Reflection
Mr.Garcia
RecruitingMotivatingandKeepingQualityEmployees.pdf
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Howard Schultz toasts at
the launch of their new
“everyday” brew, Pike
Place Roast, April 8,
Table of Contents
Chapter 7 Recruiting, Motivating, and Keeping Quality
Employees
The Grounds of a Great Work Environment
Howard Schultz has vivid memories of his father slumped on the couch with his leg in a
cast.Introductory material on Howard Schultz and Starbucks comes from Howard Schultz and Dori
Jones Yang, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time (New
York: Hyperion, 1997), 3–8. The ankle would heal, but his father had lost another job—this time as a
driver for a diaper service. It was a crummy job; still, it put food on the table, and if his father couldn’t
work, there wouldn’t be any money. Howard was seven, but he understood the gravity of the
situation, particularly because his mother was seven months pregnant, and the family had no
insurance.
This was just one of the many setbacks that plagued Schultz’s father throughout his life—an honest,
hard-working man frustrated by a system that wasn’t designed to cater to the needs of common
workers. He’d held a series of blue-collar jobs (cab driver, truck driver, factory worker), sometimes
holding two or three at a time. Despite his willingness to work, he never earned enough money to
move his family out of Brooklyn’s federally subsidized housing projects. Schultz’s father died never
having found fulfillment in his work life—or even a meaningful job. It was the saddest day of
Howard’s life.
As a kid, did Schultz ever imagine that one day he’d be the founder and
chairman of Starbucks Coffee Company? Of course not. But he did decide
that if he was ever in a position to make a difference in the lives of people
like his father, he’d do what he could. Remembering his father’s struggles
and disappointments, Schultz has tried to make Starbucks the kind of
company where he wished his father had worked. “Without even a high
school diploma,” Schultz admits, “my father probably could never have
been an executive. But if he had landed a job in one of our stores or
roasting plants, he wouldn’t have quit in frustration because the company
2008, in Bryant Park in
New York City.
Photo by Mario
Tama/Getty Images
didn’t value him. He would have had good health benefits, stock options,
and an atmosphere in which his suggestions or complaints would receive a
prompt, respectful response.”Howard Schultz and Dori Jones Yang, Pour
Your Heart into It: How Starbucks Built a Company One Cup at a Time
(New York: Hyperion, 1997), 138.
Schultz is motivated by both personal and business considerations: “When
employees have self-esteem and self-respect,” he argues, “they can contribute so much more: to their
company, to their family, to the world.”Howard Schultz and Dori Jones Yang, Pour Your Heart into
It: How Starbucks Built a Company One Cup at a Time (New York: Hyperion, 1997), 6–7. His
commitment to his employees is embedded in Starbuck’s mission statement, whose first objective is
to “provide a great work environment and treat each other with respect and dignity.”“Our Starbucks
Mission Statement,” Starbucks, http://www.starbucks.com/about-us/company-information/mission-
statement (accessed October 8, 2011). Those working at Starbucks are called partners because Schultz
believes working for his company is not just a job, it’s a passion.“Our Starbucks Mission Statement,”
Starbucks, http://www.starbucks.com/about-us/company-information/mission-statement (accessed
October 8, 2011).
Video Clip
(click to see video)
A major piece of the Starbucks success story has been the superior service provided by its motivated
employees.
7.1 Human Resource Management
LEARNING OBJECTIVE
1. Define human resource management and explain how managers develop and implement
a human resource plan.
Employees at Starbucks are vital to the company’s success. They are its public face, and every dollar of
sales passes through their hands.Howard Schultz and Dori Jones Yang, Pour Your Heart into It: How
Starbucks Built a Company One Cup at a Time (New York: Hyperion, 1997), 125. According to
Howard Schultz, they can make or break the company. If a customer has a positive interaction with an
employee, the customer will come back. If an encounter is negative, the customer is probably gone for
good. That’s why it’s crucial for Starbucks to recruit and hire the right people, train them properly,
motivate them to do their best, and encourage them to stay with the company. Thus, the company
works to provide satisfying jobs, a positive work environment, appropriate work schedules, and fair
compensation and benefits. These activities are part of Starbucks’s strategy to deploy human
resources in order to gain competitive advantage. The process is called human resource
management (HRM), which consists of all actions that an organization takes to attract, develop,
and retain quality employees. Each of these activities is complex. Attracting talented employees
involves the recruitment of qualified candidates and the selection of those who best fit the
organization’s needs. Development encompasses both new-employee orientation and the training and
development of current workers. Retaining good employees means motivating them to excel,
appraising their performance, compensating them appropriately, and doing what’s possible to retain
them.
Human Resource Planning
How does Starbucks make sure that its worldwide retail locations are staffed with just the right
number of committed employees? How does Walt Disney World ensure that it has enough qualified
“cast members” to provide visitors with a “magical” experience? How does Norwegian Cruise Lines
make certain that when the Norwegian Dawn pulls out of New York harbor, it has a complete, fully
trained crew on board to feed, entertain, and care for its passengers? Managing these tasks is a matter
of strategic human resource planning—the process of developing a plan for satisfying an
organization’s human resources (HR) needs.
A strategic HR plan lays out the steps that an organization will take to ensure that it has the right
number of employees with the right skills in the right places at the right times. HR managers begin by
analyzing the company’s mission, objectives, and strategies. Starbucks’s objectives, for example,
include the desire to “develop enthusiastically satisfied customers”“Our Starbucks Mission
Statement,” Starbucks, http://www.starbucks.com/about-us/company-information/mission-
statement (accessed October 8, 2011). as well as to foster an environment in which employees treat
both customers and each other with respect. Thus, the firm’s HR managers look for people who are
“adaptable, self-motivated, passionate, creative team members.”“25 Top MBA Employers,”
CNNMoney,
http://money.cnn.com/galleries/2007/fortune/0704/gallery.MBA_employers.fortune/14.html
(accessed October 8, 2011). Likewise, Disney’s overall objectives include not only making all visitors
feel as if they’re special in a special place but also ensuring that employees’ appearance reflects a
special image (there’s even a forty-seven-page book on the subject).“How Disney Puts the Magic in
Recruiting,” Vault, http://www.vault.com/nr/newsmain.jsp?
nr_page=3&ch_id=400&article_id=51875&cat_id=1083 (accessed May 6, 2006). Disney looks for
people who best fulfill these job requirements. The main goal of Norwegian Cruise Lines—to lavish
passengers with personal attention—determines not only the type of employee desired (one with
exceptionally good customer-relation skills and a strong work ethic) but also the number needed (one
for every two passengers on the Norwegian Dawn).“Overview of Careers on Cruise Ships,” Career
Prospects in Virginia,
http://www3.ccps.virginia.edu/career_prospects/briefs/PS/SummaryCruise.shtml (accessed May 6,
2006).
Job Analysis
To develop an HR plan, HR managers must obviously be knowledgeable about the jobs that the
organization needs performed. They organize information about a given job by performing a job
analysis to identify the tasks, responsibilities, and skills that it entails, as well as the knowledge and
abilities needed to perform it. Managers also use the information collected for the job analysis to
prepare two documents:
A job description, which lists the duties and responsibilities of a position
A job specification, which lists the qualifications—skills, knowledge, and abilities—needed to
perform the job
HR Supply and Demand Forecasting
Once they’ve analyzed the jobs within the organization, HR managers must forecast future hiring (or
firing) needs. This is the three-step process summarized in Figure 7.1 "How to Forecast Hiring (and
Firing) Needs".
Figure 7.1 How to Forecast Hiring (and Firing) Needs
Starbucks, for instance, might find that it needs three hundred new employees to work at stores
scheduled to open in the next few months. Disney might determine that it needs two thousand new
cast members to handle an anticipated surge in visitors. The Norwegian Dawn might be short two
dozen restaurant workers because of an unexpected increase in reservations.
After calculating the disparity between supply and future demand, HR managers must draw up plans
for bringing the two numbers into balance. If the demand for labor is going to outstrip the supply,
they may hire more workers, encourage current workers to put in extra hours, subcontract work to
other suppliers, or introduce labor-saving initiatives. If the supply is greater than the demand, they
may deal with overstaffing by not replacing workers who leave, encouraging early retirements, laying
off workers, or (as a last resort) firing workers.
Recruiting Qualified Employees
Armed with information on the number of new employees to be hired and the types of positions to be
filled, the HR manager then develops a strategy for recruiting potential employees. Recruiting is the
process of identifying suitable candidates and encouraging them to apply for openings in the
organization.
Before going any further, we should point out that, in recruiting and hiring, managers must comply
with antidiscrimination laws; violations can have legal consequences. Discrimination occurs when
a person is treated unfairly on the basis of a characteristic unrelated to ability. Under federal law, it’s
illegal to discriminate in recruiting and hiring on the basis of race, color, religion, sex, national origin,
age, or disability. (The same rules apply to other employment activities, such as promoting,
compensating, and firing.)The U.S. Equal Employment Opportunity Commission, “Discriminatory
Practices,” http://www.eeoc.gov/laws/practices/index.cfm (accessed October 8, 2011). The Equal
Employment Opportunity Commission (EEOC) enforces a number of federal employment
laws, including the following:
Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on
race, color, religion, sex, or national origin. Sexual harassment is also a violation of Title VII.
The Equal Pay Act of 1963, which protects both women and men who do substantially equal work
from sex-based pay discrimination.
The Age Discrimination in Employment Act of 1964, which protects individuals who are forty or
older.
Title I and Title V of the Americans with Disabilities Act of 1990, which prohibits employment
discrimination against individuals with disabilities.The U.S. Equal Employment Opportunity
Commission, “Federal Equal Employment Opportunity (EEO) Laws,”
http://www.eeoc.gov/laws/statutes/index.cfm (accessed October 8, 2011).
Where to Find Candidates
The first step in recruiting is to find qualified candidates. Where do you look for them, and how do
you decide whether they’re qualified? Let’s start with the second part of the question first. A qualified
person must be able to perform the duties listed in the job description and must possess the skills,
knowledge, and abilities detailed in the job specification. In addition, he or she must be a good “fit”
for the company. A Disney recruiter, for example, wants a candidate who fits a certain image—
someone who’s clean-cut and “wholesome” looking. The same recruiter might also favor candidates
with certain qualities—someone who has a “good attitude,” who’s a “go-getter” and a “team player,”
and who’s smart, responsible, and stable.Bob Nelson and Peter Economy, Managing for Dummies,
2nd ed. (New York: Wiley, 2003), 60.
Internal versus External Recruiting
Where do you find people who satisfy so many criteria? Basically, you can look in two places: inside
and outside your own organization. Both options have pluses and minuses. Hiring internally sends a
positive signal to employees that they can move up in the company—a strong motivation tool and a
reward for good performance. In addition, because an internal candidate is a known quantity, it’s
easier to predict his or her success in a new position. Finally, it’s cheaper to recruit internally. On the
other hand, you’ll probably have to fill the promoted employee’s position. Going outside gives you an
opportunity to bring fresh ideas and skills into the company. In any case, it’s often the only
alternative, especially if no one inside the company has just the right combination of skills and
experiences. Entry-level jobs usually have to be filled from the outside.
How to Find Candidates
Whether you search inside or outside the organization, you need to publicize the opening. If you’re
looking internally in a small organization, you can alert employees informally. In larger organizations,
HR managers generally post openings on bulletin boards (often online) or announce them in
newsletters. They can also seek direct recommendations from various supervisors.
Recruiting people from outside is more complicated. It’s a lot like marketing a product to buyers: in
effect, you’re marketing the virtues of working for your company. Starbucks uses the following outlets
to advertise openings:
A dedicated section of the corporate Web site (“Job Center,” which lists openings, provides
information about the Starbucks experience, and facilitates the submission of online applications)
College campus recruiting (holding on-campus interviews and information sessions and
participating in career fairs)
Internships designed to identify future talent among college students
Announcements on employment Web sites like Monster.com, Vault.com, Glassdoor.com, and
SimplyHired.com
Newspaper classified ads
Facebook and Twitter
Local job fairs
In-store recruiting posters
Informative “business cards” for distribution to customers“Target Your Recruitment Market,”
InFocus: Recruiter News, http://www.net-temps.com/recruiters/infocus/article.htm?
op=view&id=662 (accessed October 6, 2011).
When asked what it takes to attract the best people, Starbucks’s senior executive Dave Olsen replied,
“Everything matters.” Everything Starbucks does as a company bears on its ability to attract talent.
Accordingly, everyone is responsible for recruiting, not just HR specialists. In fact, the best source of
quality applicants is the company’s own labor force.David Lee, “Becoming a Talent Magnet: Your
First Task as a Recruiter: Recruit Senior Management onto Your Team,”
http://www.humannatureatwork.com/Recruiting-Employees.htm (accessed October 8, 2011).
The Selection Process
Recruiting gets people to apply for positions, but once you’ve received applications, you still have to
select the best candidate—another complicated process. The selection process entails gathering
information on candidates, evaluating their qualifications, and choosing the right one. At the very
least, the process can be time-consuming—particularly when you’re filling a high-level position—and
often involves several members of an organization.
Let’s examine the selection process more closely by describing the steps that you’d take to become a
special agent for the Federal Bureau of Investigation (FBI).The information in this section comes
from two sources: Federal Bureau of Investigation, “Jobs: Special Agents,” http://www.fbijobs.gov/
(accessed October 9, 2011); “Special Agent Application and Hiring Process,” Federal Bureau of
Investigations, http://www.fbijobs.gov/112.asp, (accessed October 9, 2011). Most business students
don’t generally aspire to become FBI agents, but the FBI is quite interested in business graduates—
especially if you have a major in accounting or finance. With one of these backgrounds, you’ll be given
priority in hiring. Why? Unfortunately, there’s a lot of white-collar crime that needs to be
investigated, and people who know how to follow the money are well suited for the task.
Application
The first step in becoming a gun-toting accountant is, obviously, applying for the job. Don’t bother
unless you meet the minimum qualifications: you must be a U.S. citizen, be age twenty-three to thirty-
seven, be physically fit, and have a bachelor’s degree. To provide factual information on your
education and work background, you’ll submit an application, which the FBI will use as an initial
screening tool.
Employment Tests
Next comes a battery of tests (a lot more than you’d take in applying for an everyday business
position). Like most organizations, the FBI tests candidates on the skills and knowledge entailed by
the job. Unlike most businesses, however, the FBI will also measure your aptitude, evaluate your
personality, and assess your writing ability. You’ll have to take a polygraph (lie-detector) test to
determine the truthfulness of the information you’ve provided, uncover the extent of any drug use,
and disclose potential security problems.
Interview
If you pass all these tests (with sufficiently high marks), you’ll be granted an interview. It serves the
same purpose as it does for business recruiters: it allows the FBI to learn more about you and gives
you a chance to learn more about your prospective employer and your possible future in the
organization. The FBI conducts structured interviews—a series of standard questions. You’re judged
on both your answers and your ability to communicate orally.
Physical Exam and Reference Checks
Let’s be positive and say you passed the interview. What’s next? You still have to pass a rigorous
physical examination (including a drug test), as well as background and reference checks. Given its
mission, the FBI sets all these hurdles a little higher than the average retail clothing chain. Most
businesses will ask you to take a physical exam, but you probably won’t have to meet the fitness
standards set by the FBI. Likewise, many businesses check references to verify that applicants haven’t
lied about (or exaggerated) their education and work experience. The FBI goes to great lengths to
ensure that candidates are suitable for law-enforcement work.
Final Decision
The last stage in the process is out of your control. Will you be hired or rejected? This decision is
made by one or more people who work for the prospective employer. For a business, the decision
maker is generally the line manager who oversees the position being filled. At the FBI, the decision is
made by a team at FBI headquarters. If you’re hired as a special agent, you’ll spend twenty-one weeks
of intensive training at the FBI Academy in Quantico, Virginia.
Contingent Workers
Though most people hold permanent, full-time positions, there’s a growing number of individuals
who work at temporary or part-time jobs. Many of these are contingent workers hired to
supplement a company’s permanent workforce. Most of them are independent contractors,
consultants, or freelancers who are paid by the firms that hire them. Others are oncall workers who
work only when needed, such as substitute teachers. Still others are temporary workers (or “temps”)
who are employed and paid by outside agencies or contract firms that charge fees to client companies.
The Positives and Negatives of Temp Work
The use of contingent workers provides companies with a number of benefits. Because they can be
hired and fired easily, employers can better control labor costs. When things are busy, they can add
temps, and when business is slow, they can release unneeded workers. Temps are often cheaper than
permanent workers, particularly because they rarely receive costly benefits. Employers can also bring
in people with specialized skills and talents to work on special projects without entering into long-
term employment relationships. Finally, companies can “try out” temps: if someone does well, the
company can offer permanent employment; if the fit is less than perfect, the employer can easily
terminate the relationship. There are downsides to the use of contingent workers, including increased
training costs and decreased loyalty to the company. Also, many employers believe that because
temps are usually less committed to company goals than permanent workers, productivity suffers.
What about you? Does temporary work appeal to you? On the plus side, you can move around to
various companies and gain a variety of skills. You can see a company from the inside and decide up
front whether it’s the kind of place you’d like to work at permanently. If it is, your temporary position
lets you showcase your skills and talents and grab the attention of management, which could increase
the likelihood you’ll be offered a permanent position. There are also some attractive lifestyle benefits.
You might, for example, work at a job or series of jobs for, say, ten months and head for the beach for
the other two. On the other hand, you’ll probably get paid less, receive no benefits, and have no job
security. For most people, the idea of spending two months a year on the beach isn’t that appealing.
KEY TAKEAWAYS
The process of human resource management consists of all the actions that an
organization takes to attract, develop, and retain quality employees.
To ensure that the organization is properly staffed, managers engage in strategic human
resource planning—the process of developing a plan for satisfying the organization’s
human resource needs.
Managers organize information about a given job by performing a job analysis, which
they use to prepare two documents: a job description listing the duties and
responsibilities of a position and a job specification, which lists the qualifications—skills,
knowledge, and abilities—needed to perform the job.
After analyzing the jobs that must be performed, the HR manager forecasts future hiring
needs and begins the recruiting process to identify suitable candidates and encourage
them to apply.
In recruiting and hiring, managers must comply with antidiscrimination laws enforced by
the Equal Employment Opportunity Commission (EEOC).
Discrimination occurs when a person is treated unfairly on the basis of a characteristic
unrelated to ability, such as race, color, religion, sex, national origin, age, or disability.
Once a pool of suitable candidates has been identified, managers begin the selection
process, reviewing information provided by candidates on employment applications and
administering tests to assess candidates’ skills and knowledge.
Candidates who pass this stage may be granted an interview and, perhaps, offered a job.
EXERCISE
You’re the chairperson of the management department at your college. Describe the steps
you’d take to ensure that your department has enough qualified faculty to meet its needs.
7.2 Developing Employees
LEARNING OBJECTIVE
1. Explain how companies train and develop employees, and discuss the importance of a
diverse workforce.
Because companies can’t survive unless employees do their jobs well, it makes economic sense to
train them and develop their skills. This type of support begins when an individual enters the
organization and continues as long as he or she stays there.
NewEmployee Orientation
Have you ever started your first day at a new job feeling upbeat and optimistic only to walk out at the
end of the day thinking that maybe you’ve taken the wrong job? If this happens too often, your
employer may need to revise its approach to orientation—the way it introduces new employees to
the organization and their jobs. Starting a new job is a little like beginning college; at the outset, you
may be experiencing any of the following feelings:
Somewhat nervous but enthusiastic
Eager to impress but not wanting to attract too much attention
Interested in learning but fearful of being overwhelmed with information
Hoping to fit in and worried about looking new or inexperienced“Induction: Orienting the New
Employee,” HRM Guide Network, http://www.bestbooks.biz/learning/induction.html (accessed
October 9, 2011).
The employer who understands how common such feelings are is more likely not only to help
newcomers get over them but also to avoid the pitfalls often associated with new-employee
orientation:
Failing to have a workspace set up for you
Ignoring you or failing to supervise you
Neglecting to introduce you to coworkers (or introducing you to so many people that you have no
chance of remembering anybody’s name)
Assigning you no work or giving you busywork unrelated to your actual job
Swamping you with facts about the companySusan Heathfield, “Top Ten Ways to Turn Off a New
Employee,” About, Inc., http://humanresources.about.com/library/weekly/aa022601a.htm
(accessed October 9, 2011).
A good employer will take things slowly, providing you with information about the company and your
job on a need-to-know basis while making you feel as comfortable as possible. You’ll get to know the
company’s history, traditions, policies, and culture over time. You’ll learn more about salary and
benefits and how your performance will be evaluated. Most importantly, you’ll find out how your job
fits into overall operations and what’s expected of you.
Training and Development
It would be nice if employees came preprogrammed with all the skills they need to do their jobs. It
would also be nice if job requirements stayed the same: once you’ve learned how to do a job (or been
preprogrammed), you’d know how to do it forever. In reality, new employees must be trained;
moreover, as they grow in their jobs or as their jobs change, they’ll need additional training.
Unfortunately, training is costly and time-consuming.
How costly? On average, for every $1 in payroll, large companies spend close to $0.03 in employee
training and development.“2010 Training Industry Report,” Training Magazine, November 2010,
http://www.trainingmag.com/article/2010-training-industry-report (accessed October 9, 2011). The
consulting firm Booz Allen Hamilton invests almost $0.08 in employee training and development. At
Pfizer, the world’s largest pharmaceutical company, the total is $0.14 out of every payroll dollar.“Top
100: Top Five Profile and Rank,” Training Magazine, March 2004, 42. What’s the payoff? Why are
such companies willing to spend so much money on their employees? Pfizer, whose motto is “Succeed
through People,” regards employee growth and development as its top priority. At Booz Allen
Hamilton, consultants specialize in finding innovative solutions to client problems, and their
employer makes sure that they’re up-to-date on all the new technologies by maintaining a “technology
petting zoo” at its training headquarters. It’s called a “petting zoo” because employees get to see,
touch, and interact with new and emerging technologies. For example, those attending the “petting
zoo” several years ago got to try out the Segway Human Transporter even before it hit the
market.Tammy Galvin, “The 2003 Training Top 100,” Training Magazine, March 2003, 2.
At Booz Allen Hamilton’s technology “petting zoo,” employees are receiving offthejob training.
This approach allows them to focus on learning without the distractions that would occur in the
office. More common, however, is informal onthejob training, which may be supplemented with
formal training programs. This is the method, for example, by which you’d move up from mere coffee
maker to a full-fledged “barista” if you worked at Starbucks.Brooke Locascio, “Working at Starbucks:
More Than Just Pouring Coffee,” Tea and Coffee, January/February 2004,
http://www.teaandcoffee.net/0104/coffee.htm (accessed October 9, 2011). You’d begin by reading a
large spiral book (titled Starbucks University) on the responsibilities of the barista. After you’ve
passed a series of tests on the reading material, you’ll move behind the coffee bar, where a manager or
assistant manager will give you hands-on experience in making drinks. According to the rules, you
can’t advance to a new drink until you’ve mastered the one you’re working on; the process, therefore,
may take a few days (or even weeks). Next, you have to learn enough about different types of coffee to
be able to describe them to customers. (Because this course involves drinking a lot of coffee, you don’t
have to worry about staying awake.) Eventually, you’ll be declared a coffee connoisseur, but there’s
still one more set of skills to master: you must complete a customer-service course, which trains you
in making eye contact with customers, anticipating their needs, and making them feel
welcome.Howard Schultz and Dori Jones Yang, Pour Your Heart into It: How Starbucks Built a
Company One Cup at a Time (New York: Hyperion, 1997), 250–51.
Diversity in the Workplace
The makeup of the U.S. workforce has changed dramatically over the past 50 years. In the 1950s,
more than 60 percent was composed of white males.Judith Lindenberger and Marian Stoltz-Loike,
“Diversity in the Workplace,” The Economics and Policy Resource Center,
http://www.zeromillion.com/econ/workplace-diversity.html (accessed October 9, 2011). Today’s
workforce, however, reflects the broad range of differences in the population—differences in gender,
race, ethnicity, age, physical ability, religion, education, and lifestyle. As you can see in Table 7.1
"Employment by Gender and Ethnic Group", more women and minorities have entered the
workforce, and white males now make up only 36 percent of the workforce.U.S. Equal Employment
Opportunity Commission, “Occupational Employment in Private Industry by Race/Ethnic
Group/Sex, and by Industry, United States, 2006,”
http://archive.eeoc.gov/stats/jobpat/2006/national.html (accessed October 10, 2011). Their
percentage representation diminished as more women and minorities entered the workforce.
Most companies today strive for diverse workforces. HR managers work hard to recruit, hire, develop,
and retain a workforce that’s representative of the general population. In part, these efforts are
motivated by legal concerns: discrimination in recruiting, hiring, advancement, and firing is illegal
under federal law and is prosecuted by the EEOC.U.S. Equal Employment Opportunity Commission,
“Federal Laws Prohibiting Job Discrimination: Questions and Answers,” Federal Equal Employment
Opportunity (EEO) Laws, http://www.eeoc.gov/facts/qanda.html (accessed October 9, 2011).
Companies that violate antidiscrimination laws not only are subject to severe financial penalties but
also risk damage to their reputations. In November 2004, for example, the EEOC charged that
recruiting policies at Abercrombie & Fitch, a national chain of retail clothing stores, had
discriminated against minority and female job applicants between 1999 and 2004. The employer,
charged the EEOC, had hired a disproportionate number of white salespeople, placed minorities and
women in less visible positions, and promoted a virtually all-white image in its marketing efforts. Six
days after the EEOC filed a lawsuit, the company settled the case at a cost of $50 million, but the
negative publicity will hamper both recruitment and sales for some time to come.U.S. Equal
Employment Opportunity Commission, “EEOC Agrees to Landmark Resolution of Discrimination
Case Against Abercrombie & Fitch,” http://www.eeoc.gov/press/11-18-04.html (accessed October 10,
2011).
Table 7.1 Employment by Gender and Ethnic Group
Group Total (%) Males (%) Females (%)
All employees 100 52 48
White 68 36 32
African American 14 6 8
Hispanic or Latino 13 7 5
Asian/Pacific Islander/Other 5 3 3
There’s good reason for building a diverse workforce that goes well beyond mere compliance with
legal standards. It even goes beyond commitment to ethical standards. It’s good business. People with
diverse backgrounds bring fresh points of view that can be invaluable in generating ideas and solving
problems. In addition, they can be the key to connecting with an ethnically diverse customer base. If a
large percentage of your customers are Hispanic, it might make sense to have a Hispanic marketing
manager. In short, capitalizing on the benefits of a diverse workforce means that employers should
view differences as assets rather than liabilities.
KEY TAKEAWAYS
The process of introducing new employees to their jobs and to the company is called
orientation.
An effective approach is to take things slowly, providing new employees with information
on a needtoknow basis while making them feel as comfortable as possible.
New employees will need initial training to start their jobs, and they’ll need additional
training as they grow in or change their jobs.
Offthejob training allows them to focus on learning without the distractions that would
occur in the office, but onthejob training is more common.
In addition to having welltrained employees, it’s important that a workforce reflects the
broad range of differences in the population.
The efforts of HR managers to build a workforce that’s representative of the general
population are driven in part by legal concerns: discrimination is illegal, and companies
that violate antidiscrimination laws are subject to prosecution.
But ensuring a diverse workforce goes well beyond both legal compliance and ethical
commitment. It’s good business, because a diverse group of employees can bring fresh
points of view that may be valuable in generating ideas and solving problems.
Additionally, people from varied backgrounds can help an organization connect with an
ethnically diverse customer base.
EXERCISES
1. (AACSB) Reflective Skills
Think about a fulltime or parttime job that you’ve held. Was your orientation to the
job satisfactory? If not, how would you have improved the process? Did you
receive any training? Was it useful? What additional training would have helped
you do a better job? How would it have benefited the company?
2. (AACSB) Diversity
While visiting a mall in Los Angeles, you noticed two stores located side by side
selling electronicentertainment products—CDs, DVDs, and so on. All the
employees in one store were white males. The mix of workers in the other store—
which happened to be more profitable—was more diverse. Why do you think the
store with the diverse workforce did more business? In terms of diversity, what
would be your ideal workforce in a store similar to these in Los Angeles?
7.3 Motivating Employees
LEARNING OBJECTIVE
1. Define motivation and describe several theories of motivation.
Motivation refers to an internally generated drive to achieve a goal or follow a particular course of
action. Highly motivated employees focus their efforts on achieving specific goals; those who are
unmotivated don’t. It’s the manager’s job, therefore, to motivate employees—to get them to try to do
the best job they can. But what motivates employees to do well? How does a manager encourage
employees to show up for work each day and do a good job? Paying them helps, but many other
factors influence a person’s desire (or lack of it) to excel in the workplace. What are these factors? Are
they the same for everybody? Do they change over time? To address these questions, we’ll examine
four of the most influential theories of motivation: hierarchyofneeds theory, twofactor theory,
expectancy theory, and equity theory.
HierarchyofNeeds Theory
Psychologist Abraham Maslow’s hierarchyofneeds theory proposed that we are motivated by
the five unmet needs, arranged in the hierarchical order shown in Figure 7.3 "Maslow’s Hierarchy-of-
Needs Theory", which also lists examples of each type of need in both the personal and work spheres
of life. Look, for instance, at the list of personal needs in the left-hand column. At the bottom are
physiological needs (such life-sustaining needs as food and shelter). Working up the hierarchy we
experience safety needs (financial stability, freedom from physical harm), social needs (the need to
belong and have friends), esteem needs (the need for self-respect and status), and selfactualization
needs (the need to reach one’s full potential or achieve some creative success).
Figure 7.3 Maslow’s HierarchyofNeeds Theory
There are two things to remember about Maslow’s model:
1. We must satisfy lower-level needs before we seek to satisfy higher-level needs.
2. Once we’ve satisfied a need, it no longer motivates us; the next higher need takes its place.
Let’s say, for example, that you’ve just returned to college and that for a variety of reasons that aren’t
your fault, you’re broke, hungry, and homeless. Because you’ll probably take almost any job that will
pay for food and housing (physiological needs), you go to work repossessing cars. Fortunately, your
student loan finally comes through, and with enough money to feed yourself, you can look for a job
that’s not so risky (a safety need). You find a job as a night janitor in the library, and though you feel
secure, you start to feel cut off from your friends, who are active during daylight hours. You want to
work among people, not books (a social need). So now you join several of your friends selling pizza in
the student center. This job improves your social life, but even though you’re very good at making
pizzas, it’s not terribly satisfying. You’d like something that will let you display your intellectual
talents (an esteem need). So you study hard and land a job as an intern in the governor’s office. On
graduation, you move up through a series of government appointments and eventually run for state
senator. As you’re sworn into office, you realize that you’ve reached your full potential (a self
actualization need) and you comment to yourself, “It doesn’t get any better than this.”
Needs Theory and the Workplace
What implications does Maslow’s theory have for business managers? There are two key points: (1)
Not all employees are driven by the same needs, and (2) the needs that motivate individuals can
change over time. Managers should consider which needs different employees are trying to satisfy and
should structure rewards and other forms of recognition accordingly. For example, when you got your
first job repossessing cars, you were motivated by the need for money to buy food. If you’d been given
a choice between a raise or a plaque recognizing your accomplishments, you’d undoubtedly have
opted for the money. As a state senator, by contrast, you may prefer public recognition of work well
done (say, election to higher office) to a pay raise.
TwoFactor Theory
Another psychologist, Frederick Herzberg, set out to determine which work factors (such as wages,
job security, or advancement) made people feel good about their jobs and which factors made them
feel bad about their jobs. He surveyed workers, analyzed the results, and concluded that to
understand employee satisfaction (or dissatisfaction), he had to divide work factors into two
categories:
Motivation factors. Those factors that are strong contributors to job satisfaction
Hygiene factors. Those factors that are not strong contributors to satisfaction but that must be
present to meet a worker’s expectations and prevent job dissatisfaction
Figure 7.5 "Herzberg’s Two-Factor Theory" illustrates Herzberg’s twofactor theory. Note that
motivation factors (such as promotion opportunities) relate to the nature of the work itself and the
way the employee performs it. Hygiene factors (such as physical working conditions) relate to the
environment in which it’s performed. (Note, too, the similarity between Herzberg’s motivation
factors and Maslow’s esteem and self-actualization needs.)
Figure 7.5 Herzberg’s TwoFactor Theory
TwoFactor Theory and the Workplace
We’ll ask the same question about Herzberg’s model as we did about Maslow’s: What does it mean for
managers? Suppose you’re a senior manager in an accounting firm, where you supervise a team of
accountants, each of whom has been with the firm for five years. How would you use Herzberg’s
model to motivate the employees who report to you? Let’s start with hygiene factors. Are salaries
reasonable? What about working conditions? Does each accountant have his or her own workspace,
or are they crammed into tiny workrooms? Are they being properly supervised or are they left on their
own to sink or swim? If hygiene factors like these don’t meet employees’ expectations, they may be
dissatisfied with their jobs.
As you can see in Figure 7.5 "Herzberg’s Two-Factor Theory", fixing problems related to hygiene
factors may alleviate job dissatisfaction, but it won’t necessarily improve anyone’s job satisfaction. To
increase satisfaction (and motivate someone to perform better), you must address motivation factors.
Is the work itself challenging and stimulating? Do employees receive recognition for jobs well done?
Will the work that an accountant has been assigned help him or her to advance in the firm? According
to Herzberg, motivation requires a twofold approach: eliminating dissatisfiers and enhancing
satisfiers.
Expectancy Theory
If you were a manager, wouldn’t you like to know how your employees decide to work hard or goof
off? Wouldn’t it be nice to know whether a planned rewards program will have the desired effect—
namely, motivating them to perform better in their jobs? Wouldn’t it be helpful if you could measure
the effect of bonuses on employee productivity? These are the issues considered by psychologist
Victor Vroom in his expectancy theory, which proposes that employees will work hard to earn
rewards that they value and that they consider obtainable.
As you can see from Figure 7.6 "Vroom’s Expectancy Theory", Vroom argues that an employee will be
motivated to exert a high level of effort to obtain a reward under three conditions:
1. The employee believes that his or her efforts will result in acceptable performance.
2. The employee believes that acceptable performance will lead to the desired outcome or reward.
3. The employee values the reward.
Figure 7.6 Vroom’s Expectancy Theory
Expectancy Theory and the Workplace
To apply expectancy theory to a real-world situation, let’s analyze an automobile-insurance company
with one hundred agents who work from a call center. Assume that the firm pays a base salary of
$2,000 a month, plus a $200 commission on each policy sold above ten policies a month. In terms of
expectancy theory, under what conditions would an agent be motivated to sell more than ten policies
a month?
1. The agent would have to believe that his or her efforts would result in policy sales (that, in other
words, there’s a positive link between effort and performance).
2. The agent would have to be confident that if he or she sold more than ten policies in a given
month, there would indeed be a bonus (a positive link between performance and reward).
3. The bonus per policy—$200—would have to be of value to the agent.
Now let’s alter the scenario slightly. Say that the company raises prices, thus making it harder to sell
the policies. How will agents’ motivation be affected? According to expectancy theory, motivation will
suffer. Why? Because agents may be less confident that their efforts will lead to satisfactory
performance. What if the company introduces a policy whereby agents get bonuses only if buyers
don’t cancel policies within ninety days? How will this policy affect motivation? Now agents may be
less confident that they’ll get bonuses even if they do sell more than ten policies. Motivation will
decrease because the link between performance and reward has been weakened. Finally, what will
happen if bonuses are cut from $200 to $25? Obviously, the reward would be of less value to agents,
and, again, motivation will suffer. The message of expectancy theory, then, is fairly clear: managers
should offer rewards that employees value, set performance levels that they can reach, and ensure a
strong link between performance and reward.
Equity Theory
What if you spent thirty hours working on a class report, did everything you were supposed to do, and
handed in an excellent assignment (in your opinion). Your roommate, on the other hand, spent about
five hours and put everything together at the last minute. You know, moreover, that he ignored half
the requirements and never even ran his assignment through a spell-checker. A week later, your
teacher returns the reports. You get a C and your roommate gets a B+. In all likelihood, you’ll feel that
you’ve been treated unfairly relative to your roommate.
Your reaction makes sense according to the equity theory of motivation, which focuses on our
perceptions of how fairly we’re treated relative to others. Applied to the work environment, this
theory proposes that employees analyze their contributions or job inputs (hours worked, education,
experience, work performance) and their rewards or job outcomes (salary, benefits, recognition).
Then they create a contributions/rewards ratio and compare it to those of other people. The basis of
comparison can be any one of the following:
Someone in a similar position
Someone holding a different position in the same organization
Someone with a similar occupation
Someone who shares certain characteristics (such as age, education, or level of experience)
Oneself at another point in time
When individuals perceive that the ratio of their contributions to rewards is comparable to that of
others, they perceive that they’re being treated equitably; when they perceive that the ratio is out of
balance, they perceive inequity. Occasionally, people will perceive that they’re being treated better
than others. More often, however, they conclude that others are being treated better (and that they
themselves are being treated worse). This is what you concluded when you saw your grade. You’ve
calculated your ratio of contributions (hours worked, research and writing skills) to rewards (project
grade), compared it to your roommate’s ratio, and concluded that the two ratios are out of balance.
What will an employee do if he or she perceives an inequity? The individual might try to bring the
ratio into balance, either by decreasing inputs (working fewer hours, refusing to take on additional
tasks) or by increasing outputs (asking for a raise). If this strategy fails, an employee might complain
to a supervisor, transfer to another job, leave the organization, or rationalize the situation (perhaps
deciding that the situation isn’t so bad after all). Equity theory advises managers to focus on treating
workers fairly, especially in determining compensation, which is, naturally, a common basis of
comparison.
KEY TAKEAWAYS
Motivation describes an internally generated drive that propels people to achieve goals or
pursue particular courses of action.
There are four influential theories of motivation: hierarchyofneeds theory, twofactor
theory, expectancy theory, and equity theory.
Hierarchyofneeds theory proposes that we’re motivated by five unmet needs—
physiological, safety, social, esteem, and selfactualization— and must satisfy lowerlevel
needs before we seek to satisfy higherlevel needs.
Twofactor theory divides work factors into motivation factors (those that are strong
contributors to job satisfaction) and hygiene factors (those that, though not strong
contributors to satisfaction, must be present to prevent job dissatisfaction). To increase
satisfaction (and motivate someone to perform better), managers must address motivation
factors.
Expectancy theory proposes that employees work hard to obtain a reward when they
value the reward, believe that their efforts will result in acceptable performance, and
believe that acceptable performance will lead to a desired outcome or reward.
Equity theory focuses on our perceptions of how fairly we’re treated relative to others.
This theory proposes that employees create contributions/rewards ratios that they
compare to those of others. If they feel that their ratios are comparable to those of others,
they’ll perceive that they’re being treated equitably.
EXERCISE
This chapter describes four theories of motivation: hierarchyofneeds theory, twofactor
theory, expectancy theory, and equity theory. Briefly describe each theory. Which one makes
the most intuitive sense to you? Why do you find it appealing?
7.4 What Makes a Great Place to Work?
LEARNING OBJECTIVE
1. Identify factors that make an organization a good place to work, including competitive
compensation and benefits packages.
Every year, the Great Places to Work Institute analyzes comments from thousands of employees and
compiles a list of “The 100 Best Companies to Work for in America,” which is published in Fortune
magazine. Having compiled its list for more than twenty years, the institute concludes that the
defining characteristic of a great company to work for is trust between managers and employees.
Employees overwhelmingly say that they want to work at a place where employees “trust the people
they work for, have pride in what they do, and enjoy the people they work with.”“What Is a Great
Workplace?,” Great Place to Work Institute, http://www.greatplacetowork.com/our-approach/what-
is-a-great-workplace (accessed October 10, 2011). They report that they’re motivated to perform well
because they’re challenged, respected, treated fairly, and appreciated. They take pride in what they
do, are made to feel that they make a difference, and are given opportunities for advancement.“What
do Employees Say?” Great Place to Work Institute,
http://www.greatplacetowork.com/great/employees.php (accessed May 6, 2006). The most effective
motivators, it would seem, are closely aligned with Maslow’s higher-level needs and Herzberg’s
motivating factors.
Job Redesign
The average employee spends more than two thousand hours a year at work. If the job is tedious,
unpleasant, or otherwise unfulfilling, the employee probably won’t be motivated to perform at a very
high level. Many companies practice a policy of job redesign to make jobs more interesting and
challenging. Common strategies include job rotation, job enlargement, and job enrichment.
Job Rotation
Specialization promotes efficiency because workers get very good at doing particular tasks. The
drawback is the tedium of repeating the same task day in and day out. The practice of job rotation
allows employees to rotate from one job to another on a systematic basis, eventually cycling back to
their original tasks. A computer maker, for example, might rotate a technician into the sales
department to increase the employee’s awareness of customer needs and to give the employee a
broader understanding of the company’s goals and operations. A hotel might rotate an accounting
clerk to the check-in desk for a few hours each day to add variety to the daily workload. Rotated
employees develop new skills and gain experience that increases their value to the company, which
benefits management because cross-trained employees can fill in for absentees, thus providing
greater flexibility in scheduling.
Job Enlargement
Instead of a job in which you performed just one or two tasks, wouldn’t you prefer a job that gave you
many different tasks? In theory, you’d be less bored and more highly motivated if you had a chance at
job enlargement—the policy of enhancing a job by adding tasks at similar skill levels (see Figure 7.7
"Job Enlargement versus Job Enrichment"). The job of sales clerk, for example, might be expanded to
include gift-wrapping and packaging items for shipment. The additional duties would add variety
without entailing higher skill levels.
Figure 7.7 Job Enlargement versus Job Enrichment
Job Enrichment
As you can see from Figure 7.7 "Job Enlargement versus Job Enrichment", merely expanding a job by
adding similar tasks won’t necessarily “enrich” it by making it more challenging and rewarding. Job
enrichment is the practice of adding tasks that increase both responsibility and opportunity for
growth. It provides the kinds of benefits that, according to Maslow and Herzberg, contribute to job
satisfaction: stimulating work, sense of personal achievement, self-esteem, recognition, and a chance
to reach your potential.
Consider, for example, the evolving role of support staff in the contemporary office. Today, employees
who used to be called “secretaries” assume many duties previously in the domain of management,
such as project coordination and public relations. Information technology has enriched their jobs
because they can now apply such skills as word processing, desktop publishing, creating spreadsheets,
and managing databases. That’s why we now hear such a term as administrative assistant instead of
secretary.Sandra Kerka, “The Changing Role of Support Staff,” http://calpro-
online.com/eric/docgen.asp?tbl=archive&ID=A019 (accessed October 10, 2011).
Work/Life Quality
Building a career requires a substantial commitment in time and energy, and most people find that
they aren’t left with much time for nonwork activities. Fortunately, many organizations recognize the
need to help employees strike a balance between their work and home lives.Jeffrey Greenhaus, Karen
Collins, and Jason Shaw, “The Relationship between Work-Family Balance and Quality of Life,”
Journal of Vocational Behavior 63, 2003, 510–31. By helping employees combine satisfying careers
and fulfilling personal lives, companies tend to end up with a happier, less-stressed, and more
productive workforce. The financial benefits include lower absenteeism, turnover, and health care
costs.
Alternative Work Arrangements
The accounting firm KPMG, which has made the list of the “100 Best Companies for Working
Mothers” for twelve years,KPMG firm Web site, Careers Section,
http://www.kpmgcareers.com/whoweare/awards.shtml (accessed October 11, 2011). is committed to
promoting a balance between its employees’ work and personal lives. KPMG offers a variety of work
arrangements designed to accommodate different employee needs and provide scheduling
flexibility.For information on KPMG’s programs and benefits, see “Career,” KPMG,
http://www.kpmgcareers.com/index.shtml (accessed October 10, 2011).
Flextime
Employers who provide for flextime set guidelines that allow employees to designate starting and
quitting times. Guidelines, for example, might specify that all employees must work eight hours a day
(with an hour for lunch) and that four of those hours must be between 10 a.m. and 3 p.m. Thus, you
could come in at 7 a.m. and leave at 4 p.m., while coworkers arrive at 10 a.m. and leave at 7 p.m. With
permission you could even choose to work from 8 a.m to 2 p.m., take two hours for lunch, and then
work from 4 p.m. to 6 p.m.
Compressed Workweeks
Rather than work eight hours a day for five days a week, you might elect to earn a three-day weekend
by working ten hours a day for four days a week.
PartTime Work
If you’re willing to have your pay and benefits adjusted accordingly you can work fewer than forty
hours a week.
Job Sharing
Under job sharing, two people share one full-time position, splitting the salary and benefits of the
position as each handles half the job. Often they arrange their schedules to include at least an hour of
shared time during which they can communicate about the job.
Telecommuting
Telecommuting means that you regularly work from home (or from some other nonwork location).
You’re connected to the office by computer, fax, and phone. You save on commuting time, enjoy more
flexible work hours, and have more opportunity to spend time with your family. A study of 5,500 IBM
employees (one-fifth of whom telecommute) found that those who worked at home not only had a
better balance between work and home life but also were more highly motivated and less likely to
leave the organization.Reported in Work-Life and Human Capital Solutions, The Business Case for
Telecommuting (Minnetonka, MN: WFC Resources),
http://worklifeexpo.com/EXPO/docs/The_Business_Case_for_Telecommuting-WFCResources.pdf,
(accessed October 10, 2011).
Though it’s hard to count telecommuters accurately, some estimates put the number of people who
work at home at least one day a week at 20 percent. This estimate includes 2 percent of workers who
run home-based businesses and 2 percent who work exclusively at home for other companies.“How
Many People Telecommute?,” Telework Research Network,
http://www.teleworkresearchnetwork.com/research/people-telecommute (accessed October 11,
2011). Telecommuting isn’t for everyone. Working at home means that you have to discipline yourself
to avoid distractions, such as TV, personal phone calls, home chores, or pets, and some people feel
isolated from social interaction in the workplace.
FamilyFriendly Programs
In addition to alternative work arrangements, many employers, including KPMG, offer programs and
benefits designed to help employees meet family and home obligations while maintaining busy
careers. KPMG offers each of the following benefits.“Career,” KPMG,
http://www.kpmgcareers.com/index.shtml (accessed October 11, 2011).
Dependent Care
Caring for dependents—young children and elderly parents—is of utmost importance to some
employees, but combining dependent-care responsibilities with a busy job can be particularly
difficult. KPMG provides on-site child care during tax season (when employees are especially busy)
and offers emergency backup dependent care all year round, either at a provider’s facility or in the
employee’s home. To get referrals or information, employees can call KPMG’s LifeWorks Resource
and Referral Service. KPMG is by no means unique in this respect: more than eight thousand
companies maintain on-site day care,Bonnie Harris, “Child Care Comes to Work,” Los Angeles Times,
November 19, 2000, http://articles.latimes.com/2000/nov/19/news/wp-54138, (accessed October
11, 2011). and 18 percent of all U.S. companies offer child-care resources or referral services.“New List
of Best Companies for Mom,” CNNMoney, September 23, 2003
http://money.cnn.com/2003/09/23/news/companies/working_mother/?cnn=yes (accessed October
11, 2011).
Paid Parental Leave
Any employee (whether male or female) who becomes a parent can take two weeks of paid leave. New
mothers also get time off through short-term disability benefits.
Caring for Yourself
Like many companies, KPMG allows employees to aggregate all paid days off and use them in any way
they want. In other words, instead of getting, say, ten sick days, five personal days, and fifteen
vacation days, you get a total of thirty days to use for anything. If you’re having personal problems,
you can contact the Employee Assistance Program. If staying fit makes you happier and more
productive, you can take out a discount membership at one of more than nine thousand health clubs.
Unmarried without Children
You’ve undoubtedly noticed by now that many programs for balancing work and personal lives target
married people, particularly those with children. Single individuals also have trouble striking a
satisfactory balance between work and nonwork activities, but many single workers feel that they
aren’t getting equal consideration from employers.See Karen Collins and Elizabeth Hoover,
“Addressing the Needs of the Single Person in Public Accounting,” Pennsylvania CPA Journal, June
1995, 16. They report that they’re often expected to work longer hours, travel more, and take on
difficult assignments to compensate for married employees with family commitments.
Needless to say, requiring singles to take on additional responsibilities can make it harder for them to
balance their work and personal lives. It’s harder to plan and keep personal commitments while
meeting heavy work responsibilities, and establishing and maintaining social relations is difficult if
work schedules are unpredictable or too demanding. Frustration can lead to increased stress and job
dissatisfaction. In several studies of stress in the accounting profession, unmarried workers reported
higher levels of stress than any other group, including married people with children.Data was
obtained from 1988 and 1991 studies of stress in public accounting by Karen Collins and from a 1995
study on quality of life in the accounting profession by Collins and Jeffrey Greenhaus. Analysis of the
data on single individuals was not separately published.
With singles, as with married people, companies can reap substantial benefits from programs that
help employees balance their work and nonwork lives: they can increase job satisfaction and
employee productivity and reduce turnover. PepsiCo, for example, offers a “concierge service,” which
maintains a dry cleaner, travel agency, convenience store, and fitness center on the premises of its
national office in Somers, New York.“Concierge Service Is A Surprisingly Low Cost Solution That Can
Meet A Variety Of Needs With A Single Provider,” Lifestyle Concierge Services,
http://www.lifestyleconciergeservices.com/Corporate-Concierge-Service-for-businesses.html
(accessed October 11, 2011). Single employees seem to find these services helpful, but what they value
most of all is control over their time. In particular, they want predictable schedules that allow them to
plan social and personal activities. They don’t want employers assuming that being single means that
they can change plans at the last minute. It’s often more difficult for singles to deal with last-minute
changes because, unlike married coworkers, they don’t have the at-home support structure to handle
such tasks as tending to elderly parents or caring for pets.
Compensation and Benefits
Though paychecks and benefits packages aren’t the only reasons why people work, they do matter.
Competitive pay and benefits also help organizations attract and retain qualified employees.
Companies that pay their employees more than their competitors generally have lower turnover.
Consider, for example, The Container Store, which regularly appears on Fortune magazine’s list of
“The 100 Best Companies to Work For.”“The 100 Best Companies to Work For,” Fortune,
http://money.cnn.com/magazines/fortune/bestcompanies/2011/index.html (accessed October 10,
2011). The retail chain staffs its stores with fewer employees than its competitors but pays them more
—in some cases, three times the industry average for retail workers. This strategy allows the company
to attract extremely talented workers who, moreover, aren’t likely to leave the company. Low turnover
is particularly valuable in the retail industry because it depends on service-oriented personnel to
generate repeat business.
In addition to salary and wages, compensation packages often include other financial incentives, such
as bonuses and profit-sharing plans, as well as benefits, such as medical insurance, vacation time, sick
leave, and retirement accounts.
Wages and Salaries
The largest, and most important, component of a compensation package is the payment of wages or
salary. If you’re paid according to the number of hours you work, you’re earning wages. Counter
personnel at McDonald’s, for instance, get wages, which are determined by multiplying an employee’s
hourly wage rate by the number of hours worked during the pay period. On the other hand, if you’re
paid for fulfilling the responsibilities of a position—regardless of the number of hours required to do
it—you’re earning a salary. The McDonald’s manager gets a salary for overseeing the operations of
the restaurant. He or she is expected to work as long as it takes to get the job done, without any
adjustment in compensation.
Piecework and Commissions
Sometimes it makes more sense to pay workers according to the quantity of product that they produce
or sell. Byrd’s Seafood, a crab-processing plant in Crisfield, Maryland, pays workers on piecework:
Workers’ pay is based on the amount of crabmeat that’s picked from recently cooked crabs. (A good
picker can produce fifteen pounds of crabmeat an hour and earn about $100 a day.)See “Crab
Pickers,” Crisfield Off the Beaten Path, http://www.crisfield.com/sidestreet/ickers.html (accessed
May 6, 2006); Neil Learner, “Ashore, A Way of Life Built around the Crab,” Christian Science
Monitor, June 26, 2000, http://csmonitor.com/cgi-
bin/durableRedirect.pl?/durable/2000/06/26/fp15s1-csm.shtml (accessed May 6, 2006). If you’re
working on commission, you’re probably getting paid for quantity of sales. If you were a sales
representative for an insurance company, like The Hartford, you’d get a certain amount of money for
each automobile or homeowner policy that you sell.“Benefits,” The Hartford,
http://thehartford.com/utility/careers/career-benefits (accessed October 11, 2011).
Incentive Programs
In addition to regular paychecks, many people receive financial rewards based on performance,
whether their own, their employer’s, or both. At computer-chip maker Texas Instruments (TI), for
example, employees may be eligible for bonuses, profit sharing, and stock options. All three plans are
incentive programs: programs designed to reward employees for good performance.Texas
Instruments, “Benefits,” http://www.ti.com/recruit/docs/benefits.shtml (accessed October 11, 2011).
Bonus Plans
TI’s year-end bonuses—annual income given in addition to salary—are based on company-wide
performance. If the company has a profitable year, and if you contributed to that success, you’ll get a
bonus. If the company doesn’t do well, you’re out of luck, regardless of what you contributed.
Bonus plans have become quite common, and the range of employees eligible for bonuses has
widened in recent years. In the past, bonus plans were usually reserved for managers above a certain
level. Today, however, companies have realized the value of extending plans to include employees at
virtually every level. The magnitude of bonuses still favors those at the top. High-ranking officers
(such as CEOs and CFOs) often get bonuses ranging from 30 percent to 50 percent of their salaries.
Upper-level managers may get from 15 percent to 25 percent and middle managers from 10 percent to
15 percent. At lower levels, employees may expect bonuses from 3 percent to 5 percent of their annual
compensation.Jeff D. Opdyke, “Getting a Bonus Instead of a Raise,” Wall Street Journal, December
29, 2004, http://online.wsj.com/article/SB110427526449111461.html, (accessed October 7, 2011).
ProfitSharing Plans
TI also maintains a profitsharing plan, which relies on a predetermined formula to distribute a
share of the company’s profits to eligible employees. Today, about 40 percent of all U.S. companies
offer some type of profit-sharing program.Lee Ann Obringer, “How Employee Compensation Works—
Stock Options/Profit Sharing,” HowStuffWorks, http://money.howstuffworks.com/benefits.htm
(accessed October 11, 2011). TI’s plan, however, is a little unusual: while most plans don’t allow
employees to access profit-sharing funds until retirement or termination, TI employees get their
shares immediately—in cash.
TI’s plan is also pretty generous—as long as the company has a good year. Here’s how it works. An
employee’s profit share depends on the company’s operating profit for the year. If profits from
operations reach 10 percent of sales, the employee gets a bonus worth 4 percent of his or her salary. If
operating profit soars to 20 percent, the employee bonuses go up to 26 percent of salary. But if
operating profits fall short of a certain threshold, nobody gets anything.Texas Instruments, “Benefits,”
http://www.ti.com/recruit/docs/profit.shtml (accessed October 11, 2011).
StockOption Plans
Like most stockoption plans, the TI plan gives employees the right to buy a specific number of
shares of company stock at a set price on a specified date. At TI, an employee may buy stock at its
selling price at the time when he or she was given the option. So, if the price of the stock goes up, the
employee benefits. Say, for example, that the stock was selling for $30 a share when the option was
granted in 2007. In 2011, it was selling for $40 a share. Exercising his or her option, the employee
could buy TI stock at the 2007 price of $30 a share—a bargain price.Texas Instruments, “Benefits,”
http://www.ti.com/recruit/docs/profit.shtml (accessed October 11, 2011).
At TI, stock options are used as an incentive to attract and retain top people. Starbucks, by contrast,
isn’t nearly as selective in awarding stock options. At Starbucks, all employees can earn “Bean
Stock”—the Starbucks employee stock-option plan. Both full- and part-time employees get options to
buy Starbucks shares at a set price. If the company does well and its stock goes up, employees make a
profit. CEO Howard Schultz believes that Bean Stock pays off: because employees are rewarded when
the company does well, they have a stronger incentive to add value to the company (and so drive up
its stock price). Shortly after the program was begun, the phrase “bean-stocking” became workplace
lingo for figuring out how to save the company money.
Benefits
Another major component of an employee’s compensation package is benefits—compensation other
than salaries, hourly wages, or financial incentives. Types of benefits include the following:
Legally required benefits (Social Security and Medicare, unemployment insurance, workers’
compensation)
Paid time off (vacations, holidays, sick leave)
Insurance (health benefits, life insurance, disability insurance)
Retirement benefits
Unfortunately, the cost of providing benefits is staggering. According to the Employee Benefit
Research Institute, it costs an employer 30 percent of a worker’s salary to provide the same worker
with benefits. If you include pay for time not worked (while on vacation or sick and so on), the
percentage increases to 41 percent. So if you’re a manager making $100,000 a year, your employer is
also paying out another $41,000 for your benefits. The most money goes for health care (8 percent of
salary costs), paid time off (11 percent), and retirement benefits (5 percent).“FAQs About Benefits—
General Overview,” Employee Benefit Research Institute, http://www.ebri.org/publications/benfaq/?
fa=fullfaq (accessed October 10, 2011).
Some workers receive only benefits required by law, including Social Security, unemployment, and
workers’ compensation. Low-wage workers generally get only limited benefits and part-timers often
nothing at all.National Compensation Survey: Employee Benefits in Private Industry, 2003, U.S.
Department of Labor, Bureau of Labor Statistics, March 2003, 2,
http://www.bls.gov/ncs/ebs/home.htm (accessed October 9, 2011). Again, Starbucks is generous in
offering benefits. The company provides benefits even to the part-timers who make up two-thirds of
the company’s workforce; anyone working at least twenty hours a week gets medical coverage.
KEY TAKEAWAYS
Employees report that they’re motivated to perform well when they’re challenged,
respected, treated fairly, and appreciated.
Other factors may contribute to employee satisfaction. Some companies use job
redesign to make jobs more interesting and challenging.
Job rotation allows employees to rotate from one job to another on a
systematic basis.
Job enlargement enhances a job by adding tasks at similar skill levels.
Job enrichment adds tasks that increase both responsibility and opportunity
for growth.
Many organizations recognize the need to help employees strike a balance between their
work and home lives and offer a variety of work arrangements to accommodate different
employee needs.
Flextime allows employees to designate starting and quitting times, compress workweeks,
or perform parttime work.
With job sharing, two people share one fulltime position.
Telecommuting means working from home. Many employers also offer dependent care,
paid leave for new parents, employeeassistance programs, and onsite fitness centers.
Competitive compensation also helps.
Workers who are paid by the hour earn wages, while those who are paid to fulfill the
responsibilities of the job earn salaries.
Some people receive commissions based on sales or are paid for output, based on a
piecework approach.
In addition to pay, many employees can earn financial rewards based on their own and/or
their employer’s performance.
They may receive yearend bonuses, participate in profitsharing plans (which use
predetermined formulas to distribute a share of company profits among employees), or
receive stock options (which let them buy shares of company stock at set prices).
Another component of many compensation packages is benefits—compensation other
than salaries, wages, or financial incentives. Benefits may include paid time off, insurance,
and retirement benefits.
EXERCISE
(AACSB) Analysis
1. Describe the ideal job that you’d like to have once you’ve finished college. Be sure to
explain the type of work schedule that you’d find most satisfactory, and why. Identify
familyfriendly programs that you’d find desirable and explain why these appeal to you.
2. Describe a typical compensation package for a sales manager in a large organization. If
you could design your own compensation package, what would it include?
7.5 Performance Appraisal
LEARNING OBJECTIVE
1. Explain how managers evaluate employee performance and retain qualified employees.
Employees generally want their managers to tell them three things: what they should be doing, how
well they’re doing it, and how they can improve their performance. Good managers address these
issues on an ongoing basis. On a semiannual or annual basis, they also conduct formal performance
appraisals to discuss and evaluate employees’ work performance.
The Basic ThreeStep Process
Appraisal systems vary both by organization and by the level of the employee being evaluated, but as
you can see in Figure 7.8 "How to Do a Performance Appraisal", it’s generally a three-step process:
1. Before managers can measure performance, they must set goals and performance expectations
and specify the criteria (such as quality of work, quantity of work, dependability, initiative) that
they’ll use to measure performance.
2. At the end of a specified time period, managers complete written evaluations that rate employee
performance according to the predetermined criteria.
3. Managers then meet with each employee to discuss the evaluation. Jointly, they suggest ways in
which the employee can improve performance, which might include further training and
development.
Figure 7.8 How to Do a Performance Appraisal
It sounds fairly simple, but why do so many managers report that, except for firing people, giving
performance appraisals is their least favorite task?Susan Heathfield, “Performance Appraisals Don’t
Work,” About, http://humanresources.about.com/cs/perfmeasurement/l/aa061100a.htm (accessed
October 11, 2011). To get some perspective on this question, we’ll look at performance appraisals from
both sides, explaining the benefits and identifying potential problems with some of the most common
practices.
Among other benefits, formal appraisals provide the following:
An opportunity for managers and employees to discuss an employee’s performance and to set
future goals and performance expectations
A chance to identify and discuss appropriate training and career-development opportunities for
an employee
Formal documentation of the evaluation that can be used for salary, promotion, demotion, or
dismissal purposesBob Nelson and Peter Economy, Managing for Dummies, 2nd ed. (New York:
Wiley, 2003), 140.
As for disadvantages, most stem from the fact that appraisals are often used to determine salaries for
the upcoming year. Consequently, meetings to discuss performance tend to take on an entirely
different dimension: the manager appears judgmental (rather than supportive), and the employee
gets defensive. It’s the adversarial atmosphere that makes many managers not only uncomfortable
with the task but also unlikely to give honest feedback. (They tend to give higher marks in order to
avoid delving into critical evaluations.) HR professionals disagree about whether performance
appraisals should be linked to pay increases. Some experts argue that the connection eliminates the
manager’s opportunity to use the appraisal to improve an employee’s performance. Others maintain
that it increases employee satisfaction with the process and distributes raises on the basis of effort
and results.Archer North & Associates, “Reward Issues,” Performance Appraisal,
http://www.performance-appraisal.com/rewards.htm (accessed October 11, 2011).
360Degree and Upward Feedback
Instead of being evaluated by one person, how would you like to be evaluated by several people—not
only those above you in the organization but those below and beside you? The approach is called 360
degree feedback, and the purpose is to ensure that employees (mostly managers) get feedback from
all directions—from supervisors, reporting subordinates, coworkers, and even customers. If it’s
conducted correctly, this technique furnishes managers with a range of insights into their
performance in a number of roles.
Some experts, however, regard the 360-degree approach as too cumbersome. An alternative
technique, called upward feedback, requires only the manager’s subordinates to provide feedback.
Computer maker Dell uses this approach as part of its manager-development plan. Every six months,
forty thousand Dell employees complete a survey in which they rate their supervisors on a number of
dimensions, such as practicing ethical business principles and providing support in balancing work
and personal life. Like most companies using this technique, Dell uses survey results for development
purposes only, not as direct input into decisions on pay increases or promotions.“Culture of
Winning/Tell Dell,” Dell, Inc., http://i.dell.com/sites/content/corporate/corp-
comm/en/Documents/dell-fy11-cr-report.pdf (accessed October 11, 2011).
Retaining Valuable Employees
When a valued employee quits, the loss to the employer can be serious. Not only will the firm incur
substantial costs to recruit and train a replacement, but it also may suffer temporary declines in
productivity and lower morale among remaining employees who have to take on heavier workloads.
Given the negative impact of turnover—the permanent separation of an employee from a company—
most organizations do whatever they can to retain qualified employees. Compensation plays a key role
in this effort: companies that don’t offer competitive compensation packages (including benefits) tend
to lose employees. But other factors come into play, some of which we discussed earlier, such as
training and development, as well as helping employees achieve a satisfying work/nonwork balance.
In the following sections, we’ll look at a few other strategies for reducing turnover and increasing
productivity.Gregory P. Smith, “How to Attract, Keep and Motivate Your Workforce,” Business Know
How, http://www.businessknowhow.com/manage/attractworkforce.htm (accessed October 10,
2011).
Creating a Positive Work Environment
Employees who are happy at work are more productive, provide better customer service, and are
more likely to stay with the company. A study conducted by Sears, for instance, found a positive
relationship between customer satisfaction and employee attitudes on ten different issues: a 5 percent
improvement in employee attitudes results in a 1.3 percent increase in customer satisfaction and a 0.5
percent increase in revenue.“Companies Are Finding It Really Pays to Be Nice to Employees,” Wall
Street Journal, July 22, 1998, B1, http://www.octanner.com/news/July1998.html (accessed May 6,
2006).
The EmployeeFriendly Workplace
What sort of things improve employee attitudes? The twelve thousand employees of software maker
SAS Institute fall into the category of “happy workers.” They choose the furniture and equipment in
their own (private) offices; eat subsidized meals at one of three on-site restaurants; enjoy free soft
drinks, fresh fruit on Mondays, M&M’s on Wednesdays, and a healthy breakfast snack on Fridays in
convenient break rooms; and swim and work out at a seventy-seven-thousand-square-foot fitness
center. They set their own work hours, and they’re encouraged to stay home with sick children. They
also have job security: no one’s ever been laid off because of an economic downturn. The employee-
friendly work environment helps SAS employees focus on their jobs and contribute to the attainment
of company goals.Morley Safer, CBS 60 Minutes, interview with Jim Goodnight, president and
founder of SAS Institute, April 20, 2003,
http://www.cbsnews.com/stories/2003/04/18/60minutes/main550102.shtml (accessed October 9,
2011); “2011—100 Best Companies to Work For,” Fortune,
http://money.cnn.com/magazines/fortune/bestcompanies/2011/snapshots/1.html (accessed October
11, 2011). For a description of the company’s work/life initiatives, visit its Web site at
http://www.sas.com/corporate/worklife/index.html (accessed October 11, 2011). Not surprisingly, it
also results in very low 3 percent turnover.
Recognizing Employee Contributions
Thanking people for work done well is a powerful motivator. People who feel appreciated are more
likely to stay with a company than those who don’t.Robert McGarvey, “A Tidal Wave of Turnover,”
American Way, December 15, 2004, 32–36. While personal thank-yous are always helpful, many
companies also have formal programs for identifying and rewarding good performers. The Container
Store, a national storage and container retailer, rewards employee accomplishments in a variety of
ways. Recently, for example, twelve employees chosen by coworkers were rewarded with a Colorado
vacation with the company’s owners, and the seven winners of a sales contest got a trip to visit an
important supplier—in Sweden.The Container Store, “Careers,”
http://www.containerstore.com/careers/index.jhtml;jsessionid=0C2Q2LP3RTG0XQFIAIMCM44AV
ABBMJVC (accessed October 11, 2011). The company is known for its supportive environment and
has frequently been selected as one of the top U.S. companies to work for.
Involving Employees in Decision Making
Companies have found that involving employees in decisions saves money, makes workers feel better
about their jobs, and reduces turnover. Some have found that it pays to take their advice. When
General Motors asked workers for ideas on improving manufacturing operations, management was
deluged with more than forty-four thousand suggestions during one quarter. Implementing a few of
them cut production time on certain vehicles by 15 percent and resulted in sizable savings.Freda
Turner, “An Effective Employee Suggestion Program Has a Multiplier Effect,” WebPro News, March
4, 2003, http://www.webpronews.com/an-effective-employee-suggestion-program-has-a-multiplier-
effect-2003-03 (accessed October 11, 2011).
Similarly, in 2001, Edward Jones, a personal investment company, faced a difficult situation during
the stock-market downturn. Costs had to be cut, and laying off employees was one option. Instead,
however, the company turned to its workforce for solutions. As a group, employees identified cost
savings of more than $38 million. At the same time, the company convinced experienced employees
to stay with it by assuring them that they’d have a role in managing it.Richard L. Daft and Dorothy
Marcic, Understanding Management (Florence, KY: Cengage Learning, 2006), 219,
http://books.google.com/books?id=xWxmFNMKXhEC&dq=isbn:9781439042328 (accessed October
11, 2011).
Why People Quit
As important as such initiatives can be, one bad boss can spoil everything. The way a person is treated
by his or her boss may be the primary factor in determining whether an employee stays or goes.
People who have quit their jobs cite the following behavior by superiors:
Making unreasonable work demands
Refusing to value their opinions
Failing to be clear about what’s expected of subordinates
Rejecting work unnecessarily
Showing favoritism in compensation, rewards, or promotionsGregory P. Smith, “Top Ten Reasons
Why People Quit Their Jobs,” Business KnowHow,
http://www.businessknowhow.com/manage/whyquit.htm, (accessed October 11, 2011).
Holding managers accountable for excessive turnover can help alleviate the “bad-boss” problem, at
least in the long run. In any case, whenever an employee quits, it’s a good idea for someone—someone
other than the individual’s immediate supervisor—to conduct an exit interview to find out why.
Knowing why people are quitting gives an organization the opportunity to correct problems that are
causing high turnover rates.
Involuntary Termination
Before we leave this section, we should say a word or two about termination—getting fired. Though
turnover—voluntary separations—can create problems for employers, they’re not nearly as
devastating as the effects of involuntary termination on employees. Losing your job is what
psychologists call a “significant life change,” and it’s high on the list of “stressful life events”
regardless of the circumstances. Sometimes, employers lay off workers because revenues are down
and they must resort to downsizing—to cutting costs by eliminating jobs. Sometimes a particular
job is being phased out, and sometimes an employee has simply failed to meet performance
requirements.
Employment at Will
Is it possible for you to get fired even if you’re doing a good job and there’s no economic justification
for your being laid off? In some cases, yes—especially if you’re not working under a contract. Without
a formal contract, you’re considered to be employed at will, which means that both you and your
employer have the right to terminate the employment relationship at any time. You can quit whenever
you want (which is good for you), but your employer can fire you whenever it wants (which is
obviously bad for you).
Fortunately for you, over the past several decades, the courts have undercut employers’ rights under
the employmentatwill doctrine.Charles J. Muhl, “The Employment-at-Will Doctrine: Three
Major Exceptions,” Monthly Labor Review, January 2001, 1–11,
http://www.bls.gov/opub/mlr/2001/01/art1full.pdf (accessed October 11, 2011). By and large,
management can no longer fire employees at will: usually, employers must show just cause for
termination, and in some cases, they must furnish written documentation to substantiate the reasons
for terminating an employee. If it’s a case of poor performance, the employee is generally warned in
advance that his or her current level of performance could result in termination. As a rule, managers
give employees who have been warned a reasonable opportunity to improve performance. When
termination is unavoidable, it should be handled in a private conversation, with the manager
explaining precisely why the action is being taken.
KEY TAKEAWAYS
Managers conduct performance appraisals to evaluate work performance,
usually following a threestep process:
1. Setting goals and performance expectations and specifying the criteria for
measuring performance
2. Completing written evaluations to rate performance according to predetermined
criteria
3. Meeting with employees to discuss evaluations and ways to improve
performance
Turnover—the permanent separation of an employee from a company—has a negative
effect on an organization.
In addition to offering competitive compensation, companies may take a variety of
steps to retain qualified employees:
1. Providing appropriate training and development
2. Helping employees achieve a satisfying work/nonwork balance in their lives
3. Creating a positive work environment
4. Recognizing employee efforts
5. Involving employees in decision making
On the other hand, employers may have to terminate the employment of (that is,
fire) some workers.
1. They may lay off workers because revenues are down and they have to
downsize—to cut costs by eliminating jobs.
2. Sometimes a job is phased out, and sometimes an employee simply fails to
meet performance requirements.
If there’s no written employment contract, the employment relationship falls under the
principle of employmentatwill, by which an employer can end it at any time. Usually,
however, the employer must show just cause.
EXERCISES
1. What steps does a manager take in evaluating an employee’s performance? Explain the
benefits of performance appraisals, and identify some of the potential problems entailed
by the performanceevaluation process.
2. As an HR manager, what steps would you take to retain valuable employees? Under what
circumstances would you fire an employee? Can you fire someone without giving that
person a warning?
7.6 Labor Unions
LEARNING OBJECTIVE
1. Explain why workers unionize and how unions are structured, and describe the collective
bargaining process.
As we saw earlier, Maslow believed that individuals are motivated to satisfy five levels of unmet needs
(physiological, safety, social, esteem, and self-actualization). From this perspective, employees should
expect that full-time work will satisfy at least the two lowest-level needs: they should be paid wages
that are sufficient for them to feed, house, and clothe themselves and their families, and they should
have safe working conditions and some degree of job security. Organizations also have needs: they
need to earn profits that will satisfy their owners. Sometimes, the needs of employees and employers
are consistent: the organization can pay decent wages and provide workers with safe working
conditions and job security while still making a satisfactory profit. At other times, there is a conflict—
real, perceived, or a little bit of both—between the needs of employees and those of employers. In
such cases, workers may be motivated to join a labor union—an organized group of workers that
bargains with employers to improve its members’ pay, job security, and working conditions.
Figure 7.10 "Labor Union Density, 1930–2010" charts laborunion density—union membership as a
percentage of payrolls—in the United States from 1930 to 2010. As you can see, there’s been a steady
decline since the mid-1950s, and, today, only about 12 percent of U.S. workers belong to
unions.“Union Members 2010,” Bureau of Labor Statistics, U.S. Department of Labor, January 21,
2011, http://www.bls.gov/news.release/pdf/union2.pdf, (accessed October 10, 2011). Only
membership among public workers (those employed by federal, state, and local governments, such as
teachers, police, and firefighters) has grown. In the 1940s, 10 percent of public workers and 34
percent of those in the private sector belonged to unions. Today, this has reversed: 36 percent of
public workers and 7 percent of those in the private sector are union members.“Labor Unions in the
United States,” Wikipedia, October 7, 2011,
http://en.wikipedia.org/wiki/Labor_unions_in_the_United_States#Membership (accessed October
10, 2011).
Figure 7.10 Labor Union Density, 1930–2010
Why the decline in private sector unionization? Many factors come into play. The poor economy has
reduced the number of workers who can become union members. In addition, we’ve shifted from a
manufacturing-based economy characterized by large, historically unionized companies to a service-
based economy made up of many small firms that are hard to unionize. Finally, there are more
women in the workforce, and they’re more likely to work part-time or intermittently.Kris Maher,
“Union Membership Drops 10%,” Wall Street Journal, January 10, 2010,
http://online.wsj.com/article/SB10001424052748703822404575019350727544666.html, (accessed
October 10, 2011); Steven Greenhouse, “Union Membership in U.S. Fell to a 70-Year Low Last Year,”
The New York Times, January 21, 2011,
http://www.nytimes.com/2011/01/22/business/22union.html (accessed October 10, 2011).
Union Structure
Unions have a pyramidal structure much like that of large corporations. At the bottom are locals that
serve workers in a particular geographical area. Certain members are designated as shop stewards to
serve as go-betweens in disputes between workers and supervisors. Locals are usually organized into
national unions that assist with local contract negotiations, organize new locals, negotiate contracts
for entire industries, and lobby government bodies on issues of importance to organized labor. In
turn, national unions may be linked by a labor federation, such as the American Federation of Labor
and Congress of Industrial Organizations (AFL-CIO), which provides assistance to member unions
and serves as the principal political organ for organized labor.
Collective Bargaining
In a nonunion environment, the employer makes largely unilateral decisions on issues affecting its
labor force, such as salary and benefits. Management, for example, may simply set an average salary
increase of 3 percent and require employees to pay an additional $50 a month for medical insurance.
Typically, employees are in no position to bargain for better deals. (At the same time, however, for
reasons that we’ve discussed earlier in this chapter, employers have a vested interest in treating
workers fairly. A reputation for treating employees well, for example, is a key factor in attracting
talented people.)
The process is a lot different in a union environment. Basically, union representatives determine with
members what they want in terms of salary increases, benefits, working conditions, and job security.
Union officials then tell the employer what its workers want and ask what they’re willing to offer.
When there’s a discrepancy between what workers want and what management is willing to give—as
there usually is—union officials serve as negotiators to bring the two sides together. The process of
settling differences and establishing mutually agreeable conditions under which employees will work
is called collective bargaining.
The Negotiation Process
Negotiations start when each side states its position and presents its demands. As in most
negotiations, these opening demands simply stake out starting positions. Both parties expect some
give-and-take and realize that the final agreement will fall somewhere between the two positions. If
everything goes smoothly, a tentative agreement is reached and then voted on by union members. If
they accept the agreement, the process is complete and a contract is put into place to govern labor-
management relations for a stated period. If workers reject the agreement, negotiators go back to the
bargaining table.
Mediation and Arbitration
If negotiations stall, the sides may call in outsiders. One option is mediation, under which an
impartial third party assesses the situation and makes recommendations for reaching an agreement.
A mediator’s advice can be accepted or rejected. If the two sides are willing to accept the decision of a
third party, they may opt instead for arbitration, under which the third party studies the situation
and arrives at a binding agreement.
Grievance Procedures
Another difference between union and nonunion environments is the handling of grievances—
worker complaints on contract-related matters. When nonunion workers feel that they’ve been
treated unfairly, they can take up the matter with supervisors, who may or may not satisfy their
complaints. When unionized workers have complaints (such as being asked to work more hours than
stipulated under their contract), they can call on union representatives to resolve the problem, in
conjunction with supervisory personnel. If the outcome isn’t satisfactory, the union can take the
problem to higher-level management. If there’s still no resolution, the union may submit the
grievance to an arbitrator.
When Negotiations Break Down
At times, labor and management can’t resolve their differences through collective bargaining or
formal grievance procedures. When this happens, each side may resort to a variety of tactics to win
support for its positions and force the opposition to agree to its demands.
Union Tactics
The tactics available to the union include striking, picketing, and boycotting. When they go on
strike, workers walk away from their jobs and refuse to return until the issue at hand has been
resolved. As undergraduates at Yale discovered when they arrived on campus in fall 2003, the effects
of a strike can engulf parties other than employers and strikers: with four thousand dining room
workers on strike, students had to scramble to find food at local minimarkets. The strike—the ninth at
the school since 1968—lasted twenty-three days, and in the end, the workers got what they wanted:
better pension plans.
Though a strike sends a strong message to management, it also has consequences for workers, who
don’t get paid when they’re on strike. Unions often ease the financial pressure on strikers by
providing cash payments. (Some unionized workers, by the way, don’t have the right to strike. Strikes
by federal employees, such as air-traffic controllers, are illegal because they jeopardize the public
interest.)
When you see workers parading with signs outside a factory or an office building (or even a school),
they’re probably picketing. The purpose of picketing is informative—to tell people that a workforce
is on strike or to publicize some management practice that’s unacceptable to the union. In addition,
because other union workers typically won’t cross picket lines, marchers can interrupt the daily
activities of the targeted organization. How would you like to show up for classes to find faculty
picketing outside the classroom building? In April 2001, faculty at the University of Hawaii, unhappy
about salaries, went on strike for thirteen days. Initially, many students cheerfully headed for the
beach to work on their tans, but before long, many more—particularly graduating seniors—began to
worry about finishing the semester with the credits they needed to keep their lives on
schedule.“Hawaii Professors End Strike,” USA Today, June 19, 2001,
http://www.usatoday.com/news/nation/2001-04-18-hawaii.htm (accessed October 11, 2011).
The final tactic available to unions is boycotting, in which union workers refuse to buy a company’s
products and try to get other people to follow suit. The tactic is often used by the AFL-CIO, which
maintains a national “Don’t Buy or Patronize” boycott list. In 2003, for example, at the request of two
affiliates, the Actor’s Equity Association and the American Federation of Musicians, the AFL-CIO
added the road show of the Broadway musical Miss Saigon to the list. Why? The unions objected to
the use of nonunion performers who worked for particularly low wages and to the use of a “virtual
orchestra,” an electronic apparatus that can replace a live orchestra with software-generated
orchestral accompaniment.Union Label and Service Department, AFL-CIO, “AFL-CIO National
Boycott List,” November–December 2004, http://www.unionlabel.org/boycott.jsp (accessed May 6,
2006).
Management Tactics
Management doesn’t sit by passively, especially if the company has a position to defend or a message
to get out. One available tactic is the lockout—closing the workplace to workers—though it’s rarely
used because it’s legal only when unionized workers pose a credible threat to the employer’s financial
viability. Another tactic is replacing striking workers with strikebreakers—nonunion workers who
are willing to cross picket lines to replace strikers. Though the law prohibits companies from
permanently replacing striking workers, it’s often possible for a company to get a court injunction
that allows it to bring in replacement workers.
Lockout tactics were used in the 2011 labor dispute between the National Football League (NFL) and
the National Football League Players Association when club owners and players failed to reach an
agreement on a new contract. Prior to the 2011 season, the owners imposed a lockout, which
prevented the players from practicing in team training facilities. Both sides had their demands: The
players wanted a greater percentage of the revenues, which the owners were against. The owners
wanted the players to play two additional season games, which the players were against. With the
season drawing closer, an agreement was finally reached in July 2011 bringing the 130-day lockout to
an end and ensuring that the 2011 football season would begin on time.Vinnie Iyer and Clifton Brown,
“NFL Lockout Ends as Owners, Player Reps Agree to 10-Year CBA,” Sporting News,
http://aol.sportingnews.com/nfl/feed/2010-09/nfl-labor-talks/story/nfl-lockout-ends-owners-nflpa-
10-year-deal-2011-season-cba-labor-agreement (accessed October 11, 2011).
The Future of Unions
As we noted earlier, union membership in the United States is declining. So, what’s the future of
organized labor? Will membership continue to decline and unions lose even more power? The AFL-
CIO is optimistic about union membership, pointing out recent gains in membership among women
and immigrants, as well as health care workers, graduate students, and professionals.Bureau of Labor
Statistics, Economic News Release, “Union Members Summary,” news release, January 27, 2012,
http://www.bls.gov/news.release/union2.nr0.htm (accessed January 29, 2012); Unions 101, A Quick
Study of How Unions Help workers Win a Voice on the Job, What kinds of workers are forming
unions today? http://www.aflcio.org/joinaunion/union101.cfm (accessed January 29, 2012).
But convincing workers to unionize is still more difficult than it used to be and could become even
harder in the future. For one thing, employers have developed strategies for dissuading workers from
unionizing—in particular, tactics for withholding job security. If unionization threatens higher costs
for wages and benefits, they can resort to part-time or contract workers. They can also outsource
work, eliminating jobs entirely, and more employers are now investing in technology designed to
reduce the amount of human labor needed to produce goods or offer services.
KEY TAKEAWAYS
Some workers belong to labor unions—organized groups of workers that bargain with
employers to improve members’ pay, job security, and working conditions.
Unions have a pyramidal structure. At the bottom are locals, who serve workers in
a particular geographical area.
1. Locals are usually organized into national unions that assist with local contract
negotiations and negotiate industrywide contracts.
2. Nationals may be linked by a labor federation, such as the AFLCIO, which
provides assistance to member unions and serves as the principal political
organ for organized labor.
When there’s a discrepancy between what workers want in terms of salary
increases, benefits, working conditions, and job security and what management is
willing to give, the two sides engage in a process called collective bargaining.
1. If everything goes smoothly, a contract is soon put into place.
2. If negotiations break down, the sides may resort to mediation (in which an
impartial third party makes recommendations for reaching an agreement) or
arbitration (in which the third party imposes a binding agreement).
When unionized workers feel that they’ve been treated unfairly, they can file grievances—
complaints over contractrelated matters that are resolved by union representatives and
employee supervisors.
If labor differences can’t be resolved through collective bargaining or formal
grievance procedures, each side may resort to a variety of tactics. The union can
do the following:
1. Call a strike (in which workers leave their jobs until the issue is settled)
2. Organize picketing (in which workers congregate outside the workplace to
publicize their position)
3. Arrange for boycotting (in which workers and other consumers are urged to
refrain from buying an employer’s products)
Management may resort to a lockout—closing the workplace to workers—or call in
strikebreakers (nonunion workers who are willing to cross picket lines to replace strikers).
EXERCISES
1. You’ve just gotten a job as an autoworker. Would you prefer to work in a unionized or
nonunionized plant? Why? If you were hired as a highlevel manager in the company,
would you want your workers to be unionized? Why, or why not? What’s your opinion on
the future of organized labor? Will union membership grow or decline in the next decade?
Why, or why not?
2. What happens in a unionized company when negotiations between labor and
management break down? Identify and describe the tactics that unions can use against
management and those that management can use against unions.
7.7 Cases and Problems
LEARNING ON THE WEB (AACSB)
What’s Your (Emotional) IQ?
If you were an HR manager, on what criteria would you base a hiring decision—intelligence
(IQ), education, technical skills, experience, references, or performance on the interview? All
these can be important determinants of a person’s success, but some experts believe that
there’s an even better predictor of success. It’s called emotional intelligence (or EI), and it
gained some currency in the mid1990s thanks to Daniel Goleman’s book Emotional
Intelligence: Why It Can Matter More Than IQ. EI is the ability to understand both our own
emotions and those of others, as well as the ability to use that understanding in managing our
behavior, motivating ourselves, and encouraging others to achieve goals.
An attractive aspect of EI is that, unlike IQ, it’s not fixed at an early age. Rather, its vital
components—selfawareness, selfmanagement, social awareness, and relationship
management—can be strengthened over time. To assess your level of EI, go to the Web site
maintained by the Hay Group, a managementconsulting firm, and take the tenitem test that’s
posted there (http://psychology.about.com/library/quiz/bl_eq_quiz.htm?
questnum=6&cor=2399). After completing the test, you’ll get your EI score, some instructions
for interpreting it, and an answer key.
When you’ve finished with the test, rank the following items according to the importance that
you’d give them in making a hiring decision: intelligence, education, technical skills,
experience, references, interview skills, and emotional intelligence. Explain your ranking.
CAREER OPPORTUNITIES
Are You a People Person?
You might not like the idea of sitting across the desk from a corporate college recruiter and
asking for a job, but what if you were on the other side of the desk? As a recruiter, you’d get to
return to campus each year to encourage students to join your company. Or, maybe you’d like
to help your company develop a new compensation and benefits program, implement a
performanceevaluation system, or create a new training program. All these activities fall
under the umbrella of HR.
To learn more about the field of HR, go to the WetFeet Web site (http://wetfeet.com/Careers
andIndustries/Industries/HumanResources.aspx#jobdescriptions) and read the page “Human
Resources Overview.” Then answer these questions:
1. What is the human resources field like?
2. What do HR professionals like about their jobs? What do they dislike?
3. Are job prospects in the HR field positive or negative? Which HR areas will experience the
fastest growth?
4. Based on the job descriptions posted, which specific HR job would you want?
Finally, write a paragraph responding to this question: Do you find the HR field interesting?
Why, or why not?
ETHICS ANGLE (AACSB)
Misstating the Facts
Life couldn’t get much better for George O’Leary when he was named the head football coach
at Notre Dame. Unfortunately, he barely had time to celebrate his new job before he was ruled
ineligible: after just a week on the job, he was forced to resign, embarrassing himself, his
family, his friends, and Notre Dame itself. Why? Because of a few lies that he’d put on his
résumé twenty years earlier. To get the facts behind this story, go to the Sports Illustrated Web
site (http://sportsillustrated.cnn.com/football/college/news/2001/12/14/oleary_notredame/) and
read the article “Short Tenure: O’Leary Out at Notre Dame After One Week.” Then, answer the
following questions:
1. Was O’Leary’s punishment appropriate? If you were the athletic director at Notre Dame,
would you have meted out the same punishment? Why, or why not?
2. False information on his résumé came back to haunt O’Leary after twenty years. Once
he’d falsified his résumé, was there any corrective action that he could have taken? If so,
what?
3. If O’Leary had told Notre Dame about the falsifications before they came to light, would
they have hired him?
4. Would his previous employer take him back?
5. O’Leary was later hired as a head coach by the University of Central Florida. Will the
episode involving his résumé undermine his ability to encourage players to act with
integrity? Will it affect his ability to recruit players?
6. What’s the lesson to be learned from O’Leary’s experience? In what ways might a few
(theoretical) misstatements on your résumé come back to haunt you?
TEAMBUILDING SKILLS (AACSB)
Dorm Room Rescue
Any night of the week (at least as of this writing), you can relax in front of the TV and watch a
steady stream of shows about how to improve your living space—such as New Spaces. You
like the concept of these programs well enough, but you’re tired of watching them in a tiny,
cluttered dorm room that’s decorated in early barracks style. Out of these cramped conditions,
however, you and a team of friends come up with an idea. On graduation, you’ll start a
business called Dorm Room Rescue to provide decorating services to the dorm dwellers who
come after you. You’ll help college students pick colors and themes for their rooms and select
spacesaving furniture, storage materials, area rugs, and wall decorations. Your goal will be to
create attractive dorm rooms that provide comfort, functionality, and privacy, as well as
pleasant spaces in which students can relax and even entertain.
The team decides to develop a plan for the HR needs of your future company. You’ll need to
address the following issues:
1. HR plan
Number of employees
Job descriptions: duties and responsibilities for each type of employee
Job specifications: needed skills, knowledge, and abilities
2. Recruitment of qualified employees
Recruitment plan: how and where to find candidates
Selection process: steps taken to select employees
3. Developing employees
Newemployee orientation
Training and development
4. Compensation and benefits
Wages, salaries, and incentive programs
Benefits
5. Work/Life quality
Work schedules and alternative work arrangements
Familyfriendly programs
6. Performance appraisal
Appraisal process
Retaining valuable employees
You might want to divide up the initial work, but you’ll need to regroup as a team to make your
final decisions on these issues and to create a teamprepared report.
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THE GLOBAL VIEW (AACSB)
Sending Ed to China
You’re the HR manager for a large environmental consulting firm that just started doing
business in China. You’ve asked your top engineer, Ed Deardon, to relocate to Shanghai for a
year. Though China will be new to Deardon, working overseas won’t be; he’s already
completed assignments in the Philippines and Thailand; as before, his wife and three children
will be going with him.
You’ve promised Deardon some advice on adapting to living and working conditions in
Shanghai, and you intend to focus on the kinds of cultural differences that tend to create
problems in international business dealings. Unfortunately, you personally know absolutely
nothing about living in China and so must do some online research. Here are some promising
sites:
Executive Planet (http://www.executiveplanet.com/index.php?title=China)
China Window (http://chinawindow.com)
Los Angeles Chinese Learning Center (http://chineseschool.netfirms.com)
Instructions
Prepare a written report to Deardon in which you identify and explain five or six cultural
differences between business behavior in the United States and China, and offer some advice
on how to deal with them.
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