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CHAPTER 12

Building and Managing Human Resources

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Learning Objectives 1

1. Explain why strategic human resource management can help an organization gain a competitive advantage.

2. Describe the steps managers take to recruit and select organizational members.

3. Discuss the training and development options that ensure organization members can effectively perform their jobs.

12-1. Explain why strategic human resource management can help an organization gain a competitive advantage.

12-2. Describe the steps managers take to recruit and select organizational members.

12-3. Discuss the training and development options that ensure organization members can effectively perform their jobs.

Learning Objectives 2

4. Explain why performance appraisal and feedback are such crucial activities and list the choices managers must make in designing effective performance appraisal and feedback procedures.

5. Explain the issues managers face in determining levels of pay and benefits.

6. Understand the role that labor relations play in the effective management of human resources.

12-4. Explain why performance appraisal and feedback are such crucial activities and list the choices managers must make in designing effective performance appraisal and feedback procedures.

12-5. Explain the issues managers face in determining levels of pay and benefits.

12-6. Understand the role that labor relations play in the effective management of human resources.

Strategic Human Resource Management 1

Human Resource Management (HRM)

Activities that managers engage in to attract and retain employees and to ensure that they perform at a high level and contribute to the accomplishment of organizational goals.

David Lees/Digital Vision/Getty Images

The most important resources in all organizations are human resources. Irrespective of the level, from top to entry-level, all are a resource.

Strategic Human Resource Management 2

The process by which managers design the components of a human resource management (HRM) system to be consistent with each other, with other elements of organizational architecture, and with the organization’s strategy and goals.

HRM system should enhance the organization’s efficiency, quality, innovation, and responsiveness to customers.

“Six Sigma” quality improvement plans ensure that an organization’s products and services are as free of errors or defects as possible through a variety of human resource-related initiatives.

Topics for Discussion 1

Discuss why it is important for human resources management systems to be in sync with an organization's strategy and goals and with each other. [LO 12-1]

Human resources management systems include recruitment and selection, training and development, performance appraisal and feedback, pay and benefits, and labor relations. These systems need to be consistent with an organization's strategy and goals so that the organization can increase efficiency and effectiveness, quality, innovation, and responsiveness to customers.

These objectives are the building blocks of competitive advantage and contribute to an organization's success and survival. If an organization chooses to pursue a low-cost strategy, the human resources system needs to be responsive to this strategy and needs to contain costs and find ways to do more with less. If an organization, instead, pursues a differentiation strategy and wishes to distinguish itself from the competition, human resources must attract, select, and retain the employees that will enable the organization to achieve its goal. Employees in every organization must be trained with the skills and abilities they need and must be rewarded and motivated to ensure high performance at all levels.

Components of a Human Resource Management System

Figure 12.1

Access the text alternative for slide images.

Recruitment and Selection:

Used to attract and hire new employees who have the abilities, skills, and experiences that will help an organization achieve its goals.

Training and Development:

Ensures that organizational members develop the skills and abilities that will enable them to perform their jobs effectively in the present and the future.

Changes in technology and the environment require that organizational members learn new techniques and ways of working.

Performance Appraisal and Feedback:

Provides managers with the information they need to make good human resources decisions about how to train, motivate, and reward organizational members.

Feedback from performance appraisal serves a developmental purpose for members of an organization.

Pay and Benefits:

Rewarding high performing organizational members with raises, bonuses and recognition.

Increased pay provides additional incentive.

Benefits, such as health insurance, reward membership in firm.

Labor relations:

Steps that managers take to develop and maintain good working relationships with the labor unions that may represent their employees’ interests.

The Legal Environment of HRM 1

Equal Employment Opportunity (EEO):

The equal right of all citizens to the opportunity to obtain employment regardless of their gender, age, race, country of origin, religion, or disabilities.

Equal Employment Opportunity Commission (EEOC) enforces employment laws.

The Legal Environment of HRM 2

Contemporary challenges for managers:

How to eliminate sexual harassment.

How to make accommodations for employees with disabilities.

How to deal with employees who have substance abuse problems.

How to manage HIV-positive employees and employees with AIDs.

Although the stigma of AIDS has lessened some in society, unfair treatment of those affected still occurs. It is one of the roles of management to guarantee that those with AIDs are not discriminated against. Many companies have AIDS awareness programs, guiding others to treat those with the HIV virus fairly, allowing them to continue to be productive members of the organization.

Major EEO Laws

Table 12.1 Major Equal Employment Opportunity Laws Affecting HRM

Year	Law	Description (Affecting Human Resources Management)
1963	Equal Pay Act.	Requires that men and women be paid equally if they are performing equal work.
1964	Title VII of the Civil Rights Act.	Prohibits employment discrimination on the basis of race, religion, sex, color, or national origin; covers a wide range of employment decisions, including hiring, firing, pay, promotion, and working conditions.
1967	Age Discrimination in Employment Act.	Prohibits discrimination against workers over the age of 40 and restricts mandatory retirement.
1978	Pregnancy Discrimination Act.	Prohibits employment discrimination against women on the basis of pregnancy, childbirth, and related medical decisions.
1990	Americans with Disabilities Act.	Prohibits employment discrimination against individuals with disabilities and requires that employers make accommodations for such workers to enable them to perform their jobs.
1991	Civil Rights Act.	Prohibits discriminations (as does Title VII) and allows the awarding of punitive and compensatory damages, in addition to back pay in cases of international discrimination.
1993	Family and Medical Leave Act.	Requires that employers provide 12 weeks of unpaid leave for medical and family reasons, including paternity and illness of a family member.

Recruitment and Selection

Recruitment:

Activities that managers engage in to develop a pool of qualified candidates for open positions.

Selection:

The process that managers use to determine the relative qualifications of job applicants and their potential for performing well in a particular job.

The Recruitment and Selection System

Figure 12.2

Human Resource Planning 1

Human Resource Planning (HRP):

Activities that managers engage in to forecast their current and future needs for human resources.

Consider supply and demand forecasts.

Part of a manager’s planning includes demand forecasts, estimates of the qualifications and numbers of employees an organization needs, and supply forecasts, estimates of the availability and qualifications of current and future employees, as well as the supply of qualified workers in the external labor market.

Human Resource Planning 2

Outsource:

To use outside suppliers and manufacturers to produce goods and services.

Use of contract workers rather than hiring them.

Two reasons why human resource planning sometimes leads managers to outsource are flexibility and cost.

The textbook you are reading has most likely been copyedited by a freelance editor. If a company finds itself in need of short-term assistance, places such as Kelly Services are available to supply them with temporary employees.

Job Analysis 1

The analysis identifies the tasks, duties, and responsibilities that make up a job and the knowledge, skills, and abilities needed to perform the job.

The analysis should be done for each job in the organization.

Flexible jobs have become popular with some organizations. When hiring, they may look more at a potential employee’s overall skills and knowledge and less on specific duties that the employee might perform, hoping to obtain workers who can adapt to changing tasks and responsibilities.

Job Analysis 2

Job analysis methods include:

Observing what current workers do.

Having workers and managers fill out questionnaires.

Possible questions for workers and/or managers:

What are your skills? Abilities?

What specific tasks do you perform?

How much time does it take?

What supervisory activities are involved?

What equipment do you use?

Do you prepare reports?

What decisions fall to you?

Recruitment 1

External Recruiting:

Looking outside the organization for people who have not worked at the firm previously.

Newspapers advertisements, open houses, on-campus recruiting, and the Internet.

Advantages of External Recruiting:

Having access to a potentially large applicant pool.

Being able to attract people who have the skills, knowledge, and abilities an organization needs.

Bringing in newcomers who may have a fresh approach to problems and be up to date on the latest technology.

Disadvantages of External Recruiting:

Relatively high costs.

Candidates may lack knowledge about the inner workings of the organization.

May need to receive more training.

Uncertainty concerning whether they will actually be good performers.

Recruitment 2

Internal Recruiting:

Managers turn to existing employees to fill open positions.

Benefits of internal recruiting:

Internal applicants are already familiar with the organization.

Managers already know candidates.

Can help boost levels of employee motivation and morale.

Disadvantages of internal recruiting:

A limited pool of candidates.

A tendency among candidates to be set in the organization’s ways.

No suitable internal candidates.

External recruiting can bring in new perspectives and approaches.

Recruitment 3

Lateral Move:

Job change that entails no major changes in responsibility or authority levels.

Ariel Skelley/Getty Images

It is possible that an employee might be looking to change jobs (a lateral move), not looking for a promotion or more responsibility.

Selection Tools

Figure 12.3

Background Information:

Helpful to screen out applicants who are lacking key qualifications.

Determine which qualified applicants are more promising than others.

Interviews:

Structured interviews where managers ask each applicant the same job-related questions.

Unstructured interviews that resemble normal conversations.

Usually structured interviews preferred; bias is possible in unstructured interviews.

Paper-and-Pencil Tests:

Ability tests assess the extent to which applicants possess the skills necessary for job performance.

Managers must have sound evidence that the tests are good predictors of performance.

Physical ability tests:

Measures of dexterity, strength, and stamina for physically demanding jobs.

Measures must be job related to avoid discrimination.

Performance tests:

Tests that measure an applicant’s current ability to perform the job or part of the job such as requiring an applicant to take typing speed test.

Assessment centers are facilities where managerial candidates are assessed on job-related activities over a period of a few days.

References:

Knowledgeable sources who know the applicants’ skills, abilities, and other personal characteristics.

Many former employers are reluctant to provide negative information.

The Selection Process

Selection Process:

Managers find out whether each applicant is qualified for the position and likely to be a good performer.

Possible selection tools:

Interviews.

Paper-and-pencil tests.

Physical ability tests.

Performance tests.

References.

Background information.

Reliability and Validity

Reliability:

The degree to which the tool or test measures the same thing each time it is used.

Validity:

The degree to which a tool or test measures what it is supposed to measure.

Managers should be aware of the reliability and validity (or not) of their selection tools. For example, to increase the reliability of an interview, a manager could invite different people to interview the prospects.

Training and Development 1

Training:

Teaching organizational members how to perform current jobs and helping them to acquire the knowledge and skills they need to be effective performers.

Development:

Building the knowledge and skills of organizational members so they are prepared to take on new responsibilities and challenges.

Training is focused on skill acquisition = lower levels of an organization.

Development is focused on knowledge acquisition = professionals and managers.

Topics for Discussion 2

Discuss why training and development are ongoing activities for all organizations. [LO 12-3]

Training focuses primarily on teaching organizational members how to perform their current jobs and helping them acquire the knowledge and skills they need to be effective performers. Development focuses on building organizational members' knowledge and skills so that they will be prepared to take on new responsibilities and challenges. Organizations need to continuously train and develop their human resources, especially in today's global environment. Training is more frequently used in lower levels of an organization, for example, with new hires and entry-level positions. In today's economy, these positions experience high turnover, and employees tend to move quickly between jobs and organizations, requiring new skills and knowledge in different industries and settings.

Development tends to be utilized at higher levels in organizations. People who know their jobs find they need new skills when they are given more responsibility, as is the case when jobs are enriched and organizations become decentralized. The speed of business is increasing every day, and new technology and competition make training and development necessary ongoing activities in organizations that want to survive and succeed.

Training and Development 2

Needs Assessment:

An assessment of which employees need training or development and what type of skills or knowledge they need to acquire.

Types of Training

Classroom Instruction:

Employees acquire skills in a classroom setting.

Includes use of videos, role-playing, and simulations.

On-the-Job Training:

Training that takes place in the work setting as employees perform their job tasks.

Videos can be used to model job behaviors; learning to deal with unruly customers.

Role-playing: McDonald’s Hamburger University for franchisees to learn the restaurant.

On-the-job training pairs an experienced employee with a newcomer.

Types of Development

Varied Work Experiences:

Top managers need to develop an understanding of, and expertise in, a variety of functions, products and services, and markets.

Formal Education:

College courses.

Tuition reimbursement is common for managers taking classes for MBA or job-related degrees.

Mentoring: an experienced member of an organization provides advice and guidance to a less experienced member (protégé.) Having a mentor can help managers seek out work experiences and assignments that will contribute to their development and can enable them to gain the most possible from varied work experiences.

Topics for Discussion 3

Describe the type of development activities that you think middle managers are most in need of. [LO 12-3]

Managers need development activities to help them adjust to new responsibilities and challenges in today's organizations. Many organizations have downsized, and managers need to be able to perform many duties and functions within an organization. For this reason, managers need to be exposed to a variety of work experiences. Top managers need to develop understanding of and expertise in a variety of functions, products and services, and markets. A manager cannot narrow his or her focus to only their product line or region of the country. An opportunity to experience different roles in an organization can help a manager to understand how each function fits into the organization as a whole.

Managers can also benefit from formal education, such as executive MBA programs, where they can learn the latest in business and management techniques and practices.

Whether managers receive development on-the-job or in a classroom, transfer of knowledge and skills to the workplace is crucial. A manager must be able to successfully apply what he or she has learned and use the development experience in ways that benefit the organization and allow it to reach its goals.

Training and Development 3

Figure 12.4

Access the text alternative for slide image.

Classroom Instruction:

Employees acquire skills in a classroom setting.

Includes use of videos, role-playing, and simulations.

On-the-Job Training:

Employee learning occurs in the work setting as new worker does the job.

Training is given by co-workers and can be done continuously to update the skills of current employees.

Varied Work Experiences:

Top managers have need to and must build expertise in many areas.

Employees identified as possible top managers are assigned different tasks and a variety of positions in an organization.

Formal Education:

Tuition reimbursement is common for managers taking classes for MBA or job-related degrees.

Long-distance learning can also be used to reduce travel and other expenses for managerial training.

Performance Appraisal and Feedback

Performance Appraisal:

The evaluation of employees’ job performance and contributions to their organization.

Traits, behaviors, results.

Objective and subjective appraisals.

mavo/Shutterstock

At an annual review, a manager might share the appraisal with the employee. The employee then has a chance to reflect on and discuss his or her performance with the manager. Together, the manager and subordinate can develop a plan for the future. This is performance feedback.

Who Appraises Performance? 1

Figure 12.5

Self: Self-appraisals can supplement manager view.

Peer appraisal: Coworkers provide appraisal; common in team settings.

360 Degree: A performance appraisal by peers, subordinates, superiors, and clients who are in a position to evaluate a manager’s performance.

Who Appraises Performance? 2

360-Degree Appraisal:

Performance appraisal by peers, subordinates, superiors, and sometimes clients who are in a position to evaluate a manager’s performance.

360-degree appraisals rely on trust. In fact, trust is a critical ingredient in any performance appraisal and feedback procedure. As research has indicated, 360-degree appraisals should concentrate on behaviors and not traits or results. It is also important that managers select appropriate raters.

Topics for Discussion 4

Evaluate the pros and cons of 360-degree performance appraisals and feedback. Would you like your performance to be appraised in this manner? Why or why not? [LO 12-4]

Performance appraisal and feedback are vital components of human resources management systems. Through appraisal and feedback, performance is evaluated and information is provided to employees that enables them to reflect on their performance and develop plans for the future. The 360-degree approach allows a wider range of people to evaluate and give feedback on an employee’s performance. A manager might conduct a self-appraisal, as well as receive feedback from peers, subordinates, superiors, and even customers and clients.

Some advantages of 360-degree appraisal are that employees are able to get more than one perspective, and that people who work closely with the employee on a day-to-day basis can give feedback on overall performance, not just once a month or once a year. It is also a useful technique for meeting customer needs. It is sometimes easy for members within an organization to lose sight of the customers' perspectives, and 360-degree appraisal brings the customers' viewpoints into the larger picture.

Some disadvantages include the possibility of spiteful evaluations from disgruntled subordinates, especially if evaluations are anonymous, coerced positive evaluations from intimidated employees, or misguided evaluations from employees who are not knowledgeable enough about the job they are evaluating.

Effective Performance Feedback

Formal Appraisals:

An appraisal conducted at a set time during the year and based on performance dimensions and measures that were specified in advance.

Informal Appraisals:

An unscheduled appraisal of ongoing progress and areas for improvement.

Most large organizations rely on fixed schedules for appraisals, perhaps annually.

At an appraisal, the manager gives the employee feedback on his or her performance, where does she excel and where does she fall short.

The manager should also give guidance on how the employee can improve. New responsibilities often require informal appraisals, giving timely feedback.

Effective Feedback Tips 1

Be specific and focus on behaviors or outcomes that are correctable and within a worker’s ability to improve.

Approach performance appraisal as an exercise in problem solving and solution finding, not criticizing.

Express confidence in a subordinate’s ability to improve.

Provide performance feedback both formally and informally.

Although difficult, it is important to give negative feedback.

Effective Feedback Tips 2

Praise instances of high performance and areas of a job in which a worker excels.

Avoid personal criticisms and treat subordinates with respect.

Agree to a timetable for performance improvements.

The goal of performance feedback is to enhance motivation and performance. It also informs pay raises and bonuses.

Pay and Benefits 1

Pay:

Includes employees’ base salaries, pay raises, and bonuses.

Determined by characteristics of the organization, the job, and levels of performance.

Benefits are based on membership in an organization.

Pay, of course, can be a great motivator, but it is important to tie it to an employee’s behavior or results, all with the goal of improving an organization’s effectiveness.

Pay and Benefits 2

Pay Level:

The relative position of an organization’s pay incentives in comparison with those of other organizations in the same industry employing similar kinds of workers.

High wages improve recruiting but raise costs.

Low wages provide a company with a cost advantage but can negatively affect recruitment.

Topics for Discussion 5

Discuss why two restaurants in the same community might have different pay levels. [LO 12-5]

A pay level is a broad term that refers to how an organization's pay incentives compare, in general, to those of other organizations in the same industry, employing similar kinds of workers.

Two restaurants in the same community might have different pay levels if they are pursuing different organizational strategies. An expensive French restaurant may value the competitive advantage that is gained through superior, quality food and excellent service. This restaurant would likely adopt a high pay level, paying its chefs, servers, and staff comparatively more than other restaurants. Though high pay levels raise costs, they also help ensure that the restaurant managers will be able to recruit, select, and retain high performers. A neighborhood diner, on the other hand, may adopt a low-cost strategy, and pay its cooks, wait staff, and managers relatively low wages in order to keep costs down. The diner may gain a cost advantage, but the disadvantages may include the inability to select and recruit high performers or motivate current employees to perform at a high level.

Pay and Benefits 3

Pay Structure:

The arrangement of jobs into categories reflecting their relative importance to the organization and its goals, level of skill required, and other characteristics.

Not only do U.S. companies pay large salaries and bonuses to top-management, but the gap between them and the lowest-level employee in the company is much greater than European or Japanese companies.

According the Economic Policy Institute, “. . . in 2016 CEOs in America’s largest firms made an average of $15.6 million in compensation, or 271 times the annual average pay of the typical worker.”

Mishel, L. and Schieder, J. 2017. “CEO Pay Remains High Relative to the Pay of Typical Workers and High-Wage Earners.” Economic Policy Institute. Accessed November 14, 2017.

http://www.epi.org/publication/ceo-pay-remains-high-relative-to-the-pay-of-typical-workers-and-high-wage-earners/

Pay and Benefits 4

Benefits:

Legally required: social security, workers’ compensation, unemployment insurance.

Voluntary: health insurance, retirement, day care.

Cafeteria-Style Benefit Plan:

A plan from which employees can choose the benefits they want.

The Health Care Reform Bill signed by President Obama in March 2010, starting in 2014.

Employers with 50 or more employees may face fines if they don’t provide their employees with health insurance coverage.

Benefits enabling workers to balance the demands of their jobs and of their lives away from the office or factory are of growing importance for many workers who have competing demands on their scarce time and energy.

Labor Relations

These are the activities managers engage in to ensure they have effective working relationships with the labor unions that represent their employees’ interests.

Unions represent the workers when negotiating with management, looking after the employees pay and benefits. The U.S. government has also addressed unethical and unfair treatment of workers.

Unions 1

Unions represent worker’s interests to management in organizations.

A union might be able to ensure a worker’s interests are fairly represented.

Some workers perceive negatives in joining unions:

Corrupt leadership.

Cost of dues.

Strikes.

Unions 2

Collective Bargaining:

Negotiation between labor unions and managers to resolve conflicts and disputes about issues, such as working hours, wages, benefits, working conditions, and job security.

Strikes (cessation of work) are called to bring bargaining chips to the table for the unions. After negotiations, the terms of the collective bargaining agreement are spelled out in a contract.

BE THE MANAGER

What are you going to do?

Apparently, you tried to develop this system in a vacuum. You need to solicit input from the other managers regarding the behaviors to be rated by the 20-item scale. Now that you have some feedback, you might want to do the following:

Send an e-mail to all employees and managers in the organization apologizing for any confusion and ill will that might have been created by your actions. You can explain that you were only trying to improve the system for everyone but apparently did not communicate that very well.

Next, you could ask the managers how to improve the 20-item scale. You do not need to back down from using the 360-degree or the new performance system. However, you need to educate the managers about how it could work better using their own ideas, asking for their input now and in the future and training them in how to use the instruments fairly.

Having gathered the information, you can now revise the form’s instructions, make appropriate changes, and send out a prototype of the new forms for comments by all managers.

Once changes are incorporated, you should conduct training sessions on using the new forms. Training sessions should include the guidelines for giving effective performance feedback.

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Appendix: Image Descriptions for Unsighted Students

Components of a Human Resource Management System, Text Alternative

Return to slide.

The cluster diagram demonstrates how components of a human resource management system interrelate. The components include recruitment and selection, training and development, performance appraisal and feedback, pay and benefits, and labor relations. Each component of a human resources management system influences the others, and all five must fit together.

Return to slide containing image.

Training and Development 3, Text Alternative

Return to slide.

The chart breaks down needs assessment into training and development. Training is broken down into classroom instruction, on-the-job training, and apprenticeships, which can include classroom instruction and on-the-job training. Development is broken down into classroom instruction, on-the-job training, varied work experiences, and formal education.

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