost structure. He also continues to emphasize the develop- ment of highly committed employees who spend their entire careers working to improve Southwest Airlines.12 This consistent approach of adopting a low-cost strategy and emphasizing commitment to employees has been helpful during recent times of economic difficulty. Southwest did post financial losses during the recession that began in 2008,13 but its lean structure and efficient practices helped it recover more quickly than competitors.14 Success relative to competi- tors even allowed Southwest to expand by purchasing AirTran Airways in 2011, which among other benefits has allowed expansion of cross-border routes to Mexico and Caribbean destinations while retaining its cost focus.15

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42 Chapter 2 Making Human Resource Management Strategic

The Southwest Airlines example illustrates how a strategic approach to human resource management increases organizational effectiveness. For Southwest, employees are a critical resource in meeting the needs of custom- ers. The overall strategic direction of the organization guides decisions about how people are recruited, selected, trained, and compensated. These human resource practices help create a workforce that provides the talent neces- sary to serve customers well. Organizations such as Southwest that have clear strategies for effectively meeting the needs of customers, and clear human resource practices that match those strategies, simply get better results than other organizations.

We use the term strategy to discuss many things in our lives. We talk about strategies for taking exams, strategies for getting jobs, and strategies for sav- ing money. But just what are we talking about when we use this term? We can think of a strategy as a set of coordinated choices and actions. Strategy con- cerns where you want to go and how you want to get there. Strategy is more than just decisions, however; it also concerns putting choices into practice.

With regard to human resource management in organizations, there are actually two types of strategy. One is competitive business strategy, which focuses on choices and actions about how to serve the needs of customers. The other is human resource strategy, which focuses on choices and actions con- cerning the management of people within the organization. These two types of strategy must work together to ensure high organizational effectiveness— as they do at Southwest Airlines.

One way of understanding similarities and differences in these two forms of strategy is to examine the common elements of strategy formulation. The first step in strategy formulation is gathering information (see Figure 2.1).

Strategy Coordinated choices and actions that provide direction for people and organizations.

Competitive business strategy Strategy that focuses on different ways to provide goods and services that meet customer needs.

Human resource strategy Strategy that focuses on different ways of managing employees of an organization.

How Is Strategy Formulated?

LEARNING OBJECTIVE 1

SOUTHWEST AIRLINES Southwest Airlines is a low-cost airline that employs over 46,000 people to move over 100 million passengers each year. Human resource management at Southwest builds competitive advantage by

Having a clear strategic direction for competing with other airlines. Creating a company culture where everyone is committed to success and doing whatever it takes to serve customers. Being highly selective and hiring only the very best employees. Paying above-average wages to obtain and keep the best employees.

Building Strength Through HR

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How Is Strategy Formulated? 43

Information gathering commonly involves assessments both of the external environment and of internal capabilities. Once relevant information has been gathered, it is analyzed, and decisions are made. The set of decisions made constitutes a strategic plan, which must then be implemented. In the follow- ing sections, we look at the first two steps.

GATHERING INFORMATION Effective strategic leaders seek a great deal of information. They constantly scan their external environment in an effort to understand their internal resources and capabilities. Such assessments may not allow them to predict the future perfectly but can help them better understand what has already happened, an understanding that will enable them to make better decisions.16

Assessing the External Environment An external environment consists of all the physical and social factors outside of an organization’s boundaries.17 Some of these elements provide an orga- nization with potentially favorable conditions and are labeled opportunities; other elements provide potentially unfavorable conditions and are labeled threats. Although opportunities are generally easier to control than threats, a clear understanding of both is critical for effective strategy formulation.18

One way of thinking about the importance of assessing threats and oppor- tunities is to consider them in relation to your future goal of finding a job. A successful job search depends on a clear strategy, which requires an under- standing of environmental conditions. Features of the environment might include the number of businesses hiring people in your field, the number of other new graduates looking for similar jobs, and the geographic location of potential employers. If the economy is bad and few businesses are hiring new employees, or if a large number of new graduates are highly qualified for the position you desire, you will face a threat. In contrast, a new technology that makes your skills valuable to a large number of organizations represents an opportunity. Having information about the job market in general helps you develop a good plan, or strategy, for finding a job.

External environment Forces outside the organization’s boundaries that influence the organization and its outcomes.

Opportunities Positive elements of an organization’s external environment.

Threats Negative elements of an organization’s external environment.

Step 1: Gather Information g

Step 3: Implement the Decision

v

Step 2: Analyze Information and Make Decision v

Figure 2.1 Strategy Formulation Process.

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44 Chapter 2 Making Human Resource Management Strategic

Just as you will use environmental information in finding a job, organiza- tional leaders use information about environmental opportunities and threats to form their strategies.19 Important elements of organizational environments include demographic and cultural trends, economic and political conditions, and technological developments.20

Demographic and cultural trends include population growth, the age distribution of the population, the percentage of women in the workforce, and changes in the relative sizes of ethnic groups. As discussed in Chapter 1, people in the United States are living longer, and the percentage of ethnic minorities is growing. These features provide opportunities for organizations offering services to senior citizens and for organizations that produce and sell goods and services especially desired by, for example, Latino individuals.

Critical features of the economic environment include interest rates and new job creation, whereas the political environment includes laws and the positions of elected officials. Recent changes associated with the Affordable Care Act have created numerous opportunities and threats for organizations, particularly those working in the healthcare industry. Other important threats and opportunities concern legal changes related to international trade. Stories about trade opportunities and threats in countries such as China appear almost every day.

An especially important aspect of current organizational environments is technological change. Trends such as improving manufacturing technologies and increased availability of information create opportunities for some orga- nizations and threats for others. An example of technological innovation is Twitter, which is discussed in the accompanying Technology in HR feature.

Effective strategy formulation thus begins with information about threats and opportunities outside the organization. In formulating competitive busi- ness strategy, a company’s understanding of these trends can help determine what goods and services to provide. Knowledge can also guide choices about whether to focus on lowering costs or on providing goods with superior fea- tures. Understanding broad changes outside the organization is also critical for human resource strategy. Organizations need information about demo- graphic and cultural changes, for example, to forecast how many workers with particular skills will be available in the future. An interesting example of how environmental changes influence organizations is currently seen in Taiwan. The rapid rise and economic development of China has opened doors and markets for many companies located in Taiwan. Moreover, the job market in Taiwan has been depressed due to the economic downturn, but workers have found many opportunities in China. At least 1.5 million people from Taiwan are now working in China.21 The changing nature of the global market thus provides both opportunity and threat for companies located in Taiwan and China. Problems occurring in one area often create opportunities for compa- nies and workers in other areas.

Assessing Internal Capabilities Strategy formulation also requires assessment of an organization’s internal resources and capabilities. Areas of high capability are labeled strengths, and areas of low capability are called weaknesses.

The example of a job search can be helpful for thinking about strengths and weaknesses. Threats and opportunities focus on the environment—in the case of your job search, environment signifies things other than you. Strengths and weaknesses focus internally—in the job search example, on your own

Strengths Positive elements that define areas in which an organization has high internal capability.

Weaknesses Negative factors that define areas in which an organization has low internal capability.

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How Is Strategy Formulated? 45

TWITTER AS AN OPPORTUNITY FOR BUSINESS The micro-blogging service Twitter offers an excit- ing opportunity for businesses. Companies can use Twitter to send short messages not only to custom- ers but also to current and prospective employees.

Companies such as Southwest Airlines, KFC, and General Mills have found success in commu- nicating with customers. Southwest uses Twitter to connect with first-time customers by sending them an inexpensive yet personalized message of thanks and invitation for future service. Twitter was an important part of KFC’s strategy for launch- ing its grilled chicken product. Potential custom- ers received information and links to vouchers for a free meal. In a similar way, General Mills found success by encouraging tweets about its new line of gluten-free baking products. The benefits of new products were extolled by customers rather than by a marketing department.

Human resource practices can also benefit from micro-blogging. For example, in the United Kingdom the Royal Air Force has employees con- tinually sending short messages about what it is like to work in different roles. These posts on Twitter, along with responses to questions, serve as an important recruiting tool. Twitter can also be used as a training tool. Employees in training classes become more engaged by sending messages to instructors and other participants. Experienced employees can send tweets that help teach others the steps of completing important work tasks.

Of course, companies can also make mistakes as they get involved in social networking. In contrast to traditional communication such as advertising and job posting, micro-blogging creates two-way communication. Customers and potential employ- ees talk back and share their thoughts with many

others. Blatant attempts to sell products or make a company look good are often met with criticism. Here are some steps to keep in mind to avoid some common pitfalls:

1. Listen before you speak. Successful companies begin their interactions by first finding out what is being said about them.

2. Follow key people. Identify people who fre- quently send tweets that relate to your company and its services or products.

3. Respond with help. Respond to tweets by offer- ing help and addressing customer service issues.

Sources: Tim Bradshaw, “It Pays to Think Before You Tweet; Twitter May Be the Latest Hot Marketing Tool, but Companies Need to Ensure the Tone of Their Message Suits the Medium before Launching a Campaign,” Financial Times, July 21, 2009, p. 14; Anonymous, “Make Twitter an Effective Business Tool in 4 Steps,” PR News 65, no. 29 (2009); Emily Bryson York, “Social Media Allows Giants to Exploit Niche Markets,” Advertising Age 80, no. 25 (2009): 3-4; Pat Gallagan, “Twitter as a Learning Tool. Really,” Training and Development 63, no. 3 (2009): 28–30; Anonymous, “RAF Uses Twitter and Flickr to Show Potential Recruits Life in Force,” New Media Age, July 23, 2009, p. 3.

Technology in HR

fo to

st o

rm /i

St o

ck p

ho to

characteristics. Your strengths might include past experience working in the industry or your graduation from a school with a strong reputation for pro- ducing high-quality graduates. These are all capabilities that help set you apart from other job seekers. At the same time, you probably have some weaknesses. Perhaps you have decided you must live in a certain city, or maybe your grades are lower than you wish. These weaknesses might work against your ability to

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46 Chapter 2 Making Human Resource Management Strategic

obtain a desirable job. The strengths and weaknesses of companies are similar in that they focus on characteristics that are part of the organization itself.

Obviously it is more desirable to have strengths than weaknesses, but an understanding of both is essential for true success. Just as an honest assess- ment can help you get a job, organizations do better when they continually assess both strengths and weaknesses. Most strengths and weaknesses can be thought of in terms of the resources that an organization has. Some are tangi- ble, such as money and equipment; others are intangible, such as reputation.

From a resource-based view of organizations, resources—including human resources—are true strengths when they are both valuable and rare. Accordingly, the ability to attract and keep high-quality employees represents a strength for the organization only when high-quality employees are hard to find. After all, if such employees are easy to find, every company will have them.

Consistent with the resource-based perspective, good management of skilled people is critical because high-quality employees are relatively rare. A recent report by the Task Force on Workforce Development concluded that much of the workforce lacks required skills. There is a shortage not only of technological and computer skills but also of more general skills such as critical thinking and communication.22 This shortage is not confined to the United States; similar issues have been identified in other countries, such as the United Kingdom, France, and Germany.23 Thus, effective ways to attract and keep employees do, in fact, represent sources of internal strength that can give an organization a competitive advantage.

Yet to be true strengths, human resource practices must also provide some- thing that is difficult to imitate and for which there is no substitute. As you will see later in this chapter, creating an integrated set of human resource practices is extremely difficult. Competitors are often able to imitate parts of a human resource strategy, but they can rarely imitate the entire package.24

This is particularly true when an organization is able to retain high-quality employees throughout long careers. In terms of substitutability, there is always the possibility that machines can replace employees, as has already occurred in some manufacturing organizations. However, people are still needed to design and operate the machines. Given the current emphasis on knowledge and service work, it appears that most organizations will continue to need employees, and thus human resource strategies, well into the future.

In summary, human resource practices can represent a critical internal strength for organizations. Conversely, lack of effective human resource management can represent a major weakness. Gathering information about human resource capabilities is therefore a vital part of an effective assessment of organizational strengths and weaknesses.

ANALYZING INFORMATION AND MAKING DECISIONS Once information has been gathered, the next step in the strategy-formula- tion process is to analyze the information and make decisions. Spending time and effort to gather information is of little value unless it is used to arrive at high-quality decisions that are then carried out.

Research suggests four steps that can be used to make decisions effectively.25

These steps are illustrated in Figure 2.2. The first step, to build collective intu- ition, develops when a group of people meet together often to discuss the information that has been gathered. Through these meetings, each member

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How Is Strategy Formulated? 47

can share what he or she knows with other group members. The outcome is a sense of intuition, or “gut feel,” about the proper strategic direction.

The second step is to stimulate conflict. It may seem strange, but experienc- ing conflict about how to do things is very important for making good deci- sions.26 In the absence of conflict, important threats and weaknesses are often ignored. Making sure that the team of decision makers includes people with different backgrounds can be helpful. Experienced managers and younger employees, for example, bring different insights to the decision-making pro- cess, as do marketing personnel and operations personnel. Another way to encourage conflict is to assign team members to advocate different possibili- ties, even if they don’t really believe those possibilities are best.

The third step in good decision making is to maintain an appropriate pace. Decision makers too often see their task as so large that they become para- lyzed. The key to effective decisions is to focus on issues that are large enough to be meaningful but small enough to be resolved. In this way, the team can view each decision as part of a larger set of decisions. The best plan is to set a flexible timeline that provides guidance for moving the decision forward but does not force the group to make the decision prematurely.

The final step is to diffuse politics. Bad decisions result when members of the decision-making team focus on making themselves look good at the expense of others. To avoid this problem, the team should begin with a com- mon goal that develops a sense of cooperation rather than competition. Each team member should have a clear area of responsibility, in which he or she can provide expert input.

Strategy formulation is best done by a group of decision makers working together to carefully analyze the information obtained from assessing the organization’s external environment and internal capabilities. The group then makes decisions about the best way to provide goods and services. This process of gathering and analyzing information is fundamental in determining how to

Figure 2.2 Effective Decision Making. Source: Information from Kathleen M. Eisenhardt, “Strategy as Strategic Decision Making,” Sloan Management Review 40 (1999): 65–72.

Step 1: Build Collective Intuition n

Step 4: Diffuse Politics

Step 3: Maintain Appropriate Pace

Step 2: Stimulate Conflict

v

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48 Chapter 2 Making Human Resource Management Strategic

compete with other organizations. Good decision making also provides plans for building a high-quality workforce.

? CONCEPT CHECK 1. What are the three steps in the strategy-formulation process? 2. What are some components of an organization’s external

environment? 3. Why does human resource management represent an impor-

tant potential strength for organizations? 4. What four steps are necessary for effective decision making?

Earlier we made the point that competitive business strategy and human resource strategy must work together to ensure high organizational effective- ness. In this section, we look more closely at competitive business strategies, which encompass various types of strategies. For instance, large corporations have strategies that guide their choices concerning the types of businesses they will pursue. Some corporations are made up of business units that are very similar; Whirlpool Corporation, for example, focuses only on making and selling appliances. Other corporations are made up of business units that are very different from one another. At General Electric, business units do very different things: some make small appliances, others provide financial services, and still others manufacture plastics. Decisions related to business types make up corporate-level strategy.

Good corporate-level strategy is important, but a different kind of strategy is most critical for day-to-day human resource activities. This other type of strategy is business-level strategy, which concerns how the organization will compete with other companies that provide similar goods and services. A cor- poration with several different business units needs a business-level strategy for each unit. Because each unit provides a specific type of good or service to meet a particular set of customer needs, strategies for the various units might be similar, or they might be very different. In any case, it is within business units that strategic human resource practices add the most value. Throughout this textbook we therefore focus on business-level competitive strategy.

Organizations can pursue a wide variety of strategies, but two generic business-level strategies capture the main ways business units compete: cost leadership and differentiation. Organizations with a cost leadership strat- egy seek to become low-cost producers of goods and services; their goal is to develop efficient production methods that enable them to sell at a lower price than competitors. Organizations with a differentiation strategy seek to produce goods and services that are somehow superior to the goods and services provided by competitors; their goal is to create unique value for which customers are willing to pay a higher price.27

Corporate-level strategy A competitive strategy that concerns the different businesses and diversity of products and services that an organization produces.

Business-level strategy A competitive strategy that concerns how an organization, or part of an organization, will compete with other organizations that produce similar goods or services.

Cost leadership strategy A business-level strategy that seeks to produce goods and services inexpensively.

Differentiation strategy A business-level strategy that seeks to produce goods and services that are in some manner superior to what is produced by competitors.

What Are Common Competitive Business Strategies?

LEARNING OBJECTIVE 2

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What Are Common Competitive Business Strategies? 49

COST LEADERSHIP STRATEGY An organization chooses the cost leadership strategy when its decisions and actions focus on providing value by reducing cost. The goal of a business pur- suing cost leadership is to become highly efficient, which will allow the orga- nization to create value by producing goods and services at lower cost. Many organizations using a cost leadership strategy sell at prices lower than their competitors. However, not every company that sells at low prices is using a cost leadership strategy. Cost is, of course, not the same thing as price. Cost captures the expenses associated with creating the product, whereas price is what the organization receives for the product. The difference between cost and price creates profit. The key to the cost leadership strategy is in control- ling expenses, not in simply setting low prices.

Southwest Airlines provides a good example of a firm with an effective cost leadership strategy. Southwest tries to have the lowest prices, but that is not the real basis of its strategy. Its strategy, rather, is to reduce the expenses associated with providing air travel. Other airlines often sell tickets at prices similar to Southwest’s, but their costs are higher, which results in lower profits. These firms are sometimes forced to match Southwest’s ticket prices, even when the matching price is below what it costs them to fly passengers. The practice of setting prices below costs is one reason for the high bankruptcy rate in the airline industry.

Organizations with a successful cost leadership strategy usually produce basic and standardized products and services and often have a relatively large share of the market. They pay lower prices for raw materials because they buy them in large quantities, and they use technology to develop efficient manu- facturing methods. Walmart is another organization that has succeeded with a cost leadership strategy. Walmart has extremely efficient operations. It buys in high volume, which enables it to obtain favorable prices from suppliers. It also has a very efficient transportation system, which allows it to move goods at relatively low cost. Overall, this efficiency enables Walmart to sell products at low prices but still earn a profit.

A focus on cost reduction cannot come at the expense of producing goods and services with at least acceptable levels of quality and desirable features. Even if an organization’s products are lower-priced than competing products, customers will not purchase them if their quality is unacceptable. Of course, it isn’t always easy to tell what customers will consider when making the tradeoff between price and desirable features. For instance, observers long thought that Southwest’s policy of no assigned seats would cause problems, but cus- tomers don’t seem to care enough about seat choice to pay a higher price. In fact, the CEO once posted a blog about doing away with the open seating policy, but quickly received over 700 email messages that were mostly against such a move.28 In contrast, even though it costs more, Southwest is updating its planes to include Internet connectivity and personal entertainment sta- tions. Such updates are needed because competitors began including simi- lar amenities and passengers communicated a desire for the benefits, even at a slightly higher cost. The key to success is not necessarily providing all the unique features that other airlines offer but rather reducing costs while pro- viding enough of those features to satisfy passengers.

One problem with a cost leadership strategy is that usually just one organi- zation can be the lowest-cost provider in any industry, and this is often an orga- nization that has a large share of the market and is defending its territory.29

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50 Chapter 2 Making Human Resource Management Strategic

Therefore, only a relatively small number of business organizations can be successful with a cost leadership strategy. Another problem occurs when the market changes in such a way that the goods or services provided are no lon- ger valued. Changes in technology can have this effect. Such changes can result in an organization that is a highly efficient provider of goods or services that no one needs or wants.

In the end, the cost leadership strategy can result in long-term success for organizations such as Walmart and Southwest Airlines. But what is it that allows firms such as these to succeed with a cost leadership strategy? Both firms are obsessed with cost reduction. They have cultures that create a sense of frugal- ity, discipline, and attention to detail, as well as tight control structures that carefully track cost changes, and they continually focus on learning how to do what they do more efficiently. Much of their cost leadership ability stems from their strategic human resource management practices: Their employees work more efficiently than employees at other organizations.

DIFFERENTIATION STRATEGY An organization following the differentiation strategy focuses on offering value by providing something better than competitors—something for which customers are willing to pay a higher price. The organization may differenti- ate its goods or services in any one of several ways. For example, the product itself may be unique, as when a pharmaceutical firm has a drug that no other firm has. A marketing approach is another way of differentiating goods and services. Most advertising is created to generate perceptions that goods or ser- vices are somehow different from those offered by competitors. Yet another area for differentiation is excellent customer service. Customers are often will- ing to pay more for a product if they know that the organization will help them if a problem arises. The effect of differentiation for fast-food restaurants is described in the accompanying “How Do We Know?” feature.

Target is a retail store that employs a business-level strategy of differentia- tion, seeking to set prices close to those of retailers such as Walmart. But the source of competitive advantage is not the cost structure itself. Rather, Target seeks to provide something slightly different from Walmart at a similar but perhaps slightly higher price. Target has store designer brands that are geared toward slightly more upscale customers. It also focuses on having clean, well- organized stores, as well as enough employees to ensure rapid checkout. In the end, Target tries to beat Walmart not by having lower cost but rather by providing a different value. Target’s unique value is attractive to a certain set of customers as long as costs are only slightly higher. This differentiation strategy works best when economic conditions are generally favorable. For example, early in the recession of 2008, consumers appeared to be less willing to shop at Target instead of Walmart, but relative profits at Target have substantially improved as the economy has recovered.30

Another example of a firm with a differentiation strategy is BMW, which produces automobiles that are more expensive than those of many of its com- petitors. Consumers are willing to pay a higher price for a BMW because they perceive it has greater value, particularly in the areas of reliability, comfort, and image. People expect a BMW to be a more enjoyable car to drive than a less-expensive alternative.

Whereas few organizations in a given industry can successfully use the cost leadership strategy, a large number of organizations can simultaneously pursue

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What Are Common Competitive Business Strategies? 51

differentiation strategies. Each simply seeks to differentiate in a unique way. The key is to create value that is perceived as high enough to warrant a higher price. Of course, organizations with a differentiation strategy cannot simply ignore cost. Usually, their cost structures—and associated prices—must be close to those of competitors. If costs and prices are too far out of line, the added value of the unique features may not be sufficient to encourage purchases.

The requirements for succeeding with a differentiation strategy are quite different from those associated with the cost leadership strategy. Organizations using a differentiation strategy must continually struggle to show that their products are truly unique, which often requires them to adapt rapidly to changing customer preferences. Differentiators must also be highly innova- tive, and they must take risks and continually prospect for new ways of doing things. But differentiation and cost leadership are similar in one respect: Organizations that succeed with differentiation do so because of their human resource practices. Organizations using the differentiation strategy are cre- ative and innovative because they have employees who do things better than the employees of their competitors, which helps them to be perceived as pro- viding something with higher value.

COMBINATION STRATEGY An interesting question is whether an organization can simultaneously pur- sue both cost leadership and differentiation. Theoretically, this is difficult. Organizations trying to purse both strategies often end up doing neither very well; they are stuck in the middle with no real competitive advantage.

WHAT DIFFERENTIATES FAST-FOOD RESTAURANTS? Have you ever wondered why some people like to eat at McDonald’s, but others prefer Burger King? What sets one fast-food chain apart from another? To find out, Bonnie Knutson asked 200 college students about their perceptions of Arby’s, Burger King, KFC, McDonald’s, Subway, Taco Bell, and Wendy’s. She asked the students to rate these res- taurants on features such as atmosphere, menu choices, consistency, and price.

The study found that students have common beliefs about differences between fast-food res- taurants. McDonald’s received the highest overall ratings. Students saw McDonald’s as particularly strong in terms of combination meals, kid’s meals, consistency, and value. They gave Taco Bell the highest rating for low-priced food. Subway received the highest rating for good nutrition, and Wendy’s for menu variety.

The Bottom Line. The results of this study illustrate the concepts of cost leadership and dif- ferentiation. Taco Bell is seen as a low-cost pro- vider, which can be an effective strategy as long as the cost structure really allows it to produce and serve food at low cost. Subway has been suc- cessful at differentiating itself based on nutrition, and Wendy’s has differentiated based on menu variety. These restaurants also have different human resource strategies that help support their competitive strategies. Professor Knutson con- cludes that fast-food restaurants should place high importance on creating a clear brand image that is consistent with their strategy for competing with other restaurants.

Source: Bonnie J. Knutson, “College Students and Fast Food: How Students Perceive Restaurant Brands,” Cornell Hotel and Restaurant Administration Quarterly 41, no. 3 (2000): 68–74.

How Do We Know?

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52 Chapter 2 Making Human Resource Management Strategic

Their desire to add unique features creates a cost structure that does not allow them to produce goods and services at the lowest cost. Yet their focus on cost does not allow them to develop features that are truly exceptional.

Most organizations must therefore choose one or the other approach and make strategic decisions accordingly. An organization with a primary cost leadership strategy should seek to differentiate only as long as doing so does not harm its ability to be the lowest-cost producer. Similarly, an organization with a primary differentiation strategy should seek to reduce costs wherever possible. But cost reduction only makes sense if it does not destroy the fea- tures that make the organization’s product unique and valuable.

Cases where an organization is successful at simultaneously pursuing cost leadership and differentiation strategies are rare and tend to occur in mar- kets where competition is not strong. If the market does not include a truly low-cost provider, and if most competitors are stuck between cost and differ- entiation, then an organization may be able to have it both ways for a time. An organization may also pioneer a unique innovation that provides it with a secret or protected way of doing things that is both unique and low in cost. Unfortunately, such scenarios do not typically last very long.31

? CONCEPT CHECK 1. What are the basic characteristics of the cost leadership

strategy? 2. What are the main features of the differentiation strategy?

Our discussion of competitive strategy shows that successful organizations cre- ate value by doing things for customers that other organizations do not do as well. The continued success of these organizations depends on their pos- sessing capabilities that competitors cannot easily copy. One source of poten- tial capability is physical resources, such as technology and equipment, which are often easy for competitors to duplicate. As we have seen, another source of potential capability—one that is less easy to copy—is human resources.32

Effective human resource practices create a rare and difficult-to-imitate capa- bility by increasing employee skills, motivation, and opportunity, which in turn translate to positive operational and financial outcomes.33

Effective human resource management capabilities are particularly difficult to copy because effectiveness comes not from a single practice but from a num- ber of related practices. These practices are developed over extended periods of time. Social relationships that arise from human resource practices are also extremely difficult to copy. Taken together, these factors make human resource capabilities a source of potentially sustainable competitive advantage.34

The same characteristics that make human resource practices difficult to duplicate can sometimes make their results difficult to understand and

What Are Basic Approaches to Human Resource Strategy?

LEARNING OBJECTIVE 3

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What Are Basic Approaches to Human Resource Strategy? 53

predict. Nevertheless, research has identified consistent patterns of good human resource management. Researchers have taken two basic approaches in investigating human resource patterns:

The universalistic approach seeks to identify a set of human resource practices that is beneficial for all organizations. The goal of universal- istic research is therefore to find the one best way of managing human resources. The contingency approach seeks to match human resource practices with competitive business strategies. In this view, the human resource practices that work best for organizations pursuing a certain competitive strategy will not necessarily work best for organizations pursuing a different strategy.36

Research supports both approaches. Fortunately, the two approaches are not contradictory. Whereas some human resource practices are beneficial for all organizations, the benefits of other practices seem to depend on the orga- nization’s competitive business strategy. Furthermore, the two approaches have different areas of interest. The universalistic approach tends to focus on broad principles, whereas the contingency approach focuses more on spe- cific practices.37 The two approaches are thus complementary and often work together to form an overall human resource strategy.

THE UNIVERSALISTIC APPROACH The universalistic approach, as we have seen, seeks to identify the best prac- tices for all organizations to follow. One important finding of universalis- tic research is that human resource practices are most effective when they are bundled together into internally consistent clusters.38 A single effective human resource practice, such as the use of a good employee-selection test, provides only limited benefits unless it is combined with other effective prac- tices. For instance, using a computer knowledge test to select employees offers more benefits when such testing is combined with a compensation system that rewards people who actually use the computer skills to do their jobs. In a simi- lar way, a training program that encourages innovation is most effective when it is combined with appraisal and compensation systems that measure and reward the behaviors taught during training. Sets of human resource prac- tices that are internally consistent and that reinforce each other are known as human resource bundles.

Many practices related to hiring and motivating employees cluster natu- rally into two bundles. One bundle is based on a control strategy; the primary focus of human resource practices in this bundle is standardization and effi- ciency. The second bundle is based on a commitment strategy; the primary focus of practices in this bundle is to empower workers and build a strong sense of loyalty and commitment .39

Both the control and commitment strategies have been found in a num- ber of different settings.40 For example, in the steel production industry, researchers found that the practices of a distinct group of plants represented a commitment strategy. These plants reported widespread use of incentive pay, careful screening of recruits, high teamwork, and extensive sharing of information. Another group of plants used practices representing a control strategy. These practices included close supervision, strict work rules, narrow job responsibilities, and little formal training.41 Similar observations were

Universalistic approach A human resource perspective that seeks to identify methods of managing people that are effective for all organizations.

Contingency approach A human resource perspective that seeks to align different ways of managing people with different competitive strategies for producing goods and services.

Human resource bundles Groups of human resource practices that work together to create a consistent work environment.

Control strategy A human resource bundle that emphasizes managerial control and tries to streamline production processes.

Commitment strategy A human resource bundle that builds strong attachment to the organization and emphasizes worker empowerment.

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54 Chapter 2 Making Human Resource Management Strategic

made in a study of automobile assembly plants. One set of plants reported using commitment strategy practices such as extensive recruiting, employee involvement groups, and widespread training. These practices fostered a strong sense of cooperation between employees and managers. Other assem- bly plants reported using control strategy practices such as narrowly defined jobs and close supervision. The control practices created large status differ- ences between employees and managers.42

Studies comparing the control and commitment strategies almost always conclude that the commitment strategy is better. Organizations with commit- ment strategies have higher productivity, and they generally produce higher- quality goods and services.43 The superiority of a commitment strategy is consistent across various types of organizations and industries, but it is particu- larly strong in manufacturing organizations.44 Moreover, its benefits have been documented in countries other than the United States, such as New Zealand and South Korea.45 A strong research conclusion from the universalistic approach is therefore that organizations should adopt a commitment strategy.

The commitment strategy is often summarized as a human resource bundle that encourages high involvement. (The major human resource practices in the commitment strategy bundle are summarized in Table 2.1.) What do these practices have in common? Why are they consistently related to higher produc- tivity and quality?

One answer to the question of what the practices have in common is that they communicate a message that management cares about employees. Organizations with managers who value people tend to use good human resource practices

Table 2.1 Examples of Commitment Strategy Practices

Practice Area Typical Examples

Job Tasks Broad job responsibilities

Meaningful tasks

Rotation across a variety of tasks

Empowerment Inclusive decision making

High levels of responsibility

Building employee confidence

Teams Organizing around work teams

Self-management within teams

Communication Two-way communication

Quality-of-life surveys

Encouraging suggestions

Training Extensive new employee training

Formal training for everyone

Multiple job skill development

Compensation Pay for performance

High levels of pay

Ownership forms of pay such as stock

Staffing Highly selective recruiting

Identification of skilled workers

Long-term relationships with employees

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What Are Basic Approaches to Human Resource Strategy? 55

to effectively deliver goods and services.46 These organizations provide employ- ees with opportunities for personal growth. Selective hiring, extensive training, and pay linked to performance provide employees opportunities to excel, which lead to deeper commitment to the organization.47 The organizational climate conveys a sense of concern for employees, which increases job satisfaction and employee commitment.48 Extensive training also improves employee skills. Employees develop a strong attachment to the organization and are less likely to quit.49 Employees who think that human resource actions simply minimize cost at the expense of employees are less committed and satisfied than employees who see personnel actions as increasing quality and ensuring their well-being.50

In essence, the commitment strategy bundle of human resources is beneficial because these practices treat employees as a critical resource.

Such strong support for the commitment strategy may seem to suggest that all organizations should simply adopt this strategy and the related human resource practices. Unfortunately, it’s not quite this simple. The commitment strategy is a broad concept that includes few specific details. The strategy recommends that organizations hire high-quality employees and give them freedom and responsi- bility. As explained in the “How Do We Know?” feature, the commitment bundle creates a climate of trust and cooperation, which in turn leads to knowledge exchange and ultimately increased performance. However, the commitment strategy is not clear and consistent about specific ways to do these things.51

DO GOOD HUMAN RESOURCE PRACTICES IMPROVE PERFORMANCE? Is it wise for an organization to spend money to find, hire, and train good employees? What are the effects of better hiring, training, and compen- sation? Are the benefits that these practices bring worth the costs? Christopher Collins and Ken Smith set out to answer these questions by obtaining data from 136 technology firms. They measured high- involvement work practices, which are consistent with the commitment strategy. Specific items asked about human resource practices of selection, train- ing, compensation, and performance appraisals. The researchers linked these practices to revenue from new products and sales growth. They also assessed climates for trust and cooperation, as well the exchange of knowledge.

The study found that organizations using the commitment strategy had increased revenue and growth. The data also provided insight into the pro- cess by which human resource practices improve financial returns. Better methods for hiring, train- ing, and paying employees create a climate of trust

and cooperation. This good organizational climate leads to more learning and exchange of informa- tion among employees. The improved learning and sharing of ideas in turn corresponds with increased financial performance.

The Bottom Line. Effective human resource practices build a sense of trust and cooperation among workers, which leads them to share informa- tion and learn from each other. These positive inter- actions among employees, which are set in motion by good human resource management, help innova- tive firms grow and make money. Professors Collins and Smith conclude that leaders of technology firms should carefully choose their human resource prac- tices used to manage knowledge workers.

Source: Christopher J. Collins and Ken G. Smith, “Knowledge Exchange and Combination: The Role of Human Resource Practices in the Performance of High- Technology Firms,” Academy of Management Journal 49 (2006): 544–560.

How Do We Know?

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56 Chapter 2 Making Human Resource Management Strategic

THE CONTINGENCY APPROACH The contingency approach to human resource strategy seeks to align people- management practices with competitive business strategies. Because this book takes a strategic view of human resource management, we emphasize the con- tingency approach. In this section, we look at two key differences in organiza- tions: whether they have a cost leadership or a differentiation strategy and whether they have an internal or an external labor orientation. In the remain- der of the chapter, we examine how these differences combine to define an organization’s human resource strategy.

Cost Leadership Versus Differentiation We’ve already discussed the differences between the competitive business strategies of cost leadership and differentiation. We’ve also suggested that these two strategies differ in terms of human resource practices. Table 2.2 summarizes important differences in how organizations with these strategies approach human resource management.

Organizations with a cost leadership strategy focus their efforts on increas- ing efficiency and hire generalists who work in a variety of different positions.52

They tightly control work processes and carefully define what employees should do. Appropriate behavior is specifically prescribed for employees, and human resource practices focus on minimizing labor costs.53

A cost leadership strategy with a focus on tightly controlled processes makes sense when the organization knows exactly what it wants people to do. This situation usually arises when the preferences of consumers are well known and seldom change. The result is mass production of standardized goods or services at the lowest possible cost. As described earlier, Walmart is a good example of a company pursuing this strategy. The company care- fully standardizes practices and focuses on reducing deviations within its processes. Employees focus their efforts on shipping and selling goods as effi- ciently as possible.

In contrast, organizations using a differentiation strategy focus their human resource efforts on innovation and quality enhancement. Employees in these orga- nizations are often specialists who perform very specific tasks. Rather than seeking to control processes, these organizations concentrate on outcomes. Workers have more choice about how things should be done,54 and accordingly, they are held accountable for outputs such as quality of the goods and services they produce.

Table 2.2 Strategic Human Resource Differences

Cost Strategy Differentiation Strategy

Emphasis on group contribution Emphasis on individual contribution

Focus on improving processes Focus on outcomes and results

Development of general employee skills Development of specific employee skills

Cooperation among employees Moderate competition among employees

Efficiency culture Innovation culture

Clearly prescribed tasks Flexible task assignments

Rules and procedures that standardize work Few rules and procedures; exceptions to rules allowed

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What Are Basic Approaches to Human Resource Strategy? 57

A differentiation strategy with a focus on outcomes is particularly beneficial when organizations produce customized goods or services. In these organiza- tions, the best process for completing work is often unknown, and employees are expected to continually look for different ways of doing things.55 Service orga- nizations such as investment firms and healthcare providers frequently have an outcome focus because their customers have very different needs and expecta- tions. Unique customer expectations require employees to change their actions to best serve each client.56 For instance, the investment banking firm Morgan Stanley works to build long-term relationships and meet the specific needs of clients, adapting its services for each client. This customization approach has helped Morgan Stanley obtain important clients such as Google.57

Internal Versus External Orientation In addition to differing in competitive strategy, organizations differ in the extent to which they develop employees’ skills within the organization. An organization with an internal labor orientation seeks to make its own talent and to keep employees for long periods of time. In contrast, an organization with an external labor orientation seeks to buy talent. These organizations hire people who already have the needed skills and in many cases keep them for only a short period of time.58 Internal and external orientations have been identified across a number of organizations and industries, including sales, manufacturing, technology, food, and legal firms.59 Basic differences between the two orientations are summarized in Table 2.3.

Organizations with an internal labor orientation generally hire young employees; a primary goal of hiring is to identify people who will have long careers within the organization. Because employee turnover is undesirable, human resource practices focus on developing loyalty and commitment. The idea is to develop a close relationship with employees and to provide them with a sense of stability and security. In exchange, employees agree to sacri- fice some of their own personal interests. For example, they agree to develop skills that may not be valuable to other organizations, which decreases their chances of receiving other job offers.60

An internal orientation has several potential strengths. Organizations are able to predict what skills and capabilities will be available to them in the future, and employees build strong relationships with one another, so coordination

Internal labor orientation A human resource perspective that emphasizes hiring workers early in their careers and retaining those workers for long periods of time.

External labor orientation A human resource perspective that limits attachment to a specific organization and emphasizes hiring workers who already possess the skills they need to complete specific tasks.

Table 2.3 Differences in Labor Orientation

Internal External

Hiring of people early in their careers Hiring of people who have already developed skills

Extensive orientation for new employees Limited orientation of company policies

Focus on internal promotions Focus on bringing in new talent

Ongoing training opportunities Limited training opportunities

Development of skills valuable only to the specific organization

Development of skills valuable to many organizations

Bias against laying off employees Acceptance of employee layoffs

Employees contribute because of loyalty Employees contribute because of money

People identify closely with the organization People identify closely with a profession

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58 Chapter 2 Making Human Resource Management Strategic

and cooperation are high. Organizations with an internal labor orientation also save money because they reduce expenses for recruiting, interviewing, and hiring employees. One company that has benefited from emphasizing an internal labor orientation is the British grocery producer Fenmarc, which is profiled in the accompanying “Building Strength Through HR” feature.

An internal labor orientation has potential weaknesses as well. Organizations develop long-term commitments that make it difficult for them to adapt. Changes in strategic direction are complicated because workers have been encouraged to develop specific skills necessary for carrying out the old strat- egy. Long-term commitments may also make it difficult for organizations to replace workers whose skills are not up to date. In addition, such organizations tend to develop bureaucratic structures that make them inflexible.61

Organizations with an external labor orientation look very different. These organizations seek out people who have already developed skills, and the primary goal of hiring is to identify people who are able to contribute with- out additional training. Employee turnover can be desirable in some cases

Building Strength Through HR

FENMARC PRODUCE LTD Fenmarc Produce is a vegetable processor and packer located in the United Kingdom. For a num- ber of years, the company was not consistently prof- itable. A few years ago, the privately held company was purchased by a leadership team that placed special emphasis on linking competitive strategy to human resource management. Company lead- ers, recognizing that vegetables are commodities, decided to focus on making the company a low-cost producer. Fenmarc also sought to become a pre- ferred supplier for the Walmart affiliate Asda, which is a supermarket giant in the United Kingdom.

In order to improve its production processes and ensure the delivery of safe produce, Fenmarc implemented a widespread training program. The program uses case studies, group activities, and coaching to improve the individual skills of employees. Employees who complete the training report more confidence in their abilities.

Fenmarc sees each of its over 400 employees as a valuable contributor. An important part of the organizational philosophy is that every individual has important opinions that should be valued. Six key principles capture this emphasis on people:

Say it as it is. Challenge it, improve it, learn from it.

Integrity before profit. Make it fun, make it happen. One team, one purpose. Respect for the individual.

Treating people well has helped Fenmarc retain its employees and has also improved effi- ciency. In a two-year period, the company received 2,200 suggestions for continuous improvement, and accidents fell by 20 percent. Investing more in people has paid off by improving company profitability.

Source: Information from David Pollitt, “Investment in Training and Development Bears Fruit for Fenmarc,” Human Resource Management International Digest 15, no. 1 (2007): 27–29; www.fenmarc.com/

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What Are Basic Approaches to Human Resource Strategy? 59

because it provides a way to make sure that the organization is able to continu- ally hire people with the most up-to-date skills. Long-term commitments are avoided. The relationship between the organization and its employees is weak and based on contractual agreements. Employees work because they are paid, not necessarily because they are loyal. They usually do not develop a strong feeling of attachment to the organization.

A primary strength of the external orientation is flexibility; it allows the organization to respond quickly to changing conditions. Workers trained by universities or other employers can be added quickly in areas that demand new skills. Labor costs are not fixed, and the total number of employees can be increased or decreased. A primary weakness of this orientation is lack of consistency. Employees do not really provide a unique competitive advantage. Employees are essentially shared with other organizations, which makes it more difficult to create a rare resource that cannot be imitated.62

What is the basis for choosing an internal or an external labor orientation? Several considerations are important:

Will the organization continue to need certain skills and inputs over a long period of time? If so, the organization is more likely to find an internal orientation useful. Does the organization produce goods and services that require unique labor inputs? If so, the organization may not be able to buy the labor inputs it needs. Employees must be trained to perform tasks that exist only in that organization, so an internal orientation is more appropriate than an external one. Does the organization know exactly what it needs employees to do? Sometimes an organization is unclear about what it wants from employees in certain areas. Organizational leaders may know that they need to improve a certain area, but they may be unfamiliar with the employee skills needed to carry out the improvement. Of course, an internal labor strategy allows the organization to enter into a long- term agreement that enables a new employee to become a committed member of the team and change the way some work tasks are com- pleted. In contrast, an external labor strategy allows an organization to quickly acquire specialized skills that are taught in other places, such as universities. Organizational leaders know the skills and abili- ties needed, and they also know that current employees are unable to fill the needs. In many cases it is easier to hire specialized workers such as computer programmers with the latest skills than it is to train them.63

? CONCEPT CHECK 1. How does the contingency approach to human resource

management differ from the universalistic approach? 2. What human resource practices are associated with cost

reduction strategies? differentiation strategies? 3. What are the differences between an internal labor orienta-

tion and an external labor orientation?

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60 Chapter 2 Making Human Resource Management Strategic

As we have just seen, the contingency approach identifies two strategic choices underlying an organization’s human resource strategy: whether to focus on cost leadership or differentiation and whether to make or buy talent. We can combine the two choices into a grid describing four different forms of human resource strategy, as shown in Figure 2.3. Based on the grid, we could call these four HR strategies the internal/cost, external/cost, internal/differentiation, and external/differentiation approaches. For ease of reference in this book, though, we will call the strategies the Loyal Soldier HR strategy, the Bargain Laborer HR strategy, the Committed Expert HR strategy, and the Free Agent HR strategy.

A word about these terms is in order before we begin our discussion. The strategies we will discuss reflect common differences related to managing peo- ple at work, but even human resource professionals do not have terms that describe these strategic differences clearly. Because the technical terms are somewhat awkward and hard to conceptualize, we have developed the descrip- tive terms just mentioned. We believe these descriptive terms make this text- book more interesting and easier to read, but you should be aware that the terms may not be the exact terms you will hear used in other courses or in the business world. So it is important to remember that you may sometimes need to explain the meaning of the terms when you talk to others who have not read this book. However, using the terms Loyal Soldier, Bargain Laborer, Committed Expert, and Free Agent should help you get a clearer picture of what we mean when we describe the four different strategies.

INTERNAL/COST HR STRATEGY: THE LOYAL SOLDIER Combining an internal orientation with a cost leadership strategy results in what we will call a Loyal Soldier HR strategy. We chose this label because this strategy emphasizes hiring and retaining loyal employees who do whatever the company asks of them. Organizations with this strategy design work so that employees have broad roles and perform a variety of different tasks. People are recruited and hired because they fit the organization culture and because of their poten- tial to become loyal employees. Efforts are made to satisfy the needs of employ- ees and build a strong bond that reduces the likelihood of employee turnover. Organizations with this human resource strategy hire people early in their careers and provide them with extensive training in a number of different skills. Careers often include a number of very different positions, with promotions often made into positions that are not closely related to previous experiences. Performance appraisals are designed to facilitate cooperation rather than com- petition. Compensation includes long-term incentives and benefits and is often linked to the overall performance of the organization. Unions, which can help build feelings of unity, are frequently observed in these organizations.

United Parcel Service (UPS) is a good example of a company with a Loyal Soldier HR strategy. UPS’s competitive strategy is to provide low-cost shipping. UPS has a strong internal promotion policy. A typical employee enters UPS as a part-time worker moving and sorting boxes. As employees work their way through the ranks, they may perform several different jobs, such as driver and

Loyal Soldier HR strategy A human resource strategy that combines emphasis on long- term employees with a focus on reducing costs (an internal/cost approach).

What Are Common Human Resource Strategies?

LEARNING OBJECTIVE 4

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What Are Common Human Resource Strategies? 61

facility manager. The company provides training in a number of areas, with an emphasis on teaching the company’s philosophy and policies. Teamwork, cooperation, and a strong work ethic are encouraged. Long-term incentives are tied specifically to UPS, and over half of the drivers and full-time employ- ees own stock in the company. Extensive benefit packages include excellent medical and dental plans. The company takes an interest in employees and offers wellness programs that encourage physical activity. These programs help reduce injuries and absenteeism.64 The end result is a strong bond between UPS and its employees. Most employees report a great sense of pride in working for UPS. The bottom-line result is that even during difficult eco- nomic times, UPS has seen profits that are higher than competitors.65

EXTERNAL/COST HR STRATEGY: THE BARGAIN LABORER Combining an external orientation with a cost leadership strategy results in a Bargain Laborer HR strategy. The emphasis of this strategy is on obtain- ing employees who do not demand high wages. Organizations with this strat- egy design work so that managers can tightly control employee efforts. Each employee is given clearly defined tasks that can be learned easily. People are recruited and hired to perform simple tasks that do not require clearly developed skills. Little attention is paid to meeting the long-term needs of employees. Organizations with this human resource strategy do not pro- vide careers with clear paths for promotion and advancement. Performance appraisal focuses on day-to-day feedback and rarely incorporates formal mea- sures. Training is mostly limited to on-the-job techniques that teach specific methods for completing particular tasks. Compensation is frequently based on hours worked, and benefits and long-term incentives are minimal. Short- term employment tends to make unions somewhat rare in organizations that pursue cost efficiency through an external labor orientation.

The Bargain Laborer HR strategy is very common for many positions in the hotel industry. For instance, a regional hotel located in Phoenix, Arizona is constantly searching for employees to work in jobs such as housekeeping and

Bargain Laborer HR strategy A human resource strategy that combines emphasis on short- term employees with a focus on reducing costs (an external/cost approach).

Bargain Laborer External/Cost HR Strategy

Cost Leadership

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rie nt

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Differentiation

Strategic Direction

Emphasis on Efficiency Pattern of Buying Talent

Emphasis on Distinctiveness Pattern of Buying Talent

Free Agent External/Differentiation HR Strategy

Loyal Soldier Internal/Cost HR Strategy

Emphasis on Efficiency Pattern of Making Talent

Emphasis on Distinctiveness Pattern of Making Talent

Committed Expert Internal/Differentiation HR Strategy

Figure 2.3 Strategic Framework for Human Resources.

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62 Chapter 2 Making Human Resource Management Strategic

food services. Most people who apply for these jobs are hired. Once hired, employees are given minimal on-the-job training that focuses on how to per- form specific tasks. They are expected to carefully follow their supervisor’s instructions. Pay is based on the number of hours worked. Most employees do not receive benefits. The hotel’s focus is on reducing labor costs, and employ- ees who receive better job offers from other companies frequently leave.

INTERNAL/DIFFERENTIATION HR STRATEGY: THE COMMITTED EXPERT Combining an internal orientation with a differentiation strategy results in the Committed Expert HR strategy. The primary objective of this strategy is to hire and retain employees who specialize in performing certain tasks. Organizations using this strategy design work so that employees have a great deal of freedom to innovate and improve methods of completing tasks. People are recruited and hired because of their potential fit with the organizational culture, as well as their aptitude for becoming experts in particular areas. These organizations hire people early in their careers and train them to be experts in specific fields, such as accounting or sales. Performance apprais- als are designed to balance cooperation and competition among employ- ees. Careers generally include numerous promotions into similar jobs with increasing responsibility. Employees receive long-term training that helps them develop strong expertise. Compensation is relatively high and usually includes a good benefits package that ties employees to the organization.

Merck, the pharmaceutical company, employs a Committed Expert HR strategy, focusing a great deal of attention on developing employees during long careers. When employees enter Merck, they choose a career in research, sales and marketing, manufacturing and engineering, finance, or informa- tion services. They receive extensive training to provide them with the latest information and skills in their chosen area of expertise. Many Merck employ- ees have a mentor who guides their careers and shares important informa- tion about the organizational culture. Compensation includes base pay and bonuses for exceptional performance. Many employees also receive long-term incentives, such as stock options. Merck’s human resource practices help sup- port a culture that stimulates creativity and innovation.66

EXTERNAL/DIFFERENTIATION HR STRATEGY: THE FREE AGENT Combining an external orientation with a differentiation strategy forms what we refer to as a Free Agent HR strategy. The main emphasis associated with this strategy is hiring people who have critical skills but who are not neces- sarily expected to remain with the organization for a long period of time. Organizations using this strategy design work so that employees have exten- sive responsibility within specific areas and substantial freedom to decide how to go about their work. Long-term commitments are avoided, and no efforts are made to encourage strong attachments between employees and the organization. People are recruited because they already have the skills and experience they need to perform specific jobs. They are not led to expect long-term careers in the organization. Higher-level positions are frequently given to people from outside the organization. Performance appraisal focuses on outcomes and results. Training is rare. Short-term compensation is usually

Committed Expert HR strategy A human resource strategy that combines emphasis on long- term employees with a focus on producing unique goods and services (an internal/ differentiation approach).

Free Agent HR strategy A human resource strategy that combines emphasis on short- term employees with a focus on producing unique goods and services (an external/ differentiation approach).

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How Do Human Resource Strategies Align with Competitive Business Strategies? 63

high, which is necessary if the organization is to obtain people with top skills. Pay is linked specifically to individual performance results. Benefits and long- term compensation packages, which tie employees to the organization, are avoided. We rarely see unions in these organizations.

Free Agent HR strategies are quite common for information technology firms. Information technology changes rapidly, and top skills are often in short supply. Many companies in information technology offer relatively high sala- ries to get skilled people to leave jobs with competitors. People with in-demand skills earn high salaries by frequently jumping from one firm to the next. At the extreme, many companies hire technology specialists on short-term contracts.67

As a result of these practices, people working in the field of information tech- nology are often more loyal to the profession than to a particular company.

? CONCEPT CHECK 1. What two human resource strategies are associated with the

cost leadership strategy? How do these two HR strategies differ? 2. What two human resource strategies are associated with the

differentiation strategy? How do these two HR strategies differ?

The four strategies just outlined provide a general framework for describing human resource practices. Of course, most organizations don’t fit perfectly into one of the four boxes shown in Figure 2.3. For a majority of organizations, human resource practices fall mostly into one of the categories, with some practices that don’t exactly fit. Some organizations have a more equal mix of two different strategies. In general, however, organizations fall on one contin- uum from internal to external and another continuum from cost leadership to differentiation, which means that they fit somewhere within the framework. The four basic categories are therefore useful for illustrating important issues and discussing differences across organizations. We will examine many spe- cific human resource strategies within the framework of the four strategies in Chapters 4 through 13. In Chapter 14, we will return to the question of how well the practices of actual organizations fit into the four basic strategies.

Recall that the four basic human resource strategies arise from the contin- gency approach. The core idea of the contingency perspective is the notion that human resource strategies are most effective when they match com- petitive business strategies. Accordingly, organizations with a cost leadership competitive strategy are expected to do best when they have either a Bargain Laborer or Loyal Soldier HR strategy. Organizations with a competitive busi- ness strategy of differentiation are expected to do best when they have either a Committed Expert or Free Agent HR strategy. How well does research sup- port these expectations? We answer this question next.

How Do Human Resource Strategies Align with Competitive Business Strategies?

LEARNING OBJECTIVE 5

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64 Chapter 2 Making Human Resource Management Strategic

RESEARCH SUPPORTING THE CONTINGENCY PERSPECTIVE The strategic approach to human resource management is relatively new. Researchers have only been studying the contingency perspective for a few years, which means that there are still a number of things we don’t clearly understand. However, preliminary research generally supports the notion that organizations are most successful when they take a strategic approach to managing people. Research related to the contingency perspective provides three specific insights.

1. Many organizations do have human resource strategies that fit their com- petitive strategies.

2. Organizations are more successful when they broadly adapt their human resource practices to fit their competitive strategies.

3. Organizations with a cost leadership or differentiation strategy do per- form better when they have a matching human resource strategy.

Let’s look more specifically at the research related to each insight. A starting point for contingency research has been simply to determine the per-

centage of organizations that report matching strategies. For instance, research in steel manufacturing mills examined whether plants pursuing a cost leader- ship or differentiation strategy had matching human resource strategies. About 90 percent of the plants with a cost leadership strategy had human resource prac- tices consistent with the Bargain Laborer or Loyal Soldier HR strategies. About 60 percent of the plants with a competitive business strategy of differentiation had practices consistent with the Committed Expert HR strategy.68 Other studies have found support for the notion that organizations naturally tend to adopt the human resource practices that match their competitive strategies.69 Other fac- tors, such as organizational structure and values that correspond with strategy, have also been linked to different approaches to human resource management that range from minimizing cost to maximizing employee commitment.70

The next question is whether organizations with matching strategies really have better performance. Although research related to this question does not always use the four human resource strategies outlined in Figure 2.3, the results are mostly supportive. Firms benefit from having human resource practices that support their overall strategy. For instance, law firms with a com- petitive strategy of expanding into new markets, which is consistent with a strategy of differentiation, have been shown to perform better when they hire and retain highly skilled lawyers.71 Call centers with a competitive strategy of customizing responses to customers—also consistent with differentiation— perform better when their human resource practices ensure good training and high pay.72 Compared to hotels where customers’ service expectations are not as high, hotels providing higher levels of service benefit more from good hiring, training, and compensation practices.73 Overall, this line of research confirms that organizations perform better when they use human resource practices that help them secure and motivate employees who have skills that match their approaches for providing value to customers.74

The final question is whether organizations with a cost leadership or differ- entiation strategy perform better when they have matching human resource strategies. Research in this area is generally supportive. For instance, a study of manufacturing firms found that plants with a differentiation strategy have higher performance when their human resource practices include selective

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How Do Human Resource Strategies Align with Competitive Business Strategies? 65

staffing, comprehensive technical training, and group incentives to ensure that employees are well paid. These practices fit with the Committed Expert HR strategy. As described in the “How Do We Know?” feature, banks focus- ing on differentiation similarly benefitted from human resource practices that empowered employees to deliver high-quality service. As additional evidence supporting alignment of strategies and practices, manufacturing plants using a cost leadership strategy have been found to have higher per- formance when their practices focused on ensuring compliance with poli- cies and procedures, consistent with the Loyal Soldier HR strategy.75 In still another study, organizations in both service and manufacturing performed best when they combined a cost leadership competitive strategy with a Loyal Soldier HR strategy rather than a human resource strategy focused on dif- ferentiation. Also, organizations following a competitive strategy of differ- entiation performed best with a Committed Expert HR strategy rather than human resource practices associated with a cost focus. Employees working in firms with matching competitive and human resource strategies were also found to have higher morale.76

DO HUMAN RESOURCE PRACTICES INFLUENCE CUSTOMER SERVICE? Why is the customer service at some banks better than others? Is it by chance, or do successful banks encour- age specific actions to ensure that employees meet the needs of customers? Samuel Aryee, Fred Walumbwa, Emmanuel Seidu, and Lilian Otaye sought answers to this question by obtaining data from 37 branches of two different banks located in Ghana.

Branch managers reported on human resource practices associated with enhancing employee skills and knowledge, empowerment, information shar- ing, and delivery of high-quality service. Managers also rated the market performance of the bank. Front-line employees completed a similar measure that assessed human resource issues such as train- ing, compensation, job design, and performance appraisal, along with a measure of their personal orientation toward providing superior service. Employees also rated the empowerment climate of the bank, as well as the degree to which they person- ally felt empowered. More senior customer repre- sentatives rated the customer service performance of the front-line employees. Results of the study showed that human resource practices designed to facilitate differentiated customer service helped employees

feel that they were empowered to do whatever it took to serve customers. Feelings of empowerment, particularly for individuals predisposed toward helpful customer service behavior, led to higher ratings of individual performance. Increased indi- vidual performance further translated into stronger branch-level market performance.

The Bottom Line. Human resource prac- tices that emphasize decentralized decision mak- ing, service quality–focused feedback, extensive service training, and performance contingent compensation increase feelings of empowerment. Empowerment results in increased customer ser- vice performance for both individuals and bank branches. The authors concluded that effective human resource practices do indeed represent an effective method for pursuing a strategy of provid- ing excellent service.

Source: Samuel Aryee, Fred O. Walumba, Emmanuel Y.M. Seidu, and Lilian E. Otaye, “Impact of High-Performance Work Systems on Individual- and Branch-Level Performance: Test of a Multilevel Model of Intermediate Linkages,” Journal of Applied Psychology 97 (2012): 287–300.

How Do We Know?

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66 Chapter 2 Making Human Resource Management Strategic

PUTTING IT ALL TOGETHER Although research is still developing, the evidence suggests that organiza- tions do better when their human resource strategies fit their competitive strategies. As we have seen, these results support the contingency approach to human resource strategy. At this point, we can also tie in the more general universalistic approach. Recall that this approach suggests that organizations benefit from a commitment strategy. The commitment strategy is similar in many ways to the internal labor orientation of the contingency approach. Thus, we can combine the two approaches and conclude that, although there are important exceptions, many organizations improve their long- term success when they adopt an internal labor orientation. Organizations using an internal orientation develop strong bonds with their employees. People are treated as a valuable resource that helps the organizations meet the needs of customers.

Given the choice of an internal orientation, the remaining choice con- cerns whether the organization will use a Loyal Soldier or Committed Expert HR strategy. This choice depends on the competitive business strategy of the organization. Organizations seeking cost reduction benefit from the Loyal Soldier HR strategy, whereas those seeking innovation and creativity benefit from the Committed Expert strategy.77 In the chapters that follow, we will explore how specific human resource practices differ depending on which strategy is chosen. We will also explore practices associated with the external orientation strategies.

? CONCEPT CHECK 1. In what ways does research support the contingency

approach to human resource management? 2. How does the commitment strategy fit with the contingency

approach?

IN THE MANAGER’S PERSPECTIVE THAT OPENED THE CHAP- TER, ELIZABETH WAS THINKING ABOUT WAYS TO TIE HUMAN RESOURCE STRATEGY TO COMPETITIVE BUSINESS STRATEGY. SHE FELT THAT HER SMALL CHAIN OF CONVENIENCE STORES COULD BENEFIT FROM A BETTER STRATEGY FOR COMPETING

WITH OTHER STORES. SHE ALSO WANTED TO FIND WAYS TO USE HUMAN RESOURCE PRACTICES TO HELP THE STORES ACHIEVE

A STRATEGY. ELIZABETH WONDERED WHETHER THE PREVIOUS

OWNER’S EMPHASIS ON EMPLOYEE LOYALTY WAS THE BEST APPROACH. FOLLOWING ARE ANSWERS TO THE WHAT DO YOU THINK? QUIZ THAT FOLLOWED THE DESCRIPTION OF ELIZABETH’S CIRCUMSTANCES. WERE YOU ABLE TO CORRECTLY IDENTIFY THE TRUE STATE- MENTS? COULD YOU DO BETTER NOW?

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Summary 67

A strategy is a set of coordinated choices and actions. The first step in strategy formulation is gathering information from outside and inside the organiza- tion. Information about the organization’s external environment describes opportunities, which are favorable conditions, and threats, which are unfavor- able conditions. Demographic and cultural trends, economic and political conditions, and technologi- cal developments represent important threats and opportunities for most organizations. Information is also gathered about the organization’s internal resources and capabilities. Areas of high capability are labeled strengths, and areas of low capability are labeled weaknesses. A strategic set of human resource practices can represent a valuable and rare strength.

Once information has been gathered, the next step is to analyze the information and make deci- sions. Encouraging a group of decision makers to work together can facilitate this process. Members of the group should meet often and develop their collective intuition. They should also make sure that they explore different points of view and numerous alternatives. In addition, they should set flexible timelines that keep them moving forward and making decisions. Minimizing organizational politics also facilitates decision making.

1. Having good employees is more important than having

good production equipment. TRUE. Good employees are an organizational resource that is rare and difficult

to imitate.

2. Much of the workforce lacks needed skills, so high-

quality employees are difficult to find and retain.

TRUE. Quality employees represent a critical internal strength for organizations, but surveys suggest that

companies find it difficult to hire and retain enough

employees who have not only technical skills but also

critical thinking and communication skills.

3. The most effective way for an organization to compete

with other organizations is to produce similar goods

and services at lower prices. FALSE. Organizations can compete through either cost reduction or differentia-

tion. Because only one firm can be the true lowest cost

producer, a majority of successful organizations adopt a

differentiation strategy.

4. Organizations are most effective when they develop a

highly committed workforce. TRUE. The commitment

strategy, which emphasizes treating employees well and

seeking to retain them, has been linked with higher

overall productivity for organizations.

5. An organization seeking to produce the highest-quality

products should have different human resource prac-

tices from an organization seeking to produce inex-

pensive products. TRUE. The contingency perspective focuses on aligning human resource practices with com-

petitive strategies.

Elizabeth’s questions are common to all organizations.

Organizational leaders must make decisions about how

they will compete with other organizations in their

respective industries. The strategy formulation process

can help guide their decisions. Focusing on either cost

leadership or differentiation provides them with a way

to emphasize things that customers value. Organizations

also benefit from ensuring that human resource practices

match competitive strategies.

SUMMARY

How is strategy formulated?

LEARNING OBJECTIVE 1

What are common competitive business strategies?

LEARNING OBJECTIVE 2

Business-level strategies determine how an organiza- tion will compete with other companies that provide

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68 Chapter 2 Making Human Resource Management Strategic

Two basic approaches to human resource strategy are the universalistic approach and the contingency approach. The universalistic approach focuses on identifying a set of practices that are beneficial to all organizations. This approach has identified a bundle of practices, labeled the commitment strat- egy, that appear to be generally beneficial. Practices in the commitment bundle communicate the mes- sage that management cares about employees. The commitment strategy also helps ensure that employees have the training and freedom to pur- sue important job tasks.

The contingency approach seeks to align human resource practices with competitive business prac- tices. One distinction within this approach is a focus on cost leadership versus a focus on differentia- tion. Organizations mainly concerned with reduc- ing costs emphasize processes and general roles. They carefully prescribe appropriate behaviors for performing work. Organizations that focus on differentiation are more interested in innovation and quality enhancement. They emphasize career development and having good results. Another dis- tinction of interest in the contingency approach is whether an organization has an internal or an external labor orientation. Organizations with an internal labor orientation seek long-term relation- ships with employees, whereas organizations with

The dimension of cost versus differentiation can be combined with the dimension of internal versus external labor orientation. The result is four different forms of human resource strategy. Organizations using the Loyal Soldier HR strategy focus on developing long-term relationships with employees and encouraging efficiency by having them contribute in a number of different roles. Organizations using the Bargain Laborer HR strat- egy also encourage efficiency but do not develop strong relationships with employees. Organizations using the Committed Expert HR strategy develop long-term relationships with employees and encourage them to become experts in a particular area. Finally, organizations using the Free Agent HR strategy seek employees who make short-term contributions in highly specialized roles.

similar goods and services. One common strategy is the cost leadership strategy. Organizations using this strategy strive to produce goods and services at the lowest possible cost. They usually produce basic and standardized products. The key to suc- cess for these organizations is having employees who are more efficient than the employees of other organizations.

Another common competitive business-level strategy is differentiation. Organizations using a differentiation strategy strive to produce goods and services that are somehow better than those produced by competitors. They usually strive to produce unique products and to offer exceptional service. The key to success for these organizations is having employees who do things better than the employees of other organizations.

What are basic approaches to human resource strategy?

LEARNING OBJECTIVE 3

What are common human resource strategies?

LEARNING OBJECTIVE 4

Organizations are likely to have human resource practices that fit with their competitive business strategies. Organizations that effectively recruit, select, train, and compensate their employees develop an advantage that is hard for other orga- nizations to copy. This advantage is maximized when the organization has a clear competitive strategy and a matching human resource strat- egy. Organizations whose human resource strate- gies match their competitive strategies do indeed perform better. A strategic approach to human resource management sees people as an impor- tant resource vital to organizational effective- ness. Research suggests that organizations with a cost leadership competitive strategy excel when they follow a Loyal Soldier HR strategy. Similarly, organizations with a differentiation competi- tive strategy excel when they use a Committed Expert strategy.

How do human resource strategies align with competitive business strategies?

LEARNING OBJECTIVE 5

an external labor orientation seek flexibility and do not make long-term commitments to employees.

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Example Case 69

1. Why are effective human resource practices often a better competitive resource than equipment and buildings?

2. What are some external opportunities and threats that you think organizations will face in the next 10 years? What types of organiza- tions will benefit most?

3. Why can groups be more effective than indi- viduals for making decisions?

4. What are the primary differences between a cost leadership and a differentiation strategy?

5. What are the key elements of the com- mitment strategy from the universalistic approach? Why does this approach generally contribute to success for organizations?

6. What human resource practices might be associated with a cost reduction emphasis?

What practices might be associated with a dif- ferentiation emphasis?

7. What are the strengths and weaknesses of internal and external labor orientations?

8. Choose a company where you or someone you know works. Which of the four human resource strategies do you think is most com- mon in the company?

9. What are the key elements of the four human resource strategies: Loyal Soldier, Bargain Laborer, Committed Expert, and Free Agent?

10. The chapter text pointed out that a majority of organizations have a human resource strat- egy that fits their competitive strategy. What should an organization do if the strategies don’t match?

Bargain Laborer HR strategy 61 Business-level strategy 48 Committed Expert HR strategy 62 Commitment strategy 53 Competitive business strategy 42 Contingency approach 53 Control strategy 53 Corporate-level strategy 48 Cost leadership strategy 48 Differentiation strategy 48 External environment 43 External labor orientation 57

Free Agent HR strategy 62 Human resource bundles 53 Human resource strategy 42 Internal labor orientation 57 Loyal Soldier HR strategy 60 Opportunities 43 Strategy 42 Strengths 44 Threats 43 Universalistic approach 53 Weaknesses 44

KEY TERMS

DISCUSSION QUESTIONS

EXAMPLE CASE United Parcel Service

Of course, every company wants to attract the best people it can. Equally important at UPS is attracting people who fit the company culture, which encourages high energy, hard work, fairness, inclusiveness, teamwork, and sharing the wealth.

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70 Chapter 2 Making Human Resource Management Strategic

Those who work at UPS are more than employees; they’re business partners. Promotions come largely from within the organization. Managers typically will handle assignments in about a half dozen different functional areas of the busi- ness during their careers. This employer/employee relationship remains rel- evant in today’s economy, because the nature of UPS’s business involves an extraordinary degree of teamwork.

Every business day, UPS moves 13 million packages around the globe. In effect, UPS is the world’s conveyor belt for commerce, one that requires 350,000 employees to work in harmony and with precision. Every day, 85,000 drivers take responsibility for roughly 6 percent of the nation’s GDP, which is delivered from their package cars.

Every day, thousands of decisions must be made by managers in the field to keep the conveyor belt moving smoothly—decisions about lost packages, transportation schedules, preparations for bad weather, and myriad other details. And every day, logistics and financial services people are creatively exploring ways for customers to streamline their supply chains to improve productivity and service.

Successfully coaching people is also critical to the company’s success. Managers must be empathetic to one of the world’s largest and most diverse employee workforces. They must be team builders. That takes experience and training; it’s not something that can be gotten from a textbook or learned overnight.

How does UPS attract and retain such leaders? The answer lies in connec- tion, the way the company connects to the world. This connection begins with the way UPSers connect inside, to each other and, as in any enduring culture, to their roots.

QUESTIONS 1. How do practices such as internal promotion and assignment of broad job

duties help UPS achieve its competitive business strategy? 2. How do the human resource practices at UPS help build teamwork? 3. Why are training and experience so important at UPS?

Source: Lea Soupata, “Managing Culture for Competitive Advantage at United Parcel Service,” Journal of Organizational Excellence 20, no. 3 (2001): 19–26. [Reprinted with permission of John Wiley & Sons, Inc.]

DISCUSSION CASE Mountain Bank

Mountain Bank is located in the northwest United States. The bank has four major business lines: retail banking, consumer lending, real estate and mort- gage banking, and corporate banking. Traditionally, Mountain Bank has had a strong presence in the retail banking line, with only a limited presence in the other lines. However, deregulation in the banking industry has led to mergers and acquisitions for Mountain Bank, as well as for several of its competitors.

Retail banking includes traditional banking activities such as provid- ing checking and savings accounts. Mountain Bank currently has about 50 percent of the market for retail accounts in its area. Often, however, these accounts are not very profitable. Consumer lending encompasses a variety of

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Discussion Case 71

secured and unsecured consumer loans, such as home equity lines of credit, automobile loans, boat loans, and card lines of credit. Mountain Bank cur- rently has about 25 percent of this market. Real estate and mortgage banking involves obtaining and servicing home mortgage loans, which are seen as a stable form of income for most banks. Mountain Bank currently has less than 10 percent of this market. Corporate banking provides services to businesses. Corporate clients are provided with a wide variety of basic services, as well as financing for equipment acquisitions and plant expansions. These services are often seen as very profitable. However, Mountain Bank has a very small presence in the corporate market—less than 5 percent of the market, accord- ing to current estimates.

Mountain Bank has established a strategy of leveraging its strong retail banking presence into gains in the real estate and corporate areas. Past expe- rience suggests that one of the best methods for achieving this leverage is cross-selling, which occurs when tellers and customer service representatives convince customers with retail accounts to open corporate accounts or to obtain home mortgages from Mountain Bank.

Recent studies have found that bank tellers are critical to the success of Mountain Bank. In fact, one study found that customers’ experiences with tellers is the single most important driver of customer satisfaction. After all, a bank teller is often the only person an individual customer has contact with when visiting a bank branch. Although fewer tellers are needed every year due to technological improvements, tellers are still the heart and soul of a bank.

A typical branch of Mountain Bank has three to seven tellers, depending on size and location. Floating tellers (part-timers) are also used to increase the staff during lunch hours and pay days. Mountain Bank has traditionally approached the teller position as a low-paying, entry-level position. Tellers are frequently part-time employees. Turnover is quite high, and successful tellers are often transferred to customer service positions.

Job Description

Job: Bank Teller

Pay: $14 per hour

Receives and pays out money and keeps records of money and negotiable instruments involved in

financial transactions. Receives checks and cash for deposit, verifies amount, and examines checks

for endorsements. Cashes checks and pays out money after verification of signatures and customer

balances. Enters customers’ transactions into a computer to record transactions and issues computer-

generated receipts. Places holds on accounts for uncollected funds. Orders daily supply of cash

and counts incoming cash. Balances currency, coin, and checks in cash drawer at end of shift,

using calculator, and compares totaled amounts with data displayed on computer screen. Explains,

promotes, and sells products and services, such as traveler’s checks, savings bonds, money orders,

and cashier’s checks.

QUESTIONS 1. What competitive business strategy do you recommend for Mountain Bank? 2. Based on the universalistic approach and commitment strategy, what types

of human resource practices do you recommend for Mountain Bank with respect to its tellers?

3. Which of the four human resource strategies do you recommend for Mountain Bank with respect to its tellers? Why?

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72 Chapter 2 Making Human Resource Management Strategic

Access the companion website to test your knowledge by completing a Mega Manufacturing interactive role-playing exercise. In this exercise, you meet with senior management at Mega and try to con- vince other members of the management team that HR needs to have a “seat at the table” and function as a business partner within the company. The CFO, however, expresses the opinion that HR is just a “touchy feely” department that adds no legitimate business value. Your objective is to gain credibility and show that a strategic approach to HR can improve Mega Manufacturing. Based on previous discussions, you have learned that Mega believes that its products are better than those of its competitors. You also know that the com- pany prefers to hire experienced people who won’t require much training. How will you defend the HR function to the CFO and others in the meeting who may share the same opinion of HR?

Explore the websites of several companies. Choose at least two companies from the same industry. See what you can learn about their competitive strat- egies. Visit the part of their website that links to employment opportunities.

See if you can find answers to the following questions: 1. Does the website clearly identify either a cost or

a differentiation strategy? 2. Does the information on the website fit with

your general beliefs about the company? 3. Does the website have a portal for selling goods

or services? If so, does it seem to emphasize price or quality features?

4. What has happened to the stock price of the company over the past 10 years?

5. What types of jobs are advertised in the employ- ment section of the website?

6. Does the website emphasize long-term relation- ships between the organization and employees? Does it emphasize training programs?

Based on the information you obtain, do the following: 1. Evaluate how well the websites succeed in com-

municating information. 2. Determine whether you think each company’s

competitive strategy and human resource strategy match.

3. Identify any relationships between strategies and stock prices.

4. Compare and contrast the strategies and practices of the companies that are direct competitors.

EXPERIENTIAL EXERCISE Explore Company Websites

INTERACTIVE EXPERIENTIAL EXERCISE

HR Strategy in Action: Selling the HR Function at Mega Manufacturing http://www.wiley.com/college/sc/stewart

ENDNOTES 1. Jeffrey Pfeffer, “Competitive Advantage Through

People,” California Management Review 34, no. 2 (1992): 9–28; Jon Birger, “The 30 Best Stocks from 1972 to 2002,” Money 31, no. 11 (2002): 88.

2. Birger, “The 30 Best Stocks,” 88.

3. Daniel Fisher, “Is There Such a Thing as Nonstop Growth?” Forbes 170, no. 1 (2002): 82.

4. Wendy Zeller and Michael Arndt, “Holding Steady as Rivals Sputter, Can Southwest Stay on Top?” BusinessWeek, Issue 3818 (February 2003): 66.

5. Pfeffer, “Competitive Advantage Through People,” 9–28.

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Endnotes 73

6. Birger, “The 30 Best Stocks,” 88. 7. Sally B. Donnelly, “One Airline’s Magic,’ Time 160, no.

18 (2002): 45; Melanie Trottman, “Inside Southwest Airlines, Storied Culture Feels Strains,” Wall Street Journal, July 11, 2003, A1.

8. Company website http://www.southwest.com. 9. Justin Martin, “Balancing Elephants,” Fortune Small

Business 14, no. 8 (2004): 84–90. 10. Melanie Trottman and Scott McCartney, “Southwest’s

CEO Abruptly Quits a ‘Draining Job’; Parker’s 3-Year Tenure Saw Labor Woes, Sept. 11 Costs; Airline Gives Upbeat Forecast,” Wall Street Journal, A1, July 16, 2004.

11. Melanie Trottman, “Southwest Air Profit Rises 12% As Cost-Cutting Shows Results,” Wall Street Journal, B6, October 15, 2004.

12. Melanie Trottman, “At Southwest, New CEO Sits in a Hot Seat,” Wall Street Journal, B1, July 19, 2004.

13. Sophie Segal, “Third Consecutive Quarterly Loss for Southwest,” Airfinance Journal (April 6, 2009): 45.

14. Paulo Prada, Susan Carey, and Mike Esterl, “Corporate News: Southwest Air Turns in a Profit—UAL is Aided by Fuel Hedging, but Continental Posts a Loss Amid Lackluster Demand,” Wall Street Journal, B2, July 22, 2009.

15. Paul Seidenman and David J. Spanovich, “Synergies Evolve in Southwest—AirTran Integration,” Aviation Week and Space Technology, September 17, 2012.

16. R. Duane Ireland and Michael A. Hitt, “Achieving and Maintaining Strategic Competitiveness in the 21st Century: The Role of Strategic Leadership,” The Academy of Management Executive 13 (1999): 43–57.

17. Robert B. Duncan, “Characteristics of Organizational Environments and Perceived Environmental Uncertainty,” Administrative Science Quarterly 17 (1972): 313–327.

18. Jane E. Dutton and Susan E. Jackson, “Categorizing Strategic Issues: Links to Organization Action,” Academy of Management Review 12 (1987): 76–91.

19. Donald C. Hambrick and Phyllis A. Mason, “Upper Echelons: The Organization as a Reflection of Its Top Managers,” Academy of Management Review 19 (1984): 193–207.

20. Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management: Competitiveness, and Globalization 6th ed. (Mason, OH: South-Western, 2005); Michael E. Porter, Competitive Strategy (New York: Free Press, 1985).

21. Min-Huei Chien, “The Study of Human Resource Development and Organizational Change in Taiwan,” Journal of American Academy of Business 11 (2007): 309–314.

22. Susan Meisinger, “Shortage of Skilled Workers Threatens Economy,” HR Magazine 49, no. 11 (2004): 12.

23. Anonymous, “International Comparisons of Qualifications,” Labor Market Trends 112 (September 2004): 351.

24. Patrick M. Wright, Gary C. McMahan, and Abigail McWilliams, “Human Resources and Sustained Competitive Advantage: A Resource-Based Perspective,” International Journal of Human Resource Management 5 (1994): 301–326.

25. Kathleen M. Eisenhardt, “Strategy as Strategic Decision Making,” Sloan Management Review 40 (1999): 65–72.

26. Karen A. Jehn, “A Multimethod Examination of the Benefits and Detriments of Intragroup Conflict,” Administrative Science Quarterly 40: 256–282.

27. Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985).

28. Jim Edwards, “Sour Tweets Get Sweet Results,” Brandweek 49, no. 33 (2008): 6.

29. Raymond E. Miles and Charles C. Snow, “Designing Strategic Human Resource Systems,” Organization Dynamic 13, no. 1 (1984): 36–52.

30. Jonathan Birchall, “Target’s Sales Slip Further Behind Walmart,” Financial Times, May 21, 2009, 15; Kerri Shannon, “Target Corp. Has Dethroned Wal-Mart as Discount King,” Money Morning, August 25, 2011.

31. Porter, Competitive Advantage. 32. Jay Barney, “Firm Resources and Sustained

Competitive Advantage,” Journal of Management, 17 (1991): 99–120.

33. A Kaifeng Jiang, David P. Lepak, Jia Hu, and Judith C. Baer, “How Does Human Resource Management Influence Organizational Outcomes? A Meta-Analytic Investigation of Mediating Mechanisms,” Academy of Management Journal 55 (2012): 1264–1294.

34. Patrick Wright and Gary C. McMahan, “Theoretical Perspectives for Strategic Human Resource Management,” Journal of Management 18 (1992): 295–320.

35. Randall S. Schuler and Susan E. Jackson, “Linking Competitive Strategies with Human Resource Management Practices,” Academy of Management Executive 1 (1987): 207–219.

36. John E. Delery and D. Harold Doty, “Modes of Theorizing in Strategic Human Resource Management: Tests of Universalistic, Contingency, and Configurational Performance Predictions,” Academy of Management Journal 39 (1996): 802–835.

37. Brian Becker and Barry Gerhart, “The Impact of Human Resource Management on Organizational Performance: Progress and Prospects,” Academy of Management Journal 39 (1996): 779–801.

38. John Paul MacDuffie, “Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry,” Industrial and Labor Relations Review 48 (1995): 197–221.

39. Richard E. Walton, “From Control to Commitment,” Harvard Business Review 63 (1985): 77–84; John Paul MacDuffie, “Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry,” Industrial and Labor Relations Review 48 (1995): 197–221; Casey Ichinowski, Kathryn Shaw, and Giovanna Prennushi, “The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines,” American Economic Review 87 (1997): 291–313.

40. Jeffrey Pfeffer, Competitive Advantage through People (Boston: Harvard Business School Press, 1994).

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74 Chapter 2 Making Human Resource Management Strategic

41. Ichinowski, Shaw, and Prennushi, “The Effects of Human Resource Management Practices on Productivity.”

42. MacDuffie, “Human Resource Bundles and Manufacturing Performance.”

43. Ichinowski, Shaw, and Prennushi, “The Effects of Human Resource Management Practices on Productivity”; Scott Snell and James W. Dean, Jr., “Integrated Manufacturing and Human Resource Management: A Human Capital Perspective,” Academy of Management Journal 35 (1992): 467–504.

44. John T. Delaney and Mark A. Huselid, “The Impact of Human Resource Management Practices on Perceptions of Organizational Performance,” Academy of Management Journal 39 (1996): 949–969.

45. James P. Guthrie, “High-Involvement Work Practices, Turnover, and Productivity: Evidence from New Zealand,” Academy of Management Journal 44 (2001): 180–190; Johngseok Bae and John J. Lawler, “Organizational and HRM Strategies in Korea: Impact on Firm Performance in an Emerging Economy,” Academy of Management Journal 43 (2000): 502–517.

46. Nathan Bennett, David J. Ketchen, Jr., and Elyssa Blanton Schultz, “An Examination of Factors Associated with the Integration of Human Resource Management and Strategic Decision Making,” Human Resource Management 37 (1998): 3–16.

47. Yaping Gond, Kenneth S. Law, Song Chang, and Katherine R. Xin, “Human Resource Management and Firm Performance: The Differential Role of Managerial Affective and Continuance Commitment,” Journal of Applied Psychology 94 (2009): 263–275.

48. Riki Takeuchi, Gilad Chen, and David P. Lepak, “Through the Looking Glass of a Social System: Cross- Level Effects of High-Performance Work Systems on Employee Attitudes,” Personnel Psychology 62 (2009): 1–29.

49. Jeffrey B. Arthur, “Effects of Human Resource Systems on Manufacturing Performance and Turnover,” Academy of Management Journal 3 (1994): 670–687; Guthrie, “High-Involvement Work Practices, Turnover, and Productivity.”

50. Lisa H. Nishii, David P. Lepak, and Benjamin Schneider, “Employee Attributions of the ‘Why’ of HR Practices: Their Effects on Employee Attitudes and Behaviors, and Customer Satisfaction,” Personnel Psychology, 61 (2009): 503–545.

51. Becker and Gerhart, “The Impact of Human Resource Management.”

52. Jeffrey A. Sonnenfeld and Maury A. Peiperl, “Staffing Policy as a Strategic Response: A Typology of Career Systems,” Academy of Management Review 13 (1988): 588–600.

53. Peter Bamberger and Ilan Meshoulam, Human Resource Strategy: Formulation, Implementation, and Impact (Thousand Oaks, CA: Sage Publications, 2000).

54. Sonnenfeld and Peiperl, “Staffing Policy as a Strategic Response.”

55. Bamberger and Meshoulam, Human Resource Strategy. 56. Safeev Varki and Shirley Wong, “Consumer

Involvement in Relationship Marketing of Services,” Journal of Service Research 6 (2003): 83–91.

57. David Rynecki and Doris Burke, “Morgan Stanley’s Man on the Spot,” Fortune, November 15, 2004, 120; Justin Hibbard, “Morgan Stanley: No Stars—and Lots of Top Tech IPOs,” BusinessWeek, Issue 3916 (2005): 56.

58. David P. LePak and Scott A. Snell, “The Human Resource Architecture: Toward a Theory of Human Capital Allocation and Development,” Academy of Management Review 24 (1999): 31–48; Anne S. Tsui, Jone L. Pearce, Lyman W. Porter, and Angela M. Tripoli, “Alternative Approaches to the Employee– Organization Relationship: Does Investment in Employees Pay Off?” Academy of Management Journal 40 (1997): 1089–1121.

59. Stanley B. Malos and Michael A. Campion, “Human Resource Strategy and Career Mobility in Professional Service Firms: A Test of an Options-Based Model,” Academy of Management Journal 43 (2000): 749–760; John K. Masters and Grant Miles, “Predicting the Use of External Labor Arrangements: A Test of the Transaction Costs Perspective,” Academy of Management Journal 45 (2002): 431–442; Tsui, Pearce, Porter, and Tripoli, “Alternative Approaches to the Employee– Organization Relationship: Does Investment in Employees Pay Off?”

60. Tsui, Pearce, Porter, and Tripoli, “Alternative Approaches to the Employee–Organization Relationship”; Sonnenfeld and Peiperl, “Staffing Policy as a Strategic Response.”

61. LePak and Snell, “The Human Resource Architecture.” 5 62. Ibid., 31–48; Sonnenfeld and Peiperl, “Staffing Policy

as a Strategic Response.” 63. Masters and Miles, “Predicting the Use of External

Labor Arrangements.” 64. Sarah Bloom, Employee Wellness Programs,

Professional Safety, 53, no. 8 (2008): 41–42. 65. Anonymous, “UPS versus FedEx,” Financieal Times,

March 26, 2009, page 14. 66. Company website http://www.merck.com. 67. Katherine Spencer Lee, “IT Compensation on the Rise

in ’05,” Computerworld, January 18, 2005, http://www. computerworld.com/careertopics/careers.

68. Jeffrey B. Arthur, “The Link Between Business Strategy and Industrial Relations Systems in American Steel Mini-mills,” Industrial and Labor Relations Review 45 (1992): 488–506.

69. Johngseok Bae and John J. Lawler, “Organizational and HRM Strategies in Korea: Impact on Firm Performance in an Emerging Economy,” Academy of Management Journal 43 (2000): 502–517; Snell and Dean, “Integrated Manufacturing and Human Resource Management.”

70. Soo Min Toh, Frederick P. Morgeson, and Michael A. Campion, “Human Resource Configurations: Investigating Fit with the Organizational Context,” Journal of Applied Psychology 93 (2008): 864–882.

71. Michael A. Hitt, Leonard Bierman, Katshuhiko Shimizu, and Rahul Kochhar, “Direct and Moderating Effects of Human Capital on Strategy and Performance in Professional Service Firms: A Resource-Based Perspective,” Academy of Management Journal 44 (2001): 13–28.

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72. Rosemary Batt, “Managing Customer Services: Human Resource Practices, Quit Rates, and Sales Growth,” Academy of Management Journal 45 (2002): 586–597.

73. Li-Yun Sun, Samual Aryee, and Kenneth S. Law, “High Performance Human Resource Practices, Citizenship Behavior, and Organizational Performance: A Relational Perspective,” Academy of Management Journal 50 (2007): 558–577.

74. Patrick M. Wright, Dennis L. Smart, and Gary C. McMahan, “Matches Between Human Resources and Strategy Among NCAA Basketball Teams,” Academy of Management Journal 38 (1995): 1052–1074; Mark A. Youndt, Scott A. Snell, James W. Dean, Jr., and

David P. LePak, “Human Resource Management, Manufacturing Strategy, and Firm Performance,” Academy of Management Journal 39 (1996): 836–866.

75. Youndt, Snell, Dean, and LePak, “Human Resource Management, Manufacturing Strategy, and Firm Performance.”

76. Allan Bird and Schon Beechler, “Links Between Business Strategy and Human Resource Management Strategy in U.S.-Based Japanese Subsidiaries: An Empirical Investigation,” Journal of International Business Studies 26 (1995): 23–46.

77. Miles and Snow, “Designing Strategic Human Resource Systems.”

Endnotes 75

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C h a p t e r 3

Ensuring Equal Employment

Opportunity and Safety

A M A N A G E R ’ S P E R S P E C T I V E

ALEX RETURNS TO HIS OFFICE AFTER MEETING WITH JASMINE, ONE OF HIS MOST VALUED TEAM MEMBERS. JASMINE HAS JUST INFORMED ALEX THAT SHE WILL BE MAKING A FORMAL CLAIM OF

SEXUAL HARASSMENT. BOB, A MEMBER OF THE SAME MANUFACTURING TEAM AS JASMINE—THE RED TEAM—HAS REPEATEDLY BEEN MAKING SEXUAL COMMENTS THAT CAUSE JASMINE TO FEEL UNCOMFORTABLE. JASMINE MENTIONED THIS TO ALEX A FEW WEEKS AGO, BUT ALEX HOPED THE ISSUE WOULD JUST GO AWAY. NOW HE IS WORRIED THAT HIS RESPONSE WAS NOT WHAT IT SHOULD

HAVE BEEN. TODAY HE ASSURED JASMINE THAT HE WOULD SEE TO IT THAT THERE WAS NO RETALIATION

FOR MAKING A HARASSMENT CLAIM. HOWEVER, ALEX WONDERS IF THINGS WOULD HAVE GOTTEN THIS BAD IF HE HAD STEPPED IN SOONER.

Alex knows that he should have tried to help resolve Jasmine’s concern. Yet, he is unclear whether the company is responsible for Bob’s actions. Does he as a supervisor have a responsi- bility to reprimand Bob for making sexual comments? Are there laws that protect people

from having to work in environments that make them uncom- fortable? Is there real harm as long as Bob is not physically touch- ing Jasmine?

As Alex thinks about legal issues, he remembers seeing an accident report for the blue team. Tim, one of the team members, received an injury while cleaning a piece of equipment. He tried a short- cut procedure that was not approved by company policy. In the accident report, however, Tim stated that he did not know there was a specific policy about how the equipment was to be cleaned. Tim will probably not be able to work for the next two weeks. Is the company required to pay him for the work he misses during the two weeks? Is the com- pany responsible for the medical bills? After talking to Jasmine, Alex is now wondering if Tim might also sue the company.

Alex also remembers a story he recently saw on the morning news. A nearby company is having legal difficulties because minority workers are not

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THE BIG PICTURE A Number of Laws and Court Decisions Protect Workers from Discrimination and Unsafe Working Conditions

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being promoted. Alex thinks about his company and realizes that there are very few employees who are racial minorities. He wonders if having a more diverse workforce would be helpful. Since he personally thinks diversity might be good, Alex also wonders what he could do to better promote diversity. What could he do to better enhance work opportunities for groups of people that have not historically been hired?

Of all the things he has faced as a supervisor, Alex realizes that legal issues are among those he fears most. What are his responsibilities? He remembers receiving some training when he was promoted from the line. It seemed like common sense at the time. But maybe he should review the material now that he has gained experience to help him understand what things are really important.

WHAT DO YOU THINK? Suppose you are having a conversation with Alex. He is trying to remember the training he received and makes the following statements. Which of the statements do you think are true?

People who are victims of sexual harass- ment can sue the person who harassed them but not the company.

Companies must hire minority workers even when they are not as qualified as other people who are applying for the same job.

A company can have legal problems when it doesn’t hire enough women, even if it treats men and women the same.

Men and women must be paid the same when they perform the same job.

Employees have a right to know about any hazardous chemicals they are exposed to at work.

?

T OR F

T OR F

T OR F

T OR F

T OR F

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78 Chapter 3 Ensuring Equal Employment Opportunity and Safety

People sometimes criticize human resource departments for being too con- cerned about following laws. However, a major part of the employee advocate role is ensuring that people are treated fairly. This human resource function provides important guidance for treating employees fairly and helping orga- nizations comply with laws. Complying with laws, in turn, can save organiza- tions a great deal of funds they would have to spend to fight legal accusations or to try to repair damaged reputations.

The importance of fulfilling legal responsibilities often becomes apparent only when things go wrong. Consider that many well-known companies have faced lawsuits over employment discrimination. Most of these cases have been settled outside of legal courts, but a substantial amount of money is usually spent defend- ing and settling claims. Some of the most widely publicized and expensive exam- ples of discrimination settlements include those made by State Farm Insurance, Coca-Cola, Texaco, Shoney’s, and Home Depot. Some of these high-profile cases involved alleged sex discrimination. For instance, State Farm paid $240 million to settle a case brought by 800 female employees. Home Depot took a charge of $104 million to settle claims that women were denied jobs and promotions. Other cases involve allegations of racial discrimination. Settling racial lawsuits cost Texaco $176 million, Coca-Cola $192 million, and Shoney’s $132 million.1

Several years ago, former and current employees filed a large discrimina- tion case against Walmart. These unhappy employees claimed that Walmart denied women equal pay and opportunities for promotion. Judges originally ruled that the case could proceed as a class-action suit. This was an impor- tant issue, because class-action status meant that anyone who might have been harmed by Walmart’s alleged actions—in this case, women applying for jobs or working at Walmart after December of 1998—could choose to join forces and be represented together in the case. In 2011 the Supreme Court ruled that the women bringing forth the case did not have enough in common to proceed as a group. Yet, a number of smaller, region-focused suits continue to be litigated.

Why Is It Important to Understand Legal and Safety Issues?

After reading this chapter you should be able to:

Explain how Title VII of the Civil Rights Act of 1964 and its amendment by the Civil Rights Act of 1991 protect workers against discrimination.

Describe how major laws such as the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Equal Pay Act, and the Family and Medical Leave Act protect workers.

Describe different methods for increasing workplace diversity, including opportunity enhancement, equal opportunity, tiebreak, and preferential treatment.

Explain the laws and practices concerning employee safety, including (a) the Occupational Safety and Health Act and (b) workers’ compensation.

Describe specific practices that can help an organization comply with legal guidelines and promote good health and safety practices.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

LEARNING OBJECTIVE 5

L E A R N I N G O B J E C T I V E S

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What Is the Main Law Relating to Discrimination and Employment? 79

Walmart spokespersons have denied the allegations. They argued that dif- ferences in promotions could be explained by fewer women applying for promotions, and that pay differences are the result of women not performing the same jobs as men. Walmart also embarked on a proactive campaign to address its employment practices. The company established a number of programs to advance the causes of women. It evaluated and restructured its pay scales, and it now posts job openings through an electronic system. In addition, the CEO announced a more affordable health plan, and executives now receive bonuses for meeting diversity goals.2 These measures to ensure equal treatment for women and better communication of its employment practices have helped Walmart to successfully defend itself, but the cost has been very high. In the end, it seems safe to conclude that Walmart would prefer that the legal action had never begun.3

Of course, there are no magic methods for ensuring that at least some employees will not feel they are victims of discrimination. But being famil- iar with employment laws reduces the likelihood of facing discrimination charges. Thus, an important part of effective human resource management is knowing the laws and then teaching managers and others involved in person- nel decisions how to comply with legal requirements.

RESPONDING TO DISCRIMINATION CLAIMS Walmart, Coca-Cola, State Farm Insurance, and other large employers have learned the impor- tance of preventing and quickly responding to allegations of discrimination. Organizations accomplish these goals by

Developing and enforcing clear policies against discrimination. Adopting programs that provide employment opportunities for groups that have been historically disadvantaged. Using advertising and public relations campaigns to improve the image of their company as a desirable place to work.

Building Strength Through HR

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Who is protected from discrimination? The cases mentioned so far have dealt with racial and sexual discrimination. But what happens if a company has a policy prohibiting employees from having long hair? What about a policy against wear- ing a nose ring? Can a company have a policy against hiring college students?

LEARNING OBJECTIVE 1

What Is the Main Law Relating to Discrimination and Employment?

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80 Chapter 3 Ensuring Equal Employment Opportunity and Safety

Although there seem to be laws to protect everyone, in reality federal laws in the United States protect only a few specific groups of people. In most cases, people can only claim discrimination based on immutable character- istics, that is, traits they cannot reasonably change if they really want a job. Immutable characteristics usually include sex, race, age, and religion. Specific laws have been enacted to protect people in each of these categories from dis- crimination. Laws to protect people with certain characteristics are not con- fined to the United States. Figure 3.1 shows protected classes of employees in a number of different countries.

In the United States the Constitution and its amendments provide peo- ple with some assurance that they will be treated fairly. However, protection from discrimination comes primarily from specific laws, most of which were enacted in the last 50 years. Table 3.1 presents an overview of major federal laws related to discrimination and employment. States and even cities have

Immutable characteristics Personal characteristics that cannot reasonably be changed, such as race and sex.

Table 3.1 Major U.S. Employment Laws

Law Protection Based On

Title VII of Civil Rights Act of 1964 Race, color, national origin, religion, sex

Civil Rights Act of 1991 Race, color, national origin, religion, sex

Age Discrimination in Employment Act Age (people over 40)

Americans with Disabilities Act Physical and mental disability

Equal Pay Act Sex

Family and Medical Leave Act Illness and parental status

Executive Order 11246 Race and sex

Common Protected Classes

Race Sex National/

Ethnic Origin Color Age Religion Disability Political Opinion

Sexual Orientation

Marital/ Family Status

Canada X X X X X X X X X

Chile X X X X X X X X

Germany X X X X X X

India X X

Italy X X X X X X X

Japan X X X X X X

Kenya X X X X X X X

Korea X X X X X X X X X X

South Africa X X X X X X X X X X

Spain X X X X X X X X X

Taiwan X X X X X X X

United Kingdom X X X X X X X

United States X X X X X X X

Figure 3.1 Protected Classes of Employees in Various Countries. Source: Adapted from Brett Myors et al., “International Perspectives on the Legal Environment for Selection,” Industrial and Organizational Psychology 1 (2008): 206–246.

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What Is the Main Law Relating to Discrimination and Employment? 81

acts that provide additional protection in many cases. For instance, most states have laws against discrimination based on marital status, and a number of states prohibit discrimination based on sexual orientation.4 These state laws can provide additional guidelines, but they cannot conflict with the concepts set forth by federal acts. If a state law does conflict with a federal law, the federal law rules.

In the realm of employment and discrimination, one specific law is the basis for a majority of legal issues. That law is Title VII of the Civil Rights Act of 1964. We discuss Title VII in this section, along with an amendment known as the Civil Rights Act of 1991.

TITLE VII OF THE CIVIL RIGHTS ACT OF 1964 The most important law affecting human resource practices, the Civil Rights Act of 1964,5 was passed by Congress and signed into law as a result of the civil rights movement of the 1960s, which sought to end racial discrimina- tion. Being a law passed by the U.S. Congress, the Civil Rights Act of 1964 is of course a federal law. The part of the act that specifically applies to equal opportunity in employment is Title VII. Thus, people working in human resources often refer to the Civil Rights Act of 1964 simply as Title VII.

Given that it was passed as part of a larger effort to end racial discrimi- nation, it seems obvious that Title VII should protect the interests of racial minorities. It does more than that, however. Title VII provides protection to people based on five specific traits: race, color, national origin, religion, and sex. The law is applied for the protection of people who have been historically disadvantaged, including women and members of minority racial groups. These groups are referred to as protected classes, because they represent a collection of individuals specifically protected from discrimination by the wording and intent of Title VII.

Most, but not all, companies are required to comply with Title VII. When the Civil Rights Act was originally passed in 1964, lawmakers were concerned that it would place an unreasonable burden on small employers who did not have enough resources to make sure they were in compliance. The law was thus limited to companies with 25 or more employees. It has since been amended to exclude only companies with fewer than 15 employees. Another exemption is religious institutions. Churches are not required to comply with the guidelines of Title VII. Even with these exceptions, however, Title VII cov- ers almost all employees who work for either private or public organizations. Furthermore, in cases of exemption, state laws often provide the same protec- tion as Title VII. Thus, a company that has too few employees to come under federal Title VII may still have to comply with a similar state law.

A major part of Title VII was creation of the Equal Employment Opportunity Commission (EEOC). The EEOC is a federal agency in charge of administra- tive and judicial enforcement of federal civil rights laws. The commission is led by five commissioners who are appointed by the president of the United States. The president also appoints a general counsel who conducts and oversees liti- gation. A large number of people work under the direction of these leaders in regional offices. An individual who feels that he or she has been the victim of employment discrimination can file a complaint with the EEOC. EEOC staff members research the claim and try to help resolve the complaint. Where the complaint cannot be resolved, the EEOC can sometimes take the case to court, where it proceeds with a lawsuit on behalf of the alleged victim or victims.

Title VII The portion of the Civil Rights Act of 1964 that focuses specifically on employment discrimination.

Protected classes Groups of people, such as racial minorities and women, who are protected against discrimination by law.

Equal Employment Opportunity Commission (EEOC) A federal agency with responsibility to oversee, investigate, and litigate claims of employment discrimination.

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82 Chapter 3 Ensuring Equal Employment Opportunity and Safety

In a broad sense, Title VII protects people from discrimination. Discrimination in the context of employment occurs when not all people are given the same opportunity for employment and promotions. In this sense, Title VII requires equal employment opportunity, meaning that people should be given an equal chance to obtain employment regardless of their race, color, national origin, gender, or religion. Specifically, Title VII offers protection from three distinct types of discrimination: disparate treatment, adverse impact, and harassment.

Disparate Treatment What happens when a restaurant decides to hire women but not men to serve food? Is it fair to make being female a requirement for doing the job? Does it violate Title VII? What if the restaurant is trying to differentiate itself by pro- viding a certain type of atmosphere? Should the government step in and help men who want to work as servers? These issues were hotly debated a number of years ago when a lawsuit was filed against the Hooters restaurant chain. Hooters has a company policy of having food served by women dressed in shorts and small T-shirts. The company openly denies men the opportunity to apply for server positions. A few men who wanted to work as servers com- plained to the EEOC, which brought legal action against Hooters. The case was eventually settled out of court, but it illustrates some important legal principles.6

Having a policy against hiring men is an example of disparate treatment, which is the specific practice of treating certain types of people differently than others. In the Hooters case, men were treated differently from women. A more common example might be asking some people but not others certain interview questions. For instance, suppose that an interviewer asks women applicants if they have childcare arrangements that will enable them to be available to work when scheduled. If the interviewer does not ask the same question of men, disparate treatment has taken place. Holding women to a dif- ferent standard from men is disparate treatment. Another example is requir- ing job applicants from a certain racial group to pass a problem-solving test when no such requirement is in place for people from other racial groups. In most cases, Title VII prohibits disparate treatment. There are, however, some instances in which disparate treatment is allowed.

Suppose, for example, that a prison system that houses men wants to hire only male guards. Should the prison be allowed to refuse applications from women? One reason an exclusion might be allowed is that the presence of women to guard convicted rapists could create a dangerous situation for the women guards, the prisoners, and other male guards.7 In this case, Title VII may allow men and women job applicants to be treated differently. The enter- tainment industry provides another example. Only males might be given the opportunity to perform male roles in theater productions, and only females might perform female roles. In both cases, being one gender rather than the other is seen as a bona fide occupational qualification (BFOQ). The idea of a BFOQ usually applies to gender—and in some cases religion—and means that it is reasonable to assume that only a person with that particular characteristic can do the job.

Let’s return to the Hooters case, which, as noted, was settled before it actually went to court. The settlement required the restaurant to give men an opportunity to work in a different job that was seen as being similar to the waitress position.8 Had a trial been conducted, a central issue would have been the type of job being performed. If the job was simply to serve food, then

Discrimination In the context of employment, unfair treatment that occurs when people from particular groups are not given the same employment opportunities as people in other groups.

Equal employment opportunity Absence of discrimination in the workplace; the condition in which people have an equal chance for desirable employment regardless of belonging to a certain race, gender, or other group.

Disparate treatment The practice of treating job applicants and employees differently based on race, gender, or some other group characteristic.

Bona fide occupational qualification (BFOQ) Characteristic of members of a specific group that is necessary to perform a certain job.

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What Is the Main Law Relating to Discrimination and Employment? 83

the restaurant would most likely be in violation of Title VII. It’s difficult to think of a good reason why men could not serve food. In contrast, if the job was to provide a particular form of sex entertainment, then BFOQ would be a possible defense for not hiring men. No man could provide the particular type of entertainment Hooters required. Examples of BFOQ are rare. In most cases as noted, disparate treatment is a violation of Title VII.

What can a company do to protect itself against claims of disparate treat- ment? In most cases, it must ensure consistent treatment for all employees. Company policies and practices should treat everyone the same. Fair treat- ment has other benefits as well. Treating people differently because of their race, sex, or religion is not only illegal but also reduces motivation. People are less likely to work hard when they see themselves or others being treated in unfavorable ways.9

Adverse Impact What would happen if your professor decided to base grades on students’ height? On average, women would receive lower grades than men. Such an act might seem unfair, but it would not be disparate treatment. Grades for men and women would be based on the same thing: height. Nevertheless, basing grades on height would create unequal results for men and women. Discrimination of this sort is called adverse impact. Adverse impact is subtler than disparate treat- ment and occurs when a company’s policies treat all applicants the same but result in different employment opportunities for different groups.

An example of adverse impact occurred years ago when airlines had height requirements for flight attendants. Everyone had to meet a certain standard of height, so all applicants were treated the same. However, using height to make selection decisions had the effect of screening out most Asian applicants. Another example occurred approximately 40 years ago when a power com- pany began to require laborers to have a high school diploma.10 Educational opportunities were not the same for members of different races. As a result of requiring a diploma, the power company hired a very small number of minor- ity applicants. There was no disparate treatment, as everyone was required to have a diploma. Yet requiring a diploma had the effect of screening out a greater proportion of minority applicants.

Although disparate treatment is normally a violation of Title VII, the legal- ity of adverse impact is less clear. The very purpose of employee selection is to separate people so that those who are less qualified are not hired. Problems arise when certain groups are screened out at a higher rate than others. Still, screening out more people from some groups than others isn’t by itself neces- sarily a violation of Title VII.

An important key is whether the selection method accurately identifies people who can do the job better. Companies do not violate the law when they hire fewer applicants from a protected class if they use appropriate meth- ods to make hiring decisions. A common defense for adverse impact is thus validity. Validity is shown when the measures used to select employees provide assessments that accurately identify the people most likely to succeed.

Potential victims of discrimination are usually unable to determine whether a company’s selection methods are valid. The courts have thus placed the bur- den of proof in adverse impact cases on the company. The potential victim of discrimination must simply show that members of the protected class are hired, promoted, or laid off at a different rate than others. For example, the potential victim might show that the company hires a larger percentage of

Adverse impact Discrimination that results from employer practices that are not discriminatory on their face but have a discriminatory effect.

Validity The quality of being justifiable. To be valid, a method of selecting employees must accurately predict who will perform the job well.

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84 Chapter 3 Ensuring Equal Employment Opportunity and Safety

men than women. The burden of proof would then shift to the company to demonstrate that its selection procedures are valid—that is, that the proce- dures identify the people who are best able to do the job.11

Note, too, that the courts have not required companies to employ exactly the same proportion of people from all categories. Rather, they have adopted the four-fifths rule. This rule is violated when the percentage of people selected from one group is less than 80 percent of the percentage of people selected from the best-represented group. For instance, suppose a company selects 50 percent of male applicants but selects less than 40 percent (four-fifths of 50 percent) of female applicants. Under the four-fifths rule, a potential victim of adverse impact discrimination would simply need to show that the company selects people from the protected class at this lower rate. That doesn’t necessarily mean the company is in violation of Title VII. It does mean that the burden of proof falls to the company, which is required to dem- onstrate the validity of its selection procedures. The typical legal proceedings in adverse impact cases are shown in Figure 3.2.

The example in the “How Do We Know?” feature describes how companies that use good human resource practices are less likely to be seen as discrimi- natory. The potential value of effective HR is illustrated by the case mentioned earlier, as in which laborers were required to have a high school diploma. This case clearly illustrates the purposes and procedures associated with adverse impact. The company, Duke Power, established the policy near the time that Title VII was passed into law. Because of the policy, many minority group members were barred from applying for a position they desired. These people believed that requiring a diploma was nothing more than a pretext; in their view, the company’s real goal was to avoid hiring members of the minority group. They produced statistics showing that only a small percentage of peo- ple from their protected class were hired, even though a large percentage of white applicants were hired. The burden of proof then shifted, and the power company was required to demonstrate that having a diploma was indeed nec- essary to successfully perform the job. When the company was unable to show an adequate link between having a diploma and performing the job, the case was decided in favor of the minority applicants.

Four-fifths rule Evidence of adverse impact that occurs when the hiring rate of one group is less than 80 percent of the hiring rate of another group.

Step 1: Plaintiff Demonstrates Unequal Hiring Practices

Step 3: Plaintiff Shows Alternative Procedures

y

Step 2: Company Defends Validity of Practices y

Figure 3.2 Adverse Impact Case Proceedings.

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What Is the Main Law Relating to Discrimination and Employment? 85

Duke Power could have benefitted from better development of employee selection practices. The most critical practice is to make sure a company uses valid methods to select employees. The results of tests, interviews, and other measures must be linked to differences in job performance, as described in Chapter 6. Employers with good human resource practices not only treat employees better but also are able to better defend themselves against claims of discrimination.

Fortunately, in many cases the legal requirement of showing a relationship between selection practices and job performance is consistent with actions that increase profitability. Why incur the effort and expense of testing and evaluating job applicants if the measures do not provide information that helps make better selection decisions? A company that doesn’t check to make sure its selection procedures accurately identify the applicants most likely to succeed on the job may be wasting its resources as well as unfairly discriminat- ing against applicants from protected classes.

DO COURTS GIVE COMPANIES CREDIT FOR GOOD HR PRACTICES? What can a company do to reduce the chances of being found guilty of discrimination? Does it help to follow good human resource practices? Maury Buster, Philip Roth, and Philip Bobko answer this question in a study that describes a scientific method for ensuring that hiring practices are related to job performance.

The process these researchers describe is used to determine the minimum qualifications for jobs. Minimum qualifications often include certain edu- cational degrees and job experience. Such require- ments are common, but an important question is whether they are really necessary. The researchers’ process for linking minimum qualifications to job performance involves obtaining expert ratings and includes three steps:

1. People currently doing the job and their supervisors generate statements of minimum qualifications.

2. These statements are placed into a question- naire, and experts in the field rate each poten- tial statement with respect to whether the qualifications it describes are truly necessary for a minimally acceptable candidate on the first day of the job.

3. The statements rated most favorably are then used in determining minimum qualifications for job applicants.

The three-step procedure was used to develop minimum qualifications for an engineering position. The problem was that use of the quali- fications resulted in adverse impact—fewer members of some minority groups were hired. When the case went before a federal court, however, the court accepted the three-step pro- cess as an appropriate method for determining whether minimum qualifications for education and experience were necessary.

The Bottom Line. Federal courts do indeed look favorably on the use of scientific practices to show that hiring methods result in choosing the most qualified applicants. Professor Buster and col- leagues conclude that scientific principles can be used to develop selection methods that properly screen applicants, even when adverse impact exists.

Source: Maury A. Buster, Philip L. Roth, and Philip Bobko, “A Process for Content Validation of Education and Experienced-Based Minimum Qualifications: An Approach Resulting in Federal Court Approval,” Personnel Psychology 58 (2005): 771–799.

How Do We Know?

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86 Chapter 3 Ensuring Equal Employment Opportunity and Safety

Harassment What if you are required to work with someone who says and does things that make you uncomfortable? Do you have the right to ask that person to stop? Can you require the company to create an environment that is less harmful to you? These questions get at the notion of harassment, which occurs when an employee is persistently annoyed or alarmed by the improper words or actions of other people in the workplace, such as supervisors or coworkers.

Whether harassment is illegal depends on what the person who bothers you is saying and doing. In terms of Title VII, harassment is illegal if the harassing behavior is related to any of the five protected classes. Most cases of harass- ment, however, involve behavior directed at an employee because of his or her gender. This kind of harassment is known as sexual harassment. According to the EEOC, which monitors compliance with Title VII, “Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when (1) submission to such con- duct is made either explicitly or implicitly a term or condition of an individual’s employment, (2) submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual, or (3) such conduct has the purpose or effect of unreasonably interfering with an individu- al’s work performance or creating an intimidating, hostile, or offensive working environment.”12 Because sexual harassment has received a great deal of atten- tion and is the kind most commonly discussed, we’ll focus on it here. Table 3.2 provides a list of specific guidelines for dealing with sexual harassment.

Consistent with the definition we just presented, the courts have defined two types of sexual harassment. One type is quid pro quo (literally, “something for something”) sexual harassment, which occurs when an employee is told that continued employment or advancement depends on sexual favors. This type of harassment occurs, for example, if a supervisor informs an employee that she will be promoted only if she engages in sexual activities with him. Quid pro quo sexual harassment is fairly straightforward. It is illegal to make employment consequences dependent on sexual favors. Even a single quid pro quo statement by a supervisor is enough to warrant a sexual harassment action under Title VII.

Quid pro quo harassment can also affect employees who are not directly propositioned. For instance, suppose two people are competing for a promo- tion and one engages in sexual activities with the supervisor in order to obtain the position. Does this constitute harassment for the employee who did not receive the promotion? The courts have ruled that it does. An employee who does not receive a promotion may be a victim of harassment if he or she can

Harassment In the workplace, improper actions or words of coworkers that cause an employee to feel persistently annoyed or alarmed.

Sexual harassment In the workplace, improper words or actions that are sexual in nature or that are directed toward workers of a specific sex or sexual orientation.

Quid pro quo In the context of sexual harassment, a form of harassment that makes continued employment and advancement contingent upon sexual favors.

Table 3.2 Sexual Harassment Guidelines

Define harassment and affirmatively express company disapproval of harassing actions.

Clearly define the sanctions and penalties for violation of the harassment policy.

Inform employees of their legal rights, including how to make an EEOC claim.

Establish a grievance procedure that is sensitive to the rights of all parties.

Widely communicate the plan and rapidly investigate and resolve complaints.

Source: Adapted from Arthur Gutman, EEO Law and Personnel Practices, 2nd ed. (Thousand Oaks, CA: Sage, 2000), p. 126. [Reprinted with permission.]

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What Is the Main Law Relating to Discrimination and Employment? 87

show that the person who did receive the promotion received it as the result of a sexual relationship.13

The second type of sexual harassment is labeled hostile environment. This type of harassment occurs when comments or behavior in the workplace have the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working envi- ronment. For example, continually subjecting a woman (or a man) to unwel- come sexual remarks can create a hostile environment. The person making the remarks need not be a supervisor.

An important issue in harassment cases has been whether the company should be liable for the actions of an employee or supervisor who has engaged in harassment. As explained in the “How Do We Know?” feature, not all employ- ees are equally likely to discriminate. Some early court rulings suggested that only the individuals doing the harassing would be accountable. However, a number of harassment cases made their way to the Supreme Court, which clearly established that organizations are indeed liable for the actions of their employees.14 If the organization knows or should have known about the harass- ment, then the victim of harassment can look to the company to pay damages.

Most people would agree that continually asking someone for sexual favors or improperly touching someone represents harassment, but the effects of

Hostile environment In the context of sexual harassment, a form of harassment that occurs when employees create an offensive environment in the workplace that interferes with an individual’s ability to perform work duties.

WHO IS MOST LIKELY TO UNFAIRLY DISCRIMINATE? When is unfair discrimination most likely to occur? Most of us think that some people are more likely than others to discriminate against women and minorities. We also think that discrimination is more likely in some circumstances than others. But who is most likely to discriminate, and when? A study by Jonathan Ziegert and Paul Hanges pro- vides answers to these questions.

The researchers asked 103 undergraduate stu- dents to complete a number of measurement scales. One scale measured their implicit racial attitudes, which are attitudes and ingrained beliefs about race. Students also provided a measure of their motivation to control prejudice. People with higher motivation seek to hide their prejudices. About a month after completing these measures, students completed an exercise that asked them to evaluate potential job applicants. Some of the fictional applicants were members of racial minori- ties. Students were also told to assume that they were working for a boss with certain preferences about hiring minority workers.

Students gave lower evaluations to minority job candidates when they were told that their supposed

boss preferred not to hire members of the minority group. This negative bias against recommending minority job candidates was highest for people with an implicitly negative attitude toward minorities. Students who were implicitly biased but were also motivated to control their prejudice were not as likely to give lower evaluations to minorities.

The Bottom Line. The organizational climate for prejudice is important. People seem less likely to discriminate when their supervisors establish a clear preference that everyone be treated equally. People who have subtle negative attitudes about minorities are more likely to discriminate than people who are not as biased. Yet these negative attitudes can be controlled when people consciously choose to con- trol them. The authors conclude that in order to understand discrimination we need to assess both people’s attitudes and their level of motivation to appear nonprejudiced.

Source: Jonathan C. Ziegert and Paul J. Hanges, “Employment Discrimination: The Role of Implicit Attitudes, Motivation, and Climate for Racial Bias,” Journal of Applied Psychology 90 (2005): 553–562.

How Do We Know?

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88 Chapter 3 Ensuring Equal Employment Opportunity and Safety

other actions are less clear. What if male workers place pictures of nude women in the workplace? What if men tease women in a way that doesn’t seem offen- sive to them but does seem offensive to the women? In these cases, it is some- times difficult to determine whether actions represent violations of Title VII. A single isolated comment would not normally be enough to show a pattern of hostility. However, repeated comments and unwelcome requests do consti- tute harassment. Behavior that makes others feel uncomfortable is generally forbidden. In short, actions and comments become harassment when a rea- sonable person would interpret them as harassment. Victims need not show that the comments and actions make them completely incapable of perform- ing their jobs, but only that the environment had a negative impact on their psychological well-being.15

Sexual harassment has been linked to a number of undesirable outcomes. Individuals who are harassed report decreased physical and mental health. They also have lower job satisfaction and are more likely to avoid tasks, be absent, and quit. Work groups where harassment occurs are also less productive.16 Individuals and organizations can thus benefit greatly from organizational policies and prac- tices that stop harassment. What can a company do to keep harassment from occurring? Organizations can do several things to reduce discrimination. Sexual harassment is less likely to occur when an organization has a climate of respect. Such a climate can be facilitated by formal procedures that provide guidelines for appropriate behavior, as well as channels for reporting harassment without fear of retaliation. Education can also help prevent harassment.17 Most organiza- tions have thus outlined specific procedures for making sure that no unwanted sexual and racial comments and behavior occur in the workplace. Formal poli- cies concerning harassment, as well as formal channels to communicate allega- tions of harassment, are important for demonstrating that the organization is taking reasonable care to eliminate unwanted behavior. Companies must also act aggressively when allegations are made. The accompanying “Technology in HR” feature describes how organizations are working to decrease harassment and other counterproductive actions that can occur with Internet and email use.

THE CIVIL RIGHTS ACT OF 1991 The Civil Rights Act of 1991 created some important extensions of Title VII.18

One significant issue concerned shifting of the burden of proof to companies accused of adverse impact discrimination. Normally, the burden of proof in a lawsuit is on the plaintiff—the person bringing the suit. That means that it is the plaintiff’s responsibility to show that the defendant committed a wrong- ful act. If the plaintiff can’t meet this burden of proof, the defendant is not required to prove anything. However, the burden is somewhat different in employment discrimination cases.

Let’s look briefly at the history of this issue to clarify what happened. Following passage of Title VII in 1964, the Supreme Court issued a number of rulings that essentially shifted the burden of proof to companies in discrimina- tion cases. If the plaintiff could show adverse impact, then the company bore the responsibility for demonstrating that its hiring practices were not unfairly dis- criminatory. However, the makeup of the Court changed over time, and in the years leading up to 1991 the Court decided a number of cases that appeared to signal that the burden of proof should not be shifted to the company.19

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What Is the Main Law Relating to Discrimination and Employment? 89

LEGAL ISSUES WITH INTERNET AND EMAIL USE Widespread use of email messaging and the Internet has certainly made it easier to exchange information. This ease of information exchange can, however, create legal problems for organiza- tions. Employees who might know better than to directly make a harassing remark often write inap- propriate notes in email messages that get for- warded around the office.

A sense of anonymity might also encourage employees to post inappropriate sexual com- ments to electronic bulletin boards. Similar problems occur when employees create a hos- tile work environment by viewing pornographic material on company computers. A number of court decisions have established that organiza- tions are responsible for offensive acts such as inappropriate email messages, sexually deroga- tory electronic board postings, and viewing of pornographic material.

Another potential legal liability arises when an organization allows employees to use company computers to share copyrighted material such as music and videos. Integrated Information Systems, a software company located in Arizona, paid the Recording Industry Association of America more than $1 million to settle a claim that it had allowed employees to use its equipment to share illegal copies of music. The Motion Picture Association of America has also made it clear that it will pros- ecute corporations if they do not take steps to discourage and eliminate sharing of illegal video copies.

Of course, an important question is whether an employer has the right to access its employees’ private email messages and associated computer content. The clear answer is yes. The courts have consistently ruled that employees have no right to privacy when it comes to communications pro- duced on company time with company equip- ment. The very act of accepting employment

provides the employer with permission to moni- tor employee communications. Employees should therefore not assume privacy for email messages and other electronic content created and sent with company equipment.

So what can an organization do to protect itself from problems that occur when employees mis- use electronic communication? The first answer is that an organization needs a clear policy that describes acceptable uses of company computers and other equipment. This policy must prohibit messages and communications that are sexually, religiously, and racially offensive. Many companies also have policies that prohibit the use of peer-to- peer (P2P) technology that facilitates the transfer of illegal music and videos. In fact, some organi- zations are designing their computer systems to prevent the use of P2P software. Although these safeguards might eliminate the use of some help- ful electronic tools, they are necessary to limit the liability that organizations assume for the acts of employees.

Sources: Daniel J. Langin, “Employer Liability for Employee Use of Peer-to-Peer Technology,” Journal of Internet Law 9, no. 5 (2005): 17–20; Chauncey M. DePree, Jr., and Rebecca K. Jude, “Who’s Reading Your Office E-mail? Is That Legal?” Strategic Finance 87, no. 10 (2006):44–48.

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90 Chapter 3 Ensuring Equal Employment Opportunity and Safety

To counter this trend, the 1991 act directly specified that the burden of proof rests with the company once a potential victim establishes that adverse impact exists.

Another question that was repeatedly debated in the courts in the 1980s was whether it was appropriate for companies to use different methods to score tests for people from different protected classes. When this practice, known as race-norming, is used, each person receives a score that only tells how he or she did in comparison with others of the same race or gender. The effect is to make some people rank higher than they otherwise would, since scores in their group are lower on average. The Civil Rights Act of 1991 made race-norming illegal. Now an individual’s scores must be compared with all other scores, not just with the scores of members of his or her own group.

The 1991 act also changed the kind of damages that could be awarded in discrimination cases. Until 1991, companies found guilty of discrimination could only be held liable for the actual damages caused to employees; these actual damages might include such things as lost wages. The 1991 act pro- vides for not only actual damages but also punitive damages. Punitive damages are payments designed to punish the company and can be substantially higher than actual damages. Many victims now receive punitive damages. For instance, a woman who brought a sex discrimination case against Merrill Lynch & Company received a $2.2 million settlement that included not only back pay and lost earnings but also punitive damages against the company.20 The award was given by a board of arbitrators who determined that the company had failed to train and discipline employees who engaged in sexual harassment.

Also, until 1991 judges heard employment cases, and potential victims could not ask for a jury trial. The 1991 act allows jury trials for employment discrimination cases. In many cases juries appear to be more willing than judges to award punitive damages. Allowing jury trials, along with awards of punitive damages, substantially changed the nature of employment law.

APPLICATION OF U.S. LAWS TO INTERNATIONAL EMPLOYERS The application of Title VII and other employment discrimination laws can be complex for international employers. What laws apply if the employer is based in a foreign country? Do U.S. laws apply to U.S. citizens who are working in foreign countries? The trend toward increased globalization is making issues such as these increasingly important.

Figure 3.3 shows a decision tree that can be used to help determine whether U.S. discrimination laws apply to international employers. The first step is to determine whether the job is located in the United States. If it is, and if the employer is a U.S. company, then U.S. laws protect the employee hold- ing that job against discrimination, as long as the employee is authorized to work in the United States. Protection may be limited if the employee entered the United States illegally or without permission to work. Even if the employer is not a U.S. company, discrimination laws generally apply to jobs located in the United States. An exception arises if a treaty or special status exempts the foreign employer from U.S. law. For example, an individual located in the United States but working for a foreign government may not be protected from discrimination because the employer is granted special diplomatic status.21 This is a rare exception, so most employees working in the United States are covered by Title VII and other discrimination laws, even if the employer is a foreign-based company.

Race-norming The practice of evaluating an applicant’s score by comparing the score only with scores achieved by people of the same race.

Punitive damages Payments ordered by courts that exceed actual damages and are designed to punish a defendant—for example, to punish a company for discrimination.

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What Is the Main Law Relating to Discrimination and Employment? 91

If the job is located outside the United States, a different set of rules applies. Of course, Title VII and similar laws do not apply in other countries when the employer is not a U.S. company. This makes sense, as there is no basis for the U.S. government to enforce its laws on foreign companies doing business in their own lands. However, if the employer is a U.S. company, then its employees who are U.S. citizens are protected by U.S. discrimination law, unless such protection would violate the laws of the country where the job is located. We can see an example of this exception in a case involving a non- Muslim who was prevented from working as a helicopter pilot flying into a sacred area in Saudi Arabia. U.S. courts allowed the U.S.-based employer to disqualify the pilot—a U.S. citizen—from employment on religious grounds (a potential violation of Title VII) because the presence of a non-Muslim in this area would have violated the law of Saudi Arabia.22 We should also point out that U.S. law does not generally protect employees who are citizens of foreign countries from discrimination, even if the employer is a U.S. business. Thus, workers in foreign lands are only protected by U.S. discrimination laws when they are U.S. citizens working for U.S. organizations.

No

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Laws Apply

Yes

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No Limited Application

Laws Do Not Apply

Yes

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Laws Apply

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Is the job located in the U.S.?

Is the employer a U.S. entity?

Is the employer a U.S. entity?

Is the employee authorized to

work in the U.S.?

Is there a treaty or

immunity?

Is the employee a U.S. citizen?

Would foreign laws be violated?

Figure 3.3 Do U.S. Discrimination Laws Apply to International Employers? Source: Adapted from Richard A. Posthuma, Mark V. Roehling, and Michael A. Campion, “Applying U.S. Employment Discrimination Laws to International Employers: Advice for Scientists and Practitioners,” Personnel Psychology 59 (2006): 711. [Reprinted by permission of Wiley-Blackwell.]

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92 Chapter 3 Ensuring Equal Employment Opportunity and Safety

We’ve seen that Title VII and its 1991 amendment provide protection against discrimination based on race, religion, and sex. Other laws extend similar protections to individuals based on different characteristics, such as age and disability status. Still other laws protect employees who need to take time off from work to help family members or deal with medical conditions.

THE AGE DISCRIMINATION IN EMPLOYMENT ACT Older people constitute a protected class that is not included in Title VII. Lawmakers were uncertain about the right way to address age discrimination, so they decided to study the issue further before passing a specific law. The law that was created from this study is the Age Discrimination in Employment Act of 1967 (ADEA), which essentially provides Title VII protections to older workers.23 Specifically, the law as amended applies to everyone over 40. Some special occupations, such as police officer and firefighter, have been allowed to require people to retire at a specific age.

An interesting feature of the ADEA is that it doesn’t simply classify people as either younger or older than 40. In cases of gender, race, and religion, people can simply be classified as being or not being a member of the protected class. When it comes to age, people are compared against others. Thus, discrimina- tion can occur when a worker who is 50 receives better treatment than a worker who is 60. Companies cannot defend themselves against claims of age discrimi- nation by simply showing that they employ a number of people over 40.

ADEA is similar to Title VII in that small employers are exempt. The differ- ence is that the minimum number of employees is 20 rather than 15. Like Title VII, the ADEA protects people from several types of discrimination, including disparate treatment, adverse impact, and hostile environment discrimination.

LEARNING OBJECTIVE 2

What Are Other Important Employment Laws?

? CONCEPT CHECK 1. What is the major law regarding employment discrimina-

tion, and who is protected by this law? 2. How are disparate treatment and adverse impact different? 3. What are the two types of sexual harassment? 4. What are some major provisions of the Civil Rights Act of 1991? 5. How do U.S. discrimination laws apply to international

employers?

In summary, most people working in the United States are covered by Title VII and other discrimination laws, even if the headquarters of their employer is not located in the United States. In foreign countries, U.S. law generally pro- vides protection to employees who are U.S. citizen working for U.S. companies.

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What Are Other Important Employment Laws? 93

Whereas Title VII is usually applied to hiring and promotion decisions, ADEA protection has historically been focused mostly on termination decisions, even though the reach of the law includes hiring and promotion. The most common complaint associated with the ADEA occurs when older employees are laid off or have their job benefits reduced. Disparate treatment is shown when a qualified person older than 40 is terminated and replaced with some- one substantially younger. Some cases of disparate treatment are subtler, how- ever. For example, a company might replace a worker with someone slightly younger, and then replace the new person with someone else slightly younger, until finally the person in the position is substantially younger than the origi- nal person. Another, sometimes disguised, form of disparate treatment occurs when a company terminates a number of employees in all age categories but then offers younger workers better opportunities for other positions.24

Adverse impact operates the same as for Title VII. Statistical patterns are used to show that negative employment decisions harm older workers more than other groups. Companies then bear the burden of showing that their termination policies were based on reasonable factors other than age. In the case of hostile environment, an older employee can claim that derogatory comments and conditions create an abusive workplace. For instance, an older woman going through menopause successfully used the ADEA in her claim that comments related to her age were intimidating and hostile.25

Age discrimination is of particular concern to companies when they must reduce their workforces. Unfortunately, many companies face the task of work- force reduction and thereby have the potential of negatively harming older workers more than younger workers. Good human resource practices can help these companies manage layoffs better. For instance, companies should care- fully document the need for layoffs. They should then create a written policy that describes the principles that they use to determine who is laid off. Table 3.3 provides important suggestions for things that an organization should take into account when it faces the difficult task of laying off workers.

Organizations’ performance can also be enhanced by eliminating age dis- crimination. Some people have stereotypes of older workers as less effective than younger workers. However, these notions are generally false. Research clearly shows that older workers are just as effective as younger workers when it comes to completing core job tasks. Moreover, older workers are less likely to do things that harm the organization. They engage in more safe work practices, arrive to work on time, take fewer days off, and spend extra effort to improve performance.26

In fact, the only area where older workers have been shown to be problematic is that they are less likely to engage in training and career development activities.27

Table 3.3 Guidelines for Effective Layoffs

Conduct a management study to support necessity of a layoff and what principles will guide who is affected.

Based on the management study, construct a written layoff policy.

Document alternatives to layoff that were considered and/or used.

Use length of service as a layoff principle whenever possible.

Use an internal committee for layoff decisions, not individual department heads.

Source: Adapted from Arthur Gutman, EEO Law and Personnel Practices, 2nd ed. (Thousand Oaks, CA: Sage, 2000), p. 224. [Reprinted with permission.]

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THE AMERICANS WITH DISABILITIES ACT What if you were in a skiing accident and lost the use of your legs? Should business organizations bear a burden to help you find work that can be done even with your disability? Should businesses be required to alter some of their work processes so that you can perform certain jobs? What if your eyesight is bad and you need to wear glasses? Are you disabled? These are questions addressed by the Americans with Disabilities Act (ADA), which was passed into law in 1990.28

Who Is Covered? The ADA provides protection for individuals with physical and mental dis- abilities. Physical disabilities include conditions such as loss of an arm or leg, blindness, and chronic illnesses, such as cancer and diabetes. Mental disabilities include conditions such as depression, learning disorders, and phobias. Actually determining whether an individual has a disability can, however, be somewhat difficult in practice. In order to be classified as a disability, a condi- tion must impair or limit a major life activity. Major activities include functions such as caring for oneself, walking, hearing, speaking, performing manual tasks, and learning. In essence, the ADA provides protection for individuals who have physical or mental impairments that prevent them from doing nor- mal life activities.

Lawmakers excluded a few specific conditions. People are not protected by ADA if they have sexual behavior disorders or gambling addictions, for example, or if they currently use illegal drugs. In addition, a disability must be something that cannot be easily fixed. For instance, poor vision can normally be fixed with eyeglasses or contact lenses. Someone who has poor vision that can be corrected with glasses is thus not considered disabled.29

The ADA provides specific protection to individuals currently suffer- ing from a disability. The law also protects people in two other categories: those who have a record of having a disability in the past and those who are regarded as having a disability, even if they do not. The distinction between being currently disabled and having a record of being disabled is particularly important in the case of illegal drug use. Current drug addicts are specifically exempted from the law. However, people who have a record of drug use in the past may be covered. The condition must have been a true addiction rather than just casual use, and sufficient time must have passed since the last drug use.30 But a former addict who has not used drugs for at least a number of months can qualify for protection under the ADA.31

What Protection Is Offered? The ADA does not guarantee that people with disabilities will be given any job they want. ADA guidelines apply only when the disabled person has the knowledge, skills, and abilities that are essential for performing the job. The law is thus designed only to assure that qualified individuals have fair employ- ment opportunities. In some cases, a disabled person may not be required to perform functions that are not essential to the job. This means that organiza- tions need to be very specific about the essential and nonessential parts of jobs. They do this through the process of job analysis, which will be discussed in Chapter 4.

Physical disabilities Body impairments that substantially limit an individual’s ability to engage in normal life activities.

Mental disabilities Impairments of the mind that substantially limit an individual’s ability to engage in normal life activities.

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The ADA also may require companies to provide disabled individuals with reasonable accommodation to help them perform the essential duties of their jobs. Under the law, an accommodation is any change in the work environ- ment or in the way things are customarily done that enables an individual with a disability to enjoy equal employment opportunities. Common accommoda- tions include making facilities accessible to people in wheelchairs, restructur- ing parts of the job, modifying work schedules, modifying work equipment, reassigning a person to a different job, and providing a helper to read or interpret.32 An organization is not required to change the job conditions to meet the preferences of the employee, however.33

An organization may not have to make reasonable accommodations if doing so would create undue hardship for the organization. Whether making an accommodation creates an undue hardship depends on several issues. The courts generally take into account the cost of the accommodation, the overall financial resources of the organization, the size of the business, and the nature of what it produces.34 In essence, bigger companies with more resources are expected to be capable of making more accommodations. However, even a large company need not make an accommodation that severely harms the company’s productivity. For instance, one disabled person brought a lawsuit asking that a company be required to change the assembly-line process so that he could perform a specific job. The court concluded that changing the assembly line placed an undue hardship on the company.35

A special case within the ADA is alcoholism. Alcoholism is covered to a degree within the ADA, but that doesn’t mean that a person with a drinking problem will be excused from performing his or her work tasks. The law spe- cifically says that a company can prohibit the use of alcohol at the workplace, that it can prohibit employees from being under the influence of alcohol at the workplace, and that alcoholics can be held to the same performance expectations as other employees.36 Employees who drink at work or are under the influence of alcohol at work can be terminated. The area where reason- able accommodation comes into play is usually reduced performance or absences that come from alcohol use outside of work. One court settlement suggested that a company should strive to help the person deal with alcohol- ism as a disability. This includes informing the person of available counseling services, offering a choice between treatment and discipline, providing pro- gressive discipline, and allowing sick days to be used for receiving treatment.37

How Do Companies Comply? The ADA places some important limitations on what organizations can ask and measure during the job application process. Asking people whether they have a disability on an application form or in an interview is generally prohibited. Conducting a medical exam to learn of a disability is also prohibited, with one important exception. A medical exam can be required after a conditional job offer has been made, as long as the medical exam is required of all job appli- cants. In essence, the person is offered the job with the provision that he or she pass a physical exam testing for the abilities necessary to perform job tasks.38

The ADA requires employers and employees to work together to find ways to accommodate disabilities. Unless the disability is obvious, the employer cannot ask the employee whether he or she has a condition that limits his or her ability to perform job-related tasks. This means that disabled people bear a responsibility to communicate their needs for reasonable accommodation.

Reasonable accommodation Under the ADA, an alteration of the work environment that enables a qualified individual with a disability to perform essential tasks.

Undue hardship Under the ADA, a severe economic or other hardship placed on an employer by the requirement to make accommodations for workers with disabilities; an employer is not required to make accommodations that impose undue hardship.

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Similarly, students who are disabled have an obligation to inform their pro- fessors and seek help. They cannot simply claim a disability after they have already completed the coursework. The ADA does not offer protection to someone who is disabled but does not make requests for accommodation.

A company can help ensure that it follows the guidelines of the ADA by first clearly describing the content of jobs. Specific lists of the tasks that are part of each job are necessary for determining whether someone who is disabled is capable of performing the job. A company should also develop clear lines of communication so that people with disabilities can comfortably ask for reasonable accommodations. When requests for accommodation are made, the company needs to carefully examine them and thoroughly study whether the accommodation can be made. In many cases, making accommodations can help companies find and keep high-quality employees. For instance, McDonald’s specifically recruits workers with disabilities and has found them to be among the company’s best and most loyal employees.39

THE EQUAL PAY ACT Suppose a man and woman sit at desks next to each other and perform the same tasks. Is it fair to pay one of them more than the other? Does lower pay for the woman mean that the company discriminates? Can the woman make the company pay her the same as it pays the man? As described earlier, one major complaint in the lawsuit against Walmart was that women were paid less on average than men. The Equal Pay Act, which was passed into law in 1963, addresses the issue of pay differences for men and women. Unlike many other laws, this act applies only to gender.40 It provides no protection for differences based on race or other factors.

The Equal Pay Act specifically makes it illegal for a company to pay men and women different wages, as long as they are doing equal work. Equal work is defined as tasks that require equal skill, effort, and responsibility and that are performed under similar working conditions. Of course, it is often diffi- cult to determine if all job factors are truly equal. Soon after the Equal Pay Act became law, some organizations tried to get around it by adding a few minor tasks to jobs performed by men. For instance, one firm allowed only men to lift certain objects and then paid them more.41 A medical firm tried to justify paying male nurses more by saying that they worked harder to lift patients and that men had to use extra skills to perform private duties for male patients.42

In both cases, the court system found the reason for the differences to be little more than an excuse to pay men more. The court then prescribed keys for determining when jobs are truly different: (1) One job must require extra effort and more time than the other and (2) that job must affect the com- pany’s financial results more than the other job.43

The Equal Pay Act does recognize nondiscriminatory reasons why people in the same job might be paid differently. One reason is seniority. Paying people according to seniority is acceptable as long as men and women with the same years of service are paid the same. Another acceptable reason for differential pay is merit. The law recognizes differences in performance and allows higher compensation for stronger contributors, as long as accurate per- formance measures are in place. Paying some people more than others is also acceptable if the employees are paid according to a piece-rate system—that is, when they are paid a certain amount for each part they produce or ser- vice they perform. For instance, it would be permissible for men and women

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What Are Other Important Employment Laws? 97

working as sewing machine operators to be paid differently if their pay was based on the number of shirts they made each day.

One thing that the Equal Pay Act does not require is basing pay on comparable worth. This practice involves determining what each job is worth to the company and paying accordingly, so that people whose jobs make equally important contributions are paid the same, even if the jobs are quite different in nature. Although comparable worth has been advocated at times, no U.S. law requires it. Under the Equal Pay Act, companies are only required to ensure that pay is equal for men and women performing the same job. Comparable worth is, nevertheless, a topic that is often debated.

Complying with the Equal Pay Act requires that the human resource func- tion make a number of important contributions:

Job analysis provides tools for determining when jobs are equal. We look more closely at job analysis in Chapter 4. Job evaluation uses surveys and statistics to determine how much to pay people based on comparisons both within the organization and between the organization and other organizations. These practices are described in Chapter 11. Performance measures assess the contribution of each employee and ensure that people who contribute more to the organization can be recog- nized and paid more. Performance measures are discussed in Chapter 8.

THE FAMILY AND MEDICAL LEAVE ACT Suppose a woman who is about to give birth to a child decides she would like to take time off work to spend with the new baby. Must the company that she works for grant her request for leave? If so, how long can the leave last? Will she be paid while she is on leave? When she returns to work, will she be able to return to the same job? These important questions are addressed by the Family and Medical Leave Act (FMLA), enacted in 1993.44 The FMLA provides up to 12 weeks of unpaid leave for people in certain situations. Furthermore, when the employee returns to work, he or she must be restored to the same position or an equivalent position in terms of pay, benefits, and responsibilities.

Under the FMLA, an employee—either male or female—may request a leave of absence for four reasons:

1. The employee is unable to work because he or she has a serious health condition.

2. The employee needs to care for an immediate family member with a seri- ous health condition. Immediate family members are usually limited to spouses, parents, and children who are either under 18 or disabled.

3. The employee needs to care for a newborn child. 4. The employee needs to care for a child just adopted by the employee or

placed with the employee for foster care.

Not everyone is covered by FMLA. Only companies with 50 or more employees who live within 75 miles of the workplace are required to grant leave under FMLA. In addition, in order to be covered, an employee must have worked for the company for at least 12 months and must have worked at least 1,250 hours during the previous 12 months. Also, certain key employees may be ineligible for FMLA leave.

Comparable worth A measure that assumes that each job has an inherent value to the organization and that dissimilar jobs can be compared to determine whether the pay for these jobs reflects this value.

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Employees who take leave under FMLA receive no pay while they are not working. The company is, however, required to continue providing health- care coverage under a group plan. Employees who wish to take the leave must usually provide 30 days’ advance notice, when possible. The company may also require an employee requesting leave based on a serious health condition to provide certification of the condition. The requirement that employees inform employers before taking leave for medical conditions is an important feature of FMLA. The courts have ruled that an employee who is fired cannot later claim that absences were caused by medical conditions and thus are cov- ered by FMLA.45 The employee must inform the employer of the condition when the absence occurs and before being terminated.

The goal of FMLA is to help employees balance their work demands with their family needs. Providing time off so that employees can meet their family obligations provides benefits to the company as well as to employees, because employees who are worried about family needs may not be able to focus their attention and effort while at work. Companies can ensure that they comply with FMLA by informing employees of their rights for unpaid leave. When an employee does take a leave of absence, the company should communicate support and caring for the individual. In the end, companies often find that policies that support families are an important tool for retaining a diverse workforce.

? CONCEPT CHECK 1. Who is protected by the ADEA, the ADA, the Equal Pay Act,

and the FMLA? 2. How do the concepts of reasonable accommodation and

undue hardship guide the application of ADA principles?

Organizations need to prevent discrimination and provide equal employ- ment opportunity in order to comply with laws. However, a strong case can be made that preventing discrimination increases employee diversity, which in turn increases organizational performance. Although increased diversity does not automatically improve organizational results, evidence suggests that a more diverse workforce is particularly beneficial when work tasks require creativity and diverse inputs.46 As described in the “Building Strength Through HR” feature, people from minority racial and ethnic groups are effective at meeting the needs of customers from the same group. Diversity enhancement programs can also increase the available pool of potential employees, which makes it more likely that the best job applicants will be identified and hired. An important question is thus what organizations can

How Can Organizations Increase Diversity?

LEARNING OBJECTIVE 3

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How Can Organizations Increase Diversity? 99

do to increase diversity. Approaches to diversity enhancement can be classi- fied into four categories:47

1. Opportunity enhancement programs focus on identifying and actively recruiting employees from groups that have historically been targets of discrimination, such as women and minorities.

2. Equal opportunity programs emphasize the elimination of biases and for- bid unfair treatment of underrepresented groups.

3. Tiebreak programs suggest that minority status be considered a plus when deciding between otherwise equally qualified individuals.

4. Preferential treatment programs give positive weight to being a member of an underrepresented group.

Not surprisingly, people almost universally agree that the first two forms of diversity enhancement are appropriate. But some people harbor negative atti- tudes about the tiebreak and preferential treatment programs. As might be expected, women and members of racial minority groups tend to have less

PEPSICO PepsiCo is a global food and beverage company with annual revenues of more than $66 billion. The company has over 300,000 employees in nearly 200 different countries and seeks to sell its food and beverage products to consumers in all racial and ethnic groups. Increasing the diversity of employees as a means of increasing sales to minor- ity groups is therefore a critical objective at Pepsi.

PepsiCo actively recruits diverse employees in sev- eral ways. First, the company cultivates relationships with African American colleges and universities and has an affirmative action planning process that seeks to increase the percentage of minority workers. Two external advisory boards of academics, politi- cians, and customers provide guidance on diversity issues. In addition, PepsiCo encourages employees to join affinity groups that consist of people of a par- ticular race or gender who get together to discuss issues that affect them. Each group has as its spon- sor an executive who is not a member of that race or gender.

Diversity initiatives at PepsiCo have increased the number of its minority workers. People of color now represent 17 percent of managers at midlevel and above, and women represent 34 percent of managers.

Indeed, the current CEO, Indra Krishnamurthy Nooyi, was born in India and is frequently listed among the most influential female leaders in the world. PepsiCo is also routinely rated as one of the best places of employment for minorities, and has been named to the list of Black Enterprise’s 40 Best Companies for Diversity. Such awards increase the number of minority job applicants, which further advances diversity initiatives.

Diversity also adds to PepsiCo’s profits. Innovation centers on identifying new product flavors to match the unique tastes of diverse customers. Among these products are Guacamole Doritos and Mountain Dew Code Red.

Sources: Information from Irene Chekassky, “Pepsi’s for Everybody,” Beverage World 117 (1998): 248; Carol Hymowitz, “The New Diversity: In a Global Economy,” Wall Street Journal, November 14, 2005; Chad Terhune, “Pepsi, Vowing Diversity Isn’t Just Image Polish, Seeks Inclusive Culture,” Wall Street Journal, April 19, 2005; http://cdn3.blackenterprise.com/wp- content/blogs.dir/1/files/2012/07/2012-Best-Companies- For-Diversity.pdf; http://www.pepsico.com/PEP_Diversity/ commitment/index.cfm.

©AP/Wide World Photos

Building Strength Through HR

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negative views.48 Interestingly, white men may develop negative views of diver- sity enhancement as a way to preserve their self-esteem.49

Evidence clearly suggests that attitudes about diversity can be influenced by effective communication. Employees are more accepting of diversity enhancement when they are exposed to logical reasoning about why it is ben- eficial. Organizations should specifically provide empirical facts about the need for diversity, focus on the economic benefits of diversity, and encourage employees to think deeply about reasons behind diversity enhancement.50

Diverse groups also perform better when they have been specifically shown how their group’s diversity can benefit their processes and outcomes.51 This often requires an organizational training initiative, which is described in Chapter 10.

EXECUTIVE ORDER 11246 There is no law requiring organizations to increase diversity. However, prac- tices to increase the representation of women and minority workers are often contained in affirmative action plans that are required by Executive Order 11246.52 Executive orders are not passed by Congress but rather are issued by the president of the United States. Executive Order 11246 was issued by President Lyndon B. Johnson in 1965 and requires any organization doing business with the federal government to have an affirmative action plan. Doing business with the federal government is defined as having government contracts valued at over $10,000.

Executive Order 11246 does not have the force of law and is only indirectly related to private businesses. Nonetheless, it affects any organization that wants to do business with the federal government. Since a large number of organiza- tions contract with the federal government, Executive Order 11246 has a long reach that makes it very similar to law. Most universities are covered by 11246, for example, because they receive federal funding. Construction companies that want to build public roads or buildings are also covered. In essence, the government uses its power as a large business partner to encourage companies to follow the affirmative action guidelines of Executive Order 11246.

An affirmative action plan that complies with Executive Order 11246 requires organizations to submit a number of reports to show their progress in providing work opportunities for minorities and women. One requirement is a utilization study, which compares the percentages of women and minori- ties currently holding jobs in the company with the percentages of minorities and women in the population of the immediate labor area. Once a utilization analysis has been conducted, the next step, if needed, is to use the results of the analysis to develop goals and timetables—specific plans to increase the representation of women and minorities in the company’s work force. Plans should not include quotas, which prescribe certain percentages to be hired; rather, they must be flexible objectives. Organizations must then show a good faith effort, or reasonable actions, to achieve the goals and timetables. There is no requirement to hire unqualified workers. Indeed, evidence sug- gests that organizations pursuing affirmative action plans do not have fewer qualified workers.53

Organizations doing business with the federal government that do not follow affirmative action guidelines face a number of possible sanctions. Their contracts with the government can be canceled, and they can be

Affirmative action plans A plan aimed at increasing representation of employees from protected classes who have historically been victims of discrimination.

Utilization study An assessment to determine how closely an organization’s pool of employees reflects the racial and gender profile of the surrounding community.

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How Can Organizations Increase Diversity? 101

prohibited from doing further business with the government. In rare cases, the Department of Justice or the EEOC may also pursue lawsuits for violations of criminal law or Title VII. In most cases, however, a company cannot be sued for failing to follow an affirmative action plan.

RESTRICTIONS ON AFFIRMATIVE ACTION PLANS A series of court decisions has placed important restrictions on affirmative action plans. One of the first of these cases concerned medical school admis- sion. The medical school in question set aside a certain number of places in each entering class for members of minority groups. When a white male appli- cant was denied admission to the school, even though he had higher grades and scores than some minority applicants who were accepted, he brought a lawsuit against the school claiming that its admission policy resulted in reverse discrimination—denying him admission on account of his race. The case was eventually heard by the Supreme Court, which ruled that the school’s quota system was unacceptable. However, the Court upheld the principle of affirma- tive action and stated that race could be used along with other factors in mak- ing admission decisions.54

Other court cases have focused on the issue of layoffs. In one instance, a fire department was forced to lay off some of its workers. In order to meet its affirmative action goals, the department terminated some white firefighters who had more seniority than some minority employees who were retained. The Supreme Court ruled that the policy was unacceptable because it pun- ished innocent employees to remedy past discrimination. In this particular case, helping minorities procure jobs was seen as coming at too high a cost to others.55

More recent cases related to affirmative action include a high-profile case in which a contractor was found guilty of discrimination for giving favorable status to minority subcontractors. The Supreme Court rejected the need for affirmative action in this particular case because the plan seemed too broad and not specifically tailored to correct a particular problem.56 This decision illustrates the necessity of creating an affirmative action plan that corrects a specific problem.

AFFIRMATIVE ACTION PLANS TODAY A year seldom passes without a number of hotly debated questions surround- ing affirmative action plans. One basic question that is frequently debated is whether affirmative action is contrary to the aims of Title VII. If Title VII is designed to provide equal opportunity for all, then how can Executive Order 11246 require preferential treatment for some? In general, the courts have upheld the legality of Executive Order 11246 by ruling that its practices are consistent with the intent of Title VII. Another frequently debated issue is whether it is appropriate to give preference to people who were not them- selves actual victims of discrimination. In most cases, they receive preferential treatment because they are of the same race as others who may have been harmed in the past. People in favor of affirmative action, however, argue that because of past discrimination, some groups of people still have less opportu- nity than others in terms of education and career preparation.

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102 Chapter 3 Ensuring Equal Employment Opportunity and Safety

Issues surrounding affirmative action will likely continue to be argued. Late in 2012 the Supreme Court heard oral arguments in a case filed by a woman claiming discrimination by the University of Texas because of preferences given to others who were members of a racial minority group. In June of 2013 the Supreme Court sent the case back to lower courts for further review and essentially postponed judgment, making it so that affirmative action will con- tinue to be debated and argued in the legal system.

So, what should organizations do about affirmative action and diver- sity enhancement? First, it is important to remember that discrimination is still felt by many. Women, as well as racial and ethnic minorities, continue to report feelings of discrimination in organizations where they are not well represented. Women from minority racial groups are particularly in jeopardy of being harassed.57 Research evidence confirms the validity of such percep- tions. For example, research findings have shown that many people perceive mothers as less-competent employees.58 Some of the negative feelings of discrimination decrease when organizations have supervisors who are from underrepresented groups.59 Organizations can also benefit from creating a work climate that values and encourages differences and communicates car- ing for all employees. Chapter 5 discusses methods for making the workplace a desirable environment for members of protected classes and provides guid- ance for helping all employees feel valuable to the company. The chapter also describes recruiting practices that increase minority applications. In many cases, these procedures can help organizations meet affirmative action goals through practices that are widely accepted.

? CONCEPT CHECK 1. What are four approaches to increasing workforce diversity? 2. What is Executive Order 11246, and what does it require of

companies doing business with the federal government?

As we’ve seen, the federal government has passed a number of laws that address discrimination in the workplace, and similar laws have been passed at the state level. Other areas of law are equally important to businesses. One such area is occupational safety.

In early 2006, an explosion in a West Virginia coal mine resulted in the deaths of 12 miners. The mine was relatively new but had received numer- ous citations for safety violations. During 2005, a total of 208 violations were recorded, and 96 of the violations were considered significant and substantial. Among the violations were problems with ventilation and safety inspections.60 Could the deaths have been prevented by closer adherence to safety guidelines?

What Are the Major Laws Relating to Occupational Safety?

LEARNING OBJECTIVE 4

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What Are the Major Laws Relating to Occupational Safety? 103

Although many people think very little about safety in the workplace, a look at a few statistics shows that problems exist. As many as 5,703 people are killed in occupational accidents during a calendar year.61 Each year there are also as many as 4.3 million workplace injuries and accidents that do not result in death. This translates to approximately five injury cases for every 100 workers. Injuries and illnesses are most common in jobs such as transportation, manu- facturing, and agriculture.62 Figure 3.4 shows that most of the injuries and illnesses involved problems with shoulders and backs.63

Two major types of law provide employees with some assurance of safety and protection on the job. The first is a federal law passed in 1970, the Occupational Safety and Health Act. The second is not a specific law but a group of laws at the state level generally labeled workers’ compensation laws.

OCCUPATIONAL SAFETY AND HEALTH ACT Suppose an employee of a construction company works with chemicals that could cause blisters on his feet and hands. Does the company have an obli- gation to protect him from exposure to such chemicals? Is the company required to provide him with information about the chemicals? What are his rights as a worker who must use these chemicals? Such issues are the focus of the Occupational Safety and Health Act (OSHA), a federal law passed in 1970.64 Compliance with these laws, and general efforts to promote employee well-being, not only reduce workplace accidents but also improve productivity.

Like most other laws affecting work practices, OSHA requires employers to keep records—in this case, about safety practices and incidents. Companies must have records of the information they provide to teach employees about the health concerns and dangers present in the workplace, they must keep track of all illnesses and injuries that occur at work, and they must also conduct periodic inspections to ensure workplace safety. In these inspec- tions, they examine and test structures, machines, and materials to guar- antee proper operation and not place employees in dangerous situations.

Back 36% Shoulder 12%

Knee 12% Ankle 9%

Multiple 8% Arm 4%

Wrist 3% Neck 2%

Hand(s) 2% Foot 2%

All Other 9%

Figure 3.4 Nonfatal Occupational Injuries and Illnesses with Days Away from Work by the Part of Body Affected, 2011. Source: Bureau of Labor Statistics, U.S. Department of Labor, Nonfatal Occupational Injuries and Illnesses Requiring Days Away From Work, 2011. http://www.bls.gov/news.release/pdf/osh.2.pdf.

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104 Chapter 3 Ensuring Equal Employment Opportunity and Safety

Employers must provide information and keep employees informed of protections and safety obligations.

The Occupational Safety and Health Administration was created within the U.S. Department of Labor to help enforce OSHA. Officers of the agency can enter and inspect factories, plants, or other worksites, and they can also issue citations to companies that are not in compliance with safety requirements. Employers that do not follow the guidelines of OSHA may receive civil penal- ties in the form of fines.

OSHA provides a number of safety and health standards that companies must follow. Some of the standards apply only to a few employers, such as construction companies, but a number of standards apply to most employers. These standards cover such topics as emergency plans, hazardous chemicals, workspace layout, and medical treatment and first aid availability.

Emergency Plans Plans for dealing with fires and other emergencies are the main subject of the emergency action plan standard. Not all companies are required to have formal emergency plans, but many organizations find them helpful for planning ways to prepare for potential disasters. The plan should pro- vide details about reporting fires and other emergencies and should also describe evacuation procedures and escape routes, establishing a process to account for all employees after evacuation. If employees have responsibility to rescue others or provide medical attention, the plan should make these duties clear. In addition, the plan should guide the actions of employees who might need to remain and operate or shut down critical equipment before they evacuate.

Hazardous Chemicals Exposure to certain chemicals can create both long-term and short-term problems. Which chemicals are harmful? What should employees do if they accidentally spill a harmful chemical? These concerns are the focus of the hazard communication standard, which is aimed at ensuring that employers and employees know about hazardous chemicals in the workplace. Under this standard, organizations must identify any chemicals to which workers might be exposed on the job. All chemical containers must be clearly labeled. Organizations must also provide information about protective measures that reduce the chance of harm from the chemicals. Each workplace must have a written plan that includes a list of the chemicals present at the site, the names of people who are responsible for overseeing the chemicals, and information about where employees can learn more about the chemicals. This informa- tion is usually contained in a material safety data sheet (MSDS), a paper that specifically describes the nature of the chemical and how to prevent injury. An example of an MSDS in shown in Figure 3.5.

Workspace Layout The walking/working surfaces standard emphasizes the need to keep the workplace clean and orderly in order to prevent slips and falls that may result in injury. Organizations are required to keep floors clean and dry and to keep aisles sufficiently wide and clear of obstructions. The standard also pro- vides guidelines for the proper use of ladders and scaffolding and requires covers and guards for potentially dangerous structures, such as pits, tanks, and ditches.

Emergency action plan standard The OSHA requirement that organizations develop a plan for dealing with emergencies such as fires or natural disasters.

Hazard communication standard The OSHA requirement that organizations identify and label chemicals that might harm workers.

Material safety data sheet (MSDS) An OSHA-required document that describes the nature of a hazardous chemical and methods of preventing and treating injuries related to the chemical.

Walking/working surfaces standard The OSHA requirement that an organization maintain a clean and orderly work environment.

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What Are the Major Laws Relating to Occupational Safety? 105

Medical and First Aid Even when an employer takes precautionary steps, some accidents are likely to occur. The medical and first aid standard requires employers to make medical personnel and first aid supplies available to workers to treat injuries. Employees must also have access to medical personnel and treatment facilities so that they can receive treatment for more serious injuries. This requirement is particularly important for employees who are required to handle dangerous chemicals or to work in potentially dangerous environments.

WORKERS’ COMPENSATION Each state has laws and programs governing workers’ compensation. Although some differences exist between states, all these programs have a common pur- pose, and most are quite similar. Workers’ compensation provides protection for

Medical and first aid standard The OSHA requirement that an organization make medical and first aid resources available to workers who may become injured.

Workers’ compensation State programs that provide workers and families with compensation for work-related accidents and injuries.

Figure 3.5 Sample Material Safety Data Sheet. Source: International Occupational Safety and Health Information Centre (CIS), www.ilo.org/public/english/protection/safework/cis/products/icsc/dtasht/a_index.htm. [Copyright © International Labour Organization 2007]

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106 Chapter 3 Ensuring Equal Employment Opportunity and Safety

employees who are injured or disabled while working. In most cases, workers’ compensation takes the form of an insurance program. Employers are required to carry workers’ compensation insurance, insurance that provides benefits to compensate for injuries suffered during work, no matter how the injuries were caused. Benefits include payment of medical expenses for injured workers, disability benefits to replace income for injured workers unable to return to work, and benefits for family members of workers killed on the job. Most states

UNION PACIFIC CORPORATION Union Pacific Corporation is a leading transporta- tion company with 32,000 miles of railroad opera- tions covering 23 states. The company employs over 42,000 workers and has assets valued at more than $43 billion. The safety and wellness of employees are particular areas of emphasis for Union Pacific.

Safety initiatives are highly visible throughout the company. Newsletters, job briefings, and safety hotlines provide ways to make sure that every- one talks about how to make the workplace safer. Employees frequently provide input that results in modifications to equipment and work practices. Supervisors are held accountable for achieving safety goals. An industrial hygiene program ensures compliance with regulations related to toxic chem- icals, noise, dust, and fumes. Employees receive supplies such as safety glasses, hearing protection, and safety shoes.

Union Pacific also has a wellness program that seeks to reduce illnesses by improving employee health and fitness. Since fatigue and stress can cause accidents, this program also helps to reduce acci- dents. Employees are encouraged to improve their fitness by exercising in fitness centers. Programs to help people quit smoking have reduced the num- ber of employees who smoke from 40 percent to 23  percent. The company also provides health assessments to identify health risk factors such as obesity, diabetes, and high blood pressure.

Health and safety programs at Union Pacific have had a positive impact on bottom-line results. On-the-job injuries have decreased over the past 10 years, and healthcare claims related to life- style problems such as high blood pressure have

dropped from 29 percent to 19 percent. Union Pacific also estimates that reducing the prevalence of excess weight among employees by one percent- age point can save the company $1.7 million—and so reducing the prevalence by 10 percent can save nearly $17 million.

Sources: Information from Sandy Smith, “At Union Pacific Safety Is Number One,” Occupational Hazards 67, no. 10 (2005): 30; Marybeth Luxzak, “. . . with UP Director—Health and Safety Marcy Zauha,” Railway Age 206, no. 8 (2005): 9.

Building Strength Through HR

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What Specific Practices Increase Fairness and Safety? 107

make workers’ compensation a no-fault and exclusive remedy for injury. This means that insurance must compensate an injured employee even if the actions of the employee caused the injury, but the employee cannot bring a lawsuit to try to collect more money than what is provided by the insurance policy.65

Workers’ compensation programs require employees and employers to record and report workplace accidents. In most states, workers must report an accident or injury within a certain time, such as 90 days after it occurs. Employers also must file an injury report with a state agency within a certain amount of time. An important role of the human resource function is thus to ensure the accuracy of the relevant records. Training workers in how to report injuries is important as well. Human resource professionals in many compa- nies work with medical providers who treat injuries and help determine when employees are ready to return to work.

? CONCEPT CHECK 1. What is OSHA, and how does it affect business

organizations? 2. What protection is provided by state workers’ compensation

laws?

Failure to comply with laws and regulations can be costly to an organization. The “Building Strength Through HR” feature illustrates specific benefits from safety and health initiatives at Union Pacific. What can an organization do to help all its members work safely? Research suggests that employees safety is compromised when employees feel burned out. In contrast, safety is enhanced when employee engagement is increased through a support- ive work environment.66 A few key areas that facilitate a supportive work environment for safety are outlined in Figure 3.6. As shown in the figure, employees need knowl- edge and motivation; knowledge and motivation, in turn, can be increased by leaders who show commitment, mea- sure progress, and provide rewards.67

EMPLOYEES Employees cannot follow laws and other guidelines unless they know about them; an important part of the human resource management func- tion is thus to provide information about laws and guidelines. Managers involved in hiring and supervising employees must know about relevant

What Specific Practices Increase Fairness and Safety?

LEARNING OBJECTIVE 5

Leadership

Commitment Measurement Rewards

Employees

Knowledge Motivation

Figure 3.6 Encouraging Legal and Safety Compliance.

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108 Chapter 3 Ensuring Equal Employment Opportunity and Safety

employment laws. Specifically, they need to know what things to avoid, such as asking interview questions about protected issues such as age and disabil- ity. They also need to know how to prevent harassment. Employees working in hazardous areas must be trained in procedures to protect them from injuries and illnesses. The more engaging and active the training, the more likely safety is to be improved, particularly in seriously hazardous condi- tions.68 Ongoing training programs, which are discussed in Chapter 9, are thus an important aspect of complying with laws and ensuring fair treat- ment. For instance, Calpine Corporation, a producer and marketer of elec- trical power, uses video and other materials to train employees in hazard communication, fire prevention, and disciplinary procedures. The training increases knowledge and helps employees understand why certain proce- dures are required.69

Knowledge alone is not enough, however. Members of an organization must also be committed to doing what they know is right. Motivation can be increased when organizational leaders help managers and employees see that they have the skills necessary to do what is being asked. Worker motivation for safe actions is also enhanced when supervisors have personal values that correspond with safety.70 Individuals who work hard to ensure fairness and safety should be rewarded with higher pay and promotions. Conversely, work- ers who try to accomplish tasks using shortcuts that compromise safety may need to suffer penalties.

LEADERSHIP Employees generally follow their leaders. They are therefore much more likely to comply with laws and guidelines when leaders show high commit- ment to compliance. Leaders make a difference. Leaders must set a good example and clearly communicate their expectations.71 In the case of Calpine Corporation, mentioned earlier, employees are shown a video of top executives talking about the importance of safety. This video is effec- tive because employees tend to follow directions and engage in behaviors that they hear their leaders emphasize. Compliance with regulations is thus much more likely when leaders develop and carry out programs that empha- size the goals of the regulations, such as diversity and safety. The “How Do We Know?” feature explains how leaders can create work climates that encourage safety.

Leadership can also encourage compliance by measuring key results; put simply, what gets measured gets done. Progress in hiring and recruiting minorities, women, disabled workers, and older workers should be tracked. Keeping track of these numbers not only shows that the company is comply- ing with legal guidelines but also demonstrates that leaders value progress in these areas. In a similar way, efforts to track and reduce injuries and acci- dents not only comply with laws but also communicate interest on the part of leaders.

Managers who create fair hiring practices should be rewarded for their efforts. Achievement of diversity objectives should result in positive evalua- tions and bonuses, and supervisors’ efforts to communicate the importance of safety should be tracked and rewarded. Groups of employees who follow guidelines and remain accident-free should also receive bonuses.

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What Specific Practices Increase Fairness and Safety? 109

An example of the value of leadership in encouraging compliance is shown by the results of initiatives undertaken by Catholic Healthcare West (CHW), which operates hospitals in Arizona, Nevada, and California. The company implemented a program designed to reduce workers’ compensation claims. The program began with upper management, whose bonuses were tied to reducing costs associated with worker injuries. Organizational leaders care- fully measured and monitored the number and severity of injuries and were given clear responsibilities to ensure that information was obtained and communicated throughout the organization. The end result has been a 50 percent decrease in the cost of workers’ compensation claims. For CHW, com- pliance with safety guidelines therefore not only made employees safer but also increased bottom-line profits.

WHAT CAN ORGANIZATIONS DO TO PROMOTE SAFETY? What factors explain safe behavior? Is creation of an organizational climate that encourages safety the key? Are some people just more safety conscious than others? Does emphasizing safety decrease productivity? Craig Wallace and Gilad Chen conducted a study to find the answers to these questions. They collected data from 254  employees organized into 50 work groups. They assessed safety climate by measuring the extent to which supervisors emphasized compli- ance with safe procedures. They asked employees to report their conscientiousness, which captures the degree to which someone is organized and goal driven. Employees also reported on the extent to which they focused on either accom- plishing a lot of work or following rules and regulations. Supervisors rated each employee on both safety performance (carrying out work in a safe manner) and production (completing tasks on time).

Conscientious employees simultaneously emphasized accomplishing work and following rules and regulations. Conscientious employees were thus successful on both performance dimen- sions; they completed a lot of work and did so in a safe manner. A different pattern of results was observed for safety climate. When supervisors

emphasized safety, workers focused on following rules and regulations and were thus rated higher on safety performance. However, an emphasis on safety came at the expense of production. A strong safety climate resulted in less emphasis on accomplishing a lot of work and thereby resulted in decreased production. Safety climate thus exhib- its a tradeoff. A work climate that encourages safe behavior does result in employees who focus on rule compliance, yet increased safety comes at the expense of productivity.

The Bottom Line. Creation of a strong safety climate increases safe behavior, but the strong safety climate may also reduce productivity. Professors Wallace and Chen thus suggest that organizations think carefully about the balance between safety and production. Leaders should emphasize safe behavior when accidents and injuries are prevalent or in settings where they are most likely to occur and cause a great deal of damage. The authors also suggest that hiring conscientious workers is one way to increase both safety performance and productivity.

Source: Craig Wallace and Gilad Chen, “A Multilevel Integration of Personality, Climate, Self-Regulation, and Performance,” Personnel Psychology 59 (2006): 529–557.

How Do We Know?

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110 Chapter 3 Ensuring Equal Employment Opportunity and Safety

? CONCEPT CHECK 1. What can organizational leaders do to encourage compli-

ance with laws and regulations?

IN THE MANAGER’S PERSPECTIVE THAT OPENED THE CHAPTER, ALEX WAS THINKING ABOUT LEGAL AND SAFETY ISSUES. HE WAS CONCERNED ABOUT HIS RESPONSE TO A CLAIM OF SEXUAL

HARASSMENT, AND HE DIDN’T KNOW IF HE WAS DOING ALL THAT WAS NECESSARY TO PROMOTE WORKFORCE DIVERSITY. HE ALSO WONDERED ABOUT THE CORRECT RESPONSE TO SAFETY

VIOLATIONS AND ACCIDENTS. FOLLOWING ARE THE ANSWERS TO THE “WHAT DO YOU THINK?” QUIZ THAT FOLLOWED THE CASE. WERE YOU ABLE TO CORRECTLY IDENTIFY THE TRUE STATEMENTS? COULD YOU DO BETTER NOW?

1. People who are victims of sexual harassment can sue

the person who harassed them but not the company.

FALSE. Employers can be held accountable for the illegal actions of their employees.

2. Companies must hire minority workers even when they

are not as qualified as other people who are applying

for the same job. FALSE. Diversity enhancement and affirmative action require companies to increase their

efforts to hire minority workers, but they do not require

that preference be given to minority applicants who are

less qualified.

3. A company can have legal problems when it doesn’t

hire enough women, even if it treats men and women

the same. TRUE. Treating people the same can result in adverse impact discrimination, which occurs

when employees from one group are hired at a higher

rate than employees from other groups, even though

the groups are treated the same. When a company’s

hiring procedures

result in adverse

impact discrimina-

tion, the company

is required to dem-

onstrate that the

procedures identify the people most likely to succeed

on the job.

4. Men and women must be paid the same when they per-

form the same job. TRUE. The Equal Pay Act requires them to be paid the same when the job is the same.

Exceptions can be made for differences in job tasks,

seniority, or performance.

5. Employees have a right to know about any hazardous

chemicals they are exposed to at work. TRUE. The Occupational Safety and Health Act requires employers

to inform workers of chemical hazards.

The questions that Alex faced are common to most man-

agers. Employment and safety laws require organizations

to follow certain guidelines. Alex, for example, does have

an obligation to stop sexual harassment. He must also

comply with a number of laws to eliminate discrimination

and provide a safe workplace. Although Alex may have

thought company guidelines were common-sense matters,

he is wise to review them and see that he and other mem-

bers of the organization are meeting legal requirements.

Fortunately, compliance with the laws and guidelines can

also increase productivity and profits in many ways.

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Summary 111

The Age Discrimination in Employment Act makes it illegal to discriminate against people over 40. Age discrimination is frequently observed when organizations lay off workers, and the act states that employees cannot be terminated and replaced by younger workers. The Americans with Disabilities Act protects people who have physical or mental disabilities. Organizations are required to pro- vide reasonable accommodations so that qualified disabled workers can perform essential job tasks. Accommodation is not required when it creates an undue hardship for the organization. The Equal

Pay Act requires men and women to be paid the same when they do the same job. People doing the same job can be paid differently based on seniority or merit, however. The Family Medical Leave Act provides employees with the opportunity to take up to 12 weeks of unpaid leave. Acceptable reasons for taking the leave include personal illness, illness of a direct family member, birth of a child, and adop- tion of a child.

Title VII of the Civil Rights Act of 1964 is the most important law providing protection against employ- ment discrimination. Title VII specifically prohibits discrimination based on race, color, national ori- gin, sex, and religion. Disparate treatment is one generally prohibited form of discrimination that occurs when employees and potential employees are treated differently. Adverse impact occurs when employees are treated the same but the outcome in terms of employment opportunity is different. Adverse impact discrimination can also be illegal unless an organization can show that its methods for hiring people truly identify the people most likely to succeed. Title VII also prohibits sexual harassment in the form of either quid pro quo or hostile environment harassment. The Civil Rights Act of 1991 extended Title VII by clarifying bur- den of proof, outlawing race-norming, and adding punitive damages. U.S. discrimination laws apply to most people working in the United States and to most U.S. citizens working in foreign countries for U.S. companies.

SUMMARY

What is the main law relating to discrimination and employment?

LEARNING OBJECTIVE 1

What are other important employment laws?

LEARNING OBJECTIVE 2

How can organizations increase diversity?

LEARNING OBJECTIVE 3

There are four basic approaches to increas- ing workforce diversity. Opportunity enhance- ment programs focus on recruiting minorities and women. Equal opportunity programs ensure that people from underrepresented groups are not victims of discrimination. When applicants are equally qualified, tiebreak programs give an edge for employment or promotion to members of groups that have historically been victims of discrimination. Preferential treatment programs give positive weight to minority status. Executive Order 11246 requires affirmative action plans for organizations that do business with the federal government. A number of court decisions provide guidance for organizations pursuing affirmative action plans. Organizations cannot use quotas to ensure that a specific portion of new hires are from protected classes. Affirmative action plans also are illegal when they unduly harm the inter- ests of individuals who are not members of a pro- tected class.

What are the major laws pertaining to occupational safety?

LEARNING OBJECTIVE 4

The Occupational Safety and Health Act is a fed- eral law that requires organizations to provide

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112 Chapter 3 Ensuring Equal Employment Opportunity and Safety

Adverse impact 83 Affirmative action plan 100 Bona fide occupational qualification (BFOQ) 82 Comparable worth 97 Discrimination 82 Disparate treatment 82 Emergency action plan standard 104 Equal employment opportunity 82 Equal Employment Opportunity Commission 81 Four-fifths rule 84 Harassment 86 Hazard communication standard 104 Hostile environment 87 Immutable characteristics 80 Material safety data sheet (MSDS) 104

Medical and first aid standard 105 Mental disabilities 94 Physical disabilities 94 Protected classes 81 Punitive damages 90 Quid pro quo 86 Race-norming 90 Reasonable accommodation 95 Sexual harassment 86 Title VII 81 Undue hardship 95 Utilization study 100 Validity 83 Walking/working surfaces standard 104 Workers’ compensation 106

Organizations can encourage compliance with laws and guidelines by ensuring that managers and employees have knowledge and motivation. Managers who hire and supervise others need to be familiar with the requirements of major employ- ment laws. Managers and employees need to be aware of safety procedures. Knowledge and moti- vation increase when organizational leaders dem- onstrate high commitment to following laws and guidelines. Organizations that measure and reward compliance are also less likely to experience nega- tive results from lawsuits, injuries, and accidents.

a safe work environment. The act requires orga- nizations to provide information and training to employees and to keep records related to accidents and injuries. Some specific OSHA guidelines relate to hazardous chemicals, emer- gency plans, workspace layout, and medical treat- ment and first aid.

Workers’ compensation laws exist at the state level. These laws require companies to carry insur- ance that pays medical bills and disability claims for people who are injured while working. Claims are paid even if the injured employee was at fault for causing an accident, but employees cannot generally sue an employer to receive additional compensation.

What specific practices increase fairness and safety?

LEARNING OBJECTIVE 5

KEY TERMS

DISCUSSION QUESTIONS

1. How can human resource professionals reduce employment discrimination?

2. Why do you think the majority of employment and safety laws have been passed in the last 50 years, rather than at an earlier time?

3. How is adverse impact different from disparate treatment?

4. How are Title VII and Executive Order 11246 similar? How are they different?

5. What trends in society do you think encouraged the Americans with Disabilities Act and the Family and Medical Leave Act?

6. What are some reasons employees might engage in unsafe acts even when they know they could be harmed?

7. How do workers’ compensation laws protect both employees and employers?

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Example Case 113

Leslie Varon’s boss lived by a simple rule: If he was in the office, she should be, too. In the early 1990s Varon worked in finance at Xerox, and the depart- ment’s VP was an old-style organization man. “You could set your watch by the hours this man worked,” Varon says, recalling 12-hour days that often began at 7 a.m. For Varon and her colleagues, that meant missing family dinners. After much discontent, they called a meeting. Couldn’t they take work home in order to get out in time for supper? The boss agreed, slowly growing to believe that an employee’s value lies in her work, not the hours spent at her desk. As for Varon, her earlier departures don’t seem to have impeded her career: Today she’s Xerox’s finance VP.

Her status as a female officer would make her a rarity at many companies, but not at Xerox. The $15.7 billion document-management company is one of only nine in the Fortune 500 with a female CEO, but its gender diversity extends far beyond the corner office. Of Xerox’s 32 corporate officers, eight are women. So are 800 of its middle managers, more than 30 percent of the total. The company is routinely ranked among the best places for women to work. Inside its Connecticut headquarters, female employees describe a culture where no one hesitates to reschedule a meeting to take a child to the pediatrician. Managers are judged—and compensated—on meeting diversity goals. At Xerox, “people really believe this—this is not cosmetic,” says David Nadler, chairman of Mercer Delta Consulting, who worked with Xerox for 20 years. It doesn’t see diversity as being somehow in conflict with meritocracy.

It’s an attitude that began taking root nearly 40 years ago, when Xerox’s top management became concerned about its treatment of black employees. By the 1970s, Xerox was aggressively hiring blacks and supporting a caucus of black employees who met to network and discuss grievances. And as feminism took hold, Xerox’s progressive attitudes on race made it especially receptive to changes. But David Kearns, Xerox’s CEO from 1982 to 1991, says he moved to promote women not because of fairness or altruism but because drawing from a bigger labor pool would help Xerox compete. “You had to get all of the people [involved] or you weren’t going to be able to succeed,” he recalls. During the 1980s, female employees formed a Women’s Alliance, which lob- bied management to promote more women.

Many of today’s senior Xerox women directly benefitted from these early moves. Anne Mulcahy began as a sales rep in 1976. Though her numbers were great, she figured her Xerox career would be limited by her refusal to relo- cate with her husband and two children. But her bosses accommodated her by letting her commute to ever-bigger jobs. “[They said], ‘We think you’ve got a career path here and we want you to take it as far as you can’,” she says. She took it far indeed: In 2001, with Xerox mired in financial crisis, Mulcahy

8. How might efforts to hire more minorities and women result in greater productivity and profits?

9. What are some ways organizations can moti- vate employees to follow safety guidelines?

10. Why are the example and actions of top organizational leaders so important for encouraging employees and supervisors to follow laws and guidelines?

EXAMPLE CASE Xerox

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114 Chapter 3 Ensuring Equal Employment Opportunity and Safety

became CEO. She cut the workforce from 79,000 to 58,000, refreshed the product line, and strengthened the balance sheet. The result: Its stock price is up 65 percent, and Mulcahy ranked ahead of Oprah Winfrey on Forbes’s 2005 list of powerful women.

QUESTIONS 1. How has hiring women and minorities improved Xerox’s profitability? 2. What changes did Xerox make to become a more attractive employer for

women and minorities? 3. Do you think the emphasis on hiring and promoting women and minori-

ties has been unfair to white men? Why or why not?

Source: With permission. Daniel McGinn, “Women Hold Close to a Third of Top Management Jobs at Xerox. Inside a Kinder Culture,” Newsweek, October 24, 2005, p. 68.

DISCUSSION CASE Jones Feed and Seed

Jones Feed and Seed is a large regional warehouse that supplies agricultural products to retail stores. These products include pesticides that are used to treat animals and herbicides that are used to improve crops. For its warehouse operations, the company generally hires employees who have just finished high school. These employees work under the supervision of a more senior laborer, who is usually someone with about one year of experience working in the warehouse. The supervisor is in charge of interviewing job candidates and normally makes final hiring decisions.

Job Description

Receive and count stock items and record data manually or using computer.

Pack and unpack items to be stocked on shelves in stockrooms, warehouses, or storage yards.

Verify inventory computations by comparing them to physical counts of stock and investigate

discrepancies or adjust errors.

Store items in an orderly and accessible manner in warehouses, tool rooms, supply rooms, or

other areas.

Mark stock items using identification tags, stamps, electric marking tools, or other labeling

equipment.

Clean and maintain supplies, tools, equipment, and storage areas in order to ensure compliance

with safety regulations.

Determine proper storage methods, identification, and stock location based on turnover,

environmental factors, and physical capabilities of facilities.

Keep records on the use and/or damage of stock or stock-handling equipment.

Move controls to drive gasoline or electric-powered trucks, cars, or tractors and transport

materials between loading, processing, and storage areas.

Move levers and controls that operate lifting devices, such as forklifts, lift beams and swivel-

hooks, hoists, and elevating platforms, in order to load, unload, transport, and stack material.

Position lifting devices under, over, or around loaded pallets, skids, and boxes, and secure

material or products for transport to designated areas.

Manually load or unload materials onto or off pallets, skids, platforms, cars, or lifting devices.

Load, unload, and identify building materials, machinery, and tools and distribute them to the

appropriate locations, according to project plans and specifications.

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Interactive Experiential Exercise 115

QUESTIONS 1. What training would you provide to the supervisors who conduct job

interviews? 2. What are some primary safety concerns that the company should have

about the warehouse operation? 3. What OSHA guidelines does the company need to follow and communi-

cate to employees? 4. What kind of disabilities do you think could be reasonably accommodated

for this job position?

Source: Information for job description from http://online.onetcenter.org/.

EXPERIENTIAL EXERCISE

Locating Government Resources on the Web

Visit the website that describes workers’ compensa- tion for your state. Links can be found at http:// www.workerscompensation.com/workers_comp_ by_state.php.

1. Whom can employees contact if they think they have claims?

2. How would an employee go about filing a workers’ compensation claim?

3. How soon after an injury must an employee make a claim?

4. What types of benefits might an injured employee receive?

5. What happens if the employee and employer have a dispute over workers’ compensation?

Visit the OSHA website at www.osha.gov. In the compliance assistance section, visit the area called “Quick Start.” Look at the modules that describe guidelines for the construction industry.

Based on what you learn, answer the following questions. 1. What kind of records should a construction

company keep? 2. What should be included in a jobsite safety

program? 3. What type of training should construction com-

panies offer to employees?

What features of the OSHA website do you find most helpful? What would you do to improve the website?

INTERACTIVE EXPERIENTIAL EXERCISE

The Legal Side of HR: Handling Equal Employment Issues at Mega Manufacturing http://www.wiley.com/college/sc/stewart

Access the companion website to test your knowledge by completing a Mega Manufacturing interactive role-playing exercise. In this exercise, it’s Friday afternoon, and you’re looking forward to catching up on some leisure activities this weekend. You accompany the owner of Mega Manufacturing on a tour of the plant to meet some of the hourly employees. A female employee comes up to you and complains that a male coworker has been sexually harassing her. While you are talking with her, the owner receives a phone call. When he hangs up, he tells you that the caller was a former job applicant, who insists that he was not hired because he is member of a minority group. The for- mer applicant plans to file a claim with the EEOC. The owner asks for your advice on how to begin handling these issues. So much for that weekend of relaxation.

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116 Chapter 3 Ensuring Equal Employment Opportunity and Safety

ENDNOTES 1. Ann Zimmerman, “Judge Certifies Wal-Mart Suit

as Class Action; Up to 1.6 Million Could Join Sex- Discrimination Case; Company Plans to Appeal,” Wall Street Journal, A1, June 23, 2004.

2. Douglas P. Shuit, “People Problems on Every Aisle,” Workforce Management 83, no. 2 (2004): 26–34; Daniel McGinn, Susanna Schrobsdorff, and Nicole Joseph, “Wal-Mart Hits the Wall,” Newsweek, November 14, 2005, 42–44.

3. Andy Serwer, Kate Bonamici, and Corey Hajim, “Bruised in Bentonville,” Fortune, April 18, 2005, 84–89; McGinn, Schrosdorff, and Joseph, “Wal-Mart Hits the Wall.”

4. Michael A. Zigarelli, Can They Do That? A Guide to Your Rights on the Job (New York: Lexington Books, 1994).

5. www.eeoc.gov/policy/vii.html. 6. Anonymous, “Restaurant Chain to Resist on Hiring

Men,” New York Times, A20, November 16, 1995. 7. Dothard v. Rawlinson (1977) 433 U.S. 321. 8. Anonymous, “Hooters Settles Suit by Men Denied

Jobs,” New York Times, A20, October 1, 1997. 9. Jason A. Colquitt, “Does the Justice of the One Interact

with the Justice of the Many? Reactions to Procedural Justice in Teams.” Journal of Applied Psychology 89 (2004): 633–646; Jason A. Colquitt, Donald E. Conlon, Michael J. Wesson, Christopher O. L. H. Porter, and K. Yee Ng, “Justice at the Millennium: A Meta-Analytic Review of 25 Years of Organizational Justice Research,” Journal of Applied Psychology 86 (2001): 425–445.

10. Griggs v. Duke Power (1971) 401 U.S. 424. 11. Arthur Gutman, EEO Law and Personnel Practices,

2nd ed. (Thousand Oaks, CA: Sage, 2000). 12. Code of Federal Regulations, from the U.S.

Government Printing Office, Title 29, Vol. 4, 29 CFR 1604.11.

13. Gutman, EEO Law. 14. Burlington v. Ellereth (1988) 524 U.S. 742; Faragher v.

City of Boca Raton (1998) 139 LED 2d 867 (no. 97-282). 15. Harris v. Forklift Systems, Inc. (1993) 510 U.S. 17. 16. Nathan A. Bowling and Terry A. Beehr, “Workplace

Harassment from the Victim’s Perspective: A Theoretical Model and Meta-Analysis,” Journal of Applied Psychology 91 (2007): 998–1012; Chelsea R. Willness, Piers Steel, and Kibeom Lee, “A Meta-Analysis of the Antecedents and Consequences of Workplace Sexual Harassment,” Personnel Psychology 60 (2007): 127–162.

17. Ibid. 18. www.eeoc.gov/policy/cra91.html. 19. Wards Cove Packing v. Antonio (1989) 490 U.S. 642. 20. Patrick McGeehan, “Merrill Lynch Firm Is Told It Must

Pay in Sexual Bias Case,” New York Times, A1, April 21, 2004.

21. Kato v. Ishihara, 239 F. Supp. 2d 359 (S.D.N.Y). 22. Kern v. Dynalectron Corp., 577 F. Supp 1196 (N.D. Tex.

1983), aff’d, 746 F.2d 810 (5th Cir. 1984). 23. www.eeoc.gov/policy/adea.html. 24. Gutman, EEO Law. 25. EEOC v. Massey (CA11 1997) 117 F.3d 1244. 26. Thomas W. H. Ng and Daniel C. Feldman, “The

Relationship of Age to Ten Dimensions of Job Performance,” Journal of Applied Psychology 93 (2008): 392–423.

27. Thomas W.H. Ng and Daniel C. Feldman, “Evaluating Six Common Stereotypes About Older Workers with Meta-Analytic Data,” Personnel Psychology 65 (2012): 821–858.

28. http://www.usdoj.gov/crt/ada/adahom1.htm. 29. Sutton v. United Airlines (1999) WL 407488

(No. 97-1943). 30. Hartman v. Petaluma (ND Calif. 1994) 841 F. Supp. 946. 31. EEOC v. Exxon (ND Texas 1997) 967 F. Supp. 208. 32. http://www.ada.gov/pubs/ada.htm 33. Stewart v. Happy Herman’s Cheshire Bridge (CA11 1997)

117 F.3d 1278. 34. www.usdoj.gov/crt/ada/pubs/ada.txt. 35. Dexler v. Tisch (D Conn 1987) 660 F. Supp. 1418. 36. www.usdoj.gov/crt/ada/pubs/ada.txt. 37. Rodgers v. Lehman (CA4 1989) 869 F.2d 253. 38. Gutman, EEO Law. 39. Gillian Flynn, “Can’t Get This Big Without HR

Deluxe,” Personnel Journal, December 1996, 47–53; Margaret Sheridan, “Difficult Labor,” Restaurants and Institutions, July 15, 1998, 79.

40. www.eeoc.gov/policy/epa.html. 41. Schultz v. Wheaton Glass (CA 3 1970) 421 F.2d 259. 42. Hodgson v. Brookhaven General Hospital (CA 5 1970) 423

F.2d 719; 470 F.2d 729. 43. Gutman, EEO Law. 44. http://www.dol.gov/whd/fmla/. 45. Brenneman v. MedCentral Health Sys (CA 6 2004) 366

F.3d 412. 46. Jurgen Wegge, Carla Roth, Barbara Neubach, Klaus-

Helmut Schmidt, and Ruth Kanfer, “Age and Gender Diversity as Determinants of Performance and Health in a Public Organization: The Role of Task Complexity and Group Size,” Journal of Applied Psychology 93 (2008): 1301–1313.

47. David A. Harrison, David A. Karvitz, David M. Mayer, Lisa M. Leslie, and Dalit Lev-Arey, “Understanding Attitudes Toward Affirmative Action Programs in Employment: Summary and Meta-Analysis of 35 Years of Research,” Journal of Applied Psychology 91 (2006): 1013–1036.

48. Ibid. 49. Miguel M. Unzueta, Brian S. Lowery, and Eric D.

Knowles,” Organizational Behavior and Human Decision Processes 105 (2008): 1–13.

50. Fiona A. White, Margaret A. Charles, and Jacqueline K. Nelson, “The Role of Persuasive Arguments in Changing Affirmative Action Attitudes and Expressed Behavior in Higher Education,” Journal of Applied Psychology 93 (2008): 1271–1286.

51. Astrid C. Homan, Daan van Knippenberg, Gerben A. Van Klef, and Carsten K. W. DeDreu, “Bridging Faultlines by Valuing Diversity: Diversity Beliefs, Information Elaboration, and Performance in Diverse Work Groups,” Journal of Applied Psychology 92 (2007): 1189–1199.

52. http://www.dol.gov/ofccp/regs/statutes/eo11246.htm 53. Harry Holzer and David Neumark, “What Does

Affirmative Action Do?” Industrial and Labor Relations Review 53 (2000): 240–271.

54. Regents of University of California v. Bakke (1978) 438 U.S. 265.

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Endnotes 117

55. Firefighters of Local Union 1784 v. Stotts (1984) 467 U.S. 561. 56. Adarand v. Pena (CA 10 1999) 169 F.3d 1292. 57. Jennifer L. Berdahl and Celia Moore, “Workplace

Harassment: Double Jeopardy for Minority Women,” Journal of Applied Psychology 91 (2006): 426–436.

58. Madeline E. Heilman and Tyler G. Okimoto, “Motherhood: A Potential Source of Bias in Employment Decisions,” Journal of Applied Psychology 93 (2008): 189–198.

59. Derek R. Avery, Patrick F. McKay, and David C. Wilson, “What Are the Odds? How Demographic Similarity Affects the Prevalence of Perceived Employment Discrimination,” Journal of Applied Psychology 93 (2008): 235–249.

60. Alan Levin, Thomas Frank, and Paul Overberg, “Mine Had Hundreds of Violations,” USA Today, A3, January 5, 2006.

61. www.stats.bls.gov/iif/oshcfoi1.htm#2004. 62. www.bls.gov/iif/oshsum.htm. 63. http://www.bls.gov/news.release/pdf/osh2.pdf. 64. https://www.osha.gov/pls/oshaweb/owadisp.show_

document?p_id=2743&p_table=OSHACT. 65. A good overview of different state workers compensa-

tion laws can be found at http://www.ic.nc.gov/ncic/ pages/wcadmdir.htm.

66. Jennifer D. Nahrgang, Frederick P. Morgeson, and David A. Hofmann, “Safety at Work: A Meta-Analytic

Investigation of the Link Between Job Demands, Job Resources, Burnout, Engagement, and Safety Outcomes,” Journal of Applied Psychology 96 (2011): 71–94.

67. Information in this section is based somewhat on an article by David A. Hofmann, Rick Jacobs, and Frank Landy, “High Reliability Process Industries: Individual, Micro, and Macro Organizational Influences on Safety Performance,” Journal of Safety Research 26 (1995): 131–149.

68 Michael J. Burke, Rommel O. Salvador, Kristin Smith- Crowe, Suzanne Chan-Serafin, Alexis Smith, and Shirley Sonesh, “The Dread Factor: How Hazards and Safety Training Influence Learning and Performance,” Journal of Applied Psychology 96 (2011): 46–70.

69. Sandy Smith, “Calpine: Safety Is Personal,” Occupational Hazards, October 2005, 10.

70. Sharon Newman, Mark A. Griffin, and Claire Mason, “Safety in Work Vehicles: A Multilevel Study Linking Safety Values and Individual Predictors to Work- Related Driving Crashes,” Journal of Applied Psychology 93 (2006): 632–644.

71. David A. Hofmann and Frederick P. Morgeson, “Safety- Related Behavior as Social Exchange: The Role of Perceived Organizational Support and Leader-Member Exchange,” Journal of Applied Psychology 84 (1999): 286–296.

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Par t 2 Securing Effective

Employees

Chapter 4 Designing Productive and Satisfying Work

Chapter 5 Recruiting Talented Employees Chapter 6 Selecting Employees Who Fit Chapter 7 Managing Employee Retention and

Separation

George Frey/Getty Images ©William Perlman/StarLedger/Corbis Robert Nickelsberg/Getty Images Jeremy M. Lange/©The New York Times/Redux Pictures

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C h a p t e r 4

Designing Productive and Satisfying Work

A M A N A G E R ’ S P E R S P E C T I V E

JANE SITS IN HER CUBICLE WONDERING HOW SHE CAN MAKE WORK MORE ENJOYABLE FOR THE TELEMARKETERS SHE SUPER- VISES. SHE PERSONALLY FEELS A SENSE OF ACCOMPLISH- MENT WHEN SHE CLOSES A SALE OR RESOLVES A CUSTOMER’S CONCERN. BUT SHE KNOWS THAT SEVERAL MEMBERS OF HER TEAM DON’T GET A GREAT DEAL OF SATISFACTION FROM THEIR WORK. THEY OFTEN INTERACT WITH PEOPLE WHO ARE IRRITATED FOR BEING INTERRUPTED. RECEIVING INBOUND CALLS CAN ALSO BE FRUSTRATING, AS CUSTOMERS OFTEN MAKE UNREALISTIC DEMANDS. ALTHOUGH JANE KNOWS IT IS UNLIKELY THAT SHE CAN CHANGE THE TELEMARKETER JOB

SO THAT IT IS FUN, SHE WONDERS IF THERE ARE THINGS SHE CAN DO TO IMPROVE WORKING CONDITIONS AND MOTIVATION.

The members of Jane’s team sit in private cubicles and take calls. They are given approved scripts that describe what they should say. Jane and other man- agers often listen to conversations to make sure the telemarketers are following the scripts. Jane knows the scripts were developed with input from some of the most successful telemarketers, but she often thinks that members of her team come across as presenting a memorized speech rather than being genuinely interested in the customer. She wonders if it wouldn’t be better to allow members of her team

more freedom to stray from the scripts. Would allowing greater individual freedom improve service and sales, or would too many telemarketers say the wrong thing?

Jane receives reports about things such as the num- ber of calls made to potential customers and average time to resolve a complaint from a current customer. When she shares these reports with employees, they often provide long lists of reasons why they cannot process more calls. They also complain that they feel as if they are being treated as machines rather than people. Jane is sympathetic to their concerns, but she has noticed that team members are completing more calls since she began tracking their efficiency.

As she continues thinking, Jane receives a call from Steve in the human resource department. Steve wants to know if Jane has completed her revision of the telemarketer job description. Last week when she began working on the new job description, Jane actually laughed at what was written 10 years ago. Technology had changed the telemarketer position so much that the old description was totally inaccurate. This makes Jane wonder why the company even needs job descriptions. Why waste her time working on a

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THE BIG PICTURE Organizations Maximize Productivity and Employee Satisfaction by Understanding and Effectively Coordinating Work Tasks

new description, if the company had survived for this long with a description that was this out of date? But Steve was insistent and she promised to work on the revision.

As Jane hangs up the phone and leaves her cubicle, she notices that Erin is just arriving for the afternoon shift. She greets Erin and thinks how grateful she is that Erin is still on her team. Last month Erin gave birth to her first child and was thinking about quitting. However, Jane worked with Erin to find a schedule that could accommodate her needs as a new mother. Erin seems appreciative of Jane’s understanding about her family needs. Jane is glad that she has been able to keep one of her top performers. Jane wonders whether there are other ways that she could make the job of telemar- keter more attractive to working mothers.

WHAT DO YOU THINK? Suppose Jane asks her boss, Monica, for guidance about designing employee work. Monica makes the following statements. Which of the statements do you think are true?

Giving workers more autonomy is a sure way to improve their performance.

Having updated job descriptions is impor- tant to keep the company out of legal trouble.

The primary objective of good work design is to cluster tasks into jobs that maximize the efficiency of workers.

People who continuously perform repetitive tasks often find their work to be unsatisfying.

Employees who have flexibility in decid- ing when they will work have higher performance.

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T OR F

T OR F

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122 Chapter 4 Designing Productive and Satisfying Work

How Can Strategic Design of Work Tasks Improve an Organization?

After reading this chapter you should be able to:

Describe how the design of work tasks and roles can align with overall HR strategy.

Explain the steps in the process of job analysis and how to translate results into knowledge, skill, and ability lists that can be used to guide other human resource practices.

Describe various approaches to job design, including the motivational, biological, mechanistic, and perceptual perspectives.

Identify practices that make jobs more compatible with family demands.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

L E A R N I N G O B J E C T I V E S

Many of us like to describe what we do at work by telling others about our jobs. Most of the time, we do this without thinking about who decides what tasks should go with which job. Why does an organization have sales representatives who meet with potential customers, while other employees make the actual products? Why do automobile manufacturers organize workers into assem- bly lines? These questions involve work design, the process of assigning and coordinating work tasks. One key principle of work design is differentiation. Differentiation suggests that each worker should be assigned a set of similar tasks in order to specialize in doing certain things very well. Another key prin- ciple of work design is integration. Integration is concerned with coordinating the efforts of employees.1

Strategic work design uses both differentiation and integration to deter- mine who does what. Good differentiation and integration of work helps organizations increase productivity and improve customer satisfaction.2 When work is designed strategically, employees’ efforts are coordinated in a way that helps the organization achieve its competitive strategy.

One example of an organization with effective work design is W. L. Gore & Associates. Gore is perhaps best known for manufacturing apparel and camping products that are both water resistant and breathable. The company began in 1958 as a small shop in Bill Gore’s basement. Since that time, it has grown into a multinational company with overall sales of $3 billion. Gore employs over 9,000 employees located throughout the world.3 In addition to manufacturing water-resistant fabric, known as Goretex, the company makes products for use in medicine, electronics, and industry.

The various products made by W. L. Gore are tied together by quality and innovation. People don’t normally buy Gore products because they are inex- pensive; they buy them because they are excellent products that meet their specific needs. Gore’s official statement about its strategy is “Gore’s products are designed to be the highest quality in their class and revolutionary in their

Work design The process of assigning and coordinating work tasks among employees.

Differentiation The process of dividing work tasks so that employees perform specific pieces of the work process, which allows them to specialize.

Integration The process of coordinating efforts so that employees work together.

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How Can Strategic Design of Work Tasks Improve an Organization? 123

effect.”4 W. L. Gore clearly competes with other organizations by pursuing a differentiation rather than a cost strategy.

In order to encourage innovation and quality, Gore allows workers a great deal of freedom in deciding what they will do. Workers at Gore don’t usually have specific jobs. Nobody is given a job title, and employee business cards don’t list specific positions. Employees are simply called associates. New employees negotiate with others to determine “commitments” that define their work role. Commitments take advantage of individual strengths and abilities and are dif- ferent for every employee. Gore thus replaces top-down planning with a system that allows each employee freedom to determine the specific tasks that he or she will perform. This freedom encourages each individual to find a set of enjoyable tasks. Requiring negotiation with other employees ensures that the chosen tasks will indeed help the organization achieve its goals.5

Integration at W. L. Gore is achieved through dynamic teams. Many organi- zations use a hierarchical structure with bosses and clear channels of author- ity. In contrast, Gore is organized around a lattice structure, which allows employees to talk to anyone who might have information they need. Instead of having bosses plan and organize tasks, the efforts of individual workers at Gore are coordinated through teamwork.

Gore’s practices have created a workplace where employees are highly satis- fied. The company has been named one of the best places to work by numer- ous surveys conducted in a variety of countries including Germany, Italy, South Korea, Sweden, France, and the United Kingdom. And Gore was named for the sixteenth consecutive year as one of the U.S. “100 Best Companies to Work For” by Fortune magazine in 2013.6

Of course, not everyone is able to succeed in Gore’s structure. Some people are uncomfortable without specific jobs that tell them what to do and leave Gore soon after they join. Positive peer pressure encourages people not to take advantage of the loosely organized system by not working hard.

Replacing formal planning and role assignment with a process in which roles evolve is beneficial for Gore. But would this evolutionary process

W. L. GORE & ASSOCIATES W. L. Gore & Associates is an international company employing over 9,000 people throughout the world. Human resource man- agement at Gore builds competitive strength by encouraging creative innovation through

Creating flexible job descriptions that allow employees freedom to perform work tasks that best fit their skills and abilities. Using teams to coordinate the work efforts of individuals. Reducing top-down organizational control.

Building Strength Through HR

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124 Chapter 4 Designing Productive and Satisfying Work

The example of W. L. Gore shows that strategic work design can benefit an orga- nization by assigning and coordinating tasks in ways that increase employee productivity. However, what it means to be productive may not be the same for all organizations. Instead of innovation and creativity, other organizations may benefit from speed and efficiency. The key to making work design stra- tegic is therefore to align the methods used for assigning and coordinating tasks with overall HR strategy. Next, we consider two fundamental elements of work design—autonomy and interdependence—and then explain how these elements can be aligned with the HR strategies from Chapter 2.

DEVELOPING AUTONOMY Take a moment and imagine you are observing the following experience. A family with four small children sits down in a restaurant. The waitress places a glass of water in front of each person. Fearing that the glasses will be broken, the parents ask the waitress to remove the glasses she placed in front of the children. “I’m sorry,” the waitress says, “I’ll get in trouble if everyone at the table doesn’t have a glass of water. It’s our policy.” Even though the parents beg her to make an exception, the waitress follows standard procedure and leaves the glasses in front of the children. Sure enough, several minutes later, one of the glasses of water is pushed onto the floor and broken. Unlike W. L. Gore, the restaurant in this example gives employees little autonomy.

Autonomy concerns the extent to which individual workers are given the free- dom and independence to plan and carry out work tasks.7 Greater autonomy provides two potential benefits to organizations. One benefit concerns informa- tion. In many cases, front-line workers are closer to customers and products and so they have information that a manager does not have.8 The workers can use this information to adapt quickly to change. Employees who are closer to prod- ucts and customers are often able to make rapid changes if something in the production process shifts or if customers’ needs vary. The “How Do We Know?” feature also describes a study that found greater autonomy to result in better coordination for teams, which in turn increased productivity.

Autonomy The extent to which individual workers have freedom to determine how to complete work.

How Is Work Design Strategic?

LEARNING OBJECTIVE 1

be successful elsewhere? Few other organizations seem willing to try, sug- gesting that it may not fit their needs as well. In particular, the informal process at Gore is successful because it fits with the overall strategy of differentiation through innovation. Hiring creative employees and then letting them find ways to utilize their unique talents encourages new ideas. The process may not always be efficient, as the contributions of some workers may overlap with the contributions of others. However, small losses in efficiency are acceptable in return for the increased innovation that makes Gore products highly desirable to consumers. In essence, then, W. L. Gore & Associates is a successful company because it has developed an effective human resource system, which includes an untraditional approach for work design, to help carry out its competitive strategy of innovation.

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How Is Work Design Strategic? 125

A second potential benefit of high autonomy is increased motivation. People with a greater sense of autonomy feel more responsibility for their work.9 More-autonomous employees are less likely to shirk their responsi- bilities. Employees who don’t feel autonomy often fail to do their share of work tasks. People are also more likely to go beyond minimum expectations without extra pay when autonomy is high. High-level managers with greater autonomy in both the United States and Europe report greater job satisfac- tion and less chance of leaving their current employer.10 Managers working in a foreign country also adjust to the new environment better when they experi- ence autonomy.11

High autonomy may not be desirable for all workers in all situations, how- ever. High autonomy can create coordination problems. An employee with a great deal of freedom to change the work process might do something that changes processes and outcomes for other employees.12 Such changes are par- ticularly troublesome when the work process is carefully planned in advance. For instance, high autonomy may not be good for workers in an automobile assembly plant. Production processes are carefully planned, and failure to

DO EMPOWERED TEAMS HAVE HIGHER PERFORMANCE? Do teams perform better when they feel as though they have the responsibility and authority to com- plete their work independently of a supervisor? If so, what can organizations do to help teams feel a greater sense of being empowered? John Mathieu, Lucy Gilson, and Thomas Ruddy sought to answer these questions in a study designed to examine empowerment in teams.

They gathered and analyzed data from 452 ser- vice technicians. The technicians were organized into 121 groups with responsibility for servicing and repairing photocopy machines. Team members reported the degree to which they felt the team was empowered with authority and responsibility. They reported on team processes related to plan- ning, communicating, and cooperation. Teams also reported on ways that their work tasks were designed and the support they received from the larger orga- nization. Team performance was assessed by mea- sures of how quickly teams responded to calls, how well machines operated after service, and expense control. Customer satisfaction measures were also obtained from client surveys.

Teams who felt more empowered worked together more effectively and in turn had higher per- formance and received better reports of customer

satisfaction. The sense of empowerment came from teams having more freedom and responsibility to plan and carry out work tasks, as well as a stron- ger sense of support from the organization. Teams were thus found to be most effective when organi- zational practices provided them with support and autonomy that led them to cooperate more and work together effectively. Better team processes in turn resulted in improved service and customer satisfaction.

The Bottom Line. Empowerment can be beneficial for teams. Empowered teams perceive greater authority and responsibility for completing work. Teams that feel empowered do a better job of planning and coordinating their efforts, which in turn results in higher performance. Organizations can thus benefit from empowering teams. However, the study authors point out that empowerment only works when it is supported by the larger organiza- tional context. For empowerment to be effective it needs to be extensive and go beyond a quick fix.

Source: John E. Mathieu, Lucy L. Gilson, and Thomas M. Ruddy, “Empowerment and Team Effectiveness: An Empirical Test of an Integrated Model,” Journal of Applied Psychology 91 (2006): 97–108.

How Do We Know?

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126 Chapter 4 Designing Productive and Satisfying Work

follow rules and procedures might harm the entire assembly process. In con- trast, autonomy can be helpful when tasks are complex and difficult to plan in advance. Workers with high autonomy can adapt to changing conditions and can do whatever is required to better meet the needs of customers.13

DEVELOPING INTERDEPENDENCE Have you ever been assigned to write a group paper with other students? If so, how did your group complete the task? Did everyone write different sections of the paper? Did the group meet together and discuss the content of the paper? Did members of the group work in sequence so that individuals could add to what had already been done? These different processes for coordinat- ing activities relate to interdependence.

Interdependence is the extent to which an individual’s work actions and outcomes are influenced by other people. When interdependence is low, people work mostly by themselves. Each person completes his or her set of tasks without much help from or coordination with others. A good example is a group of sales representatives, each with an individual selling territory. At the other end of the spectrum is high interdependence, which occurs when people work together closely. Perhaps each team member completes a part of the task, and the work flows back and forth between team members. Each person adapts his or her inputs to the inputs of others. An example of high interdependence is found in a strategic planning team. Team members meet together and discuss issues to combine their knowledge and perceptions in order to arrive at shared decisions.

Greater interdependence often corresponds with improved performance. When interdependence is high, people tend to feel greater responsibil- ity for completing their tasks.14 People also report higher work satisfaction when their goals and tasks are interdependent with those of other workers.15

However, as with autonomy, the benefits of interdependence are not univer- sal. Some organizations are most effective when there is little interdepen- dence and employees work mostly by themselves. When employees do work together, the type of interdependence that is best for one organization is not necessarily the type that is best for another organization.

One common form of interdependence is sequential processing, which takes place when work tasks are organized in an assembly line. In a sequential process, tasks must be performed in a certain order. One person completes a certain set of tasks. The work then flows to the next person, who completes a different set of tasks. This flow continues until each member of the team has completed his or her work and the production of the good or service is complete. A computer manufacturing plant uses sequential processing when a number of workers sit at a table and assemble parts. One person places the memory board in the computer, another adds the hard drive, and someone else installs the software. The steps are completed in a specific order, and each of the workers has a clearly defined set of tasks to complete.

Another common form of interdependence, reciprocal processing, requires more interaction and coordination among workers. Reciprocal interactions occur when people work together in a team without carefully prescribed plans for completing work tasks. A group of workers is given a broad set of tasks, and the workers decide among themselves who will do what. The work process might be different each time the set of tasks is

Interdependence The extent to which a worker’s actions affect and are affected by the actions of others.

Sequential processing Work organized around an assembly line such that the completed tasks of one employee feed directly into the tasks of another employee.

Reciprocal processing Work organized around teams such that workers constantly adjust to the task inputs of others.

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How Is Work Design Strategic? 127

completed. In this situation, the specific actions of any worker depend a lot on the actions of other workers. Software engineers use reciprocal process- ing when they work as a team to create application programs. Because each program is different, the design process for one will be different from the design process for another. One person might have the expertise needed to take the lead role for one program, and another person might be the best leader for designing a different program. Someone in the team might make a suggestion that helps other team members think of new ideas. Team mem- bers work together, and the value of each engineer’s contribution depends on the contributions of others.

The best type of interdependence depends on the work situation. Individuals and teams tend to benefit from sequential processes when work activities can be broken into small tasks that do not change. These tasks are often physical. Reciprocal processes tend to be optimal when activities are complex and require mental rather than physical inputs.16

LINKING AUTONOMY AND INTERDEPENDENCE TO HR STRATEGY Figure 4.1 shows how differences in autonomy and interdependence can be linked to HR strategy. Organizations using cost HR strategies—either Bargain Laborer or Loyal Soldier—focus on efficiency. Efficiency is often created by combining low autonomy and sequential processing.17 With cost strategies, one objective is to standardize jobs so that employees can quickly learn a set of relatively easy tasks. A cook at a fast-food restaurant, for example, receives an order and follows clearly defined rules to cook the food, which is then delivered to someone who gives it to the customer. Another objective with cost strategies is to provide a way for each worker to become very skilled and effi- cient at performing certain tasks. Doing something over and over helps work- ers learn how to eliminate errors. Scientific studies are done to find ways to perform tasks more quickly, and everyone is required to follow best practices.

Figure 4.1 Strategic Framework for Work Design.

Bargain Laborer External/Cost HR Strategy

Cost Leadership Differentiation

Strategic Direction

Design Objectives: Efficiency Standardization Specialization

Free Agent External/Differentiation HR Strategy

Loyal Soldier Internal/Cost HR Strategy

Committed Expert Internal/Differentiation HR Strategy

Design Objectives: Innovation Experimentation Broad Responsibilities

Design Features: Low Autonomy Sequential Interdependence

Design Features: High Autonomy Reciprocal Interdependence

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128 Chapter 4 Designing Productive and Satisfying Work

Sequential processes and low autonomy thus correspond with improved performance when processes are simple and require mostly physical inputs. Managers overseeing this type of work are able to determine the best methods for accomplishing tasks. Activities are completed most quickly when each per- son performs a specific set of tasks that are coordinated by managers.

Organizations that use differentiation HR strategies—either Committed Expert or Free Agent—focus on innovation. High autonomy and recip- rocal processes encourage creativity. With differentiation, the objective is to create new products and services that are better than those offered by competitors. People within the organization are more likely to meet this objective when they are free to try new approaches. Giving workers the freedom to experiment with new ideas helps companies such as W. L. Gore come up with new products. In addition, the close interaction between workers using reciprocal processes allows them to help each other and learn new things.

? CONCEPT CHECK 1. What is autonomy, and how does it influence work

performance? 2. What are the different forms of interdependence? 3. How do autonomy and interdependence link to overall

HR strategy?

How Are Employee Jobs Determined?

LEARNING OBJECTIVE 2

We wouldn’t generally expect all the employees in an organization to per- form the same tasks. Employees specialize in certain tasks, and people adopt specific roles. These tasks and roles are usually summarized in terms of jobs. A job is a collection of tasks that a person performs at work. The idea of being employed in a job is so common that many people think in terms of jobs when they describe themselves to others. But how are jobs defined? Why are some tasks grouped into a certain job while other tasks are grouped into a different job?

THE JOB ANALYSIS PROCESS Job analysis is the process of systematically collecting information about work tasks. The process involves obtaining information from experts to determine the tasks that workers must perform, the tools and equipment they need to perform the tasks, and the conditions in which they are required to work. For instance, a job analysis of the work a student does might bring together a

Job A collection of tasks that define the work duties of an employee.

Job analysis The process of systematically collecting information about the tasks that workers perform.

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How Are Employee Jobs Determined? 129

panel of experienced students and faculty. This panel would develop a list of the tasks that students commonly perform. Accompanying the list might be a description of typical tools, such as computers and textbooks. The analysis would also describe the conditions in which students work, such as lecture halls and study groups.

Job analysis is important because it helps clarify what is expected of work- ers. In the context of human resource management, knowing what tasks need to be completed helps managers select people with appropriate knowledge and skills. Understanding job tasks also provides important information for planning training programs. In addition, being able to compare the tasks of different workers helps guide decisions about pay. Finally, careful job analysis helps ensure that human resource practices comply with legal guidelines. In fact, good job analysis is often seen as a first step to appropriately recruiting, hiring, training, and compensating workers. A good example of a company that benefits from incorporating effective job analysis procedures is Purolator, which is featured in the “Building Strength Through HR” feature.

PUROLATOR Purolator is the largest courier company in Canada, with annual revenue over $1.5 billion. During an average day, Purolator’s 12,500 employees move over 1.1 million packages. Employing a large number of people involved in physical labor can be challenging. Each year, the company processes over 2,000 workers’ compensation claims and pays over $13 million for workers’ compensation insurance. Most of the claims are filed by couriers and sorters, who spend a great deal of time lifting, pushing, and pulling boxes.

Purolator uses job analysis to better understand the physical demands of various jobs. One purpose of job analysis is to provide information about jobs that injured workers can do while they are recovering. Purolator works with medical doctors to assess the tasks that each injured worker can do and then to match workers with temporary assignments that require only inputs they are physically capable of providing. Workers can return to the workplace more quickly, which saves Purolator money. Many injured workers also find being at work in a short-term assignment preferable to staying home alone with nothing to do.

Since implementing the job analysis and assign- ment program, Purolator has reduced the number

of work days lost for injury from nearly 10,000 per year to around 6,000. This improved use of workers has helped Purolator become more efficient and thereby compete more successfully with other ship- ping companies. Human resource management at Purolator builds competitive strength by using job analysis to assess the physical demands of job tasks and then matching job requirements with the capa- bilities of individual workers.

Sources: www.purolator.com; Uyen Vu, “How Purolator Dealt with Skyrocketing Costs,” Canadian HR Reporter 19, no. 5 (2006): 910.

Building Strength Through HR

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130 Chapter 4 Designing Productive and Satisfying Work

The steps in the job analysis process, as shown in Figure 4.2, are getting orga- nized, choosing jobs, reviewing knowledge, selecting job agents, collecting job information, creating job descriptions, and creating job specifications.18

Step 1. Getting Organized An important first step is planning. Careful plans describing needed resources, such as staff support and computer assets, can help ensure success. During the organizing phase, it is also necessary to make sure that key decision mak- ers support analysis plans. No matter how carefully procedures are planned, problems will arise, and top-management support will be necessary to make sure that the analysis proceeds successfully.

Step 2. Choosing Jobs Of course, the goal in any organization is to analyze all jobs, but constraints on budgets and staff time often make it necessary to choose only some of these jobs. As you might expect, high priority should be given to jobs that are important to the success of the organization. Particular emphasis should be placed on jobs in which large numbers of people are employed. Focusing analysis on jobs that are both important and widely held ensures that efforts will be concentrated in areas where improvement can have its largest impact on making the organization successful.

Step 3. Reviewing Knowledge The next step, reviewing knowledge, involves learning what is already known about similar jobs in other organizations. One important source of information

Figure 4.2 Phases of Job Analysis. Source: Information from Robert D. Gatewood and Hubert S. Field, Human Resource Selection, 5th ed. (Cincinnati, OH: South-Western, 2001).

Step 1: Getting Organized

Step 4: Selecting Job Agents s,

Step 3: Reviewing Knowledge

Step 2: Choosing Jobs

Step 5: Collecting Job Information v

Step 6: Creating a Job Description

Step 7: Creating a Job Specifications v

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How Are Employee Jobs Determined? 131

is the Occupational Information Network, which was developed by the U.S. Department of Labor. The network, called O*Net, is online at http://online. onetcenter.org. The online database contains information for over a thou- sand occupations. A visitor to the website simply types in a common job—or occupational—title and is presented with a list of tasks that are normally asso- ciated with that position, along with other information. Although developed in the United States, O*Net data have been shown to be applicable in other countries such as New Zealand and China.19 Other sources of knowledge for job analysts include studies published in research journals such as Personnel Psychology and Journal of Applied Psychology. The information in these existing sources is not a substitute for a careful analysis but does provide a good start- ing point for learning about jobs.

Step 4. Selecting Job Agents Job agents are the people who provide the job information. In many cases, the best people to provide this information are job incumbents—the people cur- rently doing the job. These employees are very familiar with day-to-day tasks. But one potential problem with using current employees is that they may emphasize what is actually done rather than what should be done. Another source of information is supervisors. Supervisors may not be as familiar with the details of the job, but they can often provide clarification about the tasks that they would like to see done. A third source of information is profession- ally trained analysts who make careers out of studying jobs. Although such specialists can provide an outside perspective, they may not be as familiar with how things are done in a particular organization.

A number of studies have examined differences in job agents. Information provided by job incumbents who are experienced is different from the infor- mation provided by incumbents who recently started the job.20 In addition, differences have been found for ratings from men and women,21 as well as for ratings from minority and nonminority incumbents.22 Some differences have also been reported between high- and low-performing employees.23

Given these differences, it is important that the characteristics of the sample of people who provide information for a job analysis be representative of the characteristics of people who will actually do the job.

Step 5. Collecting Job Information The next step is to actually collect information about the job. A common method for collecting information is the job analysis interview, a face-to-face interaction in which a trained interviewer asks job agents about their duties and responsibilities. Agents can be interviewed individually or in groups. In either case, the interview should be structured so that the same questions are asked of everyone. Job analysis interviews can be useful for learning unique aspects of a particular job. Interviews can, however, be time consuming and costly.

A second common method for collecting information is the job analysis questionnaire. Here, agents respond to written questions about the tasks they perform on the job. One type of questionnaire is an off-the-shelf instrument that has been developed to provide information about numerous different jobs. Another type is a tailored questionnaire developed just to obtain infor- mation about a specific job in a specific organization. An advantage of job analysis questionnaires is that they are relatively inexpensive; a disadvantage is that they may only provide very general information.

Occupational Information Network An online source of information about jobs and careers.

Job analysis interview Face-to-face meeting with the purpose of learning about a worker’s duties and responsibilities.

Job analysis questionnaire A series of written questions that seeks information about a worker’s duties and responsibilities.

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132 Chapter 4 Designing Productive and Satisfying Work

A third common method is observation. Job analysis observation requires job analysts to watch people as they work and to keep notes about the tasks being performed. This method can provide excellent information about jobs involving frequently repeated tasks. However, observation is difficult for jobs where tasks either are mental or are not done frequently enough to be observed by an outsider.

Given the different strengths and weaknesses of analysis techniques, the best advice is often to use a combination of techniques. Job analysis question- naires can serve as relatively inexpensive tools to obtain broad information. This information can be supplemented by interviews and observations. The overall goal of this step is to obtain as much information as possible about the work tasks. We will look more closely at some specific job analysis methods in the next section.

Step 6. Creating Job Descriptions Next, analysts use the job analysis information to create a job description. A job description is a series of task statements that describes what is to be done by people performing a job. This description focuses on duties and responsi- bilities and usually consists of a list of actions that employees perform in the job being described. An example of a job description for the job of home health aide is shown in Table 4.1.

Step 7. Creating Job Specifications The final step uses job analysis information to create job specifications. Job specifications identify the knowledge, skills, and abilities that workers need in order to perform the tasks listed in the job description. Of course, job specifications are different from the job description. Job descriptions focus more on what is done, whereas job specifications focus on who is most

Job analysis observation The process of watching workers perform tasks to learn about duties and responsibilities.

Job description Task statements that define the work tasks to be done by someone in a particular position.

Job specifications Listing of the knowledge, skills, and abilities needed to perform the tasks described in a job description.

Source: Information from the Occupational Information Network O*Net OnLine, http://online.onetcenter.org/.

Table 4.1 Job Description for Home Health Aid

Overview: Provide routine individualized healthcare such as changing bandages and dressing wounds, and applying topical medications to the elderly, convalescents, or persons with disabilities at the patient’s home or in a care facility. Monitor or report changes in health status. May also provide personal care such as bathing, dressing, and grooming the patient.

1. Maintain records of patient care, condition, progress, or problems to report and discuss observations with supervisor or case manager.

2. Check patients’ pulse, temperature, and respiration.

3. Provide patients with help moving in and out of beds, baths, wheelchairs, or automobiles and with dressing and grooming.

4. Care for patients by changing bed linens, washing and ironing laundry, cleaning, or assisting with their personal care.

5. Entertain, converse with, or read aloud to patients to keep them mentally healthy and alert.

6. Administer prescribed oral medications, under the written direction of physician or as directed by home care nurse or aide, and ensure that patients take their medicine.

7. Plan, purchase, prepare, or serve meals to patients or other family members, according to prescribed diets.

8. Accompany clients to doctors’ offices or on other trips outside the home, providing transportation, assistance, and companionship.

9. Direct patients in simple prescribed exercises or in the use of braces and artificial limbs.

10. Provide patients and families with emotional support and instruction in areas such as caring for infants, preparing healthy meals, living independently, or adapting to disability or illness.

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How Are Employee Jobs Determined? 133

likely to be able to perform the tasks successfully. An example of job specifica- tions for the position of home health aide is shown in Table 4.2.

SPECIFIC METHODS OF COLLECTING JOB ANALYSIS INFORMATION Let’s look more closely at how information is gathered in Step 5 of the job analysis process. Many methods have been developed for collecting job analysis information. In this section, we examine three representative methods: the task analysis inventory, the critical-incidents technique, and the Position Analysis Questionnaire. The first two are broad techniques that provide a general meth- odology for analyzing jobs. Although several different consulting firms market applications of these techniques, the principles used are not unique to these firms. A number of common principles underlie specific practices, and we describe these principles rather than the specific practices of a particular con- sulting firm. The third tool we discuss, the Position Analysis Questionnaire, is a bit different; it is a specific analysis tool that is marketed by a single firm.

Task Analysis Inventory The task analysis inventory asks job agents to provide ratings concerning a large number of tasks. Most analyses require responses for at least 100 different task statements. These task statements usually begin with an action verb that describes a specific activity—for example, “explains company policies to newly hired workers” and “analyzes data to determine the cost of hiring each new employee.”

Task analysis inventory A method of job analysis in which job agents rate the frequency and importance of tasks associated with a specific set of work duties.

Source: Information from the Occupational Information Network O*Net OnLine, http://online.onetcenter.org/.

Table 4.2 Job Specifications for Home Health Aide

Knowledge of

Psychology including human behavior and performance, individual differences in ability and motivation

Information and techniques needed to diagnose and treat human injuries, diseases, and deformities

Structure and content of the English language including the meaning and spelling of words, rules of composition, and grammar

Principles and processes for providing customer and personal services, including customer needs assessment and evaluation of customer satisfaction

Skills in

Active listening

Critical thinking and complex problem solving

Speaking to convey information effectively

Social perceptiveness

Monitoring performance of self and others to make improvements

Ability for

Vision to see things at close range

Deductive and inductive reasoning

Speech recognition

Information ordering

Oral and written expression

Knowing when something is wrong or likely to go wrong

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134 Chapter 4 Designing Productive and Satisfying Work

Most task analyses require job agents to provide at least two ratings for each task statement; one rating is for frequency or time spent, and the other is for importance. Ratings for frequency of performing the task range from “never performed” to “performed most of the time.” Ratings might also be made for time spent on the task. However, ratings of frequency and time spent essentially measure the same thing.24 Ratings for task importance usually range from “not important” to “extremely important.”25

Task inventories yield information that is consistent across time, meaning that ratings provided by a specific rater at one point in time are similar to ratings obtained from the same rater at a different point in time.26 Different groups of raters do, however, sometimes provide different results. The task analysis inventory thus seems to work best when job incumbents who are rela- tively new to the position provide ratings of frequency and importance.27

A task analysis inventory is fairly specific to a particular category of jobs. Thus, an analysis that provides insight into the job of grocery store clerk will provide little information about the job of taxi driver. However, the inventory does provide a good deal of detailed information about the job being studied.

Critical-Incidents Technique The critical-incidents technique identifies good and bad on-the-job behaviors. Job agents are asked to generate a number of statements that describe behav- iors they consider particularly helpful or harmful for accomplishing work. Each statement includes a description of the situation and the actions that determined whether the outcome was desirable or undesirable.28 Statements are then analyzed to identify common themes.

Results from an analysis using the critical-incidents technique are shown in Table 4.3. The analysis provides information about nurse behavior that encourages or discourages patients to participate in their own care while hospitalized. In the study, 17 patients were interviewed and asked to describe specific incidents that encouraged or discouraged them from participating in their own care. Interviewers asked additional questions to understand the cir- cumstances leading to the event, nurse actions, and patient responses. Results illustrated that patients participate more when nurses regard them as a per- son, share information, and acknowledge the patient as competent. Patients withdraw from participating when they feel abandoned, belittled, or ignored. These responses were linked to the nurse behaviors shown in Table 4.3, clari- fying specific actions that nurses can take to increase patient participation.29

Position Analysis Questionnaire The Position Analysis Questionnaire (PAQ) is a structured questionnaire that assesses the work behaviors required for a job.30 This questionnaire collects information not about tasks or duties but rather about the characteristics peo- ple must have in order to do the job well. In essence, the PAQ skips Step 6 in the job analysis process and goes right to Step 7.

The PAQ includes 187 items that relate to job activities or the work environ- ment. These items assess characteristics along six dimensions:

1. Information input—where and how a worker obtains needed information. 2. Mental processes—reasoning and decision-making activities. 3. Work output—physical actions required for the job, as well as tools or

devices used.

Critical-incidents technique A method of job analysis in which job agents identify instances of effective and ineffective behavior exhibited by people in a specific position.

Position Analysis Questionnaire (PAQ) A method of job analysis that uses a structured questionnaire to learn about work activities.

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How Are Employee Jobs Determined? 135

4. Relationships with other persons—the interactions and social connections that a worker forms with others.

5. Job context—the physical and social surroundings where work activities are performed.

6. Other job characteristics—activities, conditions, or characteristics that are important but not contained in the other five dimensions.

Questions on the PAQ are rated on scales according to what is being measured. One scale, for example, is based on extent of use and ranges from

Critical Incident Results for Nurse Actions Encouraging Patient Participation

Table 4.3

Incidents Stimulating Patient Participation

Nurse Actions

Listens and asks

Gives necessary explanations

Gives written materials

Acts as intermediary of contacts

Gives tips about self-care

Discusses and makes agreements

Hands over responsibilities

Patient Feels

Regarded as a person

Engaged through information

Acknowledged as competent

Incidents Inhibiting Patient Participation

Nurse Actions

Disparages with baby talk

Makes ironic remarks about an experience

Decides by self to reject views

Answers curtly

Neglects making notes in records

Hands over responsibilities

Patient Feels

Abandoned without backup

Belittled verbally

Ignored without influence

Source: Information adapted from Inga E. Larson, Monica J.M. Sahlsten, Kerstin Segesten, and Kaety A.E. Plos, “Patient Perceptions of Nurses’ Behavior That Influence Patient Participation in Nursing Care: A Critical Incidents Study,” Nursing Research and Practice, Article ID 534060 (2011).

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136 Chapter 4 Designing Productive and Satisfying Work

“very infrequently” to “very substantial.” Another is based on importance to the job and ranges from “very minor” to “extreme.” A few items are simply rated as “does not apply” or “does apply.”

An advantage of the PAQ is its usefulness across many different jobs. Since the information concerns worker characteristics rather than tasks, results can be compared across jobs that are quite different. For instance, PAQ results might be used to determine whether two very different jobs require similar inputs. The degree of similarity will tell management whether people doing these jobs should be paid the same amount. A disadvantage of the PAQ is its lack of task information, which limits its usefulness for creating job descrip- tions or guiding performance appraisal practices. The PAQ is nevertheless one of the most commonly used methods of job analysis.

HOW IS JOB DESCRIPTION INFORMATION MADE USEFUL? A few methods, like the PAQ, develop descriptions of worker characteristics rather than tasks and duties. However, the result of most job analysis tech- niques is a list of duties. As shown in Figure 4.3, job descriptions focus on tasks and duties, whereas job specifications focus on characteristics of people. Information in job descriptions must therefore be translated into job specifi- cations, which are required for purposes such as employee selection. After all, just knowing what employees do in a certain job isn’t very helpful for deter- mining the type of person to hire. The people doing the hiring also need to know what characteristics to look for in job applicants.

Translation into job specifications is usually done by job agents. To make good translations, job agents must be highly familiar with the job and what it takes to perform it well. They look at the list of tasks and make judgments about the knowledge, skills, and abilities needed to complete the tasks. The characteristics are incorporated into the job specifications. For instance, job agents for the position of student might be asked to make judgments about the skills needed to take notes in class. The list of skills would include some obvious characteristics, such as ability to hear and write. Other characteristics

Figure 4.3 Comparing Job Descriptions and Job Specifications.

Describes what is to be done

Focus is on duties Focus is on characteristics of people

Describes the wledge

Abilities needed to perform the duties

Job SpecificationsJob Descriptions

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How Are Employee Jobs Determined? 137

might be less obvious but more helpful for identifying people who do the tasks well—for example, the ability to simultaneously listen and write, a knowl- edge of note-organizing techniques, and skill in asking follow-up questions. Good job specifications thus focus attention on knowledge, skills, and abilities that separate high- and low-performing workers.

Job specifications provide information that serves as a foundation for a number of other human resource practices. Managers can use the list of worker characteristics as a “shopping list” when they begin identifying the type of workers they want to hire. Carefully prepared job specifications also guide selection practices so that appropriate tests can be found to identify who actually has the desirable characteristics. In addition, areas in which cur- rent employees lack skills necessary for promotion can be established as train- ing priorities.

These priorities serve as important information for designing the training programs discussed in Chapters 9 and 10. Also, as explained in Chapters 11 and 12, knowing the employee characteristics associated with high task per- formance can also provide important guidance for compensation decisions. People who have more desirable characteristics will likely expect to receive higher pay, particularly if few others have the same characteristics.

JOB ANALYSIS AND LEGAL ISSUES The process of job analysis is a starting point for many good human resource practices. Practices grounded in good analysis are most likely to result in good decisions about how to hire, evaluate, and pay employees. Legal consider- ations are another important reason for good job analysis.

A number of court decisions have confirmed the importance of using good job analysis procedures.31 When an organization makes hiring or promotion decisions that have discriminatory effects, the organization can defend itself successfully by showing that it based its decisions on solid analyses of the jobs involved. In contrast, such decisions appear arbitrary and can be judged ille- gal if the organization has not used good job analysis procedures. Some proce- dures that have been identified as critical for conducting a legally defensible job analysis are listed in Table 4.4. Following these procedures helps ensure that an organization thoroughly analyzes jobs and uses the information to develop fair hiring and compensation procedures.32

Source: Information from Duane E. Thompson and Toni A. Thompson, “Court Standards for Job Analysis in Test Validation,” Personnel Psychology 35 (1982): 865–874.

Legal Issues and Job Analysis

1. Analysis results should be in writing.

2. The method used to analyze the job should be clearly described.

3. Expert job analysts should collect data from several up-to-date sources.

4. Data should be collected from enough people to be sure the results are accurate.

5. Tasks, duties, and activities must be identified and included in the job analysis.

6. The relative degree of competency necessary for entry-level performance should be specified.

Table 4.4

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138 Chapter 4 Designing Productive and Satisfying Work

Job analysis results can also help many organizations determine whether they are complying with requirements of the Americans with Disabilities Act (ADA), which we discussed in Chapter 3. ADA guidelines make an important distinction between essential and nonessential tasks. For a disabled employee to be qualified for a position, he or she must be able to perform all essen- tial tasks (with reasonable accommodations). The employee is not, however, required to be able to perform non-essential tasks. For example, an essential task for a landscape worker might be to identify and remove weeds. A nones- sential task might be communicating verbally with other employees. In this case, an applicant with a speech disability might be seen as qualified for the job. The key to qualification is the extent to which verbal communication is necessary. If the job description does not identify verbal communication as an essential task for landscape workers, then the organization cannot appropri- ately refuse to hire someone who cannot speak.

COMPETENCY MODELING The process of job analysis has been criticized in recent years, primarily because work today is less structured around specific jobs than it once was.33

Work activities are more knowledge based. People increasingly work in teams. Task activities are more fluid and are determined through ongoing negotiation among workers.34 By the time human resource practices based on job analysis can be designed and carried out, the task activities may have changed.35 Work behavior in modern organizations is thus not easily described.

A recent development designed to adapt to the changing needs of mod- ern organizations is competency modeling, which describes jobs in terms of competencies—characteristics and capabilities people need in order to succeed at work. Competencies include knowledge, skills, and abilities, but they also seek to capture such things as motivation, values, and interests. Competencies thus include both “can-do” and “will-do” characteristics of people.36 One area of dif- ference between competency modeling and traditional job analysis is that com- petency modeling tends to link a broader set of characteristics to work success.

Typical steps for competency modeling are shown in Figure 4.4.37 Part of data collection is an assessment of competitive strategy. Consistent with the strategic focus of this textbook, competency modeling seeks to develop links between work activities and organizational strategy. The competency approach tailors solutions to purposes and uses. An analysis that will be used for compensation decisions may be different from an analysis that will be used for determining the type of job candidate to recruit. Competencies also tend to be somewhat broader and less specifically defined than the activities assessed in job analysis. Typical competencies might include skill in presenting speeches, ability to follow through on commitments, proficiency in analyzing financial information, and willingness to persist when work becomes difficult. Competencies can be rated in terms of things like current importance, future importance, and frequency.

You can see that job analysis and competency modeling differ in some important respects. Competency modeling is much more likely than job analy- sis to link work analysis procedures and outcomes to business goals and strate- gies. However, in most cases, the methods used in competency modeling are seen as being less scientific.38 Competency modeling procedures are often not documented as clearly as job analysis procedures and may be less rigorous.

Competency modeling An alternative to traditional job analysis that focuses on a broader set of characteristics that workers need to effectively perform job duties.

Competencies Characteristics and capabilities that people need to succeed in work assignments.

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How Are Employee Jobs Determined? 139

Comparing the strengths and weaknesses of traditional job analysis and competency modeling, however, obscures the important contribution that is possible by combining the best elements of the two practices. Competency modeling incorporates strategic issues and allows for a broader range of char- acteristics. From the other side, traditional job analysis provides excellent techniques for scientifically analyzing work activities. Combining the broader, more strategic approach of competency modeling with scientific methods should yield superior results. Indeed, a series of research studies concluded that a combined approach is better than either approach alone.39 Best prac- tices thus incorporate job analysis along with future-oriented job require- ments and organizational goals to analyze competencies. Information is then presented in the common language of organizations, including diagrams and pictures. A final key is that competency information be strategically integrated to ensure that HR practices associated with hiring, performance appraisal, and compensation work in unison to select and motivate employees through consistent policies.40

? CONCEPT CHECK 1. What are the seven steps involved in job analysis? 2. What can an organization do to make sure its job analysis

procedures comply with legal guidelines? 3. How is competency modeling different from job analysis?

Figure 4.4 Steps in Competency Modeling. Source: Information from Antoinette D. Lucia and Richard D. Lepsinger, The Art and Science of Competency Models: Pinpointing Critical Success Factors in Organizations (San Francisco: Jossey-Bass/Pfeiffer, 1999).

Step 1: Determine Data Collection Method

Step 4: Develop an Interim Model

Step 3: Direct Observation of Incumbents W

Step 2: Collect Data

Step 5: Test the Interim Model v

Step 6: Validate the Model

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140 Chapter 4 Designing Productive and Satisfying Work

Next time you visit a sandwich shop, take a moment to observe the work pro- cess. Does the same person who takes your order also fix the sandwich and then take your payment? Or does one person take your order, another fix the sandwich, and still another accept your payment? Some shops use a pro- cess in which a single employee serves each customer. In other shops, each employee specializes in only one part of the service. Job analysis procedures would find that each person working in the first shop must perform a lot of different tasks, whereas employees in the second shop perform a limited set of tasks over and over. Job analysis thus provides information about who does what, but it doesn’t tell us anything about how the tasks were combined into jobs in the first place. The process of job design focuses on determining what tasks will be grouped together to form employee jobs. This process of job design is critical, as nearly half of the differences in worker attitudes and behavior can be traced to factors such as task design, social interactions, and work conditions.41

Job design is important when companies are first created and when existing companies open new plants or stores. However, the principles of job design are also important for existing companies that are looking to improve. Many companies use job redesign to reorganize tasks so that jobs are changed. Job redesign often increases the sense of control for workers.42 Indeed, job rede- sign that empowers employees is particularly effective for improving perfor- mance when managers have not been providing employees with feedback and information.43 The “Building Strength Through HR” feature describes how such a redesign benefitted a large teaching hospital in England.

Problems arise when work tasks are not organized well. Earlier in this chapter, we discussed the concepts of differentiation and integration. Differentiation allows people to specialize in specific tasks, while integration coordinates actions among employees. Employees feel isolated when there is too much differentiation. Many also feel frustrated when they are unable to easily integrate their actions with the actions of other workers. A major objective of work design is thus to differentiate and integrate work tasks in ways that not only make employees more productive but also increase their satisfaction.

Work tasks that are not properly differentiated and integrated deplete employee mental and physical capacity and create fatigue and burnout.44

Burned out employees are more likely to leave the organization.45 Workers with unclear roles, and those who experience constraints such as bad equip- ment and supplies, are particularly at risk.46 These exhausted employees have decreased motivation and are less likely to help other workers voluntarily.47

They are also more prone to abuse alcohol and drugs.48 Some burnout can be resolved by making sure that people have jobs that fit their capabilities and by treating employees fairly.49 Workers experience less exhaustion when they receive social support from coworkers.50 People also seem to be better able to cope with exhaustion when they believe that they are performing at a high level.51 Taking a vacation can also reduce burnout.52

Job design The process of deciding what tasks will be grouped together to define the duties of someone in a particular work position.

Job redesign The process of reassessing task groupings to create new sets of duties that workers in particular positions are required to do.

How Do We Determine the Tasks Associated with Each Job?

LEARNING OBJECTIVE 3

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How Do We Determine the Tasks Associated with Each Job? 141

Building Strength Through HR

LEICESTER ROYAL INFIRMARY Leicester Royal Infirmary National Health Service Trust is a large teaching hospital in England. Each year, the hospital staff of 4,200 people treats 400,000 outpatients, 105,000 inpatients, and 125,000 accident and emergency victims. The hos- pital used work redesign to reduce waiting time and improve satisfaction for patients. Human resource experts worked with clinical teams to redesign the way services were delivered. The analysis assessed patient needs and determined who should provide care. One common outcome was the streamlining of processes. For example, a review of procedures in one department revealed that five different areas of responsibility and seven transfers of infor- mation were required to help a patient make an appointment. These tasks were combined into a single job, resulting in a 15 percent reduction in costs. In some cases, tests that had previously taken hours to complete were delivered in minutes as a result of redesign. Other new processes increased efficiency so that nurses could spend more time with patients. Involving hospital workers in work redesign has improved not only efficiency but

also patient satisfaction. Furthermore, nurses have benefited from redesigning jobs in ways that allow each individual to perform a broader array of tasks. This not only improves patient care but also makes nurses’ activities more interesting. Human resource management at Leicester Royal Infirmary builds competitive strength by getting nurses and other workers involved in identifying better ways to complete work tasks.

Source: Information from “HR’s Role in Re-engineering at Leicester Royal Infirmary,” Human Resources Management Journal International Digest 10, no. 4 (2002): 4–7.

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Job design and redesign specialists have adopted a number of approaches for attacking the problem of grouping tasks in ways that make jobs more productive and satisfying. The main objective of any work design method is to separate and combine work tasks in ways that make the most sense. What makes sense depends on the overall objective of the organization and is driven by strategic choices. In this section, we describe four general approaches to grouping work tasks: mechanistic, motivational, perceptual, and biological. As you will see, many of the differences in these approaches can be traced to differences among the research areas and disciplines where they originated.

MECHANISTIC APPROACH In a mechanistic approach, engineers apply concepts from science and math- ematics to design efficient methods for creating goods and services. In par- ticular, industrial engineers approach job design from the perspective of creating an efficient machine that transforms labor inputs into goods and services. They use principles of scientific management to create jobs that eliminate wasted effort so that organizations can produce goods and services quickly.53 In creating these jobs, they often use analyses designed to find the work methods that take the least time. For example, in a typical analysis, an

Scientific management A set of management principles that focus on efficiency and standardization of processes.

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142 Chapter 4 Designing Productive and Satisfying Work

observer might use a stopwatch to time different methods for moving boxes from one spot to another. Emphasis is placed on finding the fastest way to lift and carry boxes. The job is then designed so that each employee learns and uses the fastest method.

The basic goal of the mechanistic approach is to simplify work tasks as much as possible. Tasks are automated. Each job is highly specialized, and to the degree possible, tasks are straightforward. Workers focus on carrying out only one task at a time, and a small set of tasks is completed over and over.54

The mechanistic approach thus tends to reduce worker autonomy and cre- ate sequential processing. Having workers specialize and complete simplified tasks has indeed been linked to greater efficiency.55 Organizations pursuing either Loyal Soldier or Bargain Laborer HR strategies can thus benefit from job design practices that emphasize the mechanistic approach.

United Parcel Service (UPS) uses the mechanistic approach as part of a Loyal Soldier HR strategy. UPS needs to move packages as efficiently as pos- sible. People who work as sorters in package warehouses use carefully planned methods for carrying packages. From time to time, specialists observe sorters and make sure that they are following prescribed practices. Truck drivers at UPS also follow specific procedures for tasks such as planning delivery routes and starting trucks. The entire process is very much like an assembly line. The most efficient methods for completing tasks are determined and then taught to everyone. This standardization creates efficiency, which helps reduce the cost of moving packages and, in turn, creates value for customers.

MOTIVATIONAL APPROACH Work design can also be approached from the perspective of psychologists. Instead of seeking to build a machine, psychologists study human minds and behavior. A specific branch of study called organizational psychology emphasizes designing work to fulfill the needs of workers. This motivational approach is aimed at increasing employees’ enjoyment of their work and thus increasing their effort. For example, people given the goal of developing a marketing plan for a cell phone manufacturer might be given a large number of dif- ferent tasks that allow them to exercise creativity. Jobs are designed not sim- ply to get work done as quickly as possible but also to provide workers with tasks they find meaningful and enjoyable.56 The “How Do We Know?” feature describes a study that illustrates the benefits of making work tasks meaningful and significant.

Unlike the mechanistic approach, the motivational approach seeks to design work so that it is complex and challenging. One popular model of motivational job design is the job characteristics model, which focuses on building intrinsic motivation.57 Intrinsic motivation exists when employees do work because they enjoy it, not necessarily because they receive pay. According to the job characteristics model, people are intrinsically motivated when they perceive their work to have three characteristics:

1. Meaningfulness. People see work as meaningful when they are able to use many different skills, when they can see that their inputs lead to the completion of a specific service or product, and when they see their tasks as having an important impact on other people.

2. Responsibility. People feel personal responsibility for work outcomes when they have autonomy, which comes from the freedom to make decisions.

Job characteristics model A form of motivational job design that focuses on creating work that employees enjoy doing.

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How Do We Determine the Tasks Associated with Each Job? 143

3. Knowledge of the results. Knowledge of the results of work activities comes from receiving feedback in the form of information about how effectively the work is being done.

People who feel intrinsic motivation exhibit higher creativity.58 This sug- gests that the motivational approach to job design is particularly useful for organizations pursuing Committed Expert or Free Agent HR strategies. Organizations with these strategies can benefit from the greater intrinsic motivation and creativity that comes from experiencing meaningfulness, responsibility, and knowledge of results. Designing work around motivational principles also increases worker satisfaction and enables organizations to retain quality employees.59 In particular, providing workers with high auton- omy provides a means for organizations pursuing differentiation strategies to maximize the benefit of employing highly educated and trained workers who often know more than managers.

W. L. Gore & Associates, which you read about earlier in the chapter, offers a good example of a company that uses the motivational approach as part of a differentiation strategy. Workers are given a great deal of autonomy to determine work tasks. Based on their interests and capabilities, they enter

DO EMPLOYEES WORK HARDER WHEN THEY THINK THEIR TASKS MATTER? Employees are sometimes asked to complete small tasks that they often think are boring. Do employ- ees work harder on these tasks when they believe their actions contribute something valuable to soci- ety? Adam Grant sought to answer this question by studying the work outcomes of call center employ- ees and lifeguards.

In one study he conducted an experiment by separating call center employees working at a uni- versity into groups. One group of callers developed a greater sense that their work was significant by reading stories about how the funds they were rais- ing had improved the lives of students. Another group read stories from previous employees that described how working as a caller had helped their own personal careers. A third group did not read any stories. The group that read the stories about how much their work could help students obtained more pledges for a higher amount of money than either of the other two groups.

A second study was similar but focused on life- guards. A sense of the importance of work tasks

was communicated to one group of lifeguards by having them read stories about other lifeguards rescuing drowning swimmers. Compared to a control group, the lifeguards who read the life- saving stories had a higher sense that their work was important. They were more dedicated to their jobs, and they helped others more frequently.

The Bottom Line. Employees perform better when they perceive that their work is benefitting others. This sense of making a difference for others is a stronger motivator than a sense that work will benefit oneself. In order to help employees better see the significance of their tasks, Professor Grant recommends that managers share stories with employees about how what they are doing makes a difference for other people.

Source: Adam M. Grant, “The Significance of Task Significance: Job Performance Effects, Relational Mechanisms, and Boundary Conditions,” Journal of Applied Psychology 93(2008): 108–124.

How Do We Know?

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144 Chapter 4 Designing Productive and Satisfying Work

agreements that allow them to complete work tasks that they perceive as impor- tant. They also have the freedom to engage in a variety of activities. Decreases in efficiency that come from duplication of effort are balanced by high levels of creativity. Intrinsically motivated workers create unique products.

PERCEPTUAL APPROACH Some psychologists take a perceptual, rather than a motivational, approach. Job designers using this approach group tasks together in ways that help work- ers to process information better. These experts look at things such as how easily displays and gauges can be read and understood. They design written materials and instructions to be easy to read and interpret. They also examine how much information must be remembered and how much complex prob- lem solving is required.

The basic objective of the perceptual approach is to simplify mental demands on workers and thereby decrease errors. Safety and prevention of accidents are critical. Given its emphasis on simplicity, the perceptual approach to job design usually results in work characterized by sequential processing and low autonomy. Thus, it is most commonly found in organi- zations pursuing either Loyal Soldier or Bargain Laborer HR strategies. For instance, an oil refinery could use perceptual principles to ensure that gauges and meters are designed to present information clearly so that plant workers do not make mistakes that result in accidents.

BIOLOGICAL APPROACH People with backgrounds in biology and physiology also provide inputs into work design. They study issues associated with health and physical function- ing. Physiologists particularly emphasize the physical stresses and demands placed on workers. Yet physical demands often combine with psychological stress to cause injuries.60

The biological approach is sometimes associated with ergonomics, which concerns methods of designing work to prevent physical injury. Task demands are assessed in terms of strength, endurance, and stress put on joints. Work processes are then designed to eliminate movements that can lead to physical injury or excessive fatigue. Workers are often taught principles such as good posture and elimination of excessive wrist movement.

The basic goal of the biological approach is to eliminate discomfort and injury. Fatigue is reduced by incorporating breaks and opportunities to switch tasks. Short-term gains in efficiency are sometimes sacrificed in order to pre- vent discomfort or injury. Principles associated with the biological approach can therefore be useful in work that is characterized by sequential process- ing. Unlike the mechanistic and perceptual approaches, which provide guid- ance for ways to increase efficiency, the biological approach guides work design specialists in making sure that assembly-line processes do not harm workers. Work design from the biological perspective thus helps organiza- tions with Bargain Laborer or Loyal Soldier HR strategies to balance their quest for efficiency with a focus on the physical needs of workers. A good example is seen in automobile plants, where machines and work surfaces are designed to increase employee comfort and reduce repetitive motions that lead to injuries.

Ergonomics An approach to designing work tasks that focuses on correct posture and movement.

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How Can Work Be Designed to Improve Family Life? 145

COMBINING WORK DESIGN APPROACHES A potential problem associated with work design is the sometimes conflict- ing goals of the various approaches. For instance, the mechanistic approach simplifies processes by assigning workers a few specialized tasks that are rap- idly repeated. In contrast, the motivational approach emphasizes whole tasks, high variety, and substantial autonomy. Does increased efficiency come at the expense of worker satisfaction and creativity?

Research has indeed found tradeoffs between the motivational and mecha- nistic approaches. On the one hand, jobs designed around the motivational approach increase job satisfaction, but the price may be reduced efficiency.61

On the other hand, jobs designed around the mechanistic approach nor- mally improve efficiency, even though job satisfaction may decline.62 Still, studies show that tradeoffs are not always necessary and that in some cases jobs can be designed simultaneously from the mechanistic and motivational approaches.63 In fact, a recently developed Work Design Questionnaire suc- cessfully includes measures of work context and task knowledge with social characteristics.64 In this way the combined approach examines tasks in terms of both motivational and mechanistic properties. For instance, someone per- forming the job of statistical analyst might be given a set of very specialized tasks to improve efficiency but might also have high expertise and autonomy, which would create a sense of responsibility and ownership.65

Combining principles from the mechanistic and motivational approaches can thus lead to jobs that are not only efficient but also satisfying.66 Of course, in many instances the primary consideration will be either efficiency or moti- vation; the strategic objectives of the organization should be the primary factor that drives work design. The mechanistic approach, incorporating per- ceptual and biological influences, is most relevant for organizations pursuing cost strategies. The motivational approach provides important guidance when the underlying strategy is differentiation.

? CONCEPT CHECK 1. What are four different approaches to designing jobs in

organizations? 2. How does the mechanistic approach differ from the motiva-

tional approach?

How Can Work Be Designed to Improve Family Life?

LEARNING OBJECTIVE 4

One area of increasing importance for job design is conflict between work and family. Many employees find it difficult to balance their roles as employ- ees with their roles as parents or spouses. This conflict operates in both direc- tions. Stress from problems at home can have a negative influence on work

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performance, resulting in family-to-work conflict. At the same time, stress encountered at work can have a negative influence on family life, a situation called work-to-family conflict.67 In essence, employees have spillover of work and family stress.68 For example, employees who experience dissatisfaction at work are more likely to be in a bad mood, and to have lower marital sat- isfaction, when they return home.69 Employees who are more embedded in both their work organizations and surrounding communities seem to experi- ence greater conflict between work and family roles,70 but such conflict is not restricted to workers in the United States. For example, a survey of Australian construction professionals found that strain in the workplace had a negative influence on family relationships.71 Nevertheless, compared to workers in areas such as Asia and South America that value groups over individuals, work- ers in individualistic societies such as the United States are more likely to be dissatisfied and leave when they feel that their work interferes with family.72

Creating organizational policies that support families can help alleviate work and family conflict. Specific policies include providing flexible spending accounts for dependent care, elder care resources and referral, and child care resources such as on-site daycare.73 Having supervisors specifically support employees by showing empathy and helping balance family and career issues is also critical for reducing work and family conflict.74

One simple reason why work and family roles can conflict is shortage of time. Studies have shown that spending more hours at work creates more stress at home and that spending more hours with family can create stress at work.75 Being able to control work scheduling can, however, buffer some of the stress of not having enough time.76 A second reason for work and family conflict is that the psychological effort required to cope in one area takes away from resources needed to cope in the other.77 A young mother who engages in a difficult confrontation with a coworker is likely to be emotionally exhausted when she returns to her family.

Conflict between work and family roles presents problems for both orga- nizations and employees. From the organizational perspective, increased conflict between work and family roles is a problem because it increases absen- teeism and turnover.78 Conflict between roles is a problem for employees because it reduces satisfaction, increases alcohol and drug abuse, and results in poor physical health.79 These problems tend to be particularly difficult for women.80 Constraints from family duties that inhibit them from accepting international assignments is one particular example of negative family–work conflict for women.81

Some organizations are, however, effective in structuring work in ways that help decrease conflict between work and family roles. IBM, which is profiled in the next “Building Strength Through HR” feature, is a good example. One key for IBM and other organizations that minimize work and family conflict is to be seen as fair by employees.82 People working in these organizations report going beyond minimum expectations by helping coworkers and sug- gesting ways to improve work processes.83 This extra effort appears to trans- late into higher organizational performance. Organizations perform better when they incorporate family-friendly policies and procedures, such as day- care and elder-care assistance, paid parental leave, and flexible scheduling.84

Some of these policies concern benefits and services, which we discuss in later chapters. But other family-friendly practices, such as flexible scheduling and alternative work locations, relate to job design.

Family-to-work conflict Problems that occur when meeting family obligations negatively influences work behavior and outcomes.

Work-to-family conflict Problems that occur when meeting work obligations negatively influences behavior and outcomes at home.

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How Can Work Be Designed to Improve Family Life? 147

FLEXIBLE WORK SCHEDULING Dual-career households are common in the United States. Parents in these households can often benefit from flexible work scheduling that allows them to coordinate the many demands on their time. Flexible scheduling practices allow people to coordinate their schedules with a partner and thereby reduce the conflict associated with being both a parent and an employee. The poten- tial benefits are so high that most large organizations provide some form of flexible scheduling.85 Two of the most common forms of flexible scheduling are flextime and the compressed workweek.

Flextime Flextime provides employees with the freedom to decide when they will arrive at and leave work. The organization creates a core time period when all employees must be present. For example, a bank may require all tellers to be at work between the busy hours of 11 a.m. and 3 p.m. Outside of this core band, employees can work when they wish. Some may choose to arrive at 7 a.m. so they can go home early. Others may choose to arrive at 11 a.m. and leave at 8 p.m. This flexibility allows employees to better balance work with family and other demands.

Flextime A scheduling policy that allows employees to determine the exact hours they will work around a specific band of time.

Building Strength Through HR

INTERNATIONAL BUSINESS MACHINES CORPORATION International Business Machines Corporation (IBM) is an information technology company with over 400,000 employees and annual revenue of $106 billion. Over the last 30 years, IBM has been a leader in helping employees balance work and family issues. Since the 1980s, IBM has offered services such as childcare referral, parental leave, and flexible working arrangements. One innova- tive program allows full-time employees to move to part-time status; salary and work expectations are reduced, and the company continues to pay full benefits. This practice provides flexibility for work- ers who may need to spend additional time dealing with family issues, such as caring for a new child or an ailing parent. Flexibility helps IBM retain key employees. In fact, over 70 percent of employees who use flexibility say they would quit working for IBM if the program were not available. IBM has also pioneered programs enabling employees to work where it is most convenient, including at cus- tomer sites and in their homes. Analyses suggest

that such flexible arrangements can result in sub- stantial improvements in productivity for indi- vidual workers and workgroups. Human resource management at IBM builds competitive strength by providing flexible job designs, which enable the company to retain workers who are seeking less tra- ditional types of employment.

Sources: www.ibm.com/ibm/us/; E. Jeffrey Hill, Andréa D. Jackson, and Giuseppe Marinengo, “Twenty Years of Work and Family at International Business Machines Corporation,” American Behavioral Scientist 49 (2006): 1165–1183.

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148 Chapter 4 Designing Productive and Satisfying Work

As you can probably imagine, some work design problems can arise with flextime. Employees who must work with others on projects might find it dif- ficult to coordinate their efforts with coworkers who work on different sched- ules. Supervision can also be a problem if employees are working when no supervisor is present. These work design issues tend to limit flextime to non- manufacturing positions that do not require close supervision or ongoing sequential processing.86 Flextime is thus most useful for organizations pursu- ing differentiation strategies.

Even with potential difficulties, many organizations that allow flextime appear to reap substantial benefits. Flextime is associated to some extent with higher productivity, but the primary benefit is increased satisfaction among workers. In turn, workers are absent less frequently and are more likely to remain with the organization.87 Flextime is thus most consistent with the moti- vational approach to job design.

Compressed Workweek A compressed workweek enables employees to have full-time positions but work fewer than five days a week. Typically, employees with compressed sched- ules work four 10-hour days. Allowing employees to have three-day weekends can provide them with additional time for family activities. A compressed workweek may make it easier to schedule events such as doctor and dentist appointments, for example. Commuting on four rather than five days can also reduce time and expenses spent traveling.

As with flextime, employees who work a compressed workweek report higher levels of job satisfaction; they also have slightly higher performance. Unlike flextime, the compressed workweek does not appear to decrease absenteeism.88 It thus appears that providing flexibility each day may be more beneficial for reducing absenteeism than providing a designated day off each week. However, compressed workweeks may be more feasible than flextime in organizations that use assembly lines. Employees can be scheduled to work at the same time each day, and setup costs can be minimized by longer shifts. Using compressed workweeks does not seem to compromise principles associ- ated with the mechanistic approach to job design, but the longer hours may create fatigue, which is at odds with the biological perspective. Because of its compatibility with assembly-line processes, the compressed workweek seems to be best suited for organizations with Loyal Soldier HR strategies.

ALTERNATIVE WORK LOCATIONS Many organizations allow employees to work at locations other than company facilities. The most common arrangement is for employees to work at home. This practice is often called telework, since employees stay connected with the office through voice and data services provided over telephone lines. Over 80 percent of companies report at least some employees doing telework, and 45 million people in the United States spend at least some of their time tele- working.89 As described in the “Technology in HR” feature, telework is funda- mental for many organizations.

Researchers evaluating telework have created a list of suggestions to improve its effectiveness. One critical suggestion is to use care in choosing the employees who are allowed to do telework. Most likely to succeed are employ- ees who are independent and conscientious, and employees should embark

Compressed workweek Working more than eight hours in a shift so that 40 hours of work are completed in fewer than five days.

Telework Completion of work through voice and data lines such as telephone and high-speed Internet connections.

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How Can Work Be Designed to Improve Family Life? 149

POTENTIAL PROBLEMS WITH WORKING FROM HOME Allowing employees to work from home can help employers retain good workers. One company that allows employees to work at alternative locations is AT&T. The company reports that 30 percent of management employees work full-time outside the office, while another 41 percent work away from the office an average of one or two days a week. The move to work away from the office has cut expenses for office space by $30 million. These and other savings have led AT&T to conclude that allowing employees to work at alternative locations saves the company over $180 million each year.

However, difficulties balancing the benefits and difficulties of working from home have caused some companies to curtail telework. For example, Yahoo! CEO Marissa Mayer announced in early 2013 that the company would end policies allowing workers the flexibility to work from home. The stated expla- nation was that collaboration could be increased by additional face-to-face interaction. Many insiders also claimed that the telework policy was frequently abused by employees who rarely used technol- ogy resources. Best Buy similarly announced that employees not working in a store need to specifically coordinate their schedules with supervisors.

Research has indeed identified a number of potential problems that can arise when employees work from home. One such problem is the sense of isolation that some workers experience. These workers feel that they miss out on important social interaction, and in some cases, they also feel that by working at home their contributions are less likely to be noticed and rewarded. Employees often feel less connected. Indeed, research suggests that work- ing from home more than two days per week can harm relationships with coworkers. Supervisors may perceive a decrease in their ability to influence and coach employees. In addition, the security of data stored on home computers presents a growing con- cern. Home computers may not be as secure from hackers or other potential thieves as office networks.

The effect on individual careers depends some- what on manager perceptions of reasons behind the work arrangement. Employee careers can be facili- tated when their managers perceive that employees

are using telework and other flexible scheduling techniques to increase productivity. In contrast, careers can be inhibited if managers perceive ben- efits to personal life as the primary reason behind employees taking advantage of such arrangements.

Sources: Information from Ann Bednarz, “Telework Thrives at AT&T,” Network World 22, no. 50 (2005): 29; G. Manochehri and T. Pinkerton, “Managing Telecommuters: Opportunities and Challenges,” American Business Review 21, no. 1 (2003): 9–16; Ravi S. Gajendran and David S. Harrison, “The Good, the Bad, and the Unknown about Telecommuting: Meta-analysis of Psychological Mediators of Individual Consequences,” Journal of Applied Psychology 92(2007): 1524–1541; Timothy D. Golden, John F. Veiga, and Zekj Simsek, “Telecommuting’s Differential Impact on Work–Family Conflict: Is There No Place Like Home?” Journal of Applied Psychology 91(2006): 1340–1350; Timothy D. Golden, John F. Veiga, and Richard N. Dino, “The Impact of Professional Isolation on Teleworker Job Performance and Turnover Intentions: Does Time Spent Teleworking, Interacting Face-to-Face, or Having Access to Communication-Enhancing Technology Matter?” Journal of Applied Psychology 93 (2008): 1412–1421; Jessica Guynn, “Yahoo CEO Marissa Mayer Causes Uproar With Telecommuting Ban,” Los Angeles Times, February 26, 2013; Anonymous, “First Yahoo, now Best Buy Bans Telework,” Network World, 30, no. 4 (2013): 8; Lisa M. Leslie, Collen Flaherty Manchester, Tae-Youn Park, and Si Ahn Mehng, “Flexible Work Practices: A Source of Career Premiums or Penalties?” Academy of Management Journal 55 (2012): 1407-1426.

Technology in HR

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ha el

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150 Chapter 4 Designing Productive and Satisfying Work

on telework only after they have physically worked in the office for some time so that they can develop relationships and prove themselves worthy of the opportunity to work at home. A second critical suggestion is that telework should be limited to jobs where it is most appropriate; these jobs often involve word processing, Web design, sales, and consulting. A common characteristic of these jobs is the existence of clear performance objectives and methods for measuring outputs.90

In the end, telework offers substantial autonomy and usually requires employees to work independently to complete meaningful tasks. Telework is thus consistent with the motivational approach to job design. Given the need for workers in most jobs to process substantial amounts of information, princi- ples from the perceptual approach can also be important for properly design- ing telework. In particular, companies need to focus less on work processes and more on establishing clear goals and performance measures. This means that telework is most likely to occur in organizations that are pursuing differ- entiation strategies.

? CONCEPT CHECK 1. How do flextime and compressed work weeks make organiza-

tions more family friendly? 2. What are advantages and disadvantages of allow-

ing employees to complete their work tasks at alternative locations?

IN THE MANAGER’S PERSPECTIVE AT THE BEGINNING OF THE CHAPTER, JANE FACED A NUMBER OF ISSUES CONCERNING WORK TASKS. SHE WONDERED HOW TO ORGANIZE WORK TASKS TO MAXIMIZE THE SUCCESS OF HER TEAM MEMBERS. FOLLOWING ARE ANSWERS TO THE “WHAT DO YOU THINK?” QUIZ THAT FOLLOWED THE CASE. WERE YOU ABLE TO COR- RECTLY IDENTIFY THE TRUE AND FALSE STATEMENTS? COULD YOU DO BETTER NOW? 1. Giving workers more autonomy is a sure way to

improve their performance. FALSE. Autonomy is most beneficial for organizations that expect creativity. High

autonomy can actually cause coordination problems in

organizations using efficient processes such as assembly

lines.

2. Having updated job descrip-

tions is important to keep a

company out of legal trou-

ble. TRUE. The courts have ruled that job descriptions

are evidence of good human

resource practices.

3. The primary objective of good work design is to cluster

tasks into jobs that maximize the efficiency of workers.

FALSE. The primary objective of work design depends on the particular approach being adopted. Efficiency is

the primary objective of the mechanistic approach. The

motivational approach aims for high satisfaction and

intrinsic desire to perform well.

A M A N A G E R ’ S P E R S P E C T I V E R E V I S I T E D

A m

o s

M o

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/G et

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ag es

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Summary 151

There are seven steps in the job analysis process. (1) Get organized by determining who will do the analysis and by gaining the support of top man- agement. (2) Choose jobs that are critical for suc- cess and have a sufficient number of employees. (3) Review what has already been written about the job. (4) Select job agents, such as incumbents, supervisors, or experts. (5) Collect job information through interviews, questionnaires, and observa- tions. (6) Create a job description that specifies the actions that workers do when performing the job. (7) Create job specifications that list the knowledge, skills, abilities, and other characteris- tics that workers need in order to successfully per- form the job.

In order to guide other human resource prac- tices, job analysis information needs to be trans- lated into a “shopping list” of the characteristics needed by people who perform the job. Some worker-oriented job analysis procedures, such as the Position Analysis Questionnaire, provide a list of characteristics that employees need to succeed at the job. In most cases, the information in a job description needs to be translated into a list of desired worker characteristics. Job agents can do

SUMMARY

Work design practices should align with overall HR strategy. Organizations that pursue either Loyal Soldier or Bargain Laborer HR strategies ben- efit from efficiency. Efficiency comes from design- ing work so that employees have relatively little autonomy, meaning that they have little freedom to alter the way tasks are carried out. Efficiency is also increased with sequential processing, which occurs when people use assembly lines to complete work tasks. Competitive strategy that focuses on cost reduction thus aligns with work design prac- tices that limit autonomy and create sequential processing.

Organizations that pursue either Committed Expert or Free Agent HR strategies benefit from innovation and creativity. Innovation comes from designing work so that employees have substan- tial autonomy, meaning that they have freedom to make decisions and ongoing adjustments to the work process. Reciprocal processing, which occurs when employees work closely together and share tasks, also leads to higher creativity. Competitive strategy that focuses on differentiation thus aligns with work design practices that provide high auton- omy and create reciprocal processing.

How is work design strategic?

LEARNING OBJECTIVE 1

4. People who continuously perform repetitive tasks often

find their work to be unsatisfying. TRUE. People find work to be satisfying when they experience high auton-

omy, task meaningfulness, and skill variety.

5. Employees who have flexibility in deciding when they

will work have higher performance. TRUE. Employees with flextime have higher productivity and are less likely

to leave the organization.

Almost all managers are faced with issues concerning

effective work design. Jane was wise to assess the effects

of autonomy. Following the principles outlined in this

chapter could help Jane better coordinate the work of her

team members. Updating the job description would be a

good place for Jane to start. The effort will be worth-

while, for good job descriptions can help improve many

other areas of human resource management. The concepts

discussed in this chapter can also help Jane balance the

need for efficient work processes with the need to con-

tinually motivate her team members.

How are employee jobs determined?

LEARNING OBJECTIVE 2

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152 Chapter 4 Designing Productive and Satisfying Work

this by examining lists of duties in the job descrip- tion and determining the knowledge, skills, abili- ties, and other characteristics that workers need to perform the required tasks. Competency mod- eling, an alternative to traditional job analysis, seeks to determine a list of desirable worker char- acteristics linked to the strategic objectives of the organization.

How do we determine the tasks associated with each job?

LEARNING OBJECTIVE 3

In the mechanistic approach to job design, prin- ciples of scientific management are used to deter- mine the most efficient methods for completing work tasks. Each employee is expected to learn and follow procedures that result in producing goods and services as quickly as possible. The motivational approach is concerned with design- ing jobs to increase workers’ intrinsic motivation. Intrinsic motivation arises when employees feel that their work provides meaningfulness, respon- sibility, and knowledge of results. When the per- ceptual approach is used, jobs are designed so that workers can easily process important infor- mation. Equipment is developed to simplify work, and accident prevention is a focus. The biological approach involves designing jobs to prevent physi- cal injury. Equipment is used to reduce fatigue and need for excessive movement. Workers are also taught principles such as maintaining good physical posture.

There are some inherent tradeoffs associated with the various approaches to work design. In many cases, striving for efficiency by adopting the mechanistic approach comes at the expense of the principles of the motivational approach. The job design approach should thus be aligned with the overall HR strategy. The mechanistic approach is most appropriate for cost strategies, whereas the motivational approach is most appropriate for differentiation strategies. Yet, benefits can be obtained from simultaneously incor- porating principles from all approaches.

How can work be designed to improve family life?

LEARNING OBJECTIVE 4

Workers experience work-to-family conflict when the stress they feel at work is carried into their fam- ily environment. They experience family-to-work conflict when the stress they encounter at home affects their work. One way to reduce conflict between work and family roles is through flexible scheduling, including flextime and compressed workweeks. Another way to reduce work and family conflict is to allow workers to perform their tasks in alternative locations, such as at home or on the premises of clients. This practice is often referred to as telework because employees communicate with others via telephone lines. Employees who can take advantage of flexible work scheduling and working at alternative locations are more satisfied with their jobs, more productive, and less likely to leave the company.

Autonomy 124 Competencies 138 Competency modeling 138 Compressed workweek 148 Critical-incidents technique 134 Differentiation 122 Ergonomics 144 Family-to-work conflict 146 Flextime 147 Integration 122 Interdependence 126

Job 128 Job analysis 128 Job analysis interview 131 Job analysis observation 132 Job analysis questionnaire 131 Job characteristics model 142 Job description 132 Job design 140 Job redesign 140 Job specifications 132 Occupational Information Network 131

KEY TERMS

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Example Case 153

1. Why is high autonomy beneficial for organiza- tions pursuing differentiation strategies?

2. What are the key differences between sequential and reciprocal processes of interdependence?

3. Why would government officials expend sig- nificant resources creating O*Net? What are the benefits of O*Net?

4. Have you ever seen a job description for a work position you have held? If so, do you think the job description was accurate?

5. Are job descriptions more beneficial for some types of organizations than others? Could having specific job descriptions harm an organization?

6. Would you rather work in an organization using mechanistic job design principles or an organization using motivational principles?

7. Do you think any of the four job design ap- proaches (mechanistic, motivational, percep- tual, biological) will become more important in the future? Why? Do you think any of the approaches will become less important as orga- nizations change?

8. Would you like to work a compressed work- week? Why or why not?

9. Do you think you would be successful in a job that allowed you to do telework? What chal- lenges do you think you would face?

10. Identify some specific ways strategic work design can guide other human resource practices, such as selecting employees, deter- mining training needs, and making pay decisions.

DISCUSSION QUESTIONS

EXAMPLE CASE Coney Island Hospital

Often, the success of hospital-based nursing depends on its adaptability. Nurses can ensure that success when they think outside of traditional nurs- ing roles and focus on effective ways to deliver care. You’ll most likely find our assignment familiar: reduce costs, improve quality and access to care, and improve satisfaction for patients and caregivers. This is no small feat, and it requires caregivers to innovate new ways to care for patients.

To start the work redesign, they created a steering committee to collect and analyze data and create the new design. The committee included nurses from administration, education, middle management, and direct care providers, as well as nurses with differing credentials (RN and LPN) who work all shifts.

The committee agreed that staff satisfaction, leading to increased auton- omy and control, would be one of its priorities while developing the new model. The committee had a threefold objective:

1. Develop a nursing model that will more efficiently utilize RNs, LPNs, and unlicensed assistive personnel within quality standards.

2. Give staff attractive and satisfying roles. 3. Stay within the current budget.

Position Analysis Questionnaire (PAQ) 134 Reciprocal processing 126 Scientific management 141 Sequential processing 126

Task analysis inventory 133 Telework 148 Work design 122 Work-to-family conflict 146

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154 Chapter 4 Designing Productive and Satisfying Work

The committee collected data through surveys, interviews, onsite observa- tions, and work sampling. Topics for data collection included:

The efficiency of nursing care delivery (focusing on nursing and non- nursing tasks) The impact of managed care on the nurse’s role Issues that occupy the nurse’s time, affect staffing, and create chaos Patient management throughout the hospital stay, including ways to decrease length of stay Nurse–physician communication Working relationships across departments

Each committee member took part in gathering the data and presenting it to the committee. Members defined and redefined roles based on the actual and described job performances of RNs, LPNs, and unlicensed assistive per- sonnel. They also identified problem areas in the delivery system.

Next, they needed to write a work redesign proposal. The committee mem- bers wrote wish lists for the nursing model redesign with input from their peers and presented them to the committee.

With the newly designed jobs, certain registered nurses (admission nurses) would work to help transition patients to the units, maintaining the contin- uum of care. The nurse’s primary responsibility would be to minimize admis- sion delay at the point of entry and to make this experience less distressing to patients. Today, the admission RN interviews the patient, develops a care plan, explains procedures, and tries to alleviate the patient’s anxiety.

Nurses work at the other end of the continuum as well. Discharge RNs work with other disciplines to plan expedient discharge. Their primary objec- tives are to ensure that the patient leaves the hospital without any delays in the discharge process and that he or she experiences favorable outcomes.

Discharge RNs also emphasize patient education and follow-up appoint- ments. They call the patient the day after discharge to ensure that he or she

Understood instructions Could obtain medications and is taking them properly Gets an earlier follow-up appointment if necessary Was satisfied with hospitalization

Positive results of this new process include the following:

Decreased time patients spend in the emergency room, which enhances patient satisfaction Increased compliance with guidelines for effective healthcare Improvement in patient ratings of nurse performance, particularly in the area of time spent doing paperwork

QUESTIONS 1. What are some specific ways the new work design improves the satisfaction

of patients? 2. How do you think the new procedures increase autonomy? 3. What lessons can be learned from this case about the way to implement

effective work redesign?

Source: Terry Mancher, “A Better Model by Design . . . and It Works,” Nursing Management 32, no. 5 (2001): 45–47. Reprinted with permission of Lippincott, Williams & Wilkins.

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Discussion Case 155

DISCUSSION CASE Josh’s Toy Manufacturing

Josh’s Toy Manufacturing is a manufacturer of small toys that are included in kids’ meals at fast-food restaurants. Josh’s uses plastic injection technology to produce toys efficiently. Price is the main criterion restaurant chains use to determine whether they will buy toys from Josh’s or some other manufacturer.

One assembly line for toy manufacturing at Josh’s has four machines. Each machine requires an operator. Operator skill is important, since an effective operator can often manufacture toys twice as fast as an ineffective operator. The four operators on the assembly line at Josh’s were hired a year ago when the new line began operation. Machine 1 is very loud, making its operation the least desirable job. Machines 2 and 3 are very similar and require opera- tors to constantly push a variety of levers. Working on Machine 4 is the easiest job, as the operator does little more than monitor progress and push buttons. The four operators currently rotate every hour so that each operator spends two hours on each machine during an eight-hour workday.

Machine 1 Machine 2 Machine 3 Machine 4 Units Made

Hour 1 Mary Bonnie Tom Fred 335

Hour 2 Fred Mary Bonnie Tom 200

Hour 3 Tom Fred Mary Bonnie 400

Hour 4 Bonnie Tom Fred Mary 370

Supervisors have noted that production output varies depending on which operator is working on which machine. The chart shows this variance.

Analysis suggests that lower production during Hour 2 mostly results from Fred’s having trouble working with Machine 1. The noise bothers him more than the others, and he often takes short breaks to walk away from the machine and regain his composure. The relative high productivity during Hour 3 can be traced to having Bonnie work on Machine 4. Bonnie finds it especially dif- ficult to work on Machines 2 and 3.

Given their current production process, the four operators produce an average of 2,610 units each day. If they worked all day in the Hour 3 configu- ration they could average 3,200 units each day, which would be a production increase of over 22 percent.

QUESTIONS 1. Do you recommend that the four machine operators continue to switch

machines every hour? Would you recommend that the operators be per- manently assigned to the machines they currently operate during Hour 3? What do you think would be the consequences of any changes you might recommend?

2. How can the principles of the mechanistic approach to job design inform a decision about how to assign workers to machines? What about the prin- ciples of the motivational approach? the perceptual approach? the biologi- cal approach?

3. How could job analysis be used to improve this assembly line?

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156 Chapter 4 Designing Productive and Satisfying Work

Find out the job titles of three friends or acquain- tances. Use the O*Net database(http://online. onetcenter.org) to obtain a job description and specifications for each position. Have each friend or acquaintance read the information you obtained for his or her job position. After the friend or acquaintance has looked at the material you obtained, discuss the following questions.

1. Which of the things listed in the job description does the person not do as part of his or her job?

2. What important tasks or duties have been left out of the job description?

3. Which of the tasks or duties take up the most time? Which tasks are most important for achieving high performance? Are the tasks that are performed most frequently the same as those that are most important?

4. Given the particular job, how often would this list of tasks and duties need to be revised to make sure that it is up to date?

5. Which of the knowledge, skills, and abilities listed in the description does the person con- sider most critical for performing this job well?

6. What advice would the person give to a col- lege student who might want to work in the job someday?

Once you have discussed the job descriptions and specifications with three dif ferent people, answer the following questions.

1. How are the jobs similar? How are they different?

2. Are there any tasks that seem to be important across all of the jobs?

3. Are there any areas of knowledge, skills, or abili- ties that seem to be important across the differ- ent jobs?

4. Are the tasks that are most frequently done in a job generally the same as the tasks that are most important for success?

EXPERIENTIAL EXERCISE

Assessing the Accuracy of Job Descriptions

Access the companion website to test your knowledge by completing a Mega Manufacturing interactive role-playing exercise. In this exercise, you work with another client, Graphics Design, Inc. (GDI), who produces display boards and signs. The company is in the process of creating several new positions because of growth and a need for more efficiency. You rec- ommend that some form of job analysis be used to design the features of the new jobs. One of the company’s managers tells you that job analysis isn’t necessary, since the new jobs will be similar to existing jobs. But in view of the company’s need for increased efficiency and its preference for employees with high levels of loyalty, you are not sure that the old job descriptions can or should be used. When the CEO asks for your input, how will you respond?

INTERACTIVE EXPERIENTIAL EXERCISE

Job Design: Creating New Positions at Graphics Design, Inc. http://www.wiley.com/college/sc/stewart

ENDNOTES 1. Paul R. Lawrence and Jay W. Lorsch, Organization

and Environment (Boston: Harvard Business School Press, 1986).

2. Michael A. Campion, “Interdisciplinary Approaches to Job Design: A Constructive Replication with Extensions,” Journal of Applied Psychology 73 (1988): 467–481.

3. www.gore.com. 4. Ibid. 5. Frank Shipper and Charles C. Manz, “Self-

Management Without Formal Teams: The Organization as a Team” pp. 131-150 in Charles C. Manz and Henry P. Sims, Jr., Business Without Bosses: How Self-Managing Teams Are Building High Performing Companies (New York: John Wiley, 1993).

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Endnotes 157

6. http://www.greatplacetowork.com/best-companies/ browse-international-lists; http://money.cnn.com/ magazines/fortune/best-companies/.

7. Claus Langfred and Neta A. Moye, “Effects of Task Autonomy on Performance: An Extended Model Considering Motivational, Informational, and Structural Mechanisms,” Journal of Applied Psychology 89 (2004): 934–945.

8. Edwin A. Locke and D. M. Schweiger, “Participation in Decision Making: An Information Exchange Perspective,” Research in Personnel and Human Resource Management 15 (1998): 293–331.

9. J. Richard Hackman and Greg R. Oldham, “Motivation Through the Design of Work: Test of a Theory,” Organizational Behavior and Human Performance 16 (1976): 250–279.

10. John B. Bingham, Wendy R. Boswell, and John W. Boudreau, “Job Demands and Job Search among High- Level Managers in the United States and Europe,” Group & Organization Management 30 (2005): 653–681.

11. Riki Takeuchi, Jeffrey P. Shay, and Li Jiatao, “When Does Decision Autonomy Increase Expatriate Managers’ Adjustment? An Empirical Test,” Academy of Management Journal 51(2008): 45–60.

12. Brian D. Janz, Jason A. Colquitt, and Raymond A. Noe, “Knowledge Worker Team Effectiveness: The Role of Autonomy, Interdependence, Team Development, and Contextual Support Variables,” Personnel Psychology 50 (1997): 877–905.

13. Greg L. Stewart and Murray R. Barrick, “Team Structure and Performance: Assessing the Mediating Role of Intrateam Process and the Moderating Role of Task Type,” Academy of Management Journal 43 (2000): 135–148; Brett M. Wright and John L. Cordery, “Production Uncertainty as a Contextual Moderator of Employee Reactions to Job Design,” Journal of Applied Psychology 84 (1999): 456–463.

14. Jone L. Pearce and Hal B. Gregersen, “Task Interdependence and Extrarole Behavior: A Test of the Mediating Effects of Felt Responsibility,” Journal of Applied Psychology 76 (1991): 838–844.

15. Gerben S. Van Der Vegt, Ben J. M. Emans, and Evert Van de Vliert, “Patterns of Interdependence in Work Teams: A Two-Level Investigation of the Relations with Job and Team Satisfaction,” Personnel Psychology 54 (2001): 51–70.

16. Stewart and Barrick, “Team Structure and Performance”; Richard Saavedra, Christopher P. Earley, and Linn Van Dyne, “Complex Interdependence in Task Performing Groups,” Journal of Applied Psychology 78 (1993): 61–72; Ruth Wageman, “Interdependence and Group Effectiveness,” Administrative Science Quarterly 40 (1995): 145–180.

17. Ibid. 18. Robert D. Gatewood and Hubert S. Field, Human

Resource Selection, 5th ed. (Cincinnati OH: South- Western, 2001).

19. Paul J. Taylor, Wen-Dong Li, Kan Shi, and Walter C. Borman, “The Transportability of Job Information across Countries,” Personnel Psychology, 61(2008): 69–111.

20. Thorvald Haerem and Devaki Rau, “The Influence of Expertise and Objective Task Complexity on Perceived Complexity and Performance,” Journal of Applied Psychology 92(2007): 1320–1331.

21. Richard D. Arvey, Emily M. Passino, and John W. Lounsbury, “Job Analysis Results as Influenced by Sex of Incumbent and Sex of Analyst,” Journal of Applied Psychology 62 (1977): 411–416.

22. Neal Schmitt and Scott Cohen, “Internal Analyses of Task Ratings by Job Incumbents, “Journal of Applied Psychology 74 (1989): 96–104.

23. Wayman C. Mullins and Wilson W. Kimbrough, “Group Composition as a Determinant of Job Analysis Outcomes,” Journal of Applied Psychology 73 (1988): 657–664.

24. Lee Friedman, “Degree of Redundancy between Time, Importance, and Frequency of Task Ratings,” Journal of Applied Psychology 75 (1990): 748–752; Lee Friedman, “Degree of Redundancy between Time, Importance, and Frequency of Task Ratings: Correction,” Journal of Applied Psychology 76 (1991): 366.

25. Juan I. Sanchez and Scott L. Fraser, “On the Choice of Scales for Task Analysis,” Journal of Applied Psychology 77 (1992): 545–553.

26. Mark A. Wilson, Robert J. Harvey, and Barry A. Macy, “Repeating Items to Estimate the Test–Retest Reliability of Task Inventory Ratings,” Journal of Applied Psychology 75 (1990): 158–163.

27. Michael K. Lindell, Catherine S. Clause, Christina J. Brandt, and Ronald S. Landis, “Relationship Between Organizational Context and Job Analysis Task Ratings,” Journal of Applied Psychology 83 (1998): 769–776; Wendy L. Richman and Miguel A. Quinones, “Task Frequency Rating Accuracy: The Effect of Task Engagement and Experience,” Journal of Applied Psychology 81 (1996): 512–524.

28. John C. Flanagan, “The Critical Incident Technique,” Psychological Bulletin 5 (1954): 327–358.

29. Inge E. Larsson, Monika J.M. Sahlsten, Kerstin Segesten, and Kaety A.E. Plos, “Patients’ Perceptions of Nurses Behaviour That Influence Patient Participation in Nursing Care: A Critical Incident Study,” Nursing Research and Practice, published online 2011 April 27: Article ID 534060.

30. www.paq2.com/. 31. Griggs v. Duke Co., 401 U.S. 424, 436 (1971); Albemarle

Paper Co. v. Moody, 422 U.S. 405 (1975). 32. Duane E. Thompson and Toni A. Thompson, “Court

Standards for Job Analysis in Test Validation,” Personnel Psychology 35 (1982): 865–874.

33. William Bridges, Job Shift: How to Prosper in a Workplace without Jobs (Reading, MA: Addison-Wesley, 1994).

34. Greg L. Stewart and Kenneth P. Carson, “Moving Beyond the Mechanistic Model: An Alternative Approach to Staffing for Contemporary Organizations,” Human Resource Management Review 7 (1997): 157–184.

35. Benjamin Schneider and A. Konz, “Strategic Job Analysis,” Human Resource Management 28(1989): 51–63.

36. Jeffery S. Shippmann, Strategic Job Modeling: Working at the Core of Integrated Human Resources (Mahwah, NJ: Lawrence Erlbaum Associates, 1999).

37. Ibid. 38. Jeffrey S. Shippmann, Ronald A. Ash, Mariangela

Battista, Linda Carr, Lorraine D. Eyde, Beryl Hesketh, Jerry Kehoe, Kenneth Pearlman, Erich P. Prien, and Juan I. Sanchez, “The Practice of Competency Modeling,” Personnel Psychology 53 (2000): 703–740.

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158 Chapter 4 Designing Productive and Satisfying Work

39. Filip Lievens, Juan I. Sanchez, and Wilfried De Corte, “Easing Inferential Leap in Competency Modeling: The Effects of Task-Related Information and Subject Matter Expertise,” Personnel Psychology 57 (2004): 881–905.

40. Michael A. Campion, Alexis A Fink, Brian J. Ruggebert, Linda Carr, Geneva M. Phillips, and Ronald B. Odman, “Doing Competencies Well: Best Practices in Competency Modeling,” Personnel Psychology 64 (2011): 225–262.

41. Stephen E. Humphrey, Jennifer D. Nahrgang, and Frederick P. Morgeson, “Integrating Motivational, Social, and Contextual Work Design Features: A Meta- Analytic Summary and Theoretical Extension of the Work Design Literature,” Journal of Applied Psychology 92 (2007): 1332–1356.

42. Frank W. Bond, Paul E. Flaxman, and David Bunce, “The Influence of Psychological Flexibility on Work Redesign: Mediated Moderation of a Work Reorganization Intervention,” Journal of Applied Psychology 93(2008): 645–654.

43. Frederick P. Morgeson, Michael D. Johnson, Michael A. Campion, Gina J. Medsker, and Troy V. Mumford, “Understanding Reactions to Job Redesign: A Quasi- Experimental Investigation of the Moderating Effects of Organizational Context on Perceptions of Performance Behavior,” Personnel Psychology 59 (2009): 333–363.

44. Russell Cropanzano, Deborah E. Rupp, and Zinta S. Byrne, “The Relationship of Emotional Exhaustion to Work Attitudes, Job Performance, and Organizational Citizenship Behaviors,” Journal of Applied Psychology 88 (2003): 160–169.

45. Einer M. De Croon, Judith K. Sluiter, Roland W. B. Blonk, Jake P. J. Broersen, and Monique H. W. FringsDresen, “Stressful Work, Psychological Job Strain, and Turnover: A 2-year Prospective Cohort Study of Truck Drivers,” Journal of Applied Psychology 89 (2004): 442–454.

46. Simona Gilboa, Arie Shirom, Yitzhak Fried, and Cary Cooper, “A Meta-Analysis of Work Demand Stressors and Job Performance: Examining Main and Moderating Effects,” Personnel Psychology 61 (2008): 227–271.

47. Russell Cropanzano, Deborah E. Rupp, and Zinta S. Byrne, “The Relationship of Emotional Exhaustion to Work Attitudes, Job Performance, and Organizational Citizenship Behaviors,” Journal of Applied Psychology 88 (2003): 160–169; Jonathan R.B. Halbesleben and Wm. Matthew Bowler, “Emotional Exhaustion and Job Performance: The Mediating Role of Motivation,” Journal of Applied Psychology 92 (2007): 93–106.

48. Michael R. Frone, “Are Work Stressors Related to Employee Substance Abuse? The Importance of Temporal Context Assessments of Alcohol and Illicit Drug Use,” Journal of Applied Psychology 93 (2008): 199–206.

49. Peter Villanova, H. John Bernardin, Dennis L. Johnson, and Sue A. Danmus, “The Validity of a Measure of Job Compatibility in the Prediction of Job Performance and Turnover of Motion Picture Theater Personnel,” Personnel Psychology 47 (1994): 73–90; Christina Maslach and Michael P. Leiter, “Early Predictors of Job Burnout and Engagement,” Journal of Applied Psychology 93 (2008): 498–512.

50. Jonathon R. B. Halbesleben, “Sources of Social Support and Burnout: A Meta-Analytic Test of the Conservation of Resources Model,” Journal of Applied Psychology 91(2006): 1134–1145.

51. Jason D. Shaw and Nina Gupta, “Job Complexity, Performance, and Well-Being: When Does Supplies– Values Fit Matter?” Personnel Psychology (57): 847–880.

52. Charlotte Fritz and Sabine Sonnentag, “Recovery, Well-Being, and Performance-Related Outcomes: The Role of Workload and Vacation Experiences,” Journal of Applied Psychology 91(2006): 936–945.

53. Frederick W. Taylor, The Principles of Scientific Management (New York: Harper & Brothers, 1911).

54. Campion, “Interdisciplinary Approaches to Job Design.” 55. Jeffrey R. Edwards, Judith A. Scully, and Mary D. Brtek,

“The Nature and Outcomes of Work: A Replication and Extension of Interdisciplinary Work-Design Research,” Journal of Applied Psychology 85 (2000): 860–868.

56. Campion, “Interdisciplinary Approaches to Job Design,” Michael A. Campion and Paul W. Thayer, “Development and Field Evaluation of an Interdisciplinary Measure of Job Design,” Journal of Applied Psychology 70 (1985): 29–43.

57. J. Richard Hackman and Greg R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980).

58. Richard M. Ryan and Edward L. Deci, “Self- Determination Theory and the Facilitation of Intrinsic Motivation, Social Development, and Well-Being,” American Psychologist 55 (2000): 68–78; Edward L. Deci, Richard Koestner, and Richard M. Ryan, “A Meta-Analytic Review of Experiments Examining the Effects of Extrinsic Rewards and Intrinsic Motivation,” Psychological Bulletin 125 (1999): 627–668.

59. Edwards, Scully, and Brtek, “The Nature and Outcomes of Work.”

60. Christine A. Sprigg, Christopher B. Stride, Toby D. Wall, David J. Holman, Phoebe R. Smith, “Work Characteristics, Musculoskeletal Disorders, and the Mediating Role of Psychological Strain: A Study of Call Center Employees,” Journal of Applied Psychology 92 (2007): 1456–1466.

61. Rodger W. Griffeth, “Moderation of the Effects of Job Enrichment by Participation: A Longitudinal Field Experiment,” Organizational Behavior and Human Decision Processes 35 (1985): 73–93; Ricky W. Griffin, “Objective and Social Sources of Information in Task Redesign: A Field Experiment,” Administrative Science Quarterly 28 (1983): 184–200.

62. Richard S. Billings, Richard J. Klimoski, and James A. Breaugh, “The Impact of a Change in Technology on Job Characteristics: A Quasi-Experiment,” Administrative Science Quarterly 22 (1977): 318–339; Greg R. Oldham and Daniel J. Brass, “Employee Reaction to an Open-Office Plan: A Naturally Occurring Quasi-Experiment, Administrative Science Quarterly 24 (1979): 267–284.

63. Michael A. Campion and C. L. McClelland, “Follow-up and Extension of the Interdisciplinary Costs and Benefits of Enlarged Jobs,” Journal of Applied Psychology 78 (1993): 339–351.

64. Frederick P. Morgeson and Stephen E. Humphrey, “The Work Design Questionnaire (WDQ): Developing and Validating a Comprehensive Measure for Assessing Job Design and the Nature of Work,” Journal of Applied Psychology 91(2006): 1321–1139.

65. Frederick P. Morgeson and Michael A. Campion, “Minimizing Tradeoffs When Redesigning Work:

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Endnotes 159

Evidence from a Longitudinal Quasi-experiment,” Personnel Psychology 55 (2002): 589–612.

66. Eric Trist, “The Sociotechnical Perspective,” pp. 19–76 in Perspectives on Organizational Design and Behavior, edited by A. H. Van de Ven and W. F. Joyce (New York: Wiley, 1981); Morgeson and Campion, “Minimizing Tradeoffs When Redesigning Work.”

67. Michael R. Frone, Marcia Russell, and M. Lynne Cooper, “Antecedents and Outcomes of Work- Family Conflict: Testing a Model of the Work–Family Interface,” Journal of Applied Psychology 77 (1992): 65–78.

68. Michael T. Ford, Beth A. Heinen, and Krista L. Langkamer, “Work and Family Satisfaction and Conflict: A Meta-Analysis of Cross-Domain Relations,” Journal of Applied Psychology 92 (2007): 57–80.

69. Remus Ilies, Kelly Schwind Wilson, and David T. Wagner, “The Spillover of Daily Satisfaction onto Employees’ Family Lives: The Facilitating Role of Work–Family Integration,” Academy of Management Journal 52(2009): 87–102; Zhaoli Song, Maw-Der Foo, and Marilyn A. Uy, “Mood Spillover and Crossover among Dual-Earner Couples: A Cell Phone Event Sampling Study,” Journal of Applied Psychology 93(2008): 443–452; Remus Ilies, Kelly M. Schwind, David T. Wagner, Michael D. Johnson, Scott D. DeRue, and Daniel R. Ilgen, “When Can Employees Have a Family Life? The Effects of Daily Workload and Affect on Work–Family Conflict and Social Behaviors at Home,” Journal of Applied Psychology 92 (2007); 1368–1379.

70.Thomas W.H. Ng and Daniel C. Feldman, “The Effects of Organizational and Community Embeddedness on Work-to-Family and Family-to-Work Conflict,” Journal of Applied Psychology 97 (2012): 1233–1251.

71. Helen Lingard and Valerie Francis, “‘Negative Interference’ between Australian Construction Professionals’ Work and Family Roles: Evidence of an Asymmetrical Relationship,” Engineering, Construction and Architectural Management 14 (2007): 79.

72. Paul E. Spector, Tammy D. Allen, Steven A. Y. Poelmans, Laurent M. LaPierre, Cary L. Cooper, Michael O’Driscoll, Juan I. Sanchez, Nureya Abarca, Matilda Alexandrova, Barbara Beham, Paula Brough, Pablo Ferreiro, Guillermo Fraile, Chang-Qin Lu, Luo Lu, Ivonne Moreno-Valezquez, Milan Pagon, Horea Pitariu, Volodymyr Salamatov, Satoru Shima, Alejandra Wuarez Simoni, Oi Ling Siu, and Maria Widerxzal-Bazyl, “Cross- National Differences in Relationships of Work Demands, Job Satisfaction, and Turnover Intentions with Work- Family Conflict,” Personnel Psychology 60(2007): 805–835.

73. Marcus M. Butts, Wendy J. Casper, and Tae Seok Yang, “How Important are Work–Family Support Policies? A Meta-Analytic Investigation of Their Effects on Employee Outcomes,” Journal of Applied Psychology 98 (2013): 1–25.

74. Leslie B. Hammer, Ellen Ernst Kossek, W. Kent Anger, Todd Bodner, and Kristi L. Zimmerman, “Clarifying Work–Family Intervention Processes: The Roles of Work–Family Conflict and Family-Supportive Supervisor Behaviors,” Journal of Applied Psychology 96 (2011): 134-150; Ellen Ernst Kossek, Shaun Pilcher, Todd Bodner, and Leslie B. Hammer, “Workplace Social Support and Work-Family Conflict: A Meta-

Analysis Clarifying the Influence of General and Work–Family-Specific Supervisor and Organizational Support,” Personnel Psychology 64 (2011): 289–313.

75. Barbara A. Gutek, Sabrina Searl, and Lilian Klepa, “Rational versus Gender Role Explanations for Work– Family Conflict, Journal of Applied Psychology 76 (1991): 560–568; Virginia Smith Major, Katherine J. Klein, and Mark G. Ehrhart, “Work Time, Work Interference with Family and Psychological Distress,” Journal of Applied Psychology 87 (2002): 427–436.

76. Monique Valcour, “Work-Based Resources as Moderators of the Relationship between Work Hours and Satisfaction with Work–Family Balance,” Journal of Applied Psychology 92(2007): 1512–1523.

77. Frone et al., “Antecedents and Outcomes of Work– Family Conflict.”

78. Stephen J. Goff, Michael K. Mount, and Rosemary L. Jamison, “Employer Supported Child Care, Work/ Family Conflict, and Absenteeism: A Field Study,” Personnel Psychology 43 (1990): 793–809; Richard G. Netemeyer, James S. Boles, and Robert McMurrian, “Development and Validation of Work–Family Conflict and Family-Work Conflict Scales,” Journal of Applied Psychology 81(1996): 400–410.

79. Netemyer et al., “Development and Validation”; M. R. Frone, “Work-Family Conflict and Employee Psychiatric Disorders: The National Comorbidity Survey, Journal of Applied Psychology 85 (2000): 888–895.

80. Luis L. Martins, Kimberly A. Eddleston, and John F. Veiga, “Moderators of the Relationship Between Work– Family Conflict and Career Satisfaction,” Academy of Management Journal 45 (2002): 399–409.

81. Phyllis Tharenou, “Disruptive Decisions to Leave Home: Gender and Family Differences in Expatriation Choices,” Organizational Behavior and Human Decision Processes 105 (2008): 183–200.

82. Timothy A. Judge and Jason A. Colquitt, “Organizational Justice and Stress: The Mediating Role of Work–Family Conflict,” Journal of Applied Psychology 89 (2004): 395–404.

83. Susan J. Lambert, “Added Benefits: The Link Between Work–Life Benefits and Organizational Citizenship Behavior,” Academy of Management Journal 43 (2000): 801–815.

84. Jill E. Perry-Smith and Terry C. Blum, “Work–Family Resource Bundles and Perceived Organizational Performance,” Academy of Management Journal 43 (2000): 1107–1117.

85. Anonymous, “Flexibility Has Become a Top Priority for Today’s Workers,” HR Focus 81, no. 7 (2004): 9.

86. Boris B. Baltes, Thomas E. Briggs, Joseph W. Huff, Julie A. Wright, and George A. Neuman, “Flexible and Compressed Workweek Schedules: A Meta-Analysis of Their Effects on Work-Related Criteria,” Journal of Applied Psychology 84 (1999): 496–513.

87. Ibid. 88. Ibid. 89. William “Rick” Crandall, “An Update on

Telecommuting: Review and Prospects for Emerging Issues,” S.A.M. Advanced Management Journal 70, no. 3 (2005): 30–37; Anonymous, “Get the Most from Teleworkers,” HR Focus 81, no. 12 (2004): 9.

90. Crandall, “An Update on Telecommuting.”

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C h a p t e r 5

Recruiting Talented Employees

A M A N A G E R ’ S P E R S P E C T I V E

SANJIV LEAVES HIS SUPERVISOR’S OFFICE FEEL- ING GOOD ABOUT HIS RECENT ACCOMPLISHMENTS. WHEN HE GRADUATED FROM COLLEGE TWO YEARS AGO, HE ACCEPTED A JOB IN THE MARKETING DEPARTMENT AT A CONSUMER PRODUCTS COM- PANY. OVER THE PAST YEAR, HE HAS SPENT MOST OF HIS TIME WORKING ON A TEAM, WHICH JUST COMPLETED A REPORT ON AREAS OF POTEN- TIAL GROWTH FOR NEW PRODUCTS. HE IS SORRY THAT THE PROJECT IS ENDING BECAUSE HE WILL NO LONGER BE WORKING SO CLOSELY WITH HIS FRIENDS ON THE TEAM, BUT HE IS EXCITED TO MOVE ON TO SOMETHING NEW. THE SOMETHING NEW IS QUITE A SURPRISE. SANJIV HAS JUST BEEN ASKED TO BE A MEMBER OF A TEAM THAT WILL RECOMMEND BETTER WAYS TO RECRUIT NEW EMPLOYEES.

Sanjiv starts to think about why he chose this company two years ago. A friend introduced him to the opportunity and connected him with managers who were making hiring decisions. Being referred by his friend helped assure Sanjiv that it would be

a good place to work. His friend even told him some of the undesir- able things about the company. This actually reassured Sanjiv because he knew that he was getting an accurate picture of how things would be. Reflecting back, Sanjiv is sure that having a friend at the company positively influenced his choice to accept the position.

As he thinks back, Sanjiv also remembers a conversation he had with his college roommates. He was surprised to learn that they had very dif- ferent images of the ideal place to work. One of his roommates was most interested in working for a company that allowed a great deal of flexibility and freedom. Another roommate cared mostly about promotions and money. Sanjiv realizes that these differences are also important from the organiza- tional side. Which of his roommates would be most successful working with him now?

Sanjiv’s supervisor made it clear that a major objective of the committee is to identify specific

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THE BIG PICTURE Effective Organizations Gain the Interest and Commitment of Job Applicants Who Will Become Excellent Employees

WHAT DO YOU THINK? Imagine that you are listening to a conversation between Sanjiv and Alicia, who is a full-time recruiter. Alicia makes the following statements. Which of the statements do you think are true?

Effective organizations do all they can to get as many people as possible to apply for jobs.

Organizations should be careful to com- municate only positive things to job applicants.

A company should develop strong rela- tionships with professors at universities where it recruits.

One way of attracting more job applicants is to pay high wages.

Job applicants referred by current employ- ees seldom work out because employees often refer friends who don’t have good work skills.

?

T OR F

T OR F

T OR F

T OR F

T OR F

sources for recruiting. Should Sanjiv suggest that the company continue to recruit mostly through university placement centers? What about newspa- per advertisements? Should the company use the Internet?

Sanjiv knows there is a lot he doesn’t under- stand about recruiting employees. He is, however, excited about this new opportunity. His two years with the company have been terrific. He highly values his relationships with other employees. Finding ways to help attract more great coworkers could make things even better.

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162 Chapter 5 Recruiting Talented Employees

How Can Strategic Recruiting Make an Organization Effective?

After reading this chapter you should be able to:

Explain how overall HR strategy guides recruiting practices.

Describe the key elements of human resource planning.

Explain important characteristics and search patterns of different types of people looking for jobs.

Describe the characteristics of organizations that attract recruits.

List various recruiting sources and be able to describe their strengths and weaknesses, as well as their linkage with strategic recruiting practices.

Explain various approaches for evaluating the effectiveness of recruiting.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

LEARNING OBJECTIVE 5

LEARNING OBJECTIVE 6

L E A R N I N G O B J E C T I V E S

Employee recruiting is the process of identifying and attracting people to work for an organization.1 The basic goals of recruiting are to communicate a positive image of the organization and to identify and gain the interest and commitment of people who will be good employees. Effective recruiting thus entails getting people to apply for positions, keeping applicants interested in joining the organization, and persuading the best applicants to accept job offers.2

Organizations that recruit well have more options when it comes to hiring new employees. They are in a position to hire only the best. Good recruiting can also lower employment costs by making sure that new employees know what to expect from the organization, which helps keep employees on board once they are hired. Obtaining sufficient numbers of applicants and using the best recruitment sources have been linked to increased profitability.3 In short, a strategic approach to recruiting helps an organization become an employer of choice and thereby obtain and keep great employees who produce superior goods and services.

One example of effective recruiting is Google. The Internet search com- pany has frequently been identified as a top place to work. It receives as many as 1,300 résumés a day.4 Having so many people apply for jobs puts Google in a position to hire only the best. Working at Google is so desirable that 95 per- cent of job applicants who receive an offer accept it.5 It takes effective recruiting to convince so many people to apply and to have such a high percentage of offers accepted. What makes Google the kind of place where so many people want to work? And what makes it the kind of place where very few quit?

The first key to successful recruiting at Google is a culture that creates a fun and supportive working environment. Given its competitive emphasis on differentiation and creativity, Google benefits from allowing employees the freedom to be themselves. Engineers are encouraged to dedicate 20 percent of their work time to new and interesting projects that are not part of their

Employee recruiting The process of getting people to apply for work with a specific organization.

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How Can Strategic Recruiting Make an Organization Effective? 163

formal work assignments. The company also provides a number of benefits that allow employees to focus on completing work. For example, Google pro- vides onsite support for personal tasks such as dry cleaning, haircuts, and oil changes. Yet, the perk that seems to create the most excitement is gourmet food. Employee cafeterias offer free food and cater to unique tastes with dishes like roast quail and black bass with parsley pesto.6 The supportive envi- ronment allows employees to focus their energy on getting work done rather than running personal errands, and the company is rewarded by employees willing to work long hours.

The culture at Google is particularly supportive of parents with family responsibilities. When the company was young and only had two employ- ees with children, founders Larry Page and Sergey Brin suggested that a conference room be converted into an onsite daycare. The family-friendly focus continues today with new mothers getting three months of leave while receiving 75 percent of their salary. New fathers receive two weeks’ paid leave. Free meals are also delivered to the homes of new parents.7

Lactation rooms and company-provided breast pumps help new mothers transition back to the workplace. Google has thus developed a reputa- tion as an employer who helps balance work and family demands. Such efforts help make it so that only about 3 percent of staff members leave the company.8

So what does Google do to recruit employees? One effective recruitment source is referrals from current employees. Current employees are given a $2,000 bonus for each new employee they help recruit.9 Google also works closely with university professors to make sure they refer their best students for jobs. Another innovative recruiting source is contests. For example, Google once hosted an India Code Jam where computer experts competed to earn a prize for writing computer code. The contest drew 14,000 participants trying to win the prize of approximately $7,000. However, the real reason for the contest was to identify top talent, with about 50 finalists eventually being offered positions at Google.10

GOOGLE Google is an Internet search company with over 58,000 employees. Human resource management at Google builds competitive strength by:

Creating a working environment that attracts highly creative and intelligent employees. Offering perks and programs that help employees balance work and family demands. Targeting highly talented recruits by encouraging employee referrals, building university relationships, and sponsoring contests.

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Building Strength Through HR

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164 Chapter 5 Recruiting Talented Employees

As shown in the Google example, employee recruiting is strategic when it focuses on attracting people who will make great employees. Of course, recruiting practices that are successful at Google may not be as successful at other places. Google’s business model requires hiring people with very spe- cific skill sets. In such a situation, success in recruiting depends on receiving applications from the best and the brightest people available. Organizations that desire employees with less-specific skill sets may benefit from very differ- ent recruiting methods. Recruiting practices are thus best when they align with overall HR strategies.

Figure 5.1 shows how selection decisions can be aligned with the HR strate- gies from Chapter 2. As the figure shows, two important dimensions underlie strategic recruiting choices: skill scope and source of applicants. We examine these dimensions next.

BROAD VERSUS TARGETED SKILL SCOPE The horizontal dimension in Figure 5.1 represents differences in skill scope. At one end of the continuum is broad scope, which represents a set of work skills that a lot of people have. At the other end is targeted scope, which rep- resents a set of skills that only a few people have.

Broad Scope One way to think about differences in skill scope is to think about potential strategies for romantic dating. Suppose you wish to find a romantic partner. How do you go about finding him or her? One approach is to try to meet as many people as possible. You attend lots of different social events, talk with

How Is Employee Recruiting Strategic?

LEARNING OBJECTIVE 1

Figure 5.1 Strategic Framework for Employee Recruiting.

External Broad Numerous Applicants

Idealistic Message

Bargain Laborer External/Cost HR Strategy

Internal Broad Numerous Applicants

Realistic Message for New Hires

Loyal Soldier Internal/Cost HR Strategy

Internal Targeted Limited Applicants

Realistic Message for New Hires

Committed Expert Internal/Differentiation HR Strategy

Broad

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Targeted

Skill Scope

External Targeted Limited Applicants Idealistic Message

Free Agent External/Differentiation HR Strategy

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How Is Employee Recruiting Strategic? 165

a variety of people, and go on numerous dates with different people. This strategy might work if you aren’t that picky when it comes to relationship part- ners. Casting a wide net also makes sense if you are not sure about the type of person you’re looking for. It also helps if you have a lot of time to evaluate potential partners. Such an approach to dating can be summarized as “How do I know what I want until I’ve seen what’s out there?”

Some organizations adopt employee recruiting strategies that are very similar to dating a lot of different people. These organizations cast a wide net and try to get many people to apply for positions. This broad skill scope strategy focuses on attracting a large number of applicants. Such an approach makes sense when a lot of people have the characteristics needed to succeed in the job. McDonald’s is a good example, since it is constantly working to attract numerous people who do not have highly specialized skills. Successful employees learn skills on the job, and the constant need for new employees requires maintaining a large pool of potential workers. Broad recruiting prac- tices can also be helpful when an organization is recruiting for a new position where the characteristics of a successful worker are unclear or where a num- ber of different characteristics might lead to success.

In terms of the HR strategies discussed in Chapter 2, broad scope recruit- ing is most often used by organizations with cost leadership strategies. Organizations using the Bargain Laborer HR strategy hire a large number of nonspecialized employees, who often stay with the company for only short periods of time. These organizations are therefore constantly searching for new employees. In many cases, they are not too choosy about whom they hire. Most people have the necessary skills. Of course, organizations using the Loyal Soldier HR strategy seek to keep employees for longer periods, but again, the employees do not need specialized skills to succeed. Most people have what it takes to perform the job tasks, and having a lot of applicants provides the organization with many alternatives. This means that successful recruiting for organizations with Loyal Soldier HR strategies often entails attracting a large number of applicants for each position and then basing hiring decisions on assessments of fit with the culture and values of the organization. Broad scope recruiting is thus optimal for organizations with both internal and external forms of the cost strategy.

Targeted Scope Although dating a lot of different people is one approach to finding a roman- tic partner, it certainly isn’t the only approach. You might instead establish a very clear set of characteristics desired in a mate and then date only people who are likely to have those characteristics. Instead of going to as many dif- ferent parties as possible, you might just go to parties where you know certain types of people will be. You would not go on dates with people who clearly don’t meet your expectations. Such an approach makes sense if you know exactly what you want and if you don’t want to waste time meeting people who are clearly wrong for you. This approach to dating can be summarized as “I know exactly what I want, and all I need to do is find that person.”

A number of organizations adopt recruiting strategies that are similar to this targeted approach for dating. The targeted skill scope strategy seeks to attract a small group of applicants who have a high probability of possess- ing the characteristics needed to perform the specific job. Such an approach makes sense when only a select few have what it takes to perform the job suc- cessfully. Recruiting a university professor is one example of such a targeted

Broad skill scope A recruiting strategy that seeks to attract a large number of applicants.

Targeted skill scope A recruiting strategy that seeks to attract a small number of applicants who have specific characteristics.

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166 Chapter 5 Recruiting Talented Employees

approach. Only a small number of people have the education and experience necessary to work as professors. Receiving and reviewing applications from people without the required expertise wastes valuable time and resources. Universities thus benefit from targeting their recruiting to attract only quali- fied applicants.

As you might expect, targeted scope recruiting is most often pursued by organizations with a competitive strategy of differentiation. Differentiation HR strategies rely on specific contributions from a select group of employees. People are hired because they have rare skills and abilities, and only a small number of people actually have what it takes to succeed. Receiving applica- tions from a large number of people who clearly do not have the characteris- tics needed to perform the work is wasteful. Targeted scope recruiting is thus optimal for organizations with both Committed Expert and Free Agent HR strategies. These organizations benefit from identifying and attracting only the people who are most likely to be successful.

Skill Scope and Geography One caution when thinking about targeted and broad approaches is to distin- guish skill scope from geographic scope. Broad skill scope recruiting seeks to identify a large number of people. Given that many people have the required skills, this recruiting can usually be done in small geographic areas near where the new employees will work. Most likely, a sufficient number of recruits already living in the area can be identified. For instance, a local grocery store recruits cashiers by looking for people who already live close to the store. In contrast, targeted recruiting seeks to identify a smaller group of people with specialized skills and abilities. The number of qualified people in a particular area often is not large. Thus, targeted skill recruiting frequently covers wide geographic areas. An example is a law firm that conducts a nationwide search to identify a patent attorney. In summary, the terms broad and targeted refer to the range of applicant skills and not the geographic area of the recruiting search.

INTERNAL VERSUS EXTERNAL SOURCING Think back to our dating example. What are the chances you are already friends with the person who will become your romantic partner? Should you try and develop deeper relationships with people you already like? Or do you want to identify new and exciting prospects? These questions start to touch on the next aspect of strategic recruiting—internal versus external sourcing. The vertical dimension in Figure 5.1 represents this aspect of recruiting, with inter- nal sourcing at one end of the continuum and external sourcing on the other.

Internal Sourcing Internal sourcing of recruits seeks to fill job openings with people who are already working for the organization. Positions are filled by current employ- ees who are ready for promotions or for different tasks. These people have performance records and are already committed to a relationship with the organization. Because a lot is known about the motivation and skill of cur- rent employees, the risks associated with internal recruiting are relatively low. Of course, internal sourcing is a fundamental part of Loyal Soldier and Committed Expert HR strategies. With the exception of hiring entry-level workers, most organizations with these HR strategies try to fill as many job vacancies as possible by recruiting current employees.

Internal sourcing A recruiting strategy that fills job openings by transferring people who are already working in the organization.

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How Is Employee Recruiting Strategic? 167

A common example of internal sourcing is organizations looking at cur- rent employees to identify people who can fill international assignments. The people filling these assignments, usually referred to as expatriates, move to a foreign country to take a work assignment that will last for a few years. Such assignments help organizations better take advantage of the skill and exper- tise of people who are already working for the company. Employees who serve as expatriates also develop new skills that can help them in their future assign- ments. Historically, expatriate workers have received high wages and benefits to offset the potential pains of relocation. However, foreign assignments are becoming more common, and many expatriates now receive pay similar to what they would receive in their home country.11

External Sourcing External sourcing of recruits seeks to fill job openings with people from out- side the organization. Primary sources of recruits are other organizations. The high number of entry-level positions in organizations with a Bargain Laborer HR strategy often necessitates external sourcing. Almost all employees are hired to fill basic jobs, and there are few opportunities for promotion or reas- signment. Organizations with a Free Agent HR strategy also use primarily external sourcing. Bringing in a fresh perspective is key for these organiza- tions. Since little training and development is provided, current employees rarely have the specialized skills needed to fill job openings. External sourc- ing, then, is an essential part of the recruiting practices of organizations with either Bargain Laborer or Free Agent HR strategies.

An extreme example of external sourcing occurs when organizations do not actually hire people to fill positions. For example, positions may be filled by temporary workers, who are people actually employed by an outside staff- ing agency.12 Organizations often use such arrangements to avoid long-term employment commitments. This makes it easier to adjust the size of the work- force to meet increasing or decreasing demand for products and services. A potential disadvantage of using temporary workers is that it involves sharing employees with other organizations, which makes it difficult to develop a unique resource that creates a competitive advantage.13 In some cases, organi- zations hire successful temporary workers into permanent positions—a prac- tice we revisit later in this chapter when we discuss employment agencies.

Another example of extreme external sourcing is independent contractors, who have a relationship with the organization but technically work for themselves.14 An example of a company that uses independent contractors is Newton Manufacturing, which sells promotional products such as coffee mugs and caps.15 Newton products are distributed by approximately 800 inde- pendent sales representatives. These representatives set their own hours and make their own decisions about how to sell. Representatives receive a percent- age of their sales receipts, but they are not actually employed by Newton.

Temporary workers and independent contractors are examples of contingent workers—people working without either an implicit or an explicit contract for continuing work and who are not required to work a minimum number of hours.16 Cost savings are often cited as a potential benefit of using contin- gent workers. A potential problem is that organizations have limited control over the actions of contingent workers. Many experts also believe that contin- gent workers have weaker commitment and motivation. However, research suggests that contingent workers generally feel high levels of support from their associated organizations.17 Much of this support seems to come from a

External sourcing A recruiting strategy that fills job openings by hiring people who are not already employed by the organization.

Temporary workers Individuals who are employed by an outside staffing agency and assigned to work in an organization for a short period of time.

Independent contractors Individuals who actually work for themselves but have an ongoing relationship with an organization.

Contingent workers People working without either an implicit or an explicit contract and who are not required to work a minimum number of hours.

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168 Chapter 5 Recruiting Talented Employees

feeling that the contingent worker status allows them to effectively balance their professional career with other life interests.18 Nevertheless, contingent workers need to proactively learn new skills and develop a progressive career. They can do this by continually demonstrating competence, building relation- ships to get referred to other projects, and framing their skill sets in terms of new opportunities.19

REALISTIC VERSUS IDEALISTIC MESSAGING Another important aspect of dating is how much you tell others about your- self. One approach is to be on your best behavior and only tell people the good things. This is similar to idealistic messaging, wherein an organization conveys positive information when recruiting employees in order to develop and maintain an upbeat image. An opposite approach to dating is to let others see the real you. This necessitates sharing not only positive information but also information about your problems and weaknesses. Such an approach is similar to realistic messaging, which occurs when an organization gives poten- tial employees both positive and negative information about the work setting and job.

Realistic Messaging Realistic messaging is used to increase the likelihood that employees will stay with the organization once they have been hired. Job applicants are given realistic job previews designed to share a complete picture of what it is like to work for the organization. These previews usually include written descrip- tions and audiovisual presentations about both good and bad aspects of the working environment.20 Negative things such as poor working hours and fre- quent rejection by customers are specifically included in the recruiting mes- sage. That way, new recruits already know that the working environment is less than perfect when they start the job. Their expectations are lower, so they are less likely to become disappointed and dissatisfied. The overall goal of realistic messaging is thus to help new recruits develop accurate expecta- tions about the organization. Lowered expectations are easier to meet, which decreases the chance of employees leaving the organization to accept other jobs.21 Studies such as the one described in the “How Do We Know?” feature also suggest that realistic job previews increase perceptions of honesty by the organization, which in turn make employees less likely to leave.

In terms of the HR strategies presented in Chapter 2, realistic messaging is most valuable for organizations seeking long-term employees. These organiza- tions benefit from the reduced employee turnover that comes from realistic recruiting. The recruiting process provides an opportunity for people to get a sense of how well they will fit. If the organization does not provide honest and realistic information, then the assessment of the potential for a good long- term relationship is less accurate.

Realistic recruiting thus operates much like being truthful while dating. People make commitments with full knowledge of the strengths and weak- nesses of the other party, increasing the likelihood that their expectations will be met in the future. Being honest increases the likelihood of develop- ing a successful long-term relationship. Since maintaining long-term rela- tionships with employees is critical for the success of organizations pursuing either Loyal Soldier or Committed Expert HR strategies, realistic recruiting is most appropriate for these organizations.22 Of course, internal job applicants

Idealistic messaging The recruiting practice of communicating only positive information to potential employees.

Realistic messaging The recruiting practice of communicating both good and bad features of jobs to potential employees.

Realistic job previews Information given to potential employees that provides a complete picture of the job and organization.

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How Is Employee Recruiting Strategic? 169

who are working for the organization already have a realistic picture of the work environment. The key for these organizations is thus to use realistic job previews for new hires. The importance of realistic messaging for new hires with internal labor strategies is shown in Figure 5.1, which suggests that even though most hires come internally, those who do come from outside sources should receive realistic job previews.

Idealistic Messaging Unlike realistic messaging, idealistic messaging excludes negative information and paints a very positive picture of the organization. This positive empha- sis can be helpful because realistic recruiting messages discourage some job applicants and cause them to look for work elsewhere.23 Unfortunately, in many cases, highly qualified applicants who have many other alternatives are the most likely to be turned off by realistic recruiting.24

Let’s think about idealistic messaging in terms of our dating situation. Withholding negative information from a partner may work for a while, but when the “honeymoon” is over, faults are seen and satisfaction with the rela- tionship decreases. Clearly, this is not an effective strategy for building a long- term relationship. But maybe a short-term relationship is all you want, so you aren’t concerned that your partner will enter the relationship with unrealistic expectations. Once you get to know each other’s faults and weaknesses, both of you may be ready to move on to other relationships. You might also be con- cerned that sharing negative information will scare some potential partners off before they get a chance to really know you.

WHY DO REALISTIC JOB PREVIEWS REDUCE EMPLOYEE TURNOVER? Why does providing potentially negative informa- tion about an organization make it less likely that employees will leave? Is it because employees better understand their role? Does being honest some- how make the organization seem like a better place to work? David Earnest, David Allen, and Ronald Landis sought to answer this question by combin- ing and analyzing the results of 52 previous studies.

Results of the study found that employees who receive a realistic preview are indeed less likely to voluntarily leave organizations, even though the negative information has virtually no influence on whether or not candidates accept job offers. Some of the effect of the realistic preview oper- ates through better clarification of work roles, but the primary reason for the increased likelihood to remain employed is a perception of organizational honesty. Organizations that provided both positive

and negative information about jobs were perceived as being more open and trustworthy, which in turn helped retain workers. Also, realistic information given after a candidate accepts an offer is equally as beneficial as information given before hiring.

The Bottom Line. Organizations can use realistic job previews to reduce employee turnover because employees who receive such information perceive organizations as being more honest. The study authors conclude that the relatively inexpen- sive practice of providing both positive and nega- tive information about jobs provides a meaningful benefit to organizations.

Source: David R. Earnest, David G. Allen, and Ronald S. Landis, “Mechanisms Linking Realistic Job Previews with Turnover: A Meta-Analytic Path Analysis,” Personnel Psychology 64 (2011): 865–897.

How Do We Know?

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170 Chapter 5 Recruiting Talented Employees

In recruiting, too, idealistic messaging corresponds best with an emphasis on short-term relationships. This is shown in Figure 5.1 by the use of idealistic messaging for organizations pursuing external HR strategies. In particular, the Bargain Laborer HR strategy is used by organizations seeking to reduce cost through high standardization of work practices. Finding people to work in these lower-skilled jobs for even a short period of time, such as a summer, may be all that can be expected. Training for the job is minimal, so replacing people who quit is not as costly as replacing more-skilled workers. The Free Agent HR strategy requires people with more highly developed work skills, but these individuals are expected to be more committed to careers than to a particular organization. They likely have many choices of where to work, and negative information may push them to take a position elsewhere. In these cases, idealistic messaging may lead to inflated expectations about how good the job will be, but that may not matter a great deal because the new recruit is not expected to become a loyal long-term employee.

? CONCEPT CHECK 1. How does broad scope recruiting differ from narrow scope

recruiting? 2. Why would an organization tell job applicants negative

information about the position?

An important part of recruiting is planning. Organizations fail to take advantage of available talent when they begin recruiting only after a job is vacant. Carefully constructed recruiting plans not only increase the chances of identifying the best workers but also reduce costs associated with finding workers. In this section, we explore specific ways that an organiza- tion can plan and maximize recruiting effectiveness. First, we look at the overall planning process. We then describe differences between organi- zations that hire employees periodically in groups and organizations that have ongoing recruiting efforts. We also explore differences between a recruiting approach that is consistent across the entire organization and an approach that allows different departments and locations to develop their own recruiting plans.

THE PLANNING PROCESS Human resource planning is the process of forecasting employment needs. A proactive approach to forecasting can help organizations become more pro- ductive. The basic steps of human resource planning are shown in Figure 5.2. The process involves assessing current employment levels, predicting future

Human resource planning The process of forecasting the number and type of employees that will be needed in the future.

How Does Human Resource Planning Facilitate Recruiting?

LEARNING OBJECTIVE 2

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How Does Human Resource Planning Facilitate Recruiting? 171

needs, planning for internal movement, and predicting external hiring needs. This planning process is similar to models of inventory control. First, you fig- ure out what you currently have; next, you determine what you expect to need in the future; and then you plan where to obtain additional inventory.

Step 1. Assessing Current Employment Levels The first step of human resource planning, assessing current employment levels, relies heavily on the organization’s information system. Most large corporations have some type of HR information system, with the most com- mon systems being SAP and Oracle’s PeopleSoft. These databases track employees and can generate reports showing where people are currently working. This information provides a snapshot summary of the number of people in different positions. The HR information system can also pro- vide details about the qualifications and skills of current employees. This is helpful in planning for internal movement of people during the third planning step.

Step 2. Predicting Future Needs The second step in human resource planning is to predict future needs. This step requires close collaboration with strategic planners throughout the orga- nization. Predicting future needs begins with assessing environmental trends (changing consumer tastes, demographic shifts, and so forth). Based on these trends, a forecast is made of expected changes in demand for services and goods. Will people buy more or less of what the company produces? Such pro- jections are used to predict the number of employees that might be needed in certain jobs.

One common method for making employment predictions is to assume that human resource needs will match expected trends for services and goods. For instance, an organization may assume that the number of

Figure 5.2 Human Resource Planning.

Step 1: Assess Current Employee Levels or av or t

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Step 3: Predict Employee Movement

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Step 2: Predict Future Needs

Step 4: Plan External Hiring Needs

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172 Chapter 5 Recruiting Talented Employees

employees in each position will increase by 10 percent during the upcom- ing year simply because sales are expected to grow by 10 percent in that period. More sophisticated forecasting methods might account for potential differences in productivity that come from developments in areas such as technology, interest rates, and unemployment trends. In some cases, pro- jected changes are entered into statistical models to develop forecasts. In other cases, managers and other experts simply make guesses based on their knowledge of trends. Although specific practices vary, the overall goal of the second step is to combine information from the environment with the orga- nization’s competitive objectives in order to forecast the number of employ- ees needed in particular jobs.25

Step 3. Predicting Employee Movement The third step in planning is to predict movement among current employ- ees. An example of benefits from planning is shown in the “Building Strength Through HR” feature. Generally, predictions assume that past patterns will repeat in the future. Historical data is assessed to determine how many employees in each job category can be expected to quit or be terminated during the next year. Measures such as quit rates, average length of time in specific jobs, and rates of promotion are used. As mentioned earlier, the orga- nization’s information system can be used to determine how many individuals have skills and experiences that qualify them for promotions or lateral moves. Although this information may not be exact, it does provide a rough idea

Building Strength Through HR

WELLPOINT HEALTH NETWORKS WellPoint Health Networks is a healthcare orga- nization with about 37,000 employees. It has an extensive information system that helps predict when people might leave, as well as identifying cur- rent employees who might be promoted into posi- tions that are left vacant. The information system provides a type of “depth chart” that illustrates strengths and weaknesses for each position. Leaders use the information to quickly identify people who might fill job vacancies. The information is also helpful for tracking career development and deter- mining areas where additional training might be helpful. The use of information technology has helped the company reduce the average time posi- tions are open from 60 to 35 days. The system has also reduced turnover and saved WellPoint around $21 million. Human resource management at

WellPoint thus builds competitive strength by main- taining a database of current employee skills and abilities, looking internally to fill job openings, and predicting future job vacancies before they occur.

Source: Information from Patrick J. Kiger, “Succession Planning Keeps WellPoint Competitive,” Workforce Management 81, no. 4 (2002): 50–54.

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How Does Human Resource Planning Facilitate Recruiting? 173

of where current employees are likely to move. Information about employee skills can be particularly helpful for multinational organizations. Being able to identify the skills of employees currently residing in other countries helps build consistency across organizations. In all cases, using the information to make decisions and plan for the future gives the organization a competitive edge over firms that begin to fill positions only after someone leaves a job.

Step 4. Planning External Hiring The final step is to determine the number and types of people to be recruited externally. This is accomplished by combining the information from the first three steps. An example of a spreadsheet illustrating all steps is shown in Figure 5.3. Information from Step 2 is used to forecast the total number of employees needed in each position, and information from Steps 1 and 3 is used to determine how many of the projected positions can be filled by peo- ple already in the organization. The difference between the number needed and the number available provides an estimate of the number of new employ- ees who will need to be recruited from outside the organization.

Of course, the information and strategies developed through the HR plan- ning process are only estimates and are usually not totally accurate. Nevertheless, careful planning allows organizations to act strategically rather than simply react to changes. Good planning can eliminate many surprises. It can help to smooth out upward and downward trends in employee count to reduce or eliminate those instances in which an organization terminates good employees because of low need in certain areas only to realize a few months later that it has open- ings to fill in those same areas. It can also help organizations take advantage

Current employees

Currently in position

Expected to quit2

Expected to move internally to other jobs2

Expected to move internally to this job2

Internally available3

500

250

16

0

234

50

15

2

16

49

10

3

0

2

9

466 21 5

Predicted Future Needs1

External hiring need4

Entry-Level Workers

Mid-Level Supervisors

Top-Level Managers

700 70 14

1 Based on simple assumption of 40 percent growth beyond current level. 2 Based on analysis of past trends. 3 Number currently in position—numbers expected to quit or move out + number expected to move in. 4 Predicted future needs—internally available.

Figure 5.3 Illustration of Human Resource Planning.

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174 Chapter 5 Recruiting Talented Employees

of opportunities to hire exceptional employees even before specific positions are open. Overall, HR planning takes a long-term perspective on hiring and develops ongoing tactics to make sure high-quality people are available to fill job vacancies.

BATCH AND FLOW APPROACHES Human resource planning can help organizations develop consistent approaches to recruiting. Some organizations use a batch approach to recruit- ing, whereas others use a flow approach. A batch approach involves engaging in recruiting activities periodically. A flow approach involves sustained recruit- ing activities to meet the ongoing need for new employees.26

The flow approach views recruiting as a never-ending activity. The planning process is used to forecast employment needs. New employees are frequently added even before specific positions are open. An organization using a flow approach continually seeks top recruits and brings them onboard when they are available. This enables the organization to take advantage of opportunities as they arise and helps it to avoid being forced to hire less-desirable applicants because nobody better is available at the time.

Batch recruiting is different in that it operates in cycles. Groups of employ- ees are recruited together. Organizations may adopt a batch approach when new employees are only available at certain times. For instance, organizations that recruit college students usually must adopt a batch approach because students are available only at the end of a semester. Organizations also adopt a batch approach when they need to train new employees in a group or when a specific work project has a clear beginning and end. For example, a biological research organization may hire people to work on specific grants. Employees are hired in a group when a new grant begins.

A flow approach to recruiting is optimal in most cases because it allows organizations to operate strategically. Employment needs can be planned in advance, and ongoing activities can reduce the time between job openings and hiring decisions. Organizations that use a batch approach to recruiting can also benefit from good planning, however. For instance, some employees hired directly from college might be enrolled in short-term training programs until specific positions are open. Accurate human resource forecasting facili- tates this type of arrangement and allows the batch approach to reap many of the advantages associated with the flow approach.

CENTRALIZATION OF PROCESSES An additional aspect of planning and recruiting is the extent to which activi- ties are centralized. In organizations that use centralized procedures, the human resource department is responsible for recruiting activities. In organizations that use decentralized procedures, individual departments and plants make and carry out their own plans.27

A primary benefit of centralized procedures is cost savings. Organizations with centralized processes tend to put more effort into planning ways to recruit employees through inexpensive means. With centralization, recruit- ing is carried out by members of the human resource department, who don’t need to learn new details about the recruiting process and labor environ- ment each time a position opens. These professionals also develop ongoing

Batch approach Recruiting activities that bring new employees into the organization in groups.

Flow approach Recruiting activities that are ongoing and designed to constantly find new employees.

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Who Searches for Jobs? 175

relationships with other businesses, such as newspaper advertising depart- ments and employment agencies. On the whole, then, organizations with cen- tralized procedures are more likely to benefit from human resource planning through forecasting of overall needs and having full-time professional recruit- ers on staff.

A potential problem with centralized recruiting is the distance it creates between new recruits and the people with whom they will actually work. Managers often blame the human resource department when new recruits don’t become good employees. A primary advantage of decentralized proce- dures is thus the sense of ownership that they create. Managers and current employees involved in recruiting are more committed to helping recruits suc- ceed when they have selected those recruits.

In practice, many organizations benefit from combining elements of cen- tralized and decentralized procedures. Efficiency is created by using cen- tralized resources to identify a pool of job applicants. Managers and other employees then become involved to make specific decisions. Good human resource planning provides a means of coordinating the actions of different parts of the organization. Planning also helps the various parts of the organi- zation work cooperatively by identifying people who might be promoted or transferred across departments or plants.

? CONCEPT CHECK 1. What are the basic steps in human resource planning? 2. How do the batch and flow approaches to recruiting differ? 3. What benefits and problems are associated with centraliza-

tion of employee recruiting?

Who Searches for Jobs?

LEARNING OBJECTIVE 3

An important part of effective recruiting is understanding the needs, goals, and behaviors of people searching for jobs. In general, we can identify three types of people looking for work: people entering the workforce for the first time, people who have been in the workforce but are currently unemployed, and people who are currently employed but seeking a different job. Although these groups differ somewhat, they also have a number of things in common.

One characteristic that job seekers share is their tendency to mostly plan their activities.28 Thus, the things people do to find a job are rather predict- able and can be explained by three processes:

1. The first process, attitude formation, concerns feelings and emotions. People make an effort to find employment when they feel confident that they have what it takes to get a new job, when they find the search process interesting, and when others such as spouse and family members think it is a good idea.

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2. Attitudes and beliefs lead people to form specific intentions, which repre- sent goals and plans for future action.

3. Goals and intentions lead to actual job search behavior, which includes any actions aimed at finding employment. Typical job search behavior includes gathering information and visiting organizations.

People engage in job-seeking activities when they have clear goals based on their belief that doing certain things will improve their lives. Organizations can thus influence potential recruits by providing information that helps them form positive attitudes. Actions that communicate strong interest and caring are particularly beneficial. Clearly conveying the benefits of a particu- lar job can also result in forming stronger intentions and goals. The exact nature of attitudes and goals is, however, somewhat different for different types of job seekers.

NEW WORKFORCE ENTRANTS Most people enter the full-time workforce when they graduate from school— either high school or college. The job search activities of these new work- force entrants typically follow a sequence. The first stage in the sequence is a very intense and broad search of formal sources of information about many different opportunities. At this point, job seekers are looking at aspects such as whether openings exist, what qualifications are necessary, and how to apply. The second stage is more focused as the job seekers begin to search for explicit information about a small number of possibilities. Information in this stage often comes from informal contacts rather than through formal chan- nels. The focus shifts from learning about job openings to finding out specific details about particular jobs. If a job seeker spends considerable time in the second stage but is unable to find a job, he or she will go back to the first stage and conduct another broad search.29

Take a moment to consider how knowledge of the job search sequence can guide your own current and future efforts. First, you should currently be working in the first stage and learning a lot about various opportunities, even if graduation is still a few years away. As you get closer to graduation, you will benefit from focusing your efforts and learning details about specific jobs in specific organizations. You should also develop informal channels of infor- mation such as relationships with current employees. These relationships provide insights that you cannot gain from sources such as formal recruiting advertisements and websites. As described in the “How Do We Know” feature, you will benefit in each of these stages from taking a proactive approach to finding a job.

How can knowledge about the job search sequence help organizations more effectively recruit? Since people entering the workforce search broadly in the beginning, organizations can benefit from finding ways to share posi- tive messages that set them apart from other potential employers. The objec- tive is to build positive impressions that influence attitudes and thereby guide future goals and actions. Normal marketing channels such as television and newspaper advertisements are helpful in this way. For instance, the Sports Authority chain of sporting goods stores has about 14,000 employees, many of whom became interested in working for them because of their positive brand image. Regular customers who have already developed a favorable view of the store can apply for jobs at in-store kiosks.30

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Who Searches for Jobs? 177

Organizations can also benefit from making sure they provide methods of sharing informal information with people who have entered the second stage of the search process. In this second stage, potential employees benefit from contact with current employees, who can share information that helps poten- tial applicants decide whether a specific job is right. This careful examination of potential fit is most critical for firms pursuing long-term relationships with employees, and so it is most appropriate for organizations using Loyal Soldier and Committed Expert HR strategies. Organizations with these strategies ben- efit from focusing their efforts on recruiting people who are just entering the workforce and have long careers ahead of them.

UNEMPLOYED WORKERS Potential job recruits also include people who have previously been in the workforce but are currently unemployed. Much of the research in this area explores the negative attitudes associated with being unemployed. You can relate to the frustrations of these people if you have ever had trouble finding a job. Unemployed workers get depressed easily. They experience decreased mental and physical health, less life satisfaction, and increased marital and family problems.31

A consistent finding relating to job search for the unemployed is the impor- tance of social support. People remain more optimistic, engage in more activi- ties to find a job, and obtain better jobs when they feel strong social support from others.32 Like other types of job seekers, unemployed people are also more successful at locating work when they take a proactive approach, set goals, and actively look for jobs.33 Yet the strong negative emotions associated

WHO SUCCEEDS IN A JOB SEARCH? College graduates are not equally successful at finding jobs. Why do some graduates get more job offers than others? Douglas Brown, Richard Cober, Kevin Kane, Paul Levy, and Jarrett Shalhoop investi- gated this question by obtaining information from 180 graduating university students. A few months before graduation the students provided informa- tion about their personality and their confidence concerning getting job offers. Then a few months after graduation they were asked to provide infor- mation about their job search actions and their job search success.

Students with a proactive personality—that is, a tendency to take personal initiative—had more confidence in their work abilities and thus engaged in more job search behaviors such as preparing

résumés, contacting employers, and filling out applications. This led these proactive students to receive more follow-up interviews and job offers.

The Bottom Line. Graduating students who engage in more job search behaviors do indeed receive more job offers. The study authors con- clude that an individual’s success or failure in job searching depends a great deal on his or her level of proactivity. More proactive people succeed in obtaining more job offers.

Source: Douglas J. Brown, Richard T. Cober, Kevin Kane, Paul E. Levy, and Jarrett Shalhoop, “Proactive Personality and the Successful Job Search: A Field Investigation with College Graduates,” Journal of Applied Psychology 91 (2006): 717–726.

How Do We Know?

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with being unemployed suggest that many potential employees become so frustrated that they stop looking for work. Organizations recruiting people from the unemployment ranks therefore benefit from actively seeking out and encouraging people who have been laid off from other jobs. Helping individuals regain a sense of self-worth and confidence can communicate interest and caring. Organizations with a Bargain Laborer HR strategy, which have a constant need for new employees who are willing to work for lower wages, may particularly benefit from recruiting unemployed people.

Another interesting development in the recruitment of unemployed work- ers is the movement toward internationalization. Organizations in many countries find it difficult to recruit enough workers to fill entry-level positions. For instance, hotel operators in Northern Ireland struggle to find enough people to work in jobs such as housekeeping and guest services. In fact, as many as 19 percent of jobs go unfilled in Northern Ireland hotels. Several hotels are addressing this problem by recruiting workers from other countries. Recruiting has attracted people from countries such as Poland, the Czech Republic, Latvia, and Lithuania. Although these workers are not technically unemployed in their home countries, they can find better work alternatives in Ireland. Taking an international approach to recruiting workers who are not yet employed in a particular country can thus be helpful in finding people willing to do entry-level jobs.34

WORKERS CURRENTLY EMPLOYED The third group of potential job recruits includes individuals currently employed by other organizations. Some are actively seeking a change, and others are open to a move if a good opportunity arises. People who search for alternative jobs while still employed tend to be intelligent, agreeable, open to new experiences, and less prone to worry.35

Studies suggest that dissatisfaction with a current job is an important key for understanding why people accept new employment.36 In many cases, employed workers are open to taking new jobs because they have experi- enced some kind of undesirable change in their current positions. In other cases, people are willing to move because they have slowly become dissatisfied over time.37 In either situation, they are likely to move because their attitudes about their current jobs are not as positive as they would like. Changes in work conditions that create negative attitudes and make it more likely for people to leave their current jobs include an increased need to balance career and fam- ily demands, dissatisfaction with pay, and feelings that the organization is not moving in the right direction.38

So what can an organization do to increase its success in recruiting people who are already employed by other firms? One tactic is to direct recruiting messages to employees who have recently experienced negative changes in their work roles. Common signals of negative change at competitor organiza- tions include announcements of decreased profitability, lower bonuses, and changes in upper management. A primary objective of recruiting in these cases is to help channel negative attitudes into a specific goal to seek a bet- ter job. The recruiting organization might help potential employees to form positive attitudes about moving to a new job and can do so by clearly commu- nicating the fact that it will provide a superior work environment. An organi- zation trying to recruit can also take steps to minimize the hassle of changing jobs.39 A constant need for people with highly specialized skills makes efforts

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What Characteristics Make an Organization Attractive? 179

to recruit people who are currently working elsewhere particularly important to organizations with Free Agent HR strategies.

Organizations that seek to hire workers from competitors should be careful to avoid talent wars. Talent wars occur when competitors seek to “poach,” or steal, employees from one another. An organization that believes a competitor is attempting to raid its talent might respond by working to make things better internally. Or it might instead attempt to retaliate against the competitor— for example, stealing some of the competitor’s employees. Unfortunately, back-and-forth negative tactics often result in a war that is dysfunctional for both organizations. To reduce the risk of a talent war, organizations can avoid hiring batches of employees away from a competitor and making sure that employees recruited from competitors receive promotions rather than trans- fers to the same job.40

Talent wars Negative competition in which companies attempt to hire one another’s employees.

? CONCEPT CHECK 1. What are three types of job seekers, and how does each type

differ from the others? 2. What can an organization do to attract new workforce

entrants?

What Characteristics Make an Organization Attractive?

LEARNING OBJECTIVE 4

Of course, not all organizations are equally attractive employers. One way to think about differences in organizational attractiveness is to reflect on your choice of a school. Why did you choose to study at your current college or uni- versity? Was it because it was close to where you wanted to live? Was it because of a great academic program in an area you wanted to study? Was it because it was the least expensive alternative? Was it because you wanted to be with cer- tain friends? Maybe it was because it provided you with a way to balance other aspects of your life, such as work and family. Or perhaps you just didn’t have any other choice.

In a similar way, people choose jobs for a variety of reasons. Potential employees are often attracted to an organization because it provides a work opportunity in a place where they want to live.41 Why people choose to work for certain organizations is, however, complicated. Factors that influence an applicant’s decision about whether to continue applying vary across the job search. Perceptions of fit with the position are critical at the time of applica- tion, recruiter behavior and organizational characteristics have a strong influ- ence in the middle of the process, and characteristics of the specific job are given the most weight in the final job choice decision.42

Complicating the issue is the fact that what matters to one person may not matter to others. Look around your classes. Do you believe everyone chose the university for the same reasons? It is true that some qualities were prob- ably important to most people, such as the ability to get a good education.

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Beyond that, however, different features were likely to be important to dif- ferent people. Some might have based their choice on the location or on the social atmosphere. Once again, the choice of a work organization is similar. People with certain characteristics are more strongly attracted to some types of organizations than others. Obtaining enough high-quality employees is an increasingly difficult task for most organizations. This means that organiza- tions can develop a competitive advantage by creating a place where people want to work. In order to better understand what makes organizations attrac- tive places to work, let’s first look at some of the general characteristics that people desire in their places of employment. We then further explore how certain types of people are attracted to certain types of organizations.

GENERALLY ATTRACTIVE CHARACTERISTICS What organizations come to mind when you think about places where you will likely look for a job in the future? Job applicants often base their choices on characteristics such as familiarity, compensation, certain organizational traits, and recruiting activities.

Familiarity Odds are pretty high that you would prefer searching for jobs in companies that are already somewhat familiar.43 Much of this familiarity comes from corporate advertising that showcases the organizations’ products and services. Familiar firms have better reputations because people tend to remember positive things about them.44 People actively respond to recruiting efforts by compa- nies with strong reputations. Job seekers are more likely to obtain additional information about these organizations and make formal job applications.

Familiar organizations don’t benefit much from image-enhancing activi- ties such as sponsoring events or placing advertisements that provide general information about working for them. Because people already have a gener- ally positive image of familiar organizations, such activities are not necessary. In contrast, less well-known organizations can benefit from sponsorships, gen- eral advertising, and the like. These organizations must create positive attitudes before they can get people to take actions such as applying for positions. In short, companies with low product awareness benefit from image-enhancing activities like general advertisements and sponsorships, whereas companies with high product awareness benefit most from practices that provide specific infor- mation such as detailed job postings and discussions with actual employees.45

Organizations with a strong brand image thus have an overall advantage in recruiting. Their efforts to advertise their products and services provide them with a good reputation that helps them attract potential employees. They don’t need to spend time and resources helping people become familiar with them. In contrast, the less well-known company needs to create an image as a generally desirable place to work.46

Compensation and Similar Job Features Not surprisingly, compensation affects people’s attitudes about an organi- zation. People want to work for organizations that pay more.47 In general, people prefer their pay to be based primarily on their own work outcomes rather than on the efforts of other people. Most people also prefer organiza- tions that offer better and more flexible benefits.48 Greater opportunities for advancement and higher job security are also beneficial.49

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What Characteristics Make an Organization Attractive? 181

Organizational Traits Organizations, like people, have certain traits that make them more desir- able employers.50 Desirable organizations have an image of sincerity, kind- ness, and trust and have a family-like atmosphere that demonstrates concern for employees. Walt Disney, for example, is often seen as desirable employer. Another desirable organizational trait is innovativeness. People want to work for innovative organizations because they think their work will be interest- ing. Many job seekers see this trait in shoe manufacturers Nike and Reebok. Competence is also a desirable trait. People want to work for an organization that is successful. Microsoft, for example, is widely seen as highly competent. Organizations are better able to recruit when they are seen as trustworthy and friendly, as innovative, and as successful.51

Recruiting Activities What an organization does during the recruiting process also matters. Particularly helpful is obtaining endorsements from people that job recruits trust. For instance, organizations are most successful recruiting on college campuses when faculty and alumni recommend them as good places to work.52 The interpersonal skill of recruiters also influences attitudes about an organization. Recruits enjoy the process more and are more likely to accept job offers when recruiters develop positive interactions with them.53 In con- trast, as discussed in the “How Do We Know?” feature, long delays tend to decrease organizational attractiveness. Recruits, particularly those who are most qualified, develop an unfavorable impression when organizations take

ARE EARLY JOB OFFERS BETTER? Does it really matter how long after the job inter- view the organization makes a job offer? This ques- tion was examined in a study by William Becker, Terry Connolly, and Jerel Slaughter, who collected data from 3,012 job candidates at a Fortune 500 engineering technology firm. They tracked the time between final interviews and the company’s formal offer of a job, as well as the number of days it took the candidate to respond to the offer. They also collected data about subsequent per- formance for those candidates who joined the company.

The average time for the company to offer posi- tions to applicants was 23 days for students and 15 days for experienced candidates. On average, students took 21 days to respond, whereas experi- enced candidates took only 3 days. Quicker offers were more likely to be accepted by both students and experienced employees. Speed of the offer

was not clearly associated with speed of candidate responses. There was also no evidence that speed of the offer had an impact on subsequent job per- formance or leaving the organization after being hired.

The Bottom Line. Job candidates are more likely to accept a job offer when it comes soon after the final interview. Individuals who receive speedy job offers are not more likely to leave once hired, and their performance is the same as people who take longer to receive an offer. The authors conclude that an organization can benefit from extending early offers to job candidates whom they want to hire.

Source: William J. Becker, Terry Connolly, and Jerel E. Slaughter, “The Effect of Job Offer Timing on Offer Acceptance, Performance, and Turnover,” Personnel Psychology 63 (2010): 223–241.

How Do We Know?

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182 Chapter 5 Recruiting Talented Employees

a long time to make decisions and fail to keep them informed about what is happening.54 In short, organizations are constantly making an impression on recruits as they carry out the recruiting process. Table 5.1 lists factors that influence job recruits.55

FIT BETWEEN PEOPLE AND ORGANIZATIONS The world would be a boring place if everyone wanted to work for the same type of organization. A number of studies suggest that people with different characteristics are likely to be attracted to different types of organizations. One example concerns the organization’s size. Some job seekers prefer to work for large firms, while others prefer small firms.56 Another example relates to money. Even though people generally want to work for organiza- tions that pay well, some people care more about money than others. In par- ticular, people who describe themselves as having a strong desire for material goods are attracted to organizations with high pay.57 People who have a high need for achievement prefer organizations where pay is based on perfor- mance.58 Individuals who have high confidence in their own abilities also pre- fer to work in organizations that base rewards on individual rather than group performance.59

Some differences have been found between men and women. Men are more likely to be attracted to organizations described as innovative and deci- sive, whereas women tend to prefer organizations that are detail-oriented.60

People also like organizations whose characteristics are similar to their own personality traits. For instance, conscientious people seek to work in organi- zations that are outcome oriented, and agreeable people like organizations that are supportive and team-oriented. Individuals characterized by openness to experience prefer organizations that are innovative.61 The same desire for similarity is found in the realm of values. People who place a great deal of value on fairness seek out organizations that are seen as fair, people who have a high concern for others want to work for organizations that show con- cern, and people who value high achievement prefer a place with an air of success.62 The bottom line is that people feel they better fit in organizations whose characteristics and values are similar to their own. During the process of recruiting, potential employees also develop more positive perceptions of organizations whose recruiters appear similar to them.63

Positive Negative

Meeting with high-ranking leaders Disorganized interviewers

Meeting with people actually in the position Rude, condescending, and uninterested interviewers

Meeting with people similar to themselves Unorganized meeting schedules and arrangements

Flexibility in accommodating scheduling needs Being required to pay travel expenses in advance

Impressive hotel and dinner arrangements Cheap hotels and meals

Frequent contact Lack of prompt follow-up

Source: Information from Wendy R. Boswell, Mark V. Roehling, Marcie A. LePine, and Lisa M. Moynihan, “Individual Job-Choice Decisions and the Impact of Job Attributes and Recruitment Practices: A Longitudinal Field Study,” Human Resource Management 42 (2003): 23–37.

Table 5.1 Factors That Influence Job Recruits

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What Are Common Recruiting Sources? 183

Organizations use a variety of sources to find job applicants. Sources such as referrals from current employees are relatively informal, whereas sources such as professional recruiters are more formal. In this section, we consider the use of job posting, employee referrals, print advertising, electronic recruiting, employ- ment agencies, and campus recruiting. Each method has its strengths and weak- nesses, and certain methods also align better with particular HR strategies.

JOB POSTING Recruiting people who already work for the organization is relatively easy. Internal recruiting is normally done through job posting, which uses com- pany communication channels to share information about job vacancies with current employees. Historically, posting has used such tools as bulletin boards and announcements in meetings; today, most modern organizations use some form of electronic communication, such as websites and email messages. An effective job posting clearly describes both the nature of the duties associated with the position and the necessary qualifications.

As you would expect, job posting is most appropriate for organizations adopting internal recruiting strategies. When the strategy is a Loyal Soldier HR strategy, job postings should be shared with a large number of people to facilitate movement among a variety of positions. For a Committed Expert HR strategy, the posting should be targeted specifically to those who have the expertise needed to move into relatively specialized roles.

EMPLOYEE REFERRALS Employee referrals occur when current employees get their friends and acquaintances to apply for positions. Almost all organizations and job seek- ers rely on referrals to some extent. In many organizations, up to one third of new employees come through the referral process.64 A majority of human resource professionals also believe that employee referrals are the most effec- tive method of recruiting.65 Referrals are thought to have at least four primary strengths: (1) Referrals represent a relatively inexpensive method of recruit- ing, (2) they are quicker than many other forms of recruiting, (3) people hired through referrals tend to become better employees who are less likely to leave the organization, and (4) current employees become more committed to the organization when they successfully refer someone.66

Job posting Using company communication channels to communicate job vacancies.

? CONCEPT CHECK 1. What characteristics make some organizations more attrac-

tive workplaces than others? 2. What are some ways that organizations differ, and what type

of person prefers which type of organization?

What Are Common Recruiting Sources?

LEARNING OBJECTIVE 5

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184 Chapter 5 Recruiting Talented Employees

The first benefit, low cost, is sometimes questioned because organizations often pay bonuses to employees who make successful referrals. As described for Google, a typical bonus ranges from $1,000 to $2,000. This amount is, however, usually less than the cost of other recruiting methods, such as advertising and using recruitment agencies.67 Current employees are also in continuous contact with friends and acquaintances, which eliminates much of the time needed to plan and develop more formal recruiting processes. They also are in a better position to identify people who are ready to make job changes.

The informal nature of the referral process also makes it an effective method for identifying the best candidates. Current employees generally have accurate first-hand knowledge of the potential applicant’s skills and motiva- tion. This information can improve hiring decisions. Feelings of responsibility make it likely that employees will only refer people they are confident will succeed; they don’t of course want to refer someone who will make them look bad. The informal information that employees share with the people whom they are referring can also serve as a realistic job preview, which helps reduce employee turnover.68

A study of call-center employees illustrates the benefits of finding employ- ees through referrals. Highly successful call centers found 21 percent of their employees through referrals, whereas less-successful centers found only 4 per- cent of employees through this method.69 In addition, call centers that found more new employees through referrals had lower turnover.

As mentioned earlier, providing a referral also strengthens an employ- ee’s commitment to the organization. Some of this increased commitment derives from the current employee’s feeling that his or her input is valued. The feeling of being appreciated is strengthened when a reward is offered for helping the organization.70 Employees also find it more difficult to say and believe bad things about the organization after they have convinced a friend to join them.71

Referrals are effective for organizations pursuing any HR strategy. For organizations pursuing a Bargain Laborer HR strategy, referrals help the organization inexpensively identify job candidates. Referrals help decrease turnover for organizations with either a Loyal Soldier or Committed Expert HR strategy. They can also be an effective part of a Free Agent HR strat- egy, because professional employees often have strong networks of acquain- tances who have rare but needed skills. Table 5.2 lists ways to make employee

Source: Information from Michelle Neely Martinez, “The Headhunter Within: Turn Your Employees into Recruiters with a High-Impact Referral Program,” HR Magazine 46, no. 8 (2001): 48–55; Carroll Lachnit, “Employee Referral Saves Time, Saves Money, Delivers Quality,” Workforce 80, no. 6 (2001): 66–72.

Table 5.2 How to Increase Employee Referrals

Publicize success Use luncheons, meetings, and email messages to recognize referrals

Provide rewards Publicly use T-shirts, coffee mugs, etc., to reward employees giving referrals

Use bonuses The average bonus for a referral is around $1,000—up to $10,000 for top jobs

Make it fun Use eye-catching flyers and email messages to increase excitement

Make it easy Provide job vacancy information that can be forwarded easily; minimize rules

Build momentum Pay bonuses quickly, use motivational posters, have an annual recruiting day

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What Are Common Recruiting Sources? 185

referral programs more effective.72 Other keys to success include keeping things simple and communicating continuously.

PRINT ADVERTISING Employment advertisements have historically been a major part of almost all newspapers. Newspaper advertising has the potential to reach a large num- ber of people for a relatively low cost, making it potentially desirable for the Bargain Laborer HR strategy. General advertising in newspapers can also help build a positive reputation for the organization as a desirable place to work.73

Employment advertising in newspapers has, however, become less frequent as more people gain their information from online sources, and human resource professionals predict that use of newspaper advertising will decrease by as much as 40 percent in the near future.74

Focused recruiting messages can also be placed in more specialized publi- cations. For instance, openings in technical fields such as engineering can be advertised in trade journals. This more focused approach helps reduce the costs associated with sending recruiting messages to people who are obviously unsuitable for the job. Advertising in specialized journals is potentially most helpful for organizations that pursue a Free Agent HR strategy.

ELECTRONIC ADVERTISING Electronic advertising uses modern technology, particularly the Internet, to send recruiting messages. Although electronic communication is seen by applicants as somewhat less informative than face-to-face contact,75 organiza- tions are rapidly increasing its use. Popular websites, such as Monster.com and Careerbuilder.com, include thousands of job postings that can be sorted in a variety of ways. Website visitors can look for jobs in certain geographic areas, for example, or can search for specific types of jobs regardless of location. Job seekers can post their résumés online. These websites also provide a number of helpful services, such as guidance in building a good résumé.

Company websites are yet another avenue for electronic advertising. Almost all large companies have a career website. Using the company website to recruit employees is relatively inexpensive and can be carefully controlled to provide information that conveys a clear recruiting message. Effective messaging occurs when organizations include racially diverse examples in their recruiting messages, which has been shown to be especially helpful for increasing minority perceptions of organizational attraction.76

Of course, not all websites are equally effective. Some are very basic and provide only a list of job openings. More advanced websites include search engines for locating particular types of jobs, as well as services that send email messages notifying users when certain types of jobs appear. An analysis of career websites for Fortune 100 companies found that most support online submission of résumés. A majority of sites also provides information about the work environment, benefits, and employee diversity.77

Decreased cost is the most frequently identified benefit of electronic recruiting. Electronic advertising is also much faster than most other forms of recruiting. Job announcements can be posted almost immediately on many sites, and information can be changed and updated easily. Another potential advantage of electronic advertising is the identification of better job candi- dates. Many organizations report that the applicants they find through online

Electronic advertising Using electronic forms of communication such as the Internet and email to recruit new employees.

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186 Chapter 5 Recruiting Talented Employees

sources are better than the applicants they find through newspaper advertis- ing. Responding through electronic means almost guarantees some level of familiarity with modern technology. In particular, applicants for midlevel posi- tions seem to favor online resources over newspapers.78

Perhaps the biggest problem associated with electronic advertising is its tendency to yield a large number of applicants who are not qualified for the advertised jobs. Clicking a button on a computer screen and submitting an online résumé is such an easy process that people may do it even when they know they are not qualified for the job. In fact, one survey found that less than 20 percent of online applicants meet minimum qualifications. A poten- tial solution is to use software that evaluates and eliminates résumés that do not include certain words clearly suggesting a fit with the job.79 This computer screening could, however, eliminate some applicants who might actually be able to do the job. Another recently advocated strategy is thus to customize recruiting by providing applicants clear information about their potential fit with a specific job. Applicants who learn through electronic communication that their characteristics don’t fit a job or organization are less likely to waste time and effort by applying, suggesting that interactive technology may be a key to decreasing the number of unqualified applicants.80 In particular, web- sites that combine customization with nice-looking features (color, font size, spacing) are effective at screening out weak applicants.81 Table 5.3 lists tips for increasing the effectiveness of online recruiting.82

In the end, electronic recruiting can be effective for organizations pursu- ing any HR strategy. Targeted recruiting strategies should provide clear descrip- tions of job qualifications and should be placed on sites visited primarily by people likely to have the needed skills and abilities. Broad recruiting strategies should cast a wider net and can benefit from the large number of people who visit commercial recruiting sites. As shown in the “Technology in HR” feature, companies can also use electronic communication to stay in touch with recruits.

EMPLOYMENT AGENCIES Each state in the United States, has a public employment agency, which is a government bureau that helps match job seekers with employers. These agen- cies have local offices that normally post information about local job vacan- cies on bulletin boards and provide testing and other services to help people

Public employment agency Government-sponsored agency that helps people find jobs.

Sources: Information from V. Michael Prencipe, “Online Recruiting Simplified,” Sales and Marketing Management 160, no. 4 (2008): 15–16; Rita Zeidner, “Making Online Recruiting More Secure,” HR Magazine 52, no. 12 (2007): 75–77; Anonymous, “Ideas for Improving Your Corporate Web Recruiting Site,” HR Focus 83, no. 5 (2006): 9.

Table 5.3 Effective Online Recruiting

Post Information in Multiple Places Job seekers visit different Internet sites; Target likely applicants

Create an Exciting Job Description Tell an interesting story; Sell the company but be realistic about positives and negatives

Use Cascading Links to More Information Keep the design simple; Provide easy access to additional information

Communicate Key Reasons Employees Stay Focus on company culture; Identify things that make current employees happy

Ensure Data Security Only obtain necessary information; Prevent spyware and malicious links

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What Are Common Recruiting Sources? 187

learn about their strengths and weaknesses, as well as different careers that might fit their interests. Many offices help employers screen job applicants. State agencies also maintain websites for electronic recruiting. Links to the various state job banks can be found at CareerOneStop (careeronestop.org), which is sponsored by the U.S. Department of Labor and also offers career exploration information.

Many state employment agencies seek to help people transition from unemployment. They also focus on helping young people move from high school into the workforce. These agencies are therefore particularly helpful for recruiting employees into entry-level positions. Almost all services of pub- lic employment agencies are free to both organizations and job seekers. Since

STAYING IN TOUCH WITH RECRUITS Electronic forms of communication, such as email messaging, can sometimes cause problems because people get so many messages that they are unable to keep track of them all. But email messaging can also be critical in helping organizations to effec- tively recruit job applicants. In particular, this rel- atively quick and easy method of communicating can help organizations keep in touch with individu- als they are recruiting.

One company that uses email messages during recruiting is Shell Oil, an international energy com- pany that produces oil and natural gas. The Shell Group is a global employer of more than 90,000 people, with about 24,000 employees in the United States. Human resource management at Shell Oil sends the Shell Careers Newsletter via email to sub- scribers who might be interested in working for the company. Message content includes information about job market trends and customized content for fields such as marketing and engineering. A major objective of the newsletter is to build emo- tional connections and relationships with potential future employees. The newsletter costs Shell only about $12,000 a year. Tracking reports suggest that 60 to 70 percent of the people who receive the newsletter open it.

Another organization that benefits from elec- tronic communication is the New York City Police Department (NYPD), which uses email communica- tion to reduce dropouts among people applying to

take the police exam. Messages are designed to sus- tain interest by providing career information and linking readers to the NYPD website. One emphasis is on salary and benefits. Email messages cost only about 7 cents each, making them an inexpensive method for communicating with people interested in working for the NYPD. Visits to the NYPD website are up 74 percent since the email program began, and the dropout rate for the police exam is lower.

Technology is helping these two organizations build competitive strength by proactively using ongoing communication to build relationships with people who have shown interest in working for them. These methods are generally more cost effec- tive than alternative channels of communication.

Source: Information from Workforce Management Online, May 2005.

Technology in HR

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188 Chapter 5 Recruiting Talented Employees

most people who seek employment through public agencies do not have spe- cialized education and skills, these agencies are most helpful for companies engaged in broad skill recruiting.

A private employment agency is a professional recruiting firm that helps organizations identify recruits for specific job positions in return for a fee. Kelly Services, for example, provides placement services for approximately 560,000 people annually in areas including office services, accounting, engi- neering, information technology, law, science, marketing, light industrial, edu- cation, healthcare, and home care.83 Another private agency is Korn/Ferry, which specializes in recruiting top-level executives. Such firms are sometimes referred to as headhunters, because they normally target specific individuals who are employed at other organizations.

Private recruiting firms provide direct help to organizations by identifying and screening potential employees for particular positions. They also serve as temporary staffing agencies by maintaining a group of workers who can quickly fill short-term positions in client organizations. In many cases, these temporary workers are eventually hired as full-time employees. The tempo- rary staffing assignment works as a tryout for the job, which helps eliminate costs associated with hiring workers who then perform poorly.

Private employment agencies are frequently able to recruit people who are not actively seeking new positions. Executive recruiters, in particular, are known for their efforts to develop and maintain broad networks of people who are not actively seeking new jobs but who might be willing to move for the right opportunity. In addition, private agencies target people who have the specific skills for the job. Client organizations are presented with a short list of high-quality applicants, which makes the search process more efficient for them. Another advantage of using private agencies is the ability to remain anonymous. The name of the hiring firm is often not disclosed during early stages of recruiting. Such anonymity can be helpful if a high-profile employ- ee’s intention to leave has not been publicly announced or if the organization does not want competitors to know its staffing needs.

Because of their targeted approach, private employment agencies can be particularly helpful for organizations pursuing a Free Agent HR strategy. These firms require specific skills that are often rare and in high demand. In these circumstances, qualified applicants are most likely already employed.

A disadvantage of private employment agencies is cost. Most executive recruiters work on a contingency basis; that is, they are only paid when they find someone who accepts the position. The recruiting fee is usually based on the salary that will be paid to the new employee. Typical fees amount to more than 30 percent of the first year’s salary; the normal fee for finding an execu- tive is thus at least $50,000.

Because of the expense associated with private employment agencies, most organizations develop written contracts that carefully describe the rela- tionship between the agency and the client firm. A good contract should cover a number of issues, such as a guarantee of confidentiality and amount of fees. The contract should also include an off-limits statement, which formal- izes an agreement that the agency will not try to recruit the new employee for another organization within a specified amount of time (usually at least a year). Most contracts also contain clauses that clarify that the fee is paid only if the individual stays with the new organization for a minimum period of time.84

Private employment agency A business that exists for the purpose of helping organizations find workers.

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What Are Common Recruiting Sources? 189

CAMPUS RECRUITING The pharmaceutical firm Eli Lilly recruits many of its employees as they grad- uate from universities. In order to focus its efforts, Lilly targets specific uni- versities for hiring in specific functional areas. A university that is particularly strong in accounting might thus be targeted only for accounting recruits. A dif- ferent university might be a target only for human resource recruits. Focusing on a few key schools allows Lilly to build relationships that provide important advantages for obtaining the best possible employees. In many cases, Lilly also offers promising students summer internships.85

Campus recruiting usually involves a number of activities. Organizations that recruit successfully work hard to build a strong reputation among stu- dents, faculty, and alumni. Relationships are built through activities such as giving talks to student organizations and participating in job fairs. Although studies question the benefits, campus recruiting often includes hosting recep- tions that provide an informal setting where information about the organiza- tion can be shared. Managers and current employees attend these events and network with students.86

The most widely recognized aspect of campus recruiting is job posting and interviewing. Employers use campus career centers to advertise specific job openings. At the centers, students provide résumés and apply for jobs that inter- est them. Firms identify students who best match their needs and arrange on- campus interviews. Full-time recruiters and line managers (often alumni) then spend a day or two on campus conducting preliminary interviews. Students who are evaluated positively during the on-campus interview are usually invited to a second interview, which takes place at the organization’s offices.

Internships also represent a major component of most campus recruiting programs, giving students an opportunity to gain important work experience while they are enrolled in school. Students who have been interns take less time to find a first position, receive higher pay, and generally have greater job satisfaction.87 Internships also help organizations develop relationships with potential recruits. Working over a number of months provides a realistic preview of the job, which helps both the individual and the organization to determine whether there is a good fit.

Campus recruiting is well suited for organizations pursuing a Committed Expert HR strategy. These organizations adopt a targeted approach to recruit- ing that helps them identify people with the skills necessary to perform spe- cialized tasks, such as engineering and accounting. Campus recruiting also helps them meet their strategic objective of identifying people who are just beginning their careers. While campus recruiting can be expensive, cost is not a serious problem for organizations that are seeking to identify people who will spend long careers working for them.

? CONCEPT CHECK 1. What are different sources that organizations can use to find

job applicants? 2. What are some advantages and disadvantages of using elec-

tronic communication to recruit employees?

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190 Chapter 5 Recruiting Talented Employees

Some organizations are better at attracting excellent job candidates than their competitors are. These organizations use recruiting as a tool for ensuring that they have the best possible employees, which in turn improves their bottom- line profitability.88 Effective recruiting is thus an essential part of good human resource management. Unfortunately, many organizations do not measure and track how well they are doing with regard to recruiting. These organiza- tions are at a strategic disadvantage because they do not use readily available information to help them learn about areas where they can improve.

COMMON MEASURES Common measures of recruiting effectiveness include assessments of cost, time, quantity, and quality.89 Cost measures include the money paid for advertising, agency fees, and referral bonuses, and should also include travel expenses for both recruiters and recruits, as well as salary costs for people who spend time and effort on recruiting activities. Failure to include the sal- ary expenses of both full-time recruiters and managers who spend time doing recruiting often leads to substantial underestimates of true cost.

Time measures assess the length of the period between the time recruiting begins and the time the new employee is in the position. Estimates suggest that the average time to fill a position is 52 days.90 During this period, the position is often open, and important tasks are not being done. In many cases, the performance of other employees also suffers because they spend time on activities that the new employee would perform if the position were filled. These factors suggest that an important objective of recruiting is to fill posi- tions as quickly as possible.

Quantity measures focus on the number of applicants or hires generated through various recruiting activities. Common measures include number of inquiries generated, number of job applicants, and number of job accep- tances. These are measures of efficiency, and they provide information about the reach of recruiting practices. Recruiting is generally seen as more effective when it reaches a lot of potential applicants.

Quality measures concern the extent to which recruiting activities locate and gain the interest of people who are actually capable of performing the job. In most cases, measuring quality is more important than measuring quantity. Typical measures include assessments of how many applicants are qualified for the job, as well as measures of turnover and performance of the people hired.

The most frequently used measures of recruiting success combine assess- ments of cost and quantity. One measure is cost per hire, which is calculated by dividing the total cost of a particular search by the number of hires it provides. For instance, in one cost-per-hire analysis, Valero Energy Corporation found the cost for candidates from niche-focused Internet sources to be $1,100, from major job boards $1,600, and from employment agencies nearly $22,000. These figures helped the company shift some of its recruiting resources and reduce overall cost-per-hire amounts by 60 percent.91

Cost measures Methods of assessing recruiting effectiveness that focus on expenses incurred.

Time measures Methods of assessing recruiting effectiveness that focus on the length of time it takes to fill positions.

Quantity measures Methods of assessing recruiting effectiveness that focus on the number of applicants and hires found by each source.

Quality measures Methods of assessing recruiting effectiveness that focus on the extent to which sources provide applicants who are actually qualified for jobs.

Cost per hire The measure of recruiting effectiveness that determines the expense incurred to find each person who is eventually hired.

How Is Recruiting Effectiveness Determined?

LEARNING OBJECTIVE 6

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How Is Recruiting Effectiveness Determined? 191

Yet another measure is cost per applicant, which is calculated by dividing the cost of a recruiting method, such as a newspaper advertisement, by the number of people who respond. These measures allow organizational lead- ers to assess the relative value of different methods. For instance, cost-per- applicant analyses may show that placing an advertisement in the local news- paper is more cost effective than placing an ad in a specialized trade journal.

Since cost per hire and cost per applicant are based in part on quantity, they, too, are efficiency measures, which do not include assessments of qual- ity. Cost per applicant, for instance, does not tell the organization how many applicants were qualified for the position. Of course, it does little good to receive a lot of applications from people who are not qualified. More advanced methods of evaluation incorporate assessments of quality.

In assessing quality, it is helpful to provide scores of acceptability for each applicant at various points during the recruiting process.92 For instance, an initial analysis might compare the cost of an Internet advertisement with the number of applicants considered worthy of an interview. Subsequent mea- sures might look at the proportion of interviewees who were offered a job or the proportion who accepted a job that was offered. Such quality measures do a better job of determining whether the right kinds of people are being identified through recruiting.

DIFFERENCES AMONG RECRUITING SOURCES Over the years, researchers have tried to determine whether some methods of recruiting are generally better than others. Common questions concern the relative value of different methods: Is the Internet a better method than the employment agency? Do employees found through campus recruiting stay with an organization longer than those found through newspaper advertise- ments? Do people identified through referrals have higher job performance than people who apply through a company website?

One reason some methods are considered to be better than others is that different methods attract different people. People who respond to an employ- ment agency, for example, may have different skills and attributes from people who read the employment section of the local newspaper. In addition, some methods may provide better information about the job and organization. Hearing a friend describe a job may provide more accurate information than reading about that same job on an Internet site. On the whole, research does not support the idea that methods other than referrals are superior to others. A number of studies have concluded that there are not consistent differences in job performance for people identified through different sources.93 Each method, of course, has its own potential strengths and weaknesses, and each is more appropriate in some situations than in others.

Recruiting practices are most successful when they are aligned with the organization’s HR strategy. The goal of an organization pursuing a Bargain Laborer HR strategy is to identify a large number of job candidates. An orga- nization using a Loyal Soldier HR strategy seeks to recruit people who will fit the organization’s culture and will stay for a long time. An organization using a Committed Expert HR strategy also wants to recruit people who will stay over time, but this organization needs people with specialized skills. Finally, an organization pursuing a Free Agent HR strategy seeks employees who have

Cost per applicant The measure of recruiting effectiveness that assesses how much it costs to entice each person to submit an application for employment.

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192 Chapter 5 Recruiting Talented Employees

specialized skills but is not especially concerned with how long these employ- ees stay with the organization. Each of these organizations should pursue the recruiting practices that will best meet its needs.

? CONCEPT CHECK 1. How can an organization assess the effectiveness of recruit-

ing sources? 2. Why might using the least expensive recruiting sources actu-

ally cost an organization money?

IN THE MANAGER’S PERSPECTIVE THAT OPENED THIS CHAPTER, SANJIV WAS ASSIGNED TO BE A MEMBER OF A TEAM CHARGED WITH IMPROVING RECRUITING PRACTICES AT THE CONSUMER PRODUCTS

COMPANY WHERE HE WORKS. FOLLOWING ARE ANSWERS TO THE “WHAT DO YOU THINK?” QUIZ AT THE END OF THE MANAGER’S PERSPECTIVE. WERE YOU ABLE TO CORRECTLY IDENTIFY THE TRUE STATEMENTS? CAN YOU DO BETTER NOW?

1. Effective organizations do all they can to get as

many people as possible to apply for jobs. FALSE. Organizations with targeted recruiting strategies gener-

ally do not wish to attract a large number of applications.

2. Organizations should be careful to communicate only

positive things to job applicants. FALSE. Employees who receive realistic job information are more likely to

remain with the organization once they are hired.

3. A company should develop strong relationships with

professors at universities where it recruits. TRUE. An important element of recruiting new workforce entrants

is to develop relationships with people who provide

advice to job seekers.

4. One way of attracting more job applicants is to pay

high wages. TRUE. Organizations that pay higher

wages are more attrac-

tive to job seekers.

5. Job applicants referred

by current employees

seldom work out because

employees often refer

friends who don’t have

good work skills.

FALSE. Employee referrals are a high-quality source of recruits. Employees feel personal responsibility and usu-

ally only refer people they know will be successful.

Sanjiv’s thoughts about what attracted him to the con-

sumer goods company were an important step in identify-

ing effective methods for recruiting. Identifying the things

that are important to desirable workers can help an orga-

nization become an employer of choice. Sanjiv also won-

dered about different recruiting sources that might be most

effective. Finding recruiting sources that are inexpensive

yet locate desirable candidates can help an organization

achieve a competitive advantage. The principles of recruit-

ing discussed in this chapter can aid in this process.

A M A N A G E R ’ S P E R S P E C T I V E R E V I S I T E D

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c05.indd 192 1/25/2014 10:31:02 PM

Summary 193

The behavior of people searching for jobs is mostly planned and can be explained in terms of attitudes, intentions, and behaviors. Organizations can influ- ence job seekers by creating positive attitudes and intentions. The three primary types of job seeker are new workforce entrant, unemployed worker, and currently employed worker. The job search behavior of new workforce entrants follows a sequence: first a broad search using formal sources, then a focused search seeking information about specific jobs, and finally a return to a broad search if a position is not found. Unemployed workers struggle with negative emotions. Their behavior can be influenced by actions that help them regain self-esteem and confidence. Currently employed workers are most likely to accept an offer for a new job when they feel a sense of dissatisfaction with their current jobs.

Human resource planning is the process of forecast- ing future employment needs. The planning process involves four steps: assessing current employment levels, predicting future needs, predicting employee movement, and planning external hiring. Effective planning can help organizations become more proactive and ensure that high-quality people are available to fill job vacancies. Planning is helpful whether organizations adopt a batch approach to recruiting or a flow approach. Planning provides information that makes flow processes more stra- tegic and makes batch processes more like flow processes. Effective planning can also help organi- zations strike an effective balance concerning cen- tralization of recruiting procedures.

SUMMARY

Employee recruiting practices are most effective when they align with overall HR strategy. In the area of skill scope, a targeted approach seeks to recruit people with specialized skills and abili- ties. Targeted scope recruiting focuses on com- municating with a select group of people and is appropriate when the number of people who can successfully perform the job is limited. In con- trast, broad scope recruiting seeks a large number of potential job applicants. Many people have the characteristics necessary to perform the job, and the goal is to cast a wide net and develop a large pool of applicants. Targeted recruiting fits with differentiation strategies (Committed Expert, Free Agent), whereas broad recruiting aligns with cost strategies (Loyal Soldier, Bargain Laborer).

Another strategic element of recruiting is source. Internal recruiting is helpful when the organization seeks to form long-term relation- ships with employees. People are promoted from within, and existing employees are moved to fill vacancies. External recruiting is necessary when the organization does not have long-term employ- ment relationships. Internal recruiting fits with an internal HR strategy (Loyal Soldier, Committed Expert), and external recruiting fits with an exter- nal HR strategy (Bargain Laborer, Free Agent).

Recruiting can also vary in terms of the message sent to potential employees. A realistic approach shares both positive and negative information about the organization and job. An idealistic approach shares only positive information. Realistic messages help employees develop accu- rate expectations and thereby reduce employee turnover. The realistic approach is most appropri- ate when an organization seeks to retain employees for extended periods of time, making it most suit- able for obtaining new hires in firms with an internal HR strategy.

How is employee recruiting strategic?

LEARNING OBJECTIVE 1

How does human resource planning facilitate recruiting?

LEARNING OBJECTIVE 2

Who searches for jobs?

LEARNING OBJECTIVE 3

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194 Chapter 5 Recruiting Talented Employees

In general, job seekers prefer organizations that are familiar to them. Organizations that are unfamil- iar can benefit from general advertising that shows them as desirable places to work. People also prefer to work for organizations that pay more, have better benefits, and offer greater opportunity for advance- ment. In addition, organizations are more attractive if they are seen as trustworthy and friendly, innova- tive, and successful. More specifically, recruits are attracted to organizations that have traits and values similar to their personal traits and values.

What characteristics make an organization attractive?

LEARNING OBJECTIVE 4

What are common recruiting sources?

LEARNING OBJECTIVE 5

How is recruiting effectiveness determined?

LEARNING OBJECTIVE 6

Job posting, which uses company communica- tion channels to share information about job vacancies, is the primary form of internal recruit- ing. Employee referrals are a particularly valu- able recruiting source and occur when current employees get friends and acquaintances to apply. Print advertising uses newspapers and trade maga- zines to solicit recruits. Print advertising has his- torically been widely used but is currently being replaced by electronic advertising, which includes

both popular commercial job sites and company websites. Websites are most effective when they include information about the work environment, benefits, and company diversity. Public employ- ment agencies provide free resources that match job seekers and employers. Private employment agencies are professional recruiters with extensive networks that help identify job candidates with specific skills. Campus recruiting involves working with colleges and universities to recruit graduat- ing students.

Common measures of recruiting effectiveness focus on cost, time, quantity, and quality. Recruiting practices are best when they reach a large number of recruits at a low cost and when they quickly fill positions with high-quality employees. In general, research evidence has not found some recruiting sources to be better than others. Recruiting prac- tices and sources are most effective when they are aligned with overall HR strategy. The Bargain Laborer HR strategy seeks a large pool of appli- cants, the Loyal Soldier and Committed Expert HR strategies seek employees likely to remain with the organization for long periods of time, and the Free Agent HR strategy seeks employees who already have specialized skills.

Batch approach 174 Broad skill scope 165 Contingent workers 167 Cost measures 190 Cost per applicant 191 Cost per hire 190 Electronic advertising 185 Employee recruiting 162 External sourcing 167 Flow approach 174 Human resource planning 170 Idealistic messaging 168 Independent contractors 167

Internal sourcing 166 Job posting 183 Private employment agency 188 Public employment agency 186 Quality measures 190 Quantity measures 190 Realistic job previews 168 Realistic messaging 168 Talent wars 179 Targeted skill scope 165 Temporary workers 167 Time measures 190

KEY TERMS

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Example Case 195

1. Why do organizations with differentiation strate- gies benefit from targeted recruiting approaches?

2. What makes people react positively when orga- nizations share negative information during the recruiting process?

3. What can organizations do to improve their human resource planning process? What types of information improve forecasts?

4. What are some primary differences between new workforce entrants, unemployed workers, and currently employed workers? How can organizations best recruit these different types of job seekers?

5. What characteristics make an organization attractive to you? List some specific compa- nies that you think have those characteristics. What factors have influenced your perceptions about these companies?

6. Why are employee referrals a good recruiting source? What might keep you from referring friends and acquaintances for a position at an organization where you work?

7. What features increase the attractiveness of company websites?

8. For what positions might a company want to recruit through private employment agencies? Why are the services of a private agency worth their high cost for these positions?

9. Which companies do a good job of recruiting students from your college or university? List some of their recruiting activities on your campus.

10. What are some recruiting sources and prac- tices that might be seen as effective in terms of quantity but not in terms of quality?

DISCUSSION QUESTIONS

EXAMPLE CASE MITRE

The MITRE Corporation, founded in 1958, is one of eleven nonprofit U.S. corporations that manage Federally Funded Research and Development Centers (FFRDCs) for the government. Of our workforce of nearly 6,000 employees, most are in our two principal locations in Bedford, Massachusetts, and McLean, Virginia, and the rest at remote sites in the United States and around the world. MITRE’s mission is to assist the federal government with scientific research and analysis, development and acquisi- tion, and systems engineering and integration.

MITRE’s excellent reputation in operating its FFRDCs is very attractive to many mid- and late-career people, who view our employees as respected sub- ject matter experts. Older engineers and scientists appreciate the kind and quality of work done at MITRE and how it affects at an early stage the high- level decisions made at the government agencies we support. Of the more than 500 new hires who join MITRE annually, nearly half (48 percent) are 40 years of age or older. Drawn heavily from industry, they are seasoned experts with knowledge of the latest technical developments, which enables MITRE to blend long-term domain knowledge and maturity with continu- ously updated expertise to benefit our sponsors.

In the past, MITRE depended heavily on advertising and employment agencies for the majority of our hires. As those methods became increasingly expensive, MITRE asked employees to become more actively involved in the identification and attraction of appropriately qualified new workers. MITRE

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196 Chapter 5 Recruiting Talented Employees

employees are motivated to refer high-quality people like themselves because of their desire to fulfill our sponsors’ mission expectations and to work in collaboration with other equally talented individuals. In this case it is true that “birds of a feather flock together.” To further motivate such referrals, we implemented a referral program that pays employees a bonus of $2,000 for technical staff hires, $1,000 for nontechnical staff hires, and $500 for non- exempt hires. Employee referrals now provide more than half our new hires and assure us of high-quality candidates who are likely to be a good fit with MITRE’s culture.

Additionally, our data show that employee referrals significantly lower recruiting costs. In 2001, when 34 percent of new hires were through employee referrals, the average cost for all hires was about $14,200, which included agency and advertising fees, labor costs, relocation and interview expenses, and employee referral bonuses. In 2004, employee referrals accounted for 52 percent for our hires, and our cost per hire had decreased by nearly 40 percent to $8,700.

We use other methods as well to encourage employees to refer suitable candidates:

We actively and frequently communicate our most urgent recruiting needs to employees by distributing “Hot Jobs” fliers throughout the cor- poration and posting hiring notices on the company’s intranet. Staff members attending conferences are encouraged to collect business cards of people who they think would be good team members. Potential candidates are also attracted to MITRE when they attend tech- nical symposia or technology transfer meetings on MITRE property. They talk with an engaged cadre of MITRE attendees who are more than happy to respond to questions and inquiries. Employees can hand out networking, or “handshake,” cards to people who express an interest in MITRE so that they can nominate themselves in the future for a position with us. We bring our HR business partners into organizational meetings to alert our technical staff members about the importance of constantly being on the lookout for other subject matter experts.

We attribute the cost effectiveness of our process to several factors, includ- ing the following:

More than two thirds (roughly 70 percent) of our hires come from referrals, website postings, and rehires, which helps maintain our high standards. Thus, we rely very little on print advertising, employment agencies, or other broad-based recruiting channels that are costly and tend to generate less-suitable candidates. We focus on certain niches for skilled and experienced workers, targeting organizations that employ people with relevant skills and experiences and certifications that represent a required level of expertise. Our recruiting teams are attuned to older workers, those who have demonstrated high levels of competency through past performance. Recruiters are coached so they can focus on relevant skill sets and crite- ria. Candidates who are subject matter experts (SME) are interviewed and evaluated by employees in the same area, a process we call SME-to- SME—again, birds of a feather.

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Discussion Case 197

QUESTIONS 1. What overall HR strategy do you think MITRE is pursuing? Is its recruit-

ing focus broad or targeted? Does it primarily use internal or external sources?

2. What characteristics of MITRE make it particularly attractive to older workers?

3. Why is the referral program at MITRE so successful? What are some ele- ments of success that could be copied by other organizations? What suc- cess factors do you think would be hard to duplicate elsewhere?

Source: William D. Albright, Jr., and Gary A. Cluff, “Ahead of the Curve: How MITRE Recruits and Retains Older Workers,” Journal of Organizational Excellence 25, no. 1 (2005): 53–63. Reprinted with permission of John Wiley & Sons, Inc.

DISCUSSION CASE Friendly Financial Works

Friendly Financial Works is a fictional provider that sells accounting, payroll, and financial services to small businesses. The company uses an integrated software platform to help small businesses better manage their financial assets. Based on the assumption that small business owners often lack the expertise and time to manage financial assets effectively, Friendly Financial seeks to provide a rela- tively inexpensive “one-stop solution” for financial planning and control.

Friendly Financial’s business model calls for providing services at the low- est cost rather than giving customized service to each client. To be successful, Friendly Financial needs to lower its costs by continually increasing the num- ber of small businesses that use its services. The success of Friendly Financial thus depends largely on its sales force.

The sales force is divided into geographic territories, with a territory man- ager having exclusive responsibility for all sales activity within a specific area. Territories are organized into sales districts. The average number of territo- ries in each district is 20. Each district is led by a district sales manager who oversees all personnel activities, such as hiring and training, in the territories within his or her district.

Territory managers are paid on a commission basis. They generate most of their sales by cold calling on potential businesses. A typical day consists of 10 to 15 unannounced visits to small businesses. The territory manager seeks an appointment with the owner or manager of each firm he or she visits. When an appointment is granted, the territory manager makes a presenta- tion and tries to develop a contract between the small business and Friendly Financial. As with most unannounced sales calls, a large majority of visits end without a contract to provide services.

A major concern for Friendly Financial Works is identifying and keeping enough territory managers. The turnover rate is approximately 200 percent each year. This means that a district sales manager must usually hire about 40 new employees in a given year. In most cases, when a job vacancy occurs, the district sales manager travels to the sales territory to begin recruiting. The dis- trict sales manager places an advertisement in the local newspaper and includes a telephone number for potential recruits to call. The manager then spends

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198 Chapter 5 Recruiting Talented Employees

three to four days at a local hotel answering phone inquiries and conducting interviews. The territory manager position is usually offered to the best available candidate on the final day that the district sales manager is in the territory.

District sales managers pride themselves on being able to land the sales representatives they like best. Many district sales managers boast that they can sell anything to anybody, and this is how they approach employee recruiting activities. Because they are talented sales representatives, district sales manag- ers generally do a great job of touting the benefits of the position.

QUESTIONS 1. What aspects of the recruiting process increase the likelihood that terri-

tory managers will leave once they have been hired? 2. Should Friendly Financial use other methods to recruit territory manag-

ers? Which methods? 3. Is the recruiting process at Friendly Financial efficient? What are some

things that might be done to reduce recruiting costs?

Visit the career center at your school. Meet with a career counselor. As you learn about the ser- vices offered through the career center, try to find answers to the following questions:

1. What services does the career center offer? 2. How can the career center help you find a job?

When should you start working with the career center? Are there things you can do long before graduation to improve the effectiveness of your job search?

3. What companies have good relationships with your school? Which of these companies hire

people in your field of study? What characteris- tics do they look for in employees?

4. How do you go about using the career center to locate job openings? Does the career center support a website? Can you apply for as many jobs as you want?

5. Does the career center maintain a list of alumni who currently work for specific companies? Can you use this list to network with potential employers?

6. What other services, such as interview training, are provided through the career center?

EXPERIENTIAL EXERCISE Learning about Your Career Center

Access the companion website to test your knowledge by completing a Graphics Design, Inc. interactive role play. In this exercise it’s time to start trying to attract potential employees to fill the newly created positions at GDI. You have many decisions to consider, includ- ing which recruiting sources to use, what skill scope is needed, and what type of message to convey to applicants. You also need to consider the HR planning process and the fact that the basic HR strategy of GDI is that of Loyal Soldier. What will be your first recommendation to the GDI management team when you meet with them in the next several days?

INTERACTIVE EXPERIENTIAL EXERCISE

Strategic Recruitment: Finding the Right People for Graphics Design, Inc. http://www.wiley.com/college/sc/stewart

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Endnotes 199

ENDNOTES 1. Alison E. Barber, Recruiting Employees: Individual and

Organizational Perspectives (Thousand Oaks, CA: Sage, 1998).

2. Ibid.; Kevin D. Carlson, Mary L. Connerley, and Ross L. Mecham III, “Recruitment Evaluation: The Case for Assessing the Quality of Applicants Attracted,” Personnel Psychology 55 (2002): 461–490.

3. David E. Terpstra and Elizabeth J. Rozell, “The Relationship of Staffing Practices to Organizational Level Measures of Performance,” Personnel Psychology 46 (1993): 27–48; John T. Delaney and Mark A. Huselid, “The Impact of Human Resource Practices on Perceptions of Organizational Performance,” Academy of Management Journal 39 (1996): 949–969.

4. Robert Levering and Milton Moskowitz, “In Good Company,” Fortune 155, no. 1 (2007): 94.

5. Todd Raphael, “At Google, the Proof Is in the People,” Workforce 82, no. 3 (2003): 50–51.

6. Adam Lashinsky, “Search and Enjoy,” Fortune 155, no. 1 (2007): 70.

7. Todd Raphael, “At Google, the Proof Is in the People.” 8. Rob Willock, “Google Makes the Mind Boggle with Its

Recruitment Challenges,” Personnel Today, February 6, 2007, 6.

9. Adam Lashinsky, “Search and Enjoy.” 10. Joseph Puliyenthuruthel, “How Google Searches—For

Talent,” BusinessWeek 3928, April 11, 2005, 52. 11. Anonymous, “Special Report: Travelling More

Lightly—Staffing Globalisation,” The Economist 8483, June 24, 2006, 99.

12. Catherine E. Connelly and Daniel G. Gallagher, “Emerging Trends in Contingent Work Research,” Journal of Management 30 (2004): 959–983.

13. Jeffrey Pfeffer, The Human Equation: Building Profits by Putting People First (Boston: Harvard Business School Press, 1998).

14. Connelly and Gallagher, “Emerging Trends in Contingent Work Research.”

15. www.newtonmfg.com. 16. Anne E. Polivka and Thomas Nardone, “On the

Definition of Contingent Work,” Monthly Labor Review 112, no. 12 (1989): 9–16.

17. Soon Ang and Sandra A. Slaughter, “Work Outcomes and Job Design for Contract Versus Permanent Information Systems Professionals on Software Development Teams,” MIS Quarterly 25 (2001): 321–350.

18. Linn Van Dyne and Soon Ang, “Organizational Citizenship Behavior of Contingent Workers in Singapore,” Academy of Management Journal 41 (1998): 692–703.

19. Siobhan O’Mahony and Beth A. Bechky, “Stretchwork: Managing the Career Progression Paradox in External Labor Markets,” Academy of Management Journal 49 (2006): 918–941.

20. Steven L. Premack and John P. Wanous, “A Meta- Analysis of Realistic Job Preview Experiments,” Journal of Applied Psychology 70 (1985): 706–719.

21. John P. Wanous, Timothy D. Poland, Stephen L. Premack, and K. Sharon Davis, “The Effects of Met Expectations on Newcomer Attitudes and Behaviors: A

Review and Meta-Analysis,” Journal of Applied Psychology 77(1992): 288–297.

22. Glenn M. McEvoy and Wayne F. Cascio, “Strategies for Reducing Employee Turnover: A Meta-Analysis,” Journal of Applied Psychology 70 (1985): 342–353; Premack and Wanous, “A Meta-Analysis of Realistic Job Preview Experiments”; Peter W. Hom, Rodger W. Griffeth, Leslie E. Palich, and Jeffrey S. Bracker. “An Exploratory Investigation into Theoretical Mechanisms Underlying Realistic Job Previews,” Personnel Psychology 51 (1998): 421–451.

23. Premack and Wanous, “A Meta-Analysis”; Robert D. Bretz and Timothy A. Judge, “Realistic Job Previews: A Test of the Adverse Self-Selection Hypothesis,” Journal of Applied Psychology 83 (1998): 330–337.

24. Bretz and Judge, “Realistic Job Previews.” 25. Bill Macaller and Shannon Jones, “Does HR Planning

Improve Business Performance,” Industrial Management 45, no. 1 (2003): 14–20.

26. Carlson, Connerly, and Mecham, “Recruitment Evaluation.”

27. Michelle Neely Martinez, “Recruiting Here and There,” HR Magazine 47, no. 2 (2002): 95–100.

28. Brian K. Griepentrog, Crystal M. Harold, Brian C. Holtz, Richard J. Klimoski, and Sean M. Marsh, “Integrating Social Identity and the Theory of Planned Behavior: Predicting Withdrawal from an Organizational Recruitment Process,” Personnel Psychology 65 (2012): 723-752; Edwin A. J. Van Hooft, Marise Ph. Born, Toon W. Taris, Jenk van der Flier, and Roland W. B. Blonk, “Predictors of Job Search Behavior Among Employed and Unemployed People,” Personnel Psychology 57 (2004): 25–59.

29. Alison E. Barber, Christina L. Daly, Cristina M. Giannontonio, and Jean M. Phillips, “Job Search Activities: An Examination of Changes over Time,” Personnel Psychology 47 (1994): 739–766.

30. Allison Stein Wellner, “Shop Our Store! Or Better Yet, Why Not Work Here?” Workforce Management Online, October 2004.

31. Frances McKee-Ryan, Zhaoli Song, Connie R. Wanberg, and Angelo J. Kinicki, “Psychological and Physical Well-Being During Unemployment: A Meta-Analytic Study,” Journal of Applied Psychology 90 (2005): 53–76.

32. Connie R. Wanberg, John D. Watt, and Deborah J. Rumsey, “Individuals Without Jobs: An Empirical Study of Job-Seeking Behavior and Reemployment,” Journal of Applied Psychology 81 (1996): 76–87.

33. Connie R. Wanberg, Jing Zhu, Ruth Kanfer, and Zhen Zhang, “After the Pink Slip: Applying Dynamic Motivation Frameworks to the Job Search Experience,” Academy of Management Journal 55 (2012): 261-284; Connie R. Wanberg, “Antecedents and Outcomes of Coping Behaviors Among Unemployed and Reemployed Individuals,” Journal of Applied Psychology 82 (1997): 731–744; Connie R. Wanberg, Ruth Kanfer, and Maria Rotundo, “Unemployed Individuals: Motives, Job-Search Competencies, and Job-search Constraints as Predictors of Job Seeking and Reemployment,” Journal of Applied Psychology 84 (1999): 897–910.

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34. Frances Devine, Tom Baum, Niamh Hearns, and Adrian Devine, “Managing Cultural Diversity: Opportunities and Challenges for Northern Ireland Hoteliers,” International Journal of Contemporary Hospitality Management 19 (2007): 120–132.

35. John W. Boudreau, Wendy R. Boswell, Timothy A. Judge, and Robert D. Bretz, Jr., “Personality and Cognitive Ability as Predictors of Job Search Among Employed Managers,” Personnel Psychology 54 (2001): 25–50.

36. Robert D. Bretz, John W. Boudreau, and Timothy A. Judge, “Job Search Behavior of Employed Managers,” Personnel Psychology 47 (1994): 275–301.

37. Thomas W. Lee, Terence R. Mitchell, Lowell Wise, and Steven Fireman, “An Unfolding Model of Voluntary Employee Turnover,” Academy of Management Journal 39 (1996): 5–36.

38. Robert D. Bretz, John W. Boudreau, and Timothy A. Judge, “Job Search Behavior of Employed Managers,” Personnel Psychology 47 (1994): 275–301.

39. Gary Blau, “Further Exploring the Relationship Between Job Search and Voluntary Individual Turnover,” Personnel Psychology 46 (1993): 313–330.

40. Timothy M. Gardner, “In the Trenches at the Talent Wars: Competitive Interaction for Scarce Human Resources,” Human Resource Management 41 (2002): 225–237.

41. Alison E. Barber and Mark V. Roehling, “Job Postings and the Decision to Interview: A Verbal Protocol Analysis,” Journal of Applied Psychology 78 (1993): 845–856.

42. Krista l. Uggerslev, Neir E. Fassina, and David Kraichy, “Recruiting Through the Stages: A Meta- Analytic Test of Predictors of Applicant Attraction at Different Stages of the Recruiting Process,” Personnel Psychology 65 (2012): 597–660.

43. Daniel B. Turban, Chung-Ming Lau, Hang-Yue Ngo, Irene H. S. Chow, and Steven X. Si, “Organizational Attractiveness of Firms in the People’s Republic of China: A Person–Organization Fit Perspective,” Journal of Applied Psychology 86 (2001): 194–206.

44. Margaret E. Brooks, Scott Highhouse, Steven S. Russell, and David C. Mohr, “Familiarity, Ambivalence, and Firm Reputation: Is Corporate Fame a Double- Edged Sword?” Journal of Applied Psychology 88 (2003): 904–914.

45. Christopher J. Collins, “The Interactive Effects of Recruitment Practices and Product Awareness on Job Seekers’ Employer Knowledge and Application Behaviors,” Journal of Applied Psychology 92 (2007): 180–190.

46. Christopher J. Collins and Jian Han, “Exploring Applicant Pool Quantity and Quality: The Effects of Early Recruitment Practice Strategies, Corporate Advertising, and Firm Reputation,” Personnel Psychology 57 (2004): 685–717.

47. Barber and Roehling, “Job Postings and the Decision to Interview.”

48. Daniel M. Cable and Timothy A. Judge, “Pay Preferences and Job Search Decisions: A Person– Organization Fit Perspective,” Personnel Psychology 47 (1994): 317–348.

49. Filip Lievens and Scott Highhouse, “The Relation of Instrumental and Symbolic Attributes to a Company’s Attractiveness as an Employer,” Personnel Psychology 56 (2003): 75–102

50. Jerel E. Slaughter, Michael J. Zichar, Scott Highhouse, and David C. Mohr, “Personality Trait Inferences about Organizations: Development of a Measure and Assessment of Construct Validity,” Journal of Applied Psychology 89 (2004): 85–103.

51. Ibid.; Timothy A. Judge and Robert D. Bretz, “Effects of Work Values on Job Choice Decisions,” Journal of Applied Psychology 77 (1992): 261–271; Lievens and Highhouse, “The Relation of Instrumental and Symbolic Attributes.”

52. Christopher J. Collins and Cynthia Kay Stevens, “The Relationship Between Early Recruitment-Related Activities and the Application Decisions of New Labor-Market Entrants: A Brand Equity Approach to Recruitment,” Journal of Applied Psychology 87 (2002): 1121–1133.

53. Steven D. Maurer, Vince Howe, and Thomas W. Lee, “Organizational Recruiting as Marketing Management: An Interdisciplinary Study of Engineering Graduates,” Personnel Psychology 45 (1992): 807–834.

54. Sara L. Rynes, Robert D. Bretz, Jr., and Barry A. Gerhart, “The Importance of Recruitment in Job Choice,” Personnel Psychology 44 (1991): 487–521.

55. Taken from Wendy R. Boswell, Mark V. Roehling, Marcie A. LePine, and Lisa M. Moynihan, “Individual Job Choice Decisions and the Impact of Job Attributes and Recruitment Practices: A Longitudinal Field Study,” Human Resource Management 42 (2003): 23–37.

56. Allison E. Barber, Michael J. Wesson, Quinetta M. Roberson, and M. Susan Taylor, “A Tale of Two Job Markets: Organizational Size and Its Effects on Hiring Practices and Job Search Behavior,” Personnel Psychology 52 (1999): 841–867.

57. Cable and Judge, “Pay Preferences and Job Search Decisions.”

58. Daniel B. Turban and Thomas L. Keon, “Organizational Attractiveness: An Interactionist Perspective,” Journal of Applied Psychology 78 (1993): 184–193.

59. Cable and Judge, “Pay Preferences and Job Search Decisions.”

60. Timothy A. Judge and Daniel M. Cable, “Applicant Personality, Organizational Culture, and Organization Attraction,” Personnel Psychology 50 (1997): 359–394.

61. Ibid. 62. Judge and Bretz, “Effects of Work Values on Job

Choice Decisions.” 63. Maurer et al., “Organizational Recruiting as Marketing

Management.” 64. Jessica Mintz, “Large Firms Increasingly Rely on

Employees for Job Referrals,” Wall Street Journal, March 1, 2005, B4.

65. Mary-Lane Kamberg, “Personal Networking Key in Finding a Job,” Women in Business, September/October 2001, 11.

66. Carroll Lachnit, “Employee Referral Saves Time, Saves Money, Delivers Quality,” Workforce Management 80, no. 6 (2001): 66–70.

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Endnotes 201

67. Ibid.; Michelle Neely Martinez, “The Headhunter Within: Turn Your Employees into Recruiters with a High-Impact Referral Program,” HR Magazine 46, no. 8 (2001): 48–55; Alison Coleman, “Should You Phone a Friend?” Director, May 2002, 30.

68. Mark Laurie, “Employee Referral Programs: Highly Qualified New Hires Who Stick Around,” Canadian HR Reporter, June 4, 2001, 21.

69. Malcolm McCulloch, “The Best Recruiting Sources for Call Centers,” Call Center Magazine, April 2003, 8.

70. Lachnit, “Employee Referral Saves Time.” 71. Rachel S. Shinnar, Cheri A. Young, and Marta

Meena, “The Motivations for and Outcomes of Employee Referrals,” Journal of Business and Psychology 19 (2004): 271.

72. Table content adapted from Michelle Neely Martinez, Lachnit, “Employee Referral Saves Time.”

73. Vanessa Peters, “Don’t Bury the Newspaper Quite Yet,” Canadian HR Reporter, December 6, 2004, G9.

74. Rob Willock, “Employer Branding Is Key in Fight for Talent,” Personnel Today, May 17, 2005, 4.

75. Daniel M. Cable and Kang Yang Trevor Yu, “Managing Job Seekers’ Organizational Image Beliefs: The Role of Media Richness and Media Credibility,” Journal of Applied Psychology 91 (2006): 828–840.

76. H. Jack Walker, Hubert S. Feild, Jeremy B. Bernerth, and J. Bret Becton, “Diversity Cues on Recruitment Websites: Investigating the Effects of Job Seekers’ Information Processing,” Journal of Applied Psychology 97 (2012): 214-224.

77. In Lee, “The Evolution of E-Recruiting: A Content Analysis of Fortune 100 Career Web Sites,” Journal of Electronic Commerce in Organizations, July/September 2005, 57–68.

78. Ibid.; Anonymous, “The Pros and Cons of Online Recruiting,” HR Focus, April 2004, 52.

79. David Brown, “Unwanted Online Jobseekers Swamp HR Staff,” Canadian HR Reporter, April 5, 2004, 1.

80. Brian R. Dineen and Raymond A. Noe, “Effects of Customization on Application Decisions and Applicant Pool Characteristics in a Web-Based Recruitment Context,” Journal of Applied Psychology 94 (2009): 224–234.

81. Brian R. Dineen, Juan Ling, Steven R. Ash, and Devon DelVecchio, “Aesthetic Properties and Message Customization: Navigating the Dark Side of Web Recruitment,” Journal of Applied Psychology 92 (2007): 356–372.

82. Jeff Stimson, “Recruiting Via the Web,” The Practical Accountant 37, no. 7 (2004): 26–30.

83. www.kellyservices.us 84. Martinez, “Employee Referral Saves Time,” 66. 85. http://www.lilly.com/careers/ 86. James Bailey, Gary Heesacker, Karen Martinis, and

Connie Nott, “Student Recruitment Strategies,” CPA Journal 72 (2002): 58–59.

87. Jack Gault, John Redington, and Tammy Schlager, “Undergraduate Business Internships and Career Success: Are They Related?” Journal of Marketing Education 22 (2000): 45–53.

88. Mary L. Connerly, Kevin D. Carlson, and Ross L. Mecham III, “Evidence of Differences in Applicant Pool Quality,” Personnel Review, 32 (2003): 22–39.

89. Jac Fitz-Enz, “HR Measurement: Formulas for Success,” Personnel Journal 64, no. 10 (1985): 53–60.

90. Barbara Davison, “The Importance of Cost per Hire,” Workforce 80, no. 1 (2001): 32–34.

91. Eilene Zimmerman, “Complexity Squashes Ethics—Fight Back with Simplicity,” Workforce Management, online September 19, 2011; http://www. workforce.com/blogs/1-the-ethical-workplace/post/ complexity-squashes-ethics-fight-back-with-simplicity

92. Carlson, Connerly, and Mecham III, “Recruitment Evaluation.”

93. Philip G. Swaroff, Lizabeth A. Barclay, and Allan R. Bass, “Recruiting Sources: Another Look,” Journal of Applied Psychology 70 (1985): 720–728; Charles R. Williams, Chalmer E. Labis, and Thomas H. Stone, “Recruitment Sources and Posthire Outcomes for Job Applicants and New Hires: A Test of Two Hypotheses,” Journal of Applied Psychology 78 (1993): 163–172; G. Stephen Taylor, “The Relationship Between Source of New Employees and Attitudes Toward the Job,” Journal of Social Psychology 134 (2001): 99–110.

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C h a p t e r 6

Selecting Employees Who Fit

A M A N A G E R ’ S P E R S P E C T I V E

JAVIER’S MESSAGE FROM THE HUMAN RESOURCE DEPARTMENT FILLS HIM WITH BOTH ANXIETY AND

EXCITEMENT. HE JUST RECEIVED AUTHORIZATION TO HIRE AN ADDITIONAL MEMBER FOR HIS CUSTOMER

SERVICE TEAM. JAVIER IS EXCITED BECAUSE HIRING THE RIGHT PERSON COULD REALLY BOOST THE TEAM’S PERFORMANCE; HE IS ANXIOUS BECAUSE THIS WILL BE HIS FIRST HIRING DECISION.

Javier has total freedom to hire anybody he wants. What should he focus on when he makes his hiring decision? Should he hire someone who is likely to stay with the company for a long time? Should he look for someone who already has the skills to do the job? Is it more important to hire someone with the potential to be a high performer in several different jobs? Should he try to find someone who is similar to current team members, or should he bring in new ideas by hiring someone very different?

One reason for Javier’s anxiety is a story he recently heard where a manager in a different department asked a number of illegal questions during an interview. He has also heard a number of stories about managers being evaluated nega- tively because they spent too much money searching for employees. Javier has a general idea

of the questions that should be avoided when conducting inter- views, but he makes himself a note to be sure to ask someone from the human resource department to remind him of potentially problematic questions. He also wants to get some help identifying the most cost- effective hiring methods.

Javier also thinks about the specific methods he might use to evaluate people. He has participated in several job interviews, and he knows that inter- views are important. But what questions should he ask? Should he ask everyone the same questions? Will he be able to judge whether an answer is good or bad? Should he have someone else interview a group of finalists for the job?

Javier knows he won’t have time to interview everyone who will apply. How should he screen applicants? A friend recently told him about using personality tests for hiring. Javier also remem- bers taking some type of intelligence test when he applied for a different job a number of years ago. He thought the intelligence test was kind of interesting, but he wonders if such tests really help

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C h a p t e r 7

Managing Employee Retention and

Separation

A M A N A G E R ’ S P E R S P E C T I V E

ANGELA CLOSES HER CELL PHONE AND TAKES A DEEP BREATH. WAS IT REALLY A GOOD IDEA TO ACCEPT THE JOB AS RESTAURANT MANAGER? IT SOUNDED LIKE SUCH A GOOD IDEA WHEN MARK, THE REGIONAL MANAGER, OFFERED HER THE POSI- TION TWO MONTHS AGO. SHE WON’T GRADUATE WITH HER DEGREE IN ELEMENTARY EDUCATION FOR

TWO MORE YEARS. BEING THE MANAGER PROVIDES HER WITH FLEXIBILITY TO TAKE CLASSES WHEN SHE

WANTS, BUT TRYING TO SCHEDULE OTHER EMPLOY- EES IS MUCH MORE STRESSFUL THAN SHE EXPECTED.

Just now Barbara—a new cook hired last month— called to tell Angela that she is quit- ting and will not work the hours scheduled during the upcoming week. This is the third time in two months that someone has quit with little or no advance notice. It will be difficult to schedule other employees to cover for Barbara during the upcom- ing week, let alone quickly find someone to hire as a new cook.

From experience, Angela knows that cooks and food servers are unlikely to stay with the same

restaurant for long. Yet surely it should be possible to create a fun working atmosphere that would make employees less likely to leave. Might it help to pay higher wages? Would older workers and people with family responsibilities be more likely to stay than the college students she currently hires?

Angela’s thoughts quickly shift to the other dis- agreeable task she faces today. The very thought of meeting with Simon is enough to make Angela want to quit, herself. Yesterday Simon was late for work the second time this week. Once he arrived, he spent much of his shift wasting time. Working with first graders will surely be easier than supervising Simon. Should she just fire him?

Thinking about firing someone scares Angela. Would Simon become emotional? When should she meet with him if she decides to deliver the bad news? What should she say? As questions about

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204 Chapter 6 Selecting Employees Who Fit

Employee selection is the process of choosing people to bring into an orga- nization. Effective selection provides many benefits. Selecting the right employees can improve the effectiveness of other human resource practices and prevent numerous problems. For instance, hiring highly motivated employees who fit with the organizational culture can reduce disciplinary problems and diminish costs related to replacing employees who quit. Such benefits help explain why organizations that use effective staffing practices have higher annual profit and faster growth of profit.1 In short, a strategic approach to selecting employees can help an organization obtain and keep the talent necessary to produce goods and services that exceed the expecta- tions of customers.

One organization that expends a lot of effort on selection is the military. Each year, the United States Marine Corps selects and trains over 38,000 peo- ple. Of course, not everyone who wants to become a marine is accepted into the Corps. Before being accepted and enduring training at either the San Diego, California, or Parris Island, South Carolina, location, recruits must pass both mental and physical examinations.2

Because marines are required to make sound decisions quickly, the Marine Corps bases part of its selection decisions on scores for a mental abil- ity test. This examination is known as Armed Services Vocational Aptitude Battery (ASVAB). The test consists of 225 multiple-choice questions in the areas of General Science, Arithmetic Reasoning, Word Knowledge, Paragraph Comprehension, Mathematics Knowledge, Electronic Information, Auto and Shop Information, Mechanical Comprehension, and Assembling Objects. Test results determine not only whether someone will be admitted to the Marine Corps but also what type of occupations can be pursued once basic training is complete. For example, it takes a higher score to become an aerial navigator than it does to become a combat photographer.3

Employee selection The process of testing and gathering information to decide whom to hire.

After reading this chapter you should be able to:

Describe how employee selection practices can strategically align with overall HR strategy.

Explain what makes a selection method good; be able to apply the concepts of reliability, validity, utility, legality and fairness, and acceptability to appropriately evaluate different employee selection methods.

Describe several commonly used selection methods, evaluate their strengths and weaknesses, and explain how they link with particular employee selection strategies.

Explain how to combine scores from several different selection methods to arrive at a final selection decision.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

L E A R N I N G O B J E C T I V E S

How Can Strategic Employee Selection Improve an Organization?

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How Is Employee Selection Strategic? 205

Given that the job also requires physical fitness, recruits must additionally pass an assessment known as the Initial Strength Test (IST). The test for men requires pull-ups, crunches, and a timed run. For women the test has histori- cally required a flex armed hang in place of pull-ups, but test administrators are discussing whether they should require female recruits to demonstrate pull-ups the same as male recruits. This shift parallels the recent change to allow female marines into combat units.4

Physical testing does not, however, end once someone is accepted into the Marine Corps. Each year a marine must complete an evaluation known as the Physical Fitness Test (PFT), which is similar to the IST. Each marine must also complete an annual Combat Fitness Test (CFT), which includes completing a timed endurance test, a lifting exercise, and an obstacle course requiring activities such as crawling, carrying, and throwing.5

How Is Employee Selection Strategic?

LEARNING OBJECTIVE 1

As we can see from the Marine Corps example, hiring the right employees often takes a great deal of planning. An organization’s employee selection practices are strategic when they ensure that the right people are in the right places at the right times. This means that good selection practices must fit with an organization’s overall HR strategy. As described in Chapter 2, HR strategies vary along two dimensions: whether they have an internal or an external labor orientation and whether they compete through cost or differentiation. These overall HR strategies provide important guidance about the type of employee selection practices that will be most effective for a particular organization.

ALIGNING TALENT AND HR STRATEGY Consistent with the overall HR strategies, strategic selection decisions are based on two important dimensions. One dimension represents differences in the type of talent sought. At one end of the continuum is generalist talent— employees who may be excellent workers but who do not have particular areas of expertise or specialization. At the other end of the continuum is specialist talent—employees with specific and somewhat rare skills and abilities.6

Building Strength Through HR

UNITED STATES MARINE CORPS The United States Marine Corps thus uses testing to evaluate not only its 38,000 new recruits each year but also the physical abilities of continuing marines. Testing practices include

Using a minimum score on a mental ability test to determine who is accepted, as well as

cutoff scores to place marines into specific positions. Requiring a minimum score on a physical fitness test measuring basic strength and endurance. Ongoing assessment of physical ability not only to ensure a minimum level of fitness but also to determine promotions.

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206 Chapter 6 Selecting Employees Who Fit

Another dimension represents the type of relationship between the employees and the organization. At one end of the continuum is long-term talent. Employees in this category stay with the organization for a long time and develop a deep understanding of company practices and operations. At the other end of the continuum is short-term talent. These employees move from organization to organization without developing expertise in how things are done at any particular place.7 Combining the two dimensions yields four general categories shown in Figure 6.1: short-term generalist talent, long-term generalist talent, long-term specialist talent, and short-term specialist talent. Next, we look at each of these categories in turn and consider how they fit with the HR strategies introduced in Chapter 2.

Short-Term Generalists If you were hired to work at a drive-in restaurant, you would not need spe- cialized skills, you would not earn high wages, and you probably would not keep the job for a very long time. Fast-food workers are short-term generalists, who provide a variety of different inputs but do not have areas of special skill or ability. Other examples include some retail sales clerks and hotel house- keepers. Short-term generalist talent is associated with the Bargain Laborer HR strategy.8 Organizations with this HR strategy fill most positions by hir- ing people just entering the workforce or people already working in similar jobs at other companies. Selection has the objective of identifying and hiring employees to produce low-cost goods and services, and selection decisions are based on identifying people who can perform simple tasks that require little specialized skill.

Hiring generalists can be beneficial because people without specialized skills do not generally demand high compensation, which keeps payroll costs as low as possible. Because generalists lack specific expertise, they also are usually more willing to work in routine jobs and do whatever they are asked.

Short-term generalists Workers hired to produce general labor inputs for a relatively short period of time.

Short-Term Generalists Little Need for Fit

Potential and Dependability

Bargain Laborer External/Cost HR Strategy

Long-Term Generalists Need for Organization Fit Potential and Motivation

Loyal Soldier Internal/Cost HR Strategy

Long-Term Specialists Need for Organization Fit and Job Fit

Potential for Specific Expertise

Committed Expert Internal/Differentiation HR Strategy

Generalist

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Free Agent External/Differentiation HR Strategy

Figure 6.1 Strategic Framework for Employee Selection.

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How Is Employee Selection Strategic? 207

Long-Term Generalists If you were to take a job working for an electricity provider, you might not need specialized skills, but you would most likely plan to remain with the orga- nization for a long career. People working for utility companies are often long- term generalists who do not have technical expertise but who develop skills and knowledge concerning how things are done in a specific organization. Other common examples of long-term generalists are people who work for government agencies and for some package delivery companies. These work- ers contribute in a number of areas but do not need specific technical skills and abilities. Long-term generalists are beneficial for organizations using the Loyal Soldier HR strategy.9 Organizations with this HR strategy focus on keep- ing employees once they are hired. Staffing still has the objective of hiring employees to produce low-cost goods and services, but a stronger commit- ment is formed, and efforts are made to identify people who will remain with the organization for a long time.

The generalist’s lack of specific expertise allows firms to reduce payroll costs. However, over time employees develop skills and abilities that are only valuable to the specific organization, which reduces the likelihood that they will move to another employer. People develop relationships and form a strong sense of commitment to the organization.

Long-Term Specialists Suppose you took a job as an accountant with a large firm that makes and sells consumer goods such as diapers and cleaning products. People doing this job are most often long-term specialists who develop deep expertise in a particular area. Pharmaceutical sales representatives and research scientists are commonly employed as long-term specialists. People in these jobs are expected to develop specialized skills and stay with the organization for a long time. The use of long- term specialists fits the Committed Expert HR strategy.10 Organizations that use this HR strategy develop their own talent. Selection has the objective of iden- tifying people capable of developing expertise in a particular area so they can innovate and produce superior goods and services over time.

Hiring people who can develop specialized skills over time enables orga- nizations to create and keep a unique resource of talent that other organiza- tions do not have. Employees are given the time and assets to develop the skills they need to be the best at what they do.

Short-Term Specialists Information technology specialists often work as short-term specialists— employees who provide specific inputs for relatively short periods of time. These workers are valuable for organizations using the Free Agent HR strat- egy.11 Organizations with this HR strategy hire people away from other organi- zations. Staffing is aimed at hiring people who will bring new skills and produce innovative goods and top-quality service. Selection decisions focus on identify- ing people who have already developed specific skills. Other examples of this type of talent include investment bankers and advertising executives.

Hiring short-term specialists allows firms to quickly acquire needed exper- tise. New hires bring unique knowledge and skills to the organization. The organization pays a relatively high price for such knowledge and skills but makes no long-term commitments.

Long-term generalists Workers hired to perform a variety of different jobs over a relatively long period of time.

Long-term specialists Workers hired to develop specific expertise and establish a lengthy career within an organization.

Short-term specialists Workers hired to provide specific labor inputs for a relatively short period of time.

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208 Chapter 6 Selecting Employees Who Fit

MAKING STRATEGIC SELECTION DECISIONS Another way to examine how organizations make employee selection deci- sions focuses on two primary factors: the balance between job-based fit and organization-based fit and the balance between achievement and potential. As you can see in Figure 6.1, both factors relate clearly to the talent categories just discussed.

Balancing Job Fit and Organization Fit The first area of balance concerns whether employees should be chosen to fit in specific jobs or to fit more generally with the organization. When job-based fit is the goal, the organization seeks to match an individual’s abilities and interests with the demands of a specific job. This type of fit is highly depen- dent on a person’s technical skills. For instance, high ability in mathematics results in fit for a job such as financial analyst or accountant. In contrast, orga- nization-based fit is concerned with how well the individual’s characteristics match the broader culture, values, and norms of the firm. Organization-based fit depends less on technical skills than on an individual’s personality, values, and goals.12 A person with conservative values, for example, might fit well in a company culture of caution and tradition. Employees who fit with their orga- nizations have higher job satisfaction, and better fit with the organization has been shown to lead to higher performance in many settings.13 As described in the “How Do We Know?” feature, the HR strategy has an impact on how job and organization fit are weighted.

As suggested earlier, we can combine the concept of fit with the talent- based categories discussed earlier. In general, job-based fit is more important in organizations that seek to hire specialists than in those that seek gener- alists. Similarly, organization-based fit is more important for long-term than for short-term employees. These differences provide strategic direction for employee selection practices.

Organizations pursuing Bargain Laborer HR strategies are not highly con- cerned about either form of fit. Employees do not generally bring specific skills to the organization. Neither are they expected to stay long enough to necessitate close organizational fit. Thus, for firms pursuing a Bargain Laborer HR strategy, fit is not strategically critical, and hiring decisions tend to focus on obtaining the least expensive labor regardless of fit.

Organizations pursuing the Loyal Soldier HR strategy benefit from hir- ing employees who fit with the overall organization. Job-based fit is not critical. Employees rotate through a number of jobs, and success comes more from loyalty and high motivation than from specific skills. In con- trast, lengthy expected careers make fit with the organization very impor- tant. Employee selection decisions in organizations with a Loyal Soldier HR strategy should thus focus primarily on assessing personality, values, and goals.

Organizations pursuing a Committed Expert HR strategy require both job-based fit and organization-based fit. Organization-based fit is necessary because employees need to work closely with other members of the organi- zation throughout long careers. Job-based fit is necessary because employ- ees are expected to develop expertise in a specific area. Even though new employees may not yet have developed specific job skills, general aptitude

Job-based fit Matching an employee’s knowledge and skills to the tasks associated with a specific job.

Organization-based fit Matching an employee’s characteristics to the general culture of the organization.

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How Is Employee Selection Strategic? 209

in the specialized field, such as accounting or engineering, is important. Selection decisions in firms pursuing Committed Expert HR strategies should thus be based on a combination of technical skills and personality, values, and goals.

Job-based fit is critical for organizations pursuing a Free Agent HR strat- egy. These organizations hire employees specifically to perform specialized tasks and expect them to bring required knowledge and skills with them. An employee’s stay with the organization is expected to be relatively short, which means that fit with the organization is not critical. Selection decisions in orga- nizations with a Free Agent HR strategy should thus focus primarily on assess- ing technical skills and abilities.

Balancing Achievement and Potential The second area of balance concerns whether employees should be chosen because of what they have already achieved or because of their potential for future accomplishments. Assessments aimed at measuring achievement focus on history and past accomplishments that reveal information about acquired abilities and skills. For instance, a job applicant for an elementary school teaching position might have graduate degrees and years of experience that demonstrate teaching skills. In contrast, assessments aimed at measuring

Achievement A selection approach emphasizing existing skills and past accomplishments.

WHICH TYPE OF FIT IS MOST IMPORTANT? Do managers making selection decisions pay more attention to job fit or organization fit? Are candi- dates who have average fit on both dimensions pre- ferred to candidates who are high on one and low on the other? Does it depend on the nature of the job? Tomoki Sekiguchi and Vandra Huber conducted two studies to answer these questions. In one study of 120 and a second study of 92 middle- and senior- level executives, participants completed evaluations of candidate profiles that assessed how they would evaluate the credentials of potential job applicants for positions such as management, attorney, nurse, and nurse assistant.

The executives were most likely to reject appli- cants who had very poor job fit. They were more tol- erant of poor organization fit. However, individuals with very poor fit for either the organization or the job were more likely to be rejected than individuals with average fit in both areas. Consistent with the con- tingency approach to human resource management, organization fit was given more weight for permanent

compared to temporary positions, whereas job fit was more important for short-term and knowledge- intensive positions. Managers thus seem to take into account characteristics of the position being filled and adjust their fit assessments to match the situation.

The Bottom Line. Poor fit with a job is the most likely reason why an individual might not be selected for a position, but being really low on either job or organizational fit is likely to result in rejection. Organization fit is more likely to be taken into account when positions are long- term in nature, which suggests that managers do indeed make strategic hiring decisions. Professors Sekiguchi and Huber thus concluded that char- acteristics of the position do indeed influence the balance between job and organization fit.

Source: Tomoki Sekiguchi and Vandra L. Huber, “The Use of Person–Organization Fit and Person–Job Fit Information in Making Selection Decisions,” Organizational Behavior and Human Decision Processes 116 (2011): 203–216.

How Do We Know?

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210 Chapter 6 Selecting Employees Who Fit

potential are future-oriented and seek to predict how a person will learn and develop knowledge and skill over time.14 In this case, an applicant for an ele- mentary teaching position may just have graduated with high honors from a prestigious university, demonstrating high potential.

Again, we can relate the choice between achievement and potential to the framework in Figure 6.1. Organizations that use Bargain Laborer HR strate- gies do not require highly developed skills.15 Measures of achievement are not required. For these organizations, selection methods assess potential by predicting whether applicants will be dependable and willing to carry out assigned tasks.

Hiring people based on potential is critical for organizations with long- term staffing strategies. These organizations provide a great deal of training, which suggests that people learn many skills after they are hired. With a Loyal Soldier HR strategy, selection measures should focus on ability, motivation, and willingness to work in a large variety of jobs. For a Committed Expert HR strategy, the focus is on assessing potential to become highly skilled in a particular area.

Organizations seeking short-term specialists focus on measuring achieve- ment, because they seek employees who already have specific skills. Required skills change frequently, and a general lack of training by the organization makes it very difficult for these employees to keep up with new technologies. Hiring practices for organizations with Free Agent HR strategies thus focus on identifying individuals who have already obtained the necessary skills and who have demonstrated success in similar positions.

Gaining Competitive Advantage from Alignment Of course, not all organizations have selection practices that are perfectly aligned with overall HR strategies. Some firms hire long-term generalists even though they have a Free Agent HR strategy. Other firms hire short-term spe- cialists even though they have a Bargain Laborer HR strategy. The selection practices in such organizations are not strategic, and these organizations often fail to hire employees who can really help them achieve their goals. In short, organizations with closer alignment between their overall HR strategies and their specific selection practices tend to be more effective. They are success- ful because they develop a competitive advantage by identifying and hiring employees who fit their needs and strategic plans.16 What works for one orga- nization may not work for another organization with a different competitive strategy. A key for effective staffing is thus to balance job fit and organization fit, as well as achievement and potential, in ways that align staffing practices with HR strategy.

Potential A selection approach emphasizing broad characteristics that foreshadow capability to develop future knowledge and skill.

? CONCEPT CHECK 1. What are the four types of talent, and how do they fit with

the four approaches to overall HR strategy? 2. What is the difference between organization fit and job fit,

and which is most critical for each of the HR strategies? 3. How do achievement and potential fit with strategic

selection?

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What Makes a Selection Method Good? 211

What Makes a Selection Method Good?

LEARNING OBJECTIVE 2

We have considered strategic concerns in employee selection. The next step is to evaluate specific methods that help accomplish strategy. How can an orga- nization go about identifying tests or measures that will identify people who fit or who have the appropriate mix of potential and achievement? Should prospective employees be given some type of paper-and-pencil test? Is a back- ground check necessary? Will an interview be helpful? If so, what type of inter- view is best? Answers to the questions provide insights about the accuracy, cost effectiveness, fairness, and acceptability of various selection methods. Next, we examine a few principles related to each question. These principles include reliability, validity, utility, legality and fairness, and acceptability. Figure 6.2 illustrates basic questions associated with each principle.

RELIABILITY Reliability is concerned with consistency of measurement. An example that illustrates this concept can be made by examining the selection of university athletes.

Imagine that two coaches for a football team have just returned from sepa- rate recruiting trips. They are meeting to discuss the recruits they visited. The first coach describes a great recruit who weighs 300 pounds. The second coach reports about someone able to bench press 500 pounds. Which player should the coaches select? It is impossible to compare the recruits, since different information was obtained about each person. The measures are not reliable.

The football example may seem a bit ridiculous, but it is not much dif- ferent from what happens in many organizations. Just think of the interview process. Suppose five different people interview a person for a job. In many organizations, the interviewers’ judgments would not be consistent.

How, then, can we determine whether a selection method is reliable? One way to evaluate reliability is to test a person on two different occasions and then determine whether scores are similar across the two times. We call this the test-retest method of estimating reliability. Another way to evaluate

Reliability An assessment of the degree to which a selection method yields consistent results.

Test-retest method A process of estimating reliability that compares scores on a single selection assessment obtained at different times.

Figure 6.2 What Makes a Selection Method Good?

Is it related to performance?

Is it cost effective?

How will applicants

react?

Is it legal? Is it fair?

Is it consistent?

VALIDITY UTILITY LEGALITY/FAIRNESS ACCEPTABILITYRELIABILITY

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212 Chapter 6 Selecting Employees Who Fit

reliability is to give two different forms of a test. Since both tests were designed to measure the same thing, we would expect people’s scores to be similar. This is the alternate-forms method of estimating reliability. A similar method involves the use of a single test that is designed to be split into two halves that measure the same thing. The odd- and even-numbered questions might be written so that they are equivalent. We call this the split-halves method of estimating reliability. A final method, called the inter-rater method, involves having different raters provide evaluations and then determining whether the raters agree.

Each method of estimating reliability has its own strengths and weaknesses. However, all four methods rely on the correlation coefficient, a numeri- cal indicator of the strength of the relationship between two sets of scores. Correlation coefficients range from a low of 0, which indicates no relation- ship, to a high of 1, which indicates a perfect relationship. Figure 6.3 provides an illustration of correlation coefficients. Two scores for each person are rep- resented in the graph. The first score is plotted on the horizontal axis, and the second score is plotted on the vertical axis. Each person’s two scores are thus represented by a dot. In the graph representing a low correlation, you can see that some people who did very well the first time did not do well the second time. Others improved a lot the second time. The scores are quite scattered, and it would be difficult to predict anyone’s second score based on his or her first score. In the graph representing a high correlation, the scores begin to follow a straight line. In fact, scores with a correlation of 1 would plot as a single line where each person’s second score could be predicted perfectly by his or her first score.

Correlation coefficients can also be negative (indicating that high scores on one measure are related to low scores on the other measure), but we do not generally observe negative correlations when assessing reliability. When it comes to reliability estimates, a higher correlation is always better. A correla- tion coefficient approaching 1 tells us that people who did well on one of the assessments generally did well on the other.

Just how high should a reliability estimate be? Of course, this depends on many different aspects of the assessment situation. Nevertheless, a good guide- line is that a correlation coefficient of .85 or higher suggests adequate reli- ability for test-retest, alternate-forms, and split-halves estimates.17 Inter-rater

Alternate-forms method A process of estimating reliability that compares scores on different versions of a selection assessment.

Split-halves method A process of estimating reliability that compares scores on two parts of a selection assessment.

Inter-rater method A process of estimating reliability that compares assessment scores provided by different raters.

Correlation coefficient A statistical measure that describes the strength of the relationship between two measures.

Figure 6.3 Graphical Illustration of Correlations.

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What Makes a Selection Method Good? 213

reliability estimates are often lower because they incorporate subjective judg- ment, yet high estimates are still desirable.

Knowing in general how high reliability estimates should be makes manag- ers and human resource specialists better consumers of selection procedures. Consulting firms and people within an organization often propose many dif- ferent selection methods. Important decisions must be made about which of the many possible methods to use. The first question to ask about any selec- tion procedure is whether it is reliable. Information about reliability should be available from vendors who advocate and sell specific tests and interview methods.

VALIDITY Once reliability has been established, we can turn to a selection method’s validity. Suppose the football coaches in the earlier example have been taught about reliability. They go back to visit the recruits again and obtain more information. This time they specifically plan to obtain consistent information. When they report back, one of the coaches states that his recruit drives a blue car. The second coach says that his recruit drives a green car. The problem of reliability has been resolved. The coaches are now providing the same infor- mation about the two recruits. However, this information most likely has noth- ing to do with performance on the football field. We thus conclude that the information does not have validity, which means that it is not relevant for job performance.

How do we know if a test is valid? Evidence of validity can come in many forms, and assessments of validity should take into account all evidence sup- porting a relationship between the assessment technique and job perfor- mance.18 Nevertheless, as with reliability, certain methods for determining validity are most commonly used.

One method, called the content validation strategy, involves determining whether the content of the assessment method is representative of the job situation. For instance, a group of computer programmers might be asked to look at a computer programming test to determine whether the test measures knowledge needed to program successfully. The experts match tasks from the job description with skills and abilities measured by the test. Analyses are done to learn if the experts agree. The content validation strat- egy thus relies on expert judgments, and validity is supported when experts agree that the content of the assessment reflects the knowledge needed to perform well on the job. Content validation is a particularly important step for developing new tests and assessments. As a student, you see content vali- dation each time you take an exam. The course instructor acts as an expert who determines whether the questions on the exam are representative of the course material.

A second method for determining validity is known as the criterion-related validation strategy. This method differs from the content validation strategy in that it uses correlation coefficients to show that test or interview scores are related to measures of job performance. For example, a correlation coef- ficient could be calculated to measure the relationship between a personality trait and the dollars of business that sales representatives generate. A positive correlation coefficient can indicate that those who have high scores on a test of assertiveness generate more sales. In this case, a negative correlation coef- ficient might also be instructive, as it would indicate that people who have

Validity The quality of being justifiable. To be valid, a method of selecting employees must accurately predict who will perform the job well.

Content validation strategy A process of estimating validity that uses expert raters to determine if a test assesses skills needed to perform a certain job.

Criterion-related validation strategy A process of estimating validity that uses a correlation coefficient to determine whether scores on tests predict job performance.

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214 Chapter 6 Selecting Employees Who Fit

lower scores on a particular trait, such as anxiety, have higher sales figures. Either way, the test scores will be helpful for making hiring decisions and pre- dicting who will do well in the sales position.

In practice, two methods can be used to calculate criterion-related valid- ity coefficients. One method uses the predictive validation strategy. Here, an organization obtains assessment scores from people when they apply for jobs and then later measures their job performance. A correlation coefficient is calculated to determine the relationship between the assessment scores and performance. This method is normally considered the optimal one for estimating validity. However, its use in actual organizations presents certain problems. One problem is that it requires measures from a large number of people. If an organization hires only one or two people a month, it might take several years to obtain enough information to calculate a proper correlation coefficient. Another problem is that organizations may also be reluctant to pay for ongoing measurement before they have evidence that the assessments are really useful for predicting performance.

A second method for calculating validity coefficients uses the concurrent validation strategy. Here, the organization obtains assessment scores from people who are already doing the job and then calculates a correlation coef- ficient relating those scores to performance measures that already exist. In this case, for example, a personality test could be given to the sales represen- tatives already working for the organization. A correlation coefficient could be calculated to determine whether sales representatives who score high on the test also have high sales figures. This method is somewhat easier to use, but it too has drawbacks. One problem is that the existing sales representa- tives do not complete the personality assessment under the same conditions as job applicants. Applicants may be more motivated to obtain high scores and may also inflate their responses to make themselves look better. Existing sales representatives may have also learned things and changed in ways that make them different from applicants, which might reduce the accuracy of the test for predicting who will perform best when first hired.

Neither the predictive nor the concurrent strategy is optimal in all con- ditions. However, both yield important information, and this information comes in the form of a correlation coefficient. How high should this correla- tion coefficient be? Validity coefficients are lower than reliability coefficients. This is because a reliability coefficient represents the relationship between two things that should be nearly identical. In contrast, a validity coefficient repre- sents a relationship between two different things: the test or interview and job performance. Correlation coefficients representing validity rarely exceed .50. Many commonly used assessment techniques are associated with correlation coefficients that range from .25 to .50, and a few that are useful range from .15 to .25. This suggests that, as a guideline for assessing validity, a coefficient above .50 indicates a very strong relationship, coefficients between .25 and .50 indicate somewhat strong relationships, and correlations between .15 and .25 weaker but often important relationships.19 Once again, this information can help managers and human resource specialists become better consumers of assessment techniques. As with reliability, information about validity should be available for properly developed selection methods.

One additional concept related to validity is generalizability, which con- cerns the extent to which the validity of an assessment method in one con- text can be used as evidence of validity in another context. In some cases, differences in the job requirements across organizations might result in an

Predictive validation strategy A form of criterion-related validity estimation in which selection assessments are obtained from applicants before they are hired.

Concurrent validation strategy A form of criterion-related validity estimation in which selection assessments are obtained from people who are already employees.

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What Makes a Selection Method Good? 215

assessment that is valid in one context but not in another. For instance, a test that measures sociability may predict high performance for food servers in a sports bar but not for servers in an exclusive restaurant. This variability is known as situational specificity. In other cases, differences across contexts do not matter, and evidence supporting validity in one context can be used as evidence of validity in another context, a condition known as validity general- ization. A common example of a personality trait that exhibits generalization is conscientiousness. Being organized and goal oriented seems to lead to high performance regardless of the work context. We return to this subject later in discussions about different forms of assessment.

UTILITY The third principle associated with employee selection methods is utility, which concerns the method’s cost effectiveness. Think back to the football example. Suppose the university has decided to give all possible recruits a one-year scholarship, see how they do during the year, and then make a selec- tion decision about which players to keep on the team. (For the moment, we will ignore NCAA regulations.) Given an entire year to assess the recruits, the university would likely be able to make very good selection decisions, but the cost of the scholarships and the time spent making assessments would be extremely high. Would decisions be improved enough to warrant the extra cost?

Several factors influence the cost effectiveness, or utility, of a selection method. The first issue concerns validity. All other things being equal, selec- tion methods with higher validity also have higher utility. This is because valid selection methods result in more accurate predictions. In turn, more accurate predictions result in higher work performance, which leads to greater organi- zational profitability.

A second issue concerns the number of people selected into a position. An organization can generate more money when it improves its hiring proce- dures for jobs it fills frequently. After all, a good selection procedure increases the chances of making a better decision each time it is used. Even though each decision may only be slightly better than a decision made randomly or with a different procedure, the value of all the decisions combined becomes substantial. This explains why even selection decisions with moderate to low validity may have high utility.

A third issue concerns the length of time that people stay employed. Utility is higher when people remain in their jobs for long periods of time. This principle is clear when we compare the probable monetary return of making a good selection decision for someone in a summer job versus someone in a 40-year career. Hiring a great employee for a few months can be very help- ful. Hiring a great employee for an entire career, however, can yield a much greater financial benefit.

A fourth issue that influences utility is performance variability. To under- stand this concept, think about the difference in performance of good and bad cooks at a fast-food restaurant versus the difference in performance of cooks at an elite restaurant. The fast-food cooking process is so standardized that it usually does not matter who cooks the food. In this case, making a great selection decision has only limited value. In contrast, the cooking process at an elite restaurant requires the cook to make many decisions that directly influence the quality of the food. Selecting a good cook in this situation is

Situational specificity The condition in which evidence of validity in one setting does not support validity in other settings.

Validity generalization The condition in which evidence of validity in one setting can be seen as evidence of validity in other settings.

Utility A characteristic of selection methods that reflects their cost effectiveness.

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216 Chapter 6 Selecting Employees Who Fit

often the difference between a restaurant’s success and failure. Measuring performance variability for specific jobs can be somewhat difficult. Just what is the dollar value associated with hiring a good candidate versus a bad one? A number of studies suggest that salary provides a good approximation of this value.20 Variability in performance increases as salary increases. The dollar value of hiring a good company president is greater than the dollar value of hiring a good receptionist, and this difference is reflected in the higher com- pensation provided to the company president.

A fifth issue involves the ratio of applicants to hires for a particular position and concerns how choosy an organization can be. An organization that must hire three out of every four applicants is much less choosy than an organiza- tion that hires one out of every ten. If an organization hires almost everyone who applies, then it will be required to hire people even when the selection method suggests that they will not be high performers. Because people are hired regardless of the assessment results, very little value comes from devel- oping quality selection procedures. In contrast, an organization that receives a large number of applications for each position can benefit from good selec- tion techniques that help accurately predict which of the applicants will be the highest performer.

Still another issue related to utility is cost. Cost issues associated with selec- tion methods can be broken into two components: fixed costs associated with developing an assessment method and variable costs that occur each time the method is used. For example, an organization may decide to use a cognitive ability test to select computer programmers. The organization will incur some expenses in identifying an appropriate test and training assessors to use it. This cost is incurred when the test is first adopted. Most likely, the organiza- tion will also pay a fee to the test developer each time it gives the test to a job applicant. In sum, utility increases when both fixed and variable costs are low. In general, less-expensive tests create more utility, as long as their validity is similar to that of more-expensive tests.

Let’s look more closely at the variable costs of the assessment. Because it costs money for each person to take an assessment, utility decreases as the number of people tested or interviewed increases. However, there is a trad- eoff between the number of people being assessed and selectivity. Unless a test has low validity and is very expensive, the tradeoff usually works out such that the costs associated with giving the test to a large number of people are outweighed by the advantages of being choosy and hiring only the very best applicants.

Table 6.1 summarizes factors that influence utility. Of course, dollar esti- mates associated with utility are based on a number of assumptions and rep- resent predictions rather than sure bets. Just like predictions associated with financial investments, marketing predictions, and weather forecasting, these estimates will often be wrong. Some research even suggests that providing managers with detailed, complex cost information does not help persuade them to adopt the best selection methods.21 This does not, however, mean that cost analyses are worthless. Utility estimates can be used to compare human resource investments with other investments such as buying machines or expanding market reach. Estimates are also more likely to be accepted by managers when they are presented in a less complex manner and when they are framed as opportunity costs.22 Managers can use utility concepts to guide their decisions. For instance, managers should look for selection proce- dures that have high validity and relatively low cost. They should focus their

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What Makes a Selection Method Good? 217

attention on improving selection decisions for jobs involving a large number of people who stay for long periods of time. They should also focus on jobs in which performance of good and bad employees varies a great deal and in which there are many applicants for each open position.

LEGALITY AND FAIRNESS The fourth principle associated with selection decisions concerns legality and fairness. Think back to the football example again. Suppose the coaches decided to select only recruits who could pass a lie detector test. Is this legal? Chapter 3 specifically described a number of legal issues associated with human resource management.

Validity plays an important role in the legality of a selection method. As we discussed in Chapter 3, if a method results in lower hiring rates for members of a protected subgroup of people—such as people of a certain race—then adverse impact occurs. In this case, the company carries the burden of proof for demonstrating that its selection methods actually link with higher job per- formance. Because adverse impact exists in many organizations, being able to demonstrate validity is a legal necessity.

High validity may make it legal for an organization to use a test that screens out some subgroups at a higher rate than others, but this does not necessarily mean that everyone agrees that the test is fair and should be used. Fairness goes beyond legality and includes an assessment of potential bias or discrimi- nation associated with a given selection method. Fairness concerns the prob- ability that people will be able to perform satisfactorily in the job, even though the test predicted that they would not.

From the applicants’ perspective, selection procedures are seen as more fair if they believe they are given an opportunity to demonstrate their skills and qualifications.23 Because of this and other factors, assessments of fair- ness often depend a great deal on personal values. The very purpose of employee selection is to make decisions that discriminate against some peo- ple. Under optimal conditions, this discrimination is related only to differ- ences in job performance. Yet no selection procedure has perfect validity. All techniques screen out some people who would actually perform well if given the opportunity. For example, some research has found that tests can unfairly screen out individuals who believe that people like them don’t

Fairness A characteristic of selection methods that reflects individuals’ perceptions concerning potential bias and discrimination in the selection methods.

Table 6.1 Factors Influencing Utility of Selection Methods

Factor Utility When . . .

Validity ➞ selection test accuracy increases

Number ➞ more people are hired into that position

Tenure ➞ people who are hired stay with the organization for longer time periods

Performance variation ➞ there is a lot of variation in how well people do the job

Selectivity ➞ a smaller proportion of applicants are hired

Fixed cost

➞

it is expensive to establish procedures to use the test

Variable cost

➞

the cost of each test that is given is high

Number

➞

you give the test to a lot of people

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218 Chapter 6 Selecting Employees Who Fit

perform well on the specific test.24 For instance, a woman may not perform well on a mathematics test if she believes that women aren’t good at math. Simply seeing the test as biased can result in decreased motivation to try hard and thereby lower scores, even though these people have the skills necessary to do the job.

Even tests with relatively high validity screen out a number of people who could perform the job. Thus, some employee selection procedures may pro- vide economic value to organizations at the expense of individuals who are screened out even though they would perform well. This situation creates a tradeoff between a firm’s desire to be profitable and society’s desire for every- one with an equal chance to obtain quality employment. Perceptions of the proper balance between these values differ depending on personal values, making fairness a social rather than scientific concept.

ACCEPTABILITY A final principle for determining the merit of selection techniques is acceptability, which concerns how applicants perceive the technique. Can a selection method make people see the organization as a less-desirable place to work? Think back to the football coaches. Suppose they came up with a test of mental toughness that subjected recruits to intense physical pain. Would completing the test make some recruits see the school less favorably? Would some potential players choose to go to other schools that did not require such a test?

The football example shows that selection is a two-way process. As an orga- nization is busy assessing people, those same people are making judgments about whether they really want to work for the organization. Applicants see selection methods as indicators of an organization’s culture, which can influ- ence not only their decisions to join the organization but also subsequent feelings of job satisfaction and commitment.25 Organizations should thus be careful about the messages that their selection techniques are sending to applicants.

In general, applicants have negative reactions to assessment techniques when they believe that the organization does not need the information being gathered—that the information is not job related. For instance, applicants tend to believe that family and childhood experiences are private and unre- lated to work performance. Applicants also tend to be skeptical when they do not think the information from a selection assessment can be evaluated cor- rectly. In this sense, many applicants react negatively to handwriting analysis and psychological assessment because they do not believe these techniques yield information that can be accurately scored.26

One interesting finding is that perceptions of fairness differ among coun- tries. For instance, people in France see handwriting analysis and personality testing as more acceptable than do people in the United States. At the same time, people in the United States see interviews, résumés, and biographical data as more acceptable than do people in France.27

There is also some evidence that applicants react more positively to a par- ticular assessment when they believe they will do well on it. One study, for example, found people who use illegal drugs to be less favorable about drug testing.28 Although this is hardly surprising, it does illustrate the complexity of understanding individual reactions to employee selection techniques.

Acceptability A characteristic of selection methods that reflects applicants’ beliefs about the appropriateness of the selection methods.

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What Selection Methods Are Commonly Used? 219

? CONCEPT CHECK 1. What criteria are used to determine whether employee selec-

tion methods are good? 2. What are ways to assess selection method validity? 3. What influences the cost effectiveness of a selection method?

What Selection Methods Are Commonly Used?

LEARNING OBJECTIVE 3

Methods for selecting employees include testing, gathering information, and interviewing. We discuss particular practices associated with each of these cat- egories in the sections that follow.

TESTING Employment testing provides a method for assessing individual characteristics that help some people be more effective employees than others. Tests provide a common set of questions or tasks to be completed by each job applicant. Different types of tests measure knowledge, skill, and ability, as well as other characteristics, such as personality traits.

Cognitive Ability Testing Being smart is often measured through cognitive ability testing, which assesses learning, understanding, and ability to solve problems.29 Cognitive ability tests are sometimes referred to as “intelligence” or “mental ability” tests. Some measure ability in a number of specific areas, such as verbal reasoning and quantitative problem solving. However, research suggests that general mental ability, which is represented by a summation of the specific measures, is the best predictor of performance in work contexts.30 Of course, cognitive ability is somewhat related to education, but actual test scores have been shown to predict job performance better than measures of educational attainment.31

In general, cognitive ability tests are very effective selection tools. Specifically, they have high reliability; people tend to score similarly at dif- ferent times and on different test forms.32 In addition, these tests are dif- ficult to fake, and people are generally unable to substantially improve their scores by simply taking courses that teach approaches to taking the test.33 Validity is higher for cognitive ability tests than for any other selection method.34 This high validity, combined with relatively low cost, results in substantial utility. Cognitive ability tests are good, inexpensive predictors of job performance.

A particularly impressive feature of cognitive ability tests is their validity generalization. They predict performance across jobs and across cultures.35

Everything else being equal, people with higher cognitive ability perform bet- ter regardless of the type of work they do.36 Nevertheless, the benefits of high

Cognitive ability testing Assessment of a person’s capability to learn and solve problems.

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220 Chapter 6 Selecting Employees Who Fit

cognitive ability are greater for more complex jobs, such as computer program- mer or physician.37 One explanation is the link between cognitive ability and problem solving. People with higher cognitive ability obtain more knowledge.38

Example items from a widely used cognitive ability test are shown in Table 6.2. Can you see why these tests predict performance better in complex jobs? Researchers have also posited that people with higher cognitive ability adapt to change more quickly, although the actual evidence supporting better adapta- tion is inconsistent.39

A concern about cognitive ability tests is that people from different racial groups tend to score differently.40 This does not mean that every individual from a lower-scoring group will score low. Some individuals from each group will score better and some will score worse, but on average, some groups do worse than others. The result is adverse impact, wherein cognitive ability tests screen out a higher percentage of applicants from some minority groups. Because of their strong link with job performance, cognitive tests can be used legally in most settings. However, a frequent social consequence of using cog- nitive ability tests is the hiring of fewer minority workers.

1. Which of the following is the earliest date?

A) Jan. 16, 1898 B) Feb. 21, 1889 C) Feb. 2, 1898 D) Jan. 7, 1898 E) Jan. 30, 1889

2. LOW is to HIGH as EASY is to ?

J) SUCCESSFUL K) PURE L) TALL M) INTERESTING N) DIFFICULT

3. What is the next number in the series? 29 41 53 65 77 ?

J) 75 K) 88 L) 89 M) 98 N) 99

4. One word below appears in color. What is OPPOSITE of that word?

She gave a complex answer to the question and we all agreed with her.

A) long B) better C) simple D) wrong E) kind

5. Jose’s monthly parking fee for April was $150; for May it was $10 more than April; and for June $40 more than May. His average monthly parking fee was ? for these 3 months.

J) $66 K) $160 L) $166 M) $170 N) $200

6. If the first two statements are true, is the final statement true? Sandra is responsible for ordering all office supplies. Notebooks are office supplies.

Sandra is responsible for ordering notebooks.

A) yes B) no C) uncertain

7. Which THREE of the following words have similar meanings?

A) observable B) manifest C) hypothetical D) indefinite E) theoretical

8. Last year, 12 out of 600 employees at a service organization were rewarded for their excellence in customer service, which was ? of the employees.

J) 1% K) 2% L) 3% M) 4% N) 6%

Correct Answers:1. E,2. N,3. L,4. C,5. M,6. A,7. CDE,8. K

Table 6.2 Wonderlic Personnel Test Sample Questions

Source: Sample items for Wonderlic Personnel Test-Revised (WPT-R). Reprinted with permission from Wonderlic, Inc.

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What Selection Methods Are Commonly Used? 221

In terms of acceptability, managers see cognitive ability as one of the most important predictors of work performance.41 Human resource professionals and researchers strongly believe in the validity of cognitive ability tests, even though some express concern about the societal consequences of their use.42

In contrast, job applicants often perceive other selection methods as being more effective.43 Not surprisingly, negative beliefs about cognitive ability tests are stronger for people who do not perform well on the tests.44

In summary, cognitive ability tests are a useful tool for determining whom to hire. As discussed in the “How Do We Know?” feature, these tests can pre- dict long-term success. They predict potential more than achievement, mak- ing them best suited for organizations pursuing long-term staffing strategies. High cognitive ability is particularly important for success in organizations with long-term staffing strategies, as employees must learn and adapt during long careers. Using cognitive ability tests is thus beneficial for organizations seeking long-term generalists and specialists. Organizations seeking short- term generalists can also benefit by using these tests to inexpensively assess basic math and language ability.

Personality Testing Personality testing measures patterns of thought, emotion, and behavior.45

Researchers have identified five broad dimensions of personality: agreeable- ness, conscientiousness, emotional stability, extraversion, and openness to expe- rience.46 The five broad personality dimensions can be accurately measured in numerous languages and cultures, making the tests useful for global firms.

Personality testing Assessment of traits that show consistency in behavior.

IS IT BETTER TO BE SMART OR BEAUTIFUL? Do smart people have a better chance of getting rich? How about people who are physically attrac- tive? Are they more likely to be rich? Timothy Judge, Charlice Hurst, and Lauren Simon sought to answer these questions with a study of 191 ran- domly selected people between the ages of 25 and 74. Participants completed a cognitive ability measure and reported on their level of education attainment and their core self-evaluations (levels of confidence, self-esteem, sense of internal control, and lack of anxiety). They also provided a photo- graph that was rated for physical attractiveness. At a later time, participants also reported their income.

Results showed a positive effect on income for both intelligence and beauty. Smarter people had higher income, as did people who were rated higher on physical attractiveness. Smarter people attained more education and had more positive

perceptions about themselves, which in turn trans- lated into higher income. The effect was similar for physical attractiveness. Better-looking people similarly attained more education and had more positive self-perceptions, which corresponded with increased income.

Bottom Line. Being either smart or good look- ing makes someone more likely to be rich. But if you had to choose one or the other, choose being smart, as the effect of being smart was twice as large as the effect of being beautiful. Nevertheless, the authors conclude that being beautiful does indeed provide people with a seemingly unfair advantage.

Source: Timothy A. Judge, Charlice Hurst, and Lauren S. Simon, “Does It Pay to Be Smart, Attractive, or Confident (or All Three)? Relationships Among General Mental Ability, Physical Attractiveness, Core Self-Evaluations, and Income,” Journal of Applied Psychology 94 (2009): 742–755.

How Do We Know?

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222 Chapter 6 Selecting Employees Who Fit

Patterns of relationships with work performance are similar across national boundaries.47 A description of each dimension and a summary of its general relationships to job performance and job satisfaction are presented in Table 6.3.

Looking at personality tests in general, we find that measures for the five personality dimensions demonstrate adequate reliability.48 Different forms and parts of the test correlate highly with each other.

Personality tests with items that specifically ask about typical actions in employment settings tend to yield consistent measures of behaviors that are important at work.49 Specifically, relationships between personality dimen- sions and performance, which represent validity, are highest when tests specif- ically instruct people to respond in relation their work behavior, rather than in relation to their actions across different settings.50 Personality traits are generally good predictors of citizenship behavior such as helping others and going beyond minimum expectations.51 Yet, strength of validity often differs depending on the personality dimension being measured. In general, per- sonality dimensions associated with motivation are good predictors of perfor- mance. One such dimension is conscientiousness.

Conscientious employees are motivated—they set goals and work hard to accomplish tasks.52 Conscientious people also tend to be absent from work less frequently.53 Conscientious workers are more satisfied with their jobs and are more likely to go beyond minimum expectations to make the organization successful.54 Conscientiousness thus exhibits validity generalization in that it predicts work performance regardless of the type of work. Research evidence suggests that emotional stability does not relate as strongly to performance as conscientiousness, yet, it too captures aspects of motivation and demonstrates validity generalization. People high on emotional stability are more confi- dent in their capabilities, which in turn increases persistence and effort.55 Yet, people who are highly anxious can actually perform better in some contexts, such as air traffic controller, that require workers to pay very close attention to detail in a busy environment.56

Relationships with the other three personality dimensions depend on the work situation, meaning that these measures have situational specificity.

Table 6.3 Summary of Personality Testing Research

Average Correlation with Job Performance

Average Correlation with Job Satisfaction

Openness to Experience—High scorers are imaginative, idealistic, unconventional, not cautious, and inventive .07 .02

Extraversion—High scorers are sociable, aggressive, not shy, enthusiastic, cheer- ful, and forceful .15 .25

Emotional Stability—High scorers are not anxious, contented, confident, not moody, not irritable, and not fearful .15 .29

Conscientiousness—High scorers are efficient, organized, goal-driven, ambitious, and thorough .24 .20

Agreeableness—High scorers are forgiving, trusting, friendly, not stubborn, warm, and sympathetic .11 .17

Sources: Information from Timothy A. Judge, Daniel Heller, and Michael K. Mount, “Five-Factor Model of Personality and Job Satisfaction: A Meta-Analysis,” Journal of Applied Psychology 87 (2002): 530–541; Murray R. Barrick, Michael K. Mount, and Timothy A. Judge, “Personality and Performance at the Beginning of the Millennium,” International Journal of Selection and Assessment 9 (2001): 9–30.

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What Selection Methods Are Commonly Used? 223

Extraversion corresponds with a desire to get ahead and receive rewards, mak- ing it a useful predictor for performance in sales and leadership positions.57

More extraverted employees who are also more emotionally stable—think happy and bubbly personalities—have also been found to excel in customer- service jobs such as those found in a health and fitness center. Agreeableness is important for interpersonal relationships and corresponds with high per- formance in teams and service jobs that require frequent interaction with customers.58 Much of this effect occurs because agreeable employees are more likely to go beyond minimum expectations and help their coworkers.59

Openness to experience is seldom related to work performance, but recent research suggests that it can increase performance in jobs that require creativ- ity and adaptation to change.60 One setting requiring adaptation is working in a foreign country, and people more open to experience do indeed perform better in such assignments.61 People who are more open to experience are also more likely to be entrepreneurs.62

A notable feature of personality tests is their helpfulness in predicting the performance of entire teams. Teams that include just one person who is low on agreeableness or conscientiousness have lower performance.63 This means that personality tests predict not only individual performance but also how an individual’s characteristics will influence the performance of other people. This feature increases the utility of personality testing, because hiring some- one with desirable traits yields benefits related not just to the performance of that individual but also to the performance of others.

As shown in Table 6.4, a survey of selection practices around the world sug- gests that personality testing is used more frequently in countries other than the U.S. Within the U.S a few states have laws that prohibit personality testing. However, in most cases, the use of personality tests does not present problems as long as organizations use well-developed tests that do not ask outwardly

Source: Information from Ann Marie Ryan, Lynn McFarland, Helen Baron, and Ron Page, “An International Look at Selection Practices: Nation and Culture as Explanations for Variability in Practice,” Personnel Psychology 52 (1999): 359–391.

Table 6.4 Use of Selection Methods Around the World

Values are based on average ratings with 5 = Always and 1 = Never; Higher scores represent more widespread use

Scores

Selection Method United States Portugal France Hong Kong South Africa

Cognitive ability test 2.09 3.27 2.29 1.83 3.25

Personality test 1.62 3.00 3.42 2.50 3.66

Physical ability test 1.21 1.69 1.29 1.17 1.26

Integrity test 1.09 1.92 1.00 1.33 1.62

Drug test 2.21 1.93 1.18 1.17 1.58

Application form 4.12 3.40 4.09 4.75 4.20

Biodata 1.21 2.29 1.20 1.62 1.41

Work sample 1.40 1.69 1.50 1.83 1.71

Reference check 4.02 3.14 3.32 3.75 4.09

Individual interview 4.78 4.77 4.85 3.38 4.72

Panel interview 3.27 3.29 2.06 3.63 3.63

Handwriting analysis 1.09 1.00 3.26 1.00 1.45

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224 Chapter 6 Selecting Employees Who Fit

discriminatory questions.64 Personality tests do have some adverse impact for women and minorities. For minorities the negative effect is less than that for cognitive ability tests.65

With regard to acceptability, a common concern about the use of personal- ity tests is the potential for people to fake their responses. Indeed, research has shown that people are capable of faking and obtaining higher scores when instructed to do so. Moreover, people do inflate their scores when they are being evaluated for selection.66 Although faking does have the potential to make personality tests less valid predictors of job performance,67 the overall relationship between personality measures and job performance remains,68

meaning that even with faking, personality tests can be valid selection mea- sures. Using statistical procedures to try correcting for faking does little to improve the validity of tests.69 However, faking does involve issues of fairness. Some people fake more than others, and people who do not inflate their scores may be unfairly eliminated from jobs.70 Faking can thus lead to deci- sions that are unfair for some individuals, even though it has little negative consequence for the organization. To reduce the potentially negative impact on individuals, organizations can use personality tests in early stages of the selection process to screen out low scorers rather than in later stages to make final decisions about a few individuals.71 Obtaining personality scores from ratings provided by friends and coworkers rather than applicants themselves is also helpful, and current research is exploring the usefulness of techniques such as eye-tracking technology to identify when applicants are faking.72

Another method for reducing faking is to create personality tests with items that have less obvious answers. An example of this approach is a conditional reasoning test. Conditional reasoning tests are designed to assess unconscious biases and motives. With this approach, job applicants are asked to solve rea- soning problems which do not have answers that are obviously right or wrong. People with certain tendencies base their decisions on particular forms of rea- soning.73 For example, a person prone to aggression is more likely to attribute actions of others as hostile. What appears to be the most reasonable answer to the aggressive person (that other people do things because they are mean) is different from what less-aggressive people see as the most reasonable answer. Because they tap into unconscious beliefs, these tests are more difficult to fake.74 Unfortunately, conditional reasoning tests are somewhat difficult to create and as of yet do not measure the full array of personality traits.

Personality testing, then, is another generally effective tool for determin- ing whom to hire. These tests are increasingly available on the Internet, as explained in the accompanying “Technology in HR” feature. This makes per- sonality tests relatively simple to administer. Yet, personality tests often relate more to organization fit than to job fit, suggesting that personality measures are most appropriate in organizations that adopt long-term staffing strate- gies. People with personality traits that fit an organization’s culture and work demands are more likely to remain with the organization.75 Personality testing is thus especially beneficial for organizations adopting Committed Expert and Loyal Soldier HR Strategies.

Situational Judgment Tests Situational judgment tests are a relatively new development. These tests place job applicants in a hypothetical situation and then ask them to choose the most appropriate response. Items can be written to assess job knowledge, gen- eral cognitive ability, or practical savvy. Indeed, a potential strength of these

Situational judgment test Assessment that asks job applicants what they would do, or should do, in a hypothetical situation.

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What Selection Methods Are Commonly Used? 225

tests is their ability to assess interpersonal skills, which are difficult to mea- sure.76 Situational judgment tests also tend to capture broad personality traits such as conscientiousness and agreeableness, as well as tendencies toward cer- tain behavior (like taking initiative) in more specific situations.77

ADMINISTERING TESTS ON THE INTERNET Widespread access to computers and the Internet provides a potentially improved method for admin- istering employment tests. Using the Internet, people can take tests whenever and wherever they want. Testing can also be individualized so that responses to early questions are used to choose additional questions. Perhaps more important, scoring can be done quickly and accurately. These potential benefits are accompanied by a number of concerns, however.

One source of concern is test security. If some- one takes a test at home, can the organization be sure that the test was actually completed by the applicant? Are scores from a computer version of a test equivalent to scores from a paper-and- pencil version of the test? Do people fake their scores more when using a computer? Will people from racial subgroups score higher or lower on a computerized test?

Given the potential benefits of computer-admin- istered tests, researchers have conducted a great deal of research in this area. One large study compared responses from 2,544 people completing a paper- and-pencil version of a personality and biographical data test with responses from 2,356 people complet- ing the same test in a Web-based format. The com- puter test had higher reliability and less evidence of faking. Other studies have generally concluded that computer-administered tests are just as reliable and valid as traditional tests. In addition, in many instances, computer-based tests have less adverse impact and are seen as more fair by applicants from minority groups. Overall, the results suggest that increased use of technology can result in improved employment testing.

Concerns about faking do, nevertheless, con- tinue to be discussed, and evidence suggests that

applicants who take a test multiple times do indeed raise their scores on subsequent tests. Providing a warning that faking will be assessed and detected does, however, appear to reduce instances of distortion.

Sources: Information from Richard N. Landers, Paul R. Sackett, and Kathy A. Tuzinski, “Retesting after Initial Failure, Coaching Rumors, and Warnings Against Faking in Online Personality Measures for Selection,” Journal of Applied Psychology 96 (2011): 202–210; Robert E. Ployhart, Jeff A. Weekley, Brian C. Holtz, and Cary Kemp, “Web-Based and Paper and Pencil Testing of Applicants in a Proctored Setting: Are Personality, Biodata, and Situational Judgment Tests Comparable?” Personnel Psychology 56 (2003): 733–752; Wendy L. Richman, Sara Keisler, Suzanne Weisband, and Fritz Drasgow, “A Meta-Analytic Study of Social Desirability Distortion in Computer-Administered Questionnaires, Traditional Questionnaires, and Interviews,” Journal of Applied Psychology 84 (1999): 754–775.

Technology in HR

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Some situational judgment tests use a knowledge format that asks respon- dents to pick the answer that is most correct. Other tests use a behavioral tendency format that asks respondents to report what they would actually do in the situation. Although the questions are framed a bit differently, the end result seems to be the same.78 Situational judgment tests have been found to have good reliability and validity. They predict job performance in most jobs, and they provide information that goes beyond cognitive ability and personal- ity tests.79 Situational judgment tests thus appear to represent an extension of other tests. They closely parallel structured interviews, which we will discuss shortly. Questions can be framed to measure either potential in organizations with long-term orientations or achievement and knowledge in organizations with short-term labor strategies. They can also be designed to emphasize either general traits or specific skills. This makes them useful for organiza- tions pursuing any of the human resource strategies.

Physical Ability Testing Physical ability testing assesses muscular strength, cardiovascular endur- ance, and coordination.80 These tests are useful for predicting performance in many manual labor positions and in jobs that require physical strength. Physical ability tests can be particularly important in relation to the Americans with Disabilities Act, as organizations can be held liable for discrimination against disabled applicants. Managers making selection decisions should thus test individuals with physical disabilities and not automatically assume that they cannot do the job.

Physical ability tests have high reliability; people score similarly when the same test is given at different times. Validity and utility are also high for positions that require physical inputs, such as police officer, firefighter, util- ity repair operator, and construction worker.81 Validity generalization is sup- ported for positions where job analysis has shown work requirements to be physically demanding.82

As long as job analysis has identified the need for physical inputs, physi- cal ability testing presents few legal problems. However, men and women do score very differently on physical ability tests. Women score higher on tests of coordination and dexterity, whereas men score higher on tests of muscular strength.83 Physical ability tests thus demonstrate adverse impact. In particu- lar, selection decisions based on physical ability tests often result in exclusion of women from jobs that require heavy lifting and carrying.

The usefulness of physical ability testing is not limited to a particular HR strategy. Physical tests can be useful for organizations seeking any form of tal- ent, as long as the talent relates to physical dimensions of work.

Integrity Testing In the past, some employers used polygraph—or lie detector—tests to screen out job applicants who might steal from them. However, the Employee Polygraph Protection Act of 1988 generally made it illegal to use polygraph tests for hiring decisions. Since then, organizations have increasingly turned to paper-and-pencil tests for integrity testing. Such tests are designed to assess the likelihood that applicants will be dishonest or engage in illegal activity.

There are two types of integrity test: overt and covert. Overt tests ask ques- tions about attitudes toward theft and other illegal activities. Covert tests are more personality-based and seek to predict dishonesty by assessing attitudes

Integrity testing Assessment of the likelihood that an individual will be dishonest.

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What Selection Methods Are Commonly Used? 227

and tendencies toward antisocial behaviors such as violence and substance abuse.84

Research evidence generally supports the reliability and validity of integ- rity tests. These tests predict absenteeism and overall performance, but they most strongly correspond with counterproductive work behavior such as theft, property destruction, unsafe actions, poor attendance, and intentional poor performance.85 Most often, such tests are used in contexts that involve the handling of money, such as banking and retail sales.

In many ways, integrity tests are similar to personality tests. In fact, strong correlations exist between integrity test scores and personality test scores, par- ticularly for conscientiousness.86 As with personality tests, a concern is that people may fake their responses when jobs are on the line. The evidence sug- gests that people can and do respond differently when they know they are being evaluated for a job. Even so, links remain between test scores and sub- sequent measures of ethical behavior.87 Furthermore, integrity tests show no adverse impact for minorities88 and appear to predict performance consis- tently across national cultures.89

Integrity tests can be useful for organizations with Bargain Labor HR strate- gies. These firms hire many entry-level workers to fill positions in which they handle substantial amounts of money. In such cases, integrity tests can pro- vide a relatively inexpensive method for screening applicants. This explains why organizations like grocery stores, fast-food chains, and convenience stores make extensive use of integrity testing to select cashiers.90

Drug Testing Drug testing normally requires applicants to provide a urine sample that is tested for illegal substances. It is quite common in the United States, perhaps because, according to some estimates as much as 14 percent of the workforce uses illegal drugs, with as many as 3 percent of workers actually using drugs while at work.91 Illegal drug use has been linked to absenteeism, accidents, and likelihood of quitting.92 Drug testing, which is both reliable and valid, appears to be a useful selection method for decreasing such nonproductive activities. Even though administration costs can be high, basic tests are mod- estly priced, supporting at least moderate utility for drug testing.

Research related to drug testing has looked at how people react to being tested. In general, people see drug testing as most appropriate for safety- sensitive jobs such as pilot, heart surgeon, and truck driver.93 Not surprisingly, people who use illicit drugs are more likely to think negatively about drug testing.94

Drug testing can be useful for firms that hire most types of talent. Organizations seeking short-term generalists use drug testing in much the same way as integrity testing. Organizations with long-term employees fre- quently do work that requires safe operational procedures. In these organiza- tions, drug testing is useful in selecting people for positions such as forklift operator, truck driver, and medical care provider.

Work Sample Testing One way of assessing specific skills is work sample testing, which directly mea- sures performance on some element of the job. Common examples include typing tests, computer programming tests, driving simulator tests, and elec- tronics repair tests. In most cases, these tests have excellent reliability and validity.95 Many work sample tests are relatively inexpensive as well, which

Work sample testing Assessment of performance on tasks that represent specific job actions.

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translates into high utility. Because they measure actual on-the-job activities, work sample tests also involve few legal problems. However, in some cases work test scores are lower for members of minority groups.96

A problem with work sample tests is that not all jobs lend themselves to this sort of testing. What type of work sample test would you use for a medical doc- tor or an attorney, for example? The complexity of these jobs makes the cre- ation of work sample tests very difficult. However, human resource specialists have spent a great deal of time and effort developing a work sample test for the complex job of manager. The common label for this tool is assessment center.

Assessment center participants spend a number of days with other manage- rial candidates. Several raters observe and evaluate the participants’ behavior across a variety of exercises. In one typical assessment center exercise, the lead- erless group discussion, for example, managerial candidates work together in a group to solve a problem in the absence of a formal leader. For the in-basket exercise, participants write a number of letters and memos that simulate man- agerial decision making and communication. Managers and recruiters from the organization serve as observers who rate the participants in areas such as consideration and awareness of others, communication, motivation, ability to influence others, organization and planning, and problem solving.97

Assessment centers have good reliability and validity, which suggests that they can be excellent selection tools in many contexts.98 Validity improves when assessment center evaluators are trained and when exercises are spe- cifically tailored to fit the job activities of the participants.99 Minority racial groups have been found to score lower in assessment centers, but women often score higher.100 Creating and operating an assessment center can be very expensive, which substantially decreases utility for many organizations. Because of their high cost, assessment centers are normally found only in very large organizations.

Assessment centers are most common in organizations with long-term staff- ing strategies, particularly those adopting Committed Expert HR strategies. Proper placement of individuals is extremely critical for these organizations, and the value of selecting someone for a long career offsets the high initial cost of assessment. Other types of work sample tests are useful for organiza- tions pursuing any of the staffing strategies. A typing test can be a valuable aid for hiring a temporary employee as part of a Bargain Laborer HR strategy, for example. Similarly, a computer programming test can be helpful when hiring someone as part of a Free Agent HR strategy.

INFORMATION GATHERING In addition to tests, organizations use a variety of methods to directly gather information about the work experiences and qualifications of potential employees. In fact, as illustrated in the “Building Strength Through HR” feature, most organizations combine multiple methods of testing and infor- mation gathering. Common methods for gathering information include application forms and résumés, biographical data, and reference checking.

Application Forms and Résumés Many entry-level jobs require potential employees to complete an application form. Application forms ask for information such as address and phone num- ber, education, work experience, and special training. For professional-level jobs, similar information is generally presented in résumés. The reliability

Assessment center A complex selection method that includes multiple measures obtained from multiple applicants across multiple days.

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What Selection Methods Are Commonly Used? 229

and validity of these selection methods depends a great deal on the informa- tion being collected and evaluated. Measures of things such as work expe- rience and education have at least moderately strong relationships with job performance.101

With regard to education, the evidence shows that what you do in college really does matter. Employees with more education are absent less, show more creativity, and demonstrate higher task performance.102 People who com- plete higher levels of education and participate in extracurricular activities are more effective managers. Those who study humanities and social sciences tend to have better interpersonal and leadership skills than engineers and sci- ence majors.103 Grades received, particularly in a major, also have a moderate relationship with job performance, even though managers do not always use grades for making selection decisions.104

Building Strength Through HR

TARGET Target has over 1,700 retail stores that employ 365,000 people. Achieving the overall corporate goal of “friendly service from team members ready to assist with your list, fully stocked shelves and a speedy checkout process” necessitates effective employee selection. Target thus uses a variety of selection tools to help identify job candidates who are friendly and have an upbeat attitude. Specific methods include the following:

Personality test Behavioral interview Drug test Background check

Using such selection tools has helped Target develop a reputation as having excellent customer service. The process also seems to be acceptable to most candidates, as two stores opening in Los Angeles recently reported having over 4,000 appli- cants for 250 positions.

The selection tools do, however, sometimes gen- erate controversy from people believing the tests and information gathering discriminate unfairly. For example, a number of years ago Target’s use of a specific personality test was challenged because some of the questions asked about sexual practices and religious beliefs. Keeping up with advances in test development, Target settled the claims and replaced the test with an improved personal- ity assessment that does not contain problematic

inquiries. A more recent controversy focuses on background checks that are being challenged because they screen out workers with criminal records. A group called TakeAction Minnesota filed complaints with the Equal Employment Opportunity Commission claiming that the prac- tice is unfair and potentially creates adverse impact for some minority groups. Target’s response is that the background check is necessary to provide a safe and secure environment, and that the process is not designed to screen out everyone with a crimi- nal background but only those who present an unreasonable risk to safety.

Sources: Information from target.com; Anonymous, “Complaints Filed Against Target Hiring Policies, St. Cloud Times, February 21, 2013; Clair Gordon, jobs. aol.com, August 31, 2012. Accessed online at http://jobs.aol.com/articles/2012/08/31/ target-is-hiring-the-inside-scoop-on-getting-a-job/.

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Application forms and résumés also provide valuable information about work experience. People with more work experience have usually held more different positions, been in those positions for longer periods, and more often done important tasks.105 Because they have been exposed to many dif- ferent tasks, and because they have learned by doing, people with greater experience are more valuable contributors. In addition, success in previous jobs demonstrates high motivation, and executives with more experience are better at strategic thinking.106 Work experience thus correlates positively with performance, particularly when performance is determined by output mea- sures such as production or amount of sales.107

One special advantage of application forms and résumés is their utility. Because these measures are generally inexpensive, they are frequently used as early screening devices. In terms of legality and fairness, measures of edu- cation and experience do have some adverse impact.108 Information being obtained from application forms and résumés should therefore be related to job performance to ensure validity.

Application forms and résumés can provide important information about past achievements, which makes them most valuable for organizations seek- ing people with specific skills. However, these selection tools can also capture potential and fit, so many organizations seeking long-term employees find them useful as well. Application forms are used mostly in organizations hir- ing generalists. They provide good measures of work experience and educa- tion that help identify people who have been dependable in jobs and school. Résumés are more commonly used in organizations that hire specialists. In particular, résumés provide information about experience and education rel- evant to a particular position.

Biographical Data Organizations also collect biographical data, or biodata, about applicants. Collecting biodata involves asking questions about historical events that have shaped a person’s behavior and identity.109 Some questions seek information about early life experiences that are assumed to affect personality and val- ues. Other questions focus on an individual’s prior achievements based on the idea that past behavior is the best predictor of future behavior. Common categories for biographical questions include family relationships, childhood interests, school performance, club memberships, and time spent in various leisure activities. Specific questions might include the following:

How much time did you spend with your father when you were a teenager? What activities did you most enjoy when you were growing up? How many jobs have you held in the past five years?

Job recruiters frequently see these measures as indicators of not only physical and mental ability but also interpersonal skill and leadership.110 The informa- tion provided by biodata measures does not duplicate information from other measures, such as personality measures, however.111

Biodata measures have been around for a long time, and they are gen- erally useful for selecting employees. Scoring keys can be developed so that biodata responses can be scored objectively, just like a test. Objective scoring methods improve the reliability and validity of biodata. With such procedures, biodata has adequate reliability.112 Validity is also good, as studies show rela- tively strong relationships with job performance and employee turnover.113 In

Biographical data Assessment focusing on previous events and experiences in an applicant’s life.

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What Selection Methods Are Commonly Used? 231

particular, biodata measures appear to have high validity for predicting sales performance.114 One common concern has been the validity generalizability of biodata. Questions that link with performance in one setting may not be useful in other settings. However, some recent research suggests that carefully constructed biographical measures can predict performance across work set- tings.115 Identifying measures that predict work performance across settings can help overcome a weakness of biodata, which is the high initial cost of cre- ating measures. Finding items that separate high and low performers can take substantial time and effort, making items that predict performance across set- tings highly desirable.

Some human resource specialists express concern about legality and fairness issues with biodata. Much of the information collected involves things beyond the control of the person being evaluated for the job and is likely to have adverse impact for some. For instance, children from less wealthy homes may not have had as many opportunities to read books. Applicants’ responses may also be difficult to verify, making it likely that they will fake. Using questions that are objective, verifiable, and job-related can minimize these concerns.116

Biodata measures can benefit organizations, whatever their staffing strate- gies. Organizations seeking long-term employees want to measure applicants’ potential and should therefore use biodata measures that assess core traits and values. In contrast, organizations seeking short-term employees want to measure achievement and can benefit most from measures that assess verifi- able achievements.

Reference Checking Reference checking involves contacting an applicant’s previous employers, teachers, or friends to learn more about the applicant. Reference checking is one of the most common selection methods, but available information sug- gests that it is not generally a valid selection method.117

The primary reason reference checking may not be valid relates to a legal issue. Organizations can be held accountable for what they say about current or past employees. A bad reference can become the basis for a lawsuit claiming defamation of character, which occurs when something untrue and harmful is said about someone. Many organizations thus adopt policies that prevent manag- ers and human resource specialists from providing more than dates of employ- ment and position. Such information is, of course, of little value. Even when organizations allow managers to give more information, the applicant has nor- mally provided the names only of people who will give positive recommendations.

Nevertheless, a second legal issue makes reference checks critical in certain situations. This issue is negligent hiring, which can occur when an organiza- tion hires someone who harms another person and the organization could reasonably have determined that the employee was unfit.118 For instance, sup- pose an organization has hired someone to be a daycare provider. Further suppose that the organization did not conduct a thorough background inves- tigation and that, if it had investigated, it could easily have discovered that the person had been previously convicted of child abuse. If this person abuses children in the employment setting, the organization can be held liable.

The competing legal issues of defamation of character and negligent hir- ing make reference checking particularly troublesome. On the one hand, most organizations are not willing to risk providing reference information. On the other hand, safety concerns make a background check mandatory for many jobs, such as daycare provider, transportation worker, and security

Defamation of character Information that causes injury to another’s reputation or character; can arise as a legal issue when an organization provides negative information about a current or former employee.

Negligent hiring A legal issue that can arise when an organization does not thoroughly evaluate the background of an applicant who is hired and then harms someone.

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guard. One result has been the growth of professional firms that use public information sources, such as criminal records and motor vehicle registrations, to learn about an applicant’s history. Such investigations should be conducted only after initial screening tools have been used and only if the applicant signs an authorization release.

INTERVIEWING The most frequently used selection method is interviewing, which occurs when applicants respond to questions posed by a manager or some other organiza- tional representative. Most interviews incorporate conversation between the interviewer and the applicant. The interview is useful not only for evaluating applicants but also for providing information to applicants and selling the organization as a desirable place to work.

Assessing Interview Effectiveness Depending on the questions, an interview can be used to measure a variety of characteristics. Typical areas include knowledge of job procedures, mental ability, personality, communication ability, and social skills. The interview also provides an effective format for obtaining information about background cre- dentials, such as education and experience.119 People who are more conscien- tious and extraverted tend to do better in interviews, partly because they tend to spend more time learning about the company and position before the interview actually occurs.120 Applicants who present themselves well and build rapport with the interviewer also excel in interviews.121 As described in the “How Do We Know?” feature, even how someone shakes hands can make a difference.

Although the research is somewhat mixed, it appears that applicants who receive training in how to act in interviews do indeed perform better.122 One concern about the interview is that candidates seek to impress interviewers, which means that the interviewer is not seeing and evaluating the true person. Evidence does indeed show that job applicants seek to manage impressions in job interviews, and that people who excel at making a good impression are not necessarily higher performers.123

Although researchers have historically argued that the interview is not a reliable and valid selection method, managers have continued to use this method. Recent research suggests that the conclusions of early studies were overly pessimistic and that managers are right in believing that the interview is a useful tool.

The reliability of interviews depends on the type of interview being con- ducted. We discuss some particularly reliable types of interviews shortly. For these types, reliability can be as high as for other measures, such as personality testing and assessment centers.124 The overall validity of the interview is in the moderate range. However, again, validity varies for different types of inter- views, with some types showing validity that is as high as that for any selection method.125 The interview also provides unique information that cannot be obtained through other methods.126

The interview is also valuable in determining whether people “fit” with the job, workgroup, or organization. Interviewers often assess the likelihood that applicants will excel in the particular organization. These judgments are not based on typical qualifications, such as knowledge and experience, but rather on characteristics such as goals, interpersonal skills, and even physical attractiveness.127

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What Selection Methods Are Commonly Used? 233

One concern about the interview is its expense: The time managers spend conducting interviews can be costly. The interview thus has relatively low util- ity, and generally, only applicants who have been screened with less-expensive selection methods should be interviewed. Another potential concern is dis- crimination. Interviewers make a number of subjective judgments, bringing up questions of possible bias. Indeed, research does suggest that interview- ers can be biased in their judgments.128 Yet, the general conclusion is that bias is relatively low as long as the structuring techniques described below are used.129 Of course, interviewers must be careful not to ask questions that violate the laws discussed in Chapter 3. In particular, interviewers should avoid questions about family and marital relationships, age, disability, and religion.

Using Structured Interviews We have seen that reliability and validity vary with the type of interview con- ducted. What makes some interviews better than others? The biggest difference between types of interviews concerns the amount of structure. The typical inter- view is an unstructured interview in which a single rater asks a series of ques- tions and then provides an overall recommendation on whether the person interviewed should be hired. The questions asked usually vary from interviewer to interviewer, and interviewers can base their evaluations on anything that they think is important. Managers tend to prefer this type of interview. Research has

DOES IT MATTER HOW YOU SHAKE HANDS IN AN INTERVIEW? Can a good handshake really help you get a job? A search of the Internet yields over a million sites that provide information about the proper way to shake hands in an employment interview. Yet, little scientific research has been done to determine if the handshake really matters. So Greg Stewart, Susan Dustin, Murray Barrick, and Todd Darnold designed a study to learn more about the handshake. Students who were seeking jobs participated in practice interviews. During the interview process six different people secretly evaluated each student’s handshake. Neither the students nor the interviewers were aware that handshakes were being evaluated. Students shook hands with interviewers before a 30-minute interview. At the end of the interview, interviewers provided ratings of how likely they were to hire students. Ratings of the handshake were then correlated with final interview ratings to determine if the handshake was related to assessments of hirability.

Results showed that people with a better hand- shake (firm and complete grip, eye contact) were indeed more likely to receive job offers. Women were found to have less firm handshakes than men. However, women with a good handshake got more benefit out of it than did men with a firm hand- shake. Women may therefore not be as good as men at shaking hands, but those who do it well get extra credit from interviewers.

The Bottom Line. Little things like having a good handshake can indeed make a difference in an interview setting. Job candidates can benefit from a good handshake, which includes a com- plete grip of the hand, a firm grasp, moderate up- and-down movement, comfortable duration, and eye contact.

Source: Greg L. Stewart, Susan L. Dustin, Murray R. Barrick, Todd C. Darnold, “Exploring the Handshake in Employment Interviews,” Journal of Applied Psychology 93 (2008): 1139–1146.

How Do We Know?

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traditionally shown that this type of unstructured assessment is not as reliable and valid as more-structured interviews.130 According to some newly emerging research, however, the unstructured interview can be a reliable tool when several people conduct interviews and then combine their individual evaluations.131

A different type of interview, generally seen as superior, is the structured interview, which uses a list of predetermined questions based on knowledge and skills identified as being critical for success. This ensures that the ques- tions are appropriate and that all applicants are asked the same questions. The structured interview is conducted by a panel of interviewers rather than by a single person. Members of the rating panel use formal scoring proce- dures that require them to provide numerical scores for a number of pre- determined categories. The basic goal of the structured interview is to make sure that everyone who is interviewed is treated the same. This consistency across interviews improves reliability, which in turn improves validity. More- structured interviews are also more effective in reducing the biasing effect of applicant impression management.132 A method for creating structured inter- view questions and responses is outlined in Figure 6.4.

Most structured interviews fit into two types: (1) the situational interview, in which the interviewer asks questions about what the applicant would do in a hypo- thetical situation, and (2) the behavioral interview, in which the questions focus on the applicant’s behavior in past situations. Researchers disagree about which type is better, with some research supporting each type.133 In general, both types seek to have people discuss actions in a specific context and thus tend to generate responses that are good predictors of job performance. Examples of both types of interview questions are shown in Table 6.5. The table also shows scoring for sample responses; one reason these interview formats work is that they provide raters with clear examples for determining how a response should be scored.

Linking Interviews to Strategy Interviews are used by organizations with all of the HR strategies. The focus of the interview questions, however, depends on strategy. Organizations seek- ing Free Agents focus on assessing achievement. Typical questions relate to job experience and certification in specific skills. In contrast, organizations seeking Loyal Soldiers focus on assessing fit. Specific questions measure

Structured interview Employment interview that incorporates multiple raters, common questions, and standardized evaluation procedures.

Situational interview Type of structured interview that uses questions based on hypothetical situations.

Behavioral interview Type of structured interview that uses questions concerning behavior in past situations.

Figure 6.4 Creating Structured Interview Questions.

Step 1: Determine What to Measure y .

Step 2: Write Questions .

1.

Step 3: Plan Evaluation for Each Question

. y .

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How Are Final Selection Decisions Made? 235

? CONCEPT CHECK 1. What are common methods of testing? 2. What information can be obtained from application blanks

and résumés? 3. How can the reliability and validity of employment inter-

views be improved?

Table 6.5 Types of Employment Interview Question

Format Example Question Possible Response

Behavioral Questions

Ask the applicant to describe actions in a particular past situation.

It is often necessary to work together in a group to accomplish a task. Please tell me about the most recent experience you had working as part of a group.

Poor Response: Lots of conflict. The other members were ineffective.

Average Response: I did all the work myself.

Superior Response: We worked together. I helped involve everyone.

Situational Questions

Put the applicant in a particular situation and then ask for a description of behavior.

A customer comes into a store where you work to pick up a watch he left for repair. The repair was supposed to have been completed a week ago, but the watch is not yet back from the repair shop. The customer is very angry. How would you handle this situation?

Poor Response: Tell him he should check back later.

Average Response: Apologize and tell him I will call him later.

Superior Response: Listen, put him at ease, call the repair shop while he waits.

personality characteristics, motivation, and social skills. Organizations seeking Committed Experts use a combination approach that assesses both potential and fit. Typical questions measure problem-solving ability and aptitude in a particular field, such as sales or engineering.

Effective organizations thus begin the interview process by thinking care- fully about their HR strategy. After clearly determining their strategy, they begin to develop questions that help them identify individuals with the char- acteristics they most desire. Using the interview to properly identify and hire employees who are most likely to engage in the behaviors that facilitate either a low cost or differentiation strategy is thus a very effective method for using human resource management to create competitive advantage. Having the right employees develops an organizational culture that helps organizations meet the needs of customers.

How Are Final Selection Decisions Made?

LEARNING OBJECTIVE 4

What happens after an organization tests, interviews, and gathers information about job applicants? In most cases, the organization ends up with several dif- ferent scores from several different methods. How should it combine these bits of information to arrive at a final hiring decision?

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236 Chapter 6 Selecting Employees Who Fit

One possibility is that decision makers will simply look at the scores from each method and then make a judgment about who should be hired. This is what frequently happens, but it does not usually lead to the best decision.134 A better method is to use a set of decision rules and statistical tactics. Here, deci- sion makers first obtain a numerical score for the outcome of each selection method and then apply decision strategies to the numerical scores. Common decision strategies include weighting the predictors, using minimum cutoffs, establishing multiple hurdles, and banding.135

PREDICTOR WEIGHTING APPROACH In predictor weighting, we combine a set of selection scores into an over- all score in which some measures count more than others. For instance, suppose a manager has three applicants for an engineering position. Each candidate has a cognitive ability score, an interview score, and a biographi- cal test score. One applicant has a high cognitive ability score and a low interview score; the second applicant has a low cognitive ability score and a high biographical test score; and the third applicant has an average score on all three tests. How can the manager use these scores to predict which applicant will perform best?

Of course, one approach is to take a simple average of all three test scores, but this procedure ignores the fact that one type of test might provide better information than another. The alternative is to establish a weight for each test, so that the method that provides the most valuable information has a higher influence on the overall decision. For instance, the cognitive ability test and interview might both be weighted as 40 per- cent of the overall score, with the biodata being weighted as 20 percent. Each score is multiplied by its assigned weight, and final selection decisions are based on an overall score.

How should the weights be determined? Experts who have a thorough knowledge of what it takes to succeed in the job might set the weights. However, an even better method is to use statistical methods for determining the best set of weights. Regardless of how the weights are determined, the pro- cess of predictor weighting is helpful for ensuring that managers and human resource specialists give appropriate attention to the information obtained from each selection method.

MINIMUM CUTOFFS APPROACH Predictor weighting allows an applicant’s strength in one area to compen- sate for weakness in another area. Someone with a low cognitive ability score might still be hired if interview and biodata scores are high, for example. This makes sense in many contexts but not in every case. For instance, consider an organization that is hiring people to work in self-managing teams. These teams succeed only if team members are able to cooperate and work together. Suppose an applicant for a position on the team has a high cognitive ability score but a very low score on an interview measuring interpersonal skills. In the team setting, high cognitive ability will not make up for problems created by low interpersonal skills, and the organization will need to take this fact into consideration.

In such a situation, the organization can take a minimum cutoffs approach, requiring each applicant to have at least a minimum score on each selection

Predictor weighting Multiplying scores on selection assessments by different values to give more important means greater weight.

Minimum cutoffs approach The process of eliminating applicants who do not achieve an acceptable score on each selection assessment.

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How Are Final Selection Decisions Made? 237

method. An applicant who is very weak on any of the measures will not be hired.

In practice, many organizations use minimum cutoffs to identify a pool of people who meet at least minimum requirements in a number of areas. Once this pool of people is identified, then weighted predictors are used to make the final hiring decision.

MULTIPLE HURDLES APPROACH As we have seen, some selection methods are much more expensive than oth- ers. Using minimum cutoffs in a number of areas in progressive order can thus increase the utility of the overall selection process. A relatively inexpen- sive test, such as a cognitive ability test, is given first. Those who achieve at least the minimum score then go on to the next selection method. This second method might be more expensive, such as an interview. The multiple hurdles approach thus involves multiple cutoffs applied in order, and applicants must meet the minimum requirement of one selection method before they can proceed to the next. One advantage of the multiple hurdles approach is that fewer minority candidates may be eliminated because they meet the accept- able criteria even if they are not the highest scorer on a particular test.136

A potential problem with this approach is that decision makers eliminate applicants without knowing how they would score on all the tests. The process makes sense, though, when organizations use expensive selection tests and wish to limit the number of applicants who take those tests.

BANDING APPROACH Because few employment tests are totally reliable, two people with slightly dif- ferent scores may not really differ on the characteristic being measured. The difference in the scores is caused by poor measurement. This possibility has led some experts to create a process called banding. The banding approach uses statistical analysis to identify scores that may not be meaningfully dif- ferent. People with such scores are placed in a common category, or band, and managers and selection specialists are then free to choose any one of the applicants within the band.137

The practice of banding is somewhat controversial. Some people argue that banding can help organizations meet affirmative action goals. If the band of applicants includes a member of a minority group, this person can be hired even if someone else had a slightly higher score. Others, however, argue that banding can lead to decreased utility because people with lower scores, and thus lower potential to succeed, are often hired.138

Multiple hurdles approach The process of obtaining scores on a selection method and only allowing those who achieve a minimum score to take the next assessment.

Banding approach The process of treating people as doing equally well when they have similar scores on a selection assessment.

? CONCEPT CHECK 1. How can scores from different selection measures be com-

bined to make a final hiring decision? 2. How is the multiple hurdles method different from the mini-

mum cutoffs method?

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238 Chapter 6 Selecting Employees Who Fit

SUMMARY

IN THE MANAGER’S PERSPECTIVE AT THE BEGINNING OF THE CHAPTER, JAVIER WAS RESPONSIBLE FOR HIRING A NEW MEM- BER OF HIS CUSTOMER SERVICE TEAM. HE FACED A NUMBER OF ISSUES CONCERNING WHAT KIND OF PERSON TO HIRE, WHAT SELECTION METHODS TO USE, AND HOW TO MAKE HIS FINAL DECISION. FOLLOWING ARE THE ANSWERS TO THE “WHAT DO YOU THINK?” QUIZ THAT FOLLOWED THE CASE. WERE YOU ABLE TO CORRECTLY IDENTIFY THE TRUE STATEMENTS? COULD YOU DO BETTER NOW?

1. You should hire people who already have the skills and

knowledge they will need on the job. FALSE. Although organizations using short-term employment strate-

gies may prefer to hire employees who already have

the necessary skills, the potential of new employees is

often more important for organizations using long-term

employment strategies.

2. The benefits of making good hiring decisions are high-

est when the organization has a lot of job applicants.

TRUE. Organizations with numerous applicants can be choosier about whom they hire, which increases the util-

ity, or dollar value, of selection methods.

3. Intelligence tests are very helpful for predicting who

will be effective in almost any job. TRUE. Intelligence

tests are good predictors

of work performance,

and they demonstrate

generalizability across

settings.

4. Reference checking provides valuable information

about prospective employees. FALSE. Unfortunately, because of problems with defamation of character, refer-

ence checking provides very little useful information.

5. You need to ask each applicant individualized questions

to determine his or her true strengths and weaknesses.

FALSE. Asking applicants individualized questions cre- ates problems with reliability. Structured interviews in

which each applicant is asked the same questions are

generally better than unstructured interviews.

Javier’s situation is one that almost all managers

eventually face. When managers make good hiring deci-

sions, they help the organization secure high-perform-

ing employees. These employees, in turn, help produce

goods and services of high quality and low cost, result-

ing in competitive advantage for the organization. The

principles discussed in this chapter can help improve

hiring decisions.

A M A N A G E R ’ S P E R S P E C T I V E R E V I S I T E D

va le

ri y-

d av

id en

ko /i

St o

ck p

ho to

particular area and generalist talent when they oper- ate in a variety of positions. Combinations of talent can be linked to overall HR strategies. Short-term generalist talent corresponds with a Bargain Laborer HR strategy, long-term generalist talent with a Loyal Soldier HR strategy, long-term specialist talent with a Committed Expert HR strategy, and short-term spe- cialist talent with a Free Agent HR strategy.

Organizations need to achieve a strategic bal- ance between job-based fit and organization-based

Employee selection practices should align with over- all HR strategy. Employees provide short-term talent when the organization hires from outside sources and long-term talent when the organization pro- motes from within. Employees offer specialist talent when they possess highly developed expertise in a

How is employee selection strategic?

LEARNING OBJECTIVE 1

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Key Terms 239

The usefulness of a particular selection method often differs depending on the context of the

What selection methods are commonly used?

LEARNING OBJECTIVE 3

fit. Fit is not critical for organizations with short- term generalist talent. Organization-based fit is critical for organizations with long-term generalist talent. Job-based fit is critical for organizations with long-term specialist talent. Organization-based fit and job-based fit are both critical for organizations with long-term specialist talent.

Another staffing characteristic that underlies stra- tegic employee selection decisions is the balance between potential and achievement. Organizations with long-term employees who are either generalists or specialists hire based on potential. Organizations with short-term specialist talent hire based on achievement.

organization and job. However, a number of selection methods generally satisfy the five prin- ciples for being effective. Common selection tests include cognitive ability testing, personality test- ing, physical ability testing, integrity testing, drug testing, and work sample testing. Cognitive ability and personality tests can be very useful for assess- ing potential to succeed. Other methods of infor- mation gathering include application forms and résumés, biographical data, and reference check- ing. Application forms and résumés are generally inexpensive methods for obtaining information about job applicants. The interview is another commonly used method of gathering informa- tion. Interviews are more reliable and valid when they are structured to ensure consistent treatment of each person being interviewed.

How are final selection decisions made?

LEARNING OBJECTIVE 4

Managers and human resource specialists should use good decision-making procedures to combine information from different selection methods. One procedure is predictor weighting, which allows more-important selection methods to have a stron- ger influence on the final decision. Another proce- dure, labeled minimum cutoffs, requires successful applicants to achieve at least a minimum score on each method. A third procedure is multiple hurdles, where applicants must achieve a minimum score on one selection method before they can advance to the next method. A final procedure is banding, wherein employees with similar scores on a selection method are grouped into categories. People in a given cate- gory are seen as having the same score, even though their scores are slightly different.

Acceptability 218 Achievement 209 Alternate-forms method 212 Assessment center 228 Banding approach 237 Behavioral Interview 234 Biographical data 230

Cognitive ability testing 219 Concurrent validation strategy 214 Content validation strategy 213 Correlation coefficient 212 Criterion-related validation strategy 213 Defamation of character 231 Employee selection 204

KEY TERMS

Reliability, validity, utility, fairness, and acceptabil- ity represent five principles that are helpful for determining whether a selection method is good. Reliability concerns the consistency of the method. Validity represents the relationship between what the method measures and job performance. Utility focuses on the cost effectiveness of the method. Fairness concerns the effect of the method on indi- viduals and minority groups. Acceptability focuses on how applicants react when they complete the selection method.

What makes a selection method good?

LEARNING OBJECTIVE 2

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240 Chapter 6 Selecting Employees Who Fit

1. How do the concepts of long- and short-term talent and generalist and specialist talent fit with overall HR strategy?

2. For what type of HR strategy is organization fit most important? When is job fit most needed? What type of organization should base hiring on achievement? What type should hire based on potential?

3. What is reliability? How is it estimated? 4. What is validity? How is it estimated? 5. What factors affect the utility of selection

methods? 6. What is the difference between fairness and

legality?

7. Why do people sometimes react negatively to certain selection methods?

8. What are the strengths and weakness associ- ated with the following selection methods: cognitive ability testing, personality testing, physical ability testing, integrity testing, drug testing, application forms and résumés, bio- data, work sample testing, reference checking, and interviewing?

9. Which selection methods are best for organi- zations with the various employee selection strategies?

10. What are the methods for combining scores from different selection methods?

DISCUSSION QUESTIONS

EXAMPLE CASE Outback Steakhouse

Outback Steakhouse, Inc., now a $3.25 billion company with 65,000 employ- ees and 1,100 restaurants worldwide, began modestly in the spring of 1988. A key to making Outback a great place to work is hiring the right people. One of the things we recognized early on is that you cannot send turkeys to eagle school: Smart leaders do not hire marginal employees and expect them to be able to keep the commitments of the company to customers or to remain very long with the company. If you start with the right people and provide a posi- tive employee experience, turnover stays low. Thus, a rigorous employee selec- tion process was developed in the early years of the company that is rooted in the Principles and Beliefs.

Outback’s selection process for hourly and management Outbackers is proprietary; however, we can share some of the details here about the steps involved in the hiring process:

Fairness 217 Integrity testing 226 Inter-rater method 212 Job-based fit 208 Long-term generalists 207 Long-term specialists 207 Minimum cutoffs approach 236 Multiple hurdles approach 237 Negligent hiring 231 Organization-based fit 208 Personality testing 221 Potential 210 Predictive validation strategy 214 Predictor weighting 236

Reliability 211 Short-term generalists 206 Short-term specialists 207 Situational interview 234 Situational judgment test 224 Situational specificity 215 Split-halves method 212 Structured interview 234 Test-retest method 211 Utility 215 Validity 213 Validity generalization 215 Work sample testing 227

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Discussion Case 241

All applicants are given a realistic job preview that shares both the benefits and the responsibilities of working for Outback. We explain to applicants that being an Outbacker means taking care of others, and we tell them how they will be held accountable for that. We share a document, called a Dimension of Performance, which pro- vides detailed examples of the kinds of behavior expected of Outbackers and how those behaviors are tied to the vision of Outback. This is a candidate’s first exposure to our vision. (At this point, some candidates have withdrawn from the process because these dimensions set a very high standard.) When candidates agree to move forward in the process, they are asked to complete an application. The information they provide is reviewed with an eye toward determining if the candidate can perform the job, fit into the Outback culture, and stay with the company. Successful applicants are assessed for their cognitive ability, personality, and judgment through a series of tests that have been validated against existing Outbackers who have been successful in the company. Applicants who pass these tests are interviewed using questions that probe not only their experience but also their orientation toward aspects of the Outback culture, including service mindedness, hospital- ity, teamwork, and ability to think on their feet.

QUESTIONS 1. How do the employee-selection methods at Outback Steakhouse help

achieve competitive advantage? 2. How important is organization fit for Outback Steakhouse? 3. Why does Outback Steakhouse order the selection methods such that

applicants first complete an application, then complete tests, and then participate in an interview?

4. Why do you think these selection methods are valid?

Source: Tom DeCotiss, Chris Sullivan, David Hyatt, and Paul Avery, “How Outback Steakhouse Created a Great Place to Work, Have Fun, and Make Money,” Journal of Organizational Excellence (Autumn 2004): 23–33. Reprinted with permission of John Wiley & Sons, Inc.

DISCUSSION CASE Stringtown Iron Works

Stringtown Iron Works is a small fictional shipyard on the East Coast dedi- cated to ship overhaul. It focuses on obtaining government contracts for over- hauling naval ships. These overhauls require Stringtown to maintain a quality workforce that is capable of rapid production. The position of pipe fitter is particularly critical for success.

Pipe fitters are responsible for repairing and installing the piping systems on board the vessels. Employees in the pipe fitter classification may also be called on to work in the shop, building pipe pieces that are ultimately installed on the ships. Like most union jobs in the yard, pipe fitters are predominantly white men between the ages of 30 and 45. As part of the most recent bargain- ing agreement, work is primarily done in cross-functional teams.

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242 Chapter 6 Selecting Employees Who Fit

Interview a family member, friend, or someone else who has a job you would like to someday have. Learn about the hiring practices of the organiza- tion where this person works. Ask questions like the following:

1. What makes the company different from its competitors? Does it focus mostly on reducing costs, or does it try to provide goods and ser- vices that are somehow better than what com- petitors offer?

2. What tasks do you do on the job? What knowl- edge, skills, and abilities do you need in order to do this job effectively?

3. How long do most people stay at the company? Is this a place where most people work for their entire career? How long do you think you will continue working with the company?

4. What did you have to do to get hired at the company? Did you take any tests? Did they ask for a résumé? What was the interview like?

5. What type of qualifications do you think are most important for someone who wants to work at your company? If you were making a decision to hire someone to work with you, what char- acteristics would you want that person to have? How would you measure those characteristics?

EXPERIENTIAL EXERCISE Learning through Interviewing

Job Description

Job: Pipe fitter

Pay: $12.00 to $20.00 per hour

A pipe fitter must:

1. Read and interpret blueprints and/or sketches to fabricate and install pipe in accordance with specifications.

2. Perform joint preparation and fit-up to fabricate and install brazed and welded piping systems. 3. Perform layout and calculations to fabricate and install pipe. 4. Fabricate pipe pieces up to 10” in diameter and up to 10’ long to support shipboard pipe

installation.

5. Install ship’s piping, such as water, drains, hydraulics, lube oil, fuel oil, high temperature air, etc. on location and within tolerances per design.

6. Inspect and hydro test completed piping systems to ensure compliance with ship’s specifications. 7. Use a variety of hand and power tools to perform joint preparation, assembly bolt-up, and

positioning during fabrication and installation.

8. Utilize welding equipment to tack-weld pipe joints and to secure pipe supports to ship’s structure.

Completion of the above tasks requires pipe fiT1tters to do the following:

Frequent lifting and carrying of 25–50 pounds

Occasional lifting and carrying of over 50 pounds

Occasional to frequent crawling, kneeling, and stair climbing

Frequent pushing, pulling, hammering, and reaching

Frequent bending, stooping, squatting, and crouching

Occasional twisting in awkward positions

Occasional fume exposure

QUESTIONS 1. Which of the overall HR strategies would be best for Stringtown Iron Works? 2. Should Stringtown focus on job fit or organization fit? 3. Should Stringtown hire based on achievement or potential? 4. What selection methods would you recommend for Stringtown? Why?

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Endnotes 243

Access the companion website to test your knowledge by completing a Graphics Design, Inc., interactive role play. In this exercise you have identified several potential candidates for the new positions at GDI, and it is now time to begin the selection process. In design- ing the appropriate selection system for the company, you must consider reli- ability, validity, utility, legality, and acceptability, along with common testing methods, information-gathering sources, and interview types. Whatever sys- tem you choose, you know that you’ll need to gain buy-in from the managers who need these new employees. You know, too, that the system must support GDI’s basic HR strategy, the Loyal Soldier strategy. Your recommendations on the appropriate selection system are due this afternoon. What will it look like?

INTERACTIVE EXPERIENTIAL EXERCISE

Employee Selection: Choosing the Best of the Best for Graphics Design, Inc. http://www.wiley.com/college/sc/stewart

Using the information obtained from the interview, do the following: 1. Identify the competitive business strategy of the

organization. 2. Identify the human resource strategy of the

organization. 3. Evaluate whether the competitive business strat-

egy and the human resource strategy fit.

4. Evaluate the effectiveness of the organization’s selection methods for achieving its human resource strategy.

5. Make recommendations about the selec- tion methods that you think would be most appropriate for the position of the person you interviewed.

ENDNOTES 1. Chad H. Van Iddekinge, Gerald R. Ferris, Pamela L.

Perrewe, Fre R. Blass, Thomas D. Heetderks, and Alexa A. Perryman, “Effects of Selection and Training on Unit-Level Performance Over Time: A Latent Growth Modeling Approach,” Journal of Applied Psychology 94 (2009): 829–843; David E. Terpstra and Elizabeth J. Rozell, “The Relationship of Staffing Practices to Organizational Level Measures of Performance,” Personnel Psychology 46 (1993): 27–48.

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5. Lance Cpl. John Robbart III, “Tips on Training for Marine Corps’ Physical Tests,” available online at http://thevillagenews.com/story/50903; http://www. marines.com/becoming-a-marine/how-to-prepare.

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8. Judy D. Olian and Sara L. Rynes, “Organizational Staffing: Integrating Practice with Strategy,” Industrial Relations 23 (1984): 170–183; Jeffrey A. Sonnenfeld and Maury A. Peiperl, “Staffing Policy as a Strategic Response: A Typology of Career Systems,” Academy of Management Review 13 (1988): 588–601; Peter Bamberger and Ilan Meshoulam, Human Resource Strategy: Formulation, Implementation, and Impact (Thousand Oaks, CA: Sage Publications, 2000).

9. Olian and Rynes, “Organizational Staffing,” 170–183; Sonnenfeld and Peiperl, “Staffing Policy,” 588–601; Bamberger and Meshoulam, Human Resource Strategy.

10. Olian and Rynes, “Organizational Staffing,” 170–183; Sonnenfeld and Peiperl, “Staffing Policy,” 588–601; Bamberger and Meshoulam, Human Resource Strategy.

11. Ibid. 12. Jeffrey R. Edwards, “Person-Job Fit: A Conceptual

Integration, Literature Review and Methodological

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244 Chapter 6 Selecting Employees Who Fit

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Endnotes 245

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50. Jonathan A. Shaffer and Bennett E. Postlethwaite, “A Matter of Context: A Meta-Analytic Investigation of the Relative Validity of Contextualized and Noncontextualized Personality Measures,” Personnel Psychology 65 (2012): 445–493.

51. Dan S. Chiaburu, In-Sue Oh, Christopher M. Berry, Li Ning, and Richard G. Gardner, “The Five-Factor Model of Personality Traits and Organizational Citizenship Behaviors: A Meta-Analysis,” Journal of Applied Psychology 96 (2011): 1140–1166.

52. Ian R. Gellatly, “Conscientiousness and Task Performance: Test of Cognitive Process Model,” Journal of Applied Psychology 81 (1996): 474–482; Murray R. Barrick, Michael K. Mount, and Judy P. Strauss, “Conscientiousness and Performance of Sales Representatives: Test of the Mediating Effects of Goal Setting,” Journal of Applied Psychology 78 (1993): 715–722; Greg L. Stewart, Kenneth P. Carson, and Robert L. Cardy, “The Joint Effects of Conscientiousness and Self-Leadership Training on Employee Self-Directed Behavior in a Service Setting,” Personnel Psychology 49 (1996): 143–164; Timothy A. Judge and Remus Ilies, “Relationship of Personality to Performance Motivation: A Meta-Analytic Review,” Journal of Applied Psychology 87 (2002): 797–807.

53. Timothy A. Judge, Joseph J. Martocchio, and Carl J. Thoresen, “Five-Factor Model of Personality and Employee Absence,” Journal of Applied Psychology 82 (1997): 745–755.

54. Remus Ilies, Ingrid Smithey Fulmer, Matthias Spitzmuller, and Michael D Johnson, “Personality and Citizenship Behavior: The Mediating Role of Job Satisfaction,” Journal of Applied Psychology 94 (2009): 945–959.

55. Judge and Ilies, “Relationship of Personality to Performance Motivation,” 797–807.

56. Luke D. Smillie, Gilliam B. Yeo, Adrian F. Furnham, and Chris J. Jackson, “Benefits of All Work and No Play: The Relationship Between Neuroticism and Performance as a Function of Resource Allocation,” Journal of Applied Psychology 91 (2006): 139–155.

57. Murray R. Barrick, Greg L. Stewart, and Mike Piotrowski, “Personality and Job Performance: Test of the Mediating Effects of Motivation Among Sales Representatives,” Journal of Applied Psychology 87: 43–51; Greg L. Stewart, “Reward Structure as a Moderator of the Relationship Between Extraversion and Sales Performance,” Journal of Applied Psychology 81 (1996): 619–627. Timothy A. Judge, Joyce E. Bono, Remus Ilies, and Megan W. Gerhardt, “Personality and Leadership: A Qualitative and Quantitative Review,” Journal of Applied Psychology 87 (2002): 765–780.

58. Michael K. Mount, Murray R. Barrick, and Greg L. Stewart, “Five-Factor Model of Personality and Job Performance in Jobs Involving Interpersonal Interactions,” Human Performance 2/3 (1998): 145–166.

59. Remus Ilies, “Personality and Citizenship Behavior,” 945–959.

60. Jeffrey A. LePine, Jason A. Colquitt, and Amir Erez, “Adaptability and Changing Task Contexts: Effects of General Cognitive Ability, Conscientiousness, and Openness to Experience,” Personnel Psychology

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246 Chapter 6 Selecting Employees Who Fit

53 (2000): 563–593; Jennifer M. George and Jing Zhou, “When Openness to Experience and Conscientiousness Are Related to Creative Behavior: An Interactional Approach,” Journal of Applied Psychology 86 (2001): 513–524.

61. Margaret A. Shaffer, David A. Harrison, Hal Gregersen, Stewart J. Black, and Lori A. Fezandi, “You Can Take It with You: Individual Differences and Expatriate Effectiveness,” Journal of Applied Psychology 91 (2006): 109–125.

62. Hao Zhao, and Scott E. Seibert, “The Big Five Personality Dimensions and Entrepreneurial Status: A Meta-Analytical Review,” Journal of Applied Psychology 91 (2006): 259–271.

63. Murray R. Barrick, Greg L. Stewart, Mitchell J. Neubert, and Michael K. Mount, “Relating Member Ability and Personality to Work-Team Processes and Team Effectiveness,” Journal of Applied Psychology 83 (1998): 377–391; George A. Neuman and Julie Wright, “Team Effectiveness: Beyond Skills and Cognitive Ability,” Journal of Applied Psychology 84 (1999): 376–389; Jeffrey A. LePine, John R. Hollenbeck, Daniel R. Ilgen, and Jennifer Hedlund, “Effects of Individual Differences on the Performance of Hierarchical Decision-Making Teams: Much More Than g,” Journal of Applied Psychology 82 (1997): 803–811.

64. Daniel P. O’Meara, “Personality Tests Raise Questions of Legality and Effectiveness,” HRMagazine 39(1994): 97–100.

65. Hanna J. Foldes, Emily E. Duehr, and Deniz S. Ones, “Group Differences in Personality: A Meta-Analysis Comparing Five U.S. Racial Groups,” Personnel Psychology 61 (2008): 579–616; Ann Marie Ryan, Robert E. Ployhart, and Lisa A. Friedel, “Using Personality Testing to Reduce Adverse Impact: A Cautionary Note,” Journal of Applied Psychology 83 (1998): 298–307.

66. Jill E. Ellingson, Paul R. Sackett, and Leatta M. Hough, “Social Desirability Corrections in Personality Measurement: Issues of Applicant Comparison and Construct Validity,” Journal of Applied Psychology 84 (1999): 155–166; Leatta M. Hough, Newell K. Eaton, Marvin D. Dunnette, John D. Kamp, et al., “Criterion- Related Validities of Personality Constructs and the Effect of Response Distortion on Those Validities,” Journal of Applied Psychology 75 (1990): 581–595; Rose Mueller-Hanson, Eric D. Heggestad, and George C. Thornton III, “Faking and Selection: Considering the Use of Personality from Select-In and Select-Out Perspectives,” Journal of Applied Psychology 88 (2003): 348–355.

67. Shawn Komar, Douglas J. Brown, Jennifer A. Komar, and Chet Robie, “Faking and the Validity of Conscientiousness: A Monte Carlo Investigation,” Journal of Applied Psychology 93 (2008): 140–154.

68. Hough et al., “Criterion-Related Validities,” 581–595; Murray R. Barrick and Michael K. Mount, “Effects of Impression Management and Self-Deception on the Predictive Validity of Personality Constructs,” Journal of Applied Psychology 81 (1996): 261–272.

69. Neal Schmitt and Frederick L. Oswald, “The Impact of Corrections for Faking on the Validity of Noncognitive

Measures in Selection Settings,” Journal of Applied Psychology 91 (2006): 613–621.

70. Lynn A. McFarland and Ann Marie Ryan, “Variance in Faking Across Noncognitive Measures,” Journal of Applied Psychology 85 (2000): 812–821; Joseph G. Rosse, Mary D. Stecher, Janice L. Miller, and Robert A. Levin, “The Impact of Response Distortion of Preemployment Personality Testing and Hiring Decisions,” Journal of Applied Psychology 83 (1998): 634–644.

71. Mueller-Hanson, Heggestad, and Thornton, “Faking and Selection,” 348–355.

72. In-Sue Oh, Gang Wang, and Michael K. Mount, “Validity of Observer Ratings of the Five-Factor Model of Personality Traits: A Meta-Analysis,” Journal of Applied Psychology 96 (2011): 762–773; Edwin A.J. van Hooft and Marise Ph. Born, “Intentional Response Distortion of Personality Tests: Using Eye-Tracking to Understand Response Distortion When Faking,” Journal of Applied Psychology 97 (2012): 287–300.

73. L.R. James, M.D. McIntyre, C.A. Glisson, J.L. Bowler and T.R. Mitchell, “The Conditional Reasoning Measurement System for Aggression: An Overview,” Human Performance 17 (2004): 271–295.

74. James M. LeBreton, Cheryl D. Barksdale, Jennifer Robin, and Lawrence R. James, “Measurement Issues Associated with Conditional Reasoning Tests: Indirect Measurement and Test Faking,” Journal of Applied Psychology 92 (2007): 1–16.

75. Benjamin Schneider, “The People Make the Place,” Personnel Psychology 40 (1987): 437–453.

76. Filip Lievens and Paul R. Sackett, “The Validity of Interpersonal Skills Assessment Via Situational Judgment Tests for Predicting Academic Success and Job Performance,” Journal of Applied Psychology 97 (2012): 460–468.

77. Ronald Bledow and Michael Frese, “A Situational Judgment Test of Personal Initiative and Its Relationship to Performance,” Personnel Psychology 62 (2009): 229–258; Michael A. McDaniel, Nathan S. Hartman, Deborah L. Whetzel, and W. Lee Grubb III, “Situational Judgment Tests, Response Instructions, and Validity: A Meta-Analysis,” Personnel Psychology 60 (2007): 63–91.

78. Filip Lievens, Paul R. Sackett, and Tine Buyse, “The Effects of Response Instructions on Situational Judgment Test Performance and Validity in a High- Stakes Context,” Journal of Applied Psychology 94 (2009): 1095–1101.

79. Stephan J. Motowidlo, Amy C. Hooper, and Hannah L. Jackson, “Implicit Policies about Relations between Personality Traits and Behavioral Effectiveness in Situational Judgment Items,” Journal of Applied Psychology 91 (2006): 749–761; Michael A. McDaniel, “Situational Judgment Tests,” 63–91.

80. Joyce Hogan, “Structure of Physical Performance in Occupational Tasks,” Journal of Applied Psychology 76 (1991): 495–507.

81. Barry R. Blakley, Miguel A. Quinones, Marnie Swerdlin Crawford, and I. AnnJago, “The Validity of Isometric Strength Tests,” Personnel Psychology 47 (1994): 47–274.

82. Calvin C. Hoffman, “Generalizing Physical Ability Test Validity: A Case Study Using Test Transportability,

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Endnotes 247

Validity Generalization, and Construct-Related Validation Evidence,” Personnel Psychology 52 (1999): 1019–1043.

83. Michael Peters, Philip Servos, and Russell Day, “Marked Sex Differences on a Fine Motor Skill Task Disappear When Finger Size Is Used as Covariate,” Journal of Applied Psychology 75 (1990): 87–90; Richard D. Arvey, Timothy E. Landon, Steven M. Nutting, and Scott E. Maxwell, “Development of Physical Ability Tests for Police Officers: A Construct Validation Approach,” Journal of Applied Psychology 77 (1992): 996–1009.

84. Paul R. Sackett, Laura R. Burris, and Christine Callahan, “Integrity Testing for Personnel Selection: An Update,” Personnel Psychology 42 (1989): 491–530.

85. Chad H. Van Iddekinge, Philip L. Roth, Patrick H. Raymark, and Heather N. Odle-Dusseau, “The Criterion-Related Validity of Integrity Tests: An Updated Meta-Analysis,” Journal of Applied Psychology 97 (2012): 499–530; William G. Harris, John W. Jones, Reid Klion, David W. Arnold, Wayne Camara, and Michael R. Cunningham, “Test Publishers’ Perspective on “An Updated Meta-Analysis”: Comments on Van Iddekinge Roth, Raymark, and Odle-Dusseau (2012),” Journal of Applied Psychology 97 (2012): 531–536; Deniz S. Ones, Chockalingam Viswesvaran, and Frank L. Schmidt, “Integrity Tests Predict Counterproductive Work Behaviors and Job Performance Well: Comment on Van Iddekinge, Roth, Raymark, and Odle-Dusseau,” Journal of Applied Psychology 97 (2012): 537–542.

86. Joyce Hogan and Kimberly Brinkmeyer, “Bridging the Gap Between Overt and Personality-Based Integrity Tests,” Personnel Psychology 50 (1997): 587–600; James E. Wanek, Paul R. Sackett, and Deniz S. Ones, “Towards an Understanding of Integrity Test Similarities and Differences: An Item-Level Analysis of Seven Tests,” Personnel Psychology 56 (2003): 873–894.

87. Ones, Viswesvaran, and Schmidt, “Comprehensive Meta-Analysis of Integrity,” 679–703; Cunningham, Wong, and Barbee, “Self-Presentation Dynamics,” 643–658.

88. Deniz S. Ones and Chockalingam Viswesvaran, “Gender, Age, and Race Differences on Overt Integrity Tests: Results Across Four Large-Scale Job Applicant Datasets,” Journal of Applied Psychology 83 (1998): 35–42; Bernardin and Cooke, “Validity of an Honesty Test,” 1097–1108.

89. Bernd Marcus, Kibeom Lee, and Michael C. Ashton, “Personality Dimensions Explaining Relationships Between Integrity Tests and Counterproductive Behavior: Big Five, or One in Addition?” Personnel Psychology 60 (2007): 1–34.

90. Sackett, Burris, and Callahan, “Integrity Testing for Personnel Selection,” 491–530.

91. Michael R. Frone, “Prevalence of Illicit Drug Use in the Workforce and in the Workplace: Findings and Implications from a U.S. National Survey,” Journal of Applied Psychology 91 (2006): 856–869.

92. Jacques Normand, Stephen D. Salyards, and John J. Mahone, “An Evaluation of Preemployment Drug Testing,” Journal of Applied Psychology 75 (1990): 629–639.

93. Bennett Tepper, “Investigation of General and Program-Specific Attitudes Toward Corporate Drug- Testing Policies,” Journal of Applied Psychology 79 (1994): 392–401; Paronto et al., “Drug Testing,” 1159–1166; Kevin R. Murphy, George C. Thornton III, and Kristin Prue, “Influence of Job Characteristics on the Acceptability of Employee Drug Testing,” Journal of Applied Psychology 76 (1991): 447–453.

94. Kevin R. Murphy, George C. Thornton III, and Douglas H. Reynolds, “College Students’ Attitudes Toward Employee Drug Testing Programs,” Personnel Psychology 43 (1990): 615–632.

95. Hunter and Hunter, “Validity and Utility,” 72–98; Jerry W. Hedge and Mark S. Teachout, “An Interview Approach to Work Sample Criterion Measurement,” Journal of Applied Psychology 77 (1992): 453–461; Winfred Arthur Jr., Gerald V Barrett, and Dennis Doverspike, “Validation of an Information-Processing- Based Test Battery for the Prediction of Handling Accidents Among Petroleum-Product Transport Drivers,” Journal of Applied Psychology 75 (1990): 621–628.

96. Philip Roth, Philip Bobko, Lynn McFarland, and Maury Buster, “Work Sample Tests in Personnel Selection: A Meta-Analysis of Black–White Differences in Overall and Exercise Scores,” Personnel Psychology 61 (2008): 637–661.

97. Winfred Arthur Jr., Eric Anthony Day, Theresa L. McNelly, and Pamela Edens, “A Meta-Analysis of the Criterion-Related Validity of Assessment Center Dimensions,” Personnel Psychology 56 (2003): 125–154.

98. Ibid.; Kobi Dayan, Ronen Kastan, and Shaul Fox, “Entry-Level Police Candidate Assessment Center: An Efficient Tool or a Hammer to Kill A Fly?” Personnel Psychology 55 (2002): 827–850; Filip Lievens and Fiona Patterson, “The Validity and Incremental Validity of Knowledge Tests, Low-Fidelity Simulations, and High- Fidelity Simulations for Predicting Job Performance in Advanced-Level High-Stakes Selection,” Journal of Applied Psychology 96 (2011): 927–940.

99. Mark C. Bowler and David J. Woehr, “A Meta- Analytic Evaluation of the Impact of Dimension and Exercise Factors on Assessment Center Ratings,” Journal of Applied Psychology 91 (2006): 1114–1124; Neal Schmitt and Jeffrey R. Schneider, “Factors Affecting Validity of a Regionally Administered Assessment Center,” Personnel Psychology 43 (1990): 1–13; Annette C. Spychalski, Miguel A. Quinones, Barbara B. Gaugler, and Katja Pohley, “A Survey of Assessment Center Practices in Organizations in the United States,” Personnel Psychology 50 (1997): 71–90; Deidra J. Schleicher, David V Day, Bronston T. Mayes, and Ronald E. Riggio, “A New Frame for Frame-of- Reference Training: Enhancing the Construct Validity of Assessment Centers,” Journal of Applied Psychology 87 (2002): 735–746.

100. Neil Anderson, Filip Lievens, Karen van Dam, and Marise Born, “A Construct-Driven Investigation of Gender Differences in a Leadership-Role Assessment Center,” Journal of Applied Psychology 91 (2006): 555–566; Michelle A. Dean, Philip L. Roth, and Philip Bobko, “Ethnic and Gender Subgroup Differences in

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248 Chapter 6 Selecting Employees Who Fit

Assessment Center Ratings: A Meta-Analysis,” Journal of Applied Psychology 93 (2008): 685–691.

101. Miguel A. Quinones, J. Kevin Ford, and Mark S. Teachout, “The Relationship Between Work Experience and Job Performance: A Conceptual and Meta-Analytic Review,” Personnel Psychology 48 (1995): 887–910; Philip L. Roth, Craig A. BeVier, Fred S. Switzer III, and Jeffrey S. Schippmann, “Meta- Analyzing the Relationship Between Grades and Job Performance,” Journal of Applied Psychology 81 (1996): 548–556.

102. Thomas W. H. Ng and Daniel C. Feldman, “How Broadly Does Education Contribute to Job Performance?” Personnel Psychology 62 (2009): 89–134.

103. Ann Howard, “College Experiences and Managerial Performance,” Journal of Applied Psychology 71 (1986): 530–552.

104. Arlise P. McKinney, Kevin D. Carlson, Ross L. Mecham III, Nicolas C. D’Angelo, and Mary L. Connerley, “Recruiters’ Use of GPA in Initial Screening Decisions: Higher GPAs Don’t Always Make the Cut,” Personnel Psychology 56 (2003): 823–846; Roth et al., “Meta- analyzing the Relationship.”

105. Quinones, Ford, and Teachout, “The Relationship Between Work Experience.”

106. Lisa Dragoni, In-Sue Oh, Paul Vankatwyk, and Paul E. Tesluk, “Developing Executive Leaders: The Relative Contribution of Cognitive Ability, Personality, and the Accumulation of Work Experience in Predicting Strategic Thinking Competency,” Personnel Psychology 64 (2011): 829–864; Paul E. Tesluk and Rick R. Jacobs, “Toward an Integrated Model of Work Experience,” Personnel Psychology 51 (1998): 321–356.

107. Quinones, Ford, and Teachout, “The Relationship Between Work Experience.”

108. Philip L. Roth and Philip Bobko, “College Grade Point Average as a Personnel Selection Device: Ethnic Group Differences and Potential Adverse Impact,” Journal of Applied Psychology 85 (2000): 399–406.

109. Fred A. Mael, “A Conceptual Rationale for the Domain and Attributes of Biodata,” Personnel Psychology 44 (1991): 763–792.

110. Barbara K. Brown and Michael A. Campion, “Biodata Phenomenology: Recruiters’ Perceptions and Use of Biographical Information in Resume Screening,” Journal of Applied Psychology 79 (1994): 897–908.

111. Michael K. Mount, L. A. Witt, and Murray R. Barrick, “Incremental Validity of Empirically Keyed Biodata Scales over Gma and the Five Factor Personality Constructs,” Personnel Psychology 53 (2000): 299–323; Anthony T. Dalessio and Todd A. Silverhart, “Combining Biodata Test and Interview Information: Predicting Decisions and Performance Criteria,” Personnel Psychology 47 (1994): 303–316.

112. Garnett Stokes Shaffer, Vickie Saunders, and William A. Owens, “Additional Evidence for the Accuracy of Biographical Data: Long-Term Retest and Observer Ratings,” Personnel Psychology 39 (1986): 791–810.

113. Hunter and Hunter, “Validity and Utility,” 72–98; Neal Schmitt, Richard Z. Gooding, Raymond A. Noe, and Michael Kirsch, “Meta-Analyses of Validity Studies Published Between 1964 and 1982 and the

Investigation of Study Characteristics,” Personnel Psychology 37 (1984): 407–423; Fred A. Mael and Blake E. Ashforth, “Loyal from Day One: Biodata, Organizational Identification, and Turnover Among Newcomers,” Personnel Psychology 48 (1995): 309–334.

114. Margaret A. McManus and Mary L. Kelly, “Personality Measures and Biodata: Evidence Regarding Their Incremental Predictive Value in the Life Insurance Industry,” Personnel Psychology 52 (1999): 137–148; Andrew J. Vinchur, Jeffery S. Schippmann, Fred S. Swizer III, and Philip L. Roth, “A Meta-Analytic Review of Predictors of Job Performance for Salespeople,” Journal of Applied Psychology 83 (1998): 586–597.

115. Hannah R. Rothstein, Frank L. Schmidt, Frank W. Erwin, William Owens, et al., “Biographical Data in Employment Selection: Can Validities Be Made Generalizable?” Journal of Applied Psychology 75 (1990): 175–184; Kevin D. Carlson, Steven E. Scullen, Frank L. Schmidt, Hannah Rothstein, and Frank Erwin, “Generalizable Biographical Data Validity Can Be Achieved Without Multi-Organizational Development and Keying,” Personnel Psychology 52 (1999): 731–756.

116. Julia Levashina, Frederick P. Morgeson, and Michael A. Campion, “Tell Me More: Exploring How Verbal Ability and Item Verifiability Influence Responses to Biodata Questions in a High Stakes Selection Context,” Personnel Psychology 65 (2012): 359–383; Thomas E. Becker and Alan L. Colquitt, “Potential Versus Actual Faking of a Biodata Form: An Analysis Along Several Dimensions of Item Type,” Personnel Psychology 45 (1992): 389–406.

117. Hunter and Hunter, “Validity and Utility,” 72–98. 118. Ann Marie Ryan and Marja Lasek, “Negligent Hiring

and Defamation: Areas of Liability Related to Pre- Employment Inquiries,” Personnel Psychology 44 (1991): 293–319.

119. Richard A. Posthuma, Frederick P. Morgeson, and Michael A. Campion, “Beyond Employment Interview Validity: A Comprehensive Narrative Review of Recent Research and Trends over Time,” Personnel Psychology 55 (2002): 1–82; Allen I. Huffcutt, James M. Conway, Philip L. Roth, and Nancy J. Stone, “Identification and Meta-Analytic Assessment of Psychological Constructs Measured in Employment Interviews,” Journal of Applied Psychology 86 (2001): 897–913.

120. David F. Caldwell and Jerry M. Burger, “Personality Characteristics of Job Applicants and Success in Screening Interviews,” Personnel Psychology 51 (1998): 119–136.

121. Brian W. Swider, Murray R. Barrick, Brad T. Harris, and Adam C. Stoverink, “Managing and Creating an Image in the Interview: The Role of Interviewee Initial Impressions,” Journal of Applied Psychology 96 (2011): 1275–1288; Murray R. Barrick, Brin W. Swider, and Greg L. Stewart, “Initial Evaluations in the Interview: Relationships with Subsequent Interviewer Evaluations and Employment Offers,” Journal of Applied Psychology 95 (2010): 1163–1172.

122. Todd J. Maurer and Jerry M. Solamon, “The Science and Practice of a Structured Employment Interview Coaching Program,” Personnel Psychology 59 (2006): 433–456; Todd Maurer, Jerry Solamon, and Deborah

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Endnotes 249

Troxtel, “Relationship of Coaching with Performance in Situational Employment Interviews,” Journal of Applied Psychology 83 (1998): 128–136; Posthuma, Morgeson, and Campion, “Beyond Employment Interview Validity.”

123. Murray R. Barrick, Jonathan A. Shaffer, and Sandra W. DeGrassi, “What You See May Not Be What You Get: Relationships Among Self-Presentation Tactics and Ratings of Interview and Job Performance,” Journal of Applied Psychology 94 (2009): 1394–1411.

124. James M. Conway, Robert A. Jako, and Deborah F. Goodman, “A Meta-Analysis of Interrater and Internal Consistency Reliability of Selection Interviews,” Journal of Applied Psychology 80 (1995): 565–579.

125. Michael A. McDaniel, Deborah L. Whetzel, Frank L. Schmidt, and Steven D. Maurer, “The Validity of Employment Interviews: A Comprehensive Review and Meta-Analysis,” Journal of Applied Psychology 79 (1994): 599–616; Allen I. Huffcutt and Winfred Arthur Jr., “Hunter and Hunter (1984) Revisited: Interview Validity for Entry-Level Jobs,” Journal of Applied Psychology 79 (1994): 184–190.

126. Jose M. Cortina, Nancy B. Goldstein, Stephanie C. Payne, H. Kristl Davison, and Stephen W. Gilliland, “The Incremental Validity of Interview Scores over and above Cognitive Ability and Conscientiousness Scores,” Personnel Psychology 53 (2000): 325–352; Michael A. Campion, James E. Campion, and J. Peter Hudson, “Structured Interviewing: A Note on Incremental Validity and Alternative Question Types,” Journal of Applied Psychology 79 (1994): 998–1102.

127. Sara L. Rynes and Barry Gerhart, “Interviewer Assessments of Applicant ‘Fit’: An Exploratory Investigation,” Personnel Psychology 43 (1990): 13–36.

128. Sharon L. Segrest Purkiss, Pamela L. Perrewe, Treena L. Gillespie, Bronston T. Mayes, and Gerald R. Ferris, “Implicit Sources of Bias in Employment Interview Judgments and Decisions,” Organizational Behavior and Human Decision Processing 101 (2006): 152–167.

129. M. Ronald Buckley, Katherine A. Jackson, Mark C. Bolino, John G. Veres, III, and Hubert S. Field, “The Influence of Relational Demography on Panel Interview Ratings: A Field Experiment,” Personnel Psychology 60 (2007): 627–646; Joshua M. Sacco, Christine R. Scheu, Ann Marie Ryan, and Neal Schmitt, “An Investigation of Race and Sex Similarity Effects in Interviews: A Multilevel Approach to Relational Demography,” Journal of Applied Psychology 88 (2003): 852–865; Philip L. Roth, Chad H. Van Iddekinge, Allen I. Huffcutt, Carl E. Eidson, Jr., and

Philip Bobko, “Corrections for Range Restriction in Structured Interview Ethnic Group Differences: The Values May Be Larger Than Researchers Thought,” Journal of Applied Psychology 87 (2002): 369–376; Allen I. Huffcutt and Philip L. Roth, “Racial Group Differences in Employment Interview Evaluations,” Journal of Applied Psychology 83 (1998): 179–189.

130. Klaus G. Melchers, Nadja Lienhardt, Miriam Von Aarburg, and Martin Kleinmann, “Is More Structure Really Better? A Comparison of Frame-of-Reference Training and Descriptively Anchored Rating Scales to Improve Interviewers’ Rating Quality, Personnel Psychology 64 (2011): 53–87; Karen I. van der Zee, Arnold B. Bakker, and Paulien Bakker, “Why Are Structured Interviews So Rarely Used in Personnel Selection?” Journal of Applied Psychology 87 (2002): 176–184.

131. Frank L. Schmidt and Ryan D. Zimmerman, “A Counterintuitive Hypothesis about Employment Interview Validity and Some Supporting Evidence,” Journal of Applied Psychology 89 (2004): 553–561.

132. Murray R. Barrick, “What You See May Not Be What You Get,” 1394–1411.

133. Steven D. Maurer, “A Practitioner-Based Analysis of Interviewer Job Expertise and Scale Format as Contextual Factors in Situational Interviews,” Personnel Psychology 55 (2002): 307–328; Allen I. Huffcutt, Jeff Weekley, Willi H. Wiesner, Timothy G. DeGroot, and Casey Jones, “Comparison of Situational and Behavior Description Interview Questions for Higher-Level Positions,” Personnel Psychology 54 (2001): 619–644; Elaine D. Pulakos and Neal Schmitt, “Experience- Based and Situational Interview Questions: Studies of Validity,” Personnel Psychology 48 (1995): 289–308.

134. Yarv Ganzach, Avraham N. Kluger, and Nimrod Kayman, “Making Decisions from an Interview: Expert Measurement and Mechanical Combination,” Personnel Psychology 53 (2000): 1–21.

135. Gatewood and Field, Human Resource Selection. 136. David M. Finch, Bryan D. Edwards, and Craig J.

Wallace, “Multistage Selection Strategies: Simulating the Effects on Adverse Impact and Expected Performance for Various Predictor Combinations,” Journal of Applied Psychology 94 (2009): 318–340.

137. Michael A. Campion, James L. Outtz, Sheldon Zedeck, Frank L. Schmidt, Jerard F. Kehoe, Kevin R. Murphy, and Robert M. Guion, “The Controversy over Score Banding in Personnel Selection: Answers to 10 Key Questions,” Personnel Psychology 54 (2001): 149–185.

138. Ibid.

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C h a p t e r 7

Managing Employee Retention and

Separation

A M A N A G E R ’ S P E R S P E C T I V E

ANGELA CLOSES HER CELL PHONE AND TAKES A DEEP BREATH. WAS IT REALLY A GOOD IDEA TO ACCEPT THE JOB AS RESTAURANT MANAGER? IT SOUNDED LIKE SUCH A GOOD IDEA WHEN MARK, THE REGIONAL MANAGER, OFFERED HER THE POSI- TION TWO MONTHS AGO. SHE WON’T GRADUATE WITH HER DEGREE IN ELEMENTARY EDUCATION FOR

TWO MORE YEARS. BEING THE MANAGER PROVIDES HER WITH FLEXIBILITY TO TAKE CLASSES WHEN SHE

WANTS, BUT TRYING TO SCHEDULE OTHER EMPLOY- EES IS MUCH MORE STRESSFUL THAN SHE EXPECTED.

Just now Barbara—a new cook hired last month— called to tell Angela that she is quit- ting and will not work the hours scheduled during the upcoming week. This is the third time in two months that someone has quit with little or no advance notice. It will be difficult to schedule other employees to cover for Barbara during the upcom- ing week, let alone quickly find someone to hire as a new cook.

From experience, Angela knows that cooks and food servers are unlikely to stay with the same

restaurant for long. Yet surely it should be possible to create a fun working atmosphere that would make employees less likely to leave. Might it help to pay higher wages? Would older workers and people with family responsibilities be more likely to stay than the college students she currently hires?

Angela’s thoughts quickly shift to the other dis- agreeable task she faces today. The very thought of meeting with Simon is enough to make Angela want to quit, herself. Yesterday Simon was late for work the second time this week. Once he arrived, he spent much of his shift wasting time. Working with first graders will surely be easier than supervising Simon. Should she just fire him?

Thinking about firing someone scares Angela. Would Simon become emotional? When should she meet with him if she decides to deliver the bad news? What should she say? As questions about

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c07.indd 250 1/25/2014 10:31:36 PM

THE BIG PICTURE Effective Organizations Retain their Best Employees While Helping People Who Are Not Productive Find Alternative Employment

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firing Simon race through her head, Angela remem- bers a section of the restaurant operations manual that provides guidance for dealing with problem employees. She read the manual when she began working as manager, and she vaguely remembers a series of steps that she should use to discipline problem employees. Perhaps the operations manual is more useful than she thought.

Angela enters her small manager’s office and begins searching for the manual. As she searches, she asks herself why personnel issues have to be so hard. Her life would be so much easier if she could get employees like Barbara to stay and those like Simon to leave. She knows she will need a plan if she is going to survive the next two years.

WHAT DO YOU THINK? Suppose you are listening to a conversation between Angela and her boss, Mark. Mark makes the following statements. Which of the statements do you think are true?

Workers are less likely to quit when they feel the organization cares about their personal needs.

Decisions to quit often begin with a specific event that causes employees to evaluate their work situation.

It doesn’t really matter how you fire people, as long as you make it clear that their employment is being terminated.

In order to defend against potential lawsuits, an organization should carefully document methods of disciplining prob- lem employees.

Employees who see coworkers losing their jobs become more committed to staying with the organization.

?

T OR F

T OR F

T OR F

T OR F

T OR F

251

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252 Chapter 7 Managing Employee Retention and Separation

Employees are a primary asset of almost every organization, but identifying, hiring, and training good employees can be costly. Replacing an employee who quits costs an organization between one and two times the annual salary of the position.1 This means, for example, that replacing an accountant with an annual salary of $75,000 costs the firm between $75,000 and $150,000. The company loses money not only from the costs associated with hiring a replace- ment but also from lower productivity and decreased customer satisfaction.2

Such costs were illustrated by a study which found that Burger King res- taurants with higher employee turnover have longer wait times that trans- late into decreased customer satisfaction.3 Employee turnover, then, is very expensive, harms customer service, and relates negatively to organizational performance.4 Good employees leaving to work for competitors can also be a problem in that it increases the effectiveness of a rival.5 The expense and negative consequences of replacing workers requires most organizations to focus effort on employee retention, a set of actions designed to keep good employees once they have been hired.

Whereas retaining good employees is beneficial, organizations lose money when they retain poor employees. Ensuring that nonproductive employees don’t continue with the organization is often just as important as retain- ing productive workers. Furthermore, changes in economic conditions and product demand sometimes force organizations to reduce the size of their workforce. Employee separation is the process of efficiently and fairly termi- nating workers.

SAS Institute, Inc., is a successful organization that benefits from concerted efforts to retain productive workers. CEO Jim Goodnight summarizes his views about employee retention when he says, “My chief assets drive out the gate every day. My job is to make sure they come back.”6

SAS is the world’s largest privately owned software company, with revenues exceeding $2.7 billion each year. Organizations such as American Express, Chrysler, Pfizer, and the U.S. Department of Defense use SAS products to help them gather and analyze large amounts of information. Many college students also use SAS products to conduct statistical analyses for class projects.7

Employee retention The act of keeping employees; retaining good workers is particularly important.

Employee separation The act of terminating the employment of workers.

After reading this chapter you should be able to:

Explain how employee retention and separation align with overall HR strategy.

Explain the employee turnover process and describe methods that an organization can use to reduce undesirable turnover.

Discuss the potential benefits and problems associated with employee layoffs.

Describe effective methods of employee discipline, including the principles of due process and the actions of progressive discipline.

Describe effective methods for dismissing employees from an organization.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

LEARNING OBJECTIVE 5

How Can Strategic Employee Retention and Separation Make an Organization Effective?

L E A R N I N G O B J E C T I V E S

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How Can Strategic Employee Retention and Separation Make an Organization Effective? 253

An important key to success for SAS is high customer satisfaction: Its cus- tomer retention rate is above 98 percent. One reason for this success is a relentless drive to create innovative products. SAS reinvests 30 percent of its revenue in research and development each year. Another reason for success is its emphasis on building long-term relationships with clients. Each year, the company conducts a survey to determine how well customer needs are being met. Rather than spend money on marketing and advertising, SAS spends money satisfying customer needs.

Having a stable workforce made up of highly intelligent knowledge workers is critical for providing outstanding customer service.8 Jim Goodnight sums up the human resource philosophy he has practiced over the years by stat- ing, “I think our history has shown that taking care of employees has made the difference in how employees take care of our customers.”9 The average tenure at SAS is 10 years, and 300 employees have worked there for at least 25 years, which is unusual in the software industry. SAS develops long-term relationships with employees, who in turn build long-term relationships with customers. Employees treat customers with the same respect and care that they receive from SAS.10

A good indication of successful human resource practices is the low per- centage of employees who leave SAS each year. The annual turnover rate at SAS has never been higher than 5 percent, a rate that is much lower than that at competing software firms. The lower turnover saves SAS up to $80 million each year.11

What does SAS do to keep employee turnover so low? One answer is that it has created a great work environment. The great environment was recognized by Fortune magazine, which has included SAS among the top three places to work for the past four years. Its work sites, located in beautiful areas where people want to live, have a campus atmosphere.12 SAS employs a resident artist who coordinates sculptures and art decorations.13 In addition, all professional workers have private offices.14 Yet, perhaps the most important aspect of the work environment is the expectation that employees leave the office between 5 and 6 o’clock each evening. The corporate philosophy is that working too many hours in a day leads to decreased productivity for creative workers. Employees are encouraged to spend dinnertime at home with their families.15

Another reason SAS excels at employee retention is its exceptional benefits. Back in its startup days, SAS faced the possibility of losing some key personnel who were going on maternity leave and unlikely to return to work. Goodnight and other leaders solved the problem by creating an onsite daycare center. In the ensuing 25 years, SAS has become a leader in offering family-friendly ben- efits. Employees are often seen in the cafeteria eating lunch with their young children who attend onsite daycare. Vacation and sick leave policies are gener- ous, and most workers have the option of flexible scheduling.16 The company also has excellent fitness facilities, which even launder gym clothes.17 Pay is rarely more than what is offered by other software firms, but SAS does offer competitive compensation packages that include profit sharing.

SAS is also good at identifying and retaining employees who are compat- ible with its organizational culture. People who fit with the family-friendly environment are recruited across industries and not just from the software sector. Not being located in Silicon Valley helps SAS recruit workers who are less likely to move to other companies. SAS also takes advantage of poor economic conditions by hiring the best workers who have been laid off from

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254 Chapter 7 Managing Employee Retention and Separation

competitors.18 For each open position, the company receives up to 200 appli- cations.19 To retain good employees who want to pursue different jobs, the company works hard to facilitate internal transfers.20 Those who are hired but don’t fit the organizational culture are encouraged to leave SAS and find other employment.21

How Are Employee Retention and Separation Strategic?

LEARNING OBJECTIVE 1

The SAS Institute example shows how an organization can benefit from plac- ing a strong emphasis on retaining workers. As we have seen with other human resource practices, however, such a strong emphasis on retaining workers may not be as beneficial for other organizations. Strategies for retaining employ- ees are most effective when they fit with an organization’s strategy. Figure 7.1 illustrates how employee retention and separation fit with competitive busi- ness strategy and overall HR strategy.

STRATEGIC EMPHASIS ON EMPLOYEE RETENTION Retaining good employees is the very essence of an internal labor orientation. The competitive advantage here comes from developing a loyal workforce that consistently excels at satisfying customer demands. For organizations that use the Loyal Soldier HR strategy, retaining employees reduces recruiting expenses and provides workers with a sense of security that persuades them to work for slightly lower wages than they might be able to earn at competing firms. For instance, people employed at a state government office might be able to earn more money elsewhere but prefer to continue working as public servants because government agencies are less likely to replace workers.

SAS INSTITUTE, INC. SAS Institute, Inc., is a software developer that employs over 11,000 people. Human resource management at SAS builds com- petitive strength by

Providing a great work atmosphere that encourages employees to stay with the company. Offering family-friendly benefits such as onsite daycare and flexible scheduling. Hiring high-performing employees who are motivated not only to make money but also to balance work life with outside interests.

Building Strength Through HR

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How Are Employee Retention and Separation Strategic? 255

With the Committed Expert HR strategy, employee retention helps build a workforce with unique skills that employees of other organizations do not have. These skills are critical for producing exceptional products and services that cannot be easily duplicated by competitors. SAS Institute uses a Committed Expert strategy of this kind. Employees with specialized skills develop long-term relationships with customers, who continue to purchase SAS products because of the excellent service they receive.

Employee retention is not as critical for organizations with an external labor orientation. Employees are expected to leave the organization to pursue other opportunities. For organizations pursuing a Bargain Laborer HR strat- egy, separations are seen as a necessary consequence of combining entry-level work with relatively low wages. Indeed, a moderate amount of employee turn- over has been found to be beneficial with the Bargain Laborer HR strategy.22

For organizations with a Free Agent HR strategy, some employee turnover is desirable, since those who leave can often be replaced by individuals with more up-to-date knowledge and skills.

STRATEGIC EMPHASIS ON EMPLOYEE SEPARATION When it comes to pursuing a differentiation strategy, employee separation can be just as important as employee retention. Innovative organizations rely on highly skilled employees who have specialized knowledge and ability. An employee who is not capable of providing skilled inputs does not contribute, making termination of nonperforming employees critical for organizations that seek to produce premium goods and services.

Organizations pursuing a Committed Expert HR strategy focus on termi- nating the employment of low performers soon after they are hired. Quickly identifying individuals who do not fit the organizational culture, or who appear unable to develop needed skill and motivation, reduces the cost of bad

Figure 7.1 Strategic Retention and Separation of Employees.

Bargain Laborer External/Cost HR Strategy

Low Emphasis on Retaining High Performers

Loyal Soldier Internal/Cost HR Strategy

High Emphasis on Retaining High Performers

Committed Expert Internal/Differentiation HR Strategy

High Emphasis on Retaining High Performers

Cost Leadership

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Free Agent External/Differentiation HR Strategy

Low Emphasis on Retaining High Performers

Low Emphasis on Removing Low Performers

High Emphasis on Removing Low Performers

High Emphasis on Removing Low Performers

Low Emphasis on Removing Low Performers

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256 Chapter 7 Managing Employee Retention and Separation

hiring decisions. A law firm engages in such practice when it denies promo- tion to a junior-level attorney who is not performing at the level necessary for making partner.

Organizations with a Free Agent HR strategy benefit from frequently replacing employees with others who bring new skills and a fresh perspec- tive. Employee separation is a common occurrence in such organizations, and ongoing efforts are needed to ensure that disruptions from frequent turnover are minimized as much as possible.23 For example, an organization might cre- ate incentives that encourage employees working on a major project not to leave until the project is completed.

Managing employee separation is not as critical, but still important, for organizations that have cost-reduction strategies. For example, an organi- zation pursuing a Loyal Soldier HR strategy has the primary goal of hiring young employees who stay with the organization for long careers. Having high performers is not as critical in these cost-focused organizations, which means that termination of employment is only necessary when a worker clearly fails to meet minimum expectations. People who are not performing well in a spe- cific job are frequently transferred to other positions. The overall focus on sta- bility also makes employee layoffs an uncommon occurrence. Organizations with Loyal Soldier HR strategies thus expend little effort on developing employee separation practices.

Similarly, effective management of employee separation is not critical for an organization with a Bargain Laborer HR strategy. Because of their rela- tively low wage rates and repetitive jobs, such organizations expect many of their employees to move on. Furthermore, the basic nature of the work and the emphasis on close supervision mean that identifying and terminat- ing low performers need not be a major focus. A good example is fast-food restaurants that rarely have policies to actively identify and terminate low- performing workers. Employees are allowed to continue working as long as their performance meets minimum standards.

? CONCEPT CHECK 1. Retaining good employees is most critical for which of the

HR strategies? 2. Which of the HR strategies might encourage some employee

separation?

How Can Undesirable Employee Turnover Be Reduced?

LEARNING OBJECTIVE 2

Who is most likely to remain with an organization? As shown in Figure 7.2, the answer is that employees with average performance are most likely to remain with an organization. High performers are at risk of being recruited away by other organizations to work in more-fulfilling and better-paying jobs. Low performers likely perceive lack of fit with their current position and resent the relatively low compensation they receive. Interestingly, this effect for low

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How Can Undesirable Employee Turnover Be Reduced? 257

performers has been shown to occur predominantly when organizations are located in countries such as the United States that value high individual achievement and greater separation between people of varying status.24

Of course, organizations are most concerned about losing high perform- ers. From the organization’s perspective, losing low performers is of little con- cern and is usually seen as a desirable outcome. From the employee’s point of view, much of the effect of leaving depends on whether we’re dealing with voluntary turnover, in which the employee makes the decision to leave, or involuntary turnover, in which the organization terminates the employment relationship. Not surprisingly, involuntary turnover has a much more negative effect on the employee.

One way of thinking about turnover is thus to categorize it along two dimen- sions. One dimension is whether the person leaving is a high or low per- former. The second dimension is whether the person plans to voluntarily leave. Combining the two dimensions results in four possible types of turnover:25

1. Functional retention, which occurs when high-performing employees remain employed, can benefit both the individual and the organization.

2. Functional turnover, which occurs when low-performing employees volun- tarily quit, can also benefit both parties.

3. Dysfunctional retention occurs when low-performing employees remain with the organization. Later in the chapter, we deal with situations in which the organization must terminate low performers who do not leave voluntarily.

4. Dysfunctional turnover occurs when an employee whose performance is at least adequate voluntarily quits. We focus on this situa- tion in the remainder of this section.

When a good employee chooses to leave, the organiza- tion usually must identify and hire another worker to fill the position. This process can be highly disruptive. Just think of a product development team with high turnover among members. Frequent personnel changes make it difficult for the team to coordinate efforts. A lot of time and energy are spent on finding new team members and teaching them the necessary skills. All this energy and time is wasted if people leave just as they are becoming integrated into the team. Frequently replacing employ- ees consumes many resources and makes it difficult for organizations to develop a competitive advantage. In general, organizations are thus more effective when they have programs and practices that proactively work to reduce employee turnover.

RECOGNIZING PATHS TO VOLUNTARY TURNOVER We’ve seen that dysfunctional turnover causes problems for organizations. What, then, can they do to prevent or reduce it? A starting point is to understand why employees choose to leave.26 Observations of actual deci- sions suggest specific processes explain how turnover unfolds over time.27

One difference is the amount of thought that goes into the decision. Since moving from one organization to another is a radical life change for most people, we might expect a person to put a great deal of thought into a

Voluntary turnover Employee separation that occurs because the employee chooses to leave.

Involuntary turnover Employee separation that occurs because the employer chooses to terminate the employment relationship.

Dysfunctional turnover Undesirable employee turnover that occurs when good employees quit.

Job Performance of Individual Employee

Low High

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Figure 7.2 Relationship Between Employee Performance and Turn. Source: Based on informa- tion from Michael C. Sturman, Lian Shao, and Jan H. Katz, “The Effect of Culture on the Curvilinear Relationship Between Performance and Turnover,” Journal of Applied Psychology 97 (2012): 46–62.

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258 Chapter 7 Managing Employee Retention and Separation

decision to move. Yet sometimes people make hasty decisions without care- fully thinking about the consequences. Another difference concerns whether a single event can be identified as the beginning of the decision to leave an organization. Figure 7.3 uses these differences to capture four paths to quit- ting. Next, we examine each of the four paths in more detail.

Quick Decision to Leave The first path shown in Figure 7.3 is a quick decision to leave the organization. This path begins with some external event that causes an employee to rethink the employment relationship. The employee might be asked to engage in unethical behavior, for example, or might be denied a promotion. The event may not even be directly related to work. For instance, the employee might become pregnant or receive an inheritance. Regardless of what the event is, the result is a highly emotional reaction that leads the employee to quit without much thought.

Calculated Decision to Leave Like the first path, the second path shown in the figure begins with an event that causes an individual to begin thinking about leaving the organization. Here, however, the individual does not make a quick decision. Alternatives are weighed, and the benefits of staying are compared with the benefits of leaving. For instance, an employee may learn that others in the organization are making more money even though they have less experience on the job. The employee who hears this news might carefully analyze the benefits and drawbacks associated with staying with the present employer. As explained in the “Building Strength Through HR” feature, companies can intervene at this point to communicate potential benefits of staying. Such effort is helpful because a decision to leave the organization occurs only after careful thought. Note, however, that the decision for this path is not influenced by alternative job opportunities. The decision is simply whether to stay or leave.

Comparison with Other Alternatives The third path in the figure involves a comparison between the current job and other alternatives. Once again, some external event initiates thoughts

Figure 7.3 Paths to Decisions to Quit. Source: Information taken from Thomas W. Lee and Terence R. Mitchell, “An Alternative Approach: The Unfolding Model of Voluntary Employee Turnover,” Academy of Management Review 19 (1994); 51–90.

Thoughtful Analysis

Thoughtful Analysis

Thoughtful Analysis

Decision to Quit

Decision to Quit

Decision to Quit

Quick Decision to Quit

Comparison with Alternative Jobs

Comparison with Alternative Jobs

Path 2:

Path 1:

Path 3:

Path 4: Feeling of Dissatisfaction

Initial Shock

Initial Shock

Initial Shock

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How Can Undesirable Employee Turnover Be Reduced? 259

about leaving the organization. For example, research has established that receiving a job offer from a different company is a critical event that often leads an employee to quit.28 Once the event has occurred, the employee begins to look at alternative opportunities. The benefits of jobs with other organizations are carefully compared with the benefits of the current job. A decision to leave becomes a conscious choice between the present job and specific alternatives. This path appears to be the most common course that leads an employee to leave an organization.

Sense of Dissatisfaction In the final path shown in Figure 7.3, the employee develops a general sense of dissatisfaction over time. This sense of dissatisfaction leads to either a calcu- lated decision to leave or a search and comparison with other job opportuni- ties. This path is different from the other paths in that no specific event can be identified as causing the employee to begin thinking about quitting.

UNDERSTANDING DECISIONS TO QUIT An important part of each path to turnover is a lack of satisfaction with the current work situation. It is easy to see how a lack of satisfaction can lead to a decision to leave. Most of us can recall a time when we have been part of a

Building Strength Through HR

CONVERGYS CORPORATION Convergys Corporation, which provides various busi- ness services, is a global leader, with annual revenues of more than $2.8 billion. The 74,000 employees at Convergys help companies manage customer and employee relationships through activities such as bill- ing, customer inquiry management, and employee benefit management. Convergys uses an “early warn- ing system” to help identify employees who might quit. Team leaders provide a weekly assessment of each employee’s probability of leaving the company. Employees unlikely to leave receive a green rating, and employees likely to leave receive a red rating. Organizational leaders meet with red-rated employ- ees to encourage them to stay. These employees are offered alternative work schedules, and many are referred to health and benefit programs. These practices show employees that the organization cares about them. Employees stay with the organization, and 80 percent of managers are promoted from within. Growth and expansion require frequent hir- ing of new employees, which is much easier than

endless replacing of employees who quit. By empha- sizing employee retention, Convergys has been con- sistently recognized by Fortune magazine as one of America’s most admired companies.

Sources: www.convergys.com/company_overview.html; Philip Quinn, “Colour Coding for Early Warning: Keeping Employees Is Becoming More Important in Today’s Tighter Labour Market,” Ottawa Citizen, October 7, 2006; Andrew Dunn, “Convergys to add 1,600 jobs at Charlotte Call Centers,” Charlotte Observer, February 21, 2013; http:// money.cnn.com/_magazines/fortune/mostadmired.

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260 Chapter 7 Managing Employee Retention and Separation

team, club, or other organization that we wanted to leave as fast as possible. Perhaps it was a sports team where teammates fought among themselves and seldom won games. Maybe it was a student work team that included several individuals who didn’t do their share of the work. Being stuck in such a team can have a negative impact on personal happiness. Working in an organiza- tion with an undesirable environment can also lead to feelings of dissatisfac- tion. Employees who are more dissatisfied are more likely to quit than are employees who experience a positive work environment.29 In particular, envi- ronments that are plagued by constraints, hassles, dysfunctional politics, and uncertainty about what to do increase the likelihood that employees will be less satisfied and quit.30

A basic model illustrating how lack of satisfaction leads to quitting is shown in Figure 7.4. The employee’s decision to leave begins with a sense of low job satisfaction. Consistent with the paths described above, this sense may be created by a specific event or as part of a global feeling that builds over time. Individuals who are not satisfied with their work arrangements begin to withdraw from the organization and think about quitting. Thoughts trans- late into action as individuals begin searching for alternative employment, which often leads to turnover.31 Other factors—such as the availability of other jobs and individual personality characteristics—also influence whether thoughts of withdrawal are acted upon so that an individual actually leaves. Let’s explore each aspect of the model in order to better understand why people quit jobs.

Low Job Satisfaction Job satisfaction represents a person’s emotional feelings about his or her work. When work is consistent with employees’ values and needs, job satis- faction is likely to be high.32 Satisfaction increases when employees are able

Job satisfaction Employees’ feelings and beliefs about the quality of their jobs.

Figure 7.4 How Job Satisfaction Leads to Quitting. Source: Adapted from Peter W. Hom, Fanny Caranikas- Walker, Gregory E. Prussia, and Rodger W. Griffeth, “A Meta-Analytical Structural Equations Analysis of a Model of Employee Turnover,” Journal of Applied Psychology 77 (1992): 905. Adapted with permission.

Other Factors Influencing

Withdrawal–Quit Link Alternative Jobs

Individual Characteristics

Low Job Satisfaction

Withdrawal Negative Thoughts

Intent to Quit

Decision to Quit

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How Can Undesirable Employee Turnover Be Reduced? 261

to pursue goals and activities that are truly important to them.33 Employees are also happier when they are able to do work that fits with their interests and life plans.34 For example, a high school mathematics teacher is likely to experience high job satisfaction when she perceives that she is helping others develop critical life skills.

Employees often make an overall assessment of their job satisfaction, but job satisfaction can also be divided into different dimensions, as shown in Table 7.1.35 An employee who is satisfied with one aspect of the job may not be satisfied with others. Someone may have high satisfaction in the area of job fulfillment because he enjoys the work he does, for instance, but have little satisfaction with how much pay he receives. Also, not every aspect of job satis- faction is equally important to every employee. Some people value empower- ment more than security, whereas others will place greater value on security.36

These different values and perceptions mean that job satisfaction represents a complicated mix of feelings. Nevertheless, satisfaction with compensation is often the dimension that is most strongly related to overall perceptions of job satisfaction.

Overall job satisfaction varies among organizations as well as among indi- viduals. On average, some organizations have happier employees. Those with happier employees tend to be more productive.37 Yet even organizations with high overall levels of job satisfaction likely have individual employees who are not happy with their jobs.

Withdrawal from the Organization Employees who are unhappy with their work tend to withdraw from the orga- nization. Withdrawal occurs when employees put less effort into their work activities and become less committed to the organization. As their sense of attachment to the organization decreases, they feel less obligated to work toward ensuring the organization’s success.

Withdrawal The process that occurs when employees begin to distance themselves from the organization by working less hard and planning to quit.

Table 7.1 Dimensions of Job Satisfaction

Dimension Examples

Satisfaction with empowerment

Satisfaction with job fulfillment

Satisfaction with pay

Satisfaction with work group

Satisfaction with security

Satisfaction with work facilitation

Source: Information from Benjamin Schneider, Paul J. Hanges, D. Brent Smith, and Amy Nicole Salvaggio, “Which Comes First: Employee Attitudes or Organizational Financial and Market Performance?” Journal of Applied Psychology 88 (2003): 836–851.

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262 Chapter 7 Managing Employee Retention and Separation

Withdrawal is a progressive process whereby an employee who is dissatisfied pulls away from the organization over time.38 Dissatisfied employees begin to provide less input39 and become less helpful toward coworkers.40 Early signs of withdrawal include increased lateness and in many cases absenteeism, and decreasing commitment, as well as a low sense of empowerment, turn into a decision to quit.41

Exit from the Organization Many dissatisfied workers do not go on to the final step of the turnover pro- cess. Instead, they continue in their jobs. What explains why some dissatisfied workers leave while others stay?

As you might expect, one important factor that determines whether work- ers continue in undesirable jobs is the availability and desirability of alterna- tive jobs. In spite of low job satisfaction, employees are likely to stay with an organization when they perceive that it will be difficult to find another job. People are also more likely to stay with their current jobs when they perceive that switching will have high economic and psychological costs. In essence, dissatisfied employees are more likely to leave when they expect it to be easy to find alternative work with pay that is equal to or higher than what they are receiving.42

Substantial evidence suggests that some people are simply more likely than others to leave organizations. Part of the reason is that some people are pre- disposed toward either high or low levels of satisfaction regardless of the work environment.43 A small number of employees are likely unsatisfied no matter how good a job is. People with chronically low job satisfaction tend to expe- rience negative moods in all aspects of their lives.44 They also tend to have dysfunctional characteristics such as perfectionism that undermine their feel- ings of self-worth.45 A lower level of general satisfaction makes these people likely to leave jobs, but moving to a new job may not increase their long-term satisfaction with life.

Evidence also suggests that people with certain characteristics are more likely to leave an organization regardless of their level of job satisfaction. Individuals who are low on agreeableness often leave a job because they like doing things their own way. Individuals who are highly open to experience tend to leave to seek out new adventures. In contrast, conscientious employ- ees tend to feel a higher sense of obligation, which makes them less likely to quit.46 Employees who are more averse to risk, as well as those who care less about what others think of them, are also less likely to actually quit.47

ORGANIZATIONAL PRACTICES THAT REDUCE TURNOVER We have already seen that organizations pursuing internal labor strategies would prefer to retain employees, especially high-performing ones. Once an employee has decided to quit, it is often too late to do anything to change that individual’s mind about leaving. Thus, organizations that want to reduce turn- over must work to ensure that employees’ needs are being met continuously. Good human resource management practices related to staffing, career plan- ning, training, compensation, and workforce governance can help. Table 7.2 provides an overview of practices in each area that have been identified as helping to reduce turnover.

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How Can Undesirable Employee Turnover Be Reduced? 263

Effective organizations develop ongoing procedures to find out why indi- viduals leave. Each employee who leaves has an exit interview in which the interviewer tries to determine why the employee decided to quit. Information gained during exit interviews is used to improve organizational procedures and reduce turnover of other employees. In the rest of this section, we explore organizational procedures that can help to decrease turnover.

Assessing Employee Satisfaction Organizations seeking to reduce employee turnover frequently measure their employees’ job satisfaction. Such assessments are done through surveys that ask employees about various facets of their work experience. Generally, employees can fill out the surveys anonymously. A common survey is the Job Descriptive Index, which assesses satisfaction with work tasks themselves, pay, promotions, coworkers, and supervision.48 Research has shown this index to be an accurate indicator of employee perceptions.49

Along with employees’ responses, the organization collects general infor- mation about demographic characteristics, work positions, and locations. Results are then analyzed to determine average levels of satisfaction, as well as differences between departments and worksites. Analysis provides insight into areas of concern and helps organizations determine which facets of the work experience might need improvement. Business Development Bank of Canada, for example, conducts surveys to obtain assessments about employee benefits. As a result of employees’ responses, the bank has offered monetary gifts, extra vacation days, and flexible work hours, increasing employee satis- faction and helping to reduce employee turnover.50

Job satisfaction surveys are best when they quickly engage employees by asking interesting questions. Topics expected to be most important to employ- ees should be placed at the beginning of the survey. Routine questions such as length of time worked and department should be placed at the end.51 The value of employee surveys can also be increased by including items measuring

Exit interview Face-to-face discussion conducted by an organization to learn why an employee is quitting.

Table 7.2 Human Resource Practices that Reduce Turnover

HR Practice Example of Effective Tactics

Staffing

Training and development

Labor relations

Source: Information from Thomas W. Lee and Steven D. Maurer, “The Retention of Knowledge Workers with the Unfolding Model of Voluntary Turnover,” Human Resource Management Review 7 (1997): 247–275.

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264 Chapter 7 Managing Employee Retention and Separation

how well the organization is meeting strategic objectives. For example, the survey might ask employees how well they think customer needs are being met or whether they believe the company is truly providing differentiated products and services.52

The organization’s climate for diversity is something that can be particu- larly important to assess. People are more likely to leave groups when they perceive that they are very different from others.53 Women and racial minori- ties thus tend to quit more frequently than white men.54 Retention of women and minorities is higher in organizations that value and support diversity.55

But the benefits don’t stop with retention; a supportive climate for diversity can also reduce absenteeism and increase performance.56 Organizations thus benefit a great deal from measuring and improving their diversity climates.

Yet, one problem with job satisfaction surveys is that the least satisfied employees are not likely to respond to the survey. These employees have already started to withdraw from the organization, so they see little personal benefit in completing the survey. They see things as too negative to fix, and they no longer care about the work environment of the company they are planning to leave. Organizational leaders are thus wise to remember that job satisfaction results will likely make things appear more positive than they really are.57

Socializing New Employees Efforts to retain employees should begin when they are hired, as there is a ten- dency for new employees to feel a lack of support within a few months of join- ing an organization.58 An important process for new employees is socialization, the process of acquiring the knowledge and behaviors needed to be a member of an organization.59 Effective socialization occurs when employees are given critical information that helps them understand the organization. Finding out things such as how to process travel reimbursements and whom to ask for guid- ance helps to make employees feel welcome in the organization. As employ- ees acquire information during the socialization process, their feelings of fit with the organization increase,60 and employees who perceive that they fit are more likely to stay with an organization.61 A key to effective socialization is the opportunity for new employees to develop social relationships by interacting with coworkers and leaders. Orientation meetings, mentoring programs, and social events are thus important tools for reducing employee turnover.62 As explained in the “Technology in HR” feature, much of the benefit of these pro- grams comes from interactions with others that build a sense of social support.

Building Perceptions of Organizational Support Another factor that influences employee turnover is perceived organizational support—employees’ beliefs about the extent to which an organization values their contribution and cares about their well-being. Employees who feel sup- ported by the organization reciprocate with a feeling of obligation toward the organization.63 Employees who perceive greater support are more committed to sticking with the organization and feel a stronger desire to help the orga- nization succeed.64 This sense of obligation reduces absenteeism and turn- over.65 For instance, Fraser’s Hospitality, a hotel organization in Singapore, has achieved below-average turnover by creating a work culture that encour- ages a sense of personal worth and dignity. Treating service workers such as housekeepers and technicians with respect, as well as spending substantial amounts of money on training and development, has helped Fraser’s gener- ate higher profits by increasing occupancy at its hotels.66

Socialization The process in which a new employee learns about an organization and develops social relationships with other organizational members.

Perceived organizational support Employees’ beliefs about how much their employer values their contributions and cares about their personal well-being.

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How Can Undesirable Employee Turnover Be Reduced? 265

A number of organizational characteristics and practices increase percep- tions of organizational support. Actions of organizational leaders are par- ticularly important. Employees feel greater support from the organization and are less likely to quit when they feel that their supervisor cares about them and values their contributions.67 Better compensation practices, bet- ter-designed jobs, fairness of procedures, and absence of politics are also critical for building perceptions of organizational support.68 In the end,

COMPUTERIZED ORIENTATION PROGRAMS Orientation training is often used to help newcom- ers adjust to an organization. Because this training can be costly, many organizations have explored alternative methods for delivering orientation training. One alternative is self-paced computer- ized training. An interesting question is whether computerized orientation training is as effective as face-to-face meetings.

A study by Michael Wesson and Celile Gogus compared a traditional newcomer orientation program with a computer-based program. A technology-based consulting firm had been using an orientation program that involved flying all new employees to a central location and provid- ing a week of orientation training. The training included videos, question-and-answer sessions, and team-building activities. In order to reduce costs and make it easier to deliver the training, the company developed a multimedia orientation program that was computer-based. The computer- based training took two to three days to complete and included the same information as the face-to- face training.

The computer-based orientation was similar to face-to-face orientation in terms of teaching the language (such as acronyms and abbreviations) and traditions of the organization and giving instruction on how to efficiently complete work tasks. However, the computer-based training was not as effective for conveying information about the organization’s goals, politics, and people. The end result was that employees who received the computer-based orien- tation were found later to have lower job satisfaction and organizational commitment than employees who received face-to-face training.

It seems that although computer-based ori- entation training can be helpful in some areas, interacting with a computer does not help new employees to develop important social relation- ships or understand other social aspects of the orga- nization. Effective human resource management thus requires that orientation training include the human touch.

Source: Information from Michael J. Wesson and Celile Itir Gogus, “Shaking Hands with a Computer: An Examination of Two Methods of Organizational Newcomer Orientation,” Journal of Applied Psychology 90 (2005): 1018–1026.

Technology in HR

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266 Chapter 7 Managing Employee Retention and Separation

businesses that employees view as having fairer human resource practices have higher employee commitment and lower rates of employee turnover.69

Organizations can therefore improve employee retention through effective human resource practices related to leadership, work design, compensation, and performance appraisal.

Selecting Employees Who Are Likely to Stay One way to reduce employee turnover is to avoid hiring people who are likely to quit. An example of a company that does this effectively is FreshDirect, which is profiled in the accompanying “Building Strength Through HR” section. Recognizing and selecting employees who are likely to stay is criti- cal for organizations. Realistic job previews, which we discussed in Chapter 5, offer one method of screening out people who are likely to quit. Realistic previews provide job applicants with both positive and negative information

Building Strength Through HR

FRESHDIRECT FreshDirect, an online grocer in the New York City area, delivers food daily to homes and busi- nesses. A source of competitive advantage is pur- chasing food directly from farms, dairies, and fisheries. Delivering rather than stocking food in a store also reduces costs and improves freshness because each type of food can be kept in its opti- mal climate.

Each day’s orders are assembled between 11 p.m. and 11 a.m. A few years back, FreshDirect, which employs over 2,000 people, realized that it was experiencing turnover rates of over 200 percent. Since then, it has reduced turnover to 75 percent, with a goal of 50 percent. Specific methods that have helped reduce turnover include the following:

Focusing recruitment efforts in neighbor- hoods that allow easy commutes. Providing support to new employees who are adjusting to working at night and in the cold. Offering better benefits, such as an upgraded break room, better meals, and improved medical coverage. Tying a portion of managers’ pay to turnover rates in each department.

Sources: Chana Schoenberger, “Will Work with Food,” Forbes.com, September 18, 2006; Laura Demars, “Finders Keepers,” CFO 22, no. 3 (2006): 8–9.

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How Can Undesirable Employee Turnover Be Reduced? 267

about the position. A clearer understanding of the job and the organiza- tion can help employees better determine whether the position is right for them. Employees who have more realistic expectations about the job are less likely to quit.

Another method of reducing turnover is to directly assess individual dif- ferences. We have already seen that some people have characteristics that make them more likely to quit than others. People who spent less time in their last job are more likely to quit, for example. Specific scales that directly ask how long an applicant plans to stay with the organization or that assess certain specific characteristics have also been found to predict who quits.70 A good example of using selection practices to reduce employee turnover is Via Christi Senior Services, which operates a number of health centers for older people in Kansas and Oklahoma. Via Christi uses an online screening tool that assesses individual characteristics, such as personality. Use of the screen- ing tool helps Via Christi reduce employee turnover and save approximately $250,000 each year.71

ARE COWORKERS CONTAGIOUS? Are employees affected by the attitudes and behav- iors of their coworkers? In the specific case of employee turnover, the question is whether having other embedded coworkers makes it more likely that a given worker is also embedded and whether working with people who are looking for other jobs is contagious in that it influences an employee to also look for a new job. Will Felps, Terence Mitchell, David Hekman, Thomas Lee, Brooks Holtom, and Wendy Harman conducted two studies to answer these questions.

In the first study they obtained data from 8,663 employees working at 1,037 different golf clubs, country clubs, and resorts. They measured the job embeddedness of each employee and then assessed whether the embeddedness of others working at the club was correlated with an individual vol- untarily quitting. They found that an individual employee was less likely to quit if his coworkers were embedded in their jobs. This effect was inde- pendent of the employee’s own embeddedness, job satisfaction, and commitment to the organization.

In a second study, the authors obtained data from 486 employees working in 45 branches of a retail bank. In addition to measures of embedded-

ness, they measured the job search behaviors of coworkers. Their results found that coworkers who were less embedded were more active in searching for other jobs. Having coworkers search for alter- native jobs in turn resulted in a greater likelihood that an employee would quit. This suggests that the effect of coworker embeddedness on employee quitting operates through coworker job search- ing. Less-embedded coworkers spend more time searching for a different job, which in turn makes it more likely that an employee will quit.

Bottom Line. Coworkers’ attitudes and behav- iors are indeed contagious. Working with people who are not embedded in their jobs and therefore looking for alternative work increases the chance that an employee will quit. Professor Felps and his colleagues thus conclude that organizations should actively strive to increase the embeddedness of all employees.

Source: Will Felps, Terence R. Mitchell, David R. Hekman, Thomas W. Lee, Brooks C. Holtom, and Wendy S. Harman, “Turnover Contagion: How Coworkers’ Job Embeddedness and Job Search Behaviors Influence Quitting,” Academy of Management Journal 52(2009): 545–561.

How Do We Know?

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268 Chapter 7 Managing Employee Retention and Separation

? CONCEPT CHECK 1. What are four common paths to voluntary employee

turnover? 2. What perceptions and choices explain the process whereby

low job satisfaction translates into a specific action of quitting?

3. What can an organization do to reduce voluntary employee turnover?

Promoting Employee Embeddedness The paths to turnover shown in Figure 7.3 suggest that an employee’s deci- sion to quit is often set in motion by an initial shock. Organizations can thus reduce dysfunctional turnover by insulating employees against such shocks. One method of insulating against shocks is to encourage embeddedness, which represents the web of factors that ties the individual to the organi- zation. Not surprisingly, organizations with Loyal Soldier and Committed Expert HR strategies tend to have employees who are more embedded.72

People are more embedded when they have strong connections to others, when they have values and goals that fit with their environment, and when they feel that leaving would result in monetary or psychological losses.73

People become embedded not only in organizations but also in the com- munities where they live. People, particularly women, are less likely to leave when they are embedded in either the specific organization or the surround- ing community.74

Some organizations are better than others at promoting embeddedness. To promote embeddedness, organizations can provide enjoyable work, desir- able work schedules, strong promotional opportunities, and good benefits, as well as encouraging employees to build positive social relationships with coworkers. Organizations use a number of specific approaches to do this. Encouraging employees to work in teams helps develop strong social rela- tionships within the organization. Company-sponsored service projects and athletic teams build similar relationships in the community. To increase the sacrifice associated with leaving, compensation packages can reward employ- ees for continuing with the organization for several years. Providing desirable perks such as tickets to athletic events and company vehicles can also reduce turnover by increasing embeddedness.75 As explained on the previous page in the “How Do We Know?” feature, an individual is also less likely to quit when coworkers are embedded.

Helping employees balance their work and family responsibilities is a par- ticularly strong method of increasing embeddedness. As discussed in Chapter 4, employees with family roles that conflict with work roles experience less job satisfaction.76 In addition, job satisfaction and general life satisfaction are related, so conflict between work and family roles reduces happiness both on and off the job.77 Indeed, mental health concerns are greater for people who experience conflict between work and family responsibilities.78

Organizational policies and programs such as onsite daycare and flexible work scheduling thus increase embeddedness by reducing conflict between work and other aspects of life.

Embeddedness The extent to which an employee is tied to an organization and to the surrounding community.

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How Do Layoffs Affect Individuals and Organizations? 269

How Do Layoffs Affect Individuals and Organizations?

LEARNING OBJECTIVE 3

Large-scale terminations of employment, which are not a response to indi- vidual employees performing poorly, are known as layoffs.

Unfortunately, layoffs happen fairly frequently. Almost everyone has a friend or family member who has lost a job in a layoff, and newspaper stories about companies laying off employees are common. This section discusses the effects of layoffs on both organizations and workers. It also describes steps that organizations can take to reduce the negative consequences of layoffs.

THE EFFECT OF LAYOFFS ON ORGANIZATIONS Many organizations lay off employees as part of an overall change effort. In some cases, the need for change comes from shifting demand for products and services. People no longer want to buy as much of what the organiza- tion produces. In other cases, competition from rival organizations forces the organization to develop more efficient processes. When an organization engages in widespread layoffs intended to permanently reduce the size of its workforce, it is said to be downsizing.

Downsizing has been promoted as a practice that can help an organization shift direction and reorient itself in relation to its customers. An important question, then, is whether downsizing and the associated employee layoffs are actually helpful for organizations. What happens to organizations that lay off workers? Do they really change for the better? Does downsizing help the orga- nization become more efficient and more profitable?

The fact is, the effects of downsizing on organizations are not altogether clear. An organization’s reputation is usually harmed by downsizing.79 Yet, research suggests that the financial performance of organizations that have downsized is similar to the performance of organizations that have not down- sized. This finding both supports and challenges the effectiveness of downsiz- ing. Firms are usually not performing well when they pursue downsizing, so finding that their performance is similar to that of competitors after downsiz- ing suggests that layoffs may initially improve profitability. Yet, firms that use downsizing do not have higher performance in subsequent years. This sug- gests that downsizing may not help an organization become more efficient and increase long-term productivity.80

Furthermore, the effect of downsizing is not the same for all organiza- tions. Some organizations appear to benefit more than others. About half the firms that downsize report some benefit, whereas half report no improve- ment in profits or quality.81 Downsizing is most harmful to organizations with long-term employment relationships: those pursuing Loyal Soldier and Committed Expert HR strategies.82 Downsizing also seems to present the most problems when an organization reduces its workforce by more than 10 percent and makes numerous announcements of additional layoffs.83

Moreover, reasons behind downsizing seem critical. Firms that downsize as part of a larger strategy to change before problems become serious are gen- erally valued more by investors than firms that downsize after problems have already occurred.84 In the end, then, downsizing alone is not as effective as

Layoffs Large-scale terminations of employment that are unrelated to job performance.

Downsizing Widespread layoffs with the objective of permanently reducing the number of employees.

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270 Chapter 7 Managing Employee Retention and Separation

downsizing combined with strategic efforts to change.85 For example, down- sizing that eliminates supervisory positions and reduces hierarchy seems to be particularly beneficial.86

THE EFFECTS OF LAYOFFS ON INDIVIDUALS Being laid off from a job is a traumatic experience. Work provides not only an income but also a sense of security and identity, which are critical for psycho- logical health. But the impact of downsizing goes beyond those who lose their jobs. Widespread layoffs can also have a negative effect on employees who remain with the organization.

Consequences for Layoff Victims Layoff victims—the individuals who actually lose their jobs—experience a number of problems. Job loss begins a chain of negative feelings and events, including worry, uncertainty, and financial difficulties. Layoff victims are likely to suffer declines in mental health and psychological well-being, as well as physical health. They also experience less satisfaction with other aspects of life, such as marriage and family life.87

As we might expect, people who spend more effort on finding a new job are more likely to be reemployed quickly.88 Unfortunately, those who work the hardest to find a new job often suffer the most negative consequences to their physical and mental well-being, as efforts to obtain a new job often result in rejection and frustration.

Figure 7.5 illustrates how individuals cope with job loss:

Individuals with high work-role centrality, which is the extent to which work is a central aspect of life, derive much of their life satisfaction from having a good job. These individuals suffer more from job loss than do individuals for whom work is less important. Individuals who have more resources cope better. Common resources include financial savings and support from close friends and family members. Mental perceptions are also critical. Individuals who have positive per- ceptions of their abilities to obtain a new job, and who perceive that the job loss did not result from something they did wrong, cope better than others.89

Strategies for coping with job loss can also affect individual well-being. People who focus their efforts on solving problems and who deal con- structively with their emotions have fewer health problems. People who feel that they can control the situation and obtain a new job are less harmed than those who perceive that they have little personal control.90

Setting goals, proactively managing emotions, and being committed to getting back to work also facilitate reemployment.91

The quality of the job the victim finds to replace the one lost is another important factor in determining the long-term consequences of a layoff. Individuals who find new jobs that they enjoy, and that pay well, are less trau- matized by the experience of job loss.92 Perceptions of fairness surrounding the layoff process also have a critical impact on how victims experience a lay- off.93 Organizations should thus strive for fairness during the layoff process.

Layoff victims Individuals whose employment is terminated in a layoff.

Work-role centrality The degree to which a person’s life revolves around his or her job.

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How Do Layoffs Affect Individuals and Organizations? 271

Consequences for Layoff Survivors Layoff survivors are employees who continue to work for the downsizing organization. It seems better to be a survivor than a victim. However, even those whose jobs are not eliminated often react negatively to downsizing.

In many ways, survivors’ reactions are similar to victims’ reactions. Like vic- tims, survivors can have negative reactions, including anger at the loss expe- rienced by coworkers and insecurity concerning the future of their own jobs. Survivors may also experience some positive emotions, however. They might feel relief that their own jobs were spared. These feelings result in a number of possible outcomes related to job satisfaction, commitment to the organiza- tion, and work performance.94

One possible reaction of employees who survive a layoff is increased moti- vation and performance. In some cases, individuals who remain employed feel an obligation to work harder to show that their contributions are indeed more valuable than the workers who were let go.95 However, this effect does not occur for all survivors. Effort increases the most for survi- vors who perceive a moderate threat to their own jobs. If people feel that their jobs are completely insulated from future layoffs, or if they believe it is only a matter of time before their own jobs are eliminated, they are unlikely to increase their efforts. Employees who are the primary wage earners in their households are also more likely to increase their efforts after observ- ing coworker layoffs.96

Even if they increase their performance, many survivors suffer in terms of psychological and emotional health. Anxiety, anger, and fear lead some indi- viduals to withdraw from the organization. In addition, fewer workers mean

Layoff survivors Individuals who continue to work for an organization when their coworkers are laid off.

Figure 7.5 Coping with Job Loss and Unemployment. Source: Adapted from Frances M. McKee Ryan, Zhaoli Song, Connie Wanberg, and Angelo J. Kinicki, “Psychological and Physical Well-Being During Unemployment: A Meta-Analytic Study,” Journal of Applied Psychology 90 (2005): 56. Adapted with permission.

Coping Strategies Job Search

Problem Solving Emotion Control

Work-Role Centrality

How important is work?

Mental Perceptions

New Job Expectations Stress Blame

Coping Resources Financial

Social Support

Psychological and Physical Well-Being

Mental Health Life Satisfaction

Illness

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272 Chapter 7 Managing Employee Retention and Separation

greater work responsibilities for those who remain, resulting in greater stress among workers.97 Many who were not laid off begin to search voluntarily for new jobs.98

Similar to victims, an important factor in determining whether survivors will react positively or negatively is the fairness that they perceive in the layoff pro- cedures. Survivor commitment is highest when employees who remain perceive that terminations were carried out with fair procedures. For example, survivors react more positively when they feel that victims received adequate compensa- tion.99 As shown in Figure 7.6, fair procedures are particularly important when organizations are located in countries with cultures of individual achievement and when the motive behind a layoff is seen as profit maximization. Effective human resource management practices that ensure fair treatment and provide surviving employees with opportunities for personal development are therefore critical for reducing the negative impact of downsizing.100

REDUCING THE NEGATIVE IMPACT OF LAYOFFS The best method for reducing the negative impact of layoffs is to avoid them. The value of avoiding layoffs was illustrated in the U.S. airline industry follow- ing the terrorist attacks of September 11, 2001. The attacks reduced demand for air travel and forced airlines to explore methods of reducing costs and increasing efficiency. Some airlines included downsizing as part of these efforts. Other airlines with financial reserves and good strategic plans did not need to downsize. Those that did not downsize were more effective in the long run.101 Having a clear plan and accurately forecasting labor needs can help reduce the need for layoffs.

Of course, maintaining employee count isn’t always possible. Table 7.3 presents a summary of alternatives to layoffs. When layoffs are unavoidable, laying off low performers is generally more effective than laying off employees across the board. Not hiring new workers when current employees voluntarily quit or are terminated for cause can effectively reduce the employee count. Many organizations also encourage early retirement. The natural process of

Organizational Commitment

Fair Termination Procedures

Factors Strengthening Fairness–Commitment Link:

Individualistic Country Culture

& Perception of Profit

Maximization

Figure 7.6 Relationships Between Fairness, Reasons for Downsizing, and Organizational Commitment. Source: Based on information from Dirk van Dierendock and Gabriele Jacobs, “Survivors and Victims, a Meta-Analytical Review Of Fairness and Organizational Commitment after Downsizing,” British Journal of Management 23 (2012): 96–109.

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How Do Layoffs Affect Individuals and Organizations? 273

not replacing people who leave is less painful than layoffs, but this strategy can take a long time if employees don’t leave the organization very often.

Another solution is to reduce or eliminate overtime. Yet another is to ask employees to share jobs, so that each works fewer hours than a normal work- week. Although working fewer hours will reduce employees’ pay, total job loss would reduce it much more. Employees might also be transferred to other parts of the organization that are experiencing growth. Such transfers often allow an organization to change while retaining high-quality workers. Finally, organizations can have their employees perform tasks that were previously contracted to outside firms.102

When layoffs are necessary, effective communication of downsizing deci- sions and plans is particularly critical. Table 7.4 provides specific guidelines for making announcements about layoffs.103 Too often, organizations make

Table 7.3 Alternatives to Layoffs

Alternative Description

Reduce Working Hours of some.

Reassign Workers Have employees complete maintenance tasks or other work that is usually outsourced.

Lend Employees Assign employees to work for neighbor organizations that need seasonal labor; directly bill the neighbor for labor costs.

Reduce Hiring Stop hiring new employees and reassign existing workers into those positions.

Ask employees to help identify alternative savings such as travel expense reduction.

Encourage Voluntary Separation Provide incentives for early retirement or quitting to pursue alternative jobs.

Sources: Information from Matthew Boyle, “Cutting Work Hours Without Cutting Staff,” BusinessWeek 4122 March 9, 2009, p. 55; Beth Mirza, “Looking for Alternatives to Layoffs,” Society for Human Resource Management, available online at http://www.shrm.org/ hrdisciplines/businessleadership/articles/pages/alternativestolayoffs.aspx.

Table 7.4 Minimizing the Negative Effects of Layoffs

Action Description

Identify the Business Need Look first for other alternatives, examine likely long-term effects of laying off workers

Explain the reasons for downsizing; be honest and open

Identify Future Work Assess employee inputs that are most likely to be needed in the future; ensure that employees who are retained are likely to have future-oriented skills and abilities

Determine the factors that will be used to decide layoffs; focus on objective measures of past performance and seniority

Establish Fair Evaluation Procedures Ensure the appropriateness of measures used to determine who is laid off; use multiple trained evaluators, be sure information is accurate and documented, be fair and establish mechanisms for appeal

Analyze Adverse Impact Analyze data to see how terminations are related to employee age; take corrective action if older workers are more frequently targeted for layoffs.

Evaluate Processes and Outcomes

Involve HR Staff Include human resource staff in decisions and implementation; empower staff to give inputs from an employee advocate perspective

Source: Information from Michael A. Campion, Laura Guerrero, and Richard Posthuma, “Reasonable Human Resource Practices for Making Employee Downsizing Decisions,” Organizational Dynamics 40 (2011): 174–180.

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274 Chapter 7 Managing Employee Retention and Separation

the mistake of not involving employees in the decision process. Being honest and giving employees access to information can help alleviate many of the negative consequences of downsizing.104 Organizational leaders who carefully plan the announcement process are more likely to be perceived as fair and to retain the support of both layoff victims and survivors.

Understanding legal issues is also important for successful downsizing. Layoffs must be completed without discrimination. Analyses should be con- ducted to determine the impact of layoffs on women, members of minority groups, and older workers. As mentioned in Chapter 3, layoffs often have more impact on older workers. Replacing older workers with younger workers is illegal in many cases and may open the organization to allegations of dis- crimination. Once again, the fairness with which employees are treated is an important predictor of legal actions. Layoff victims perceive less discrimina- tion when their supervisors communicate with them honestly.105

? CONCEPT CHECK 1. How does downsizing affect organizations in the short term?

in the long term? 2. What are the common reactions of downsizing victims? 3. How do employees who remain with an organization react

when they see their coworkers being laid off?

Unfortunately, sometimes employees fail to carry out their duties in an acceptable manner. We have already seen that retaining employees who do not perform at an adequate level is harmful to an organization, particularly when the organization is pursuing a differentiation strategy. Of course, it is usually wrong to terminate problem employees without giving them a chance to improve. The process whereby management takes steps to help an employee overcome problem behavior is known as discipline. In essence, discipline is instruction with the purpose of correcting misbehavior.

The world of sports provides some high-profile examples of discipline. Almost every college football team has suspended players for violating team rules. Professional athletes are frequently suspended from practice and games for violating substance-abuse policies. Each instance of drug use results in a greater penalty, and players who continue to violate the rules may be expelled from the team and the league. Athletes, whether at the col- lege or professional level, are representatives of their organizations who are expected to follow a certain code of conduct. Discipline is the corrective action that occurs when the code is not followed. The ultimate goal of disci- pline is to change behavior and help the individual become a contributing member of the team.

Discipline Organizational efforts to correct improper behavior of employees.

What Are Common Steps in Disciplining Employees?

LEARNING OBJECTIVE 4

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What Are Common Steps in Disciplining Employees? 275

Most organizations and workplace leaders face similar discipline prob- lems with employees, although these problems are less public. Employees who are not meeting organizational expectations are disciplined as part of a process aimed at changing undesirable behavior. Organizations whose employees belong to labor unions generally work with union officials to administer discipline. We will discuss this process in Chapter 13. Most other organizations adopt formal discipline procedures based on the notion of providing due process.

PRINCIPLES OF DUE PROCESS Due process represents a set of procedures carried out in accordance with established rules and principles. The underlying intent of due process is to make sure employees are treated fairly. A number of court cases and decisions by labor arbitrators have established a set of principles, summarized here, that organizations should follow to provide due process for employees.106

1. Employees have a right to know what is expected of them and what will happen if they fail to meet expectations. A production employee should not be punished for failing to clean a machine if she is not aware that the machine needs cleaning. Effective discipline requires that organizations communicate clear expectations for acceptable behavior.

2. Discipline must be based on facts. Reducing a steel worker’s pay for being consistently late to work is improper unless evidence shows that he has actually been late a specific number of times. Disciplinary actions should be carried out only after a careful investigation of the facts and circumstances. Fair investigations involve obtaining testimonial evidence from witnesses and those involved. Documents and physical evidence can also provide key details to either support or refute allegations against employees.107

3. Employees should also have a right to present their side of the story. A sales representative accused of falsifying expense reports must be given a chance to explain his financial records. Employees should also have the right to appeal decisions. Providing the opportunity for another person to evaluate the facts of the case and the decision of the supervisor is impor- tant for ensuring fair and consistent treatment.

4. Any punishment should be consistent with the nature of the offense. Perhaps an employee who becomes angry with a single customer should not be fired. The procedures used to investigate the alleged offense and the nature of the punishment should also be consistent with common practices in the organization. Disciplining an individual for doing something that is routinely done by others who go unpunished can be evidence of discrimination against the person receiving the discipline.

THE PROCESS OF PROGRESSIVE DISCIPLINE Some forms of misconduct are so serious that they result in immediate termination of an employee. For instance, it might be appropriate to fire an employee who physically attacks a client. Stealing from the company might also be grounds for immediate dismissal. In such cases, due process

Due process A set of procedures carried out in accordance with established rules and principles and aimed at ensuring fairness.

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276 Chapter 7 Managing Employee Retention and Separation

generally allows termination of employment once the facts have been dis- covered. However, most offenses are not serious enough to warrant imme- diate dismissal, and in these cases, due process requires the organization to allow employees to correct their misbehavior. In the interest of giving employees an opportunity for improvement, as well as clearly conveying expectations for behavior, most organizations have adopted a process of progressive discipline.

In the progressive discipline process, management provides successively more severe punishment for each occurrence of negative behavior. A supervi- sor meets and discusses company policy with an employee the first time an unacceptable behavior occurs. No further action is taken if the misbehavior is not repeated. The employee is punished if the misbehavior is repeated. Subsequent instances of the misbehavior are met with harsher punishment that eventually results in termination of employment.

Although the number of steps and actions differ by organization, most pro- gressive discipline systems include at least four steps.108 Figure 7.7 presents the four basic steps.

The first step is a verbal warning. The supervisor clearly communicates what the employee did wrong and informs the employee of what will hap- pen if the behavior occurs again. If the behavior is repeated, the employee receives a written warning. This warning is usually placed in the employee’s personnel file for a period of time. A repeat of the behavior after the writ- ten warning leads to suspension. The employee cannot come to work for a period of time and in most cases will not be paid. A suspension is usually accompanied by a final written warning that clearly states the employee will be dismissed if the behavior occurs again. The final step is discharge from the organization.

The concept of progressive discipline thus emphasizes the need for organi- zations to allow employees an opportunity to correct inappropriate behavior. This is a time when human resource professionals can help mediate poten- tial conflicts if the employee does not respond to the manager’s requests for changes in behavior.

Progressive discipline Discipline involving successively more severe consequences for employees who continue to engage in undesirable behavior.

Figure 7.7 Steps for Progressive Discipline.

Step 1: Verbal Warning y

.

Step 3: Suspension y y

y.

Step 2: Written Warning

.

Step 4: Dismissal

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How Should Employee Dismissals Be Carried Out? 277

A common problem associated with progressive discipline is that supervi- sors are sometimes unwilling to take the first step in the process. Most super- visors, like the rest of us, seek to avoid conflict. As a result, they often ignore instances of misbehavior. (If you don’t believe this, just think of group proj- ects you complete as part of your university classes. A low-performing group member is seldom confronted by teammates.) Managers are also reluctant to discipline employees when they perceive unfairness in the disciplinary pro- cess, as explained in the “How Do We Know?” feature. Developing fair proce- dures is thus critical. Managers are also more likely to discipline employees when they know they will be supported by leaders above them in the organi- zation, when they have been trained to deliver discipline properly, and when there is a pattern of constructive discipline within the organization.109

DO MANAGERS THINK DISCIPLINE IS FAIR? Are discipline procedures fair? The answer might depend on whom you ask. Perhaps managers per- ceive discipline as fair, even when employees receiv- ing the discipline think it is unfair. But are there times when managers also believe that discipline is unfair? Kenneth Butterfield, Linda Trevino, Kim Wade, and Gail Ball sought to find out. They asked 62 experienced human resource managers to report on instances of discipline and then rate the instances in terms of fairness.

The results suggested that managers perceive dis- cipline as fair when they believe that the employee knew the offending behavior was wrong and expected to be punished for it. Ratings of fairness were also higher when the managers felt that the

consequence was appropriate given the seriousness of the misbehavior and when there was a clear link between the misbehavior and the consequence.

The Bottom Line. Discipline is perceived as fair when it follows the principles of due process. The authors conclude that perceptions of fairness are important to managers and that managers feel better about carrying out discipline when employ- ees accept some blame for the misconduct.

Source: Information from Kenneth D. Butterfield, Linda Klebe Trevino, Kim J. Wade, and Gail A. Ball, “Organizational Punishment from the Manager’s Perspective: An Exploratory Study,” Journal of Managerial Issues 17 (2005): 363–382.

How Do We Know?

? CONCEPT CHECK 1. What are the four principles of due process?

2. What are the steps for progressive discipline?

Having to dismiss employees is one of the most difficult tasks that a man- ager faces. Just think how much people’s lives change when their employ- ment is terminated. Suddenly, they don’t have scheduled activities that

How Should Employee Dismissals Be Carried Out?

LEARNING OBJECTIVE 5

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278 Chapter 7 Managing Employee Retention and Separation

fill their time; they no longer interact frequently with some of their closest social contacts; and of course, their source of financial security is gone. When employees are terminated, organizations often use outplacement services to help them both cope with emotional struggles and obtain new employ- ment. Nevertheless, the actual dismissal of an employee is usually done by the employee’s manager with help from the human resources department.

OUTPLACEMENT SERVICES Outplacement services provide employees who have been dismissed from an organization with assistance in finding new jobs. In many cases, outplacement services are provided by outside firms. An outside firm is often in a better posi- tion to work with dismissed employees, since these employees may feel some resentment toward the organization that dismissed them. Indeed, displaced workers who receive outplacement assistance from an outside source gener- ally experience more positive reactions and are more likely to find a position that is comparable to the job that was lost.110

Outplacement services normally include testing and assessments to help displaced workers understand the type of work for which they are most quali- fied. Employment counselors provide guidance to improve job search skills in areas such as résumé preparation and interviewing. Many outplacement firms offer financial planning advice. Psychological counseling to deal with grief, anger, and anxiety is also frequently provided not only to displaced workers but also to their spouses. Finally, some outplacement firms provide actual job leads.

THE DISMISSAL MEETING Outplacement services can help alleviate some of the anxiety associated with job loss. Nevertheless, the actual event in which a person is told that his or her employment is being terminated is highly stressful. Managing this event in the right way is critical if the organization is to show respect for employees and maintain a good reputation.

An example from Radio Shack a few years back illustrates how not to fire employees. One day, 400 employees opened their email accounts to learn that they had been dismissed from the company. The messages reportedly read, “The workforce reduction notification is currently in progress. Unfortunately, your position is one that has been eliminated.” Sending such traumatic news via email is insensitive to the needs of employees and has been widely criticized.111

Because of the emotional nature of dismissal, face-to-face meetings are usually best. Most experts also agree that employees should not be dismissed on a Friday. A late-week dismissal leaves the terminated employee with two days of time before actions can be taken to recover from the bad news. Dismissals early in the week allow the individual an opportunity to get right to work at finding a new job and reduce the amount of time thinking about how bad things might get.

A few key principles should guide communication during the dismissal meeting.112 In most cases, it is best to have a third person present to serve as a witness. It is important to tell the employee directly that he or she is being dismissed. Although many managers find it difficult to convey the news, an effective dismissal requires a clear statement that the person’s employment is being terminated. In addition, the meeting should be brief. If principles of

Outplacement services Professional assistance provided to help employees who have been dismissed to cope with job loss and find new positions.

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How Should Employee Dismissals Be Carried Out? 279

due process have been followed, the employee should already know why he is being fired. The dismissal meeting is not a time for a lengthy discussion of how things might have been different.

Once the bad news has been delivered, the manager should listen to the employee who is being dismissed. There is no need for the manager to argue or to defend the action. This is an emotional moment, and some individuals will simply need to vent their frustration. Finally, it is usually best to present a written summary of the meeting to the employee being dismissed. The sum- mary should include information like when the last day of employment will be, how to return company equipment such as keys and computers, and what will happen to health insurance and other benefits.

The dismissal meeting should include a discussion of severance compen- sation if it is being offered. Severance compensation provides money to help cover living expenses during the upcoming period of unemployment. In many cases, severance compensation is given only if the dismissed worker agrees in a contract not to pursue legal action against the company for discrimination or other reasons.

The safety of the supervisor and other workers has become an increasingly important consideration. When possible, security personnel should be alerted before a dismissal takes place. They can plan to provide assistance if the person becomes violent or makes threatening statements. Security personnel should be close at hand if past behavior suggests that the person being terminated will react in a violent manner. The dismissed employee may also need to be escorted from the work site if the organization works with highly sensitive infor- mation or if the employee is being terminated for offenses such as theft or violence with coworkers.

Severance compensation Money provided to an employee as part of a dismissal package.

? CONCEPT CHECK 1. How can an outplacement firm help an organization man-

age employee dismissals? 2. What should a manager do and say when she tells an

employee he is being fired?

IN THE MANAGER’S PERSPECTIVE THAT OPENED THE CHAPTER, ANGELA FELT CONCERN ABOUT AN EMPLOYEE WHO HAD JUST QUIT. SHE WAS ALSO THINKING ABOUT CONFRONTING AN EMPLOYEE WHOSE PERFORMANCE WAS UNACCEPTABLE. FOLLOWING ARE THE ANSWERS TO THE “WHAT DO YOU THINK?” QUIZ THAT FOLLOWED THE MANAGER’S PERSPECTIVE. WERE YOU ABLE TO CORRECTLY IDENTIFY THE TRUE STATEMENTS? CAN YOU DO BETTER NOW?

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280 Chapter 7 Managing Employee Retention and Separation

1. Workers are less likely to quit when they feel the

organization cares about their personal needs.

TRUE. Individuals who feel they receive support from the organization are more likely to remain with the

organization, even if they have experiences that cause

them to think about leaving.

2. Decisions to quit often begin with a specific event that

causes employees to evaluate their work situation.

TRUE. In most cases, a specific event can be identi- fied as the point where the employee begins to think

about leaving the organization.

3. It doesn’t really matter how you fire people, as long as you

make it clear that their employment is being terminated.

FALSE. It is important for the person doing the firing to make it clear that the person is being dismissed, but a

number of other issues should be addressed to minimize

the trauma of firing someone.

4. In order to defend against potential lawsuits, an

organization should carefully document methods of

disciplining problem employees. TRUE. Principles of due process and progressive discipline suggest that employees

should receive clear written warnings as part of the disci-

plinary process.

5. Employees who see coworkers losing their jobs become

more committed to staying with the organization.

FALSE. In many cases, layoff survivors begin to look for jobs at other organizations.

Angela’s frustration with employees who quit and employees

who perform poorly is not uncommon. High employee turn-

over is costly. Angela is therefore wise to consider ways to

increase the chances of good employees staying with the res-

taurant. She is also being an effective leader when she takes

actions to help low performers such as Simon improve. The

principles of due process and the steps of progressive disci-

pline can guide Angela’s efforts. These and other concepts in

this chapter provide information about effective methods of

retaining employees, as well as effective ways to discipline

and dismiss employees whose performance is inadequate.

Employee turnover usually begins with a specific event that causes the individual to think about leaving the organization. Sometimes, however,

How can undesirable turnover of employees be reduced?

LEARNING OBJECTIVE 2

Employee retention is critical for organizations pursuing internal labor strategies. Competitive advantage for an organization with a Committed Expert HR strategy comes from retaining employ- ees who develop specialized skills that allow them to be more productive than employees working for competitors. Organizations with a Loyal Soldier HR strategy save money by offering job security in place of high wages.

Effective employee separation is important for organizations with differentiation strategies. A Committed Expert HR strategy involves quickly

SUMMARY

How are employee retention and separation strategic?

LEARNING OBJECTIVE 1 identifying low performers and encouraging them to leave rather than pursue a career with the orga- nization. For organizations with a Free Agent HR strategy, frequent turnover of employees is expected and is often helpful for ensuring that employee skills are up-to-date.

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Key Terms 281

employees develop a general sense of dissatisfac- tion that eventually causes them to leave. Low job satisfaction is strongly related to employee turnover. Employees who are not satisfied with their jobs begin to withdraw from the organiza- tion and may eventually quit. Organizations can reduce turnover by conducting satisfaction sur- veys to identify employee concerns and needs. Socialization processes help new employees become more comfortable with the organization, and building perceptions of organizational sup- port among employees increases their sense of commitment to the organization. Selection prac- tices that identify individuals who are less likely to leave can reduce turnover, as can encouraging employees to build social relationships within the organization and the community.

Employee discipline is most effective when it follows principles of due process. Due process requires that employees be clearly informed about what is expected of them. Any punishment for misbehavior should follow careful examination of facts, and the offending employee should have an opportunity to defend himself. Punishment should also be consistent with the nature of the misbehavior. Progressive discipline procedures help ensure due process. Progressive discipline moves from verbal warning to written warning, to suspension, and finally to discharge.

How do layoffs affect individuals and organizations?

LEARNING OBJECTIVE 3

What are the common steps in disciplining employees?

LEARNING OBJECTIVE 4

How should employee dismissals be carried out?

LEARNING OBJECTIVE 5

The organizational benefits of downsizing are unclear. Downsizing is most common in organiza- tions struggling with profitability. There is, how- ever, little evidence of long-term improvement in organizational performance after downsiz- ing. Individuals who lose their jobs experience a number of negative effects, including decreased psychological and physical health. Some layoff survivors may increase their individual perfor- mance, but most suffer negative psychological consequences. Organizations can reduce the neg- ative consequences of downsizing by being fair and communicating honestly with both victims and survivors.

Having to fire someone is a difficult part of the man- agement job. Outplacement services alleviate some of the negative effects of dismissal by helping dis- placed employees improve their job skills, provid- ing emotional support, and sometimes supplying information about alternative jobs. An employee dismissal meeting can be stressful, but following proper procedures helps preserve both the dignity of individuals and the reputation of the organiza- tion. Dismissal should take place in a brief face- to-face meeting. Important facts and information about the dismissal should be written down and presented to the person being dismissed. Planning should also address the safety of other employees and the manager conducting the dismissal meeting.

Discipline 274 Downsizing 269 Due process 275 Dysfunctional turnover 257 Embeddedness 268 Employee retention 252

Employee separation 252 Exit interview 263 Involuntary turnover 257 Job satisfaction 260 Layoffs 269 Layoff survivors 271

KEY TERMS

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282 Chapter 7 Managing Employee Retention and Separation

EXAMPLE CASE Apparel Inc.

To better understand the challenges that managers on the front lines of downsizing efforts face in delivering messages with dignity and respect, we conducted a study of a Fortune 500 company that we call Apparel Inc. (we disguised the corporation’s real name to preserve confidentiality). Both line managers and HR managers at Apparel Inc. reported difficulty handling lay- off conversations. For line managers, the experience was challenging for two reasons: their limited experience with dire personnel situations and their existing relationships with the affected employees. Many managers had genuine friendships with their direct reports and knew or had met their

1. How can SAS compete with other software firms when its employees appear to work less than the employees at competing firms?

2. Do you think a fast-food restaurant such as Arby’s would benefit from reducing turnover of cooks and cashiers? What could the com- pany reasonably do to encourage employees to stay? What problems might occur if employees stayed for longer periods of time?

3. Do you think the university you attend makes a concerted effort to dismiss low-performing workers? How does the university’s approach to dismissing low performers affect overall services for students?

4. What are some specific events that might cause you to leave an organization without having found a different job?

5. Which dimensions of job satisfaction are most important to you? Would you accept less pay to work in a job with better coworkers? How important is doing work that you find enjoyable?

6. What things keep you embedded in your current situation? Are there personal and family factors that encourage you to keep your life as it is? Can you identify social relationships that might influence you to avoid moving to another university or a different job?

7. Why do you think organizations that lay off workers frequently fail to improve their long- term performance?

8. Some people who have been layoff victims look back on the experience as one of the best things in their lives. Why might a victim say such a thing several years after the layoff?

9. Can you identify a time when a low-perform- ing individual has not been disciplined by a leader? How did the lack of discipline affect the poor performer? How did it affect other workers or team members?

10. As a manager, what would you say to a person whom you were firing?

DISCUSSION QUESTIONS

Layoff victims 270 Outplacement services 277 Perceived organizational support 264 Progressive discipline 276 Severance compensation 279

Socialization 264 Voluntary turnover 257 Withdrawal 261 Work-role centrality 270

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Discussion Case 283

employees’ families. Although HR managers tended to have more experience with terminations than line managers, they nonetheless found downsizing conversations to be difficult and emotionally unwieldy. An HR manager with years of experience handling layoff conversations made this point: “It’s a pretty horrific event, frankly. It’s not easy and it’s never easy to get used to.” HR managers and line managers alike reported experiencing a range of negative emotions, often at a high level of intensity. Emotions ranged from anxiety and fear to sympathy and guilt—sometimes, even shame. One manager described the physical effects of anxiety both before and during the event:

Internally there is a nervous stomach, you feel on edge. Sometimes you get physically nauseous or headache. Very often the night before or after you have very bad dreams that are not necessarily related to the downsiz- ing itself, but from the stress. There is a degree of nervousness that almost makes you have to step back and say, “I have to be calm, I can’t show that I am nervous about delivering this message.”

Alongside anxiety, managers conducting layoffs experience sympathy and sadness. One manager explained: “It is very difficult from an emotional standpoint knowing you are dealing with somebody’s livelihood, dealing with somebody’s ego, dealing with somebody’s ability to provide for their family.” Another manager concurred, emphasizing how distressing it can be to deliver the negative news:

If I am about to cry because this is upsetting me as much as it is upsetting the other individual, I am definitely going to try not to cry. But the emotion that I feel is genuine in terms of the unhappiness or the sorrow that I am feeling that I have to deliver this message to someone.

QUESTIONS 1. What are some ways that managers might cope with negative emotions

when they are forced to lay off employees? 2. Why might someone argue that it is a good thing for managers to feel

such negative emotions? 3. How do you think you would personally react to the task of laying

off workers?

Source: Andrew Molinsky and Joshua Margolis, “The Emotional Tightrope of Downsizing: Hidden Challenges for Leaders and Their Organizations,” Organizational Dynamics 35 (2006): 145–159. Copyright Elsevier 2006.

DISCUSSION CASE County General Hospital

County General Hospital is a 200-bed facility located approximately 150 miles outside Chicago. It is a regional hospital that draws patients from surrounding farm communities. Like most hospitals, County General faces the difficult task of providing high-quality care at a reasonable cost.

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284 Chapter 7 Managing Employee Retention and Separation

Examine the website for your university to locate information that guides the disciplinary actions of supervisors. If you can’t locate this information for your university, visit a few websites for other universities. Examine the supervisor guidelines and answer the following questions:

1. What does the university do to ensure due process? 2. How many steps are in the university plan for progressive discipline? Are

the steps similar to the four steps outlined in this chapter? 3. What involvement does the human resource department have in cases of

employee discipline? 4. Does the site offer guidance for how to deal with specific instances of

employee misbehavior? 5. What steps can an employee take to appeal a disciplinary action? 6. Are any unions involved in disciplinary procedures? 7. Based on your experiences with the university, do you think supervisors

actually follow the steps of progressive discipline?

EXPERIENTIAL EXERCISE

Learning about Discipline Procedures

One of the most difficult obstacles encountered by the hospital is finding and retaining qualified nurses. The annual turnover rate among nurses is nearly 100 percent. A few of the nurses are long-term employees who are either committed to County General or attached to the community. Employment patterns suggest that many of the nurses who are hired stay for only about six months. In fact, County General often appears to be a quick stop between graduation from college and a better job.

Many who leave acknowledge that they were contacted by another hospital that offered them more money. Exit interviews with nurses who are leaving similarly suggest that low pay is a concern. Another concern is the lack of social atmosphere for young nurses. Nurses just finishing college, who are usually not married, complain that the community does not provide them enough oppor- tunity to meet and socialize with others their age.

Hospital administrators are afraid that paying higher wages will cause finan- cial disaster. Big insurance companies and Medicaid make it difficult for them to increase the amount they charge patients. However, the lack of stability in the nursing staff has caused some noticeable problems. Nurses sometimes appear to be ignorant of important hospital procedures. Doctors also com- plain that they spend a great deal of time training nurses to perform proce- dures, only to see those nurses take their new skills someplace else.

QUESTIONS 1. Turnover is high at almost every facility where nurses are employed. What

aspects of nursing make turnover for nurses higher than for many other jobs? 2. What programs do you suggest County General might implement to

decrease nurse turnover? Be specific. 3. How might County General work with other hospitals to reduce nurse

turnover?

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Endnotes 285

ENDNOTES 1. Charles Fishman, “Sanity Inc.,” Fast Company 21

(December 1998): 84. 2. John P. Hausknecht, Charlie O. Trevor, and Michael

J. Howard, “Unit-Level Turnover Rates and Customer Service Quality: Implications of Group Cohesiveness, Newcomer Concentration, and Size,” Journal of Applied Psychology 94 (2009): 1068–1075.

3. K. Michele Kacmar, Martha C. Andrews, David L. Van Rooy, R. Chris Steilberg, and Stephen Cerrone, “Sure Everyone Can be Replaced … But at What Cost? Turnover as a Predictor of Unit-Level Performance,” Academy of Management Journal 49 (2006): 133–144.

4. Tae-Youn Park and Jason D. Shaw, “Turnover Rates and Organizational Performance: A Meta- Analysis,” Journal of Applied Psychology 98 (2013): 268-309; Rosemary Batt and Alexander J. S. Colvin, “An Employment Systems Approach to Turnover: Human Resource Practices, Quits, Dismissals, and Performance,” Academy of Management Journal 54 (2011): 695–711.

5. Somaya Deepak, Ian O. Williamson, and Natalia Lorinkova, “Gone But Not Lost: The Different Performance Impacts of Employee Mobility Between Cooperators Versus Competitors,” Academy of Management Journal 51 (2008): 936–953.

6. David A. Kaplan, “SAS: A New No. 1 Best Employer,” Fortune, January 2010.

7. www.sas.com/corporate/ 8. Richard Florida and Jim Goodnight, “Managing for

Creativity,” Harvard Business Review 83, no. 7/8 (2005): 125–131.

9. Jennifer Schu, “Even in Hard Times, SAS Keeps Its Culture Intact,” Workforce 80, no. 10 (2001): 21.

10. Gerald D. Klein, “Creating Cultures that Lead to Success: Lincoln Electric, Southwest Airlines, and SAS Institute,” Organizational Dynamics 41 (2012): 32– 43; Simon London, “Profit Machines that Put People First,” Financial Times, September 26, 2003, p. 16.

11. Janet Wiscombe, “CEO Takes HR to Prime Time,” Workforce 81, no. 13 (2002): 10.

12. Anonymous, “Case Study: SAS Institute. In a Sector Where the Competition for Talent Is Fierce, One Company Believes that Creating a Good Working Environment Is the Key to Success,” Financial Times, April 29, 2004, p. 5.

13. Wiscombe, “CEO Takes HR to Prime Time.” 14. Charles Fishman, “Moving Toward a Balanced Work

Life,” Workforce 79, no. 3 (2000): 38–42. 15. Michelle Conson and Kathy Moore, “Dr. Goodnight’s

Company Town,” BusinessWeek 3686 (2000): 192. 16. Fishman, “Moving Toward a Balanced Work Life.” 17. Fishman, “Sanity Inc.” 18. John S. McClenahen, “Educating for the Future,”

Industry Week 253, no. 12 (2004): 46. 19. Fishman, “Moving Toward a Balanced Work Life.” 20. Kenneth Hein, “Success Secrets,” Incentive 173, no. 8

(1999): 48–49. 21. Joanne Cole, “Case Study: SAS Institute Inc. Uses

Sanity as Strategy,” HR Focus 76, no. 5 (1999): 6. 22. W. Stanley Seibert and Nikolay Zubanov, “Searching

for the Optimal Level of Employee Turnover: A Study of a Large U.K. Retail Organization,” Academy of Management Journal 52 (2009): 294–313.

23. Jeffrey A. Sonnenfeld and Maury A. Peiperl, “Staffing Policy as a Strategic Response: A Typology of Career Systems,” Academy of Management Review 13 (1988): 588–600.

Access the companion website to test your knowledge by completing a Global Telecommunications interactive role-playing exercise. In this exercise you work with another client, Global Telecommunications. Global has adopted a Committed Expert HR strategy. Unfortunately, it has some potential turnover problems. In a few minutes, you will meet with a key member of senior management who has posted her résumé online and is actively looking for a new job. How will you handle this discussion? Another problem concerns an employee who, in management’s view, is a detriment to his department and truly needs to be fired. He can be very emotional and is viewed as having a bad temper. Before this person can be fired, you will need to make sure all appropriate steps have been taken. This will be a challenging assignment. As you begin reviewing his file, the senior manage- ment member arrives for her meeting with you. Good luck—she doesn’t look happy to be here.

INTERACTIVE EXPERIENTIAL EXERCISE

Turnover: Dealing with the Good, the Bad, and the Ugly at Global Telecommunications http://www.wiley.com/college/sc/stewart

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24. Michael C. Sturman, Lian Shao, and Jan H. Katz, “The Effect of Culture on the Curvilinear Relationship Between Performance and Turnover,” Journal of Applied Psychology 97 (2012): 46–62; Charlie O. Trevor, Barry Gerhart, and John W. Boudreau, “Voluntary Turnover and Job Performance: Curvilinearity and the Moderating Influences of Salary Growth and Promotions,” Journal of Applied Psychology 82 (1997): 44–61.

25. Taken from Peter W. Hom and Rodger W. Griffeth, Employee Turnover (Cincinnati, OH: South-Western College Publishing, 1995), 7.

26. Thomas W. Lee and Terence R. Mitchell, “An Alternative Approach: The Unfolding Model of Voluntary Employee Turnover,” Academy of Management Review 19 (1994): 51–89.

27. Thomas W. Lee, Terence R. Mitchell, Lowell Wise, and Steven Fireman, “An Unfolding Model of Voluntary Employee Turnover,” Academy of Management Journal 39 (1996): 5–36; Thomas W. Lee, Terence R. Mitchell, Brooks C. Holtom, Linda S. McDaniel, and John W. Hill, “The Unfolding Model of Voluntary Turnover: A Replication and Extension,” Academy of Management Journal 42 (1999): 450–462.

28. Tae Heon Lee, Barry Gerhart, Ingo Weller, and Charlie O. Trevor, “Understanding Voluntary Turnover: Path Specific Job Satisfaction Effects and the Importance of Unsolicited Job Offers,” Academy of Management Journal 51 (2008): 651–671.

29. Peter W. Hom and Rodger W. Griffeth, “Structural Equations Modeling Test of a Turnover Theory,” Journal of Applied Psychology 76 (1991): 350–366; Robert P. Tett and John P. Meyer, “Job Satisfaction, Organizational Commitment, Turnover Intention, and Turnover: Path Analyses Based on Meta-Analytic Findings,” Personnel Psychology 46 (1993): 259–283.

30. Nathan P. Podsakoff, Jeffrey A. LePine, and Marcie A. LePine, “Differential Challenge Stressor– Hindrance Stressor Relationships with Job Attitudes, Turnover Intentions, Turnover, and Withdrawal Behavior: A Meta-Analysis,” Journal of Applied Psychology 92 (2007): 438–454.

31. Peter W. Hom, Fanny Caranikas-Walker, Gregory E. Prussia, and Rodger W. Griffeth, “A Meta-Analytical Structural Equations Analysis of a Model of Employee Turnover,” Journal of Applied Psychology 77 (1992): 890–909.

32. Edwin A. Locke, “What Is Job Satisfaction?” Organizational Behavior and Human Performance 4 (1969): 309–336.

33. Timothy A. Judge, Joyce E. Bono, Amir Erez, and Edwin A. Locke, “Core Self-Evaluations and Job and Life Satisfaction: The Role of Self-Concordance and Goal Attainment,” Journal of Applied Psychology 90 (2005): 257–268.

34. Mary Ann M. Fricko and Terry A. Beehr, “A Longitudinal Investigation of Interest Congruence and Gender Concentration as Predictors of Job Satisfaction,” Personnel Psychology 45 (1992): 99–117.

35. Benjamin Schneider, Paul J. Hanges, D. Brent Smith, and Amy Nicole Salvaggio, “Which Comes First: Employee Attitudes or Organizational Financial and Market Performance?” Journal of Applied Psychology 88 (2003): 836–851.

36. Robert W. Rice, Douglas A. Gentile, and Dean B. McFarlin, “Facet Importance and Job Satisfaction,” Journal of Applied Psychology 76 (1991): 31–39.

37. James K. Harter, Frank L. Schmidt, and Theodore L. Hayes, “Business-Unit-Level Relationships Between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis,” Journal of Applied Psychology 87 (2002): 268–279; Cheri Ostroff, “The Relationship between Satisfaction, Attitudes, and Performance: An Organizational Level Analysis,” Journal of Applied Psychology 77 (1992): 963–974.

38. Meni Koslowsky, Abraham Sagie, Moshe Krausz, and Ahuva Dolman Singer, “Correlates of Employee Lateness: Some Theoretical Considerations,” Journal of Applied Psychology 82 (1997): 79–88.

39. Michael C. Sturman, “The Implications of Linking the Dynamic Performance and Turnover Literatures,” Journal of Applied Psychology 86 (2001): 684–696.

40. Xio-Ping Chen, Chun Hui, and Douglas J. Sego, “The Role of Organizational Citizenship Behavior in Turnover: Conceptualization and Preliminary Tests of Key Hypotheses,” Journal of Applied Psychology 83 (1998): 922–931.

41. Timothy M. Gardner, Patrick M. Wright, and Lisa M. Moynihan, “The Impact of Motivation, Empowerment, and Skill Enhancing Practices on Aggregate Voluntary Turnover: The Mediating Effect of Collective Affective Commitment,” Personnel Psychology 64 (2011): 315–350; Liu Dong, Shu Zhang, Lei Wang, and Thomas W. Lee, “The Effects of Autonomy and Empowerment on Employee Turnover: Test of a Multilevel Model in Teams,” Journal of Applied Psychology 96 (2011): 1305–1316; Kathleen Bentein, Robert Vandenberg, Christian Vandenberghe, and Florence Stinglhamber, “The Role of Change in the Relationship Between Commitment and Turnover: A Latent Growth Modeling Approach,” Journal of Applied Psychology 90 (2005): 468–482.

42. John D. Kammeyer-Mueller, Connie R. Wanberg, Theresa M. Glomb, and Dennis Ahlburg, “The Role of Temporal Shifts in Turnover Processes: It’s about Time,” Journal of Applied Psychology 90 (2005): 644–658.

43. Robert P. Steel and Joan R. Rentsch, “The Dispositional Model of Job Attitudes Revisited: Findings of a 10-year Study,” Journal of Applied Psychology 82 (1997): 873–879; Richard D. Arvey, Thomas J. Bouchard, Nancy L. Segal, and Lauren M. Abraham, “Job Satisfaction: Environmental and Genetic Components,” Journal of Applied Psychology 74 (1989): 187–192.

44. Remus Ilies and Timothy A. Judge, “On the Heritability of Job Satisfaction: The Mediating Role of Personality,” Journal of Applied Psychology 88 (2003): 750–759.

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Endnotes 287

45. Timothy A. Judge and Edwin A. Locke, “Effect of Dysfunctional Thought Processes on Subjective Well- Being and Job Satisfaction,” Journal of Applied Psychology 78 (1993): 475–490.

46. Ryan D. Zimmerman, “Understanding the Impact of Personality Traits on Individuals’ Turnover Decisions: A Meta-Analytic Path Model,” Personnel Psychology 61 (2008): 309–348.

47. David G. Allen, Kelly P. Weeks, and Karen R. Moffitt, “Turnover Intentions and Voluntary Turnover: The Moderating Roles of Self-Monitoring, Locus of Control, Proactive Personality, and Risk Aversion,” Journal of Applied Psychology 90 (2005): 980–990.

48. For information about the Job Descriptive Index see the website located at: http://www.bgsu.edu/ departments/psych/io/jdi/

49. Angelo J. Kinicki, Frances M. McKee-Ryan, Chester A. Schriesheim, and Kenneth P. Carson, “Assessing the Construct Validity of the Job Descriptive Index: A Review and Meta-Analysis,” Journal of Applied Psychology 87 (2002): 14–32.

50. Stephanie Whittaker, “Employees Are Proud to Work Here,” The Gazette (Montreal), October 14, 2006, G3.

51. Michael T. Roberson and Eric Sundstrom, “Questionnaire Design, Return Rates, and Response Favorableness in an Employee Attitude Questionnaire,” Journal of Applied Psychology 75 (1990): 354–357.

52. Benjamin Schneider, Steven D. Ashworth, A. Catherine Higgs, and Linda Carr, “Design, Validity, and Use of Strategically Focused Employee Attitude Surveys,” Personnel Psychology 49 (1996): 695–705.

53. Hui Liao, Aichia Chuang, and Aparna Joshi, “Perceived Deep-Level Dissimilarity: Personality Antecedents and Impact on Overall Job Attitude, Helping, Work Withdrawal, and Turnover,” Organizational Behavior and Human Decision Processes 106 (2008): 106–124.

54. Peter W. Hom, Loriann Roberson, and Aimee D. Ellis, “Challenging Conventional Wisdom About Who Quits: Revelations from Corporate America,” Journal of Applied Psychology 93 (2008): 1–34.

55. Patrick F. McKay, Derek A. Avery, Scott Tonidandel, Mark A. Morris, Morela Hernandez, and Michelle R. Hebl, “Racial Differences in Employee Retention: Are Diversity Climate Perceptions the Key?” Personnel Psychology 60 (2007): 35–62.

56. Derek R. Avery, Patrick F. McKay, David C. Wilson, and Scott Tonidandel, “Unequal Attendance: The Relationships Between Race, Organizational Diversity Cues, and Absenteeism,” Personnel Psychology 60 (2007): 875–902; Patrick F. McKay, Derek R. Avery, and Mark A. Morris, “Mean Racial-Ethnic Differences in Employee Sales Performance: The Moderating Role of Diversity Climate,” Personnel Psychology 61 (2008): 349–374.

57. Steven G. Rogelberg, Alexandra Luong, Matthew E. Sederburg, and Dean S. Cristol, “Employee Attitude Surveys: Examining the Attitudes of Noncompliant Employees,” Journal of Applied Psychology 85 (2000): 284–293.

58. Markku Jokisaari and Jari-Erik Nurmi, “Change in Newcomers’ Supervisor Support and Socialization Outcomes after Organizational Entry,” Academy of Management Journal 52 (2009): 527–544; Wendy R. Boswell, Abbie J. Shipp, Stephanie C. Payne, and Satoris S. Culbertson, “Changes in Newcomer Job Satisfaction Over Time: Examining the Pattern of Honeymoons and Hangovers,” Journal of Applied Psychology 94 (2009): 844–858.

59. Talya N. Bauer and Stephen G. Green, “Testing the Combined Effects of Newcomer Information Seeking and Manager Behavior on Socialization,” Journal of Applied Psychology 83 (1998): 72–83.

60. Tae-Yeol Kim, Daniel M. Cable, and Sang-Pyo Kim, “Socialization Tactics, Employee Proactivity, and Person–Organization Fit,” Journal of Applied Psychology 90 (2005): 232–241.

61. Amy L. Kristof, “Person–Organization Fit: An Integrative Review of Its Conceptualizations, Measurement, and Implications,” Personnel Psychology 49 (1996): 1–49.

62. Connie R. Wanberg and John D. Kammeyer-Mueller, “Predictors and Outcomes of Proactivity in the Socialization Process,” Journal of Applied Psychology 85 (2000): 373–385.

63. Linda Rhoades and Robert Eisenberger, “Perceived Organizational Support: A Review of the Literature,” Journal of Applied Psychology 87 (2002): 698–714.

64. Randall P. Settoon, Nathan Bennett, and Robert C. Liden, “Social Exchange in Organizations: Perceived Organizational Support, Leader-Member Exchange, and Employee Reciprocity,” Journal of Applied Psychology 81 (1996): 219–227; Lynn M. Shore and Sandy J. Wayne, “Commitment and Employee Behavior: Comparison of Affective Commitment and Continuance Commitment with Perceived Organizational Support,” Journal of Applied Psychology 78 (1993): 774–780.

65. Robert Eisenberger, Peter Fasolo, and Valerie Davis- LaMastro, “Perceived Organizational Support and Employee Diligence, Commitment, and Innovation,” Journal of Applied Psychology 75 (1990): 51–59; Sandy J. Wayne, Lynne M. Shore, and Robert C. Liden, “Perceived Organizational Support and Leader– Member Exchange: A Social Exchange Perspective,” Academy of Management Journal 40 (1997): 82–111.

66. Uma Shankari, “The Human Capital Factor: Investing in People Development Has Paid Off Handsomely for Fraser’s Hospitality,” The Business Times Singapore, October 17, 2006.

67. Robert Eisenberger, Florence Stinglhamber, Christian Vandenberghe, Ivan L. Sucharski, and Linda Rhoades, “Perceived Supervisor Support: Contributions to Perceived Organizational Support and Employee Retention,” Journal of Applied Psychology 87 (2002): 565–573.

68. Rhoades and Eisenberger, “Perceived Organizational Support.”

69. Tony Simons and Quinetta Roberson, “Why Managers Should Care about Fairness: The Effects of Aggregate

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288 Chapter 7 Managing Employee Retention and Separation

Justice Perceptions on Organizational Outcomes,” Journal of Applied Psychology 88 (2003): 432–443.

70. Murray R. Barrick and Ryan D. Zimmerman, “Reducing Voluntary, Avoidable Turnover Through Selection,” Journal of Applied Psychology 90 (2005): 159–166.

71. Andi Atwater, “Screening Program Reduces Worker Turnover: A Pre-Employment Tool Has Saved Via Christi Senior Services Thousands of Dollars This Year,” Wichita Eagle (Kansas), October 21, 2006, 6B.

72. Peter W. Hom, Anne S. Tsui, Joshua B. Wu, Thomas W. Lee, Ann Yan Zhang, Ping Ping Fu, and Lan Li, “Explaining Employment Relationships with Social Exchange and Job Embeddedness,” Journal of Applied Psychology 94 (2009): 277–297.

73. Terence R. Mitchell, Brooks C. Holtom, Thomas W. Lee, Chris J. Sablynski, and Miriam Erez, “Why People Stay: Using Job Embeddedness to Predict Voluntary Turnover,” Academy of Management Journal 44 (2001): 1102–1121.

74. Kaifeng Jiang, Dong Liu, Patrick F. McKay, Thomas W. Lee, and Terence R. Mitchell, “When and How Is Job Emeddedness Predictive of Turnover? A Meta-Analytic Investigation,” Journal of Applied Psychology 97 (2012): 1077–1096; Craig D. Crossley, Rebecca J. Bennett, Steve M. Jex, and Jennifer L. Burnfield, “Development of a Global Measure of Job Embeddedness and Integration into a Traditional Model of Voluntary Turnover,” Journal of Applied Psychology 92 (2007): 1031–1042; Thomas W. Lee, Terence R. Mitchell, Chris J. Sablynski, James P. Burton, and Brooks Holtom, “The Effects of Job Embeddedness on Organizational Citizenship, Job Performance, Volitional Absences, and Voluntary Turnover,” Academy of Management Journal 47 (2004): 711–722.

75. Terence R. Mitchell, Brooks C. Holtom, and Thomas W. Lee, “How to Keep Your Best Employees: Developing an Effective Retention Policy,” Academy of Management Executive 15 (2001): 96–108.

76. Samuel Aryee, E. S. Srinivas, and Hwee Hoon Tan, “Rhythms of Life: Antecedents and Outcomes of Work–Family Balance in Employed Parents,” Journal of Applied Psychology 90 (2005): 132–146.

77. Timothy A. Judge and Shinichiro Watanabe, “Another Look at the Job Satisfaction–Life Satisfaction Relationship,” Journal of Applied Psychology 78 (1993): 939–948.

78. Michael R. Frone, “Work–Family Conflict and Employee Psychiatric Disorders: The National Comorbidity Survey,” Journal of Applied Psychology 85 (2000): 888–895.

79. Geoffrey E. Love and Matthew Kraatz, “Character, Conformity, or the Bottom Line? How and Why Downsizing Affected Corporate Reputation,” Academy of Management Journal 52 (2009): 314–335.

80. Wayne F. Cascio, Clifford E. Young, and James R. Morris, “Financial Consequences of Employment- Change Decisions in Major U.S. Corporations,” Academy of Management Journal 40 (1997): 1175–1189.

81. Anonymous, “The Futility of Downsizing,” Industry Week 242 (1993): 27–28.

82. Christopher D. Zatzick and Roderick D. Iverson, “High-Involvement Management and Workforce Reduction: Competitive Advantage or Disadvantage?” Academy of Management Journal 49 (2006): 999–1015.

83. Kenneth P. DeMeuse, Thomas J. Bergmann, Paul A. Vanderheiden, and Catherine E. Roraff, “New Evidence Regarding Organizational Downsizing and a Firm’s Financial Performance: A Long-Term Analysis,” Journal of Managerial Issues 16 (2004): 155–177.

84. Javad Kashefi and Gilbert J. McKee, “Stock Prices’ Reactions to Layoff Announcements,” Journal of Business and Management 8, no. 2 (2002): 99–107.

85. Peter Chalos and Charles J. P. Chen, “Employee Downsizing Strategies: Market Reaction and Post Announcement Financial Performance,” Journal of Business Finance and Accounting 29 (2002): 847–871.

86. D. Scott DeRue, John R. Hollenbeck, Michael D. Johnson, Daniel R. Ilgen, and Dustin K. Jundt, “How Different Team Downsizing Approaches Influence Team-Level Adaptation and Performance,” Academy of Management Journal 51 (2008): 182–196.

87. Frances M. McKee Ryan, Zhaoli Song, Connie Wanberg, and Angelo J. Kinicki, “Psychological and Physical Well-Being During Unemployment: A Meta- Analytic Study,” Journal of Applied Psychology 90 (2005): 53–76.

88. Ruth Kanfer, Connie R. Wanberg, and Tracy M. Kantrowitz, “Job Search and Employment: A Personality-Motivational Analysis and Meta-Analytic Review,” Journal of Applied Psychology 86 (2001): 837–855.

89. Gregory E. Prussia, Angelo J. Kinicki, and Jeffrey S. Bracker, “Psychological and Behavioral Consequences of Job Loss: A Covariance Structure Analysis Using Weiner’s (1985) Attribution Model,” Journal of Applied Psychology 78 (1993): 382–394.

90. Peter A. Creed, Vivien King, Michelle Hood, and Robert McKenzie, “Goal Orientation, Self-Regulation Strategies, and Job Seeking Intensity in Unemployed Adults, “Journal of Applied Psychology 94 (2009): 806–813.

91. Connie Wanberg, “Antecedents and Outcomes of Coping Behaviors Among Unemployed and Reemployed Individuals,” Journal of Applied Psychology 82 (1997): 731–744.

92. Angelo J. Kinicki, Gregory E. Prussia, and Frances M. McKee-Ryan, “A Panel Study of Coping with Involuntary Job Loss,” Academy of Management Journal 43 (2000): 90–100.

93. Joel Brockner, Mary Konovsky, Rochelle Cooper- Schneider, Robert Folger, Christopher Martin, and Robert J. Bies, “Interactive Effects of Procedural Justice and Outcome Negativity on Victims and Survivors of Job Loss,” Academy of Management Journal 37 (1994): 397–409.

94. Joel Brockner, “The Effects of Work Layoffs on Survivors: Research, Theory, and Practice,” Research in Organizational Behavior 10 (1988): 213–255.

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Endnotes 289

95. Joel Brockner, Jeanette Davy, and Carolyn Carter, “Layoffs, Self-Esteem, and Survivor Guilt: Motivational, Affective, and Attitudinal Consequences,” Organizational Behavior and Human Decision Processes 36 (1985): 229–244.

96. Joel Brockner, Steven Grover, Thomas F. Reed, and Rocki Lee DeWitt, “Layoffs, Job Insecurity, and Survivors Work Effort: Evidence of an Inverted-U Relationship,” Academy of Management Journal 35 (1992): 413–425.

97. Aneil K. Mishra and Gretchen M. Spreitzer, “Explaining How Survivors Respond to Downsizing: The Roles of Trust, Empowerment, Justice, and Work Redesign,” Academy of Management Review 23 (1998): 567–588; Joel Brockner, Steven L. Grover, and Maritz D. Blonder, “Predictors of Survivors’ Job Involvement Following Layoffs: A Field Study,” Journal of Applied Psychology 73 (1988): 436–442.

98. Gretchen M. Spreitzer and Aneil K. Mishra, “To Stay or Go: Voluntary Survivor Turnover Following an Organizational Downsizing,” Journal of Organizational Behavior 23 (2002): 707.

99. Joel Brockner, Steven Grover, Thomas Reed, Rocki DeWitt, and Michael O’Malley, “Survivors’ Reactions to Layoffs: We Get by with a Little Help for Our Friends,” Administrative Science Quarterly 32 (1987): 526–541.

100. Charlie O. Trevor and Anthony J. Nyberg, Keeping Your Headcount When All About You Are Losing Theirs: Downsizing, Voluntary Turnover Rates, and the Moderating Role of HR Practices,” Academy of Management Journal 51 (2008): 259–276.

101. Jody Hoffer Gittell, Kim Cameron, Sandy Lim, and Victor Rivas, “Relationships, Layoffs, and Organizational Resilience: Airline Industry Responses to September 11,” Journal of Applied Behavioral Science 42 (2006): 300–329.

102. Peter Allan, “Minimizing Employee Layoffs While Downsizing: Employer Practices that Work,” International Journal of Manpower 18 (1997): 576.

103. Larry R. Smeltzer and Marie F. Zener, “Minimizing the Negative Effects of Employee Layoffs Through Effective Announcements,” Employee Counseling Today 6, no. 4 (1994): 3–9.

104. Wayne F. Cascio and Peg Wynn, “Managing a Downsizing Process,” Human Resource Management 43 (2004): 425–436.

105. Scott David Williams, William M. Slonaker, and Ann C. Wendt, “An Analysis of Employment Discrimination Claims Associated with Layoffs,” S.A.M. Advanced Management Journal 68 (2003): 49–55.

106. David S. Dhanoa and Brian H. Kleiner, “How to Conduct Due Process Discipline,” Management Research News 23, no. 7/8 (2000): 89–94.

107. Antone Aboud, “Conducting a Fair Investigation,” Dispute Resolution Journal 59, no. 4 (2004–2005): 16–21.

108. Dhanoa and Kleiner, “How to Conduct Due Process Discipline.”

109. Peggy Anderson and Marcia Pulich, “A Positive Look at Progressive Discipline,” Health Care Manager 20, no. 1 (2001): 1–9.

110. Jeanette A. Davy, Joe S. Anderson, and Nicholas DiMarco, “Outcome Comparisons of Formal Outplacement Services and Informal Support,” Human Resource Development Quarterly 6 (1995): 275–288.

111. Joe Hobel, “Virtually Letting Go Is the Wrong Way to Say Goodbye,” Canadian HR Reporter, September 25, 2006, 26.

112. Cliff Ennico, “The Right Way to Fire Someone,” Entrepreneur.com, September 11, 2006, www.entrepreneur. com/humanresources/managingemployees/ discipliningandfiring/article166644.html; Michael Bryant, “How to Fire Someone,” Maryland Bar Bulletin, February 2005, http://www.msba.org/departments/ commpubl/publications/bar_bult/2005/feb05/solo.asp.

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©AP/Wide World Photos ©Ingo Schulz/Imagebroker/Corbis Spencer Platt/Getty Images

Par t 3 Improving Employee

Performance

Chapter 8 Measuring Performance and Providing Feedback

Chapter 9 Training for Improved Performance Chapter 10 Developing Employees and Their Careers

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C h a p t e r 8

Measuring Performance and Providing Feedback

A M A N A G E R ’ S P E R S P E C T I V E

TYRONE FEELS EXHAUSTED. AS MANAGER OF THE LOCAL HARDWARE STORE, HE JUST COMPLETED AN ANNUAL PERFORMANCE REVIEW FOR EACH OF HIS

EMPLOYEES. HE STRUGGLED TO SEPARATE THE GOOD AND BAD EMPLOYEES. WAS HE RIGHT TO CARE- FULLY IDENTIFY THE TOP PERFORMERS, OR SHOULD HE HAVE JUST RATED EVERYONE THE SAME?

One of the things that Tyrone found most difficult was how to account for different aspects of perfor- mance. One of the sales representatives—Joe—had the highest sales volume, but often refused to help other less-experienced coworkers. Because of Joe’s lack of cooperation, Tyrone gave him a much lower rating than might be suggested by the objective sales figures. Was this a good idea?

Another employee, Logan, became upset last week and actually threatened violence against two coworkers. At first Tyrone gave him a very low rat- ing, but then he thought back about Logan’s per- formance over the entire rating period. Up until last week Logan’s work had been exemplary. Tyrone thus decided that it would not be fair to penalize Logan with an extremely low rating. On the other hand,

Tyrone wants to communicate that threats of violence will not be tolerated. He wonders what he should say when he meets with Logan.

Tyrone also worries about any potential biases that he might have. When he looked over his rat- ings he saw that the two lowest scores were given to women. He wondered if this was a problem and spent a great deal of time listing good and bad things that he had seen both women do. In the end he con- cluded that his initial ratings were accurate, but he continues to worry that he is somehow biased.

In order to prepare for performance discussions, Tyrone asked each employee to provide self-ratings. He was a little shocked when he looked at these ratings last night. Almost everyone had a self- rating that was higher than the rating he gave them. Curiously, Ed and Janice, two of the lowest performers, actually gave themselves some of the highest self-ratings. How could this be? Didn’t they know that they were not performing up to standard?

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THE BIG PICTURE Performance Management Evaluates Employees’ Contributions and Provides Feedback So That Employees Can Improve.

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Thinking about sitting down with the employ- ees and sharing his evaluations makes Tyrone nervous. Would it be best to provide general com- ments, or should he describe very specific behav- iors that he would like to see? He is sure that Ed and Janice will complain about their low ratings. What if they become defensive and emotional? Will he be able to have a constructive discussion with Logan?

Tyrone realizes that mixed with his uncertainty about how people might react to the ratings is a sense of excitement. Perhaps completing ratings and sharing feedback will give him an opportunity to address some of the performance issues he has been avoiding. This just might be an important key to making the store more profitable. This is important as recently he has been feeling pressure from corporate headquarters to increase sales and customer satisfaction ratings.

WHAT DO YOU THINK? Suppose Tyrone asks his boss, Monica, for guidance about performance management. Monica makes the following statements. Which of the statements do you think are true?

Employee rating systems are of no value unless at least some employees receive low ratings.

When completing performance ratings, it is best to focus only on whether an employee completes tasks and not on how well he or she works with others.

Objective measures of performance, which are represented by things that can be counted, are better than subjective mea- sures such as supervisor judgments.

Self-ratings of performance are usually higher than ratings provided by others.

Employee performance increases when supervisors communicate high expectations.

?

T OR F

T OR F

T OR F

T OR F

T OR F

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294 Chapter 8 Measuring Performance and Providing Feedback

How Can Performance Management Make an Organization Effective?

After reading this chapter you should be able to:

Describe how merit-based and parity-based performance management systems relate to overall HR and competitive strategy.

Describe the three dimensions of job performance.

Explain differences among, and common problems with, various types of performance measures.

Explain the value of using multiple sources to obtain performance appraisal ratings.

Describe effective methods for providing feedback to employees.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

LEARNING OBJECTIVE 5

Grades are an important part of almost every university class. What would happen if grades were eliminated? Would your individual performance improve or decline? Would the reputation of your university rise or fall? Similar issues are at the heart of performance management, which involves assessing and communicating employee contributions. Rating employees’ performance is similar to giving them grades. In the employment context, important questions include the following: Do employees improve their per- formance when their contributions to the organization are measured? Is it helpful to give feedback so that employees know how they are doing? Does effective measurement of individual contributions lead to improved organi- zational performance?

Measuring performance and providing feedback does indeed improve employee performance. And improvements in individual performance translate into better organizational performance. Organizations have higher productivity when top management encourages supervisors to set goals, assess performance, and provide feedback to employees.1 One reason is that trust in management increases when performance is accurately measured and adequately rewarded.2

Effective appraisals, particularly appraisals that allow employee participation, have also been linked to higher levels of job satisfaction.3

An example of a company that practices effective performance manage- ment is General Electric (GE). GE is consistently ranked as one of the world’s most admired corporations.4 Much of the admiration comes from GE’s abil- ity to attract and retain superior employees. This ability comes from a cul- ture that sees human resource management as a strategic activity. The human resource department is not seen as a support function but rather as a business partner. CEO Jeff Immelt puts it this way: “HR people need to work for com- panies where people are valued. There’s not a day that goes by that I don’t talk to our senior HR leader.” In fact, Immelt considers the triangle formed by himself, the CFO, and the senior HR leader to be “absolutely central to

Performance management The process of measuring and providing feedback about employee contributions to the organization.

L E A R N I N G O B J E C T I V E S

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How Can Performance Management Make an Organization Effective? 295

how the business is led.”5 Within this strategic orientation, one area that most sets GE apart is the successful use of performance management to identify and reward excellent employees, who make up a workforce that is difficult for competitors to imitate.6

GE’s performance management system is best known for its empha- sis on clearly identifying high and low performers. Historically, the com- pany asked managers to follow a rating distribution that placed 20 percent of employees in the top category, 70 percent in a middle category, and 10 percent in a category of low performance.7 These strict percentages have been relaxed over the past few years, but most managers continue to place about this percentage of employees in each category. One effect of forcing managers to use such categories is clear identification of low performers. The objective of identifying low performers was summarized by the head of human resources, William Conaty, when he stated, “We want to create angst in the system … you have to know who are the least effective people on your team and then you have to do something about them.”8 Either replac- ing low-performing employees with higher performers or taking specific steps to improve the productivity of low performers increases the likelihood that the company will be successful. Another effect of the forced catego- ries is clear identification of high performers. Only 20 percent of employees receive a top rating, so employees feel a special sense of accomplishment when they are rated in the top category. Employees come to see exceptional performance, rather than politics or favoritism, as the key to promotion and advancement.

Clear goals that encourage employees to stretch and improve are another important aspect of the GE performance system. In the process of measur- ing and discussing performance, managers work with employees to establish difficult goals. Focusing on goals provides clear direction for improvement. Accomplishing stretch goals requires a great deal of effort and often neces- sitates working in radically different ways.9 The performance appraisal process at GE helps ensure that an individual’s goals are aligned with com- pany goals. This is done through a process of cascading, wherein goals and performance assessments begin at the top and flow downward. Top-level goals and assessments become critical input for goals and assessments at lower levels.10

Performance management at GE also adapts to the changing needs of the organization. The behaviors encouraged in the rating process are behaviors that link to the company’s competitive strategy. For example, the performance appraisal system was recently updated to provide ratings for things such as imagination and understanding of market trends.11 These traits are consistent with GE’s strategic focus on innovation and growth.

Performance management at GE is a critical component of the overall human resource system that encourages innovation and quality. Top per- formers are clearly identified and encouraged to stay with the company. The performance appraisal system also provides a merit-based foundation for compensation decisions. Low performance is likewise identified in order to encourage weaker contributors to improve or to leave the company. With this emphasis, the performance management process at GE creates a culture of excellence that brings out the best in employees.

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296 Chapter 8 Measuring Performance and Providing Feedback

Although identifying high and low performers is an important part of perfor- mance management at General Electric, it might not be the best approach for other organizations. In some cases, encouraging people to stand out from the crowd may discourage teamwork and harm employee motivation. Like other HR practices, then, performance management practices are most effective when aligned with an organization’s competitive strategy.

EMPHASIZING EITHER MERIT OR PARITY Organizations tend to follow one of two approaches in measuring perfor- mance. Some organizations create a merit-based climate that emphasizes per- formance differences among employees. In other organizations, the system encourages parity, or a sense of equality, among employees.

Merit-Based Systems The basic objective of a merit-based system is to create and recognize high performance in order to achieve superior outcomes. This is the approach adopted by GE with the underlying purpose of performance management being encouragement to perform at the highest possible level. Employees who produce the highest outcomes, or results, are given high marks. As at GE, this is usually done through the use of relative measures that com- pare employees with each other. Success at work is defined not just as meet- ing a certain standard but as doing better than others. With a merit-based system, managers are also frequently required to place a certain percentage

Merit-based system A performance management system that specifically seeks to identify and recognize the contributions of high performers.

Relative measures Performance ratings that assess an employee’s contributions through comparison with the contributions of other employees.

GENERAL ELECTRIC General Electric is a multinational company that employs over 301,000 people. Human resource management at GE builds compet- itive strength by

Clearly identifying people who are high and low performers, so that high performers can be rewarded and low performers can be encouraged to improve or leave. Establishing stretch goals that focus employee efforts on areas where they can improve their performance. Aligning the behaviors assessed in the performance appraisal process with strategic objectives.

Building Strength Through HR

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How Is Performance Management Strategic?

LEARNING OBJECTIVE 1

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How Is Performance Management Strategic? 297

of employees in each rating category, which is called a forced distribution. Only a few can be given the highest rating, and at least some must be given the lowest rating. In summary, merit-based systems focus on bottom-line results and use relative measures and forced distributions to ensure that high and low performers are clearly identified.12

Students who have been in a class with a grading curve have experienced a merit-based performance system. In such classes, a student’s grade is deter- mined to some extent by how well other students perform. Even if you have never experienced such a grading scheme, just thinking about it can help identify possible outcomes. Students who want a top grade tend to work very hard because they know the teacher will give only a few As. Students who do receive an A feel a strong sense of accomplishment because they know that they performed better than most others. Students who are not performing well are also clearly identified. In some cases, students resist helping their peers, since doing so may result in their own grade being lower. The class cli- mate is competitive, but individual performance is usually very high.

Parity-Based Systems The basic objective of a parity-based system is to encourage cooperation and allow everyone who meets a certain standard to be classified as a high per- former. Parity-based performance measures frequently focus on processes rather than outcomes. High performance is defined as following guidelines and performing behaviors assigned by supervisors. This usually involves absolute measures that compare employees with an established benchmark rather than with each other. Most parity-based systems also adopt a free distribution, which allows any percentage of employees to be placed in a particular category. For example, any employee who assembles a certain number of cell phones without error can be given a top performance rat- ing, regardless of how many cell phones others assemble. In general, parity- based performance systems do not separate people into categories of high and low performance but rather encourage all employees to perform above a certain standard.

The underlying principle of a parity-based system is communicated when- ever a professor announces that every student in a class can achieve an A. More students usually receive As and Bs in such classes than in classes graded on a curve. Without a curve, teachers are less likely to give failing grades. However, receiving a high grade in such classes may not be especially meaningful. If almost everyone receives an A, it is impossible to identify the best students. In fact, it is often the top performers who are most unhappy with a parity-based performance system. They may resent receiving the same grade as others, although they performed better, or they may reduce their effort and perform just above the cutoff for the highest grade. The class cli- mate is thus more cooperative, but fewer students really stretch and perform at their highest level.

LINKING MERIT AND PARITY SYSTEMS TO HR STRATEGY In general, merit-based approaches are best suited to organizations pursu- ing differentiation strategies, while parity-based systems make sense for organizations using cost strategies. Organizations with internal and external

Forced distribution Performance ratings that spread out ratings by requiring raters to place a certain percentage of employees in each category.

Parity-based system A performance management system that seeks to recognize contributions from all employees without elevating some above others.

Absolute measures Performance ratings that assess an employee’s contribution in comparison to a fixed standard or benchmark.

Free distribution Performance ratings that allow raters to place as many employees as they wish into each rating category.

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298 Chapter 8 Measuring Performance and Providing Feedback

labor systems do not differ in terms of their approaches to merit and parity. Linkages between merit and parity approaches to performance management are shown in Figure 8.1.

Merit Systems and Differentiation Strategies The merit-based approach is most beneficial for organizations pursuing a Free Agent HR strategy. Producing truly exceptional products and services is the key to success and is best accomplished by employees who are stretching to accomplish high goals. This sense of stretching and competition is enhanced by ratings that communicate how the employee is performing relative to oth- ers.13 Employees performing poorly are identified and encouraged to leave the organization so that they can be replaced with others who have greater skill and motivation. Organizations pursuing a Committed Expert HR strategy also tend to adopt merit-based approaches. Promotions and advancement in these organizations depend largely on achieving results and performing bet- ter than others. As we saw in the GE example, a merit-based approach to per- formance management that recognizes truly excellent performance is a key feature of effective differentiation strategies.

Parity Systems and Cost Strategies For an organization using a Loyal Soldier HR strategy, success comes from cooperative employees who work with maximum efficiency. The contribution of an exceptional performer is often of little more benefit than the contri- bution of others who simply do what they are asked. In these cases, a per- formance appraisal system that creates competition among employees may actually harm the group’s overall performance. Employees are usually more satisfied with evaluation systems that compare them to standards rather than to other employees.14 Evaluating most employees as high performers encour- ages long-term employee relationships and a strong sense of loyalty.

Like organizations that use a Loyal Soldier HR strategy, organizations pur- suing a Bargain Laborer HR strategy are not concerned with identifying top performers. In this case, the reason is that these individuals are unlikely to stay employed with the organization for long periods. In addition, placing employees in different performance categories is time consuming and diffi- cult. For an organization requiring only that employees meet expectations, such classification may not be worth the effort.

Figure 8.1 Strategic Framework for Performance Management.

Bargain Laborer External/Cost HR Strategy

Free Agent External/Differentiation HR Strategy

Parity-Based Comparisons to Standards

Free Distribution

Merit-Based Comparisons to Other People

Forced Distribution

Loyal Soldier Internal/Cost HR Strategy

Committed Expert Internal/Differentiation HR Strategy

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What Is Performance? 299

In the simplest sense, job performance represents the contribution that indi- viduals make to the organization that employs them.

Figure 8.2 shows a diagram of important elements of job performance. At the top of the figure is a general performance factor that represents overall contribution to the organization. This general factor is important because all specific measures of job performance tend to be positively related, meaning that people who do well at one aspect of performance tend to do well at other aspects. Some people are simply better performers than oth- ers. Because they have positive traits, such as intelligence and motivation, these individuals excel no matter which aspect of performance is being measured.15

Under the general performance factor you will see three main perfor- mance dimensions: task, citizenship, and counterproductive performance. We examine each of these dimensions in the following sections.16

TASK PERFORMANCE Task performance is behavior that contributes directly to the production of goods or services. Some actions may be job-specific, as when a secretary

Job performance The contribution that individuals make to the organization that employs them.

General performance factor A broad factor of performance that represents an employee’s overall contribution to the organization.

Task performance Employee behavior that directly contributes to producing goods or services.

? CONCEPT CHECK 1. How does a merit-based performance system differ from a

parity-based performance system? 2. Which HR strategies best align with a merit-based system?

Which are best for a parity-based system?

What Is Performance?

LEARNING OBJECTIVE 2

Figure 8.2 Elements of Job Performance.

General Performance Factor

Task Performance

Citizenship Performance

Counterproductive Performance

Declarative Knowledge

Organizational Citizenship

Organizational: Production Deviance Property Deviance

Procedural Knowledge

and Skill

Interpersonal Citizenship

Interpersonal: Political Deviance Personal Aggression

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prepares a document, a home builder lays the foundation for a house, or a waiter fills beverage glasses. Administrative tasks, such as planning and del- egating, are important aspects of task performance for people working as managers.17 Other actions are less specific to a particular job and include things like following safety regulations, making decisions, and keeping the workspace clean.18 In order to perform tasks in most jobs, employees must also communicate with others by either writing or speaking.19

Because it represents behaviors that directly produce goods and services, task performance is the most obvious form of contribution to an organization. In most organizations, a very large proportion of employee effort is spent on task performance. The result is that supervisors see task performance as the most important contribution that an employee makes.20

When it comes to task performance, employees are most likely to make significant contributions when they have appropriate knowledge, skill, and motivation.21 They must first have declarative knowledge, which is an understanding of what needs to be done to perform certain tasks. For instance, declarative knowledge for a carpenter might include knowing that constructing a cabinet involves obtaining accurate measurements, cut- ting boards to appropriate lengths, and then fastening the boards together in the proper sequence. Employees must also have procedural knowledge and skill, which concerns the ability to perform the prescribed tasks. Thus, the carpenter must be able to measure accurately, make straight cuts with a power saw, and drive nails without damaging the wood. However, know- ing what to do and how to do it is not enough to ensure that the carpenter will actually build the cabinets. The third important factor is motivation. Employees show motivation when they choose to expend effort by engaging and persisting in production tasks. Motivation increases when workers feel supported by supervisors and coworkers, which in turn leads them to higher task performance.22

CITIZENSHIP PERFORMANCE Whereas task performance contributes by directly creating goods and ser- vices, citizenship behavior contributes by building a positive organizational environment. Citizenship performance is thus behavior that contributes to the social and psychological environment of the organization. Going beyond minimum expectations and helping out is seen as particularly beneficial when employees must work closely with each other to complete tasks.23 Common examples of citizenship behavior include volunteering to take on tasks that are not part of one’s job, following organizational procedures even when it is not convenient, and supporting and defending the organization.24 Willingly taking charge and initiating positive change also demonstrates citizenship performance.25 Work groups with higher levels of citizenship performance are more productive and profitable.26

Citizenship performance can be pursued to help either the organization as a whole or specific individuals. Things that are done to benefit the orga- nization are labeled organizational citizenship behavior. Employees engage in this type of performance when they do such things as protect the orga- nization’s property, give advance notice when unable to come to work, and follow informal rules that help maintain order. Another set of actions— labeled interpersonal citizenship behavior—has the effect of benefiting specific people. Such behaviors include taking time to listen to coworkers’

Declarative knowledge An employee’s understanding of the tasks that need to be done to perform job duties.

Procedural knowledge and skill Information and expertise that an employee needs to have in order to carry out specific actions.

Citizenship performance Employee behavior that helps others and creates a positive work environment.

Organizational citizenship behavior Positive employee actions aimed at helping the organization as a whole to succeed.

Interpersonal citizenship behavior Positive employee actions aimed at helping specific coworkers succeed.

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What Is Performance? 301

problems, passing along information to peers, and helping people who have been absent. Coworkers who are confident and who are the center of communication networks, which makes them popular among coworkers, are most likely to receive helping behavior.27

The distinction between organizational and interpersonal citizenship is important because the likelihood that employees will engage in helpful behavior differs depending on whether the behavior is intended to aid the overall organization or some individual. Employees engage in more organi- zational citizenship behavior when they feel that they receive reasonable pay, are praised for doing a good job, and have pleasant working conditions.28

Interpersonal citizenship behavior is more likely to occur when employees have close relationships with coworkers and supervisors.29 Thus, for example, employees who are unwilling to expend extra effort to help the organization may be willing to do extra things that benefit others whom they like.

Even though it may not be part of formal job requirements, citizenship performance represents a critical contribution to the organization. In fact, in many instances citizenship performance is what separates top performers from everyone else. Perhaps this is because citizenship performance primarily represents voluntary action. Given its voluntary nature, citizenship behavior depends not on specific knowledge and skills but on motivation. This means that employees with motivational personality traits such as dependability, cooperativeness, empathy, and being proactive are generally more likely to go beyond minimum expectations and help both the organization and other indi- viduals.30 Workers who feel they are treated fairly by their supervisors and the organization are also more likely to engage in citizenship behavior.31 The role of the leader is particularly critical, as citizenship performance often depends on the supervisor’s being seen as trustworthy and acting with integrity.32

Employees are most likely to engage in citizenship performance when they perceive a long-term work relationship,33 suggesting that citizenship contribu- tions are higher in organizations with Loyal Soldier and Committed Expert HR strategies. This makes sense because developing cooperation among workers is at the heart of these labor strategies.

COUNTERPRODUCTIVE PERFORMANCE In addition to engaging in helpful behavior, employees can consciously choose to engage in counterproductive performance. Specifically, counter- productive performance is voluntary behavior that harms the organization. Organizations whose employees engage in more counterproductive behavior have been found to have lower productivity.34 Interestingly, self-reports of counterproductive behavior are very similar to reports provided by others such as supervisors and coworkers.35 Moreover, although individuals who engage in counterproductive behavior are somewhat less likely to excel at citizenship performance, these two measures are not the two ends of a single dimension.36 An employee who contributes with high task and citizenship performance in some cases also causes harm by engaging in counterproduc- tive behavior.

Like citizenship performance, counterproductive behavior can be directed toward either the organization or specific individuals. Negative actions directed toward the organization include production and property devi- ance. Production deviance occurs when employees do things that reduce the speed and accuracy with which goods and services are produced. Employees

Counterproductive performance Employee behavior that is harmful to the organization.

Production deviance Harmful employee actions aimed at reducing the speed and accuracy of production processes.

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The process of measuring what each employee contributes, called performance appraisal, is a necessary but difficult part of managing others. Indeed, for many managers, performance appraisal is near the bottom of the list of things they want to do. Perhaps more troublesome is that a majority of workers say that performance reviews do nothing to improve their future effectiveness.43

What makes assessing performance so tough? One reason managers dislike

Performance appraisal The process of measuring what employees contribute to the organization.

frequently do this by taking unauthorized breaks, intentionally working slowly, and wasting company resources. Perhaps more serious is property deviance, which includes actions that destroy the assets of an organization. Employees who do this sabotage equipment, misuse expense accounts, or steal materials and products.37

Counterproductive behaviors can also be targeted toward specific individ- uals. These actions fall into the categories of political deviance and personal aggression. Political deviance occurs when an employee does things that put other employees at a disadvantage. Examples include showing favorit- ism, gossiping about coworkers, and competing with others in nonbeneficial ways. The more serious form of counterproductive behavior directed toward individuals is personal aggression, which is represented by hostile acts such as violence and sexual harassment.38 Employees working in groups lacking civility and respect are particularly prone to act aggressively.39

As described in the “Technology in HR” feature, organizations use a num- ber of tactics to reduce counterproductive behavior. Motivation that comes from a sense of being treated fairly is a very important factor influencing counterproductive performance. Employees are more prone to engage in counterproductive performance when they perceive that the organization treats them unfairly.40 Having a leader who is ethical, fair, and not abusive is a critical deterrent of counterproductive behavior.41 Thus, organizations and leaders can reduce counterproductive behavior by communicating an interest in the well-being of employees, providing developmental opportunities, and acting in an ethical manner themselves. In addition, employees who are more conscientious, more agreeable, higher in self-mastery, less anxious, and less driven by a desire to obtain rewards indulge in less counterproductive behav- ior, even when they do not feel support from the organization.42

Property deviance Harmful employee actions aimed at destroying assets of the organization.

Political deviance Harmful employee actions designed to harm the performance and careers of other employees.

Personal aggression Harmful employee actions that seek to personally harm coworkers.

? CONCEPT CHECK 1. What are three different types of performance that fall

directly under the general performance factor? 2. How is citizenship performance different from task

performance? 3. What are four types of counterproductive performance

behavior?

How Is Performance Measured?

LEARNING OBJECTIVE 3

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How Is Performance Measured? 303

MONITORING ELECTRONIC ACTIVITY Increased use of computers and other technology has the potential to make workers more productive. But it is also possible that workers will become less efficient if they use the technology in counterpro- ductive ways. The use of company computers for purposes other than work completion is sometimes referred to as cyberloafing, and it is not unusual. Over 60 percent of workers report surfing the Web at least once a day for personal purposes. Workers themselves report spending about 1.5 hours per week visiting websites unrelated to work, whereas human resource managers suggest the actual time is closer to 8 hours. Such problems have prompted as many as 76 percent of organizations to monitor employees’ Internet connections.

One way of monitoring employees’ computer usage is through the use of special software. The software is able not only to block access to websites but also to provide supervisors with reports list- ing the websites visited. Using such software can, however, communicate lack of trust. Research thus suggests that companies need to be careful when monitoring electronic activities.

Employees are more accepting of electronic monitoring when they are given advance notice that it will be used. Monitoring is also less threat- ening if employees feel general support from the organization. Using monitoring to show employees how they can improve rather than to wield punish- ment is one way to increase the acceptance of elec- tronic monitoring. On the whole, evidence suggests

that electronic monitoring can deter counterpro- ductive actions, but it is most effective when used in ways that do not violate employee perceptions of trust and fairness.

Sources: G. Stoney Alder, Terry W. Noel, and Maureen L. Ambrose, “Clarifying the Effects of Internet Monitoring on Job Attitudes: The Mediating Role of Employee Trust,” Information & Management 43 (2006): 894–903; Deborah L. Wells, Robert Moorman, and Jon M. Werner, “The Impact of the Perceived Purpose of Electronic Performance on an Array of Attitudinal Variables,” Human Resource Development Quarterly 18, no. 1 (2007): 121–138.

Technology in HR

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performance appraisal is the difficulty of capturing all areas of contribution. Employees contribute in a number of different ways, and it is often hard to accurately evaluate their efforts with a numerical score. Another reason is that many employees seem to feel that performance ratings are biased. They see the process as sometimes unfair. A starting point for thinking about performance measures is thus to consider ways evaluations can be inaccurate. After examin- ing general sources of inaccuracy in performance measures, we will explore various types of performance measures. We will also discuss problems that these specific measures have, and the formats—or specific types of questions— used to provide performance ratings.

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CONTAMINATION AND DEFICIENCY AS SOURCES OF INACCURACY Basic problems with performance appraisal are shown in Figure 8.3. One cir- cle in the figure represents the employee’s true contribution to the organi- zation. The other circle represents contribution as it is measured. Of course, the objective of performance appraisal is to have the two circles overlap as much as possible. However, two types of error often interfere with achieving this objective.

One error is contamination, which occurs when things that should not be measured are included in an employee’s performance evaluation. For instance, a supervisor who is racially biased might give lower ratings to an employee from a minority group. A measure of the number of computer circuits that an employee assembles might be contaminated if the employee must use machinery that frequently breaks down.

The second type of error is deficiency, which occurs when things that should be included in an employee’s performance evaluation are not mea- sured. A measure that fails to include citizenship behavior is deficient because it does not recognize actions that aid coworkers. A monthly measure of insur- ance sales might also be deficient if it fails to include an assessment of effort expended to build relationships that will result in future sales.

A good appraisal system minimizes contamination and deficiency. The concepts of deficiency and contamination can also help guide our assess- ment of different types of performance measures.

GENERAL TYPES OF PERFORMANCE MEASURES Organizations use a number of different methods for appraising perfor- mance. In general, performance appraisal methods vary in two important ways: whether they are subjective or objective and whether they focus on pro- cess or outcome.

Contamination A problem with performance appraisal that occurs when things that should not be included in the measurement are included.

Deficiency A problem with performance appraisal that occurs when things that should be included in the measurement are not included.

Figure 8.3 Sources of Inaccuracy in Performance Measurement.

Accurate Appraisal

Deficiency What should be

measured but is not

Contamination What is measured but

should not be

CONTRIBUTION TO ORGANIZATION

PERFORMANCE APPRAISAL MEASURE

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How Is Performance Measured? 305

Objective Versus Subjective Measures Beginning in elementary school, students encounter differences between objective and subjective measures of performance. Teachers grade math tests objectively by identifying how many of the problems were solved cor- rectly. Such objective performance measures are based on counts of either behavior or outcomes. In contrast, writing assignments are given subjec- tive grades that reflect the teacher’s evaluation of quality. These subjective performance measures are based on judgments from raters such as teachers and supervisors.

When it comes to job performance, objective and subjective measures often don’t agree.44 An important question thus concerns which type of mea- sure is best. Most people believe the answer is that objective measures are best. It is easy to see how raters could have biases that may reduce the accu- racy of subjective measures. For example, workers who have a more positive attitude receive higher evaluations from supervisors but do not generally perform better on objective measures.45 To many people, objective mea- sures thus seem more consistent and fair. However, objective measures also have problems. In the case of employees with a positive attitude, it may be that their cooperation with others represents a contribution that the objec- tive measure fails to capture. Indeed, subjective ratings have been shown to capture not only task performance but also citizenship performance,46 mak- ing them less deficient than objective measures in many contexts.

Another problem with objective measures can be seen in a common exam- ple involving employee productivity. Suppose a supervisor has two employ- ees working on a production line with two machines that manufacture cell phone components. One employee produces 20 components every hour. The other produces only 15. The objective indicator of performance suggests that the first employee contributes more to the organization. However, the supervisor may know that one production machine frequently breaks down. Knowing that the employee who only produces 15 components frequently stops to repair the machine may cause the supervisor to provide a higher subjective rating for that person. In such a case, the objective rating is defi- cient because it does not capture an important part of overall contribution: repairing the machine.

An example that is closer to home for most college students concerns grad- ing on an accounting exam. A purely objective measure will not give credit for a problem unless the final answer is correct. However, students often ask for and receive partial credit based on the grader’s judgment that certain parts of the problem were done correctly. The end result is a combination of objective and subjective measurement. The part of performance where the objective measure is deficient is captured in the subjective measure. In summary, then, objective measures are not necessarily foolproof. It is usually desirable for assessments of job performance to include both objective and subjective measures.

Outcome Versus Behavioral Measures Performance measures also differ in whether they focus on outcomes or behav- iors. Outcome measures assess end results such as number of automobiles repaired or success of an advertising campaign. Behavioral measures place more emphasis on the actions of employees. Typical behavioral measures

Objective performance measures Performance measures that are numerical and based on counts of behaviors or outcomes.

Subjective performance measures Performance measures that represent judgments made by raters.

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include following company procedures for reacting to customer complaints and using appropriate processes to move and store goods in a warehouse.

We can see some of the differences in outcome and behavioral measures by looking at organizations that employ sales representatives. One approach to managing sales representatives focuses on outcome measures. Organizations adopting this approach identify top performers as the individuals who sell the most products and services. Bottom-line results are most important, and methods of obtaining sales are not specifically evaluated as part of perfor- mance appraisal. This approach provides sales representatives with a great deal of autonomy. Individual representatives are expected to use their own knowledge and skills to determine the best way to meet the needs of indi- vidual customers.

A different approach to managing sales representatives focuses on behav- ioral measures. Organizations using this approach have preferred ways of interacting with customers and obtaining sales, and they provide sales repre- sentatives with very specific descriptions of appropriate selling behavior. Top performers simply carry out the actions specified by the organization. It is assumed that desirable outcomes will result when representatives engage in the desired actions. Following company procedures is thus emphasized more than simply making a high number of sales.

Outcome and behavioral measures can each suffer from deficiency and contamination, suggesting that both should be assessed in most situations. However, which type of measure dominates often depends on the organiza- tion’s competitive strategy. Organizations pursuing cost-focused strategies tend to have production processes that are clearly established. In these organi- zations, research and experience have determined the most efficient produc- tion methods, and the objective of low-cost production is best accomplished by having employees follow prescribed procedures. Behavioral measures are thus most often linked with Loyal Soldier and Bargain Laborer HR strategies.

In contrast, outcome measures are most common for organizations pur- suing Committed Expert and Free Agent HR strategies. These organizations rely on creativity and innovation. Optimal methods for producing goods and services are often unknown. High-performing employees are expected to use their unique knowledge and skills to produce the desired outcome of deliver- ing superior goods and services. In these cases, the outcome, or end result, is what matters most.

COMMON PROBLEMS WITH PERFORMANCE MEASURES Objective and subjective measures, as well as outcome and behavioral mea- sures, suffer from several potential problems. For subjective measures, bias can be introduced when humans provide ratings. People are not perfect information processors, and subjective ratings based on human judgments are often both contaminated and deficient. Objective and outcome measures are also imperfect, as they sometimes hold employees accountable for things they cannot control. Finally, all types of performance ratings can suffer from inconsistency, because performance at one point in time is likely different from performance at another time. We can thus identify the following com- mon problems with performance appraisal measures: rater errors and bias, situational influences, and changes over time.

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How Is Performance Measured? 307

Rater Errors Research suggests that raters commit a number of errors when they rate employee performance. Rating errors occur when raters provide assessments that follow an undesirable pattern or when the rater does not properly account for factors that might influence assessments. As explained in the “How Do We Know?” feature, some raters are more prone to errors than others. One common error involves the pattern of results that arises when a rater dislikes separating people into categories. This leads to central tendency error, which is the pattern of placing almost everyone in the middle of the scale.

Another common problem occurs when a rater unintentionally compares people with one another. Suppose a rater is evaluating three employees and one of them is an outstanding performer. Observing the high performer may raise the rater’s expectations so that he gives the other two employees low ratings even though their performance is above average. This type of error is called contrast error.

A different sort of error occurs when a rater bases an assessment on a gen- eral impression of an employee rather than on the employee’s specific contri- butions.47 Over an extended period, the rater observes a number of different behaviors and forms an overall judgment of the contribution of the employee. The rater may then judge specific aspects of performance—such as quality of work, quantity of work, and cooperation with others—in terms of this overall perception of the employee, rather than judging each aspect of performance separately. For instance, a rater may be quite accurate in identifying a truck driver as a good employee but may not really be aware of whether the driver is

Central tendency error A rating error that occurs when raters give almost all employees scores in the middle of the scale.

Contrast error A rating error that occurs when raters unknowingly allow comparisons among employees to influence ratings.

WHO IS MOST LIKELY TO PROVIDE ERROR-FREE RATINGS?

Do some people provide better performance measures than others? If so, who are the best rat- ers? Kok-Yee Ng, Christine Koh, Soon Any, Jeffrey Kennedy, and Kim-Yan Chan explored ratings in the Singapore Armed Forces to answer such questions.

Military officers received ratings from supervi- sors, peers, and subordinates. The ratings were then examined for differences in halo and leniency (giving everyone a high score). Subordinates were more likely than peers or superiors to provide rat- ings with halo and leniency, and peers were more likely than supervisors to demonstrate leniency. These errors for subordinates were most pro- nounced when the rater held stronger beliefs in the need for hierarchy and respect for authority.

Subordinates and peers with a stronger sense of harmony and avoiding embarrassing others were also more likely to provide lenient ratings.

The Bottom Line. Some raters are more prone to errors than others. In particular, subordi- nates and peers appear to provide ratings with error. The authors thus conclude that organizations need to ensure that raters are trained to reduce their idiosyncratic tendencies.

Source: Kok-Yee Ng, Christine Koh, Soon Ang, Jeffrey C. Kennedy, and Kim-Yin Chan, “Rating Leniency and Halo in Multisource Feedback Ratings: Testing Cultural Assumptions of Power Distance and Individualism– Collectivism,” Journal of Applied Psychology 96 (2011): 1033-1044.

How Do We Know?

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consistently on time with deliveries. When a rater provides similar ratings for all the different dimensions of performance based on a general impression, the result is halo error. As might be expected, some raters are more affected by halo error than others.

Yet another type of error is recency error, which arises when raters place too much emphasis on recent behaviors and outcomes. Here, an employee who demonstrated outstanding performance during most weeks of the per- formance period may receive a lower rating if performance was not as high during the week right before the ratings were obtained. It is easier for the rater to recall recent actions and outcomes, so the rater places greater empha- sis on more recent data.

A related but opposite problem, primacy error, occurs when a rater places too much emphasis on the behavior that is first observed. For example, a sales representative who loses an important account at the beginning of the year may be given a low rating even though her performance is excellent the rest of the year. In this case, the rater makes an initial judgment and fails to adequately account for later contributions that warrant an adjustment to the initial rating. Primacy can be particularly problematic when initial perfor- mance is very high, as raters don’t sufficiently adjust their ratings downward.48

Rater errors result in contamination and deficiency and are difficult to pre- vent. Rating accuracy can be improved somewhat by making raters aware of the kinds of errors that can arise. Various rating formats, which are discussed below, can also be used to reduce errors. But the most effective method for increasing rating accuracy is to help raters develop a consistent view of what represents good and bad performance.49 This approach, often labeled frame-of-reference training, provides instruction and practice to help raters see different performance episodes in the same way.

An example of effective rater training for restaurant managers might go as follows. A group of raters meet to discuss descriptions of performance for a hostess in a restaurant. At the beginning of the training, one rater believes that a hostess who smiles and greets customers in a pleasant manner should be rated 4 on a 5-point scale. Another rater thinks that really connecting with the customer is important and that being pleasant and smiling represents only a 3 on the scale. Other raters have other views. The raters then discuss various aspects of performance until they arrive at a common frame of reference—an agreement on what constitutes each level of performance. This is beneficial because it makes ratings more consistent. The process also makes individual raters more aware of the behaviors and outcomes they are assessing and tends to result in appraisals that more accurately reflect actual contribution.

Rater Bias Substantial problems occur when rater errors operate in such a way that people with certain characteristics are consistently rated lower than others. Consistently providing lower ratings to people with certain characteristics is known as rater bias.

A frequently asked question is whether raters give lower ratings to employees who are members of minority groups. The simple answer is yes. Ratings tend to differ depending on the race of the person being rated.50 The reasons for these differences are, however, difficult to determine. One possible explanation is that raters give higher ratings to employees whose race is the same as theirs, but the available data do not support this simple explanation.51 The pattern is more complex. White raters sometimes give higher ratings to white employees.

Halo error A rating error that occurs when raters allow a general impression to influence ratings on specific dimensions of performance.

Recency error A rating error that occurs when raters place too much emphasis on performance observed right before the measure is taken.

Primacy error A rating error that occurs when raters place too much emphasis on performance observed at the beginning of the measurement period.

Frame-of-reference training Training that focuses on building consistency in the way different raters observe and evaluate employee behaviors and outcomes.

Rater bias Bias that occurs when a rater unfairly provides lower ratings to certain groups of people, such as women and minorities.

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How Is Performance Measured? 309

Black raters tend to give higher ratings to everyone.52 Differences in ratings for racial groups are also greater in some occupations than others. For example, ratings for members of racial groups differ more for technical plant operations than for service or healthcare jobs.53 The reasons behind these racial differ- ences are unclear. However, it is not all rater bias, as racial differences are also observed for objective performance measures.54 More research is needed to better understand the role of race in performance management.

Performance ratings can also vary for men and women. Women tend to receive lower ratings in jobs done mostly by men, such as construction.55 Here, stereotypes about who should perform the job seem to sway rater evaluations. Citizenship performance also has different effects for men and women. When women engage in citizenship behavior by helping others, their performance ratings don’t necessarily improve as a result, but their ratings go down when they withhold help. In contrast, men don’t get lower ratings when they with- hold help, but they get higher ratings when they engage in citizenship behav- ior. The likely explanation is stereotyping. Raters assume that women should be more helpful and cooperative than men. Women are punished when they don’t behave in accordance with the stereotype.

Ratings thus may be biased because of both race and sex. One way to over- come bias is simply to make raters aware of it. Another solution is to ask raters to generate lists of instances where they have observed both positive and nega- tive behaviors, and then review the list before completing ratings. Writing lists of each type of behavior seems to reduce unconscious bias from negative ste- reotypes.56 Obtaining ratings from multiple sources, since it is unlikely that all the raters will have the same prejudices, is also helpful for reducing the negative impact of rater biases.

Situational Influences Table 8.1 lists some common situational influences that can either facilitate or inhibit performance outcomes.57 To understand such influences, suppose you have been given the task of mowing the grass at an exclusive golf resort. Strong thunderstorms roll in every day for a week and prevent you from being able to mow. At the end of the week, your supervisor, who has been away at a golf tournament, calls you and asks why the lawn has not been mowed as

Table 8.1 Situational Factors Influencing Performance

1. Job-Related Information—Rules, Policies, Informal Procedures

2. Tools and Equipment—Machinery and Instruments

3. Materials and Supplies—Ingredients and Components

4. Budgetary Support—Financial Resources

5. Required Services and Help from Others

6. Task Preparation—Education and Training from Organization

7. Time Availability—Interruptions and Alternative Obligations

8. Work Environment—Noise, Temperature, Space, Lighting

Source: Information from Lawrence H. Peters and Edward J. O’Connor, “Situational Constraints and Work Outcomes: The Influences of a Frequently Overlooked Construct,” Academy of Management Review 5 (1980): 391–397.

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requested. Of course, your answer is that the thunderstorms prevented you from completing your assigned work tasks. The thunderstorms are an exam- ple of situational influences, which are factors outside the control of workers that influence performance.

In the golf example, it is fairly easy to identify the situational influence that led to lower work performance. Situational factors are not always so easy to identify, but certain factors are fairly common. Another common situational factor is the actions of other people such as coworkers.58 Clearly, these situ- ational factors can influence the contribution an employee makes to the organization.

Research suggests that subjective ratings are frequently contaminated and deficient because raters fail to account for situational influences.59 However, it is at least possible for raters to adjust subjective evaluations to control for situ- ational factors.60 Situational influences present a greater problem for objective, outcome-oriented performance measures.61 Factors outside the control of the employee often influence production, which is the primary basis for outcome- oriented measures. For instance, one study found great variation in the amount of sales dollars taken in each week by sales representatives. Changes from week to week were largely explained by the number of referrals that the sales repre- sentative received from the central office at the beginning of the week. In this case, the measure of sales income is contaminated by the number of referrals.62

Although it is impossible to identify all possible situational influences, a few steps can be taken to minimize the biases they create. First, raters can be trained to take situational influences into account. Second, consistent biases, such as difficulty of a sales territory, can be identified and assessed to get a clearer picture of their impact on objective, outcome-oriented mea- sures. Finally, a variety of different measures can be used. Combining infor- mation from a number of different measures reduces the contamination present in any single measure.

Changes over Time Another problem with measurement is that performance may not be consis- tent across time. A commonly identified source of variation in behaviors and outcomes at various points in time is difference in motivation. For example, an incentive such as a special bonus may motivate employees to achieve high per- formance for a short period. Measuring this short-term achievement may result in an assessment that is quite different from an assessment that reflects typical performance on most days.63 Changes in performance may also follow specific patterns of increasing or decreasing contribution.64 The most common pattern for someone new to a job is a period of rapidly increasing performance followed by a fairly stable plateau.65 Not everyone follows the same pattern, however. Performance for people with certain characteristics, such as conscientiousness, tends to increase more rapidly than the performance of others.66

Unfortunately, differences in performance across time have the potential to decrease the accuracy of the appraisal process, which causes problems in other areas of human resource management. For instance, a number of research- ers have suggested that changes in performance across time may reduce the effectiveness of selection measures.67 This might occur if cognitive ability is critical for high performance in early stages of the job, but conscientiousness is more critical once the job tasks have been mastered. The benefits of hiring people with high cognitive ability might go away after people have been on

Situational influences Factors that affect performance but that are outside the control of the employee being rated.

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How Is Performance Measured? 311

the job for a certain period of time. In this case, using performance measures taken soon after someone begins a job may result in the organization’s not having a good idea about who performs well over time, which in turn may result in hiring the wrong type of employee. Another example involves using appraisal results to determine training needs. Poor decisions about training may be made if the performance measure fails to capture aspects of perfor- mance that change over time.

How can organizations deal with appraisal issues related to variability of performance over time? Some evidence shows that supervisor ratings can account for variance over time by capturing trends, suggesting that subjective assessments may present a somewhat acceptable approach.68 A specific solu- tion to the time problem is to obtain performance measures at many differ- ent points in time. Another possibility is to use a measure that reflects what is most important to the organization. For some tasks, such as working on an assembly line, typical performance may be most relevant. For other tasks, such as developing a marketing plan, maximum performance may be more important. The key is to base the timing of performance measurement on the nature of the desired contribution.

RATING FORMATS Rating format concerns the type of instrument used to obtain ratings. Several different formats, most of which are probably familiar to you, exist for assessing performance. Each of the formats has strengths and weak- nesses, and no method is always better than the others. The key to a suc- cessful appraisal is to choose the format that best accomplishes the purpose of the appraisal.

Narrative Ratings One format is the narrative rating. Organizations that use narrative ratings ask supervisors or other raters to simply provide a written description of per- formance. You have experienced such a rating if a professor has written a note evaluating a paper you have turned in. A benefit of narrative ratings is that they can be tailored to describe specific, and perhaps unique, aspects of per- formance. A stock analyst may have a specific set of goals and circumstances that does not apply to other analysts. In this case, the narrative rating allows the analyst’s supervisor to make comments and evaluations that apply only to that analyst. Such comments can also be very helpful for improving future performance.

Personalized ratings can, however, create problems when it comes to comparing the performance of different individuals. The lack of consistent measurement makes it difficult to determine which employees are high and low performers, which in turn creates problems for training and compensa- tion. Narrative ratings are thus best for providing feedback in organizations where decisions related to training, promotions, and compensation are not based on comparisons with other employees.

Graphic Ratings Perhaps the most common rating format uses graphic scales. With graphic ratings, raters are asked to provide a numerical rating for a number of differ- ent dimensions of work performance.

Narrative ratings A rating format that asks raters to provide a written description of an employee’s performance.

Graphic ratings A rating format that asks raters to provide a numerical score for an employee on each of several dimensions of performance.

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312 Chapter 8 Measuring Performance and Providing Feedback

Graphical ratings can be designed to measure either outcomes or behav- iors. Common dimensions of performance include quality of output, quantity of output, cooperation with others, and skill development. For each perfor- mance dimension, the rater is asked to place the employee in a specific rating category. Most scales have between three and seven rating categories, each represented by a number. For example, a scale with three categories may include a rating of 1 for unsatisfactory performance, 2 for average perfor- mance, and 3 for outstanding performance.

One benefit of graphic ratings is that all employees are rated on a com- mon set of dimensions, which makes it easy to compare employees with one another. A problem is that some performance dimensions may not apply to some employees. Raters who use graphical scales are also prone to rater errors, as described earlier. In many cases, raters who use graphical ratings end up giving most employees a similar score—the central tendency error. This tendency to rate people similarly makes graphical ratings best suited for organizations that are pursuing cost-reduction strategies and encouraging employee parity. Figure 8.4 shows an example of a graphic rating scale.

Forced Rankings Another rating format is forced ranking, which occurs when a rater is required to rank all employees. For example, an office manager might be asked to rank the office’s five secretaries in order from highest performer to lowest per- former. A class ranking in which all students are ordered from highest GPA to lowest GPA is another example of such a measure.

The forced ranking technique eliminates central tendency error and pro- vides clear guidance for organizations that want to give promotions and pay raises to top performers. Many supervisors are uncomfortable with rankings, however, because a high proportion of their employees perform at essentially the same level. Forced ranking formats are thus best for organizations that encourage competition among employees, which makes them most suitable for organizations that use merit-based performance management to pursue differentiation strategies.

Forced ranking A rating format that asks raters to directly compare the contribution of an employee with the contribution of other employees.

Figure 8.4 Graphic Rating Scale.

Quality of Work Performed

Quantity of Work Performed

Timeliness of Completing Work

Cooperation with Others

Innovation and Creativity

1

1

1

1

1

2

2

2

2

2

3

3

3

3

3

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4

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Un sa

tis fac

tor y

M ar

gin al

Sa tis

fac tor

y

Go od

Ou tst

an din

g

Worker’s Name ___________________

Directions: Please circle the number that you feel best describes this worker’s performance for each work dimension.

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Who Should Measure Performance? 313

Forced Distributions A rating format that combines the graphic rating with the forced rating is a forced distribution. As mentioned earlier, this format requires that a certain percentage of employees be placed in each rating category. A supervisor of computer programmers, for instance, may be required to rate 50 percent of them as average, 30 percent as outstanding, and 20 percent as unsatisfactory. Raters tend not to like forced distributions because they perceive them as less fair and more difficult to complete.69 Yet, this format represents a compro- mise between the graphical format, which allows everyone to receive the same ranking, and the forced ranking format, which requires a different score for each person being rated. Because they encourage competition, forced distri- bution formats emphasize merit and are most suitable for organizations pur- suing differentiation strategies.

? CONCEPT CHECK 1. How do contamination and deficiency affect performance

ratings? 2. What is the difference between objective and subjective mea-

sures? How do outcome and behavioral measures differ? 3. What are three common problems that affect performance

ratings? 4. What are the strengths and weaknesses of various rating

formats?

Who Should Measure Performance?

LEARNING OBJECTIVE 4

Students’ performance is usually measured by a professor. What would hap- pen if students rated their own performance? Would their grades be higher than the grades given by the professor? What about having other members of the class determine each student’s grade? Would that be fair? Would every- one’s grade be the same? If students received ratings from the professor, other students, and themselves, how similar would those different types of ratings be? These are important issues related to who should carry out performance appraisals. As you will see, it’s a good idea to have more than one source of performance measurement.

MULTISOURCE PERFORMANCE RATINGS Just as grades usually come from professors, employee ratings usually come from supervisors. Most organizations place the primary responsibility for managing employees with supervisors, making performance appraisal one of their most important tasks. In a majority of cases, this makes sense, because supervisors are in a good position to evaluate what tasks need to be done,

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314 Chapter 8 Measuring Performance and Providing Feedback

whether the employee is performing the right tasks, and how well the tasks are being performed. However, a supervisor may not see the complete picture, and supervisors have biases that can unfairly influence the ratings. In other words, ratings from supervisors suffer from both deficiency and contamina- tion. Gathering information and ratings from multiple sources is thus a key to effective performance appraisal.

The process of obtaining performance ratings from multiple sources is known as multisource ratings, or sometimes as 360-degree appraisal, based on the notion that a completed circle has 360 degrees. multisource performance ratings seek to evaluate performance by obtaining information from multiple raters who have different perspectives. Figure 8.5 shows a typical 360-degree rating approach. Ratings are usually obtained not only from supervisors but also from coworkers and the employees themselves. If the person being rated is a supervisor, ratings are also obtained from the subordinates he or she super- vises. Some organizations obtain ratings from customers and suppliers as well. As discussed in the accompanying “How Do We Know?” feature, multisource ratings are more commonly adopted in countries such as Denmark and Israel, where hierarchy and power differences between people are minimized.

In summary, ratings from multiple sources give a more complete picture of performance and usually provide better guidance about what the employee can do to improve.70 These benefits can be enhanced by having the various raters meet together and discuss their evaluations.71 Employees also report higher satisfaction with the performance management process when multi- source ratings are used.72

RATING SOURCE DIFFERENCES One concern about multisource ratings is that the measures from different sources often do not agree.73 In particular, researchers have found that self- assessments tend to differ from ratings provided by others.74 In some cases,

Multisource performance ratings Performance ratings obtained from a variety of raters such as customers, coworkers, supervisors, and self.

Figure 8.5 360-Degree Performance Appraisal. This is an example of multisource performance ratings.

Self-Appraisal

Supervisor Appraisal

Subordinate Appraisal

Peer Appraisal

Customer Appraisal

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Who Should Measure Performance? 315

particularly in cultures that value modesty, self-ratings can be lower than rat- ings by others.75 But in most cases, self-ratings are higher than ratings pro- vided by supervisors and peers.76 Interestingly, self-ratings are still high but more similar to ratings provided by others for women, as well as for employees who are younger, less experienced, more educated, and white. Part of this effect occurs because experienced, nonwhite men seem to overrate their own performance more than others. In addition, ratings from others tend to be lower for people who are older and less educated, contributing to a larger difference between self-ratings and ratings from others for older, less- educated employees.77 These issues reflect potential biases in self-ratings. Another problem is that people with lower performance are the very ones who are less accurate in their self-appraisals. Lack of perception that keeps some employees from performing well also makes them less accurate in their self-assessments.78

IS PERFORMANCE MANAGEMENT THE SAME AROUND THE WORLD? Are methods of managing employee performance the same everywhere? Are companies located in different countries likely to have the same pro- cesses? Do these processes have the same effect on outcomes such as employee attendance and turnover? Hilla Peretz and Yizhak Fried sought to answer these questions by exploring the perfor- mance management practices with two samples of companies. One set of responses came from 5,991 organizations located in 21 different countries, and the other sample came from 4,878 organizations located in 16 countries.

The most senior human resource manager in each company was asked to complete a question- naire focused on issues such as whether a for- mal performance management system was being used, what percentage of employees was evalu- ated, the number of raters who provided ratings, and whether the appraisal was used to make deci- sions about individuals (e.g., compensation deci- sions) or the broader organization (e.g., broad training needs). Managers also provided ratings of annual turnover and absenteeism. These rat- ings were then linked to data that captured differ- ences in country culture such as power distance (acceptance of inequality and hierarchy), future orientation (planning and delayed gratification),

individualism/collectivism (individual rights verses group loyalty), and uncertainty avoidance (desire for predictability and rules).

The desire for planning and control results in greater use of formal performance assessments in countries with higher future orientation and uncertainty avoidance. Companies are most likely to use multisource ratings when they are located in countries with lower power distance, higher future orientation, and a greater sense of individual- ism. Moreover, multisource ratings help decrease absenteeism and turnover when operating in these countries.

The Bottom Line. Societal culture practices influence how companies manage the perfor- mance of employees. Practices are not the same around the world, and companies with practices more congruent with the culture of their coun- tries reported lower absenteeism and turnover. Professors Peretz and Fried thus conclude that human resource practices should be aligned with broader cultural and strategic objectives.

Source: Hilla Peretz and Yitzhak Fried, “National Cultures, Performance Appraisal Practices, and Organizational Absenteeism and Turnover: A Study Across 21 Countries,” Journal of Applied Psychology 97 (2012): 448-459.

How Do We Know?

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316 Chapter 8 Measuring Performance and Providing Feedback

Self-ratings and ratings from others differ for several reasons. One rea- son is that people generally have a self-serving bias—that is, they want to see themselves in the best possible light. People may also rate themselves higher because they have more opportunities than anyone else to observe their own work contributions. Finally, there may be disagreement over standards.79 For this reason, self-ratings and ratings from others become more similar when organizations establish clear standards to describe high performance and when the employees being rated have more knowledge about the perfor- mance appraisal system.80 Perceptions of performance also tend to be more similar when the person being rated and the other rater are both highly con- scientious. This similarity may arise because both raters focus mostly on task contributions, leading to increased objectivity.81

Whereas self-ratings and ratings from others often differ, ratings from peers and supervisors tend to be quite similar.82 The one exception occurs when the person being rated performs very poorly; peer ratings in this case are not as low as ratings from supervisors.83 Evidently, many peers are not willing to give low ratings to people with whom they work closely, even when those people might deserve low ratings. Regardless of whether peer ratings are consistent with supervisor ratings, simply obtaining peer ratings can be beneficial. In workgroups that use peer ratings, group members have better relationships with each other and focus more on task completion.84

Even though ratings from supervisors and peers are similar, they are not identical, suggesting that perceptions of performance may not always be consistent. Indeed, even assessments from raters representing the same source—such as ratings from a number of different peers—tend to disagree somewhat.85 Furthermore, ratings from any individual are likely to suffer from various biases, as explained earlier. Fortunately, many of the biases of one rater can be offset by different biases of another rater. Each of the ratings can focus on a somewhat different aspect of performance and thereby provide unique information about how well an employee is performing.86 Obtaining ratings from multiple sources and raters thus provides the best picture of over- all contribution to the organization.

? CONCEPT CHECK 1. Who usually provides evaluations for multisource perfor-

mance ratings? 2. How are self-ratings of performance different from ratings

provided by others?

How Should Feedback Be Provided?

LEARNING OBJECTIVE 5

Effective performance management requires more than simply measuring employee contributions. If such measurements are to result in improved performance, employees must receive information about how well they are

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How Should Feedback Be Provided? 317

performing. That is, they must be given feedback. Trying to improve per- formance without feedback can be highly frustrating. Just imagine taking an algebra test and never finding out which problems you solved correctly. You might become aggravated and unwilling to continue working problems. You would also be unlikely to get much better at algebra until you learned what you might be doing wrong. In the same way, employees who do not receive feed- back tend to become dissatisfied and perform at suboptimal levels. Feedback is thus desired by most employees. In fact, the accompanying “Technology in HR” feature describes how many younger employees are using Twitter and Facebook to ask for feedback.

Several hundred studies have examined the effect of feedback on per- formance and have found that people who receive feedback generally per- form better than people who do not. Before discussing specific ways to make feedback more effective, it is thus important to note that feedback can have a lasting positive influence on performance. Effective feedback reduces perceptions of negative workplace politics and thereby increases worker morale.87 Improvement from feedback is greatest when the person receiv- ing the information feedback perceives a real need to change and believes that he or she has the skill and ability to do what is needed to perform at a higher level.88 Formal feedback meetings, usually held once or twice a year, provide a setting for communicating these matters. Much of the ben- efit of feedback comes from two-way discussions between supervisors and employees that is created during feedback meetings. Employees who meet with their evaluators gain more from feedback than do employees who are only given written appraisals.89 However, in some cases, receiving feedback actually decreases performance.90 It is thus important to pay attention to how feedback is provided.

Feedback Information given to employees to communicate how well they are performing.

FEEDBACK THROUGH TWITTER AND FACEBOOK Many employees do not want to wait until their formal performance appraisal interview to receive feedback. They get this information in real time from the people in their online networks. For example, after making a presentation, an employee may tweet to ask others in the room how he or she did. The immediate response from friends is often helpful for improving future behavior. Of course, the accuracy of the feedback depends on who receives the initial tweet and how willing they are to be honest with the presenter.

Wiki technology provides another mechanism for receiving feedback. A manager posts feedback and then allows others to add their perceptions.

Some employees might be uncomfortable receiv- ing feedback in such a public way, but online dis- cussion can open communication channels.

For years managers and trainers have wondered about ways to provide employees with more ongo- ing feedback. Although social networking sites such as Twitter and Facebook were not developed for this specific purpose, they do provide an easy means for providing rapid, ongoing information. Of course, businesses are also developing dedi- cated software that can be tailored to the specific task of providing employees with feedback.

Source: Pat Galagan, “Dude, How’d I Do?” T+D 63, no. 7 (2009): 26.

Technology in HR

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318 Chapter 8 Measuring Performance and Providing Feedback

PROVIDING POSITIVE AND NEGATIVE FEEDBACK The “Building Strength Through HR” feature illustrates benefits from provid- ing feedback. Of course, feedback can be classified as either positive or nega- tive. Messages communicating high performance convey positive feedback. A sales representative who exceeds her sales quota receives positive feedback when her supervisor congratulates her for doing so well. Messages communi- cating low performance and a need to improve convey negative feedback. A parts assembler receives negative feedback when a supervisor tells him that one-half of the components he produced failed the quality test.

The model shown in Figure 8.6 explains how positive and negative feed- back relate to motivation. Positive feedback leads to higher motivation when it is linked by employees and supervisors with ongoing expectations for contin- ued high performance. Positive feedback, then, creates a sense of accomplish- ment that encourages sustained effort as long as employees have goals that provide them with the opportunity to further excel.

Positive feedback Information that communicates things that an employee is doing well.

Negative feedback Information that communicates things an employee needs to change in order to improve.

Building Strength Through HR

WHIRLPOOL CORPORATION Whirlpool Corporation is an international manu- facturer of household appliances that employs 71,000 people and has annual sales over $18 billion. Performance management is an important part of the overall effort to increase productivity at Whirlpool. A number of years ago, the company streamlined its performance management process to help manag- ers save time. Most feedback was provided through email exchanges. Unfortunately, the streamlined pro- cess was ineffective. Whirlpool thus revised its feed- back process to include more face-to-face interaction. Specific features of the new appraisal and feedback process include the following:

Managers are required to meet with each employee at least four times during the year to discuss performance and provide feedback. Employees write personal objectives that they share with supervisors. At least one objective must focus on a stretch goal for exceptional performance. Managers now spend a significant amount of time coaching and developing employees, which organizational leaders identify as the true role of a manager.

Sources: Bill Stopper, “Innovation at Whirlpool: Embedment and Sustainability,” Human Resource Planning 29, no. 3 (2006): 28; Erin White, “For Relevance, Firms Revamp Worker Reviews,” Wall Street Journal, July 17, 2006, p. B1; CEC Council, CIO 23, no. 6 (2010).

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How Should Feedback Be Provided? 319

The influence of negative feedback on performance is somewhat less clear. Employees who perceive negative feedback as criticism become less motivated and more likely to experience conflict with others.91 The basic problem is that people become defensive when they hear that they are not performing as well as expected. As shown in Figure 8.6, the initial reac- tion of employees who have received negative feedback is to increase their effort. But they will continue to put forth greater effort only if they expe- rience success or believe that success is likely. In other words, negative feedback only improves performance when people are confident that they can do what is necessary to improve.92 Building confidence and helping people see that they have the skills necessary to improve is therefore one important consideration in making sure that negative feedback improves performance.

EFFECTIVELY COMMUNICATING METHODS FOR IMPROVEMENT Of course feedback is helpful only if it results in employees doing things dif- ferently. Feedback should thus be communicated in ways that increase the likelihood that employees will actually change their behavior. People are most likely to accept and act on feedback when they perceive that it is accurate, suggesting that the person giving the feedback must be seen as credible.93 The first key to effectively communicating feedback is thus to build a relationship

Figure 8.6 Effects of Positive and Negative Feedback. Source: Information from Avraham N. Kluger and Angelo DeNisi, “The Effects of Feedback Interventions on Performance: A Historical Review, A Meta-Analysis, and a Preliminary Feedback Intervention Theory,” Psychological Bulletin 119(1996): 254–284.

Yes

No

Yes

No

Positive

Feedback

Negative

Perception of Personal

Capability?

Increased Motivation

Decreased Motivation

Increased Motivation

Decreased Motivation

Continuous Improvement

Goal?

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320 Chapter 8 Measuring Performance and Providing Feedback

so that the receiver has confidence in the supervisor’s ability to provide help- ful advice. Employees who feel that their leader cares about them and looks out for their best interests are more likely to seek out and respond to nega- tive feedback.94 Feedback is also improved when supervisors clarify the behav- iors they are looking for when they evaluate employees,95 suggesting that it is useful for supervisors to provide clear descriptions of specific behaviors they hope to observe. For example, a sales supervisor who wants an employee to be more proactive in preparing for meetings with clients might describe spe- cific behaviors, such as gathering relevant sales figures and preparing poten- tial responses to clients’ excuses for not making a purchase. Supervisors also communicate effectively when they continue to build relationships by treating employees as individuals and taking into account personal circumstances. In the end, then, feedback is more likely to be accepted when the person giving it has a good relationship with the receiver and when the message is clear enough that the receiver knows exactly what to do to improve.96 Table 8.2 provides several keys for successfully communicating feedback.

The importance of providing clear direction is captured in the principle of feedback specificity, which concerns the level of detail in the message. Specific feedback provides detailed descriptions of actions and outcomes and is good for communicating what someone has done to achieve success. In addition, specific feedback facilitates quick learning of skills when the skills are clearly defined and carried out in environments that do not change.97

Providing a very detailed description of the optimal steps for bolting a bum- per on a car is an example. Carefully describing each and every detail is help- ful because the process has been thoroughly studied and optimal methods of performance have been identified. Furthermore, bolting car bumpers onto cars is a process that doesn’t vary much from environment to environment.

Specific feedback is not always optimal, however. Less-specific feedback encourages people to explore and try alternative methods for accomplishing tasks. In some cases, giving very specific feedback can inhibit learning. An exam- ple might involve giving specific feedback about how to operate a properly func- tioning machine. The feedback is helpful as long as the machine operates as it should. However, the specific feedback may inhibit the machine operator from exploring different methods of interacting with the machine. This may prevent the operator from learning more about how the machine operates.98

We can conclude, then, that specific feedback is best for communicating how to do clearly defined tasks that do not change. However, specific feedback

Feedback specificity The level of detail in communication, which can range from broad information about overall performance to specific information about certain actions.

Table 8.2 Conducting Appraisal Interviews

1. Place the employee at ease with small talk.

2. Allow the employee to share his or her perspective before you share yours.

3. Be positive and use action-oriented behavioral terms.

4. Use specific and measurable expressions.

5. Avoid comparing the employee to yourself or others.

6. Balance negatives with positives; start with a positive.

7. Spend time planning for improvement.

Source: Information from David Javitch, “Appraising Employee Performance,” Management Services 50, no. 3 (2006): 19–20.

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How Should Feedback Be Provided? 321

may discourage employees from learning that extends beyond knowing how to follow prescribed procedures. To improve performance in such instances, it may be better to provide feedback that is not so specific that it suggests that there is only one best way of doing something.

Another factor that influences whether someone benefits from feedback is the extent to which the receiver can do what is necessary to improve. Feedback is more likely to be accepted when it focuses on things that an individual can actually change.99 Focusing on factors outside the control of the employee increases frustration and does not provide a path for improving future per- formance. A store clerk who receives negative feedback because of low sales figures during a snow storm, for example, is left with a sense of confusion and little guidance for how to improve future performance. Supervisors are thus most effective when they separate out situational influences and communi- cate about issues the employee can control.

REDUCING NEGATIVE EMOTIONAL RESPONSES Think of a time when you received a very poor grade on an assignment or exam. What was your initial reaction? Were you angry? Disappointed? Did you feel like a failure? Perhaps you wanted to quit trying. Were you upset with the professor who wrote and graded the exam? Did you commit yourself to work harder and make sure you received a better grade the next time?

People who receive feedback, particularly negative feedback, experience a wide range of emotions. These emotions have a lot to do with the effect of feedback on performance. Feedback that is channeled through positive emo- tions generally improves performance, whereas feedback that is channeled through negative emotions often causes performance to become worse.100

Negative emotions such as fear, anger, sadness, and guilt harm perfor- mance because they focus attention away from future tasks. Feedback is thus most likely to lead to better performance when it is presented in ways that do not bring out negative emotions.101 Effective leaders who have good relation- ships with employees are able to give feedback that doesn’t make recipients feel negative.102 Ideas for presenting feedback in ways that reduce negative emotion are shown in Table 8.3.

Positive emotions that accompany feedback generally focus on learning and skill development. In addition, feedback that specifically teaches new skills can be effective for showing employees what they can do to improve future performance.103 Organizations that develop a culture of providing ongoing feedback that emphasizes improvement rather than criticism are thus most effective in communicating methods for enhancing performance.104

Table 8.3 Giving Employee Feedback

1. Focus comments on the task rather than the person.

2. Combine feedback with goals for improvement.

3. Describe behaviors in an unemotional manner.

4. Focus on what is observed rather than underlying causes.

5. Remain nonjudgmental.

6. Provide clear examples to support points.

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322 Chapter 8 Measuring Performance and Providing Feedback

Individuals who approach life with an orientation toward learning and improving themselves benefit most from receiving feedback.105 People with positive self-concepts are also more likely to react positively to feedback. When employees have a strong sense of self-worth and confidence in their abilities, they generally perceive negative feedback as intended to improve performance rather than to criticize and tear down.106 Hiring skilled workers who have a desire to continuously improve is thus one way to ensure success- ful performance management.

BUILDING HIGH EXPECTATIONS One interesting aspect of feedback is its potential to communicate high expectations. Performance often rises to the level of expectations that leaders have for their followers. The effect by which high expectations lead to better performance is often labeled the Pygmalion effect. A number of studies have shown that the Pygmalion effect operates in work organizations where high expectations translate into improved job performance.107 Supervisors who perceive their employees as having exceptional ability communicate greater confidence, which in turn raises the employees’ performance.108 Supervisors can therefore improve their feedback by clearly communicating high expecta- tions for future performance. How do supervisors communicate high expec- tations? By telling employees that they have confidence in their abilities and by providing models so that employees can see that others have succeeded.109

Pygmalion effect A process whereby performance increases when leaders have high expectations about the skills and capabilities of followers.

? CONCEPT CHECK 1. What are keys to effectively giving positive feedback? How

should negative feedback be given? 2. What can be done to reduce negative emotional reactions to

feedback?

IN THE MANAGER’S PERSPECTIVE THAT OPENED THE CHAPTER, TYRONE WAS CONCERNED ABOUT PERFORMANCE RATINGS AND FEEDBACK. HE WONDERED WHETHER HIS RATINGS WERE ACCURATE, AND HE FELT ANXIOUS ABOUT THE NEED TO COMMUNICATE LOW RATINGS TO SOME EMPLOYEES. FOLLOWING ARE THE ANSWERS TO THE “WHAT DO YOU THINK?” QUIZ THAT FOLLOWED THE MANAGER’S PERSPECTIVE. WERE YOU ABLE TO CORRECTLY IDENTIFY THE TRUE STATEMENTS? CAN YOU DO BETTER NOW ?

A M A N A G E R ’ S P E R S P E C T I V E R E V I S I T E D d

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Summary 323

1. Employee rating systems are of no value unless at

least some employees receive low ratings. FALSE. Parity-based rating systems are helpful for organiza-

tions with strategies that do not benefit from identify-

ing differences among employees whose performance

is adequate.

2. When completing performance ratings, it is best to

focus only on whether an employee completes tasks

and not on how well he or she works with others.

FALSE. Citizenship performance and counterproductive performance are important aspects of contribution that

should be reflected in ratings.

3. Objective measures of performance, which are rep-

resented by things that can be counted, are bet-

ter than subjective measures such as supervisor

judgments. FALSE. Like subjective measures, objec- tive measures can suffer from contamination and

deficiency.

4. Self-ratings of performance are usually higher than rat-

ings provided by others. TRUE. Because of self-serving biases, people usually give themselves ratings that are

higher than the ratings others give them.

5. Employee performance increases when supervisors

communicate high expectations. TRUE. Performance in organizational settings is higher when leaders believe

employees are capable and communicate their high

expectations to the employees.

Although conducting performance appraisals is a difficult task,

Tyrone’s effort is likely to pay off. Tyrone should take into

account all aspects of performance. Given his need to improve

store performance, he should also differentiate employees so

that the individuals who are not performing at an adequate

level can be identified. As explained in this chapter, carefully

appraising performance and giving feedback to employees are

key methods for improving organizational productivity.

Merit-based systems use relative measures and forced distributions to recognize high performance. Because they encourage competition and stretch goals to foster innovation and high quality, merit- based systems are usually adopted in organizations that pursue either Free Agent or Committed Expert HR strategies. Parity-based systems incorporate absolute measures and free distributions to encour- age cooperation. These systems are usually less costly and can recognize most employees as high performers, which aligns them most closely with Bargain Laborer and Loyal Soldier HR strategies.

SUMMARY

How is performance management strategic?

LEARNING OBJECTIVE 1

What is performance?

LEARNING OBJECTIVE 2

Job performance represents the contribution individuals make to an organization. Most spe- cific measures of job performance are related to one another and combine to create a general performance factor that represents overall con- tribution to the organization. Task performance, citizenship performance, and counterproductive performance represent three main dimensions of the general performance factor. Task perfor- mance contributes to the actual production of goods and services. Employees who excel at task performance need both declarative knowledge

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324 Chapter 8 Measuring Performance and Providing Feedback

Performance ratings should be obtained from mul- tiple sources. An example of an effective measure- ment of this sort is the multisource performance rating, which includes information not only from supervisors but also from coworkers, subordinates, customers, and employees themselves. Each of these sources can provide information about dif- ferent aspects of an employee’s contribution to the organization.

(an understanding of what needs to be done) and procedural knowledge and skill (the ability to perform the necessary actions). Citizenship performance contributes to the social and psy- chological environment of the organization. Organizational citizenship behavior benefits the entire organization, whereas interpersonal citizen- ship behavior is directed toward specific individu- als. Counterproductive performance harms the organization. Production and property deviance are forms of counterproductive performance directed toward the entire organization. Political deviance and personal aggression are forms of counterproductive performance that are directed toward specific individuals.

How is performance measured?

LEARNING OBJECTIVE 3

How should feedback be provided?

LEARNING OBJECTIVE 5

Who should measure performance?

LEARNING OBJECTIVE 4

The goal of performance appraisal is accurate por- trayal of each employee’s contribution to an orga- nization. Appraisal measures that measure things unrelated to contribution suffer from contamina- tion. Measures that fail to capture things that do relate to contribution suffer from deficiency.

Organizations use a variety of methods to appraise performance. Objective performance measures are based on counts of behaviors and outcomes, while subjective measures are based on judgments from raters. Outcome measures focus on end results, whereas behavior measures assess employees’ actions. Each type of measure may suf- fer from contamination and deficiency.

Performance ratings suffer from a number of problems. Raters may commit various errors, including central tendency error, contrast error, halo error, recency error, and primacy error. Rating errors that result in consistently lower scores for people with certain characteristics suf- fer from rater bias. Objective ratings are particu- larly susceptible to situational influences, which are factors outside the control of employees. In addition, performance frequently changes across time, so an assessment at a given time may not accurately reflect overall performance. Various

Feedback provides information to employees so that they know how well they are performing. Feedback is most effective when the employee receiving it perceives a need to change and believes in his or her ability to do what is needed for improvement. Positive feedback increases performance when it is linked to goals for continued improvement. Negative feedback increases performance when the individuals receiving the feedback are confident in their abilities. Specific feedback is good for commu- nicating how to accomplish well-defined tasks. However, providing very specific feedback can stifle learning and exploration. Feedback should be presented in a way that reduces negative emotions. An organization can nurture positive emotions by developing a culture of ongoing feedback that encourages continuous learning and development. Leaders can also improve performance by communicating high expecta- tions for followers.

rating formats have strengths and weaknesses. Because of these problems, organizations tend to adopt a combination of measures that operate together to provide a more accurate picture of overall contribution.

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Discussion Questions 325

Absolute measures 297 Central tendency error 307 Citizenship performance 300 Contamination 304 Contrast error 307 Counterproductive performance 301 Declarative knowledge 300 Deficiency 304 Feedback 317 Feedback specificity 320 Forced distribution 297 Forced ranking 312 Frame-of-reference training 308 Free distribution 297 General performance factor 299 Graphic ratings 311 Halo error 308 Interpersonal citizenship behavior 300 Job performance 299 Merit-based system 296 Multisource performance ratings 314

Narrative ratings 311 Negative feedback 318 Objective performance measures 305 Organizational citizenship behavior 300 Parity-based system 297 Performance appraisal 302 Performance management 294 Personal aggression 302 Political deviance 302 Positive feedback 318 Primacy error 308 Procedural knowledge and skill 300 Production deviance 301 Property deviance 302 Pygmalion effect 322 Rater bias 308 Recency error 308 Relative measures 296 Situational influences 310 Subjective performance measures 305 Task performance 299

KEY TERMS

1. Would you prefer working under a merit-based or parity-based performance management system?

2. How do you think employees might react to a change from a parity system to a merit system? How about a change from a merit system to a parity system?

3. Which do you think is most important: task performance, citizenship performance, or counterproductive performance? Why?

4. Have you ever observed an employee with high task performance but low citizenship performance? If so, describe that situation. If not, describe a scenario in which you think such performance might occur.

5. Why do you think instances of counterproduc- tive performance are rising? What do you think should be done to decrease counterproductive

performance? Is teaching ethics in manage- ment classes a good solution?

6. What are typical sources of contamination and deficiency in objective measures of job performance?

7. What are some situational influences that affect your performance as a student? Would it be fair for professors to take into account situ- ational influences when assigning grades?

8. What factors might explain differences between coworker and supervisor ratings?

9. How do you react to negative feedback? What might you do to help yourself and others ben- efit more from negative feedback?

10. Why do we treat people we think have high ability differently from people we think have low ability?

DISCUSSION QUESTIONS

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326 Chapter 8 Measuring Performance and Providing Feedback

EXAMPLE CASE Medical Center

This healthcare organization provides a wide array of services including inpa- tient services, transitional care services, and outpatient treatment and testing.

A few years ago, the facility changed its performance appraisal methodol- ogy. It shifted from a subjective performance appraisal system to a more objec- tive rating system that focused on the actions and behaviors of the employee. This shift can be considered a good move because the use of behavior-based scales tends to overcome evaluation errors that plague more subjective evalua- tions. Employee evaluations in this organization were performed once a year.

The performance appraisal system was instituted in this healthcare organi- zation as a four-step process:

Step 1: The employee performs a self-appraisal first by completing an appraisal sheet and then submitting it to his or her supervisor. Employees generally welcome use of self-appraisal, and it tends to decrease defensive- ness about the process.

Step 2: The supervisor then responds to the same questions the employee had previously answered based on his or her perceptions and observations of the employee’s performance.

Step 3: Finally, the supervisor and employee meet and discuss the ratings on the evaluation.

Step 4: The results of the evaluation are intended to then be used as a guiding tool to determine the annual raise of the employee.

The questions in the performance evaluation questionnaire were divided into two sections. The first section was based on the overall organizational standards that had been set for the entire hospital. Areas addressed in this section include professionalism, efficiency, quality of work, respect, and ser- vice. Every employee, full-time and part-time, has to complete this section of the performance appraisal. The second section of the appraisal consisted of various competencies for each individual position. These competencies were specific to the tasks required to fulfill the duties of the individual in their respective positions. The competencies, varying greatly from position to posi- tion, were based strictly on duties required for that position. This is impor- tant, as having similarly situated employees evaluated on like criteria improves the consistency of the appraisal process.

In this healthcare organization, both the employee and the supervisor were instructed on the evaluation instrument to rate the employee on each of the areas on the following scale:

0 = Not Applicable 1 = Does Not Meet Expectations 2 = Meets Expectations 3 = Exceeds Expectations

This system was implemented to improve performance appraisals and make them more objective. The use of the same evaluation form throughout the organization improved the consistency in the evaluation process.

The healthcare organization also used some guidelines regarding what should be done if an employee obtained a certain score. Here is a brief

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Discussion Case 327

description of the organization’s policies. If the person being rated received a mark of 1 or 3, then documentation had to be provided to justify that rating. Also, if the employee was given a rating of 1 by the supervisor, then some method of learning was to be designed to help the employee to achieve a level of meeting expectations. Following this, the employee was to be reevaluated in this area and was required to demonstrate abilities to meet expectations.

QUESTIONS 1. Do you think the new system is really more objective? 2. Why do you think the organization requires documentation for certain

ratings? 3. What strengths do you see in the new system? What weaknesses do you see

in the process?

Source: Ashish Chandra and Zachary D. Frank, “Utilization of Performance Appraisal Systems in Health Care Organizations and Improvement Strategies for Supervisors,” The Health Care Manager 23, no. 1 (2004): 25–40. [Used with permission.]

DISCUSSION CASE Reliable Underwriters

Reliable Underwriters is a risk management firm that provides insurance ser- vices to large organizations. Part of its operation is a claims-processing cen- ter that employs 156 clerical workers. These workers interact with clients to answer questions and provide information about the status of claims. Reliable has a corporate objective of obtaining the highest possible customer satisfac- tion ratings. However, recent customer satisfaction surveys suggest that some of the clerical workers are not adequately meeting clients’ needs.

As part of an initiative to increase customer satisfaction, the management team of the claims processing center has decided to change the performance appraisal process. In the past, ratings have been made on a 5-point scale. A score of 5 represented outstanding performance, a score of 1 represented unacceptable performance, and a score of 3 represented average performance. Last year, 135 employees received a score of 4. Only 3 received a score of 5, and only 2 received the lowest rating. Since almost everyone receives the same rat- ing, employees in the claims-processing center have little concern about being evaluated. For the most part, they see performance appraisal simply as a nui- sance. However, the newly proposed process will create major changes.

The main change will be the use of a forced distribution. Each supervisor must rate at least 20 percent of employees as outstanding and at least 10 per- cent as unacceptable. This forced distribution is expected to clearly identify top performers. Low performers will also be identified and encouraged to either improve or seek employment elsewhere.

QUESTIONS 1. Do you predict that the forced distribution will increase customer satisfac-

tion? Why or why not? 2. Which clerical workers do you think will most strongly oppose the change? 3. How do you think supervisors will react to the proposed change? 4. What problems with contamination and deficiency could occur with the

forced distribution ratings?

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328 Chapter 8 Measuring Performance and Providing Feedback

ENDNOTES 1. Robert Rodgers and John E. Hunter, “Impact of

Management by Objectives on Organizational Productivity,” Journal of Applied Psychology 76 (1991): 323–336.

2. Roger C. Mayer and James H. Davis, “The Effect of Performance Appraisal System on Trust for Management: A Field Quasi-Experiment,” Journal of Applied Psychology 84 (1999): 123–136.

3. Brian D. Cawley, Lisa M. Keeping, and Paul E. Levy, “Participation in the Performance Appraisal Process and Employee Reactions: A Meta-Analytic Review of Field Investigations,” Journal of Applied Psychology 83 (1998): 615–633.

4. Geoffrey Colvin, “What Makes GE Great,” Fortune 153, Issue 4 (2006): 90–96.

5. Ann Pomeroy, “CEO of GE Values People, HR,” HR Magazine 52 (2007): 12.

6. Betsy Morris and Geoffrey Colvin, “The GE Mystique,” Fortune 153, Issue 4 (2006): 98–102.

7. Jena McGregor, “The Struggle to Measure Performance,” BusinessWeek 3966, January 9, 2006, 26–28.

8. Diane Brady, “Secrets of an HR Superstar: On the Eve of Retiring, GE’s Bill Conaty Offers Tips on Nurturing Leaders in Your Organization,” BusinessWeek, April 9, 2007, 66.

9. Steven Kerr and Steffen Landauer, “Using Stretch Goals to Promote Organizational Performance and

Visit an Internet site containing performance data for professional athletes. Examples include the following:

National Football League: www.nfl.com/stats Major League Baseball: http://sports.espn. go.com/mlb/statistics National Hockey League: www.nhl.com/ice/ statshome.htm#?navid=nav-sts-main National Basketball Association: www.nba.com/ statistics

Examine the statistics for individual players and teams, and answer the following questions.

1. How are these measures of performance defi- cient and contaminated?

2. Do the statistical measures capture behaviors or outcomes?

3. What statistics might you add to measure citi- zenship performance?

4. Choose five players and look at their statis- tics across multiple years. How stable is their performance?

5. Does high individual performance equate with high team performance? Can you identify individual players with good personal statistics whose teams are unsuccessful?

EXPERIENTIAL EXERCISE Assessing Performance in Sports

Access the companion website to test your knowledge by completing a Global Telecommunications interactive role-playing exercise. In this exercise it is performance appraisal time for Global Telecommu- nications. In the past, the company has had problems with several manag- ers who have either failed to complete appraisals of their employees, failed to distinguish among employees in any meaningful way, or failed to evalu- ate the appropriate information. The company has asked you to modify its appraisal program and to train managers on the benefits and techniques of good performance management programs. In particular, top management wants you to help the company better achieve its Committed Expert HR strategy. How will you modify the program and gain the needed buy-in from individual managers?

INTERACTIVE EXPERIENTIAL EXERCISE

Performance Appraisal: Delivering Positive and Negative Feedback at Global Telecommunications http://www.wiley.com/college/sc/stewart

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Endnotes 329

Personal Growth: General Electric and Goldman Sachs,” Academy of Management Executive 18 (2004): 134–138.

10. Thomas D. Cairns, “Talent Management at Homeland Security: A Corporate Model Suggests a Recipe for Success,” Employee Relations Today, Fall 2009, 19–26.

11. McGregor, “The Struggle to Measure Performance.” 12. Peter Bamberger and Ilan Meshoulam, Human

Resource Strategy: Formulation, Implementation, and Impact (Thousand Oaks, CA: Sage, 2000).

13. Don A. Moore and William M.P. Klein, “Use of Absolute and Comparative Performance Feedback in Absolute and Comparative Judgments and Decisions,” Organizational Behavior and Human Decision Processes 107 (2008): 60–74.

14. Stephen M. Garcia and Avishalom Tor, “Rankings, Standards, and Competition: Task vs. Scale Comparisons,” Organizational Behavior and Human Decision Processes 102 (2007): 95–108.

15. Chockalingam Viswesvaran, Frank L. Schmidt, and Deniz S. Ones, “Is There a General Factor in Ratings of Job Performance? A Meta-Analytic Framework for Disentangling Substantive and Error Influences,” Journal of Applied Psychology 90 (2005): 108–131.

16. Maria Rotundo and Paul R. Sackett, “The Relative Importance of Task, Citizenship, and Counterproductive Performance to Global Ratings of Job Performance: A Policy-Capturing Approach,” Journal of Applied Psychology 87 (2002): 66–80; Stephen J. Motowidlo and James R. Van Scotter, “Evidence that Task Performance Should Be Distinguished from Contextual Performance,” Journal of Applied Psychology 79 (1994): 475–480.

17. Steven E. Scullen, Michael K. Mount, and Timothy A. Judge, “Evidence of the Construct Validity of Developmental Ratings of Managerial Performance,” Journal of Applied Psychology 88 (2003): 50–66.

18. John P. Campbell, Rodney A. McCloy, Scott H. Oppler, and Christopher E. Sager, “A Theory of Performance,” in Personnel Selection in Organizations, ed. Neal Schmitt, Walter C. Borman, and Associates, 35–70 (San Francisco: Jossey-Bass, 1993); Motowidlo and Van Scotter, “Evidence That Task Performance.”

19. Jeff W. Johnson, “The Relative Importance of Task and Contextual Performance Dimensions to Supervisor Judgments of Overall Performance,” Journal of Applied Psychology 86 (2001): 984–996.

20. Walter C. Borman, Leonard A. White, and David W. Dorsey, “Effects of Ratee Task Performance and Interpersonal Factors on Supervisor and Peer Performance Ratings,” Journal of Applied Psychology 80 (1995): 168–177; Rotundo and Sackett, “The Relative Importance of Task.”

21. Rodney A. McCloy, John P. Campbell, and Robert Cudeck, “A Confirmatory Test of a Model of Performance Determinants,” Journal of Applied Psychology 79 (1994): 493–505.

22. Laura Rhoades Shanock and Robert Eisenberger, “When Supervisors Feel Supported: Relationships with Subordinates’ Perceived Supervisor Support, Perceived Organizational Support, and Performance,” Journal of

Applied Psychology 91 (2006): 689–695; Dishan Kamdar and Linn Van Dyne, “The Joint Effects of Personality and Workplace Social Exchange Relationships in Predicting Task Performance and Citizenship Behavior,” Journal of Applied Psychology 92 (2007): 1286–1298.

23. Daniel G. Bachrach, Benjamin C. Powell, Elliot Bendoly, and R. Glenn Richey, “Organizational Citizenship Behavior and Performance Evaluations: Exploring the Impact of Task Interdependence,” Journal of Applied Psychology 91 (2006): 193–201.

24. Motowidlo and Van Scotter, “Evidence that Task Performance.”

25. Henry Moon, Dishan Kamdar, David M. Mayer, and Riki Takeuchi, “Me or We? The Role of Personality and Justice as Other-Centered Antecedents to Innovative Citizenship Behaviors Within Organizations,” Journal of Applied Psychology 93 (2008): 84–94.

26. Nathan P. Podsakoff, Steven W. Whiting, Philip M. Podsakoff, and Brian D. Blume, “Individual- and Organizational-Level Consequences of Organizational Citizenship Behaviors: A Meta-Analysis,” Journal of Applied Psychology 94 (2009): 122–141.

27. Brent A. Scott and Timothy A. Judge, “The Popularity Contest at Work: Who Wins, Why, and What Do They Receive?” Journal of Applied Psychology 94 (2009): 20–33.

28. Larry J. Williams and Stella E. Anderson, “Job Satisfaction and Organizational Commitment as Predictors of Organizational Citizenship and In-Role Behaviors,” Journal of Management 17 (1991): 601–617.

29. Wm. Matthew Bowler and Daniel J. Brass, “Relational Correlates of Interpersonal Citizenship Behavior: A Social Network Perspective,” Journal of Applied Psychology 91(2006): 70–82; Remus Ilies, Jennifer D. Nahrgang, and Frederick P. Morgeson, “Leader- Member Exchange and Citizenship Behaviors: A Meta-Analysis,” Journal of Applied Psychology 92 (2007): 269–277; Vijaya Venkataramani and Reeshad S. Dalal, “Who Helps and Harms Whom? Relational Antecedents of Interpersonal Helping and Harming in Organizations,” Journal of Applied Psychology 92 (2007): 952–966.

30. Remus Ilies, Brent A. Scott, and Timothy A. Judge, “The Interactive Effects of Personal Traits and Experienced States on Intraindividual Patterns of Citizenship Behavior,” Academy of Management Journal 49 (2006): 561–575; Randall Settoon and Kevin W. Mossholder, “Relationship Quality and Relationship Context as Antecedents of Person and Task-Focused Interpersonal Citizenship Behavior,” Journal of Applied Psychology 87(2002): 255–267; Motowidlo and Van Scotter, “Evidence That Task Performance.”

31. Dishan Kamdar, Daniel J. McAllister, and Daniel B. Turban, “All in a Day’s Work: How Follower Individual Differences and Justice Perceptions Predict OCB Role Definitions and Behavior,” Journal of Applied Psychology 91 (2006): 841–855; Brian J. Hoffman, Carrie A. Blair, Hohn P. Meriac, and David J. Woehr, “Expanding the Criterion Domain? A

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330 Chapter 8 Measuring Performance and Providing Feedback

Quantitative Review of the OCB Literature,” Journal of Applied Psychology 92 (2007): 555–566.

32. Brian R. Dineen, Roy J. Lewicki, and Edward C. Tomlinson, “Supervisory Guidance and Behavioral Integrity: Relationships with Employee Citizenship and Deviant Behavior,” Journal of Applied Psychology 91 (2006): 622–635; Adam Grant and John J. Sumanth, “Mission Possible? The Performance of Prosocially Motivated Employees Depends on Manager Trustworthiness,” Journal of Applied Psychology 94 (2009): 927–944.

33. Jeff Joireman, Dishan Kamdar, Denise Daniels, and Blythe Duell, “Good Citizens to the End? It Depends: Empathy and Concern with Future Consequences Moderate the Impact of a Short-Term Time Horizon on Organizational Citizenship Behaviors,” Journal of Applied Psychology 91 (2006): 1307–1320.

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36. Reeshad S. Dalal, “A Meta-Analysis of the Relationship Between Organizational Citizenship Behavior and Counterproductive Work Behavior,” Journal of Applied Psychology 90 (2005): 1241–1255.

37. Sandra L. Robinson and Rebecca J. Bennett, “A Typology of Deviant Workplace Behaviors: A Multidimensional Scaling Study,” Academy of Management Journal 38 (1995): 555–572.

38. Ibid. 39. M. Sandy Hershcovis, Nick Turner, Julian Barling, Kara

A. Arnold, Kathryne E. Dupre, Michelle Inness, Manon Mireille LeBlanc, and Nior Sivanathan, “Predicting Workplace Aggression: A Meta-Analysis,” Journal of Applied Psychology 92 (2007): 228–238.

40. Timothy A. Judge, Brent A. Scott, and Remus Ilies, “Hostility, Job Attitudes, and Workplace Deviance: Test of a Multilevel Model,” Journal of Applied Psychology 91 (2006): 126–138; Yochi Cohen-Charash and Jennifer S. Mueller, “Does Perceived Unfairness Exacerbate or Mitigate Interpersonal Counterproductive Work Behaviors Related to Envy?” Journal of Applied Psychology 92 (2007): 666–680.

41. Michael E. Brown and Linda K. Trevino, “Socialized Charismatic Leadership, Values Congruence, and Deviance in Work Groups,” Journal of Applied Psychology 91 (2006): 954–962; Brian R. Dineen, Roy J. Lewicki, and Edward C. Tomlinson, “Supervisory Guidance and Behavioral Integrity: Relationships with Employee Citizenship and Deviant Behavior,” Journal of Applied Psychology 91 (2006): 622–635; Marie S. Mitchell and Maureen L. Ambrose, “Abusive Supervision and Workplace Deviance and the Moderating Effects of Negative Reciprocity Beliefs,”

Journal of Applied Psychology 92 (2007): 1159–1168; Bennett J. Tepper, Jon C. Carr, Denise M. Breaux, Sharon Geider, Changya Hu, and Wei Hua, “Abusive Supervision, Intentions to Quit, and Employees’ Workplace Deviance: A Power/Dependence Analysis,” Organizational Behavior and Human Decision Processes 109 (2009): 156–167.

42. Amy E. Colbert, Michael K. Mount, James K. Harter, L.A. Witt, and Murray R. Barrick, “Interactive Effects of Personality and Perceptions of the Work Situation on Workplace Deviance,” Journal of Applied Psychology 89 (2004): 599–609; James M. Diefendorff and Kajal Mehta, “The Relations of Motivational Traits with Workplace Deviance,” Journal of Applied Psychology 92 (2007): 967–997; Christopher M. Berry, Deniz S. Ones, and Paul R. Sackett, “Interpersonal Deviance, Organizational Deviance, and Their Common Correlates: A Review and Meta-Analysis,” Journal of Applied Psychology 92 (2007): 410–424.

43. Adrienne Fox, “Curing What Ails Performance Appraisal,” HR Magazine 54, no. 1, 52.

44. William H. Bommer, Jonathan L. Johnson, Gregory A. Rich, Philip M. Podsakoff, and Scott B. MacKenzie, “On the Interchangeability of Objective and Subjective Measures of Employee Performance: A Meta-Analysis,” Personnel Psychology 48 (1995): 587–605.

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47. Ian Dennis, “Halo Effects in Grading Student Projects,” Journal of Applied Psychology 92 (2007): 1169–1176.

48. Todd J. Thorsteinson, Jennifer Breier, Anna Atwell, Catherine Hamilton, and Monica Privette, “Anchoring Effects on Performance Judgments,” Organizational Behavior and Human Decision Processes 107 (2008): 29–40.

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50. Joseph M. Staugger and Ronald M. Buckley, “The Existence and Nature of Racial Bias in Supervisory Ratings,” Journal of Applied Psychology 90 (2005): 586–591.

51. Paul R. Sackett and Cathy L. DuBois, “Rater–Ratee Race Effects on Performance Evaluation: Challenging Meta-Analytic Conclusions,” Journal of Applied Psychology 76 (1991): 873–877.

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Endnotes 331

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53. David A. Waldman and Bruce J. Avolio, “Race Effects in Performance Evaluations: Controlling for Ability, Education, and Experience,” Journal of Applied Psychology 76 (1991): 897–901.

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55. Paul R. Sackett, Cathy L. DuBois, and Ann W. Noe, “Tokenism in Performance Evaluation: The Effects of Work Group Representation on Male–Female and White–Black Differences in Performance Ratings,” Journal of Applied Psychology 76 (1991): 263–267.

56. Boris B. Baltes, Cara B. Bauer, and Peter A. Frensch, “Does a Structured Free Recall Intervention Reduce the Effect of Stereotypes on Performance Ratings and by What Mechanism?” Journal of Applied Psychology 92 (2007): 151–164.

57. Lawrence H. Peters and Edward J. O’Connor, “Situational Constraints and Work Outcomes: The Influences of a Frequently Overlooked Construct,” Academy of Management Review 5 (1980): 391–397.

58. Greg L. Stewart and Amit Nandkeolyar, “Exploring How Constraints Created by Other People Influence Intraindividual Variation in Objective Performance Measures,” Journal of Applied Psychology 92 (2007): 1149–1158.

59. Robert L. Cardy and Gregory H. Dobbins, Performance Appraisal: Alternative Perspectives (Cincinnati, OH: South-Western, 1994).

60. Erich C. Dierdorff and Eric A. Surface, “Placing Peer Ratings in Context: Systematic Influences Beyond Ratee Performance,” Personnel Psychology 60 (2007): 93–126.

61. Michael C. Sturman, Robin A. Charamie, and Luke H. Cashen, “The Impact of Job Complexity and Performance Measurement on the Temporal Consistency, Stability, and Test-Retest Reliability of Employee Performance Ratings,” Journal of Applied Psychology 90 (2005): 269–283.

62. Greg L. Stewart and Amit K. Nandkeolyar, “Adaptation and Intraindividual Variation in Sales Outcomes: Exploring the Interactive Effects of Personality and Environmental Opportunity,” Personnel Psychology 59 (2006): 307–332.

63. Paul R. Sackett, Sheldon Zedeck, and L. Folgi, “Relations Between Measures of Typical and Maximum Performance,” Journal of Applied Psychology 73 (1988): 482–486.

64. David A. Hofmann, Rick Jacobs, and Steve J. Gerras, “Mapping Individual Performance over Time,” Journal of Applied Psychology 77 (1992): 185–195.

65. Robert E. Ployhart and Milton D. Hakel, “The Substantive Nature of Performance Variability: Predicting Interindividual Differences in Intraindividual Performance,” Personnel Psychology 51

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66. Carl J. Thoresen, Jill C. Bradley, Paul D. Bliese, and Joseph D. Thoresen, “The Big Five Personality Traits and Individual Job Performance Growth Trajectories in Maintenance and Transitional Job Stages,” Journal of Applied Psychology 89 (2004): 835–853.

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72. Nihal Mamatoglu, “Effects on Organizational Context (Culture and Climate) from Implementing a 360-Degree Feedback System: The Case of Arcelik,” European Journal of Work and Organizational Psychology 17 (2008): 426–449.

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74. M. M. Harris and J. Schaubroeck, “A Meta-Analysis of Self–Boss, Self–Peer, and Peer–Boss Ratings,” Personnel Psychology 41 (1988): 43–62.

75. Jing-Lih Farh, Gregory H. Dobbins, and Bor-Shiuan Cheng, “Cultural Relativity in Action: A Comparison of Self-Ratings,” Personnel Psychology 44 (1991): 129–148.

76. Jiayuan Yu and Kevin R. Murphy, “Modesty Bias in Self-Ratings of Performance: A Test of the Cultural Relativity Hypothesis,” Personnel Psychology 46 (1993): 357–364; Heike Heidemeier and Klaus Moser, “Self– Other Agreement in Job Performance Ratings: A Meta- Analytic Test of a Process Model,” Journal of Applied Psychology 94 (2009): 353–370.

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77. Cheri Ostroff, Leanne E. Atwater, and Barbara Feinberg, “Understanding Self–Other Agreement: A Look at Rater and Ratee Characteristics, Context, and Outcomes,” Personnel Psychology 57 (2004): 333–375; Manuel London and Arthur J. Wohlers, “Agreement Between Subordinate and Self-Ratings of Upward Feedback,” Personnel Psychology 44 (1991): 375–391.

78. Joyce Ehrlinger, Kerri Johnson, Matthew Banner, David Dunning, and Justin Kruger, “Why the Unskilled Are Unaware: Further Explorations of (Absent) Self-Insight Among the Incompetent,” Organizational Behavior and Human Decision Processes 105 (2008): 98–121.

79. Gordon W. Cheung, “Multifaceted Conceptions of Self- Other Ratings Disagreement,” Personnel Psychology 52 (1999): 1–36.

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81. David Antonioni and Heejoon Park, “The Effects of Personality Similarity on Peer Ratings of Contextual Work Behaviors,” Personnel Psychology 54 (2001): 331–360.

82. Todd J. Mauer, Nambury S. Raju, and William C. Collins, “Peer and Subordinate Performance Appraisal Measurement Equivalence,” Journal of Applied Psychology 83 (1998): 693–702.

83. Paul W.B. Atkins and Robert E. Wood, “Self- Versus Others’ Ratings as Predictors of Assessment Center Ratings: Validation Evidence for 360-Degree Feedback Programs,” Personnel Psychology 55 (2002): 871–905.

84. Vanessa Urch Druskat and Steven B. Wolff, “Effects and Timing of Developmental Peer Appraisals in Self- Managing Work Groups,” Journal of Applied Psychology 84 (1999): 58–74.

85. Mount, Judge, Scullen, Sytsma, and Hezlett, “Trait, Rater and Level Effects in 360-Degree Performance Ratings.”

86. Leanne E. Atwater, Cheri Ostroff, Francis J. Yammarino, and John W. Fleenor, “Self–Other Agreement: Does It Really Matter?” Personnel Psychology 51 (1998): 577–599.

87. Christopher C. Rosen, Paul E. Levy, and Rosalie J. Hall, “Placing Perceptions of Politics in the Context of the Feedback Environment, Employee Attitudes, and Job Performance,” Journal of Applied Psychology 91 (2006): 211–220.

88. James W. Smither, Manuel London, and Richard Reilly, “Does Performance Improve Following Multisource Feedback? A Theoretical Model, Meta-analysis, and Review of Empirical Findings,” Personnel Psychology 58 (2005): 33–66.

89. Alan G. Walker and James W. Smither, “A Five-Year Study of Upward Feedback: What Managers Do with Their Results Matters,”Personnel Psychology 52 (1999): 393–423.

90. Avraham N. Kluger and Angelo DeNisi, “The Effects of Feedback Interventions on Performance: A Historical Review, a Meta-Analysis, and a Preliminary Feedback Intervention Theory,” Psychological Bulletin 119 (1996): 254–284.

91. Robert A. Baron, “Countering the Effects of Destructive Criticism: The Relative Efficacy of Four Interventions,” Journal of Applied Psychology 75 (1990): 235–245.

92. Adam P. Tolli and Aaron M. Schmidt, “The Role of Feedback, Causal Attribution, and Self-Efficacy in Goal Revision,” Journal of Applied Psychology 93 (2008): 692–701; AnJanette A. Nease, Brad O. Mudgett, and Miguel A. Quinones, “Relationships Among Feedback Sign, Self-Efficacy, and Acceptance of Performance Feedback,” Journal of Applied Psychology 84(1999): 806–814.

93. Angelo J. Kinicki, Gregory E. Prussia, Bin (Joshua) Wu, and Frances M. McKee-Ryan, “A Covariance Structure Analysis of Employees’ Response to Performance Feedback,” Journal of Applied Psychology 89 (2004): 1057–1069.

94. Ziguang Chen, Wing Lam, and Jian An Zhong, “Leader– Member Exchange and Member Performance: A New Look at Individual-Level Negative Feedback-Seeking Behavior and Team-Level Empowerment Climate,” Journal of Applied Psychology 92 (2007): 202–212.

95. R. Blake Jelley and Richard D. Goffin, “Can Performance-Feedback Accuracy Be Improved? Effects of Rater Priming and Rating-Scale Format on Rating Accuracy,” Journal of Applied Psychology 86 (2001): 134–144.

96. Wing Lam, Xu Huang, and Ed Snape, “Feedback- Seeking Behavior and Leader–Member Exchange: Do Supervisor-Attributed Motives Matter?” Academy of Management Journal 50 (2007): 348–363.

97. Jodi S. Goodman, Robert E. Wood, and Margaretha Hendrickx, “Feedback Specificity, Exploration, and Learning,” Journal of Applied Psychology 89 (2004): 248–262.

98. Jodi S. Goodman and Robert E. Wood, “Feedback Specificity, Learning Opportunities, and Learning,” Journal of Applied Psychology 89 (2004): 809–821.

99. Joseph J. Martocchio and James Dulebohn, “Performance Feedback Effects in Training: The Role of Perceived Controllability,” Personnel Psychology 47 (1994): 357–373.

100. Remus Ilies and Timothy A. Judge, “Goal Regulation Across Time: The Effects of Feedback and Affect,” Journal of Applied Psychology 90 (2005): 453–467; Simon S.K. Lam, Michelle S. Yik, and John Schaubroeck, “Responses to Formal Performance Appraisal Feedback: The Role of Negative Affectivity,” Journal of Applied Psychology 87 (2002): 192–201.

101. Steven P. Brown, Robert A. Westbrook, and Goutam Challagalla, “Good Cope, Bad Cope: Adaptive and Maladaptive Coping Strategies Following a Critical Negative Work Event,” Journal of Applied Psychology 90 (2005): 792–798.

102. Don VandeWalle, Shankar Ganesan, Goutam N. Challagalla, and Steven P. Brown, “An Integrated

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Endnotes 333

Model of Feedback-Seeking Behavior: Disposition, Context, and Cognition,” Journal of Applied Psychology 85 (2000): 996–1003.

103. Don VandeWalle, Steven P. Brown, William L. Cron, and John W. Slocum, “The Influence of Goal Orientation and Self-Regulation Tactics on Sales Performance: A Longitudinal Field Test,” Journal of Applied Psychology 84 (1999): 249–259.

104. Angelo J. Kinicki, Gregory E. Prussia, Bin (Joshua) Wu, and Frances M. McKee-Ryan, “A Covariance Structure Analysis of Employees’ Response to Performance Feedback,” Journal of Applied Psychology 89 (2004): 1057–1069.

105. Don VandeWalle and Larry L. Cummings, “A Test of the Influence of Goal Orientation on the Feedback-Seeking Process,” Journal of Applied Psychology 82 (1997): 390–400.

106. Joyce E. Bono and Amy E. Colbert, “Understanding Responses to Multi-Source Feedback: The Role of Core Self-Evaluations,” Personnel Psychology 58 (2005): 171–204.

107. Brian D. McNatt, “Ancient Pygmalion Joins Contemporary Management: A Meta-Analysis of the Result,” Journal of Applied Psychology 85 (2000): 314–322.

108. Oranit B. Davidson and Dov Eden, “Remedial Self-Fulfilling Prophecy: Two Field Experiments to Prevent Golem Effects Among Disadvantaged Women,” Journal of Applied Psychology 85(2000): 386–398.

109. Dov Eden and Joseph Kinnar, “Modeling Galatea: Boosting Self-Efficacy to Increase Volunteering,” Journal of Applied Psychology 76 (1991): 770–780.

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C h a p t e r 9

Training for Improved Performance

A M A N A G E R ’ S P E R S P E C T I V E

CHARLOTTE WALKED OUT OF THE TRAINING ROOM MORE EXCITED THAN SHE HAD BEEN IN QUITE A

WHILE. SHE HAD JUST LEARNED ABOUT A PROJECT MANAGEMENT SOFTWARE PROGRAM THAT SHE’D READ ABOUT A YEAR AGO. WHEN SHE HEARD THAT HER COMPANY WAS OFFERING A PROJECT MANAGEMENT

WORKSHOP, SHE HAD CALLED TO SEE WHETHER THE SOFTWARE SHE HOPED TO LEARN WAS COVERED. IT WAS. SO SHE REARRANGED TWO IMPORTANT MEET- INGS AND BOOKED THE TRAINING.

The training had gone even better than she had hoped. The trainer opened with a story of a project just like the one Charlotte was managing. The trainer told another short story as a preview to the day’s agenda and then asked participants what they hoped to accomplish that day. Charlotte had practically jumped out of her seat to explain how she had long wanted to improve her project management skills, and in particular, use software to track her employees’ tasks and, of course, due dates. The trainer had listened to Charlotte, and to the other participants’ comments, and offered to make some adjustments to the workshop schedule to allow for more hands-on practice with the project management software.

Charlotte was grateful for the time to actually use the software. She was able to practice and ask

questions, and the trainer listened to each question and answered what she could. When Charlotte had a detailed question that the trainer couldn’t answer, the trainer had admitted she wasn’t sure. After a short break, though, the trainer came over to Charlotte and provided her business card with an Internet address written on the back. “I called technical support, and they said that this web page should have the answer to your question. If it doesn’t, my contact information is on the card—give me a call.” Charlotte was impressed with how responsive the trainer had been, and how quickly she had found an answer.

As Charlotte left the room, she planned how she would get started. She needed a bit more practice time with the software this week before she would feel comfortable introducing it to her employees. She had the trainer’s business card and planned to arrange a few training sessions for her employees and other managers in the department. We should be up and running by the end of the month, she thought.

The bad news began the next morning and con- tinued throughout the day. When she called the trainer, Charlotte found out that she was no longer on contract with her company. She would not be

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THE BIG PICTURE Effective Organizations Systematically Design and Deliver Training to Improve Individual and Organizational Performance.

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able to conduct anymore sessions without a new contract. When she called the HR department to inquire, the Director of Training and Development said, “Our budget has been cut, and we cannot afford any more training by outside vendors.” A quick call to her manager confirmed it—Charlotte could go ahead and use the software but there would be no money available to support training. Charlotte hung up the phone dejected.

Charlotte didn’t know what to do next. Could she just ask employees to use a new system without train- ing? Was there some other way to get employees to learn the system without formal training? Or was there a way to get them training that would cost less but still be just as effective? Charlotte set about to do some research so she could decide her next move.

WHAT DO YOU THINK? Imagine you are listening to a conversation between Charlotte and her manager. Her manager makes the following statements. Which do you think are true?

Training keeps employees happy because it’s a break from work, but it has little impact on the organization’s bottom line.

If trainees learn in training, they will trans- fer that learning back on the job.

Lecture is a terrible method for delivering training.

Training presented face to face is always more effective than training presented via computer technology.

Evaluating training is a waste of everyone’s time.

?

T OR F

T OR F

T OR F

T OR F

T OR F

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336 Chapter 9 Training for Improved Performance

Nearly everyone who has worked has attended a training program. Training is a planned effort by a company to help employees learn job-related knowl- edge, skills, and attitudes.1 The vast majority of companies offer training pro- grams, and they come in many shapes and sizes: large group lectures given by an expert, on-the-job training delivered by a supervisor, simulations guided by a computer program, small-group projects coordinated by an executive, or online discussions with colleagues from around the country. The common element that defines training is that employees go through a structured expe- rience that helps them to learn something they can use to improve their per- formance at work.

We usually equate learning with being in school. For example, when we were younger and in primary school, we gained knowledge, which includes facts and principles of all kinds. We gained physical and cognitive skills, which allow us to perform a wide range of tasks like throwing a ball, using com- puters, resolving interpersonal conflicts, and solving math problems. We also developed new attitudes, such as (hopefully) the belief that school is both fun and beneficial. When our experiences change our knowledge, skills, or atti- tudes, we call it learning. Learning, then, is a change in what we know, what we can do, or what we believe that occurs because of experience.

Of course, the truth is that we don’t just learn in school, nor do we ever stop learning. We learn all the time in and out of classes, and we continue to learn throughout our lives. When we start a new job, we must learn about the industry, the company, and the day-to-day details of the position (including where to find the bathroom). To add to this challenge, companies and the jobs in them change over time. A company will get a new computer system, people will quit and new people will join, and products and services will be modified to meet changing customer demands. Most changes require that employees learn something new. So every job requires not only some learning to get started but also continued learning to avoid falling behind.

Training A planned effort to help employees learn job-related knowledge, skills, and attitudes.

Knowledge Memory of facts and principles.

Skill Proficiency at performing a particular act.

Attitude An evaluative reaction to particular categories of people, issues, objects, or events.

Learning A change in knowledge, skill, or attitude that results from experience.

After reading this chapter you should be able to:

Explain how employee training practices can be aligned with an organization’s competitive strategy.

Describe how partnering and using a systematic process for developing training helps an organization benefit from training.

Discuss the different ways organizations determine their training needs.

Describe various training methods and explain how to make each more effective.

Explain why the purpose of a training evaluation should be used to guide the evaluation process.

LEARNING OBJECTIVE 1

LEARNING OBJECTIVE 2

LEARNING OBJECTIVE 3

LEARNING OBJECTIVE 4

LEARNING OBJECTIVE 5

L E A R N I N G O B J E C T I V E S

How Can Strategic Employee Training Improve an Organization?

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How Can Strategic Employee Training Improve an Organization? 337

Most organizations, regardless of size and industry, offer at least some formal training to help employees learn.2 In a manufacturing setting, for instance, new employees can receive training on how to operate their equip- ment safely and effectively. Employees can learn in other, less formal ways, such as by watching others, asking for help, experimenting, or studying on their own.3 These informal methods can be effective and inexpensive, so some firms rely heavily on informal learning. Small firms, in particular, often expect their employees to learn mostly through informal means.4

While informal learning methods can work, they are not always appropri- ate. What if new employees at an automotive parts manufacturing facility were asked to learn all about metal stamping on their own? This process involves using large and dangerous equipment to shape metal products such as pipes. If an employee were injured because the company had not prepared him to use the equipment, then the company could be held liable for the injury. Formal training is also useful because it ensures that everyone learns the same things, such as the most efficient and most safe ways to perform a task.

Training, when designed and delivered properly, can improve the overall effectiveness of an organization in three ways.5 First, it can boost employees’ commitment and motivation. Opportunities to learn new skills are important in today’s economy, so employees appreciate learning opportunities offered by training. As a result, companies that offer more training foster employee commitment.6 To be more precise, organizations that offer employees oppor- tunities to learn and grow are seen as having employees’ best interests at heart, and as a result, employees feel more committed to the organizations.7

Employee commitment also can benefit an organization by increasing reten- tion of high-performing employees (see Chapter 7).

Second, training helps employees perform their work more effectively and efficiently, so the organization is able to function better on a day-to-day basis. If you’ve ever been to a grocery store where the cashier had not been trained to use the cash register efficiently, then you’ve been a victim of poor train- ing (or, if you were really unlucky, it might have been a combination of poor employee selection and poor training). Research is very clear on this point— employees who receive training know more and are able to do more than employees who do not receive training.8

These first two benefits should come as no surprise given research findings about the commitment HR strategy discussed in Chapter 2. Providing employees with formal training is a key element of commitment-based HR.9 Furthermore, providing training adds value beyond other HR practices. All other things being equal, providing training to a larger percentage of a company’s workforce will increase that company’s overall productivity.10 Employees who are trained are more likely to be committed to the organization and have higher levels of knowledge and skill. As a result, they are better individual per- formers, and this helps the organization to be more productive.

The third way training benefits organizations is by helping them to meet their strategic objectives. It does so by providing employees with the specific knowledge, skills, and attitudes necessary to achieve designated strategic goals. This benefit is more subtle, and it’s about alignment of training activities to the organization’s overall strategy and specific goals that follow from it. If an organi- zation aligns training effectively, it will have the right people with the right skills necessary to pursue the competitive advantage sought by the strategy.

Informal learning methods Natural learning that is neither planned nor organized.

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338 Chapter 9 Training for Improved Performance

An example of a company that uses training effectively is Rockwell Collins. A leading supplier of aviation electronics equipment, Rockwell Collins is con- sistently faced with pressures to reduce design time of new products (in order to keep pace with new technology) and to improve quality of current products (in order to reduce equipment failure). Faced with these challenges, Rockwell Collins continuously examines bottlenecks in moving from initial design to final products, looking for ways to speed up the process and improve quality.

A common bottleneck in the Rockwell Collins product design process was delays caused by electromagnetic interference (EMI), which often results in destruction of electronic parts. The company estimated that it was los- ing at least $1 million a year because of EMI. A quick investigation into the causes of the problem revealed that many testing engineers lacked a basic understanding of how to avoid EMI. Working with a training company called Strategic Interactive, Rockwell staff developed a 12-hour CD-ROM course that was delivered to 1,300 engineers in about six months. Delivering the train- ing via CD-ROM meant a larger up-front cost for developing the course, but it allowed Rockwell to train engineers more quickly. Engineers could do the training on their own time without taking time away from work to travel to corporate headquarters.

Although the course cost nearly $500,000 to develop, the end result was worth the cost. The EMI problem disappeared, and Rockwell has avoided approximately $1 million in equipment losses every year since the training. The investment in training paid off for Rockwell, and it helped the company to implement its strategy to reduce the time it takes to design new products.

ROCKWELL COLLINS Rockwell Collins is a leading designer and producer of aviation electronics. With approximately 20,000 employ- ees, and nearly $4.5 billion in sales in 2009, it serves government and com- mercial customers all over the world. Using a strategic approach to train- ing, Rockwell was able to:

Identify a critical problem for the organization—design delays caused by electromagnetic interference—that could be solved by training. Use computer-based training opportunities to deliver a course to over 1,300 engineers in about six months. Speed up product design and testing and avoid approximately $1 mil- lion in equipment losses.

Sources. Cliff Purington and Chris Butler with Sarah Fister Gale, Built to Learn: The Inside Story of How Rockwell Collins Became a True Learning Organization (New York: AMACOM, 2003).

Building Strength Through HR

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How Is Employee Training Strategic? 339

How Is Employee Training Strategic?

LEARNING OBJECTIVE 1

As we’ve just seen, training offers universal benefits for improving employee motivation, commitment, and job performance. Training can also be aligned with strategy to help an organization gain a competitive advantage over other organizations. Training needs and training resources thus vary across firms depending on the business strategy that they pursue.11 Figure 9.1 summarizes some of these differences.

DIFFERENTIATION VERSUS COST LEADERSHIP STRATEGY Let’s first consider how training efforts should be aligned with the cost and differentiation strategies described in Chapter 2. A cost leadership strategy, including both the Bargain Laborer and Loyal Soldier strategies, requires that employees have knowledge, skills, and attitudes that help reduce costs and improve efficiency. For example, a local restaurant that is trying to compete based on low-cost menu items must have employees who know how to do their work efficiently with little waste. In other words, they must have the knowl- edge and skill needed to prepare and serve food quickly. Employees should also believe in efficiency and cost reduction and have a positive attitude toward working quickly. As a result, training for employees at this restaurant should not only build knowledge and skill so employees can work quickly without creating waste, it should also convince employees it is important to do so. The efforts of this small restaurant are, on a much larger scale, what companies

Bargain Laborer External/Cost HR Strategy

More emphasis on hiring new employees with desired skills than

on training existing employees Training focuses on reducing costs

and improving efficiency

Emphasis on training existing employees

Training focuses on reducing costs and improving efficiency

Emphasis on training existing employees

Training focuses on providing superior service, innovation

Loyal Soldier Internal/Cost HR Strategy

Committed Expert Internal/Differentiation HR Strategy

Cost Leadership

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Differentiation

Strategic Direction

Free Agent External/Differentiation HR Strategy

More emphasis on hiring new employees with desired skills than

on training existing employees Training focuses on providing superior service, innovation

Figure 9.1 Strategic Framework for Employee Training.

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340 Chapter 9 Training for Improved Performance

like Motorola, General Electric, and Samsung Electronics are trying to accom- plish with training programs designed to measure and improve quality. By training their employees on quality control principles and practices, these companies have been able to become more efficient, thereby reducing costs and increasing profits.12

A differentiation strategy, including both Free Agent and Committed Expert strategies, requires that employees be able to deliver services or make products that are superior to the services or products offered by competitors.13

Some companies differentiate via innovation—constantly staying ahead of the competition with new products and services. With this type of differentiation, team-focused creativity training is a useful way to help employees share knowl- edge and build creative products. Coach, 3M, and General Mills are examples of companies that pursue this type of differentiation strategy and rely on this type of training. Differentiation can also be achieved via excellent customer service. For example, consider a different local restaurant trying to compete based on excellent service. This restaurant will train its employees how to impress customers by being considerate, friendly, and prompt. The efforts of this restaurant are similar to the efforts of companies like Nordstrom, Disney, Ritz-Carlton, and WorldColor.14 The training efforts that Apple uses at its retail stores are offered as a detailed illustration in the “Building Strength Through HR” feature.

APPLE Apple is well known for its revolutionary digi- tal products including the iMac, iPod, iPad, and iPhone. To protect its brand image and expand sales, Apple opened its own retail stores in 2001. The stores include a Genius Bar, where experts answer questions about Apple products. The train- ing for Geniuses ensures not only technical knowl- edge but also customer service knowledge and skill. Training materials recommend, for example, responding to customer concerns with the three F’s: feel, felt, and found. This is a form of empa- thetic listening aimed at changing the customer’s mind without openly disagreeing. When a cus- tomer states a concern about the iPad because it does not have a mouse, the training recommends that the Genius respond by saying, “I may know how you feel. I’m a mouse fan and felt as if I’d never get used to the iPad, but I found it becomes very easy with a little practice.”

What kind of results does Apple get with their well-trained Geniuses? Industry research suggests

that “9 out of every 10 Apple owners are somewhat or much more likely to make another purchase fol- lowing their tech support experience.” They also found that 31 percent had a better perception of Apple after getting help.

Source: Sam Biddle, “How to Be a Genius: This is Apple’s Secret Employee Training Manual,” Gizmodo (2012) avail- able online at http://www.gizmodo.com; Raz Godelnik, “Apple’s Genius Training—Phone 101 or Great Customer Service?” Triplepundit (2012) available online at http:// www.triplepundit.com.

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How Is Employee Training Strategic? 341

INTERNAL VERSUS EXTERNAL LABOR ORIENTATION Training efforts must also be aligned with the relative emphasis the organiza- tion places on internal versus external labor orientations. As you know, a com- pany with an internal labor orientation seeks to make its own talent, whereas a company with an external labor orientation seeks to buy talent that is already developed. These different orientations clearly influence how much time and money a company will spend on training. Companies with an internal labor orientation are willing to spend time and money to train current employ- ees, while companies with an external orientation tend instead to hire new employees to fill their needs.

For example, consider a company with an internal labor orientation that discovers managers are not following appropriate labor laws in their recruit- ing and hiring (covered in Chapter 3). With an internal labor orientation, the company is likely to see this as a knowledge deficit that should be addressed by training managers on these laws. An alternative approach, and one that might be adopted by a company with an external labor orientation, would be to cen- tralize employee selection and hire a labor attorney to coordinate processes and enforce compliance with laws.

The distinction between internal and external labor orientation can also play out at an organizational level when a company decides whether to train employees for new business opportunities or acquire a new company. As an example of an external orientation, consider Adobe’s acquisition of Macromedia in 2005. Adobe was the world leader in static documents on the Internet (you have probably opened and read documents in the Adobe Acrobat PDF file format). However, the company had few employees and no business units with expertise in dynamic content for the Web, such as web pages that automatically update or offer interactive displays. Rather than cre- ating a series of training programs to help employees learn about dynamic documents, and then build that capacity into their products, Adobe chose to buy that expertise. By acquiring Macromedia (which created Flash Player, a commonly used program that runs dynamic content on the Internet), Adobe was able to increase its capacity to compete in the software industry.15 Adobe acquired this expertise rather than developing it via training.

Do companies with external labor orientations skip training altogether? The answer is clearly no. In such companies, training programs are still offered for a variety of reasons, particularly to help employees learn company- specific knowledge and skills. However, in such firms, HR management must find ways to keep training costs low. One way to do this is to purchase a train- ing course that has already been designed. HR management first should verify that the course is relevant to their organization and potential trainees. If the material is relevant, then purchasing an existing program can be dramatically less expensive than developing a program from scratch. For safety training, for example, the National Safety Council sells self-study books, videos, and DVDs that cover such topics as Defensive Driving, First Aid, Motorcycle Safety, Electrical Safety, and Fire Protection. Most of these courses cost less than $50.16 Even better from a cost perspective, some government agencies provide free online tools that can be used as instruction, such as the U.S. Department of Labor’s programs on eye and face protection, respiratory protection, lock- out/tagout, poultry processing, scaffolding, beverage delivery, baggage han- dling, and grocery warehousing.17

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342 Chapter 9 Training for Improved Performance

What Are Key Principles for Getting Benefits from Training?

LEARNING OBJECTIVE 2

Earlier, we identified three benefits an organization can gain from training its employees: Training can increase employees’ commitment and motivation, it can enable them to perform better, and it can help the organization to meet its strategic objectives. To achieve these three benefits, training must result not only in learning but also in transfer of training. Transfer of training occurs when trainees apply what they have learned in training to their jobs.18

For transfer to happen, employees must first remember what they learned, or maintain an attitude over time. For example, if a trainer shows a new employee the steps involved in using a piece of manufacturing equipment, the

Transfer of training Application on the job of knowledge, skills, or attitudes learned in training.

? CONCEPT CHECK 1. What is the key focus of training for a company pursuing a

differentiation strategy? A cost leadership strategy? 2. How does training differ between companies that pursue an

internal versus an external labor orientation?

Table 9.1 provides a list of visible and hidden training costs and suggestions for how to reduce them. These tips can also be used by small businesses or any organization that needs training but also has to reduce costs.

Table 9.1 Costs of Training and Tips for Keeping Training Costs Low

Type of Cost Tips to Reduce Costs

Visible Costs

Development Costs Partner with other organizations to share costs; purchase off-the-shelf training; use free or subsidized training from the government and nonprofits like university extension programs

Delivery Costs Reduce trainee travel and eliminate facility costs by using self-paced, individualized instruction or technology delivery; reduce number and length of handouts; plan for reuse by laminating and retaining exhibits

Trainer Salary and Benefits

Train current employees to be part-time trainers; use contract trainers for nonrecurring projects

Hidden Costs

Trainee Compensation and Lost Productivity

Shift training to be readily available at employees’ desks; simplify work processes so employees can learn on the job without much training; reduce training time using task analyses to isolate and train only critical knowledge and skills

Wasted Investments

Use needs assessments to ensure that training need exists and is important to address; partner with management to increase transfer

Sources: David Van Adelsberg and Edward A. Trolley, Running Training Like a Business: Delivering Unmistakable Value (San Francisco: Berrett-Koehler, 1999); National Court Appointed Special Advocate Association, “Tips to Keep Volunteer Training Costs Down,” 2001, retrieved online at http://www.casanet.org on April 4, 2007.

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What Are Key Principles for Getting Benefits from Training? 343

employee must remember those steps after training is complete. Moreover, the employee must actually use those steps back on the job.

Transfer is more complicated than it sounds, and there is considerable evidence that many training programs get employees to learn but not to transfer.19 In other words, employees seem to understand the training mate- rial, but they do not change their behavior on the job. When this happens, investments in training are essentially wasted. Imagine, for example, what would have happened if Rockwell Collins’s 1,300 trained engineers had fin- ished training and done nothing differently back at work. A great deal of everyone’s time and money would have been wasted, and those responsible might be trying to claim unemployment benefits.

How can training be designed to encourage learning and transfer? Two fundamental practices will help HR professionals to meet this goal: (1) man- agers, employees, and HR professionals must work in partnership; and (2) organizations must use a systematic process for designing, developing, and delivering training.

PARTNERSHIP The first fundamental practice for ensuring learning and transfer is to oper- ate training as a partnership among employees, their managers, and HR pro- fessionals. A partnership between HR professionals and employees is critical because these professionals cannot determine employees’ knowledge and skill levels without their help. In addition, without the support of management, HR professionals are unlikely to be able to change the actual behavior of employees on the job. For example, if managers do not want employees to take the time to work on cost-cutting and quality-control projects, then training employees in how to run these projects is unlikely to change how the employees do their work and even less likely to improve the organization’s bottom line.

Another way to think about the need for partnership is to consider that employee performance is determined by many factors that are not under the direct control of a human resource department. Table 9.2 lists six factors that are commonly considered to have a powerful influence on job performance.

The first four factors that affect job performance are primarily the respon- sibility of the employees’ manager. First, managers must set clear expectations about what employees should and should not do on the job. Second, managers must provide necessary support in the form of equipment, supplies, and other

Table 9.2 Factors Affecting Job Performance with Responsible Stakeholders

Factor Stakeholder

1. Clear Expectations Manager

2. Necessary Support Manager

3. Useful Feedback Manager

4. Appropriate Consequences Manager

5. Individual Capacity Manager and HR Professional

6. Required Knowledge and Skill Manager and HR Professional

Source: Information from Geary A. Rummler and Alan P. Brache, Improving Performance: How to Manage the White Space on the Organization Chart, 2nd ed. (San Francisco: Jossey-Bass, 1995).

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344 Chapter 9 Training for Improved Performance

resources. Third, managers must provide useful feedback indicating whether employees are exceeding, meeting, or failing to meet expectations. The feed- back must also guide employees toward better performance. Fourth, managers must set appropriate consequences, which means rewarding effective perfor- mance and, if necessary, punishing ineffective performance. The fifth and sixth factors, individual capacity and required knowledge and skill, are the only two factors that HR professionals have much control over. Ineffective perfor- mance on the part of any one employee, then, may be largely a function of a manager’s failure to ensure that one or more of these factors are in place.

HR professionals can influence employees’ job performance by working with managers to ensure that employees have the individual capacity (gen- erally through recruitment and selection) and the required knowledge and skill (generally through training and development) to do the job. So the HR function does play an important role, but even in this role, there must be a partnership. If what HR professionals offer as training seems worthless to managers, then they will tell their employees to disregard training and instead do their work as it should “really be done.”

SYSTEMATIC PROCESS The second fundamental practice used to ensure learning and transfer is to develop training systematically. There are many possible ways to develop train- ing, but almost all have three fundamental components:

1. Needs assessment to determine who should be trained and what the training should include.

2. Design and delivery to ensure that training maximizes learning and transfer. 3. Evaluation to determine how training can be improved, whether it worked

as intended, and whether it should be continued.20

Two different forms of this three-component process are diagrammed in Figure 9.2. Part a depicts a circular process. This is the traditional model of instructional design, and it suggests beginning with a needs assessment that is followed by design and delivery and then by evaluation. Of course, the process is never complete because training needs are always changing, so after evalua- tion there will eventually be another needs assessment.

Part b of the figure shows the rapid model of instructional design.21

Organizations may use this version of the process when they need to speed up the time from identified need to delivery of training. In the rapid model,

Traditional model of instructional design A process used to create training programs in which needs assessment is followed by design and delivery and then by evaluation.

Rapid model of instructional design A process used to create training programs in which assessment, design and delivery, and evaluation overlap in time.

Figure 9.2 Two Approaches to Designing Training Programs.

Needs Assessment

(a) Traditional Model of Instructional Design (b) Rapid Model of Instructional Design

Time

Design and Delivery

Evaluation

Needs Assessment

Design and Delivery

Evaluation

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How Are Training Needs Determined? 345

How does an organization determine what training to offer and who should be trained? This process is called needs assessment, and it occurs in two differ- ent ways.22 First, needs assessments may be done on a regular basis as training programs are planned and budgets are set. This planning process requires a proactive approach to determining training needs and developing training plans. Second, needs assessments may also be done in a reactive fashion in response to requests for particular training programs. The reactive and proac- tive approaches are described in more detail below.

PROACTIVE NEEDS ASSESSMENT Proactive needs assessment is a systematic process for determining and pri- oritizing the training programs to be developed and delivered by an organiza- tion. It generally has three distinct steps—organization analysis, task analysis, and person analysis.23 Each step requires different types of data.

Organization Analysis Organization analysis requires information about the organization’s strate- gic goals, environment, resources, and characteristics. With this information, an organization can determine whether certain types of training would be useful for employees and for the organization as a whole. As noted earlier,

Needs assessment A process for determining what training to offer and who should be trained.

Proactive needs assessment A systematic process for determining and prioritizing the training programs to be developed and delivered by an organization.

Organization analysis A process used to identify characteristics of the organizational environment that will influence the effectiveness of training.

How Are Training Needs Determined?

LEARNING OBJECTIVE 3

? CONCEPT CHECK 1. What is transfer of training? 2. What are the two different systematic approaches to design-

ing training programs? How are they similar, and how are they different?

training design begins while the needs assessment continues, as indicated by the overlap in the bars. Just as important, training begins before the program design is completely finished, and evaluation is used to modify the training as it is developed.

Whether the traditional or rapid model is appropriate depends on the nature of the training being designed. Training that must be right the first time—either because there is only one opportunity to train particular employees or because the cost of employees doing the wrong thing is too high—should not use the rapid model. For example, training for employees who operate expensive and dangerous equipment (airplanes, cranes, bulldozers, and tanks, for example) should not be delivered to trainees unless it has been examined in great detail for accuracy and safety. Product training for retail sales employees, in contrast, could be delivered before it was perfected, and this would ensure that employ- ees had at least some knowledge of new products as they arrived.

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346 Chapter 9 Training for Improved Performance

the organization’s strategy is relevant to decisions about training because different strategies require different knowledge, skills, and attitudes on the part of employees. Organizations that seek to differentiate themselves from their competitors with excellent service, for example, are more likely to benefit from service-related training courses than organizations with a cost-reduction strategy. The organization’s labor orientation helps to deter- mine whether training will be seen as an appropriate way to build employee knowledge and skill.

Organization analysis also requires an understanding of the environment within which the organization functions. Many facets of the environment, including the technical and legal environments, influence the type of train- ing that an organization should offer. The technical environment includes the current and future technologies that employees will use to perform their work. For example, if an organization is planning to upgrade its computer systems, it will need to plan for training to assist in the transition and will also need to change its existing training to be consistent with the new systems.

The legal environment includes both legislative and regulatory mandates. HR professionals should know how training can assist in compliance and reduce the risk of legal problems. As an example, U.S. courts have determined that the degree of an organization’s liability for discrimination depends on whether managers were trained in nondiscriminatory hiring practices.24

Consequently, managerial training covering laws related to discrimination is useful for organizations covered by employment laws like the Civil Rights Act and the Americans with Disabilities Act, discussed in Chapter 3. Organization analysis should determine which laws are applicable.

Organization analysis also measures characteristics of the work environ- ment, such as how much the organization supports its employees in attend- ing training and using what they learned in training back on the job. Such support may take the form of policies, reward systems, management atti- tudes and actions, and peer support. Organizations that support training are considered to have a positive training climate. Thus, they are more likely to have employees who use learned skills back on the job, because employees are much more likely to succeed in transfer if they perceive that their organization has a supportive climate.25 If trainees will be returning to a work environment that is not supportive, they should be prepared in training with strategies that will help them overcome the lack of support. Alternatively, it may be necessary to change the climate before investing in the training. Of course, this is easier said than done, because changing climate is a difficult process that unfolds over time only with the commit- ment of top management.26

It is important to note that organization analysis need not be repeated every time a proactive needs assessment is conducted, but it should be repeated if the organization or its environment changes. Changes in competitors’ prac- tices, in internal management structure, and in labor laws can alter training needs, as can mergers, acquisitions, and alliances. HR professionals should constantly monitor the environment for such changes and conduct a formal organization analysis when changes are noted.

Task Analysis Task analysis is a form of job analysis that involves identifying the work activi- ties performed by trainees and the knowledge and skill necessary to perform the tasks effectively (see Chapter 4). The methods used in task analysis vary

Training climate Environmental factors that support training, including policies, rewards, and the attitudes and actions of management and coworkers.

Task analysis A process used to describe the work activities of employees, including the knowledge and skill required to complete those activities.

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How Are Training Needs Determined? 347

depending on the task being analyzed. The most common process used when the task analysis is being done to help design training is the following:

1. Groups of job incumbents develop lists of the tasks performed. 2. HR professionals group tasks into clusters based on similarity. 3. Groups of managers generate knowledge and skill statements for each

task cluster. 4. Surveys, given to a new sample of incumbents, verify the task, task cluster,

knowledge, and skill lists.

To avoid bias in the data collection, it is generally suggested that multiple groups and multiple incumbents be involved.27 Of course, in smaller organi- zations or for jobs that don’t exist yet, it may be impossible to get informa- tion from people already doing the job. In this case, a few of the individuals who will be responsible for the work to be done can participate. Whoever is involved, it is important to use more than one person in order to get high- quality data; any one individual may not have a complete or accurate perspec- tive on the tasks.

There are three common variations of task analysis: competency modeling, cognitive task analysis, and team task analysis.

1. Competency modeling is similar to task analysis but results in a broader, more worker-focused (as opposed to work-focused) list of training needs. The process was described in Chapter 4. Competency modeling is most fre- quently used with managerial jobs. One benefit of using a competency model for needs assessment is lower cost, because this type of analysis does not involve determining specific competencies for a particular job. A related drawback is that the result of competency modeling may not have sufficient detail to guide training for any one particular job.28

2. Cognitive task analysis examines the goals, decisions, and judgments that employees make on the job.29 While traditional task analysis focuses on observable tasks and behaviors, cognitive task analysis delves into the thought processes that underlie effective performance of a task. Experts are asked to think out loud while they perform each step of the task. Later, the transcripts of their words are analyzed to identify the knowledge and skills that were necessary at each step.

3. Team task analysis involves examining the task and coordination require- ments of a group of individuals working together toward a common goal.30 It is important to use team task analysis in situations where the performance of interest to the organization is largely determined by coor- dinated efforts. Research on nuclear power plant operations, for example, indicates that operating teams must exchange information and share key tasks in order to perform effectively. Team task analysis will identify the knowledge and skills that underlie these exchanges. Then, training will focus on knowledge and skills identified in the team task analysis as well as the required technical skills.

Person Analysis Person analysis involves answering three questions:

1. Is training necessary to ensure that employees can perform tasks effectively?

2. If training is needed, who needs the training? 3. Are potential trainees ready for training?

Person analysis A process used to identify who needs training and what characteristics of those individuals will influence the effectiveness of training.

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348 Chapter 9 Training for Improved Performance

First, person analysis should determine whether training is necessary by determining whether employees’ knowledge and skill are relevant to improv- ing their performance. If employees lack knowledge and skill required for performance, then training is appropriate. There are, however, many other reasons why employees may not perform effectively, including unclear expec- tations, lack of necessary support in the form of resources and equipment, lack of feedback about performance, inappropriate consequences, and lack of capacity.31 You may recall this list from Table 9.2.

Second, if training is needed, it is necessary to determine who needs training. A number of different methods can be employed to make this determination. Two of the most common are examining employee records and asking employees whether they think they need training. Both can be useful, but each suffers from potential bias. Employee records may not be sufficiently detailed or may gloss over skill deficiencies because of legal concerns over keeping records of poor performance. As to self-assessments of training needs, employees generally overestimate their skills and thus underestimate the need for training.32 Another commonly used method is to rely on supervisors to identify those who need or would benefit from training. Because no one method is perfect, multiple methods should be used when possible.

Third, HR professionals must determine if those who need to be trained are ready for training. To do this, they should examine the general mental abilities, basic skills, motivation, and self-efficacy of the potential trainees. Research suggests that individuals with higher levels of general mental ability, necessary basic skills, motivation to learn, and self-efficacy are more likely to benefit from training.33 That does not mean that training should be offered only to those who fit this profile. Training will, however, be more successful if it is adjusted for particular groups of trainees, as outlined in Table 9.3.

As one example, consider an outsourced call center where employees in another country answer phone calls from the United States. The center might develop two different training programs for employees with different levels of English-language skills. Employees with lower English-language skills may need a course that covers basic terminology and English phone etiquette before being trained on company-specific phone procedures. Assessing the basic

Table 9.3 Personal Characteristics Relevant to Training Effectiveness and Implications for Design

Personal Characteristic Definition Suggestions for Training Design

General Mental Ability Overall ability to process information and learn

Trainees with lower general mental ability generally require more time to learn and more structure and guidance in the training environment.

Basic Skills Ability to perform fundamental tasks like reading, writing, and math

Trainees without basic skills required for a particular training program may need extra assistance during training or remediation prior to training.

Motivation to Learn Interest in and desire to learn the material in training

Trainees with lower motivation may need to be convinced of the importance of training, either within the training environment or outside the training environment by their managers.

Self-efficacy Confidence that the skills can be learned and applied on the job

Trainees with lower self-efficacy may need extra practice opportunities and may need to have training framed in a more positive and supportive way.

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How Are Training Needs Determined? 349

language skills of employees will be necessary to determine whether language skill differences exist and to help assign employees to the proper training.

REACTIVE NEEDS ASSESSMENT The analyses we have discussed are useful for proactively determining how an organization should allocate training resources. An alternative model deals with situations that involve a specific performance problem, such as low sales or high turnover. This model, reactive needs assessment, is a problem-solving process that begins with defining the problem and then moves to identifying the root cause of the problem and designing an inter- vention to solve it. Some organizations, like Rockwell Collins, have imple- mented this problem-solving process by requiring managers who request training to fill out a form. A modified version of the form used at Rockwell Collins is presented in Table 9.4. The questions on this form are designed to help managers think through whether the training requested is relevant to the company’s strategy and related goals and whether training is the most efficient solution to the problem.

Reactive needs assessment A problem-solving process used to determine whether training is necessary to fix a specific performance problem and, if training is necessary, what training should be delivered.

Table 9.4 Reactive Needs Assessment via Training Request Form

Your Name:

Your Position:

Your Department:

Your Business Unit:

Best Way to Reach You:

Training Requested:

1. What business goals/objectives will this training support?

2. How does it support these goals/objectives?

3. What will the participants know or do differently (that they don’t know or can’t do now) after training is complete?

4. How critical is this change in knowledge or skill for improving employees’ job performance? for your department or business unit’s performance?

5. Can you envision benefits to this training beyond an improvement in participants’ job performance? Consider, for example, improved teamwork among your employees or retention of high-performing employees.

6. Do any of your current employees have the desired knowledge/skill? If so, please provide information on who these employees are and how they acquired the desired knowledge/skill.

7. Can alternatives to a training course be used to ensure employees get the desired knowledge/skill? Consider, for example, new policies, a performance support tool like a job aid, coaching, or work redesign.

8. Is your department willing to incur the full cost of the training if no other departments are able to be involved?

9. Do you have any preferences for who should deliver this training? If you have an outside vendor in mind, please provide contact infor- mation and estimated cost information here.

10. Who needs the desired knowledge/skill? Please describe who they are (positions) and how many. Then answer the following questions about the projected participants:

a. Approximately what percentage of their working time will be spent on tasks that require this knowledge/skill over the next 12 months?

b. How soon after training will they make use of the knowledge/skill gained?

c. In your opinion, are they interested and willing to learn the new knowledge/skill?

11. What is your timeline? When would the training need to start and end?

Source: Information from Cliff Purington and Chris Butler with Sarah Fister Gale, Built to Learn: The Inside Story of How Rockwell Collins Became a True Learning Organization (New York: AMACOM, 2003).

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350 Chapter 9 Training for Improved Performance

Some other organizations follow a three-step process. The steps are (1) problem definition, (2) causal analysis, and (3) solution implementation.34

Problem Definition Problem definition begins with the identification of a business need. When a request for training comes in, the first question to be asked is whether the problem is important. Companies must prioritize, and it may be that the prob- lem is not sufficiently related to the company’s current strategy and goals to warrant the resources required to fix it. If the problem is sufficiently impor- tant, then the next question to be asked is, “What should be happening, and how does that vary from what is actually happening?” This means stating the problem as a gap between desired and actual performance. For example, sup- pose your sales team has been selling primarily inexpensive products (less than $100 per item) but management wants you to increase sales of more- expensive products (more than $1,000 per item) by 50 percent. In this case, the 50 percent difference between current sales and desired sales of expensive products represents a gap between desired and actual performance.

Causal Analysis Once a problem has been defined as a gap, it is necessary to find out the reasons for the gap. This is done through causal analysis. To understand the causes, we ask, “Why does this gap exist?” The gap may result from a lack of knowledge, a lack of motivation, a lack of feedback, or a poor environment. To determine the underlying cause of poor performance, HR professionals explore what employees are doing and why.

In the case of a sales team that should be selling more-expensive prod- ucts, causal analysis would determine why those products are not being sold. Is it because of a problem with the product itself or with the customers who are currently being targeted? Is it because sales employees are not motivated to make those sales, or perhaps because they are not knowledgeable enough about those products to close sales? Asking the right questions can lead to identifying a set of causes that will help determine whether training will solve the problem. If the cause is a knowledge deficit, then training can help close the gap between desired and actual results. If the cause is most likely the prod- uct or employee motivation, then a need has been identified that cannot be resolved through training.

Solution Implementation The final step involves selecting and implementing the appropriate solution or solutions. This step includes brainstorming possible interventions, exam- ining them for effectiveness and efficiency, and prioritizing them. Table 9.5 gives examples of possible solutions to the sales problem in our example. It is worth noting that many solutions do not involve training; training is not a useful solution to every performance problem. Note also that these solutions are categorized according to the performance factors identified in Table 9.2. Alternative solutions should be considered for their relative effectiveness (how well do we think they will work?) and efficiency (how much will they cost? how long will they take?). People familiar with the job can be asked to rate each potential solution for its anticipated effectiveness and efficiency. The solution that best balances efficiency and effectiveness should be selected for design and implementation.

Problem definition The gap between desired and actual performance.

Causal analysis A process used to determine the underlying causes of a performance problem.

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How Are Training Needs Determined? 351

PRIORITIZING AND CREATING OBJECTIVES Once the organization has collected needs assessment information, it must put all that information together to determine what training to offer and whom to train. This part of the assessment process includes prioritizing train- ing needs and setting objectives for training.

Determining Priorities An organization often identifies a number of different training needs—usu- ally more than can possibly be covered given the training budget and the time that employees can be away from their work. What can be done? Prioritize! There are a few different ways to prioritize, including ratings and interviews, but no one method is best.

Figure 9.3 shows one method for prioritizing training needs based on a task analysis. The figure lists some knowledge and skills necessary for a gen- eral manager’s human resource responsibilities. A sample of managers and employees familiar with the job can be asked to rate each item on this list along two scales—strategic importance and need for training. Strategic importance is the importance of this particular item for helping the person perform his or her work effectively and in a way that benefits the entire organization. Need for training is the degree to which it is important that the person have this knowl- edge and skill before beginning work. A low need for training means that per- formers can learn as they work. Once all the ratings have been collected, they are summed to create a composite rating. Then the list is rank-ordered from highest to lowest scores. The needs that come to the top are those that are most relevant to the organization’s strategy and that are required early on the job. The items highest on the list should be the focus of training.

Creating Objectives Whether proactive or reactive needs assessment techniques are used, if train- ing is required, then an essential output of the assessment process should be a list of training objectives. Here, an objective is simply a desired and intended outcome. Two of the most critical types of objectives are learning objectives and organizational objectives.35

Table 9.5 Potential Solutions to Performance Problems

Cause Category Potential Solutions

Sales agents expect their managers to sell expensive and higher profit margin items.

Clear Expectations Explain to all sales agents that sales of high-margin items are part of each employee’s job duties

Sales agents can’t get questions about high-cost products answered from available technical manuals and technical support staff.

Necessary Support Develop new technical manuals or hire a support person who can answer those questions

Sales agents cannot recall how much they sold that was high-margin and how much was low.

Useful Feedback Classify products by margin and provide weekly feedback on percent of category sold

Sales agents are rewarded for number of items they sell rather than for total money value of sales.

Appropriate Consequences

Alter rewards so commission is based not on number of sales but on profit from sales

Sales agents do not understand and cannot explain technical details of more-expensive products.

Individual Capacity Develop technical manuals that customers can access; hire a team of sales agents with this capacity and assign them responsibility for expensive items

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352 Chapter 9 Training for Improved Performance

Learning objectives are the intended individual learning outcomes from training. For a veterinary surgeon, for example, an outcome might be knowl- edge of the anatomy of a particular animal or skill in using a scalpel to remove cysts. The learning objectives should be used to determine the content, meth- ods, and media used in training (we describe these elements of training in the next section).36 Learning objectives are useful because they provide a basis for selecting features of training, provide measurable results that can be used to determine if training was effective, offer guidance to learners about what they should be doing, and ensure that, even if multiple trainers or sessions are involved, the same outcomes are achieved.37

Effective learning objectives have three components:

1. Performance identifies what the trainee is expected to do or produce. 2. Conditions describe important circumstances under which performance is

to occur. 3. Criteria describe acceptable performance in a quantifiable and objective

way.

Table 9.6 gives some examples of ineffective learning objectives and the changes necessary to make them effective.

Organizational objectives capture the intended results of training for the company. These may include increased productivity, decreased waste, or bet- ter customer service. Specifying the intended organizational result of training programs helps to ensure that the training provides value to the organiza- tion as a whole and that each program is linked to the strategy of the firm. Setting organizational objectives can thus help in prioritizing. For example, if

Learning objective The individual learning outcome sought by training.

Organizational objective The organization result sought by training.

Knowledge, Skill, or Attitude

Knowledge of laws, regulations, policies, standards, and procedures for hiring new employees

3 4 7

Strategic Importance

Need for Training

Knowledge of laws, regulations, policies, standards, and procedures for promoting employees

1 0 1

Knowledge of laws, regulations, policies, standards, and procedures for terminating employees

3 1 4

Skill presenting technical concepts and solutions to nontechnical functional teams

4 2 6

Be passionate about high-quality, high-touch customer service 4 4 8

Need for Training

How important is it that employees be trained on this before they start work?

Scale

0 = Not Important 1 = Somewhat Important 2 = Important 3 = Very Important 4 = Extremely Important

Strategic Importance

How important is this knowledge, skill, or attitude to the job and the organization as a whole?

Composite

Figure 9.3 Sample Prioritization Worksheet Using Knowledge, Skill, and Attitude Statements.

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How Is Effective Training Designed and Delivered? 353

How Is Effective Training Designed and Delivered?

LEARNING OBJECTIVE 4

? CONCEPT CHECK 1. What are the steps in a reactive needs assessment? A proac-

tive needs assessment? 2. What components do effective learning objectives include?

Table 9.6 Examples of Ineffective and Effective Learning Objectives

Ineffective Objective Missing Element(s) Effective Objective

Understand business ethics Performance

Conditions

Criteria

Given videotaped scenes of a manager running a business meeting (conditions), be able to identify instances of unethical behavior (performance). Identify all instances of unethical behavior as defined by your company’s Code of Conduct (criterion).

Be able to describe the features and benefits of a product

Conditions

Criteria

Given a potential customer, a product, and related literature (conditions), describe the features and benefits of the product (performance). All key benefits and features in literature are described; all information presented is factual; customer is not insulted, demeaned, embarrassed, or ridiculed (criteria).

Identify three major varieties of red wine with 100% accuracy

Conditions Given three glasses of different varieties of red wine (conditions), be able to identify (performance) each correctly while blindfolded (criterion).

On the 15-yard shooting range, be able to draw your revolver and fire five rounds from the hip within three seconds

Criteria On the 15-yard shooting range (conditions), be able to draw your revolver and fire five rounds (performance) from the hip within three seconds. All rounds must hit the standard silhouette target (criteria).

Source: Information from Robert F. Mager, Preparing Instructional Objectives, 3rd ed. (Atlanta: Center for Effective Performance, 1997).

Once objectives have been written, decisions must be made about content (what to deliver to trainees), methods (how to help trainees learn the con- tent), media (how to deliver content and methods to trainees), and transfer- enhancement techniques (how to help trainees transfer what they learned back to the job).

In terms of content, organizations devote the largest proportion of training time to topics that are specific to the industry, such as computer assembly and testing at computer companies such as Dell and inventory control at clothing companies such as Old Navy. Other types of training that receive considerable time include information technology, managerial and supervisory, mandatory

a training program has the objective of increasing customer satisfaction, but reducing costs is the primary strategic direction of the firm, then that pro- gram should be considered lower priority than a program intended to help reduce costs.

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354 Chapter 9 Training for Improved Performance

and compliance, business processes and procedures, quality and product knowl- edge, and sales. Figure 9.4 specifically illustrates the extent to which a variety of content is emphasized by a large sample of organizations in the United States. Part b of the figure also captures the type of media used and indicates that train- ing media have changed gradually over the years to include more and more technology-based delivery, including CD-ROM and Internet-based training.

CONTENT Content is the material that is covered in training. Training objectives are used to determine what content is needed. The person responsible for training can select content in several ways: (1) create it from scratch, (2) consult with subject matter experts, (3) examine theory and research in the literature, (4) purchase off-the-shelf materials, and (5) contract with a training vendor to cre- ate the materials.38 No one way is best, and many training designers combine these techniques. For example, a management training course offered by Ford

Percent of Selected Content Converage by Content Area

Percent of Training Delivered via Instructor and Technology

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