Human Resource Management-Discussion 6

Saylor URL: http://www.saylor.org/books Saylor.org 1

This text was adapted by The Saylor Foundation under a Creative

Commons Attribution-NonCommercial-ShareAlike 3.0 License without

attribution as requested by the work’s original creator or licensee.

Saylor URL: http://www.saylor.org/books Saylor.org 352

Chapter 11: Employee Assessment A Tough Conversation

As you wake up this morning, you think about the performance evaluation you will give one of your

employees, Sean, later this morning. Sean has been with your company for two years, and over the last six

months his performance has begun to slide. As the manager, it is your responsibility to talk with him

about performance, which you have done on several occasions. However, the performance evaluation will

make his nonperformance more formalized. You know that Sean has had some personal troubles that can

account for some of the performance issues, but despite this, you really need to get his performance up to

par. Your goal in the performance evaluation interview today is to create an improvement plan for Sean,

while documenting his nonperformance.

When you arrive at work, you look over the essay rating part of Sean’s evaluation. It details two client

project deadlines that were missed, as well as the over-budget amounts of the two client projects. It was

Sean’s responsibility to oversee both aspects of this project. When Sean arrives at your office, you greet

him, ask him to take a seat, and begin to discuss the evaluation with him.

“Sean, while you have always been a high performer, these last few months have been lackluster. On two

of your projects, you were over budget and late. The client commented on both of these aspects when it

filled out the client evaluation. As a result, you can see this is documented in your performance

evaluation.”

Using defensive nonverbal language, Sean says, “Missing the project deadlines and budget wasn’t my

fault. Emily said everything was under control, and I trusted her. She is the one who should have a bad

performance review.”

You say, “Ultimately, as the account director, you are responsible, as outlined in your job description. As

you know, it is important to manage the accountability within your team, and in this case, you didn’t

perform. In fact, in your 360 reviews, several of your colleagues suggested you were not putting in enough

time on the projects and seemed distracted.”

“I really dislike those 360 reviews. It really is just a popularity contest, anyway,” Sean says. “So, am I fired

for these two mistakes?” You have worked with people who exhibited this type of defensive behavior

before, and you know it is natural for people to feel like they need to defend themselves when having this

Saylor URL: http://www.saylor.org/books Saylor.org 353

type of conversation. You decide to move the conversation ahead and focus on future behavior rather than

past behavior.

You say, “Sean, you normally add a lot of value to the organization. Although these issues will be

documented in your performance evaluation, I believe you can produce high-quality work. As a result,

let’s work together to develop an improvement plan so you can continue to add value to the organization.

The improvement plan addresses project deadlines and budgets, and I think you will find it helpful for

your career development.”

Sean agrees begrudgingly and you begin to show him the improvement plan document the company uses,

so you can fill it out together.

When you head home after work, you think about the day’s events and about Sean. As you had suspected,

he was defensive at first but seemed enthusiastic to work on the improvement plan after you showed him

the document. You feel positive that this performance evaluation was a step in the right direction to

ensure Sean continues to be a high producer in the company, despite these mistakes.

Saylor URL: http://www.saylor.org/books Saylor.org 354

11.1 Performance Evaluation Systems LEARNING OBJECTIVES

1. Define the reasons for a formal performance evaluation system.

2. Explain the process to develop a performance review system.

A performance evaluation system is a systematic way to examine how well an employee is performing in

his or her job. If you notice, the word systematic implies the performance evaluation process should be a

planned system that allows feedback to be given in a formal—as opposed to informal—sense. Performance

evaluations can also be called performance appraisals, performance assessments, or employee appraisals.

There are four reasons why a systematic performance evaluation system should be implemented. First,

the evaluation process should encourage positive performance and behavior. Second, it is a way to satisfy

employee curiosity as to how well they are performing in their job. It can also be used as a tool to develop

employees. Lastly, it can provide a basis for pay raises, promotions, and legal disciplinary actions.

Designing a Performance Appraisal System

There are a number of things to consider before designing or revising an existing performance appraisal

system. Some researchers suggest that the performance appraisal system is perhaps one of the most

important parts of the organization, [1]

while others suggest that performance appraisal systems are

ultimately flawed, [2]

making them worthless. For the purpose of this chapter, let’s assume we can create a

performance appraisal system that will provide value to the organization and the employee. When

designing this process, we should recognize that any process has its limitations, but if we plan it correctly,

we can minimize some of these.

The first step in the process is to determine how often performance appraisals should be given. Please

keep in mind that managers should constantly be giving feedback to employees, and this process is a more

formal way of doing so. Some organizations choose to give performance evaluations once per year, while

others give them twice per year, or more. The advantage to giving an evaluation twice per year, of course,

is more feedback and opportunity for employee development. The downside is the time it takes for the

manager to write the evaluation and discuss it with the employee. If done well, it could take several hours

for just one employee. Depending on your organization’s structure, you may choose one or the other. For

example, if most of your managers have five or ten people to manage (this is called span of control), it

might be worthwhile to give performance evaluations more than once per year, since the time cost isn’t

Saylor URL: http://www.saylor.org/books Saylor.org 355

high. If most of your managers have twenty or more employees, it may not be feasible to perform this

process more than once per year. To determine costs of your performance evaluations, see Table 11.1

"Estimating the Costs of Performance Evaluations". Asking for feedback from managers and employees is

also a good way to determine how often performance evaluations should be given.

Table 11.1 Estimating the Costs of Performance Evaluations

Narrow Span of Control

Average span of control 8

Average time to complete one written review 1 hour

Average time to discuss with employee 1 hour

Administrative time to set up meetings with employees 1/2 hour

8 employees × 2 hours per employee + 1/2 hour administrative time to set up times to meet with employees = 16.5 hours of time for one manager to complete all performance reviews

Wider Span of Control

Average span of control 25

Average time to complete one written review 1 hour

Average time to discuss with employee 1 hour

Administrative time to set up meetings with employees 1 hour

25 employees × 2 hours per employee + 1 hour administrative time to set up times to meet with employees = 51 hours

Once you have the number of hours it takes, you can multiply that by your manager’s hourly pay to get an

estimated cost to the organization

16 hours × $50 per hour = $85051 hours × $50 per hour = $2550

Should pay increases be tied to performance evaluations? This might be the second consideration before

development of a performance evaluation process. There is research that shows employees have a greater

acceptance of performance reviews if the review is linked to rewards. [3]

Saylor URL: http://www.saylor.org/books Saylor.org 356

The third consideration should include goal setting. In other words, what goals does the organization

hope to achieve with the performance appraisal process?

Once the frequency, rewards, and goals have been determined, it is time to begin to formalize the process.

First, we will need to develop the actual forms that will be used to evaluate each job within the

organization. Every performance evaluation should be directly tied with that employee’s job description.

Determining who should evaluate the performance of the employee is the next decision. It could be their

direct manager (most common method), subordinates, customers or clients, self, and/or peers. Table 11.2

"Advantages and Disadvantages of Each Source for Performance Evaluations" shows some of the

advantages and disadvantages for each source of information for performance evaluations. Ultimately,

using a variety of sources might garner the best results.

A 360-degree performance appraisal method is a way to appraise performance by using several sources to

measure the employee’s effectiveness. Organizations must be careful when using peer-reviewed

information. For example, in the Mathewson v. Aloha Airlines case, peer evaluations were found to be

retaliatory against a pilot who had crossed picket lines during the pilot’s union strike against a different

airline.

Management of this process can be time-consuming for the HR professional. That’s why there are many

software programs available to help administer and assess 360 review feedback. Halogen 360, for

example, is used by Princess Cruises and media companies such as MSNBC. [4]

This type of software

allows the HR professional to set criteria and easily send links to customers, peers, or managers, who

provide the information requested. Then the data are gathered and a report is automatically generated,

which an employee can use for quick feedback. Other similar types of software include Carbon360 and

Argos.

Performance Appraisal System Errors

Before we begin to develop our performance review process, it is important to note some of the errors that

can occur during this process. First, halo effects can occur when the source or the rater feels one aspect of

the performance is high and therefore rates all areas high. A mistake in rating can also occur when we

compare one employee to another, as opposed to the job description’s standards. Sometimes halo effects

will occur because the rater is uncomfortable rating someone low on a performance assessment item. Of

course, when this occurs, it makes the performance evaluation less valuable for employee development.

Saylor URL: http://www.saylor.org/books Saylor.org 357

Proper training on how to manage a performance appraisal interview is a good way to avoid this. We

discuss this in Section 11.3.4 "Performance Appraisal Interviews".

Validity issues are the extent to which the tool measures the relevant aspects of performance. The aspects

of performance should be based on the key skills and responsibilities of the job, and these should be

reviewed often to make sure they are still applicable to the job analysis and description.

Reliability refers to how consistent the same measuring tool works throughout the organization (or job

title). When we look at reliability in performance appraisals, we ask ourselves if two raters were to rate an

employee, how close would the ratings be? If the ratings would be far apart from one another, the method

may have reliability issues. To prevent this kind of issue, we can make sure that performance standards

are written in a way that will make them measurable. For example, instead of “increase sales” as a

performance standard, we may want to say, “increase sales by 10 percent from last year.” This

performance standard is easily measured and allows us to ensure the accuracy of our performance

methods.

Acceptability refers to how well members of the organization, manager and employees, accept the

performance evaluation tool as a valid measure of performance. For example, let’s assume the current

measurement tools of Blewett Gravel, Inc. are in place and show validity for each job function. However,

managers don’t think the tool is useful because they take too much time. As a result, they spend minimal

time on the evaluation. This could mean the current process is flawed because of acceptability error.

Another consideration is the specificity, which tells employees the job expectations and how they can be

met. If they are not specific enough, the tool is not useful to the employee for development or to the

manager to ensure the employee is meeting expectations. Finally, after we have developed our process, we

need to create a time line and educate managers and employees on the process. This can be done through

formal training and communicated through company blogs or e-mails. According to Robert

Kent, [5]

teaching people how to receive benefit from the feedback they receive can be an important part of

the process as well.

Performance Appraisal Legal Considerations

The legality of performance appraisals was questioned in 1973 in Brito v. Zia, in which an employee was

terminated based on a subjective performance evaluation. Following this important case, employers

began to rethink their performance evaluation system and the legality of it.

Saylor URL: http://www.saylor.org/books Saylor.org 358

The Civil Service Reform Act of 1978 set new standards for performance evaluation. Although these

standards related only to public sector employees, the Reform Act began an important trend toward

making certain performance evaluations were legal. The Reform Act created the following criteria for

performance appraisals in government agencies:

1. All agencies were required to create performance review systems.

2. Appraisal systems would encourage employee participation in establishing the performance standards

they will be rated against.

3. The critical elements of the job must be in writing.

4. Employees must be advised of the critical elements when hired.

5. The system must be based exclusively on the actual performance and critical elements of the job. They

cannot be based on a curve, for example.

6. They must be conducted and recorded at least once per year.

7. Training must be offered for all persons giving performance evaluations.

8. The appraisals must provide information that can be used for decision making, such as pay decisions and

promotion decisions.

Early performance appraisal research can provide us a good example as to why we should be concerned

with the legality of the performance appraisal process. Holley and Field [6]

analyzed sixty-six legal cases

that involved discrimination and performance evaluation. Of the cases, defendants won thirty-five of the

cases. The authors of the study determined that the cases that were won by the defendant had similar

characteristics:

1. Appraisers were given written instructions on how to complete the appraisal for employees.

2. Job analysis was used to develop the performance measures of the evaluation.

3. The focus of the appraisal was actual behaviors instead of personality traits.

4. Upper management reviewed the ratings before the performance appraisal interview was conducted.

This tells us that the following considerations should be met when developing our performance appraisal

process:

1. Performance standards should be developed using the job analysis and should change as the job changes.

2. Provide the employees with a copy of the evaluation when they begin working for the organization, and

even consider having the employees sign off, saying they have received it.

Saylor URL: http://www.saylor.org/books Saylor.org 359

3. All raters and appraisers should be trained.

4. When rating, examples of observable behavior (rather than personality characteristics) should be given.

5. A formal process should be developed in the event an employee disagrees with a performance review.

Now that we have discussed some of the pitfalls of performance appraisals, we can begin to discuss how to

develop the process of performance evaluations.

Table 11.2 Advantages and Disadvantages of Each Source for Performance Evaluations

Source Advantages Disadvantages

Manager/Supervisor

Usually has extensive knowledge of the

employee’s performance and abilities

Bias Favoritism

Self Self-analysis can help with employee

growth

In the employee’s interest to inflate his or

her own ratings

Peer

Works well when the supervisor doesn’t

always directly observe the employee Relationships can create bias in the review

Can bring a different perspective, since

peers know the job well

If evaluations are tied to pay, this can put

both the employee and the peer in an

awkward situation

If confidential, may create mistrust

within the organization

Customer/Client

Customers often have the best view of

employee behavior Can be expensive to obtain this feedback

Can enhance long-term relationships with

the customer by asking for feedback Possible bias

Subordinate

Data garnered can include how well the

manager treats employees

Possible retaliation if results are not

favorable

Can determine if employees feel there is

favoritism within their department

Rating inflation

Subordinates may not understand the

“big picture” and rate low as a result

Can be used as a self-development tool If confidential, may create mistrust within

Saylor URL: http://www.saylor.org/books Saylor.org 360

Source Advantages Disadvantages

for managers the organization

If nothing changes despite the evaluation,

could create motivational issues among

employees

HUMAN RESOURCE RECALL

What are the steps we should take when developing a performance review process?

KEY TAKEAWAYS

 A performance evaluation system is a systematic way to examine how well an employee is

performing in his or her job.

 The use of the term systematic implies the process should be planned.

 Depending on which research you read, some believe the performance evaluation system is one

of the most important to consider in HRM, but others view it as a flawed process, which makes it

less valuable and therefore ineffective.

 The first step in designing a performance appraisal process is to determine how often the

appraisals will be given. Consideration of time and effort to administer the evaluation should be

a deciding factor.

 Many companies offer pay increases as part of the system, while some companies prefer to

separate the process. Determine how this will be handled in the next step in the performance

appraisal development process.

 Goals of the performance evaluation should be discussed before the process is developed. In

other words, what does the company hope to gain from this process? Asking managers and

employees for their feedback on this is an important part of this consideration.

 After determining how often the evaluations should be given, if pay will be tied to the

evaluations and goals, you can now sit down and develop the process. First, determine what

forms will be used to administer the process.

Saylor URL: http://www.saylor.org/books Saylor.org 361

 After you have determined what forms will be used (or developed), determine who will be the

source for the information. Perhaps managers, peers, or customers would be an option. A 360

review process combines several sources for a more thorough review.

 There are some errors that can occur in the process. These include halo effects or comparing an

employee to another as opposed to rating employees only on the objectives. Other errors might

include validity, reliability, acceptability, andspecificity.

 Performance evaluations should always be based on the actual job description.

 Our last step in development of this process is to communicate the process and train employees

and managers on the process. Also, training on how best to use feedback is the final and perhaps

most important step of the process.

EXERCISES

1. Perform an Internet search on 360 review software. Compare at least two types of software and

discuss advantages and disadvantages of each.

2. Discuss the advantages and disadvantages of each type of performance evaluation source.

[1] J. Lawrie, “Prepare for a Performance Appraisal,” Personnel Journal 69 (April 1990): 132–36.

[2] Marjorie Derven, “The Paradox of Performance Appraisals,” Personnel Journal 69 (February 1990): 107–11.

[3] Brendan Bannister and David Balkin, “Performance Evaluation and Compensation Feedback Messages: An

Integrated Model,” Journal of Occupational Psychology 63 (June 1990): 97–111.

[4] Halogen Software, accessed March 22, 2011, http://www.halogensoftware.com.

[5] Robert Kent, “Why You Should Think Twice about 360 Performance Reviews,” ManagerWise, accessed March

22, 2011, http://www.managerwise.com/article.phtml?id=128.

[6] Hubert Field and William Holley, “The Relationship of Performance Appraisal System Characteristics to Verdicts

in Selected Employment Discrimination Cases,” Academy of Management Journal 25, no. 2 (1982): 392–406.

Saylor URL: http://www.saylor.org/books Saylor.org 362

11.2 Appraisal Methods LEARNING OBJECTIVE

1. Be able to describe the various appraisal methods.

It probably goes without saying that different industries and jobs need different kinds of appraisal

methods. For our purposes, we will discuss some of the main ways to assess performance in a

performance evaluation form. Of course, these will change based upon the job specifications for each

position within the company. In addition to industry-specific and job-specific methods, many

organizations will use these methods in combination, as opposed to just one method. There are three

main methods of determining performance. The first is the trait method, in which managers look at an

employee’s specific traits in relation to the job, such as friendliness to the customer.

The behavioral method looks at individual actions within a specific job.Comparative methods compare

one employee with other employees.Results methods are focused on employee accomplishments, such as

whether or not employees met a quota.

Within the categories of performance appraisals, there are two main aspects to appraisal methods. First,

the criteria are the aspects the employee is actually being evaluated on, which should be tied directly to

the employee᾿s job description. Second, the rating is the type of scale that will be used to rate each

criterion in a performance evaluation: for example, scales of 1–5, essay ratings, or yes/no ratings. Tied to

the rating and criteria is the weighting each item will be given. For example, if “communication” and

“interaction with client” are two criteria, the interaction with the client may be weighted more than

communication, depending on the job type. We will discuss the types of criteria and rating methods next.

Graphic Rating Scale

The graphic rating scale, a behavioral method, is perhaps the most popular choice for performance

evaluations. This type of evaluation lists traits required for the job and asks the source to rate the

individual on each attribute. A discrete scale is one that shows a number of different points. The ratings

can include a scale of 1–10; excellent, average, or poor; or meets, exceeds, or doesn’t meet expectations,

for example. Acontinuous scale shows a scale and the manager puts a mark on the continuum scale that

best represents the employee’s performance. For example:

Poor — — — — — — — — Excellent

Saylor URL: http://www.saylor.org/books Saylor.org 363

The disadvantage of this type of scale is the subjectivity that can occur. This type of scale focuses on

behavioral traits and is not specific enough to some jobs. Development of specific criteria can save an

organization in legal costs. For example, in Thomas v. IBM, IBM was able to successfully defend

accusations of age discrimination because of the objective criteria the employee (Thomas) had been rated

on.

Many organizations use a graphic rating scale in conjunction with other appraisal methods to further

solidify the tool’s validity. For example, some organizations use amixed standard scale, which is similar to

a graphic rating scale. This scale includes a series of mixed statements representing excellent, average,

and poor performance, and the manager is asked to rate a “+” (performance is better than stated), “0”

(performance is at stated level), or “−” (performance is below stated level). Mixed standard statements

might include the following:

 The employee gets along with most coworkers and has had only a few interpersonal issues.

 This employee takes initiative.

 The employee consistently turns in below-average work.

 The employee always meets established deadlines.

An example of a graphic rating scale is shown in Figure 11.1 "Example of Graphic Rating Scale".

Essay Appraisal

In an essay appraisal, the source answers a series of questions about the employee’s performance in essay

form. This can be a trait method and/or a behavioral method, depending on how the manager writes the

essay. These statements may include strengths and weaknesses about the employee or statements about

past performance. They can also include specific examples of past performance. The disadvantage of this

type of method (when not combined with other rating systems) is that the manager’s writing ability can

contribute to the effectiveness of the evaluation. Also, managers may write less or more, which means less

consistency between performance appraisals by various managers.

Checklist Scale

A checklist method for performance evaluations lessens the subjectivity, although subjectivity will still be

present in this type of rating system. With a checklist scale, a series of questions is asked and the manager

simply responds yes or no to the questions, which can fall into either the behavioral or the trait method, or

both. Another variation to this scale is a check mark in the criteria the employee meets, and a blank in the

Saylor URL: http://www.saylor.org/books Saylor.org 364

areas the employee does not meet. The challenge with this format is that it doesn’t allow more detailed

answers and analysis of the performance criteria, unless combined with another method, such as essay

ratings. A sample of a checklist scale is provided in Figure 11.3 "Example of Checklist Scale".

Figure 11.1 Example of Graphic Rating Scale

Saylor URL: http://www.saylor.org/books Saylor.org 365

Critical Incident Appraisals

This method of appraisal, while more time-consuming for the manager, can be effective at providing

specific examples of behavior. With a critical incident appraisal, the manager records examples of the

employee’s effective and ineffective behavior during the time period between evaluations, which is in the

behavioral category. When it is time for the employee to be reviewed, the manager will pull out this file

and formally record the incidents that occurred over the time period. The disadvantage of this method is

the tendency to record only negative incidents instead of postive ones. However, this method can work

well if the manager has the proper training to record incidents (perhaps by keeping a weekly diary) in a

fair manner. This approach can also work well when specific jobs vary greatly from week to week, unlike,

for example, a factory worker who routinely performs the same weekly tasks.

Figure 11.2 Example of Essay Rating

Figure 11.3 Example of Checklist Scale

Saylor URL: http://www.saylor.org/books Saylor.org 366

Work Standards Approach

For certain jobs in which productivity is most important, awork standards approach could be the more

effective way of evaluating employees. With this results-focused approach, a minimum level is set and the

employee’s performance evaluation is based on this level. For example, if a sales person does not meet a

quota of $1 million, this would be recorded as nonperforming. The downside is that this method does not

allow for reasonable deviations. For example, if the quota isn’t made, perhaps the employee just had a bad

month but normally performs well. This approach works best in long-term situations, in which a

reasonable measure of performance can be over a certain period of time. This method is also used in

manufacuring situations where production is extremely important. For example, in an automotive

assembly line, the focus is on how many cars are built in a specified period, and therefore, employee

performance is measured this way, too. Since this approach is centered on production, it doesn’t allow for

rating of other factors, such as ability to work on a team or communication skills, which can be an

important part of the job, too.

Ranking Methods

In a ranking method system (also called stack ranking), employees in a particular department are ranked

based on their value to the manager or supervisor. This system is a comparative method for performance

evaluations.The manager will have a list of all employees and will first choose the most valuable employee

and put that name at the top. Then he or she will choose the least valuable employee and put that name at

the bottom of the list. With the remaining employees, this process would be repeated. Obviously, there is

room for bias with this method, and it may not work well in a larger organization, where managers may

not interact with each employee on a day-to-day basis.

To make this type of evaluation most valuable (and legal), each supervisor should use the same criteria to

rank each individual. Otherwise, if criteria are not clearly developed, validity and halo effects could be

present. The Roper v. Exxon Corp case illustrates the need for clear guidelines when using a ranking

system. At Exxon, the legal department attorneys were annually evaluated and then ranked based on

input from attorneys, supervisors, and clients. Based on the feedback, each attorney for Exxon was ranked

based on their relative contribution and performance. Each attorney was given a group percentile rank

(i.e., 99 percent was the best-performing attorney). When Roper was in the bottom 10 percent for three

years and was informed of his separation with the company, he filed an age discrimination lawsuit. The

Saylor URL: http://www.saylor.org/books Saylor.org 367

courts found no correlation between age and the lowest-ranking individuals, and because Exxon had a set

of established ranking criteria, they won the case. [1]

Another consideration is the effect on employee morale should the rankings be made public. If they are

not made public, morale issues may still exist, as the perception might be that management has “secret”

documents.

FORTUNE 500 FOCUS

Critics have long said that a forced ranking system can be detrimental to morale; it focuses too much on

individual performance as opposed to team performance. Some say a forced ranking system promotes too

much competition in the workplace. However, many Fortune 500 companies use this system and have

found it works for their culture. General Electric (GE) used perhaps one of the most well-known forced

ranking systems. In this system, every year managers placed their employees into one of three categories:

“A” employees are the top 20 percent, “B” employees are the middle 70 percent, and “C” performers are

the bottom 10 percent. In GE’s system, the bottom 10 percent are usually either let go or put on a

performance plan. The top 20 percent are given more responsibility and perhaps even promoted.

However, even GE has reinvented this stringent forced ranking system. In 2006, it changed the system to

remove references to the 20/70/10 split, and GE now presents the curve as a guideline. This gives more

freedom for managers to distribute employees in a less stringent manner. [2]

The advantages of a forced ranking system include that it creates a high-performance work culture and

establishes well-defined consequences for not meeting performance standards. In recent research, a

forced ranking system seems to correlate well with return on investment to shareholders. For example,

the study [3]

shows that companies who use individual criteria (as opposed to overall performance) to

measure performance outperform those who measure performance based on overall company success. To

make a ranking system work, it is key to ensure managers have a firm grasp on the criteria on which

employees will be ranked. Companies using forced rankings without set criteria open themselves to

lawsuits, because it would appear the rankings happen based on favoritism rather than quantifiable

performance data. For example, Ford in the past used forced ranking systems but eliminated the system

after settling class action lawsuits that claimed discrimination. [4]

Conoco also has settled lawsuits over its

forced ranking systems, as domestic employees claimed the system favored foreign workers. [5]

To avoid

these issues, the best way to develop and maintain a forced ranking system is to provide each employee

Saylor URL: http://www.saylor.org/books Saylor.org 368

with specific and measurable objectives, and also provide management training so the system is executed

in a fair, quantifiable manner.

In a forced distribution system, like the one used by GE, employees are ranked in groups based on high

performers, average performers, and nonperformers. The trouble with this system is that it does not

consider that all employees could be in the top two categories, high or average performers, and requires

that some employees be put in the nonperforming category.

In a paired comparison system, the manager must compare every employee with every other employee

within the department or work group. Each employee is compared with another, and out of the two, the

higher performer is given a score of 1. Once all the pairs are compared, the scores are added. This method

takes a lot of time and, again, must have specific criteria attached to it when comparing employees.

HUMAN RESOURCE RECALL

How can you make sure the performance appraisal ties into a specific job description?

Management by Objectives (MBO)

Management by objectives (MBOs) is a concept developed by Peter Drucker in his 1954 book The Practice

of Management. [6]

This method is results oriented and similar to the work standards approach, with a few

differences. First, the manager and employee sit down together and develop objectives for the time period.

Then when it is time for the performance evaluation, the manager and employee sit down to review the

goals that were set and determine whether they were met. The advantage of this is the open

communication between the manager and the employee. The employee also has “buy-in” since he or she

helped set the goals, and the evaluation can be used as a method for further skill development. This

method is best applied for positions that are not routine and require a higher level of thinking to perform

the job. To be efficient at MBOs, the managers and employee should be able to write strong objectives. To

write objectives, they should be SMART: [7]

1. Specific. There should be one key result for each MBO. What is the result that should be achieved?

2. Measurable. At the end of the time period, it should be clear if the goal was met or not. Usually a number

can be attached to an objective to make it measurable, for example “sell $1,000,000 of new business in

the third quarter.”

3. Attainable. The objective should not be impossible to attain. It should be challenging, but not impossible.

Saylor URL: http://www.saylor.org/books Saylor.org 369

4. Result oriented. The objective should be tied to the company’s mission and values. Once the objective is

made, it should make a difference in the organization as a whole.

5. Time limited. The objective should have a reasonable time to be accomplished, but not too much time.

SETTING MBOS WITH EMPLOYEES

To make MBOs an effective performance evaluation tool, it is a good idea to train managers and

determine which job positions could benefit most from this type of method. You may find that for some

more routine positions, such as administrative assistants, another method could work better.

Behaviorally Anchored Rating Scale (BARS)

A BARS method first determines the main performance dimensions of the job, for example, interpersonal

relationships. Then the tool utilizes narrative information, such as from a critical incidents file, and

assigns quantified ranks to each expected behavior. In this system, there is a specific narrative outlining

what exemplifies a “good” and “poor” behavior for each category. The advantage of this type of system is

that it focuses on the desired behaviors that are important to complete a task or perform a specific job.

This method combines a graphic rating scale with a critical incidents system. The US Army Research

Institute [8]

developed a BARS scale to measure the abilities of tactical thinking skills for combat

leaders. Figure 11.4 "Example of BARS" provides an example of how the Army measures these skills.

Saylor URL: http://www.saylor.org/books Saylor.org 370

Figure 11.4 Example of BARS

Saylor URL: http://www.saylor.org/books Saylor.org 371

Figure 11.5 More Examples of Performance Appraisal Types

Saylor URL: http://www.saylor.org/books Saylor.org 372

HOW WOULD YOU HANDLE THIS?

Playing Favorites

You were just promoted to manager of a high-end retail store. As you are sorting through your

responsibilities, you receive an e-mail from HR outlining the process for performance evaluations. You

are also notified that you must give two performance evaluations within the next two weeks. This

concerns you, because you don’t know any of the employees and their abilities yet. You aren’t sure if you

should base their performance on what you see in a short time period or if you should ask other

employees for their thoughts on their peers’ performance. As you go through the files on the computer,

you find a critical incident file left from the previous manager, and you think this might help. As you

look through it, it is obvious the past manager had “favorite” employees and you aren’t sure if you

should base the evaluations on this information. How would you handle this?

How Would You Handle This?

https://api.wistia.com/v1/medias/1360849/embed

The author discusses the How Would You Handle This situation in this chapter

at:https://api.wistia.com/v1/medias/1360849/embed.

Table 11.3 Advantages and Disadvantages of Each Performance Appraisal Method

Type of Performance

Appraisal Method Advantages Disadvantages

Graphic Rating Scale

Inexpensive to develop Subjectivity

Easily understood by employees and

managers

Can be difficult to use in making

compensation and promotion decisions

Essay

Can easily provide feedback on the

positive abilities of the employee

Subjectivity

Writing ability of reviewer impacts validity

Time consuming (if not combined with

other methods)

Checklist scale

Measurable traits can point out

specific behavioral expectations

Does not allow for detailed answers or

explanations (unless combined with

another method)

Saylor URL: http://www.saylor.org/books Saylor.org 373

Type of Performance

Appraisal Method Advantages Disadvantages

Critical Incidents

Provides specific examples

Tendency to report negative incidents Time consuming for manager

Work Standards

Approach

Ability to measure specific

components of the job Does not allow for deviations

Ranking

Can create a high-performance work

culture

Possible bias

Validity depends on the amount of

interaction between employees and

manager

Can negatively affect teamwork

MBOs

Open communication

Many only work for some types of job

titles Employee may have more “buy-in”

BARS

Focus is on desired behaviors

Time consuming to set up

Scale is for each specific job

Desired behaviors are clearly outlined

No one performance appraisal is best, so most companies use a variety of methods to ensure the best

results.

KEY TAKEAWAYS

 When developing performance appraisal criteria, it is important to remember the criteria should

be job specific and industry specific.

 The performance appraisal criteria should be based on the job specifications of each specific job.

General performance criteria are not an effective way to evaluate an employee.

 The rating is the scale that will be used to evaluate each criteria item. There are a number of

different rating methods, including scales of 1–5, yes or no questions, and essay.

Saylor URL: http://www.saylor.org/books Saylor.org 374

 In a graphic rating performance evaluation, employees are rated on certain desirable attributes.

A variety of rating scales can be used with this method. The disadvantage is possible subjectivity.

 An essay performance evaluation will ask the manager to provide commentary on specific

aspects of the employee’s job performance.

 A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the

employee’s job.

 Some managers keep a critical incidents file. These incidents serve as specific examples to be

written about in a performance appraisal. The downside is the tendency to record only negative

incidents and the time it can take to record this.

 The work standards performance appraisal approach looks at minimum standards of productivity

and rates the employee performance based on minimum expectations. This method is often

used for sales forces or manufacturing settings where productivity is an important aspect.

 In a ranking performance evaluation system, the manager ranks each employee from most

valuable to least valuable. This can create morale issues within the workplace.

 An MBO or management by objectives system is where the manager and employee sit down

together, determine objectives, then after a period of time, the manager assesses whether those

objectives have been met. This can create great development opportunities for the employee

and a good working relationship between the employee and manager.

 An MBO’s objectives should be SMART: specific, measurable, attainable, results oriented, and

time limited.

 A BARS approach uses a rating scale but provides specific narratives on what constitutes good or

poor performance.

EXERCISE

1. Review each of the appraisal methods and discuss which one you might use for the

following types of jobs, and discuss your choices.

a. Administrative Assistant

b. Chief Executive Officer

c. Human Resource Manager

d. Retail Store Assistant Manager

Saylor URL: http://www.saylor.org/books Saylor.org 375

[1] Richard Grote, Forced Ranking: Making Performance Management Work (Boston: Harvard Business School

Press, 2005).

[2] “The Struggle to Measure Performance,” BusinessWeek, January 9, 2006, accessed August 15,

2011, http://www.businessweek.com/magazine/content/06_02/b3966060.htm.

[3] Lisa Sprenkel, “Forced Ranking: A Good Thing for Business?” Workforce Management, n.d., accessed August 15,

2011, http://homepages.uwp.edu/crooker/790-iep-pm/Articles/meth-fd-workforce.pdf.

[4] Mark Lowery, “Forcing the Issue,” Human Resource Executive Online, n.d., accessed August 15,

2011, http://www.hrexecutive.com/HRE/story.jsp?storyId=4222111&query=ranks.

[5] Mark Lowery, “Forcing the Issue,” Human Resource Executive Online, n.d., accessed August 15,

2011, http://hre.lrp.com/HRE/story.jsp?query=ranking&storyId=4222111.

[6] Peter Drucker, The Practice of Management (New York: Harper, 2006).

[7] George T. Doran, “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives,”Management

Review 70, no. 11 (1981): 35.

[8] Jennifer Phillips, Jennifer Shafter, Karol Ross, Donald Cox, and Scott Shadrick, Behaviorally Anchored Rating

Scales for the Assessment of Tactical Thinking Mental Models (Research Report 1854), June 2006, US Army

Research Institute for the Behavioral and Social Sciences, accessed August 15,

2011, http://www.hqda.army.mil/ari/pdf/RR1854.pdf.

Saylor URL: http://www.saylor.org/books Saylor.org 376

11.3 Completing and Conducting the Appraisal LEARNING OBJECTIVES

1. Be able to discuss best practices in performance review planning.

2. Be able to write an improvement plan for an employee.

So far, we have discussed the necessity of providing formal feedback to employees through a systematic performance

evaluation system. We have stressed the importance of making sure the HR professional knows how often

performance evaluations should be given and if they are tied to pay increases.

The next step is to make sure you know the goals of the performance evaluation; for example, is the goal to improve

performance and also identify people for succession planning? You will then determine the source for the

performance evaluation data, and then create criteria and rating scales that relate directly to the employee’s job

description. Once this is done, the successful functioning of the performance evaluation system largely depends on

the HR professional to implement and communicate the system to managers and employees. This will be the primary

focus of our next section.

Best Practices in Performance Appraisals

The most important things to remember when developing a performance evaluation system include the

following:

1. Make sure the evaluation has a direct relationship to the job. Consider developing specific criteria for each

job, based on the individual job specifications and description.

2. Involve managers when developing the process. Garner their feedback to obtain “buy-in” for the process.

3. Consider involving the employee in the process by asking the employee to fill out a self-evaluation.

4. Use a variety of methods to rate and evaluate the employee.

5. Avoid bias by standardizing performance evaluations systems for each job.

6. Give feedback on performance throughout the year, not just during performance review times.

7. Make sure the goals of the performance evaluation tie into the organizational and department goals.

8. Ensure the performance appraisal criteria also tie into the goals of the organization, for a strategic HRM

approach.

9. Review the evaluation for each job title often, since jobs and expectations change.

Saylor URL: http://www.saylor.org/books Saylor.org 377

As you can see from Figure 11.7 "Performance Review System", the performance appraisal aspect is just

one part of the total process. We can call this a performance review system. The first step of the process is

goal setting with the employee. This could mean showing the employee his or her performance appraisal

criteria or sitting down with the employee to develop MBOs. The basic idea here is that the employee

should know the expectations and how his or her job performance will be rated.

Constant monitoring, feedback, and coaching are the next step. Ensuring the employee knows what he or

she is doing well and is not doing well in a more informal manner will allow for a more productive

employee.

Figure 11.6 Best Practices in Performance Appraisal Systems

Saylor URL: http://www.saylor.org/books Saylor.org 378

Next, of course, is the formal performance evaluation process. Choosing the criteria, rating scale, and

source of the evaluation are steps we have already discussed. The next step is to work with the employee

to develop improvement plans (if necessary) and offer any rewards as a result of excellent performance.

The process then begins again, setting new goals with the employee.

Tr

ain

ing

M

an

ag

ers

an

d

E

m

pl

oy

ee

s

As

HR

pro

fess

ionals, we know the importance of performance evaluation systems in developing employees, but this may

not always be apparent to the managers we work with on a daily basis. It is our job to educate managers

and employees on the standards for completing performance evaluation forms as well as train them on

how to complete the necessary documents (criteria and ratings), how to develop improvement plans when

necessary, and how to deliver the performance appraisal interview.

EMPLOYEE FEEDBACK

Figure 11.7 Performance Review System

Saylor URL: http://www.saylor.org/books Saylor.org 379

First, after you have developed the new performance appraisal system (or adjusted an old one), consider

offering training on how to effectively use it. The training, if required, can save time later and make the

process more valuable. What we want to avoid is making it seem as if the performance appraisal process is

“just one more thing” for managers to do. Show the value of the system in your training or, better yet,

involve managers in developing the process to begin with.

Set standards should be developed for managers filling out the performance ratings and criteria. The

advantage of this is accuracy of data and limiting possible bias. Consider these “ground rules” to ensure

that information is similar no matter which manager is writing the evaluation:

1. Use only factual information and avoid opinion or perception.

2. For each section, comments should be at least two sentences in length, and examples of employee

behavior should be provided.

3. Reviews must be complete and shared with the employee before the deadline.

4. Make messages clear and direct.

5. Focus on observable behaviors.

Once your managers are trained, understand how to fill out the forms, and are comfortable with the

ground rules associated with the process, we can coach them on how to prepare for performance

evaluations. For example, here are the steps you may want to discuss with your managers who provide

performance evaluations:

1. Review the employee’s last performance evaluation. Note goals from the previous evaluation period.

2. Review the employee’s file and speak with other managers who interface with this person. In other words,

gather data about performance.

3. Fill out the necessary forms for this employee’s appraisal. Note which areas you want to address in the

appraisal interview with the employee.

4. If your organization bases pay increases on the performance evaluation, know the pay increase you are

able to offer the employee.

5. Write any improvement plans as necessary.

6. Schedule a time and date with the employee.

Most people feel nervous about giving and receiving performance evaluations. One way to limit this is to

show the employee the written evaluation before the interview, so the employee knows what to expect. To

Saylor URL: http://www.saylor.org/books Saylor.org 380

keep it a two-way conversation, many organizations have the employee fill out the same evaluation, and

answers from the employee and manager are compared and discussed in the interview. When the

manager meets with the employee to discuss the performance evaluation, the manager should be clear,

direct, and to the point about positives and weaknesses. The manager should also discuss goals for the

upcoming period, as well as any pay increases or improvement plans as a result of the evaluation. The

manager should also be prepared for questions, concerns, and reasons for an employee’s not being able to

meet performance standards.

Improvement plans should not be punitive, but the goal of an improvement plan should be to help the

employee succeed. Improvement plans are discussed in Chapter 7 "Retention and Motivation". Coaching

and development should occur throughout the employee’s tenure, and he or she should know before the

performance evaluation whether expectations are not being met. This way, the introduction of an

improvement plan is not a surprise. There are six main components to an employee improvement plan:

1. Define the problem.

2. Discuss the behaviors that should be modified, based on the problem.

3. List specific strategies to modify the behavior.

4. Develop long- and short-term goals.

5. Define a reasonable time line for improvements.

6. Schedule “check-in” dates to discuss the improvement plan.

An employee improvement plan works best if it is written with the employee, to obtain maximum buy-in.

Once you have developed the process and your managers are comfortable with it, the process must be

managed. This is addressed in Section 11.3.3 "Organizing the Performance Appraisal Process".

Organizing the Performance Appraisal Process

While it will be up to the individual manager to give performance appraisals to employees, as an HR

professional, it will be up to you to develop the process (which we have already discussed) and to manage

the process. Here are some things to consider to effectively manage the process:

1. Provide each manager with a job description for each employee. The job description should highlight the

expectations of each job title and provide a sound basis for review.

2. Provide each manager with necessary documents, such as the criteria and rating sheets for each job

description.

Saylor URL: http://www.saylor.org/books Saylor.org 381

3. Give the manager instructions and ground rules for filling out the documents.

4. Work with the manager on pay increases for each employee, if your organization has decided to tie

performance evaluations with pay increases.

5. Provide coaching assistance on objectives development and improvement plans, if necessary.

6. Give time lines to the manager for each performance review he or she is responsible for writing.

Most HR professionals will keep a spreadsheet or other document that lists all employees, their manager,

and time lines for completion of performance evaluations. This makes it easier to keep track of when

performance evaluations should be given.

Of course, the above process assumes the organization is not using software to manage performance

evaluations. Numerous types of software are available that allow the HR professional to manage key job

responsibilities and goals for every employee in the organization. This software tracks progress on those

goals and allows the manager to enter notes (critical incidents files) online. The software can track 360

reviews and send e-mail reminders when it is time for an employee or manager to complete evaluations.

This type of software can allow for a smoother, more streamlined process. Of course, as with any new

system, it can be time-consuming to set up and train managers and employees on how to use the system.

However, many organizations find the initial time to set up software or web-based performance

evaluation systems well worth the easier recording and tracking of performance goals.

No matter how the system is managed, it must be managed and continually developed to meet the

ultimate goal—continuing development of employees.

Performance Appraisal Interviews

Once a good understanding of the process is developed, it is time to think about the actual meeting with

the employee. A performance review process could be intricately detailed and organized, but if the

meeting with the employee doesn’t go well, the overall strategic objective of performance reviews may not

be met. In Norman R. F. Maier’s famous book The Appraisal Interview, he addressed three types of

appraisal interview styles. The first is the tell and sell interview. In this type of interview, the manager

does most of the talking and passes his or her view to the employee. In thetell and listen type of interview,

the manager communicates feedback and then addresses the employee’s thoughts about the interview. In

the problem-solving interview, the employee and the manager discuss the things that are going well and

Saylor URL: http://www.saylor.org/books Saylor.org 382

those that are not going well, which can make for a more productive discussion. To provide the best

feedback to the employee, consider the following:

1. Be direct and specific. Use examples to show where the employee has room for improvement and where

the employee exceeds expectations, such as, “The expectation is zero accidents, and you have not had any

accidents this year.”

2. Do not be personal; always compare the performance to the standard.For example, instead of saying, “You

are too slow on the production line,” say, the “expectations are ten units per hour, and currently you are at

eight units.”

3. Remember, it is a development opportunity. As a result, encourage the employee to talk. Understand what

the employee feels he does well and what he thinks he needs to improve.

4. Thank the employee and avoid criticism. Instead of the interview being a list of things the employee

doesn’t do well (which may give the feeling of criticizing), thank the employee for what the employee does

well, and work on action plans together to fix anything the employee isn’t doing well. Think of it as a team

effort to get the performance to the standard it needs to be.

The result of a completed performance evaluation usually means there are a variety of ramifications that

can occur after evaluating employee performance:

1. The employee now has written, documented feedback on his or her performance.

2. The organization has documented information on low performance, in case the employee needs to be

dismissed.

3. The employee has performed well and is eligible for a raise.

4. The employee has performed well and could be promoted.

5. Performance is not up to expectations, so an improvement plan should be put into place.

6. The employee hasn’t done well, improvement plans have not worked (the employee has been warned

before), and the employee should be dismissed.

In each of these cases, planning in advance of the performance appraisal interview is important, so all

information is available to communicate to the employee. Consider Robin, an employee at Blewett Gravel

who was told she was doing an excellent job. Robin was happy with the performance appraisal and when

asked about promotion opportunities, the manager said none was available. This can devalue a positive

Saylor URL: http://www.saylor.org/books Saylor.org 383

review and impact employee motivation. The point, of course, is to use performance evaluations as a

development tool, which will positively impact employee motivation.

KEY TAKEAWAYS

 There are many best practices to consider when developing, implementing, and managing a

performance appraisal system. First, the appraisal system must always tie into organization goals

and the individual employee’s job description.

 Involvement of managers in the process can initiate buy-in.

 Consider using self-evaluation tools as a method to create a two-way conversation between the

manager and the employee.

 Use a variety of rating methods to ensure a more unbiased result. For example, using peer

evaluations in conjunction with self- and manager evaluations can create a clearer picture of

employee performance.

 Be aware of bias that can occur with performance appraisal systems.

 Feedback should be given throughout the year, not just at performance appraisal time.

 The goals of a performance evaluation system should tie into the organization’s strategic plan,

and the goals for employees should tie into the organization’s strategic plan as well.

 The process for managing performance evaluations should include goal setting, monitoring and

coaching, and doing the formal evaluation process. The evaluation process should involve

rewards or improvement plans where necessary. At the end of the evaluation period, new goals

should be developed and the process started over again.

 It is the HR professional’s job to make sure managers and employees are trained on the

performance evaluation process.

 Standards should be developed for filling out employee evaluations, to ensure consistency and

avoid bias.

 The HR professional can assist managers by providing best practices information on how to

discuss the evaluation with the employee.

 Sometimes when performance is not up to standard, an improvement plan may be necessary.

The improvement plan identifies the problem, the expected behavior, and the strategies needed

Saylor URL: http://www.saylor.org/books Saylor.org 384

to meet the expected behavior. The improvement plan should also address goals, time lines to

meet the goals, and check-in dates for status on the goals.

 It is the job of the HR professional to organize the process for the organization. HR should

provide the manager with training, necessary documents (such as criteria and job descriptions),

instructions, pay increase information, and coaching, should the manager have to develop

improvement plans.

 Some HR professionals organize the performance evaluation information in an Excel spreadsheet

that lists all employees, job descriptions, and due dates for performance evaluations.

 There are many types of software programs available to manage the process. This software can

manage complicated 360 review processes, self-evaluations, and manager’s evaluations. Some

software can also provide time line information and even send out e-mail reminders.

 The performance evaluation process should be constantly updated and managed to ensure the

results contribute to the success of the organization.

 A variety of ramifications can occur, from the employee’s earning a raise to possible dismissal, all

of which should be determined ahead of the performance appraisal interview.

EXERCISES

1. What are the important aspects of an improvement plan? Why are these so important?

2. Name and describe three best practices for a performance evaluation system.

Saylor URL: http://www.saylor.org/books Saylor.org 385

11.4 Cases and Problems CHAPTER SUMMARY

 A performance evaluation system is a systematic way to examine how well an employee is performing in

his or her job.

 The use of the term systematic implies the process should be planned.

 Depending on which research you read, some believe the performance evaluation system is one of the

most important to consider in HRM, but others view it as a flawed process, which makes it less valuable

and therefore ineffective.

 The first step in designing a performance appraisal process is to determine how often the appraisals will

be given. Consideration of time and effort to administer the evaluation should be a deciding factor.

 Many companies offer pay increases as part of the system, while some companies prefer to separate the

process. Determining how this will be handled is the next step in the performance appraisal development

process.

 Goals of the performance evaluation should be discussed before the process is developed. In other words,

what does the company hope to gain from this process? Asking managers and employees for their

feedback on this is an important part of this consideration.

 After determining how often the evaluations should be given, and if pay will be tied to the evaluations and

goals, you can now sit down and develop the process. First, determine what forms will be used to

administer the process.

 After you have determined what forms will be used (or developed), determine who will be the source for

the information. Managers, peers, and customers are options. A 360 review process combines several

sources for a more thorough review.

 There are some errors that can occur in the process. These include halo effectsor comparing an employee

to another as opposed to rating them only on the objectives.

 Performance evaluations should always be based on the actual job description.

 Our last step in the development of this process is to communicate the process and train our employees

and managers on the process. Also, training on how best to use feedback is the final and perhaps most

important step of the process.

Saylor URL: http://www.saylor.org/books Saylor.org 386

 When developing performance appraisal criteria, it is important to remember the criteria should be job

specific and industry specific.

 The performance appraisal criteria should be based on the job specifications of each specific job. General

performance criteria are not an effective way to evaluate an employee.

 The rating is the scale that will be used to evaluate each criteria item. There are a number of different

rating methods, including scales of 1–5, yes or no questions, and essay.

 In a graphic rating performance evaluation, employees are rated on certain desirable attributes. A variety

of rating scales can be used with this method. The disadvantage is possible subjectivity.

 An essay performance evaluation will ask the manager to provide commentary on specific aspects of the

employee’s job performance.

 A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the

employee’s job.

 Some managers keep a critical incidents file. These incidents serve as specific examples to be written

about in a performance appraisal. The downside is the tendency to record only negative incidents and the

time it can take to record this.

 The work standards performance appraisal approach looks at minimum standards of productivity and

rates the employee performance based on minimum expectations. This method is often used for sales

forces or manufacturing settings where productivity is an important aspect.

 In a ranking performance evaluation system, the manager ranks each employee from most valuable to

least valuable. This can create morale issues within the workplace.

 An MBO or management by objectives system is where the manager and employee sit down together,

determine objectives, then after a period of time, the manager assesses whether those objectives have

been met. This can create great development opportunities for the employee and a good working

relationship between the employee and manager.

 An MBO’s objectives should be SMART: specific, measurable, attainable, results oriented, and time

limited.

 A BARS approach uses a rating scale but provides specific narratives on what constitutes good or poor

performance.

Saylor URL: http://www.saylor.org/books Saylor.org 387

 There are many best practices to consider when developing, implementing, and managing a performance

appraisal system. First, the appraisal system must always tie into organization goals and the individual

employee’s job description.

 Involvement of managers in the process can initiate buy-in for the process.

 Consider using self-evaluation tools as a method to create a two-way conversation between the manager

and the employee.

 Use a variety of rating methods to ensure a more unbiased result. For example, using peer evaluations in

conjunction with self and manager evaluations can create a clearer picture of employee performance.

 Be aware of bias that can occur with performance appraisal systems.

 Feedback should be given throughout the year, not just at performance appraisal time.

 The goals of a performance evaluation system should tie into the organization’s strategic plan, and the

goals for employees should tie into the organization’s strategic plan as well.

 The process for managing performance evaluations should include goal setting, monitoring and coaching,

and doing the formal evaluation process. The evaluation process should involve rewards or improvement

plans where necessary. At the end of the evaluation period, new goals should be developed and the

process started over again.

 It is the HR professional’s job to make sure managers and employees are trained on the performance

evaluation process.

 Standards should be developed for filling out employee evaluations, to ensure consistency and avoid bias.

 The HR professional can assist managers by providing best practices information on how to discuss the

evaluation with the employee.

 Sometimes when performance is not up to standard, an improvement plan may be necessary. The

improvement plan identifies the problem, the expected behavior, and the strategies needed to meet the

expected behavior. The improvement plan should also address goals, time lines to meet the goals, and

check-in dates for status on the goals.

 It is the job of the HR professional to organize the process for the organization. HR should provide the

manager with training, necessary documents (such as criteria and job descriptions), instructions, pay

increase information, and coaching, should the manager have to develop improvement plans.

Saylor URL: http://www.saylor.org/books Saylor.org 388

 Some HR professionals organize the performance evaluation information in an Excel spreadsheet that

lists all employees, job descriptions, and due dates for performance evaluations.

 There are many types of software available to manage the process. This software can manage complicated

360 review processes, self-evaluations, and manager’s evaluations. Some software can also provide time

line information and even send out e-mail reminders.

 The performance evaluation process should be constantly updated and managed to ensure the results

contribute to the success of the organization.

CHAPTER CASE

Revamping the System

It is your first six months at your new job as an HR assistant at Groceries for You, a home delivery grocery

service. When you ask the HR director, Chang, about performance evaluations, he just rolls his eyes and

tells you to schedule a meeting in his Outlook calendar to discuss them. In the meantime, you gather some

data that might be helpful in your discussion with Chang.

Number of managers 4

Number of employees 82

Average span of control

Delivery—38

Warehouse—24

Marketing/technology—16

Job types

11—customer service

1—delivery manager

1—warehouse manager

1—marketing and technology manager

38—delivery drivers

24—warehouse workers

Saylor URL: http://www.saylor.org/books Saylor.org 389

1—tech support

5—marketing and website design

When you meet, Chang is very forward with you about the current process. “Right now, managers groan

when they are told they need to complete evaluations. The evaluations are general—we use the same form

for all jobs in the organization. It appears that promotion decisions are not based on the evaluations but

instead tend to be based on subjective criteria, such as how well the manager likes the individual. We

really need to get a handle on this system, but I haven’t had the time to do it. I am hoping you can make

some recommendations for our system and present them to me and then to the managers during next

month’s meeting. Can you do this?”

1. Detail each step you will take as you develop a new performance evaluation system.

2. Identify specifics such as source, type of rating system, and criteria plans for each job category. Discuss

budget for each performance evaluation. Address how you will obtain management buy-in for the new

process.

3. Develop PowerPoint slides for your presentation to management about your proposed process and forms.

TEAM ACTIVITY

1. In a group of three to four, develop a performance evaluation sheet, using at least two methods, for the

following job description, and present to the class:

Job Class Specification for:

ACCOUNTANT, City of Seattle

Class Specification Schematic Number: 2000504

Class Summary:

Performs a variety of professional accounting functions and tasks for a city department or utility. Audits,

monitors, researches, and recommends revisions to accounting procedures and operations. Performs and

coordinates the maintenance and production of accounting reports and records and ensures compliance

with established accounting procedures and practices.

Distinguishing Characteristics of the Class:

The accountant class is capable of performing a range of professional accounting functions and tasks

within the established guidelines of the department/city and according to generally accepted accounting

Saylor URL: http://www.saylor.org/books Saylor.org 390

practices, procedures, and methods. This class is supervised by a higher level accountant or manager and

supervises accounting support personnel as required.

Assignments are performed under moderate supervision within established guidelines, generally accepted

accounting principles, standards, and methods. Receives direction on special projects or where guidelines

and rules are unclear. Knowledge of accounting practices, methods, laws, rules, ordinances, and

regulations is required to determine the most appropriate accounting methods and procedures to apply

and to ensure appropriate compliance.

Personal contacts are with department employees, other departments, agencies, or the public to provide

information, coordinate work activities, and resolve problems.

Examples of Work:

 Analyzes and prepares cash flow forecasts and updates forecasts based on actual revenues and

expenditures.

 Prepares financial reports, statements, and schedules.

 Audits and reconciles assigned accounts in the general ledger.

 Monitors and controls accounting activities in the recording of financial transactions, that is, accounts

receivables, accounts payables, collections, and fixed assets.

 Verifies and reviews accounting transactions. Makes appropriate corrections, entries, and adjustments to

ensure accuracy of reports.

 Researches, analyzes, and prepares journals for financial transactions.

 Analyzes and maintains subsidiary ledgers (i.e., investments). Monitors and maintains investment ledger

entries and investment schedules.

 Prepares variance reports required by outside auditors and program summaries explaining variances.

 Coordinates, trains, and monitors the work of accounting support personnel to ensure proper work

operations.

 Assists in development and modification of internal accounting control policies, procedures, and practices.

 Assists in special projects such as research and analysis of financial information, long-term debt schedules,

investment security reports, and reports for special information requested by departmental personnel.

 Performs other related duties of a comparable level/type as assigned.

Work Environment/Physical Demands:

Saylor URL: http://www.saylor.org/books Saylor.org 391

Work is performed in an office environment.

Minimum Qualifications:

Bachelor's Degree in Accounting (or a combination of education and/or training and/or experience that

provides an equivalent background required to perform the work of the class).

Saylor URL: http://www.saylor.org/books Saylor.org 392

Chapter 12: Working with Labor Unions Unhappy Employees Could Equal Unionization

As the HR manager for a two-hundred-person company, you tend to have a pretty good sense of employee

morale. Recently, you are concerned because it seems that morale is low, because of pay and the

increasing health benefit costs to employees. You discuss these concerns with upper-level management,

but owing to financial pressures, the company is not able to give pay raises this year.

One afternoon, the manager of the marketing department comes to you with this concern, but also with

some news. She tells you that she has heard talk of employees unionizing if they do not receive pay raises

within the next few months. She expresses that the employees are very unhappy and productivity is

suffering as a result. She says that employees have already started the unionization process by contacting

the National Labor Relations Board and are in the process of proving 30 percent worker interest in

unionization. As you mull over this news, you are concerned because the organization has always had a

family atmosphere, and a union might change this. You are also concerned about the financial pressures

to the organization should the employees unionize and negotiate higher pay. You know you must take

action to see that this doesn’t happen. However, you know you and all managers are legally bound by rules

relating to unionization, and you need a refresher on what these rules are. You decide to call a meeting

first with the CEO and then with managers to discuss strategy and inform them of the legal implications of

this process. You feel confident that a resolution can be developed before the unionization happens.

Saylor URL: http://www.saylor.org/books Saylor.org 393

12.1 The Nature of Unions LEARNING OBJECTIVES

1. Be able to discuss the history of labor unions.

2. Explain some of the reasons for a decline in union membership over the past sixty years.

3. Be able to explain the process of unionization and laws that relate to unionization.

A labor union, or union, is defined as workers banding together to meet common goals, such as better pay,

benefits, or promotion rules. In the United States, 11.9 percent of American workers belong to a union,

down from 20.1 percent in 1983. [1]

In this section, we will discuss the history of unions, reasons for

decline in union membership, union labor laws, and the process employees go through to form a union.

First, however, we should discuss some of the reasons why people join unions.

People may feel their economic needs are not being met with their current wages and benefits and believe

that a union can help them receive better economic prospects. Fairness in the workplace is another reason

why people join unions. They may feel that scheduling, vacation time, transfers, and promotions are not

given fairly and feel that a union can help eliminate some of the unfairness associated with these

processes. Let’s discuss some basic information about unions before we discuss the unionization process.

History and Organization of Unions

Trade unions were developed in Europe during the Industrial Revolution, when employees had little skill

and thus the entirety of power was shifted to the employer. When this power shifted, many employees

were treated unfairly and underpaid. In the United States, unionization increased with the building of

railroads in the late 1860s. Wages in the railroad industry were low and the threat of injury or death was

high, as was the case in many manufacturing facilities with little or no safety laws and regulations in place.

As a result, the Bortherhood of Locomotive Engineers and several other brotherhoods (focused on specific

tasks only, such as conductors and brakemen) were formed to protect workers’ rights, although many

workers were fired because of their membership.

The first local unions in the United States were formed in the eighteenth century, in the form of the

National Labor Union (NLU).

The National Labor Union, formed in 1866, paved the way for other labor organizations. The goal of the

NLU was to form a national labor federation that could lobby government for labor reforms on behalf of

the labor organizations. Its main focus was to limit the workday to eight hours. While the NLU garnered

Saylor URL: http://www.saylor.org/books Saylor.org 394

many supporters, it excluded Chinese workers and only made some attempts to defend the rights of

African-Americans and female workers. The NLU can be credited with the eight-hour workday, which was

passed in 1862. Because of a focus on government reform rather than collective bargaining, many workers

joined the Knights of Labor in the 1880s.

The Knights of Labor started as a fraternal organization, and when the NLU dissolved, the Knights grew in

popularity as the labor union of choice. The Knights promoted the social and cultural spirit of the worker

better than the NLU had. It originally grew as a labor union for coal miners but also covered several other

types of industries. The Knights of Labor initiated strikes that were successful in increasing pay and

benefits. When this occurred, membership increased. After only a few years, though, membership

declined because of unsuccessful strikes, which were a result of a too autocratic structure, lack of

organization, and poor management. Disagreements between members within the organization also

caused its demise.

The American Federation of Labor (AFL) was formed in 1886, mostly by people who wanted to see a

change from the Knights of Labor. The focus was on higher wages and job security. Infighting among

union members was minimized, creating a strong organization that still exists today. In the 1930s, the

Congress of Industrial Organizations (CIO) was formed as a result of political differences in the AFL. In

1955, the two unions joined together to form the AFL-CIO.

Currently, the AFL-CIO is the largest federation of unions in the United States and is made up of fifty-six

national and international unions. The goal of the AFL-CIO isn’t to negotiate specific contracts for

employees but rather to support the efforts of local unions throughout the country.

Currently in the United States, there are two main national labor unions that oversee several industry-

specific local unions. There are also numerous independent national and international unions that are not

affiliated with either national union:

1. AFL-CIO: local unions include Airline Pilots Association, American Federation of Government Employees,

Associated Actors of America, and Federation of Professional Athletes

2. CTW (Change to Win Federation): includes the Teamsters, Service Employees International Union,

United Farm Workers of America, and United Food and Commercial Workers

3. Independent unions: Directors Guild of America, Fraternal Order of Police, Independent Pilots

Association, Major League Baseball Players Association

Saylor URL: http://www.saylor.org/books Saylor.org 395

The national union plays an important role in legislative changes, while the local unions focus on

collective bargaining agreements and other labor concerns specific to the area. Every local union has

a union steward who represents the interests of union members. Normally, union stewards are elected by

their peers.

A national union, besides focusing on legislative changes, also does the following:

1. Lobbies in government for worker rights laws

2. Resolves disputes between unions

3. Helps organize national protests

4. Works with allied organizations and sponsors various programs for the support of unions

For example, in 2011, the national Teamsters union organized demonstrations in eleven states to protest

the closing of an Ontario, California, parts distribution center. Meanwhile, Teamster Local 495 protested

at the Ontario plant. [2]

Saylor URL: http://www.saylor.org/books Saylor.org 396

Current Union Challenges

The labor movement is currently experiencing several challenges, including a decrease in union

membership, globalization, and employers’ focus on maintaining nonunion status. As mentioned in the

opening of this section, the United States has seen a steady decline of union membership since the 1950s.

In the 1950s, 36 percent of all workers were unionized, [3]

as opposed to just over 11 percent today.

HUMAN RESOURCE RECALL

When you are hired for your first job or your next job, do you think you would prefer to be part of a union

or not?

Figure 12.1 The Complicated Structure of AFL-CIO

Source: AFL-CIO.

Saylor URL: http://www.saylor.org/books Saylor.org 397

Claude Fischer, a researcher from University of California Berkeley, believes the shift is cultural. His

research says the decline is a result of American workers preferring individualism as opposed to

collectivism. [4]

Other research says the decline of unions is a result of globalization, and the fact that many

jobs that used to be unionized in the manufacturing arena have now moved overseas. Other reasoning

points to management, and that its unwillingness to work with unions has caused the decline in

membership. Others suggest that unions are on the decline because of themselves. Past corruption,

negative publicity, and hard-line tactics have made joining a union less favorable.

To fully understand unions, it is important to recognize the global aspect of unions. Statistics on a

worldwide scale show unions in all countries declining but still healthy in some countries. For example, in

eight of the twenty-seven European Union member states, more than half the working population is part

of a union. In fact, in the most populated countries, unionization rates are still at three times the

unionization rate of the United States. [5]

Italy has a unionization rate of 30 percent of all workers, while

the UK has 29 percent, and Germany has a unionization rate of 27 percent.

In March 2011, Wisconsin governor Scott Walker proposed limiting the collective bargaining rights of

state workers to save a flailing budget. Some called this move “union busting” and said this type of act is

illegal, as it takes away the basic rights of workers. The governor defended his position by saying there is

no other choice, since the state is in a budget crisis. Other states such as Ohio are considering similar

measures. Whatever happens, there is a clear shift for unions today.

Globalization is also a challenge in labor organizations today. As more and more goods and services are

produced overseas, unions lose not only membership but union values in the stronghold of worker

culture. As globalization has increased, unions have continued to demand more governmental control but

have been only somewhat successful in these attempts. For example, free trade agreements such as the

North American Free Trade Agreement (NAFTA) have made it easier and more lucrative for companies to

manufacture goods overseas. This is discussed in Chapter 14 "International HRM". For example, La-Z-

Boy and Whirlpool closed production facilities in Dayton and Cleveland, Ohio, and built new factories in

Mexico to take advantage of cheaper labor and less stringent environmental standards. Globalization

creates options for companies to produce goods wherever they think is best to produce them. As a result,

unions are fighting the globalization trend to try and keep jobs in the United States.

Saylor URL: http://www.saylor.org/books Saylor.org 398

There are a number of reasons why companies do not want unions in their organizations, which we will

discuss in greater detail later. One of the main reasons, however, is increased cost and less management

control. As a result, companies are on a quest to maintain a union-free work environment. In doing so,

they try to provide higher wages and benefits so workers do not feel compelled to join a union. Companies

that want to stay union free constantly monitor their retention strategies and policies.

Labor Union Laws

The Railway Labor Act (RLA) of 1926 originally applied to railroads and in 1936 was amended to cover

airlines. The act received support from both management and unions. The goal of the act is to ensure no

disruption of interstate commerce. The main provisions of the act include alternate dispute resolution,

arbitration, and mediation to resolve labor disputes. Any dispute must be resolved in this manner before a

strike can happen. The RLA is administered by the National Mediation Board (NMB), a federal agency,

and outlines very specific and detailed processes for dispute resolution in these industries.

The Norris-LaGuardia Act of 1932 (also known as the anti-injunction bill), barred federal courts from

issuing injunctions (a court order that requires a party to do something or refrain from doing something)

against nonviolent labor disputes and barred employers from interfering with workers joining a union.

The act was a result of common yellow-dog contracts, in which a worker agreed not to join a union before

accepting a job. The Norris-LaGuardia Act made yellow-dog contracts unenforceable in courts and

established that employees were free to join unions without employer interference.

In 1935, the Wagner Act (sometimes called the National Labor Relations Act) was passed, changing the

way employers can react to several aspects of unions. The Wagner Act had a few main aspects:

1. Employers must allow freedom of association and organization and cannot interfere with, restrain, or

coerce employees who form a union.

2. Employers may not discriminate against employees who form or are part of a union, or those who file

charges.

3. An employer must bargain collectively with representation of a union.

The National Labor Relations Board (NLRB) oversees this act, handling any complaints that may arise

from the act. For example, in April 2011, the NLRB worked with employees at Ozburn-Hessey Logistics in

Tennessee after they had been fired because of their involvement in forming a union. The company was

also accused of interrogating employees about their union activities and threatened employees with loss of

Saylor URL: http://www.saylor.org/books Saylor.org 399

benefits should they form a union. The NLRB utilized their attorney to fight on behalf of the employees,

and a federal judge ordered the company to rehire the fired employees and also to desist in other

antiunion activities. [6]

The Taft-Hartley Act also had major implications for unions. Passed in 1947, Taft-Hartley amended the

Wagner Act. The act was introduced because of the upsurge of strikes during this time period. While the

Wagner Act addressed unfair labor practices on the part of the company, the Taft-Hartley Act focused on

unfair acts by the unions. For example, it outlawed strikes that were not authorized by the union,

calledwildcat strikes. It also prohibited secondary actions(or secondary boycotts) in which one union goes

on strike in sympathy for another union. The act allowed the executive branch of the federal government

to disallow a strike should the strike affect national health or security. One of the most famous injunctions

was made by President Ronald Reagan in 1981. Air traffic controllers had been off the job for two days

despite their no-strike oath, and Reagan ordered all of them (over eleven thousand) discharged because

they violated this federal law.

The Landrum Griffin Act, also known as the Labor Management Reporting and Disclosure (LMRDA) Act,

was passed in 1959. This act required unions to hold secret elections, required unions to submit their

annual financial reports to the U.S. Department of Labor, and created standards governing expulsion of a

member from a union. This act was created because of racketeering charges and corruptions charges by

unions. In fact, investigations of the Teamsters Union found they were linked to organized crime, and the

Teamsters were banned from the AFL-CIO. The goal of this act was to regulate the internal functioning of

unions and to combat abuse of union members by union leaders.

Saylor URL: http://www.saylor.org/books Saylor.org 400

The Unionization Process

There are one of two ways in which a unionization process can begin. First, the union may contact several

employees and discuss the possibility of a union, or employees may contact a union on their own. The

union will then help employees gather signatures to show that the employees want to be part of a union.

To hold an election, the union must show signatures from over 30 percent of the employees of the

organization.

Once the signatures are gathered, the National Labor Relations Board is petitioned to move forward with

a secret-ballot election. An alternative to the secret-ballot election is the card check method, in which the

union organizer provides the company with authorization cards signed by a simple majority (half plus

one). The employer can accept the cards as proof that the employees desire a union in their organization.

The NLRB then certifies the union as the employees’ collective bargaining representative.

Figure 12.3 Major Acts Regarding Unions, at a Glance

Saylor URL: http://www.saylor.org/books Saylor.org 401

If the organization does not accept the card check method as authorization for a union, the second option

is via a secret ballot. Before this method is used, a petition must be filed by the NLRB, and an election is

usually held two months after the petition is filed. In essence, the employees vote whether to unionize or

not, and there must be a simple majority (half plus one). The NLRB is responsible for election logistics

and counting of ballots. Observers from all parties can be present during the counting of votes. Once votes

are counted, a decision on unionization occurs, and at that time, the collective bargaining process begins.

Figure 12.4 The Unionization Process

Saylor URL: http://www.saylor.org/books Saylor.org 402

Once the NLRB is involved, there are many limits as to what the employer can say or do during the

process to prevent unionization of the organization. It is advisable for HR and management to be

educated on what can legally and illegally be said during this process. It is illegal to threaten or intimidate

employees if they are discussing a union. You cannot threaten job, pay, or benefits loss as a result of

forming a union. Figure 12.5 "Things That Shouldn’t Be Said to Employees during a Unionization

Pro

ces

s" i

ncl

ude

s

info

rma

tion

on

wh

at should legally be avoided if employees are considering unionization.

Obviously, it is in the best interest of the union to have as many members as possible. Because of this,

unions may use many tactics during the organizing process. For example, many unions are also politically

involved and support candidates who they feel best represent labor. They provide training to organizers

and sometimes even encourage union supporters to apply for jobs in nonunion environments to actively

work to unionize other employees when they are hired. This practice is calledunion salting. Unions,

especially on the national level, can be involved in corporate campaigns that boycott certain products or

companies because of their labor practices. The United Food and Commercial Workers (UFCW), for

example, has a “Wake Up Walmart Campaign” that targets the labor practices of this organization.

Strategies Companies Use to Avoid Unionization

Most organizations feel the constraints of having a union organization are too great. It affects the cost to

the organization and operation efficiency. Collective bargaining at times can put management at odds

with its employees and cost more to produce products and services. Ideally, companies will provide safe

Figure 12.5 Things That Shouldn’t Be Said to Employees during a Unionization Process

Saylor URL: http://www.saylor.org/books Saylor.org 403

working conditions, fair pay, and benefits so the employees do not feel they need to form a union. There

are three main phases of unionization:

1. Phase 1: Your organization is union free and there is little or no interest in unionizing.

2. Phase 2: You learn that some employees are discussing unionization or you learn about specific attempts

by the union to recruit employees.

3. Phase 3: You receive a petition from the National Labor Relations Board filed by a union requesting a

unionization vote.

Because of increased costs and operational efficiency, it is normally in a company’s best interest to avoid

unionization. While in phase 1, it is important to review employee relations programs including pay,

benefits, and other compensation. Ensure the compensation plans are fair so employees feel fairly treated

and have no reason to seek the representation of a union.

Despite your best efforts, you could hear of unionization in your organization. The goal here is to prevent

the union from gaining support to ask for a National Labor Relations Board election. Since only 30

percent of employees need to sign union cards for a vote to take place, this phase to avoid unionization is

very important. During this time, HR professionals and managers should respond to the issues the

employees have and also develop a specific strategy on how to handle the union vote, should it get that far.

In phase 3, familiarization with all the National Labor Relations Board rules around elections and

communications is important. With this information, you can organize meetings to inform managers on

these rules. At this time, you will likely want to draw up an antiunion campaign and communicate that to

managers, but also make sure it does not violate laws. To this end, develop specific strategies to encourage

employees to vote “no” for the union. Some of the arguments that might be used include talking with the

employee and mentioning the following:

1. Union dues are costly.

2. Employees could be forced to go on strike.

3. Employees and management may no longer be able to discuss matters informally and individually.

4. Unionization can create more bureaucracy within the company.

5. Individual issues may not be discussed.

6. Many decisions within a union, such as vacation time, are based on seniority only.

Saylor URL: http://www.saylor.org/books Saylor.org 404

With unionization in decline, it is likely you may never need to handle a new union in your organization.

However, organizations such as Change to Win are in the process of trying to increase union membership.

This organization has four affiliated unions, with a goal to strengthen the labor movement. Teamsters,

United Food and Commercial Workers, United Farm Workers, and Service Employees International

Union are all unions affiliated with this organization. [7]

The next few years will be telling as to the fate of

unions in today’s organizations.

FORTUNE 500 FOCUS

Perhaps no organization is better known for its antiunion stance than Walmart. Walmart has over 3,800

stores in the United States and over 4,800 internationally with $419 billion in sales. [8]

Walmart employs

more than 2 million associates worldwide. [9]

The billions of dollars Walmart earns do not immunize the

company to trouble. In 2005, the company’s vice president, Tom Coughlin, was forced to resign after

admitting that between $100,000 and $500,000 was spent for undeclared purposes, but it was eventually

found that the money was spent to keep the United Food and Commercial Workers union (UFCW) out of

Walmart [10]

(he was found guilty and sentenced to two years of house arrest).

Other claims surrounding union busting are the closing of stores, such as the Walmart Tire and Lube

Express in Gatineau, Quebec, [11]

when discussions of unionization occurred. Other reports of union

busting include the accusation that company policy requires store managers to report rumors of

unionizing to corporate headquarters. Once the report is made, all labor decisions for that store are

handled by the corporate offices instead of the store manager. According to labor unions in the United

States, Walmart is willing to work with international labor unions but continues to fiercely oppose

unionization in the United States. In one example, after butchers at a Jacksonville, Texas, Walmart voted

to unionize, Walmart eliminated all US meat-cutting departments.

A group called OUR Walmart (Organization United for Respect), financed by the United Food and

Commercial Workers* (UFCW) union, has stemmed from the accusations of union busting. Walmart

spokesperson David Tovar says he sees the group as a Trojan horse assembled by labor organizations to

lay the groundwork for full-fledged unionization and seek media attention to fulfill their agenda. While

the organization’s activities may walk a fine line between legal and illegal union practices under the Taft-

Hartley Act, this new group will certainly affect the future of unionization at Walmart in its US stores.

*Note: UFCW was part of the AFL-CIO until 2005 and now is an independent national union.

Saylor URL: http://www.saylor.org/books Saylor.org 405

The Impact of Unions on Organizations

You may wonder why organizations are opposed to unions. As we have mentioned, since union workers

do receive higher wages, this can be a negative impact on the organization. Unionization also impacts the

ability of managers to make certain decisions and limits their freedom when working with employees. For

example, if an employee is constantly late to work, the union contract will specify how to discipline in this

situation, resulting in little management freedom to handle this situation on a case-by-case basis. In 2010,

for example, the Art Institute of Seattle faculty filed signatures and voted on unionization. [12]

Some of the

major issues were scheduling issues and office space, not necessarily pay and benefits. While the

particular National Labor Relations Board vote was no to unionization, a yes vote could have given less

freedom to management in scheduling, since scheduling would be based on collective bargaining

contracts. Another concern about unionization for management is the ability to promote workers. A union

contract may stipulate certain terms (such as seniority) for promotion, which means the manager has less

control over the employees he or she can promote.

Section 12.2 "Collective Bargaining" and Section 12.3 "Administration of the Collective Bargaining

Agreement" discuss the collective bargaining and grievance processes.

KEY TAKEAWAYS

 Union membership in the United States has been slowly declining. Today, union membership

consists of about 11.9 percent of the workforce, while in 1983 it consisted of 20 percent of the

workforce.

 The reasons for decline are varied, depending on whom you ask. Some say the moving of jobs

overseas is the reason for the decline, while others say unions’ hard-line tactics put them out of

favor.

 Besides declining membership, union challenges today include globalization and companies’

wanting a union-free workplace.

 The United States began its first labor movement in the 1800s. This was a result of low wages, no

vacation time, safety issues, and other issues.

 Many labor organizations have disappeared, but the American Federation of Labor (AFL) still

exists today, although it merged with the Congress of Industrial Organizations (CIO) and is now

Saylor URL: http://www.saylor.org/books Saylor.org 406

known as the AFL-CIO. It is the largest labor union and represents local labor unions in a variety

of industries.

 The United States has a low number of union members compared with other countries. Much of

Europe, for example, has over 30 percent of their workforce in labor unions, while in some

countries as much as 50 percent of the workforce are members of a labor union.

 Legislation has been created over time to support both labor unions and the companies who

have labor unions. The Railway Labor Act applies to airlines and railroads and stipulates that

employees may not strike until they have gone through an extensive dispute resolution process.

The Norris-LaGuardia Act madeyellow-dog contracts illegal and barred courts from issuing

injunctions.

 The Wagner Act was created to protect employees from retaliation should they join a union.

The Taft-Hartley Act was developed to protect companies from unfair labor practices by unions.

 The National Labor Relations Board is the overseeing body for labor unions, and it handles

disputes between companies as well as facilitates the process of new labor unions in the

developing stages. Its job is to enforce both the Wagner Act and the Taft-Hartley Act.

 The Landrum Griffin Act was created in 1959 to combat corruption in labor unions during this

time period.

 To form a union, the organizer must have signatures from 30 percent of the employees. If this

occurs, the National Labor Relations Board will facilitate a card check to determine more than 50

percent of the workforce at that company is in agreement with union representation. If the

company does not accept this, then the NLRB holds secret elections to determine if the

employees will be unionized. A collective bargaining agreement is put into place if the vote is yes.

 Companies prefer to not have unions in their organizations because it affects costs and

operational productivity. Companies will usually try to prevent a union from organizing in their

workplace.

 Managers are impacted when a company does unionize. For example, management rights are

affected, and everything must be guided by the contract instead of management prerogative.

EXERCISES

Saylor URL: http://www.saylor.org/books Saylor.org 407

1. Visit the National Labor Relations Board website. View the “weekly case summary” and discuss it

in at least two paragraphs, stating your opinion on this case.

2. Do you agree with unionization within organizations? Why or why not? List the advantages and

disadvantages of unions to the employee and the company.

[1] “Union Members: 2010,” Bureau of Labor Statistics, US Department of Labor, news release, January 21, 2011,

accessed April 4, 2011, http://www.bls.gov/news.release/pdf/union2.pdf.

[2] “Teamsters Escalate BMW Protests across America,” PR Newswire, August 2, 2011, accessed August 15,

2011, http://www.teamster.org/content/teamsters-escalate-bmw-protests-across-america.

[3] Gerald Friedman, “Labor Unions in the United States,” Economic History Association, February 2, 2010,

accessed April 4, 2011,http://eh.net/encyclopedia/article/friedman.unions.us.

[4] Claude Fischer, , “Why Has Union Membership Declined?” Economist’s View, September 11, 2010, accessed

April 11, 2011,http://economistsview.typepad.com/economistsview/2010/09/why-has-union-membership-

declined.html.

[5] Federation of European Employers, “Trade Unions across Europe,” accessed April 4,

2011,http://www.fedee.com/tradeunions.html.

[6] “Federal Judge Orders Employer to Reinstate Three Memphis Warehouse Workers and Stop Threatening Union

Supporters While Case Proceeds at NLRB,” Office of Public Affairs, National Labor Relations Board, news release,

April 7, 2011, accessed April 7, 2011,http://www.nlrb.gov/news/federal-judge-orders-employer-reinstate-three-

memphis-warehouse-workers- and-stop-threatening-un.

[7] Change to Win website, accessed April 7, 2011, http://www.changetowin.org.

[8] “Investors,” Walmart Corporate, 2011, accessed August 15,

2011,http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome.

[9] “Investors,” Walmart Corporate, 2011, accessed August 15,

2011,http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome.

[10] Los AngelesTimes Wire Services, “Wal-Mart Accused of Unfair Labor Practices,” accessed September 15,

2011, http://articles.latimes.com/2005/apr/13/business/fi-walmart13.

[11] UFCW Canada, “Want a Union? You’re Fired,” n.d., accessed August 15,

2011,http://www.ufcw.ca/index.php?option=com_multicategories&view=article&id=1935&Itemid=98&lang=en.

Saylor URL: http://www.saylor.org/books Saylor.org 408

[12] “Union Push in For-Profit Higher Ed,” Inside Higher Ed, May 24, 2010, accessed August 15,

2011, http://www.insidehighered.com/news/2010/05/24/union.

Saylor URL: http://www.saylor.org/books Saylor.org 409

12.2 Collective Bargaining LEARNING OBJECTIVES

1. Be able to describe the process of collective bargaining.

2. Understand the types of bargaining issues and the rights of management.

3. Discuss some strategies when working with unions.

When employees of an organization vote to unionize, the process for collective bargaining

begins. Collective bargaining is the process of negotiations between the company and representatives of

the union. The goal is for management and the union to reach a contract agreement, which is put into

place for a specified period of time. Once this time is up, a new contract is negotiated. In this section, we

will discuss the components of the collective bargaining agreement.

The Process of Collective Bargaining

In any bargaining agreement, certain management rights are not negotiable, including the right to

manage and operate the business, hire, promote, or discharge employees. However, in the negotiated

agreement there may be a process outlined by the union for how these processes should work.

Management rights also include the ability of the organization to direct the work of the employees and to

establish operational policies. As an HR professional sits at the bargaining table, it is important to be

strategic in the process and tie the strategic plan with the concessions the organization is willing to make

and the concessions the organization will not make.

Another important point in the collective bargaining process is the aspect of union security. Obviously, it

is in the union’s best interest to collect dues from members and recruit as many new members as possible.

In the contract, a checkoff provision may be negotiated. This provision occurs when the employer, on

behalf of the union, automatically deducts dues from union members’ paychecks. This ensures that a

steady stream of dues is paid to the union.

To recruit new members, the union may require something called a union shop. Aunion shop requires a

person to join the union within a certain time period of joining the organization. In right-to-work states a

union shop may be illegal. Twenty-two states have passed right-to-work laws, as you can see in Figure

12.6 "Map of Right-to-Work States". These laws prohibit a requirement to join a union or pay dues and

fees to a union. To get around these laws, agency shops were created. An agency shop is similar to a union

shop in that workers do not have to join the union but still must pay union dues. Agency shop union fees

Saylor URL: http://www.saylor.org/books Saylor.org 410

are known as agency fees and may be illegal in right-to-work states. A closed shop used to be a mechanism

for a steady flow of membership. In this arrangement, a person must be a union member to be hired. This,

however, was made illegal under the Taft-Hartley Act. According to a study by CNBC, all twenty-two

right-to-work states are in the top twenty-five states for having the best workforces. [1]

However, according

to the AFL-CIO, the average worker in a right-to-work state makes $5,333 less per year than other

workers. [2]

In a collective bargaining process, both parties are legally bound to bargain in good faith. This means they

have a mutual obligation to participate actively in the deliberations and indicate a desire to find a basis for

agreement. There are three main classification of bargaining topics: mandatory, permissive, and illegal.

Wages, health and safety, management rights, work conditions, and benefits fall into

Figure 12.6 Map of Right-to-Work States

Saylor URL: http://www.saylor.org/books Saylor.org 411

themandatory category. Permissive topics are those that are not required but may be brought up during

the process. An example might include the requirement of drug testing for candidates or the required

tools that must be provided to the employee to perform the job, such as a cellular phone or computer. It is

important to note that while management is not required by labor laws to bargain on these issues,

refusing to do so could affect employee morale. We can also classify bargaining issues as illegal topics,

which obviously cannot be discussed. These types of illegal issues may be of a discriminatory nature or

anything that would be considered illegal outside the agreement.

EXAMPLES OF BARGAINING TOPICS

 Pay rate and structure

 Health benefits

 Incentive programs

 Job classification

 Performance assessment procedure

 Vacation time and sick leave

 Health plans

 Layoff procedures

 Seniority

 Training process

 Severance pay

 Tools provided to employees

 Process for new applicants

Saylor URL: http://www.saylor.org/books Saylor.org 412

The collective bargaining process has five main steps; we will discuss each of these steps next. The first

step is the preparation of both parties. The negotiation team should consist of individuals with knowledge

of the organization and the skills to be an effective negotiator. An understanding of the working

conditions and dissatisfaction with working conditions is an important part of this preparation step.

Establishing objectives for the negotiation and reviewing the old contract are key components to this step.

The management team should also prepare and anticipate union demands, to better prepare for

compromises.

The second step of the process involves both parties agreeing on how the time lines will be set for the

negotiations. In addition, setting ground rules for how the negotiation will occur is an important step, as it

lays the foundation for the work to come.

In the third step, each party comes to the table with proposals. It will likely involve initial opening

statements and options that exist to resolve any situations that exist. The key to a successful proposal is to

come to the table with a “let’s make this work” attitude. An initial discussion is had and then each party

generally goes back to determine which requests it can honor and which it can’t. At this point, another

meeting is generally set up to continue further discussion.

Figure 12.7 Steps in Collective Bargaining

Saylor URL: http://www.saylor.org/books Saylor.org 413

Once the group comes to an agreement or settlement (which may take many months and proposals), a

new contract is written and the union members vote on whether to accept the agreement. If the union

doesn’t agree, then the process begins all over again.

Ramifications of a Bargaining Impasse

When the two parties are unable to reach consensus on the collective bargaining agreement, this is called

a bargaining impasse. Various kinds of strikes are used to show the displeasure of workers regarding a

bargaining impasse. Aneconomic strike is a strike stemming from unhappiness about the economic

conditions during contract negotiations. For example, 45,000 Verizon workers rallied in the summer of

2011 when contract negotiations failed. [3]

The two unions, Communications Workers of America and the

International Brotherhood of Electric Workers, claim that the new contract is unfair, as it asks Verizon

workers to contribute more to health plans, and the company is also looking to freeze pensions at the end

of the year and reduce sick time. [4]

Verizon says the telecommunications business is changing, and it

cannot afford these expenses. An unfair labor practices strike can happen during negotiations. The goal of

an unfair labor practices strike is to get the organization to cease committing what the union believes to be

an unfair labor practice. A bargaining impasse could mean the union goes on strike or a lockout occurs.

The goal of a lockout, which prevents workers from working, is to put pressure on the union to accept the

contract. A lockout can only be legally conducted when the existing collective bargaining agreement has

expired and there is truly an impasse in contract negotiations. In summer 2011, the National Basketball

Association locked out players when the collective bargaining agreement expired, jeopardizing the 2011–

12 season [5]

while putting pressure on the players to accept the agreement. Similarly, the goal of a strike is

to put pressure on the organization to accept the proposed contract. Some organizations will impose a

lockout if workers engage in slowdowns, an intentional reduction in productivity. Some unions will

engage in a slowdown instead of a strike, because the workers still earn pay, while in a strike they do not.

A sick-outis when members of a union call in sick, which may be illegal since they are using allotted time,

while a walk-out is an unannounced refusal to perform work. However, this type of tactic may be illegal if

the conduct is irresponsible or indefensible, according to a judge. Jurisdictional strikes are used to put

pressure on an employer to assign work to members of one union versus another (if there are two unions

within the same organization) or to put pressure on management to recognize one union representation

when it currently recognizes another. The goal of a sick-out strike is to show the organization how

Saylor URL: http://www.saylor.org/books Saylor.org 414

unproductive the company would be if the workers did go on strike. As mentioned under the Taft-Hartley

Act, wildcat strikes are illegal, as they are not authorized by the union and usually violate a collective

bargaining agreement.Sympathy strikes are work stoppages by other unions designed to show support for

the union on strike. While they are not illegal, they may violate the terms of the collective bargaining

agreement.

HUMAN RESOURCE RECALL

How would you feel about going on strike? What kinds of situations may cause you to do so?

Working with Labor Unions

First and foremost, when working witih labor unions, a clear understanding of the contract is imperative

for all HR professionals and managers. The contract (also called the collective bargaining agreement) is

the guiding document for all decisions relating to employees. All HR professionals and managers should

have intimate knowledge of the document and be aware of the components of the contract that can affect

dealings with employees. The agreement outlines all requirements of managers and usually outlines how

discipline, promotion, and transfers will work.

Because as managers and HR professionals we will be working with members of the union on a daily

basis, a positive relationship can not only assist the day-to-day operations but also create an easier

bargaining process. Solicitation of input from the union before decisions are made can be one step to

creating this positive relationship. Transparent communication is another way to achieve this goal.

In HR, one of the major aspects of working with labor unions is management of the union contract. We

discuss the grievance process in Section 12.3 "Administration of the Collective Bargaining Agreement".

HOW WOULD YOU HANDLE THIS?

Union Busting

The employees in your organization are unhappy with several aspects of their job, including pay. You

have tried to solve this issue by creating new compensation plans, but with no avail. You hear talk of

unionizing. When you bring this issue to your CEO, she vehemently opposes unions and tells you to let

the employees know that if they choose to unionize, they will all lose their jobs. Knowing the CEO’s

threat is illegal, and knowing you may lose your job if the workers decide to unionize, how would you

handle this?

How Would You Handle This?

Saylor URL: http://www.saylor.org/books Saylor.org 415

https://api.wistia.com/v1/medias/1360905/embed

The author discusses the How Would You Handle This situation in this chapter

at:https://api.wistia.com/v1/medias/1360905/embed.

KEY TAKEAWAYS

 A union has two goals: to add new members and to collect dues. A check-off provision of a

contract compels the organization to take union dues out of the paycheck of union members.

 In a union shop, people must join the union within a specified time period after joining the

organization. This is illegal in right-to-work states. An agency shop is one where union

membership is not required but union dues are still required to be paid. This may also be illegal

in right-to-work states.

 Made illegal by the Taft-Hartley Act, a closed shop allows only union members to apply and be

hired for a job.

 Collective bargaining is the process of negotiating the contact with union representatives.

Collective bargaining, to be legal, must always be done in good faith.

 There are three categories of collective bargaining issues. Mandatory issues might include pay

and benefits. Permissive bargaining items may include things such as drug testing or the required

equipment the organization must supply to employees. Illegal issues are those things that cannot

be discussed, which can include issues that could be considered discriminatory.

 The collective bargaining process can take time. Both parties prepare for the process by

gathering information and reviewing the old contract. They then set time lines for the bargaining

and reveal their wants and negotiate those wants. Abargaining impasse occurs when members

cannot come to an agreement.

 When a bargaining impasse occurs, a strike or lockout of workers can occur. Aneconomic

strike occurs during negotiations, while an unfair labor practices strikecan occur anytime, and

during negotiations. A sick-out can also be used, when workers call in sick for the day. These

strategies can be used to encourage the other side to agree to collective bargaining terms.

 Some tips for working with unions include knowing and following the contract, involving unions

in company decisions, and communicating with transparency.

EXERCISES

Saylor URL: http://www.saylor.org/books Saylor.org 416

1. Research negotiation techniques, then list and describe the options. Which do you think would

work best when negotiating with unions?

2. Of the list of bargaining issues, which would be most important to you and why?

[1] “Best Workforces Are in Right to Work States,” Redstate, June 30, 2011, accessed August 14,

2011, http://www.redstate.com/laborunionreport/2011/06/30/best-workforces-are-in-right-to-work-states-

survey-finds/.

[2] “Right to Work for Less,” AFL-CIO, accessed August 14,

2011,http://www.aflcio.org/issues/legislativealert/stateissues/work/.

[3] Dan Goldberg, “Verizon Strike Could Last Months,” New Jersey News, August 7, 2011, accessed August 15,

2011,http://www.nj.com/news/index.ssf/2011/08/verizon_workers_outline_differ.html.

[4] Dan Goldberg, “Verizon Strike Could Last Months,” New Jersey News, August 7, 2011, accessed August 15,

2011,http://www.nj.com/news/index.ssf/2011/08/verizon_workers_outline_differ.html.

[5] Steve Kyler, “Division among Owners?” HoopsWorld, August 8, 2011, accessed August 15,

2011, http://www.hoopsworld.com/Story.asp?story_id=20549.

Saylor URL: http://www.saylor.org/books Saylor.org 417

12.3 Administration of the Collective Bargaining

Agreement LEARNING OBJECTIVE

1. Be able to explain how to manage the grievance process.

A grievance procedure or process is normally created within the collective bargaining agreement.

The grievance procedure outlines the process by which grievances over contract violations will be

handled. This will be the focus of our next section.

Procedures for Grievances

A violation of the contract terms or perception of violation normally results in a grievance. The process is

specific to each contract, so we will discuss the process in generalities. A grievance is normally initiated by

an employee and then handled by union representatives. Most contracts specify how the grievance is to be

initiated, the steps to complete the procedure, and identification of representatives from both sides who

will hear the grievance. Normally, the HR department is involved in most steps of this process. Since

HRM has intimate knowledge of the contract, it makes sense for them to be involved. The basic process is

shown in Figure 12.8 "A Sample Grievance Process".

The first step is normally an informal conversation with the manager, employee, and possibly a union

Figure 12.8 A Sample Grievance Process

Saylor URL: http://www.saylor.org/books Saylor.org 418

representative. Many grievances never go further than this step, because often the complaint is a result of

a misunderstanding.

If the complaint is unresolved at this point, the union will normally initiate the grievance process by

formally expressing it in writing. At this time, HR and management may discuss the grievance with a

union representative. If the result is unsatisfactory to both parties, the complaint may be brought to the

company’s union grievance committee. This can be in the form of an informal meeting or a more formal

hearing.

After discussion, management will then submit a formalized response to the grievance. It may decide to

remedy the grievance or may outline why the complaint does not violate the contract. At this point, the

process is escalated.

Further discussion will likely occur, and if management and the union cannot come to an agreement, the

dispute will normally be brought to a national union officer, who will work with management to try and

resolve the issue. A mediator may be called in, who acts as an impartial third party and tries to resolve the

issue. Any recommendation made by the mediator is not binding for either of the parties involved.

Mediators can work both on grievance processes and collective bargaining issues. For example, when the

National Football League (NFL) and its players failed to reach a collective bargaining agreement, they

agreed to try mediation. [1]

In this case, the agreement to go to mediation was a positive sign after several

months of failed negotiations. In the end, the mediation worked, and the NFL players started the 2011–12

season on time. In Washington State (as well as most other states), a nonprofit organization is available to

assist in mediations (either grievance or collective bargaining related) and arbitrations. The goal of such

an organization is to avoid disruptions to public services and to facilitate the dispute resolution process.

In Washington, the organization is called the Public Employment Relations Commission (PERC). Figure

12.9 "The Mediation Process for the Public Employment Relations Commission in Washington

State"shows the typical grievance handling process utilizing the free PERC services.

If no resolution develops, an arbitrator might be asked to review the evidence and make a decision.

An arbitrator is an impartial third party who is selected by both parties and who ultimately makes a

binding decision in the situation. Thus arbitration is the final aspect of a grievance.

Saylor URL: http://www.saylor.org/books Saylor.org 419

Some examples of grievances might include the following:

1. One employee was promoted over another, even though he had seniority.

2. An employee doesn’t have the tools needed to perform his or her job, as outlined in the contract.

3. An employee was terminated, although the termination violated the rules of the contract.

4. An employee was improperly trained on chemical handling in a department.

Most grievances fall within one of four categories. There are individual/personal grievances, in which one

member of the union feels he or she has been mistreated. A group grievance occurs if several union

members have been mistreated in the same way. Aprinciple grievance deals with basic contract issues

surrounding seniority or pay, for example. If an employee or group is not willing to formally file a

grievance, the union may file a union or policy grievance on behalf of that individual or group.

The important things to remember about a grievance are that it should not be taken personally and, if

used correctly can be a fair, clear process to solving problems within the organization.

KEY TAKEAWAYS

 The grievance process is a formal process to address any complaints about contract violations.

 The grievance process varies from contract to contract. It is an important part of the contract

that ensures a fair process for both union members and management.

Figure 12.9 The Mediation Process for the Public Employment Relations Commission in Washington State

Saylor URL: http://www.saylor.org/books Saylor.org 420

 HR is normally involved in this process, since it has intimate knowledge of the contract and laws

that guide the contract.

 The grievance process can consist of any number of steps. First, the complaint is discussed with

the manager, employee, and union representative. If no solution occurs, the grievance is put into

writing by the union. Then HR, management, and the union discuss the process, sometimes in

the form of a hearing in which both sides are able to express their opinion.

 Management then expresses its decision in writing to the union.

 If the union decides to escalate the grievance, the grievance may be brought to the national

union for a decision. At this point, an arbitrator may be brought in, suitable to both parties, to

make the final binding decision.

 There are four main types of grievances. First, the individual grievance is filed when one member

of the union feels mistreated. A group grievance occurs when several members of the union feel

they have been mistreated and file a grievance as a group. A principle grievance may be filed on

behalf of the union and is usually based on a larger issue, such as a policy or contract issue.

A union or policy grievance may be filed if the employee does not wish to file individually.

 Grievances should not be taken personally and should be considered a fair way in which to solve

problems that can come up between the union and management.

EXERCISE

1. What are the advantages of a grievance process? What disadvantages do you see with a

formalized grievance process?

[1] Associated Press, “NFL, Union Agree to Mediation,” February 17, 2011, accessed August 15,

2011, http://msn.foxsports.com/nfl/story/NFL-players-union-agree-to-mediation-federal-for-labor-talks-CBA-

021711.

Saylor URL: http://www.saylor.org/books Saylor.org 421

12.4 Cases and Problems CHAPTER SUMMARY

 Union membership in the United States has been slowly declining. Today, union membership consists of

about 11.9 percent of the workforce, while in 1983 it consisted of 20 percent of the workforce.

 The reasons for decline are varied, depending on who you ask. Some say the moving of jobs overseas is the

reason for the decline, while others say unions’ hard-line tactics put them out of favor.

 The United States began its first labor movement in the 1800s. This was a result of low wages, no vacation

time, safety issues, and other issues.

 Many labor organizations have disappeared, but the American Federation of Labor (AFL) still exists today,

although it merged with the Congress of Industrial Organizations (CIO) and is now known as the AFL-CIO.

It is the largest labor union and represents local labor unions in a variety of industries.

 The United States has a low number of union members compared with other countries. Much of Europe,

for example, has over 30 percent of their workforce in labor unions, while in some countries as much as

50 percent of the workforce are members of a labor union.

 Legislation has been created over time to support both labor unions and the companies who have labor

unions. The Wagner Act was created to protect employees from retaliation should they join a union.

The Taft-Hartley Actwas developed to protect companies from unfair labor practices by unions.

 The National Labor Relations Board is the overseeing body for labor unions, and it handles disputes

between companies as well as facilitates the process of certifying new labor unions. Its job is to enforce the

Wagner and Taft-Hartley acts.

 The Landrum Griffin Act was created in 1959 to combat corruption in labor unions during this time

period.

 To form a union, the organizer must have signatures from 30 percent of the employees. If this occurs, the

National Labor Relations Board will facilitate a card check to determine whether more than 50 percent of

the workforce at that company is in agreement with union representation. If the company does not accept

this, then the NLRB holds secret elections to determine if the employees will be unionized.

 A union has two goals: to add new members and to collect dues. The checkoff provision of a contract

compels the organization to take union dues out of the paycheck of union members.

Saylor URL: http://www.saylor.org/books Saylor.org 422

 In a union shop, people must join the union within a specified time period of joining the organization.

This is illegal in right-to-work states.

 Made illegal by the Taft-Hartley Act, a closed shop allows only union members to apply and be hired for a

job.

 Collective bargaining is the process of negotiating the contact with union representatives. Collective

bargaining, to be legal, must always be done in good faith.

 There are three categories of collective bargaining issues. Mandatory issuesmight include pay and

benefits. Permissive bargaining items may include things such as drug testing or the required equipment

the organization must supply to employees. Illegal issues are those things that cannot be discussed, which

can include issues that could be considered discriminatory.

 The collective bargaining process can take time. Both parties prepare for the process by gathering

information and reviewing the old contract. They then set time lines for the bargaining and reveal their

wants and negotiate those wants. A bargaining impasse occurs when members cannot come to an

agreement.

 When a bargaining impasse occurs, a strike or lockout of workers can occur. These are both strategies that

can be used to encourage the other side to agree to collective bargaining terms.

 Some tips for working with unions include knowing and following the contract, involving unions in

company decisions, and communicating with transparency.

 The grievance process is a formal process that addresses any complaints about contract violations.

 The grievance process varies from contract to contract. It is an important part of the contract that ensures

a fair process for both unions members and management.

 HRM is normally involved in the grievance process, since it has intimate knowledge of the contract and

laws guiding the contract.

 The grievance process can consist of any number of steps. First, the complaint is discussed with the

manager, employee, and union representative. If no solution occurs, the grievance is put into writing by

the union. Then HR, management, and the union discuss the process, sometimes in the form of a hearing

in which both sides are able to express their opinion.

 Management then expresses its decision in writing to the union.

Saylor URL: http://www.saylor.org/books Saylor.org 423

 If the union decides to escalate the grievance, the grievance may be brought to the national union for a

decision. At this point, an arbitrator may be brought in, suitable to both parties, to make the final binding

decision.

 There are four main types of grievances. First, the individual grievance is filed when one member of the

union feels mistreated. A group grievance occurs when several members of the union feel they have been

mistreated and file a grievance as a group. A principle grievance may be filed on behalf of the union and is

usually based on a larger issue, such as a policy or contract issue. A union or policy grievance may be filed

if the employee does not wish to file the grievance individually.

 Grievances should not be taken personally and should be considered a fair way in which to solve problems

that can come up between the union and management.

CHAPTER CASE

But I Didn’t Know

After a meeting with the operations manager of your organization, you close the door to your office so you

can think of strategies to resolve an issue that has come up. The operations manager casually mentioned

he had just finished a performance review of one of his employees and offered the employee a large raise

because of all the hours the employee was putting in. The raise was equal to 11 percent of the employee’s

salary. The operations manager, being new both to the company and to a union shop, wasn’t aware of the

contract agreement surrounding pay increases. An employee must receive a minimum of a 2 percent pay

increase per year and a maximum of 6 percent per year based on the contract. You worry that if the union

gets wind of this, everyone at that employee’s pay level may file a grievance asking for the same pay raise.

Of course, the challenge is that the manager already told this person he would be receiving the 11 percent

raise. You know you need to act fast to remedy this situation.

1. As an HR professional, what should you have done initially to prevent this issue from happening?

2. Outline a specific strategy to implement stating how you will prevent this from happening in the future.

3. What would you do about the 11 percent pay raise that was already promised to the employee?

4. If the union files a grievance, what type of grievance do you think it would be? Provide reasoning for your

answer.

5. If the union does file a grievance, draft a response to the grievance to share with your upper-level

managers as a starting point for discussion on how to remedy the situation.

Saylor URL: http://www.saylor.org/books Saylor.org 424

TEAM ACTIVITY

1. Break into teams of four or five. Please choose the following roles for each of your team members:

o Mediator

o Manager

o HR professional

o Employee

Once roles are chosen, please determine a solution or make a recommendation for the following situation

(remember, this is a role play; you may make reasonable assumptions): The employee believes the

performance evaluation the manager gave was unfair and has filed a grievance about it. The employee

shows proof of a good attendance record and three letters from colleagues stating the high quality of her

work. The manager contends the employee does not use time wisely at work, hence the 3 out of 5 rating.

The manager is able to show several examples of poor time usage.

Saylor URL: http://www.saylor.org/books Saylor.org 425

Chapter 13: Safety and Health at Work Training for Safety

As the HR manager of a large construction company, your workers’ health and safety is of paramount

concern. Last week, you reported an incidence rate of 7.5 accidents per 100 employees to the Occupational

Safety and Health Administration (OSHA). When you compared these numbers to last year, you found the

number had significantly increased, as it was 4.2. This is concerning, because you know an unsafe

workplace is not only bad for employees and bad for business, but it could result in fines from OSHA. You

ask your operations managers to meet with you about the situation. When you bring this to his attention,

he doesn’t seem at all concerned about the almost double increase in accidents over the last year. He says

the increase in accidents is a result of scaffolding falling during a building project where several workers

were hurt. He says this one accident skewed the numbers. He mentions that the supervisor responsible for

the scaffolding had been let go six months ago for other reasons, and he assures you that there is no

reason to be concerned. A few weeks after this conversation, two of your workers spend time in the

hospital because of a falling scaffolding injury. Again, you approach the operations manager and he

assures you that those employees were just new and he will implement proper procedures. You know the

incident will result in another high incident percentage, even if there isn’t another accident the rest of the

year. You consider your options.

You look back over ten years of accident reports and find there are three areas for which your company

seems to have 90 percent of all accidents. You decide you will develop a training program to address these

safety issues in your workplace. You refer to your HRM textbook for tips on how to prepare and

communicate this training to your employees. When you present this option to your operations manager,

he says that employees don’t have the time to take from their jobs to go through this training and suggests

you just let it go. You are prepared for this response, and you give him the dollar figure of money lost

owing to worker injury in your organization. This gets his attention, especially when you compare it to the

small cost of doing a two-hour training for all employees. Both of you check your Outlook schedules to

find the best day of the week to schedule the training, for minimum impact on employees’ work.

Saylor URL: http://www.saylor.org/books Saylor.org 426

13.1 Workplace Safety and Health Laws LEARNING OBJECTIVES

1. Be able to explain OSHA laws.

2. Understand right-to-know laws.

Workplace safety is the responsibility of everyone in the organization. HR professionals and managers,

however, play a large role in developing standards, making sure safety and health laws are followed, and

tracking workplace accidents. Section 13.1.1 "Occupational Safety and Health Administration (OSHA)

Laws"addresses workplace laws as they relate to safety.

Occupational Safety and Health Administration (OSHA) Laws

In 2009 (the most recent data available at the time of this writing), 4,340 fatalities and 3.3 million

injuries were reported. [1]

This staggering number represents not only the cost to employees’ well-being

but also financial and time costs to the company. This is why health and safety is a key component of any

human resource management (HRM) strategic plan.

What Is OSHA About?

The Occupational Safety and Health Act (OSHA), passed in 1970, created the Occupational Safety and

Health Administration, which oversees health and safety in the workplace. The organization’s mission is

to ensure safe and healthful working conditions for working men and women by setting and enforcing

standards and by providing training, outreach, education, and assistance. For example, OSHA offers ten-

and thirty-hour courses on workplace hazards and also provides assistance to ensure companies are in

compliance with standards. OSHA is part of the US Department of Labor, with the main administrator

being the assistant secretary of labor for occupational safety and health. This person reports to the labor

secretary, who is a member of the president’s cabinet.

Although OSHA applies to all companies, health and safety standards are specifically mentioned for the

following types of businesses:

1. Construction

2. Shipyard

3. Marine terminals

Although OSHA standards may appear to apply only to companies in production, manufacturing, or

construction, even companies with primarily an office function are required to abide by the laws set by

Saylor URL: http://www.saylor.org/books Saylor.org 427

OSHA. Examples (not at all an exhaustive list) of the types of safety laws (for all types of businesses) that

are overseen by OSHA are as follows:

1. Regulations on walking/working surfaces. According to OSHA, slips, trips, and falls constitute the

majority of general industry accidents and 15 percent of all accidental deaths. The standards apply to all

permanent places of employment. The provision says that “all passageways, storerooms, and service

rooms shall be kept clean and orderly. Every floor and working space shall be kept free of protruding nails,

splinters, holes, or loose boards.” These are a few examples included in this provision.

2. Means of egress (exiting), which includes emergency evacuation plans.“Every building or structure shall

be arranged and maintained as to provide free and unobstructed egress from all part of the buildings. No

lock or fastening to prevent free escape from inside the building should be installed (except in penal or

corrective institutions).” The provision also says that exits shall be marked by a visible sign.

3. Occupational noise exposure. “Protection against the effects of noise exposure shall be provided when the

sound levels reach a specified level. Controls should be used to control the sound, and protective

equipment should be provided.”

4. Hazardous handling of materials. OSHA regulates exposure to four hundred substances and requires

communication about the possible chemical hazards to employees.

5. Protective equipment, such as eye, face, and respiratory protection.OSHA requires the use of personal

protective equipment to reduce employee exposure to hazards. For example, head protection is required

when workers are in an area where there is potential for falling, and eye and face protection is required

when workers are exposed to eye or face hazards such as flying particles and molten metal.

6. Sanitation. Some examples of these OSHA requirements include the following: Potable water should be

provided in all places of employment. Vermin control is required in all enclosed workplaces. Toilet

facilities must be provided, separate for each sex. The number of toilets provided depends on the number

of employees.

7. Requirement of first aid supplies on-site. First aid kits are mandatory and should include gauze pads,

bandages, gauze roller bandages, and other required items.

8. Standards for fire equipment. Fire extinguishers are required to be on-site for use by employees, unless

there is a written fire policy that requires the immediate and total evacuation of employees.

Saylor URL: http://www.saylor.org/books Saylor.org 428

9. Standards for machine guards and other power tools. Moving machine parts require safeguards

(depending upon the industry) to prevent crushed fingers, hands, amputations, burns, or blindness.

Safeguards might include a guard attached to the machine.

10. Electrical requirements and standards. OSHA electrical standards are designed to protect employees from

electric shock, fires, and explosions. Electrical protective devices are required to cover wiring. OSHA also

addresses the installation of electrical wiring.

11. Commercial diving operation requirements. OSHA provides information on the safety aspects of

commercial diving such as pre- and postdive procedures, mixed-gas diving, and necessary qualifications

of the dive team.

HR professionals and managers should have a good understanding of these laws and make sure, no

matter which industry, that all these standards are followed in the workplace. These standards are

normally part of the overall strategic HRM plan of any organization and are even more crucial to

organizations involved in manufacturing.

There exist many examples of OSHA violations. For example, in a Queensbury, Pennsylvania, Dick’s

Sporting Goods store, OSHA found six violations, including blocked access to a fire extinguisher and

workers’ entering a trash compactor with the power supply on. Dick’s was fined $57,300 by OSHA and

told it had fifteen days to comply or contest the findings. [2]

THE MOST FREQUENTLY VIOLATED AND CITED OSHA STANDARDS

1. 1926.451—Scaffolding

2. 1926.501—Fall Protection

3. 1910.1200—Hazard Communication

4. 1910.134—Respiratory Protection

5. 1926.1053—Ladders

6. 1910.147—Lockout/Tagout

7. 1910.305—Electrical, Wiring Methods

8. 1910.178—Powered Industrial Trucks

9. 1910.303—Electrical, General Requirements

10. 1910.212—Machine Guarding

Right-to-Know Laws

Saylor URL: http://www.saylor.org/books Saylor.org 429

The Emergency Planning and Community Right to Know Act (EPCRA) or more simply, right-to-know

laws, were established by Congress in 1986. The purpose of this act was to require local and state

governments to provide emergency response plans to respond to a chemical emergency. [3]

The other

requirement is that these plans must be reviewed on an annual basis. Companies that

handleextremely hazardous substances (EHSs) in large quantities must develop response plans as well. In

addition, any organization that manufactures, processes, or stores certain hazardous chemicals must

make available to local fire departments and state and local officials material data safety sheets. The

material data safety sheet should also be provided to employees, as the data lists not only the chemical

components but health risks of the substance, how to handle the material safely, and how to administer

first aid in the case of an accident. This requirement also states that inventories of all on-site chemicals

must be reported to local and state governments, but the data sheets must also be made public, too.

This law and how it will be reported should be facilitated by the HR professional. Although the HRM may

not know the chemical makeup of the materials used, he or she is responsible for facilitating the process

to ensure that reporting is done timely and accurately. For organizations that use EHSs often, it is

worthwhile to include the reporting process within the orientation training and provide ongoing training

as the law changes. The A-Treat Bottling facility in Allentown, Pennsylvania, was cited by OSHA for repeat

violations of lacking material safety data sheets for the chemicals it uses in manufacturing, among other

infractions such as blocked exits and forklift violations. The fines totaled $110,880, and the company had

fifteen days to comply or contest the allegations. [4]

It is also important to note that some state standards are different from federal standards, which means

the HR professional will need to be aware of the laws in the individual state in which the company is

operating.

HUMAN RESOURCE RECALL

How do you think the OSHA requirements apply to office work settings?

OSHA Enforcement

The record-keeping aspect of OSHA is perhaps as important as following the laws. Companies having

fewer than ten employees in some industries are not required to keep records. The purpose of the record

keeping does not imply that the employee or the company is at fault for a illness or injury. In addition, just

because a record is kept doesn’t mean the employee will be eligible for workersworker’s

Saylor URL: http://www.saylor.org/books Saylor.org 430

compensation#8217; compensation. The record-keeping aspect normally refers to the keeping of

incidence rates, or the number of illnesses or injuries per one hundred full-time employees per year, as

calculated by the following formula

incidence rate=number of injuries and illness ×

200,000 total hours worked by all employees in the period

Two hundred thousand is the standard figure used, as it represents one hundred full-time employees who

work forty hours per week for fifty weeks per year. An HR professional can then use this data and

compare it to other companies in the same industry to see how its business is meeting safety standards

compared with other businesses. This calculation provides comparable information, no matter the size of

the company. If the incidence rate is higher than the average, the HR professional might consider

developing training surrounding safety in the workplace.

Knowing what should be

reported and what shouldn’t be

reported is an important

component to OSHA. Figure

13.1 "The OSHA Decision Tree

for Determining If an Injury or

Illness Should Be

Recorded"provides a decision

tree that explains this. Data are

reported using a form called

OSHA 300, which is shown

in .Figure 13.2 "OSHA

Reporting Form 300".As

mentioned earlier, OSHA is

responsible for enforcing

standards. Besides requiring

reporting, OSHA also performs

inspections. OSHA is responsible for 7 million worksites across the country and so, of course, has to

Figure 13.1 The OSHA Decision Tree for Determining If an

Injury or Illness Should Be Recorded

Source: http://www.osha.gov/recordkeeping/ppt1/RK1flowch

art.html (accessed September 2, 2011).

Saylor URL: http://www.saylor.org/books Saylor.org 431

prioritize which ones it visits. OSHA has five main priorities for inspecting sites. First, it will inspect

imminent danger situations. These are serious dangers that could cause death or serious harm. The

second priority is for those sites where three or more employees were harmed, suffered illness, or were

killed. These events are classified as fatalities or catastrophes and must be reported within an eight-hour

time frame. The next priority is responding to complaints, which employees are allowed to file

anonymously. Organizations that have had previous violations are prioritized next, and finally, planned

programs. A planned program might be an organization that has had safety problems in the past and is

working with OSHA to remedy the problem.

Most site visits are unannounced and

begin with the inspector introducing

himself or herself. Prior to this, the

inspector has performed research on

the organization to be inspected. Once

this occurs, a representative of the

organization is assigned to accompany

the inspector and the inspector

discusses the reasons for the site visit.

The HR professional is normally

responsible for this task.

The inspector then walks around,

pointing out any obvious violations,

and then the inspector and

representative discuss the findings.

Within six months a complete report

is sent, along with any citations or

fines based on what the inspector

found. If the organization is in

disagreement with the violation or citation, a follow-up meeting with the OSHA director is scheduled and

Figure 13.2 OSHA Reporting Form 300

Source: http://www.osha.gov/recordkeeping/new-

osha300form1-1-04.pdf(accessed September 2, 2011).

Saylor URL: http://www.saylor.org/books Saylor.org 432

some fines may be reduced if the organization can show how it has improved and met the standards since

the original visit.

OSHA has several penalties (per violation) it can assess on organizations, ranging from $7,000 to

$70,000. The higher penalties often are a result of very serious offenses, in which an employee could have

been killed, but also are imposed for willful offenses that the employer was aware could cause serious

injury or death and did nothing about them. This is considered blatant indifference to the law. For

example, Northeastern Wisconsin Wood Products was issued $378,620 in fines for willful violations in

the summer of 2011. The violations stemmed from repeat visits and citations to the facility, where no

safety changes had been made. Some of the willful violations included lack of guards on dangerous

machine belts and band saw blades and open-sided floors without a guardrail to prevent falls. Michael

Connors, OSHA’s regional administrator in Chicago, said, “Northeastern Wisconsin Wood Products has a

history of failing to comply with OSHA standards. The company has yet to abate many violations cited in

previous inspections and are unduly placing their workers at risk.” [5]

While any violation of OSHA is

serious, a willful violation is more serious, and the fines associated with it represent this.

FORTUNE 500 FOCUS

PepsiCo is the world’s largest manufacturer, seller, and distributor of Pepsi-Cola products and generates

$119 billion in sales every year. [6]

Tropicana juice is owned by Pepsi-Co. In October of 2005, a spark

triggered an explosion at a Tropicana juice processing plant in Bradenton, Florida, causing burns to two-

thirds of a worker’s body. While the worker survived, he underwent multiple surgeries to treat his burns.

In this case, OSHA concluded that the fire could have been prevented if Tropicana had followed basic

safety requirements such as risk evaluation, given tools to workers that did not produce sparks, and

monitored for a buildup of flammable vapors and ventilated the area. OSHA inspectors tallied up a dozen

violations, including two serious ones. Vice president of operations Mike Haycock said the plant has an

incidence rate that is far lower than others in the industry, and plants around the country have

immediately addressed many of the problems and are constantly working to correct other problems. [7]

The irony is that although the Tropicana factory paid $164,250 in fines to OSHA, the company was part of

the VPP or Voluntary Protection Program, whose membership benefits include exemption from regular

inspections. Even after the fire, in 2007, OSHA formally reapproved the plant as a “star site,” the highest

level in VPP, meaning the plant pledged to exceed OSHA standards. [8]

OSHA contends the VPP program

Saylor URL: http://www.saylor.org/books Saylor.org 433

isn’t perfect but is still a useful model to all employers of what can be achieved. For admission into the

VPP program, workplaces must show they have fewer accidents and missed work days than average for

their industry. According to Robert Tuttle, president of the local Teamsters union representing Tropicana

workers, accidents are more common when employees are shifted out of their normal responsibilities,

which is more common as the weak economy has led to staff cuts. [9]

Tropicana plants have had more than

eighty deaths since 2000, varying from preventable explosions to chemical releases to crane

accidents. [10]

PepsiCo and Tropicana have taken a hard stance on these types of accidents, as each of the

plants now has a safety manager trained on OSHA standards to prevent accidents. In addition, strict

operating procedures have been implemented to prevent future problems.

KEY TAKEAWAYS

 Every year, 4,340 fatalities and 3.3 million injuries occur in the workplace in the United States.

 The Occupational Safety and Health Act was passed in 1970, with the goal of providing a safe and

healthy work environment for all US workers.

 The Occupational Safety and Health Administration is part of the US Department of Labor and

was created as a result of the act in 1970.

 OSHA applies to some specific industries, such as construction, shipyards, and marine terminals.

However, some of the OSHA regulations apply to all industries.

 Some states may also have safety requirements that may be more stringent than federal laws.

 Right-to-know laws refer to a material data safety sheet, which discusses the types of chemicals,

proper handling and storage, and first aid in case of an accident. These data sheets should be

made available to the general public and employees.

 Right-to-know laws also require specific reporting to local and state agencies on chemicals used

in certain quantities for some industries.

 OSHA requires recording keeping for all workplace accidents or illness. Record keeping is usually

the responsibility of HR, and reports are made via OSHA Form 300.

 OSHA can inspect any site without prior notification. Usually, OSHA will gather information, visit

the site, and ask for a representative. The representative is normally the HR person. The site visit

will be performed, followed by discussion with the company representative. Within six months

of the visit, a report and any penalties will be communicated.

Saylor URL: http://www.saylor.org/books Saylor.org 434

EXERCISES

1. Research the Internet for recent OSHA violations and write two paragraphs describing one.

2. Research possible strategies to reduce OSHA violations and write a paragraph on at least two

methods.

[1] “Workplace Injuries and Illnesses: 2009,” Bureau of Labor Statistics, US Department of Labor, news release,

October 21, 2010, accessed April 14, 2011,http://www.bls.gov/news.release/archives/osh_10212010.pdf.

[2] Chris Churchill, “OSHA Finds Violations at Queensbury Retailer,” Union Times, August 8, 2011, accessed August

21, 2011, http://www.timesunion.com/business/article/OSHA-finds-violations-at-Queensbury-retailer-

1779404.php.

[3] “Emergency Planning and Community Right-to-Know Act (EPCRA),” United States Environmental Protection

Agency, accessed April 15, 2011,http://www.epa.gov/epahome/r2k.htm.

[4] “OSHA Cites Allentown Soft Drink Company,” NewsWire.com, August 4, 2011, accessed August 21,

2011, http://www.mmdnewswire.com/us-labor-departmen-57793.html.

[5] “$378,620 in Fines Issued for Willful Violations,” Occupational Health and Safety, July 31, 2011, accessed

August 21, 2011, http://ohsonline.com/articles/2011/07/31/378620-in-fines-issued-to-wisconsin-wood-firm-for-

willful-violations.aspx? admgarea=news.

[6] “PepsiCo Annual Report,” accessed September 15,

2011,http://www.pepsico.com/Download/PepsiCo_Annual_Report_2010_Full_Annual_Report.pdf.

[7] Just-drinks editorial team, “US: Tropicana in Safety Hazards Payout,” just-drinks, April 18, 2006, accessed

August 21, 2011, http://www.just-drinks.com/news/tropicana-in-safety-hazards-payout_id86183.aspx.

[8] Chris Hamby, “Model Workforce Not Always Safe,” Massachusetts Coalition for Occupational Safety and Health,

July 7, 2011, accessed August 21, 2011,http://www.masscosh.org/node/721.

[9] David Gulliver, “Employees Not Always Safe in Model Workplaces,” Florida Center for Investigative Reporting,

July 22, 2011, KitchenAid Mixer Review, accessed August 21,

2011,http://kitchenaidmixereview.com/2011/07/22/employees-not-always-safe-in-model-workplaces/.

[10] Chris Hamby, “Model Workplaces Not Always Safe,” Iwatchnews, July 7, 2011, accessed August 21,

2011, http://www.iwatchnews.org/2011/07/07/5130/model-workplaces-not-always-so-safe.

Saylor URL: http://www.saylor.org/books Saylor.org 435

13.2 Health Hazards at Work LEARNING OBJECTIVE

1. Be able to explain health concerns that can affect employees at work.

While OSHA covers many areas relating to health and safety at work, a few other areas are also important

to mention. Stress management, office-related injuries such as carpal tunnel syndrome, and no-fragrance

areas are all contemporary issues surrounding employee health and safety. We will discuss these issues in

this section.

Stress

In its annual survey on stress in America, [1]

the American Psychological Association found that money (76

percent), work (70 percent), and the economy (65 percent) remain the most oft-cited sources of stress for

Americans. Job instability is on the rise as a source of stress: nearly half (49 percent) of adults reported

that job instability was a source of stress in 2010 (compared to 44 percent in 2009). At the same time,

fewer Americans are satisfied with the ways their employers help them balance work and nonwork

demands (36 percent in 2010 compared to 42 percent in 2009). The implications of these findings are

obviously important for HRM professionals.

Before we discuss what HR professionals can do, let’s discuss some basic information about stress. As it is

currently used, the term stress was coined by Hans Selye in 1936, who defined it as “the nonspecific

response of the body to any demand for change.” [2]

In other words, we can say that stress is the reaction

we have to a stressor. Astressor is some activity, event, or other stimulus that causes either a positive or

negative reaction in the body. Despite what people may think, some stress is actually good. For example,

receiving a promotion at work may cause stress, but this kind of stress is considered to be positive. Stress

is very much a personal thing, and depending on individual personalities, people may have different

opinions about what is a stressor and what is not. For example, a professor does not normally find public

speaking to be a stressor, while someone who does not do it on a daily basis may be very stressed about

having to speak in public.

STRESS MANAGEMENT

Selye recognized that not all stress is negative. Positive stress is called eustress. This type of stress is

healthy and gives a feeling of fulfillment and other positive feelings. Eustress can cause us to push

ourselves harder to meet an end goal. On the other hand,distress is the term used for negative stress.

Saylor URL: http://www.saylor.org/books Saylor.org 436

While eustress can push us, distress does not produce positive feelings and can go on for a long time

without relief. We can further classify distress by chronic stress, which is prolonged exposure to stress,

and acute stress, which is short-term high stress. For example, someone who receives little or no positive

result from stress and is continuously stressed may experience chronic stress. Acute stress occurs in

shorter bursts and may be experienced while someone is on a tight deadline for a project.

Two other terms related to stress are hyperstress and hypostress. Hyperstress is a type of stress in which

there are extremes with little or no relief for a long period of time. This type of stress often results in

burnout. Hypostress is the lack of eustress or distress in someone’s life. Remember, some stress can be

good and pushes us to work harder. We see this type of stress with people who may work in a factory or

other type of repetitive job. The effect of this type of stress is usually feelings of restlessness.

One last important thing to note is

how a person goes through the cycle

of stress.Figure 13.3 "The Stress

Curve" shows an example of how

stress is good up to a point, but

beyond that point, the person is

fatigued and negatively affected by

the stress. Bear in mind, this varies

from person to person based on

personality type and stress-coping

mechanisms.

As you have already guessed, stress

on the job creates productivity

issues, which is why it concerns HR

professionals. We know that stress

can cause headaches, stomach

issues, and other negative effects

that can result in lost productivity but also result in less creative work. Stress can raise health insurance

Figure 13.3 The Stress Curve

Source: Adapted from P. Nixon, 1979.

Saylor URL: http://www.saylor.org/books Saylor.org 437

costs and cause employee turnover. Because of this, according to HR Magazine, [3]

many employers are

taking the time to identify the chief workplace stressors in employees’ lives. With this information, steps

can be taken to reduce or eliminate such stress.

PricewaterhouseCoopers, for example, implemented several strategies to reduce stress in its workplace.

The firm restructured its work teams so that rather than having one employee work with one client, teams

of employees work with groups of clients. Rather than having an employee say, “I can’t go to my son’s

baseball game because I need to wait for this client call,” this arrangement allows employees to cover for

each other.

The organization also requires employees to take vacation time and even promotes it with posters

throughout the office. In fact, even weekends are precious at PricewaterhouseCoopers. If an employee

sends an e-mail on the weekend, a popup screen reminds her or him it is the weekend and it is time to

disconnect.

BEING A STUDENT CAN BE STRESSFUL

Here are the most common stressors for college students:

 Death of a loved one

 Relocating to a new city or state

 Divorce of parents

 Encounter with the legal system

 Transfer to a new school

 Marriage

 Lost job

 Elected to leadership position

 New romantic relationship

 Serious argument with close friend

 Increase in course load or difficulty of courses

 Change in health of family member

 First semester in college

 Failed important course

 Major personal injury or illness

Saylor URL: http://www.saylor.org/books Saylor.org 438

 Change in living conditions

 Argument with instructor

 Outstanding achievement

 Change in social life

 Change in sleeping habits

 Lower grades than expected

 Breakup of relationship

 New job

 Financial problems

 Change in eating habits

 Chronic car trouble

 Pregnancy

 Too many missed classes

 Long commute to work/school

 Working more than one job

 Impending graduation

 Argument with family member

 Sexual concerns

 Changes in alcohol and/or drug use

 Roommate problems

 Raising children

Offering flextime is also a way to reduce employee stress. It allows employees to arrange their work and

family schedule to one that reduces stress for them. This type of creative scheduling, according to Von

Madsen, HR manager at ARUP Laboratories, [4]

allows employees to work around a schedule that suits

them best. Other creative ways to reduce stress might be to offer concierge services, on-site child care,

wellness initiatives, and massage therapy. All these options can garner loyalty and higher productivity

from employees.

HUMAN RESOURCE RECALL

What does your organization do to reduce stress? What should it do that it is not doing?

Saylor URL: http://www.saylor.org/books Saylor.org 439

Cumulative Trauma Disorders

Cumulative trauma disorders (CTDs) are injuries to the fingers, hands, arms, or shoulders that result

from repetitive motions such as typing.

Carpal tunnel syndrome, or CTS, is a common cumulative disorder in which the hand and wrist is

particularly affected. CTS is a disabling syndrome that fortunately can be prevented or at least minimized.

According to one study of CTS, [5]

the percentage of a workday at a computer, posture while at the

workstation, and the individual’s body features all contribute to this workplace issue. More recently, CTD

can be found in people who text a lot or use their smartphones to type or surf the Internet.

There are a number of keyboards, chairs, and other devices that can help limit or prevent CTD issues. CTD

disorders cost companies money through higher health-care costs and workersworker’s

comp

ensati

on#8

217;

comp

ensati

on

paym

ents.

CTD

is a

requi

red

recor

dable

case

under OSHA. OSHA has voluntary employer guidelines for reducing CTD in specific industries such as

poultry processing, shipyards, retail grocery, and nursing homes. OSHA is currently developing standards

for industry-specific and task-specific jobs. [6]

Figure 13.4 Example of an OSHA Standard for Retail Grocery Stores to Avoid CTD

Source:http://www.osha.gov/ergonomics/guidelines/retailgrocery/retailgrocery.html

#storewide (accessed September 2, 2011).

Saylor URL: http://www.saylor.org/books Saylor.org 440

Microsoft is attempting to relieve CTD by developing “surface” technology. First introduced in 2007, the

system is controlled through intuitive touch rather than the traditional mouse and keyboard. Microsoft

and Samsung in early 2011 introduced the newest consumer-ready product, which looks like a large tablet

(or iPad) used to perform the same functions as one normally would on her computer. [7]

HOW WOULD YOU HANDLE THIS?

To Tell or Not?

You work for a large multinational organization as a manager on the factory floor. One of your

employees was moving large barrels of chemicals from one workstation to another, when the barrel

burst and gave him mild burns. When you talk with him about it, he says it was his own fault, and he

doesn’t want to take any days off or see a doctor. How would you handle this?

How Would You Handle This?

https://api.wistia.com/v1/medias/1360951/embed

The author discusses the How Would You Handle This situation in this chapter

at:https://api.wistia.com/v1/medias/1360951/embed.

Video Display Terminals (VDTs)

In 1984, only 25 percent of people used computers at work, and today that number is 68

percent. [8]

Awareness of the effects of computer monitors and other similar terminals are necessary to

ensure a healthy workplace. Vision problems; fatigue; eye strain; and neck, back, arm, and muscle pain

are common for frequent users of VDTs. OSHA recommands taking a break after every hour on a

computer screen and reducing glare on screens. Proper posture and seat adjustment also limits the

amount of injuries due to VDTs.

Chemical and Fragrance Sensitivities

The EEOC defines a disability as a physical or mental impairment that substantially limits one or more of

the major life activities of individuals and the ability to provide evidence of such an

impairment. [9]

Because of this definition, people who

havemultiple chemical sensitivity (MCS) or environmental illness (EI) are eligible for reasonable

accommodations in the workplace. MCS or EI is the inability to tolerate an environmental chemical or

class of foreign chemicals. Symptoms can include headache, dizziness, inability to breathe, muscle pain,

and many more depending on the person. As a result, implementing policies surrounding MCS may be

Saylor URL: http://www.saylor.org/books Saylor.org 441

not only a legal requirement but a best practice to keep employees safe and healthy in the workplace.

Some examples of such policies might include the following:

1. Institute a fragrance-free

workplace policy (e.g., no

scented lotions, hair products,

or perfumes).

2. Limit use of restroom air

fresheners, cleaning agents, and

candles.

3. Ensure the ventilation system is

in good working order.

4. Provide a workspace with

windows where possible.

5. Consider providing an alternate

workspace.

6. Be cautious of remodels,

renovations, and other projects

that may cause excessive dust

and odors.

If an organization is going to

implement a fragrance-free

work policy, this is normally

addressed under the dress code

area of the organization’s

employee manual. However,

many employers are reluctant to

require employees to refrain

from wearing or using scented

products. In this case, rather

Figure 13.5 VDT Checklist to Reduce Workplace Injuries

Saylor URL: http://www.saylor.org/books Saylor.org 442

than creating a policy, it might be worthwhile to simply request a fragrance-free zone from employees

through e-mail and other means of communication. An example of such a policy is used by Kaiser

Permanente:

We recognize that exposure to strong scents and fragrances in the environment can cause discomfort, as

well as directly impact the health of some individuals. Since we hope to support a healthful environment

for employees, physicians, and visitors, it is the intent of Quality and Operations Support to strive for a

fragrance-controlled workplace. Therefore, for the comfort and health of all, use of scents and fragrant

products by QOS employees, other than minimally scented personal care products, is strongly

discouraged. [10]

Chemicals and Substances

OSHA, as we mentioned earlier, has certain standards for how chemicals should be handled and how they

should be labeled. Chemicals should be labeled in English, and employees must be able to cross-reference

the chemicals to the materials safety data sheet, which describes how the chemicals should be handled.

It is estimated that 1,200 new chemicals are developed in North America alone every year. [11]

For many of

these chemicals, little is known about their immediate or long-term effects on the health of workers who

come into contact with them. As a result, policies should be developed on how chemicals should be

handled, and proper warnings should be given as to the harmful effects of any chemicals found in a job

site.

In the United States, twenty-six of the fifty states have smoking bans in enclosed public spaces. These

smoking bans are designed to protect workers’ health from the dangers of secondhand smoke. A recent

report released by the Centers for Disease Control and Prevention [12]

says that state or local smoke-free

laws cover 47.8 percent of workplaces. The report says if the trend continues, the United States will be 100

percent smoke free by 2020. Many companies implement no-smoking policies because of health-care

costs, and some companies, such as Humana, Inc., say their no-tobacco policy is simply setting a good

example (since they are a health-care organization). Humana tests all applicants for tobacco in a

preemployment screening that applies to all tobacco products. [13]

Most workplaces have no-smoking

policies, and some even prefer not to hire smokers because of the higher cost of health care. Policies

dealing with substances and chemicals are an important part of any employee training and orientation.

BENEFITS TO A SMOKE-FREE WORK ENVIRONMENT AND SAMPLE POLICY

Saylor URL: http://www.saylor.org/books Saylor.org 443

For the employees

 A smoke-free environment helps create a safer, healthier workplace.

 Workers who are bothered by smoke will not be exposed to it at work.

 Smokers who want to quit may have more of a reason to do so.

 Smokers may appreciate a clear company policy about smoking at work.

 Managers are relieved when there is a clearly defined process for dealing with smoking in the workplace.

For the employer

 A smoke-free environment helps create a safer, healthier workplace.

 Direct health-care costs to the company may be reduced.

 A clear plan that is carefully put into action by the employer to lower employees' exposure to secondhand

smoke shows the company cares.

 Employees may be less likely to miss work due to smoking-related illnesses.

 Maintenance costs go down when smoke, matches, and cigarette butts are taken out of work facilities.

 Office equipment, carpets, and furniture last longer.

 The risk of fires is lower.

 It may be possible to get lower rates on health, life, and disability insurance coverage as fewer employees

smoke.

Sample smoking policy

Because we recognize the hazards caused by exposure to environmental tobacco smoke, it shall be the

policy of ____________ to provide a smoke-free environment for all employees and visitors. This policy

covers the smoking of any tobacco product and the use of oral tobacco products or "spit" tobacco, and it

applies to both employees and nonemployee visitors of ____________.

Source: American Cancer Society,http://www.cancer.org/Healthy/StayAwayfromTobacco/Smoke-

freeCommunities/CreateaSmoke-freeWorkplace/smoking-in-the-workplace-a-model-policy (accessed

August 20, 2011).

Drugs and alcohol are discussed in Chapter 10 "Managing Employee Performance"on managing

performance issues. Substance abuse in the workplace can cause many problems for the organization. Not

only does it create impaired ability to perform a job—resulting in more accidents—but it results in more

sick days and less productivity, and substance abusers are more likely to file workersworker’s

Saylor URL: http://www.saylor.org/books Saylor.org 444

compensation#8217; compensation claims. Keep in mind that taking prescription drugs, if not used in the

proper amounts or used long after the prescribed use, is considered substance abuse. A drug-free policy,

according to OSHA, [14] has five parts:

1. A policy

2. Supervisor training

3. Employee education

4. Employee assistance

5. Drug testing

According to the National Clearinghouse for Alcohol and Drug Information, substance abuse costs

companies over $100 billion in the United States alone. [15]

This staggering figure alone makes it

worthwhile for companies to implement a policy and training on substance abuse.

Workplace Violence and Bullying

According to OSHA, 2 million American workers are victims of workplace violence every year. [16]

OSHA

addresses some of the workers who are at increased risk for workplace violence:

1. Workers who exchange money with the public

2. Workers who deliver goods, passengers, or services

3. People who work alone or in small groups

4. Workers who work late at night or early in the morning

5. Workers who work in high-crime areas

It is up to the organization and human resources to implement policies to ensure the safety of workers

and provide a safe working environment. OSHA provides tips to provide a safer workplace:

1. Establish a workplace violence prevention policy, with a zero tolerance policy.

2. Provide safety education.

3. Secure the workplace with cameras, extra lighting, and alarm systems.

4. Provide a drop safe to limit the amount of cash on hand.

5. Provide cell phones to workers.

6. Require employees to travel in groups using a “buddy system.”

Development of workplace policies surrounding these items is important. Ongoing training and

development in these areas are key to the creation of a safe workplace. While outside influences may affect

Saylor URL: http://www.saylor.org/books Saylor.org 445

employee safety, it is also important to be aware of the employee’s safety from other employees. There are

several indicators of previolence as noted by the Workplace Violence Research Institute: [17]

1. Increased use of alcohol and/or illegal drugs

2. Unexplained increase in absenteeism

3. Noticeable decrease in attention to appearance and hygiene

4. Depression and withdrawal

5. Explosive outbursts of anger or rage without provocation

6. Threats or verbal abuse to coworkers and supervisors

7. Repeated comments that indicate suicidal tendencies

8. Frequent, vague physical complaints

9. Noticeably unstable emotional responses

10. Behavior indicative of paranoia

11. Preoccupation with previous incidents of violence

12. Increased mood swings

13. Has a plan to “solve all problems”

14. Resistance and overreaction to changes in procedures

15. Increase of unsolicited comments about firearms and other dangerous weapons

16. Repeated violations of company policies

17. Escalation of domestic problems

WORKPLACE VIOLENCE

A video on workplace violence training.

Please view this video at http://www.youtube.com/watch?v=oiuWLkdUZ5o.

Anyone exhibiting one or more of these preincident indicators should get the attention of HRM. The HR

professional should take appropriate action such as discussing the problem with the employee and

offering counseling.

Workplace bullying is defined as a tendency of individuals or groups to use persistent or repeated

aggressive or unreasonable behavior against a coworker or subordinate. The Workplace Bullying Institute

found that 35 percent of workers have reported being bullied at work. This number is worth considering,

given that workplace bullying reduces productivity with missed work days and turnover. The Workplace

Saylor URL: http://www.saylor.org/books Saylor.org 446

Bullying Institute found that litigation and settlement of bullying lawsuits can cost organizations

$100,000 to millions of dollars, in addition to the bad publicity that may be created. Examples of

workplace bullying include the following:

1. Unwarranted or invalid criticism

2. Blame without factual information

3. Being treated differently than the rest of your work group

4. Humiliation

5. Unrealistic work deadlines

6. Spreading rumors

7. Undermining or deliberately impeding a person’s work

In an Indiana Supreme court case, a hospital employee who was repeatedly bullied by a surgeon sued for

emotional distress and won. This ruling drew national attention because it was an acknowledgment by the

courts of the existence of workplace bullying as a phenomenon. [18]

Prevention of workplace bullying

means creating a culture in which employees are comfortable speaking with HR professionals and

managers (assuming they are not the ones bullying) about these types of situations. Similar to traditional

bullying, cyberbullying is defined as use of the Internet or technology used to send text that is intended to

hurt or embarrass another person. Examples include using Facebook to post negative comments or

setting up a fake e-mail account to send out fake e-mails from that person. Comments or blogs and posts

that show the victim in a bad light are other examples of cyberbullying. Similar to workplace bullying,

cyberbullying is about power and control in workplace relationships. Elizabeth Carll’s research on

cyberbullying shows that people who experience this type of harassment are more likely to experience

heightened anxiety, fear, shock, and helplessness, which can result in lost productivity at work and

retention issues, [19]

a major concern for the HR professional. The US Justice Department shows that some

850,000 adults have been targets of online harassment. [20]

Many states, including New York, Missouri,

Rhode Island, and Maryland, have passed laws against digital harassment as far back as 2007. [21]

In a

recent cyberbullying case, a US Court of Appeals upheld a school’s discipline of a student for engaging in

off-campus cyberbullying of another student. [22]

In the case, the victim said a MySpace profile was created

that included inappropriate pictures of her, and the page’s creator invited other people to join. The

student who created the page sued the school after she was disciplined for it, saying it violated her right to

Saylor URL: http://www.saylor.org/books Saylor.org 447

free speech, but courts found that students do not have the right to cyberbully other students. While it

seems that cyberbullying is for young people, as mentioned earlier, 35 percent of American workers feel

they have been bullied. Bullying should be identified immediately and handled, as it affects workplace

productivity, customer satisfaction, and eventually, profits.

Employee Privacy

In today’s world of identity theft, it is important that HR professionals work to achieve maximum security

and privacy for employees. When private information is exposed, it can be costly. For example, in March

of 2011, the Texas Comptroller’s office inadvertently disclosed on a public website the names, addresses,

and social security numbers of 3.5 million state workers. [23]

The state has already spent $1.8 million to

remedy this problem by sending letters to affected parties and hiring technology consultants to review

office procedures. While keeping employee information private is the responsibility of all management in

an organization, ensuring privacy remains the job of the HR professional.

Some of the things to combat employee identity theft include the following:

1. Conduct background and criminal checks on employees who will have access to sensitive data.

2. Restrict access to areas where data is stored, including computers.

3. Provide training to staff who will have access to private employee information.

4. Keep information in locked files or in password-protected files.

5. Use numbers other than social security numbers to identify employees.

Another privacy issue that comes up often is the monitoring of employee activities on devices that are

provided to them by the organization. Case law, for the most part, has decided that employees do not have

privacy rights if they are using the organization’s equipment, with a few exceptions. As a result, more than

half of all companies engage in some kind of monitoring. According to an American Management

Association [24]

survey, 73 percent of employers monitor e-mail messages and 66 percent monitor web

surfing. If your organization finds it necessary to implement monitoring policies, ensuring the following is

important to employee buy-in of the monitoring:

1. Develop a policy for monitoring.

2. Communicate what will be monitored.

3. Provide business reasons for why e-mail and Internet must be monitored.

Saylor URL: http://www.saylor.org/books Saylor.org 448

Working with your IT department to implement standards and protect employee data kept on computers

is a must in today’s connected world. Communication of a privacy policy is an important step as well.

Agrium, a Canadian-based supplier of agricultural products in North America, states its employee privacy

policy on its website and shares with employees the tactics used to prevent security breaches. [25]

At Agrium we are committed to maintaining the accuracy, confidentiality, and security of your personal

information. This Privacy Policy describes the personal information that Agrium collects from or about

you, and how we use and to whom we disclose that information.

Terrorism

Since the 9/11 attacks, terrorism and its effect on the workplace are in the forefront of the HR

professional’s mind. Planning for evacuations is the job of everyone in an organization, but HR should

initiate this discussion. OSHA provides free assistance in implementing plans and procedures in case of a

terror attack. OSHA also provides a fill-in-the-blank system

(http://www.osha.gov/SLTC/etools/evacuation/expertsystem/default.htm) to help organizations write a

comprehensive report for evacuations and terrorist attacks.

Promoting a Culture of Safety and Health

Employee health and safety is a must in today’s high-stress work environments. Although some may see

employee health as something that shouldn’t concern HR, the increasing cost of health benefits makes it

in the best interest of the company to hire and maintain healthy employees. In fact, during the recession

of the late 2000s, when cutbacks were common, 50 percent of all workplaces increased or planned to

increase investments in wellness and health at their organization. [26]

EXAMPLE OF HEALTH AND SAFETY POLICY

Cordis (A Johnson & Johnson Company) Environmental, Health, and Safety Policy

Cordis Corporation is committed to global Environmental, Health, and Safety (EHS) performance and

leadership with respect to its associates, customers, suppliers, contractors, visitors, and communities. To

fulfill this commitment, Cordis Corporation conducts its business emphasizing regulatory compliance and

collaboration.

We strive for:

 Comprehensive risk management

 Pollution prevention

Saylor URL: http://www.saylor.org/books Saylor.org 449

 Healthy lifestyle culture

 Continuous improvement and sustainability

 Engaging partnerships

 Possession of outstanding EHS capabilities and skill sets

We affirm that EHS is:

 A core business value and a key indicator of organizational excellence

 Considered in every task we perform and in every decision we make

We believe that:

 All incidents and injuries are preventable

 Process Excellence is the driver for continuous improvement and sustainable results in all aspects of EHS

 Every associate is responsible and accountable for complying with all aspects of EHS, creating a safe and

healthy work environment while leaving the smallest environmental footprint

A safe culture doesn’t happen by requiring training sessions every year; it occurs by creating an

environment in which people can recognize hazards and have the authority and ability to fix them. Instead

of safety being a management focus only, every employee should take interest by being alert to the safety

issues that can exist. If an employee is unable to handle the situation on his or her own, the manager

should then take suggestions from employees seriously; making the change and then communicating the

change to the employee can be an important component of a safe and healthy workplace.

A culture that promotes safety is one that never puts cost or production numbers ahead of safety. You do

not want to create a culture in which health and safety priorities compete with production speedup, which

can lead to a dangerous situation.

Another option to ensure health and safety is to implement anemployee assistance program (EAP). This

benefit is intended to help employees with personal problems that could affect their performance at work.

The EAP usually includes covered counseling and referral services. This type of program can assist

employees with drug or alcohol addictions, emotional issues such as depression, stress management, or

other personal issues. Sometimes these programs are outsourced to organizations that can provide in-

house training and referral services to employees. For example, REI (Recreation Equipment Inc.), based

in Seattle, has a comprehensive EAP for its employees in both retail stores and corporate offices.

Saylor URL: http://www.saylor.org/books Saylor.org 450

Possible techniques you can implement to have a safe and healthy work environment include the

following:

1. Know OSHA and other safety laws.

2. Provide training to employees on OSHA and safety laws.

3. Have a written policy for how violations will be handled.

4. Commit the resources (time and money) necessary to ensure a healthy work environment.

5. Involve employees in safety and health discussions, as they may have good ideas as to how the

organization can improve.

6. Make safety part of an employee’s job description; in other words, hold employees accountable for always

practicing safety at work.

7. Understand how the health (or lack of health) of your employees contributes to or takes away from the

bottom line and implement policies and programs to assist in this effort.

KEY TAKEAWAYS

 Stress is a major concern for organizations, since it can decrease productivity in the workplace.

There are several types of stress.

 Eustress is a positive type of stress that can cause people to work harder toward a goal. Distress,

on the other hand, is a type of negative stress.

 Acute stress occurs in short bursts, such as when finishing a project, while chronic stress tends to

persist for long periods of time.

 Hyperstress is stress that is unrelieved for long periods of time and can often result in employee

burnout. Hypostress is the lack of eustress in one’s life, which can be as damaging as other types

of stress, since stress is sometimes what pushes people harder.

 HR professionals can encourage employees to take vacation time, offer flextime, and encourage

employees to take weekends off to help reduce stress.

 Cumulative trauma disorder (CTD) affects the hands, fingers, arms, or shoulders as a result of

continuous repetitive motions. Carpel tunnel syndrome (CTS) is a type of CTD that affects the

hand and wrist. People with these disorders often work in a factory or at a desk where they are

doing repetitive motions constantly, such as typing or cashiering.

Saylor URL: http://www.saylor.org/books Saylor.org 451

 OSHA has voluntary guidelines for reducing CTD in the workplace. HR can assist by ensuring

employees are provided with proper equipment and training.

 Multiple chemical sensitivity (MCS) or environmental illness (EI) is extreme sensitivity to

chemicals found in products such as hairsprays or lotions. Some individuals are extremely

sensitive to other types of chemicals, such as those used in the manufacturing of carpets.

 MCS can be considered a disability if it limits one or more life activities. In this case, reasonable

accommodations must be made, such as implementing fragrance-free zones as part of a

workplace dress code.

 OSHA has specific guidelines on how to handle chemicals, but other chemicals, such as those

from secondhand smoke, are an important consideration in workplace safety. Twenty-six states,

for example, have implemented no-smoking policies to help protect the health of workers.

 Workplace violence affects 2 million Americans every year. A number of groups, such as those

who deliver goods, people, or services, are at greatest risk. However, workplace violence can

occur internally, which is why we must be aware of the warning signs.

 Workplace bullying is when a person is aggressive and unreasonable in his or her behavior

toward another individual. Cyberbullying is similar, except technology is used to humiliate and

intimidate the employee.

 Keeping employee information private is the job of HR and IT. In addition, some organizations

may engage in web or e-mail monitoring to ensure employees are on task. Specific policies

should be developed and communicated to let employees know how they may be monitored.

 Some organizations have employee assistance programs (EAPs) that can provide assistance,

counseling, and the like in case of personal problems or drug or alcohol abuse.

 To maintain a healthful working environment, know OSHA policies and make sure people are

trained on the policies. Also ensure that specific policies on all areas of health and safety are

communicated and employees are trained in those areas where necessary.

EXERCISES

1. Visit http://www.osha.gov/SLTC/etools/evacuation/expertsystem/default.htm and create your

own evacuation plan using the tool on the OSHA website. (Note: web addresses sometimes

change, so you may have to search further for the tool.) Bring your plan to class to share.

Saylor URL: http://www.saylor.org/books Saylor.org 452

2. Research examples of workplace bullying, write two paragraphs about two examples, and share

your findings with the class.

[1] American Psychological Association, “Key Findings,” news release, n.d., accessed April 17,

2011, http://www.apa.org/news/press/releases/stress/key-findings.aspx.

[2] The American Institute of Stress, accessed September 15, 2011,http://www.stress.org/topic-definition-

stress.htm.

[3] Kathryn Tyler, “Stress Management,” HR Magazine, September 1, 2006, accessed April 19,

2011, http://www.shrm.org/Publications/hrmagazine/EditorialContent/Pages/0906tyler.aspx.

[4] Kathryn Tyler, “Stress Management,” HR Magazine, September 1, 2006, accessed April 19,

2011, http://www.shrm.org/Publications/hrmagazine/EditorialContent/Pages/0906tyler.aspx.

[5] A. C. Matias, G. Salvendy, and T. Kuczek, Ergonomics Journal 41, no. 2 (1998): 213–26, accessed April 19,

2011, http://www.ncbi.nlm.nih.gov/pubmed/9494433.

[6] “OSHA Protocol for Developing Industry-Specific and Task-Specific Ergonomics Guidelines,” Occupational Safety

and Health Administration, accessed April 25, 2011,http://www.osha.gov/SLTC/ergonomics/protocol.html.

[7] Microsoft News Center, “Microsoft and Samsung Unveil the Next Generation of Surface,” news release, January

2011, accessed August 21, 2011,http://www.microsoft.com/presspass/press/2011/jan11/01-

06mssurfacesamsungpr.mspx.

[8] “Survey Shows Widespread Enthusiasm for High Technology,” NPR Online, n.d., accessed August 20,

2011, http://www.npr.org/programs/specials/poll/technology/.

[9] “Section 902: Definition of the Term Disability,” Equal Employment Opportunity Commission, accessed April 25,

2011, http://www.eeoc.gov/policy/docs/902cm.html#902.1.

[10] Kaiser Permanente Fragrance Policy, accessed September 15,

2011,http://users.lmi.net/wilworks/ehnlinx/k.htm.

[11] International Labor Organization, “Your Safety and Health at Work: Chemicals in the Workplace,” accessed

April 25, 2011, http://actrav.itcilo.org/actrav-english/telearn/osh/kemi/ciwmain.htm.

[12] Julie Steenhuysen, “26 US States Have Comprehensive Smoking Bans,” Reuters, April 21, 2011, accessed April

25, 2011, http://www.reuters.com/article/2011/04/21/usa-smoking-idUSN2128332820110421.

Saylor URL: http://www.saylor.org/books Saylor.org 453

[13] “Insurer Humana Inc. Won’t Hire Smokers in Arizona,” Associated Press, June 30, 2011, accessed August 20,

2011, http://finance.yahoo.com/news/Insurer-Humana-Inc-wont-hire-apf-961910618.html?x=0&.v=1.

[14] “Workplace Substance Abuse,” Occupational Safety and Health Administration, accessed August 20,

2011, http://www.osha.gov/SLTC/substanceabuse/index.html.

[15] T. Buddy, “Substance Abuse in the Workplace,” About.com, November 20, 2011, accessed August 20,

2011, http://alcoholism.about.com/cs/work/a/aa990120.htm.

[16] “Workplace Violence” (OSHA Fact Sheet), Occupational Safety and Health Administration, accessed April 25,

2011, http://www.osha.gov/OshDoc/data_General_Facts/factsheet-workplace-violence.pdf.

[17] Jurg Mattman, “Pre-Incident Indicators,” Workplace Violence Research Institute, June 2010, accessed April 27,

2011, http://www.nesdis.noaa.gov/RESPECT/pdf/RESPECT-Pre-IncidentIndicators24Jun09.pdf.

[18] Karen Klein, “Employers Can’t Ignore Workplace Bullies,” Bloomberg Businessweek, May 7, 2008, accessed

August 20, 2011,http://www.businessweek.com/smallbiz/content/may2008/sb2008057_530667.htm.

[19] Madeleine White, “Are Cyber Bullies Worse for Victims than Real Bullies?” Globe and Mail, August 8, 2011,

accessed August 20, 2011, http://www.theglobeandmail.com/life/the-hot-button/are-cyber-bullies-worse-for-

victims-than-real-bullies/article2122943/

[20] Madeleine White, “Are Cyber Bullies Worse for Victims than Real Bullies?” Globe and Mail, August 8, 2011,

accessed August 20, 2011, http://www.theglobeandmail.com/life/the-hot-button/are-cyber-bullies-worse-for-

victims-than-real-bullies/article2122943/.

[21] National Conference of State Legislatures, “State Cyberstalking, Cyberharassment, and Cyberbullying Laws,”

January 26, 2011, accessed August 20, 2011,http://www.ncsl.org/default.aspx?tabid=13495.

[22] Daniel Solove, “Off Campus Cyberbullying and the First Amendment,” Huffington Post, July 28, 2011, accessed

August 20, 2011, http://www.huffingtonpost.com/daniel-j-solove/offcampus-cyberbullying-a_b_911654.html.

[23] Patricia Hart, “Attorneys Seek to Question Texas Comptroller Over Exposed Info,”Houston Chronicle, April 26,

2011, accessed April 27, 2011,http://www.chron.com/disp/story.mpl/metropolitan/7537769.html.

[24] “Electronic Monitoring and Surveillance Survey,” American Management Association, 2007, accessed April 27,

2011, http://press.amanet.org/press-releases/177/2007-electronic-monitoring-surveillance-survey/.

[25] “Employee Privacy Policy,” Agrium Inc., accessed August 21,

2011,http://www.agrium.com/employee_privacy.jsp.

Saylor URL: http://www.saylor.org/books Saylor.org 454

[26] Donald Sears, “Gym Memberships and Wellness Programs Remain Standard Employee Benefits,” The Ladders

Career Line, July 21, 2009, accessed April 27, 2011, http://www.career-line.com/job-search/gym-memberships-

and-wellness-programs-remain-standard-employee-benefits/.

Saylor URL: http://www.saylor.org/books Saylor.org 455

13.3 Cases and Problems CHAPTER SUMMARY

 Every year, 4,340 fatalities and 3.3 million injuries occur in the workplace in the United States.

 The Occupational Safety and Health Act was passed in 1970, with the goal of providing a safe and healthy

work environment for all US workers.

 The Occupational Safety and Health Administration is part of the US Department of Labor and was

created as a result of the act in 1970.

 OSHA applies to some specific industries such as construction, shipyards, and marine terminals. However,

some of the regulations of OSHA apply to all industries.

 Some states may also have safety requirements, which may be more stringent than federal Laws.

 Right-to-know laws refer to a material data safety sheet, which discusses the types of chemicals, proper

handling and storage, and first aid in case of an accident. These data sheets should be made available to

the general public and employees.

 Right-to-know laws also require specific reporting to local and state agencies on chemicals used in certain

quantities for some industries.

 OSHA requires recording keeping for all workplace accidents or illness. The record keeping is usually the

responsibility of HR; OSHA Form 300 is used for reporting purposes.

 OSHA can inspect any site without prior notification. Usually, it will gather information, visit the site, and

ask for a representative. The representative is normally the HR person. The site visit will be performed,

followed by discussion with the company representative. Within six months of the visit a report and any

penalties will be communicated.

 Stress is a major concern for organizations, since it can decrease productivity in the workplace. There are

several types of stress.

 Eustress is a positive type of stress that can cause people to work harder toward a goal. Distress, on the

other hand, is a type of negative stress.

 Acute stress occurs in short bursts, such as when finishing a project, whilechronic stress tends to persist

for long periods of time.

Saylor URL: http://www.saylor.org/books Saylor.org 456

 Hyperstress is stress that is unrelieved for long periods of time and can often result in employee

burnout. Hypostress is the lack of eustress in one’s life, which can be as damaging as other types of stress,

since stress is sometimes what pushes people harder.

 HR professionals can encourage employees to take vacation time, offer flextime, and encourage

employees to take weekends off to help reduce stress.

 Cumulative trauma disorder (CTD) affects the hands, fingers, arms, or shoulders as a result of continuous

repetitive motions. Carpel tunnel syndrome (CTS) is a type of CTD that affects the hand and wrist. People

with these disorders often work in a factory or at a desk where they are doing repetitive motions

constantly, such as typing or cashiering.

 OSHA has voluntary guidelines for reducing CTD in the workplace. HR can assist by ensuring employees

are provided with proper equipment and training.

 Multiple chemical sensitivity (MCS) or environmental illness (EI) is extreme sensitivity to chemicals

found in products such as hairsprays or lotions. Some individuals are extremely sensitive to other types of

chemicals, such as those used in the manufacturing of carpets.

 MCS can be considered a disability if it limits one or more of life activities. In this case, reasonable

accommodations must be made, such as implementing fragrance-free zones as part of a workplace dress

code.

 OSHA has specific guidelines on how to handle chemicals, but other chemicals, such as those from

secondhand smoke, are an important consideration in workplace safety. Twenty-six states, for example,

have implemented no-smoking policies to help protect the health of workers.

 Workplace violence affects 2 million Americans every year. A number of groups, such as those that deliver

goods, people, or services, are at greatest risk. However, workplace violence can occur internally, which is

why we must be aware of the warning signs.

 Workplace bullying is when a person is aggressive and unreasonable in his or her behavior toward

another individual. Cyberbullying is similar, except technology is used to humiliate and intimidate the

employee.

 Keeping employee information private is the job of HR and IT. In addition, some organizations may

engage in web or e-mail monitoring to ensure employees are on task. Specific policies should be developed

and communicated to let employees know how they may be monitored.

Saylor URL: http://www.saylor.org/books Saylor.org 457

 Some organizations have employee assistance programs (EAPs) that can provide assistance, counseling,

and the like in case of personal problems or drug or alcohol abuse.

 To maintain a healthful working environment, know OSHA policies and make sure people are trained on

the policies. Also ensure that specific policies on all areas of health and safety are communicated and

employees are trained in those areas where necessary.

CHAPTER CASE

Bullying Ming

You just ended a meeting with Ming (one of your six employees), who gave you some disturbing

information. She feels she is being bullied by one of her coworkers and is seeking your advice on how to

handle it. Ming said that Mindy has been saying “good morning” to everyone as she walks by their office

but doesn’t say it to Ming. Ming also said that Mindy organized a farewell lunch for one of your departing

employees last week and didn’t invite Ming. She also told you of nasty things that Mindy tells other

colleagues about her. For example, last month when Ming ran into Mindy at the grocery store, Mindy told

everyone the next day the medications that Ming had in her cart, which included medication for irritable

bowel syndrome. Ming also showed you an e-mail that Mindy had sent blaming Ming for the loss of one of

Mindy’s clients. Mindy had copied the entire department on the e-mail. Ming thinks that other employees

have been reluctant to involve her in projects as a result of this e-mail. Ming left your office quite upset,

and you think you may need to take some action.

1. Do you think Ming is correct in saying Mindy is bullying her? What are the indications of bullying?

2. What advice would you give to Ming?

3. How would you handle this situation with Mindy, without embarrassing Ming?

TEAM ACTIVITY

1. Calculate the yearly incidence rates for Organic Foods Company:

a. 2010: 10 injuries with 300,000 hours worked

b. 2011: 5 injuries with 325,000 hours worked

c. 2012: 20 injuries with 305,000 hours worked

What are some of the possible causes for the increase in incidence rates?

Saylor URL: http://www.saylor.org/books Saylor.org 458

Chapter 14: International HRM Things Weren’t What They Seemed

When your organization decided to go “global” two years ago, the executives didn’t know what they were

getting into. While the international market was attractive for your company’s product, the overall plan

wasn’t executed well. The organization was having great success selling its baby bath product in the

domestic market, and once that market was saturated, the organization decided to sell the product in

South America. Millions of dollars’ worth of research went into product marketing, and great success was

had selling the product internationally. It was only when the organization decided to develop a sales

presence in Peru and purchase a company there that the problems started. While market research had

been done on the product itself, the executives of the company did little research to find out the cultural,

economic, and legal aspects of doing business in that country. It was assumed that the Peru office would

run just like the US office in terms of benefits, compensation, and hiring practices. This is where the

strategy went wrong.

Many cultural aspects presented themselves. When executives visited the Peru office, the meeting was

scheduled for 9 a.m., and executives were annoyed that the meeting didn’t actually start until 9:45 a.m.

When the annoyed executives started in on business immediately, the Peruvian executives disapproved,

but the US executives thought they disapproved of the ideas and weren’t aware that the disapproval came

from the fact that Peruvians place a high emphasis on relationships, and it was rude to get down to

business right away. When the executives walked around the office and spoke with various employees,

this blunder cost respect from the Peruvian executives. Because Peru has a hierarchical structure, it was

considered inappropriate for the executives to engage employees in this way; they should have been

speaking with management instead.

Besides the cultural misunderstandings, executives had grossly underestimated the cost of compensation

in Peru. Peru requires that all employees receive a bonus on the Peruvian Independence Day and another

on Christmas. The bonus is similar to the monthly salary. After a year of service, Peruvians are allowed to

go on paid vacation for thirty calendar days. Higher benefit costs were also an issue as well, since Peru

requires workers to contribute 22 percent of their income to pension plans, and the company is required

to pay 9 percent of salaries toward social (universal) health insurance. Life insurance is also required to be

Saylor URL: http://www.saylor.org/books Saylor.org 459

paid by the employer after four years of service, and severance payments are compulsory if the

organization has a work stoppage or slowdown.

As you wade through the variety of rules and regulations, you think that this could have been avoided if

research had been performed before the buyout happened. If this had occurred, your company would have

known the actual costs to operate overseas and could have planned better.

Source: Based on information from CIA World Factbook and PKF Business Advisors.

Saylor URL: http://www.saylor.org/books Saylor.org 460

14.1 Offshoring, Outsourcing LEARNING OBJECTIVES

1. Be able to explain the terminology related to international HRM.

2. Define global HRM strategies.

3. Explain the impact of culture on HRM practices.

As you already know, this chapter is all about strategic human resource management (HRM) in a global

environment. If this is an area of HRM that interests you, consider taking the WorldatWork Global

Remuneration Professional certification (GRP). The GRP consists of eight examinations ranging from

global rewards strategy to job analysis in a global setting. [1]

Before we begin to discuss HRM in a global environment, it is important to define a few terms, some of

which you may already know. First, offshoring is when a business relocates or moves some or part of its

operations to another country. Outsourcinginvolves contracting with another company (onshore or

offshore) to perform some business-related task. For example, a company may decide to outsource its

accounting operations to a company that specializes in accounting, rather than have an in-house

department perform this function. Thus a company can outsource the accounting department, and if the

function operates in another country, this would also be offshoring. The focus of this chapter will be on

the HRM function when work is offshored.

The Global Enviornment

Although the terms international, global multinational, and transnational tend to be used

interchangeably, there are distinct differences. First, a domestic market is one in which a product or

service is sold only within the borders of that country. Aninternational market is one in which a company

may find that it has saturated the domestic market for the product, so it seeks out international markets in

which to sell its product. Since international markets use their existing resources to expand, they do not

respond to local markets as well as a global organization. A global organization is one in which a product

is being sold globally, and the organization looks at the world as its market. The local responsiveness is

high with a global organization. Amultinational is a company that produces and sells products in other

markets, unlike an international market in which products are produced domestically and then sold

overseas. A transnational company is a complex organization with a corporate office, but the difference is

that much of the decision making, research and development, and marketing are left up to the individual

Saylor URL: http://www.saylor.org/books Saylor.org 461

foreign market. The advantage to a transnational is the ability to respond locally to market demands and

needs. The challenge in this type of organization is the ability to integrate the international offices. Coca-

Cola, for example, engaged first in the domestic market, sold products in an international market, and

then became multinational. The organization then realized they could obtain certain production and

market efficiencies in transitioning to a transnational company, taking advantage of the local market

knowledge.

Table 14.1 Differences between International, Global, Multinational, and Transnational Companies

Global Transnational

Centrally controlled operations

Foreign offices have control over production,

markets

No need for home office integration, since home office makes

all decisions Integration with home office

Views the world as its market

High local responsiveness Low market responsiveness, since it is centrally controlled

International Multinational

Centrally controlled Foreign offices are viewed as subsidiaries

No need for home office integration, as home office makes all

decisions Home office still has much control

Uses existing production to sell products overseas

High local responsiveness Low market responsiveness

Globalization has had far-reaching effects in business but also in strategic HRM planning. The signing of

trade agreements, growth of new markets such as China, education, economics, and legal implications all

impact international business.

Trade agreements have made trade easier for companies. A trade agreement is an agreement between two

or more countries to reduce barriers to trade. For example, the European Union consists of twenty-seven

countries (currently, with five additional countries as applicants) with the goal of eliminating trade

Saylor URL: http://www.saylor.org/books Saylor.org 462

barriers. The North American Trade Agreement (NAFTA) lifts barriers to trade between Canada, the

United States, and Mexico. The result of these trade agreements and many others is that doing business

overseas is a necessity for organizations. It can result in less expensive production and more potential

customers. Because of this, along with the strategic planning aspects of a global operation, human

resources needs to be strategic as well. Part of this strategic process can include staffing differences,

compensation differences, differences in employment law, and necessary training to prepare the

workforce for a global perspective. Through the use of trade agreements and growth of new markets, such

as the Chinese market, there are more places available to sell products, which means companies must be

strategically positioned to sell the right product in the right market. High performance in these markets

requires human capital that is able to make these types of decisions.

The level of education in the countries in which business operates is very important to the HR manager.

Before a business decides to expand into a particular country, knowledge of the education, skills, and

abilities of workers in that country can mean a successful venture or an unsuccessful one if the human

capital needs are not met. Much of a country’s human capital depends on the importance of education to

that particular country. In Denmark, for example, college educations are free and therefore result in a

high percentage of well-educated people. In Somalia, with a GDP of $600 per person per year, the focus is

not on education but on basic needs and survival.

Economics heavily influences HRM. Because there is economic incentive to work harder in capitalist

societies, individuals may be more motivated than in communist societies. The motivation comes from

workers knowing that if they work hard for something, it cannot be taken away by the government,

through direct seizure or through higher taxes. Since costs of labor are one of the most important strategic

considerations, understanding of compensation systems (often based on economics of the country) is an

important topic. This is discussed in more detail in Section 14.3.3 "Compensation and Rewards".

The legal system practiced in a country has a great effect on the types of compensation; union issues; how

people are hired, fired, and laid off; and safety issues. Rules on discrimination, for example, are set by the

country. In China, for example, it is acceptable to ask someone their age, marital status, and other

questions that would be considered illegal in the United States. In another legal example, in Costa Rica,

“aguinaldos” also known as a thirteenth month salary, is required in December. [2]

This is a legal

Saylor URL: http://www.saylor.org/books Saylor.org 463

requirement for all companies operating in Costa Rica. We discuss more specifics about international laws

in Section 14.3.5 "The International Labor Environment".

Table 14.2 Top Global 100 Companies

Rank Company Revenues ($ millions) Profits ($ millions)

1 Walmart Stores 408,214 14,335

2 Royal Dutch Shell 285,129 12,518

3 Exxon Mobil 284,650 19,280

4 BP 246,138 16,578

5 Toyota Motor 204,106 2,256

6 Japan Post Holdings 202,196 4,849

7 Sinopec 187,518 5,756

8 State Grid 184,496 −343

9 AXA 175,257 5,012

10 China National Petroleum 165,496 10,272

11 Chevron 163,527 10,483

12 ING Group 163,204 −1,300

13 General Electric 156,779 11,025

14 Total 155,887 11,741

15 Bank of America Corp. 150,450 6,276

16 Volkswagen 146,205 1,334

17 ConocoPhillips 139,515 4,858

18 BNP Paribas 130,708 8,106

Saylor URL: http://www.saylor.org/books Saylor.org 464

Rank Company Revenues ($ millions) Profits ($ millions)

19 Assicurazioni Generali 126,012 1,820

20 Allianz 125,999 5,973

21 AT&T 123,018 12,535

22 Carrefour 121,452 454

23 Ford Motor 118,308 2,717

24 ENI 117,235 6,070

25 J.P. Morgan Chase & Co. 115,632 11,728

26 Hewlett-Packard 114,552 7,660

27 E.ON 113,849 11,670

28 Berkshire Hathaway 112,493 8,055

29 GDF Suez 111,069 6,223

30 Daimler 109,700 −3,670

31 Nippon Telegraph & Telephone 109,656 5,302

32 Samsung Electronics 108,927 7,562

33 Citigroup 108,785 −1,606

34 McKesson 108,702 1,263

35 Verizon Communications 107,808 3,651

36 Crédit Agricole 106,538 1,564

37 Banco Santander 106,345 12,430

38 General Motors 104,589 —

Saylor URL: http://www.saylor.org/books Saylor.org 465

Rank Company Revenues ($ millions) Profits ($ millions)

39 HSBC Holdings 103,736 5,834

40 Siemens 103,605 3,097

41 American International Group 103,189 −10,949

42 Lloyds Banking Group 102,967 4,409

43 Cardinal Health 99,613 1,152

44 Nestlé 99,114 9,604

45 CVS Caremark 98,729 3,696

46 Wells Fargo 98,636 12,275

47 Hitachi 96,593 −1,152

48 International Business Machines 95,758 13,425

49 Dexia Group 95,144 1,404

50 Gazprom 94,472 24,556

51 Honda Motor 92,400 2,891

52 Électricité de France 92,204 5,428

53 Aviva 92,140 1,692

54 Petrobras 91,869 15,504

55 Royal Bank of Scotland 91,767 −4,167

56 PDVSA 91,182 1,608

57 Metro 91,152 532

58 Tesco 90,234 3,690

Saylor URL: http://www.saylor.org/books Saylor.org 466

Rank Company Revenues ($ millions) Profits ($ millions)

59 Deutsche Telekom 89,794 491

60 Enel 89,329 7,499

61 UnitedHealth Group 87,138 3,822

62 Société Générale 84,157 942

63 Nissan Motor 80,963 456

64 Pemex 80,722 −7,011

65 Panasonic 79,893 −1,114

66 Procter & Gamble 79,697 13,436

67 LG 78,892 1,206

68 Telefónica 78,853 10,808

69 Sony 77,696 −439

70 Kroger 76,733 70

71 Groupe BPCE 76,464 746

72 Prudential 75,010 1,054

73 Munich Re Group 74,764 3,504

74 Statoil 74,000 2,912

75 Nippon Life Insurance 72,051 2,624

76 AmerisourceBergen 71,789 503

77 China Mobile Communications 71,749 11,656

78 Hyundai Motor 71,678 2,330

Saylor URL: http://www.saylor.org/books Saylor.org 467

Rank Company Revenues ($ millions) Profits ($ millions)

79 Costco Wholesale 71,422 1,086

80 Vodafone 70,899 13,782

81 BASF 70,461 1,960

82 BMW 70,444 284

83 Zurich Financial Services 70,272 3,215

84 Valero Energy 70,035 −1,982

85 Fiat 69,639 −1,165

86 Deutsche Post 69,427 895

87 Industrial & Commercial Bank of China 69,295 18,832

88 Archer Daniels Midland 69,207 1,707

89 Toshiba 68,731 −213

90 Legal & General Group 68,290 1,346

91 Boeing 68,281 1,312

92 US Postal Service 68,090 −3,794

93 Lukoil 68,025 7,011

94 Peugeot 67,297 −1,614

95 CNP Assurances 66,556 1,396

96 Barclays 66,533 14,648

97 Home Depot 66,176 2,661

98 Target 65,357 2,488

Saylor URL: http://www.saylor.org/books Saylor.org 468

Rank Company Revenues ($ millions) Profits ($ millions)

99 ArcelorMittal 65,110 118

100 WellPoint 65,028 4,746

Source: Adapted from Fortune 500 List

2010,http://money.cnn.com/magazines/fortune/global500/2010/full_list/ (accessed August 11, 2011).

HRM Global Strategies

When discussing HRM from the global perspective, there are many considerations. Culture, language,

management styles, and laws would all be considerations before implementing HRM strategies. Beechler

et al. [3]

argued that for multinational companies, identifying the best HRM processes for the entire

organization isn’t the goal, but rather finding the best fit between the firm’s external environment (i.e., the

law) and the company’s overall strategy, HRM policies, and implementation of those policies. To this end,

Adler and Bartholomew developed a set of transnational competencies that are required for business to

thrive in a global business environment. [4]

A transnational scope means that HRM decisions can be made

based on an international scope; that is, HRM strategic decisions can be made from the global perspective

rather than a domestic one. With this HRM strategy, decisions take into consideration the needs of all

employees in all countries in which the company operates. The concern is the ability to establish

standards that are fair for all employees, regardless of which country they operate in.

Atransnational representation means that the composition of the firm’s managers and executives should

be a multinational one. A transnational process, then, refers to the extent to which ideas that contribute to

the organization come from a variety of perspectives and ideas from all countries in which the

organization operates. Ideally, all company processes will be based on the transnational approach. This

approach means that multicultural understanding is taken into consideration, and rather than trying to

get international employees to fit within the scope of the domestic market, a more holistic approach to

HRM is used. Using a transnational approach means that HRM policies and practices are a crucial part of

a successful business, because they can act as mechanisms for coordination and control for the

international operations. [5]

In other words, HRM can be the glue that sticks many independent operations

together.

Saylor URL: http://www.saylor.org/books Saylor.org 469

Before we look at HRM strategy on the global level, let’s discuss some of the considerations before

implementing HRM systems.

Culture as a Major Aspect of HRM Overseas

Culture is a key component to managing HRM on a global scale. Understanding culture but also

appreciating cultural differences can help the HRM strategy be successful in any country. Geert Hofstede,

a researcher in the area of culture, developed a list of five cultural dimensions that can help define how

cultures are different. [6]

The first dimension of culture is individualism-collectivism. In this dimension, Hofstede describes the

degree to which individuals are integrated into groups. For example, in the United States, we are an

individualist society; that is, each person looks after him- or herself and immediate family. There is more

focus on individual accomplishments as opposed to group accomplishments. In a collective society,

societies are based on cohesive groups, whether it be family groups or work groups. As a result, the focus

is on the good of the group, rather than the individual.

Power distance, Hofstede’s second dimension, refers to the extent to which the less powerful members of

organizations accept that power is not distributed equally. For example, some societies may seek to

eliminate differences in power and wealth, while others prefer a higher power distance. From an HRM

perspective, these differences may become clear when employees are asked to work in cross-functional

teams. A Danish manager may have no problem taking advice from employees because of the low power

distance of his culture, but a Saudi Arabian manager may have issues with an informal relationship with

employees, because of the high power distance.

Uncertainty avoidance refers to how a society tolerates uncertainty. Countries that focus more on

avoidance tend to minimize the uncertainty and therefore have stricter laws, rules, and other safety

measures. Countries that are more tolerant of uncertainty tend to be more easygoing and relaxed.

Consider the situation in which a company in the United States decides to apply the same HRM strategy

to its operations in Peru. The United States has an uncertainty avoidance score of 46, which means the

society is more comfortable with uncertainty. Peru has a high uncertainty avoidance, with a score of 87,

indicating the society’s low level of tolerance for uncertainty. Let’s suppose a major part of the pay

structure is bonuses. Would it make sense to implement this same compensation plan in international

operations? Probably not.

Saylor URL: http://www.saylor.org/books Saylor.org 470

Masculinity and femininity refers to the distribution of emotional roles between genders, and which

gender norms are accepted by society. For example, in countries that are focused on femininity,

traditional “female” values such as caring are more important than, say, showing off. The implications to

HRM are huge. For example, Sweden has a more feminine culture, which is demonstrated in its

management practices. A major component in managers’ performance appraisals is to provide mentoring

to employees. A manager coming from a more masculine culture may not be able to perform this aspect of

the job as well, or he or she may take more practice to be able to do it.

The last dimension is long-term–short-term orientation, which refers to the society’s time horizons. A

long-term orientation would focus on future rewards for work now, persistence, and ordering of

relationships by status. A short-term orientation may focus on values related to the past and present such

as national pride or fulfillment of current obligations. We can see HRM dimensions with this orientation

in succession planning, for example. In China the person getting promoted might be the person who has

been with the company the longest, whereas in short-term orientation countries like the United States,

promotion is usually based on merit. An American working for a Chinese company may get upset to see

someone promoted who doesn’t do as good of a job, just because they have been there longer, and vice

versa.

Based on Hofstede’s dimensions, you can see the importance of culture to development of an

international HRM strategy. To utilize a transnational strategy, all these components should be factored

into all decisions such as hiring, compensation, and training. Since culture is a key component in HRM, it

is important now to define some other elements of culture.

Table 14.3 Examples of Countries and Hofstede’s Dimensions

Country

Power

Distance Individualism/Collectivism Masculinity/Femininity

Uncertainty

Avoidance

Long/Short

Term

Orientation

New

Zealand 22 79 58 49 30

UK 35 89 66 35 25

United

States 40 91 62 46 29

Saylor URL: http://www.saylor.org/books Saylor.org 471

Country

Power

Distance Individualism/Collectivism Masculinity/Femininity

Uncertainty

Avoidance

Long/Short

Term

Orientation

Japan 54 46 95 92 80

Taiwan 58 17 45 69 87

Zambia 64 27 41 52 25

India 77 48 56 40 61

China 80 20 66 40 118

Philippines 94 32 64 44 19

Chile 63 23 28 86

(this

dimension

was only

studied in 23

countries)

Power distance: Refers to the comfort level of power differences among society members. A lower score shows greater equality among levels of society, such as New Zealand.

Individualism/collectivism: A high ranking here, such as the United States, means there is more concern for the individualistic aspects of society as opposed to collectivism. Countries with high scores on

individualism means the people tend to be more self-reliant.

Masculinity/femininity: A lower score may indicate lower levels of differentiation between genders. A lower score, such as Chile, may also indicate a more openly nurturing society.

Uncertainty avoidance: Refers to the tolerance for uncertainty. A high score, such as Japan’s, means there is lower tolerance for uncertainty, so rules, laws, policies, and regulations are implemented.

Long/short term orientation: Refers to thrift and perseverance, overcoming obstacles with time (long- term orientation), such as China, versus tradition, social obligations.

Culture refers to the socially accepted ways of life within a society. Some of these components might

include language, norms, values, rituals, andmaterial culture such as art, music, and tools used in that

culture. Language is perhaps one of the most obvious parts of culture. Often language can define a culture

and of course is necessary to be able to do business. HRM considerations for language might include

Saylor URL: http://www.saylor.org/books Saylor.org 472

something as simple as what language (the home country or host country) will documents be sent in? Is

there a standard language the company should use within its communications?

FORTUNE 500 FOCUS

For anyone who has traveled, seeing a McDonald’s overseas is common, owing to the need to expand

markets. McDonald’s is perhaps one of the best examples of using cultural sensitivity in setting up its

operations despite criticism for aggressive globalization. Since food is usually a large part of culture,

McDonald’s knew that when globalizing, it had to take culture into consideration to be successful. For

example, when McDonald’s decided to enter the Indian market in 2009, it knew it needed a vegetarian

product. After several hundred versions, local McDonald’s executives finally decided on the McSpicy

Paneer as the main menu item. The spicy Paneer is made from curd cheese and reflects the values and

norms of the culture. [7]

In Japan, McDonald’s developed the Teriyaki Burger and started selling green tea ice cream. When

McDonald’s first started competing in Japan, there really was no competition at all, but not for the reason

you might think. Japanese people looked at McDonald’s as a snack rather than a meal because of their

cultural values. Japanese people believe that meals should be shared, which can be difficult with

McDonald’s food. Second, the meal did not consist of rice, and a real Japanese meal includes rice—a part

of the national identity [8]

and values. Most recently, McDonald’s introduced the McBaguette in France to

align with French cultural values. [9]

The McBaguettes will be produced in France and come with a variety

of jams, a traditional French breakfast. Just like in product development, HRM must understand the

differences between cultures to create the best HRM systems that work for the individual culture.

Norms are shared expectations about what is considered correct and normal behavior. Norms allow a

society to predict the expected behavior and be able to act in this manner. For many companies operating

in the United States, a norm might be to dress down for work, no suit required. But if doing business

overseas, that country’s norm might be to wear a suit. Not understanding the norms of a culture can

offend potential clients, customers, and colleagues.

Values, another part of culture, classify things as good or bad within a society. Values can evoke strong

emotional feelings from a person or a society. For example, burning of the American flag results in strong

emotions because values (love of country and the symbols that represent it) are a key component of how

people view themselves, and how a culture views society. In April 2011, a pastor in Florida burned a holy

Saylor URL: http://www.saylor.org/books Saylor.org 473

book, the Koran, which sparked outrage from the Muslim community all over the world. This is an

example of a strongly held value that when challenged can result in community rage. [10]

Rituals are scripted ways of interacting that usually result in a specific series of events. Consider a

wedding in the United States, for example. The basic wedding rituals (first dance, cutting of cake, speech

from best man and bridesmaid) are practiced throughout society. Besides the more formalized rituals

within a society, such as weddings or funerals, daily rituals, such as asking someone “How are you?”

(when you really don’t want to know the answer) are part of culture, too. Even bonding rituals such as

how business cards are exchanged and the amount of eye contact given in a social situation can all be

rituals as well.

The material items a culture holds important, such as artwork, technology, and architecture, can be

considered material culture. Material culture can range from symbolic items, such as a crucifix, or

everyday items, such as a Crockpot or juicer. Understanding the material importance of certain items to a

country can result in a better understanding of culture overall.

HUMAN RESOURCE RECALL

Which component of culture do you think is the most important in HRM? Why?

KEY TAKEAWAYS

 Offshoring is when a business relocates or moves part of its operations to a country different

from the one it currently operates in.

 Outsourcing is when a company contracts with another company to do some work for another.

This can occur domestically or in an offshoring situation.

 Domestic market means that a product is sold only within the country that the business operates

in.

 An international market means that an organization is selling products in other countries, while

a multinational one means that not only are products being sold in a country, but operations are

set up and run in a country other than where the business began.

 The goal of any HRM strategy is to be transnational, which consists of three components. First,

the transnational scope involves the ability to make decisions on a global level rather than a

domestic one. Transnational representation means that managers from all countries in which the

Saylor URL: http://www.saylor.org/books Saylor.org 474

business operates are involved in business decisions. Finally, a transnational process means that

the organization can involve a variety of perspectives, rather than only a domestic one.

 Part of understanding HRM internationally is to understand culture. Hofstede developed five

dimensions of culture. First, there is the individualism-collectivismaspect, which refers to the

tendency of a country to focus on individuals versus the good of the group.

 The second Hofstede dimension is power distance, that is, how willing people are to accept

unequal distributions of power.

 The third is uncertainty avoidance, which means how willing the culture is to accept not knowing

future outcomes.

 A masculine-feminine dimension refers to the acceptance of traditional male and female

characteristics.

 Finally, Hofstede focused on a country’s long-term orientation versus short-term orientation in

decision making.

 Other aspects of culture include norms, values, rituals, and material culture.Norms are the

generally accepted way of doing things, and values are those things the culture finds important.

Every country has its own set of rituals for ceremonies but also for everyday

interactions. Material culture refers to the material goods, such as art, the culture finds

important.

 Other HRM aspects to consider when entering a foreign market are the economics, the law, and

the level of education and skill level of the human capital in that country.

EXERCISE

1. Visit http://www.geert-hofstede.com/ and view the cultural dimensions of three countries. Then

write a paragraph comparing and contrasting all three.

[1] “Global Remuneration Professional,” WorldatWork Society of Certified Professionals, accessed August 10,

2010,http://www.worldatworksociety.org/society/certification/html/certification-grp.jsp.

[2] “Labor Laws and Policy,” The Real Costa Rica, accessed April 29,

2011,http://www.therealcostarica.com/costa_rica_business/costa_rica_labor_law.html.

Saylor URL: http://www.saylor.org/books Saylor.org 475

[3] Schon Beechler, Vladimir Pucik, John Stephan, and Nigel Campbell, “The Transnational Challenge: Performance

and Expatriate Presence in the Overseas Affiliates of Japanese MNCs,” in Japanese Firms in Transition: Responding

to the Globalization Challenge, Advances in International Management, vol. 17, ed. Tom Roehl and Allan Bird

(Bingley, UK: Emerald Group, 2004), 215–42.

[4] Nancy J. Adler and Susan Bartholomew, “Managing Globally Competent People,” Executive6, no. 3 (1992): 52–

65.

[5] Markus Pudelko and Anne-Wil Harzing, “Country-of-Origin, Localization, or Dominance Effect? An Empirical

Investigation of HRM Practices in Foreign Subsidiaries,” Human Resource Management 46, no. 4 (2007): 535–59.

[6] Geert Hofstede, Cultural Dimensions website, accessed April 29, 2011, http://www.geert-hofstede.com/.

[7] Gus Lubin, “A Brilliant Lesson in Globalization from McDonalds,” Business Insider, June 16, 2011, accessed

August 13, 2011, http://www.businessinsider.com/a-brilliant-lesson-in-globalization-from-mcdonalds-2011-6.

[8] Emiko Ohnuki-Tierney, “McDonald’s in Japan: Changing Manners and Etiquette,” in Golden Arches East:

McDonald’s in East Asia, ed. J. L. Watson (Stanford, CA: Stanford University Press, 1997), 161-82.

[9] Sarah Rappanport, “McDonalds Introduces France to the McBaguette,” Business Insider Europe, July 29, 2011,

accessed August 12, 2011,http://www.businessinsider.com/mcbaguette-mcdonalds-france-2011-7.

[10] Sarah Drury, “Violent Protests Over Koran Burning Spread,” ABC News, April 4, 2011, accessed April 27,

2011, http://www.abc.net.au/worldtoday/content/2011/s3181541.htm.

Saylor URL: http://www.saylor.org/books Saylor.org 476

14.2 Staffing Internationally LEARNING OBJECTIVES

1. Be able to explain the three staffing strategies for international businesses and the advantages

and disadvantages for each.

2. Explain the reasons for expatriate failures.

One of the major decisions for HRM when a company decides to operate overseas is how the overseas

operation will be staffed. This is the focus of this section.

Types of Staffing Strategy

There are three main staffing strategies a company can implement when entering an overseas market,

with each having its advantages and disadvantages. The first strategy is a home-country national strategy.

This staffing strategy uses employees from the home country to live and work in the country. These

individuals are calledexpatriates. The second staffing strategy is a host-country national strategy, which

means to employ people who were born in the country in which the business is operating. Finally, a third-

country national strategy means to employee people from an entirely different country from the home

country and host country. Table 14.4 "Advantages and Disadvantages of the Three Staffing Strategies" lists

advantages and disadvantages of each type of staffing strategy. Whichever strategy is chosen,

communication with the home office and strategic alignment with overseas operations need to occur for a

successful venture.

Table 14.4 Advantages and Disadvantages of the Three Staffing Strategies

Home-Country National Host-Country National Third-Country National

Advantages

Greater control of organization

Language barrier is

eliminated

The third-country national

may be better equipped to

bring the international

perspective to the business

Managers gain experience in

local markets

Possible better

understanding of local rules

and laws

Costs associated with hiring

such as visas may be less

expensive than with home-

country nationals

Possible greater understanding

and implementation of business

strategy

Hiring costs such as visas

are eliminated

Saylor URL: http://www.saylor.org/books Saylor.org 477

Home-Country National Host-Country National Third-Country National

Cultural understanding

Morale builder for employees

of host country

Disadvantages

Adapting to foreign

environment may be difficult

for manager and family, and

result in less productivity

Host-country manager may

not understand business

objectives as well without

proper training

Must consider traditional

national hostilities

Expatriate may not have

cultural sensitivity

May create a perception of

“us” versus “them”

The host government and/or

local business may resent

hiring a third-country

national

Language barriers

Can affect motivation of

local workers Cost of visa and hiring factors

HUMAN RESOURCE RECALL

Compare and contrast a home-country versus a host-country staffing strategy.

Expatriates

According to Simcha Ronen, a researcher on international assignments, there are five categories that

determine expatriate success. They include job factors, relational dimensions, motivational state, family

situation, and language skills. The likelihood the assignment will be a success depends on the attributes

listed in Table 14.5 "Categories of Expatriate Success Predictors with Examples". As a result, the

appropriate selection process and training can prevent some of these failings. Family stress, cultural

inflexibility, emotional immaturity, too much responsibility, and longer work hours (which draw the

expatriate away from family, who could also be experiencing culture shock) are some of the reasons cited

for expatriate failure.

Table 14.5 Categories of Expatriate Success Predictors with Examples

Job Factors

Relational

Dimensions Motivational State

Family

Situation Language Skills

Technical skills Tolerance for

Belief in the mission Willingness of

spouse to live Host-country

Saylor URL: http://www.saylor.org/books Saylor.org 478

Job Factors

Relational

Dimensions Motivational State

Family

Situation Language Skills

ambiguity abroad language

Familiarity with host

country and

headquarters

operations Behavioral flexibility

Congruence with

career path

Adaptive and

supportive

spouse

Nonverbal

communication

Managerial skills Nonjudgmentalism

Interest in overseas

experience

Stable marriage

Administrative

competence

Cultural empathy and

low ethnocentrism

Interest in specific

host-country culture

Interpersonal skills

Willingness to acquire

new patterns of

behavior and attitudes

Source: Adapted from Simcha Ronen, Training the International Assignee (San Francisco: Jossey-Bass,

1989), 426–40.

Most expatriates go through four phases of adjustment when they move overseas for an assignment. They

include elation/honeymoon, resistance, adaption, andbiculturalism. In the elation phase, the employee is

excited about the new surroundings and finds the culture exotic and stimulating. In the resistance phase,

the employee may start to make frequent comparisons between home and host country and may seek out

reminders of home. Frustration may occur because of everyday living, such as language and cultural

differences. During the adaptation phase, the employee gains language skills and starts to adjust to life

overseas. Sometimes during this phase, expatriates may even tend to reject their own culture. In this

phase, the expatriate is embracing life overseas. In the last phase, biculturalism, the expatriate embraces

the new culture and begins to appreciate his old life at home equally as much as his new life overseas.

Many of the problems associated with expatriate failures, such as family life and cultural stress, have

diminished.

Saylor URL: http://www.saylor.org/books Saylor.org 479

Host-Country National

The advantage, as shown in Table 14.4 "Advantages and Disadvantages of the Three Staffing Strategies",

of hiring a host-country national can be an important consideration when designing the staffing strategy.

First, it is less costly in both moving expenses and training to hire a local person. Some of the less obvious

expenses, however, may be the fact that a host-country national may be more productive from the start, as

he or she does not have many of the cultural challenges associated with an overseas assignment. The host-

country national already knows the culture and laws, for example. In Russia, 42 percent of respondents in

an expatriate survey said that companies operating there are starting to replace expatriates with local

specialists. In fact, many of the respondents want the Russian government to limit the number of

expatriates working for a company to 10 percent. [1]

When globalization first occurred, it was more likely

that expatriates would be sent to host countries, but in 2011, many global companies are comfortable that

the skills, knowledge, and abilities of managers exist in the countries in which they operate, making the

hiring of a host-country national a favorable choice. Also important are the connections the host-country

nationals may have. For example, Shiv Argawal, CEO of ABC Consultants in India, says, “An Indian CEO

helps influence policy and regulations in the host country, and this is the factor that would make a global

company consider hiring local talent as opposed to foreign talent.” [2]

Third-Country Nationals

One of the best examples of third-country nationals is the US military. The US military has more than

seventy thousand third-country nationals working for the military in places such as Iraq and Afghanistan.

For example, a recruitment firm hired by the US military called Meridian Services Agency recruits

hairstylists, construction workers, and electricians from all over the world to fill positions on military

bases. [3]

Most companies who utilize third-country national labor are not new to multinational

businesses. The majority of companies who use third-country national staffing have many operations

Figure 14.2 Phases of Expatriate Adjustment

Saylor URL: http://www.saylor.org/books Saylor.org 480

already overseas. One example is a multinational company based in the United States that also has

operations in Spain and transfers a Spanish manager to set up new operations in Argentina. This would be

opposed to the company in the United States sending an American (expatriate) manager to Argentina. In

this case, the third-country national approach might be the better approach because of the language

aspect (both Spain and Argentina speak Spanish), which can create fewer costs in the long run. In fact,

many American companies are seeing the value in hiring third-country nationals for overseas

assignments. In an International Assignments Survey, [4]

61 percent of United States–based companies

surveyed increased the use of third-country nationals by 61 percent, and of that number, 35 percent have

increased the use of third-country nationals to 50 percent of their workforce. The main reason why

companies use third-country nationals as a staffing strategy is the ability of a candidate to represent the

company’s interests and transfer corporate technology and competencies. Sometimes the best person to

do this isn’t based in the United States or in the host country.

KEY TAKEAWAYS

 There are three types of staffing strategies for an international business. First, in the home-

country national strategy, people are employed from the home country to live and work in the

country. These individuals are called expatriates. One advantage of this type of strategy is easier

application of business objectives, although an expatriate may not be culturally versed or well

accepted by the host-country employees.

 In a host-country strategy, workers are employed within that country to manage the operations

of the business. Visas and language barriers are advantages of this type of hiring strategy.

 A third-country national staffing strategy means someone from a country, different from home

or host country, will be employed to work overseas. There can be visa advantages to using this

staffing strategy, although a disadvantage might be morale lost by host-country employees.

EXERCISES

1. Choose a country you would enjoy working in, and visit that country’s embassy page. Discuss the

requirements to obtain a work visa in that country.

2. How would you personally prepare an expatriate for an international assignment? Perform

additional research if necessary and outline a plan.

Saylor URL: http://www.saylor.org/books Saylor.org 481

[1] “Russia Starts to Abolish Expat jobs,” Expat Daily, April 27, 2011, accessed August 11, 2011, http://www.expat-

daily.com/news/russia-starts-to-abolish-expat-jobs/.

[2] Divya Rajagorpal and MC Govardhanna Rangan, “Global Firms Prefer Local Executives to Expats to Run Indian

Operation,” Economic Times, April 20, 2011, accessed September 15,

2011, http://articles.economictimes.indiatimes.com/2011-04-20/news/29450955_1_global-firms-joint-ventures-

investment-banking.

[3] Sarah Stillman, “The Invisible Army,” New Yorker, June 6, 2011, accessed August 11,

2011,http://www.newyorker.com/reporting/2011/06/06/110606fa_fact_stillman.

[4] “More Third Country Nationals Being Used,” n.d., SHRM India, accessed August 11,

2011,http://www.shrmindia.org/more-third-country-nationals-being-used.

Saylor URL: http://www.saylor.org/books Saylor.org 482

14.3 International HRM Considerations LEARNING OBJECTIVES

1. Be able to explain how the selection process for an expatriate differs from a domestic process.

2. Explain possible expatriate training topics and the importance of each.

3. Identify the performance review and legal differences for international assignments.

4. Explain the logistical considerations for expatriate assignments.

In an international environment, as long as proper research is performed, most HRM concepts can be

applied. The important thing to consider is proper research and understanding of cultural, economic, and

legal differences between countries. This section will provide an overview of some specific considerations

for an international business, keeping in mind that with awareness, any HRM concept can be applied to

the international environment. In addition, it is important to mention again that host-country offices

should be in constant communication with home-country offices to ensure policies and practices are

aligned with the organization.

Recruitment and Selection

As we discussed in Section 14.2 "Staffing Internationally", understanding which staffing strategy to use is

the first aspect of hiring the right person for the overseas assignment. The ideal candidate for an overseas

assignment normally has the following characteristics:

1. Managerial competence: technical skills, leadership skills, knowledge specific to the company operations.

2. Training: The candidate either has or is willing to be trained on the language and culture of the host

country.

3. Adaptability: The ability to deal with new, uncomfortable, or unfamiliar situations and the ability to adjust

to the culture in which the candidate will be assigned.

As we discussed earlier, when selecting an expatriate or a third-country national for the job, assuring that

the candidate has the job factors, relational dimensions, motivational state, family situation, and language

skills (or can learn) is a key consideration in hiring the right person. Some of the costs associated with

failure of an expatriate or third-country national might include the following:

1. Damage to host-country relationships

2. Motivation of host-country staff

3. Costs associated with recruitment and relocation

Saylor URL: http://www.saylor.org/books Saylor.org 483

4. Possible loss of that employee once he or she returns

5. Missed opportunities to further develop the market

Because success on an overseas assignment has such complex factors, the selection process for this

individual should be different from the selection process when hiring domestically. The process should

start with the job analysis, as we discussed in Chapter 4 "Recruitment". The job analysis and job

description should be different for the overseas assignment, since we know that certain competencies

(besides technical ones) are important for success. Most of those competencies have little to do with the

person’s ability to do the job but are related to his or her ability to do the job in a new cultural setting.

These additional competencies (besides the skills needed for the job) may be considered:

1. Experience working internationally

2. Extroverted

3. Stress tolerance

4. Language skills

5. Cultural experiences

Once the key success factors are determined, many of which can be based on previous overseas

assignments successes, we can begin to develop a pool of internal candidates who possess the additional

competencies needed for a successful overseas assignment.

To develop the pool, career development questions on the performance review can be asked to determine

the employee’s interest in an overseas assignment. Interest is an important factor; otherwise, the chance

of success is low. If there is interest, this person can be recorded as a possible applicant. An easy way to

keep track of interested people is to keep a spreadsheet of interested parties, skills, languages spoken,

cultural experiences, abilities, and how the candidates meet the competencies you have already developed.

Once an overseas assignment is open, you can view the pool of interested parties and choose the ones to

interview who meet the competencies required for the particular assignment.

Saylor URL: http://www.saylor.org/books Saylor.org 484

Training

Much of the training may include cultural components, which were cited by 73 percent of successful

expatriates as key ingredients to success. [1]

Training isn’t always easy, though. The goal is not to help someone learn a language or cultural traditions

but to ensure they are immersed in the sociocultural aspects of the new culture they are living in. Roger N.

Blakeney, [2]

an international business researcher, identifies two main pathways to adapting to a new

culture. First, people adjust quickly from the psychological perspective but not the social one. Blakeney

argues that adjusting solely from the psychological perspective does not make an effective expatriate.

Although it may take more time to adjust, he says that to be fully immersed and to fully understand and

be productive in a culture, the expatriate must also have sociocultural adaption. In other words, someone

who can adjust from a sociocultural perspective ends up performing better because he or she has a deeper

level of understanding of the culture. Determining whether your candidate can gain this deeper level

would figure in your selection process.

Figure 14.3 Sample Selection Process for Overseas Assignments

lection Process for Overseas Assignments

Saylor URL: http://www.saylor.org/books Saylor.org 485

One of the key decisions in any global organization is whether training should be performed in-house or

an outside company should be hired to provide the training. For example, Communicaid offers online and

on-site training on a variety of topics listed. Whether in-house or external training is performed, there are

five main components of training someone for an overseas assignment:

1. Language

2. Culture

3. Goal setting

4. Managing family and stress

5. Repatriation

Figure 14.4 Blakeney’s Model of Psychological versus Sociocultural Adaption

Source: Roger Blakeney, “Psychological Adjustment and Sociocultural Adaptation: Coping on International

Assignments” (paper, Annual Meeting of Academy of Management, Atlanta, GA, 2006).

Saylor URL: http://www.saylor.org/books Saylor.org 486

Training on languages is a basic yet necessary factor to the success of the assignment. Although to many,

English is the international business language, we shouldn’t discount the ability to speak the language of

the country in which one is living. Consider Japan’s largest online retailer, Rakuten, Inc. It mandated that

English will be the standard language by March 2012. [3]

Other employers, such as Nissan and Sony, have

made similar mandates or have already implemented an English-only policy. Despite this, a large

percentage of your employee’s time will be spent outside work, where mastery of the language is

important to enjoy living in another country. In addition, being able to discuss and negotiate in the

mother tongue of the country can give your employee greater advantages when working on an overseas

assignment. Part of language, as we discussed in Chapter 9, isn’t only about what you say but also includes

all the nonverbal aspects of language. Consider the following examples:

 In the United States, we place our palm upward and use one finger to call someone over. In Malaysia, this

is only used for calling animals. In much of Europe, calling someone over is done with palm down, making

a scratching motion with the fingers (as opposed to one finger in the United States). In Columbia, soft

handclaps are used.

 In many business situations in the United States, it is common to cross your legs, pointing the soles of

your shoes to someone. In Southeast Asia, this is an insult since the feet are the dirtiest and lowest part of

the body.

 Spatial differences are an aspect of nonverbal language as well. In the United States, we tend to stand

thirty-six inches (an arm length) from people, but in Chile, for example, the space is much smaller.

 Proper greetings of business colleagues differ from country to country.

 The amount of eye contact varies. For example, in the United States, it is normal to make constant eye

contact with the person you are speaking with, but in Japan it would be rude to make constant eye contact

with someone with more age or seniority.

The goal of cultural training is to train employees what the “norms” are in a particular culture. Many of

these norms come from history, past experience, and values. Cultural training can include any of the

following topics:

1. Etiquette

2. Management styles

3. History

Saylor URL: http://www.saylor.org/books Saylor.org 487

4. Religion

5. The arts

6. Food

7. Geography

8. Logistics aspects, such as transportation and currency

9. Politics

Cultural training is important. Although cultural implications are not often discussed openly, not

understanding the culture can harm the success of a manager when on overseas assignment. For example,

when Revlon expanded its business into Brazil, one of the first products it marketed was a Camellia flower

scented perfume. What the expatriate managers didn’t realize is that the Camellia flower is used for

funerals, so of course, the product failed in that country. [4]

Cultural implications, such as management

style, are not always so obvious. Consider the US manager who went to Mexico to manage a production

line. He applied the same management style that worked well in America, asking a lot of questions and

opinions of employees. When employees started to quit, he found out later that employees expect

managers to be the authority figure, and when the manager asked questions, they assumed he didn’t know

what he was doing.

Training on the goals and expectations for the expatriate worker is important. Since most individuals take

an overseas assignment to boost their careers, having clear expectations and understanding of what they

are expected to accomplish sets the expatriate up for success.

Because moving to a new place, especially a new country, is stressful, it is important to train the employee

on managing stress, homesickness, culture shock, and likely a larger workload than the employee may

have had at home. Some stress results from insecurity and homesickness. It is important to note that

much of this stress occurs on the family as well. The expatriate may be performing and adjusting well, but

if the family isn’t, this can cause greater stress on the employee, resulting in a failed assignment. Four

stages of expatriate stress identified in the Selyes model, the General Adaption Syndrome, are shown

in Figure 14.5 "General Adaption Syndrome to Explain Expatriate Stress". The success of overseas

employees depends greatly on their ability to adjust, and training employees on the stages of adjustment

they will feel may help ease this problem.

Saylor URL: http://www.saylor.org/books Saylor.org 488

Spouses and children of

the employee may also

experience much of the

stress the expatriate feels.

Children’s attendance at

new schools and lack of

social networks, as well as

possible sacrifice of a

spouse’s career goal, can

negatively impact the

assignment. Many

companies offer training

not only for the employee

but for the entire family

when engaging in an

overseas assignment. For

example, global

technology and

manufacturing company

Honeywell offers employees and their families a two-day cultural orientation on the region they will be

living in. [5]

Some of the reasons for lack of adjustment by family members might include the following:

1. Language issues

2. Social issues

3. Schooling

4. Housing

5. Medical services

Figure 14.5 General Adaption Syndrome to Explain Expatriate Stress

Source: Bala Koteswari and Mousumi Bhattacharya, “Managing

Expatriate Stress,”Delhi Business Review 8, no. 1 (2007): 89–98.

Saylor URL: http://www.saylor.org/books Saylor.org 489

The ability of the organization to meet these family needs makes for a more successful assignment. For

example, development of an overseas network to provide social outlets, activities, schooling and housing

options, assignment of mentors to the spouse, and other methods can help ease the transition.

Finally, repatriation is the process of helping employees make the transition to their home country. Many

employees experience reverse culture shock upon returning home, which is a psychological phenomenon

that can lead to feelings of fear, helplessness, irritability, and disorientation. All these factors can cause

employees to leave the organization soon after returning from an assignment, and to take their knowledge

with them. One problem with repatriation is that the expatriate and family have assumed things stayed

the same at home, while in fact friends may have moved, friends changed, or new managers may have

been hired along with new employees. Although the manager may be on the same level as other managers

when he or she returns, the manager may have less informal authority and clout than managers who have

been working in the particular office for a period of time. An effective repatriation program can cost

$3,500 to $10,000 per family, but the investment is worth it given the critical skills the managers will

have gained and can share with the organization. In fact, many expatriates fill leadership positions within

organizations, leveraging the skills they gained overseas. One such example is FedEx president and CEO

David Bronczek and executive vice president Michael Drucker. Tom Mullady, the manager of

international compensation planning at FedEx, makes the case for a good repatriation program when he

says, “As we become more and more global, it shows that experience overseas is leveraged back home.” [6]

Repatriation planning should happen before the employee leaves on assignment and should be a

continuous process throughout the assignment and upon return. The process can include the following:

 Training and counseling on overseas assignment before leaving

 Clear understanding of goals before leaving, so the expatriate can have a clear sense as to what new skills

and knowledge he or she will bring back home

 Job guarantee upon return (Deloitte and Touche, for example, discusses which job each of the two

hundred expats will take after returning, before the person leaves, and offers a written letter of

commitment. [7]

)

 Assigning the expatriate a mentor, ideally a former expatriate

 Keeping communication from home open, such as company newsletters and announcements

 Free return trips home to stay in touch with friends and family

Saylor URL: http://www.saylor.org/books Saylor.org 490

 Counseling (at Honeywell, employees and families go through a repatriation program within six months

of returning. [8]

)

 Sponsoring brown bag lunches where the expatriate can discuss what he or she learned while overseas

 Trying to place expatriates in positions where they can conduct business with employees and clients from

where they lived

It is also important to note that offering an employee an international assignment can help develop that

person’s understanding of the business, management style, and other business-related development.

Working overseas can be a crucial component to succession planning. It can also be a morale booster for

other employees, who see that the chosen expatriate is further able to develop his or her career within the

organization.

While the focus of this section has been on expatriate assignments, the same information on training is

true for third-country nationals.

If it is decided that host-country nationals will be hired, different training considerations might occur. For

example, will they spend some time at your domestic corporate headquarters to learn the business, then

apply what they learned when they go home? Or, does it make more sense to send a domestic manager

overseas to train the host-country manager and staff? Training will obviously vary based on the type of

business and the country, and it may make sense to gain input from host-country managers as opposed to

developing training on your own. As we have already discussed in this chapter, an understanding of the

cultural components is the first step to developing training that can be utilized in any country.

Compensation and Rewards

There are a few options when choosing compensation for a global business. The first option is to maintain

companywide pay scales and policies, so for example, all sales staff are paid the same no matter what

country they are in. This can reduce inequalities and simplify recording keeping, but it does not address

some key issues. First, this compensation policy does not address that it can be much more expensive to

live in one place versus another. A salesperson working in Japan has much higher living expenses than a

salesperson working in Peru, for example. As a result, the majority of organizations thus choose to use a

pay banding system based on regions, such as South America, Europe, and North America. This is called

alocalized compensation strategy. Microsoft and Kraft Foods both use this approach. This method

provides the best balance of cost-of-living considerations.

Saylor URL: http://www.saylor.org/books Saylor.org 491

However, regional pay banding is not necessarily the ideal solution if the goal is to motivate expatriates to

move. For example, if the employee has been asked to move from Japan to Peru and the salary is

different, by half, for example, there is little motivation for that employee to want to take an assignment in

Peru, thus limiting the potential benefits of mobility for employees and for the company.

One possible option is to pay a similar base salary companywide or regionwide and offer expatriates an

allowance based on specific market conditions in each country. [9]

This is called

the balance sheet approach. With this compensation approach, the idea is that the expatriate should have

the same standard of living that he or she would have had at home. Four groups of expenses are looked at

in this approach:

1. Income taxes

2. Housing

3. Goods and services

4. Base salary

5. Overseas premium

The HR professional would estimate these expenses within the home country and costs for the same items

in the host country. The employer then pays differences. In addition, the base salary will normally be in

the same range as the home-country salary, and anoverseas premium might be paid owing to the

challenge of an overseas assignment. An overseas premium is an additional bonus for agreeing to take an

overseas assignment. There are many companies specializing in cost-of-living data, such as Mercer

Reports. It provides cost-of-living information at a cost of $600 per year. Table 14.6 "The Balance Sheet

Approach to Compensation" shows a hypothetical example of how the balance sheet approach would

work.

Table 14.6 The Balance Sheet Approach to Compensation

Chicago, IL Tokyo Allowance

Tax rate 30% 35% 5% or $288/month

Housing $1250 $1800 $550

Base salary $5400 $5,750 $350

Saylor URL: http://www.saylor.org/books Saylor.org 492

Chicago, IL Tokyo Allowance

Overseas premium 15% $810

Total allowance $1998

Total salary and allowance $5400 $7748

Other compensation issues, which will vary greatly from country to country, might include the following:

1. The cost of benefits in another country. Many countries offer universal health care (offset by higher taxes),

and therefore the employee would have health benefits covered while working and paying taxes in that

country. Canada, Finland, and Japan are examples of countries that have this type of coverage. In

countries such as Singapore, all residents receive a catastrophic policy from the government, but they

need to purchase additional insurance for routine care. [10]

A number of organizations offer health care for

expatriates relocating to another country in which health care is not already provided.

2. Legally mandated (or culturally accepted) amount of vacation days. For example, in Australia twenty paid

vacation days are required, ten in Canada, thirty in Finland, and five in the Philippines. The average

number of US worker vacation days is fifteen, although the number of days is not federally mandated by

the government, as with the other examples. [11]

3. Legal requirements of profit sharing. For example, in France, the government heavily regulates profit

sharing programs. [12]

4. Pay system that works with the country culture, such as pay systems based on seniority. For example,

Chinese culture focuses heavily on seniority, and pay scales should be developed according to seniority.

In Figure 14.6 "Hourly World Compensation Comparisons for Manufacturing Jobs", examples of hourly

compensation for manufacturing workers are compared.

Saylor URL: http://www.saylor.org/books Saylor.org 493

5. Thirteenth month (bonus) structures and expected (sometimes mandated) annual lump-sum

payments. Compensation issues are a major consideration in motivating overseas employees. A

systematic system should be in place to ensure fairness in compensation for all expatriates.

Performance Evaluations

The challenge in overseas performance evaluations is determining who should rate the performance of the

expatriate. While it might make sense to have the host-country employees and managers rate the

expatriate, cultural differences may make this process ineffective. Cultural challenges may make the host

country rate the expatriate more harshly, or in some cases, such as Indonesia, harmony is more important

than productivity, so it may be likely an Indonesia employee or manager rates the expatriate higher, to

keep harmony in the workplace. [13]

If the home-country manager rates the performance of the expatriate, he or she may not have a clear

indication of the performance, since the manager and expatriate do not work together on a day-to-day

basis. A study performed by Gregersen, Hite, and Black suggests that a balanced set of raters from host

Figure 14.6 Hourly World Compensation Comparisons for Manufacturing Jobs

Source: Bureau of Labor Statistics, Division of International Labor Comparisons,

International Comparisons of Hourly Compensation costs in Manufacturing,

2009,http://www.bls.gov/news.release/ichcc.toc.htm (accessed September 16, 2011).

Saylor URL: http://www.saylor.org/books Saylor.org 494

and home countries and more frequent appraisals relate positively to the accuracy of performance

evaluations. [14]

They also suggest that the use of a standardized form relates negatively to perceived

accuracy. Carrie Shearer, an international HR expert, concurs by stating that the standardized form, if

used, should also include special aspects for the expatriate manager, such as how well the expatriate fits in

with the culture and adaptation ability. [15]

Besides determining who should rate the expatriate’s performance, the HR professional should determine

the criteria for evaluating the expatriate. Since it is likely the expatriate’s job will be different overseas, the

previous criteria used may not be helpful in the evaluation process. The criteria used to rate the

performance should be determined ahead of time, before the expatriate leaves on assignment. This is part

of the training process we discussed earlier. Having a clear picture of the rating criteria for an overseas

assignment makes it both useful for the development of the employee and for the organization as a tool. A

performance appraisal also offers a good opportunity for the organization to obtain feedback about how

well the assignment is going and to determine whether enough support is being provided to the

expatriate.

The International Labor Environment

As we have already alluded to in this chapter, understanding of laws and how they relate to host-country

employees and expatriates can vary from country to country. Because of this, individual research on laws

in the specific countries is necessary to ensure adherence:

1. Worker safety laws

2. Worker compensation laws

3. Safety requirements

4. Working age restrictions

5. Maternity/paternity leaves

6. Unionization laws

7. Vacation time requirements

8. Average work week hours

9. Privacy laws

10. Disability laws

11. Multiculturalism and diverse workplace, antidiscrimination law

Saylor URL: http://www.saylor.org/books Saylor.org 495

12. Taxation

As you can tell from this list, the considerable HRM factors when doing business overseas should be

thoroughly researched.

One important factor worth mentioning here is labor unions. As you remember fromChapter 12 "Working

with Labor Unions", labor unions have declined in membership in the United States. Collective bargaining

is the process of developing an employment contract between a union and management within an

organization. The process of collective bargaining can range from little government involvement to

extreme government involvement as in France, for example, where some of the labor unions are closely

tied with political parties in the country.

Some countries, such as Germany, engage in codetermination, mandated by the government.

Codetermination is the practice of company shareholders’ and employees’ being represented in equal

numbers on the boards of organizations, for organizations with five hundred or more employees. The

advantage of this system is the sharing of power throughout all levels of the organization; however, some

critics feel it is not the place of government to tell companies how their corporation should be run. The

goal of such a mandate is to reduce labor conflict issues and increase bargaining power of workers.

Taxation of expatriates is an important aspect of international HRM. Of course, taxes are different in

every country, and it is up to the HR professional to know how taxes will affect the compensation of the

expatriate. The United States has income tax treaties with forty-two countries, meaning taxing authorities

of treaty countries can share information (such as income and foreign taxes paid) on residents living in

other countries. US citizens must file a tax return, even if they have not lived in the United States during

the tax year. US taxpayers claim over $90 billion in foreign tax credits on a yearly

basis. [16]

Foreign tax credits allow expatriates working abroad to claim taxes paid overseas on their US tax

forms, reducing or eliminating double taxation. Many organizations with expatriate workers choose to

enlist the help of tax accountants for their workers to ensure workers are paying the correct amount of

taxes both abroad and in the United States.

Table 14.7 Examples of HRM-Related Law Differences between the United States and China

United States China*

Employment

Contracts Most states have at-will employment

Contract employment system. All employees must

have a written contract

Saylor URL: http://www.saylor.org/books Saylor.org 496

United States China*

Layoffs

No severance required

Company must be on verge of bankruptcy before it

can lay off employees

Two years of service required to pay

severance; more than five years of

experience requires a long service

payment

Termination Employment at will

Employees can only be terminated for cause, and

cause must be clearly proved. They must be given

30 days’ notice, except in the case of extreme

circumstances, like theft

Overtime None required for salaried employees

Employees who work more than 40 hours must be

paid overtime

Salary Up to individual company

A 13-month bonus is customary, but not required,

right before the Chinese New Year

Vacation No governmental requirement

Mandated by government:

First year: no vacation

Year 2–9: 5 days

Years 10–19: 10 days

20 years or more: 15 days

Paid Holidays None required by law

3 total. Chinese New Year, International Labor Day,

and National Day. However, workers must “make

up” the days by working a day on the previous

weekend

Social Security

Required by law for employer and

employee to pay into social security

Greater percentages are paid by employer: 22% of

salary paid by employer, 8% paid by employee

Discrimination

Laws

Per EEOC, cannot discriminate based

on race, sex, age, genetic information,

or other protected groups Laws are in place but not enforced

Maternity Leave

Family and Medical Leave Act allows

12 weeks 90 days’ maternity leave

Saylor URL: http://www.saylor.org/books Saylor.org 497

United States China*

*In China, all employees are covered by the Labor Contract Law.

Source: Harris and Moure, pllc, “China Employment Contracts, Ten Things to Consider,” China Law

Blog,http://www.chinalawblog.com/2010/04/china_employment_contracts_ten.html(accessed August

13, 2011) and Cindy Zhang, “Employment Law in China,” June 21,

2011, http://www.attorneycz.com/ (accessed August 13, 2011).

Logistics of International Assignments

As you learned earlier, providing training for the expatriate is an important part of a successful

assignment. However, many of the day-to-day aspects of living are important, too.

One of the most important logistical aspects is to make sure the employee can legally work in the country

where you will be sending him or her, and ensuring his or her family has appropriate documentation as

well. A visa is permission from the host country to visit, live, or work in that country. Obtaining visas is

normally the job of an HR professional. For example, the US Department of State and the majority of

countries require that all US citizens have a valid passport to travel to a foreign country. This is the first

step to ensuring your host-country national or third-country national can travel and work in that country.

Next, understanding the different types of visas is a component to this process. For example, the United

States offers a Visa Waiver Program (VWP) that allows some nationals of thirty-six participating countries

to travel to the United States for stays of less than ninety days. Iceland, Singapore, and France are

examples of countries that participate in this program. For most host-national assignments, however, this

type of visa may not be long enough, which then requires research of the individual country. It is

important to mention that most countries have several types of visas, such as the following:

1. Visas for crew members working on ships or airlines

2. Tourist visas

3. Student visas

4. Employment visas for long-term employment at a foreign company

5. Business visas

Saylor URL: http://www.saylor.org/books Saylor.org 498

The visa process and time line can vary greatly depending on the country for which the visa is required.

For example, obtaining a visa to work in China may take six months or longer. The best place to research

this topic is on the country’s embassy website.

Besides ensuring the expatriate can legally work in the country, other considerations are worth

mentioning as well:

1. Housing. Where will I live is one of the most important questions that an expatriate may ask. The HR

professional can help this process by outsourcing a leasing or rental company in the city where the

expatriate will live to find a rental that meets the expectations of the expatriate. Choosing a place to live

ahead of time can reduce stress (one of the causes of failure for assignments) for the expatriate and his or

her family. Allowances may be made for housing costs, as discussed in the compensation section.

2. Moving belongings. Determination of how belongings left behind will be stored at home or if those items

will be brought to the host country is another logistical consideration. If items will be brought, beyond

what can be carried in a suitcase, the HR professional may want to consider hiring a moving logistics

company that specializes in expatriate moves to help with this process.

3. The possibility of return trips home. As part of the initial discussion, the option of offering return trips

home can make repatriation and performance reviews with home-country managers easier. This also

gives the expatriate and his or her family the opportunity to visit with family and friends, reducing reverse

culture shock upon return.

4. Schooling. Some organizations may want to provide information on the schooling system to the expatriate,

if he or she has children. Schools begin at different times of the year, and this information can make the

registration process for school easier on the family.

5. Spousal job. We know already from earlier in this chapter that one of the biggest challenges facing

expatriates (and reasons for failure) is unhappiness of the spouse. He or she may have had a career at

home and given that up while the spouse takes an assignment. HR professionals might consider offering

job search services as part of the allowance discussed earlier in this chapter. Lockheed Martin, for

example, offers job search services to spouses moving overseas. [17]

In any situation, support from the HR professional will help make the assignment a success, which shows

that HRM practices should be aligned with company goals.

HOW WOULD YOU HANDLE THIS?

Saylor URL: http://www.saylor.org/books Saylor.org 499

Visa Blues

Your manager has just notified you that one of your marketing managers has taken an assignment in

China to work for one year. You tell your manager you will begin the visa process for employment. She

disagrees and tells you it will be quicker to just get a tourist visa. You mention this is illegal and could

get the employee and company in trouble, but she insists on your getting a tourist visa so the employee

can leave within the month. How would you handle this?

How Would You Handle This?

https://api.wistia.com/v1/medias/1361075/embed

The author discusses the How Would You Handle This situation in this chapter

at:https://api.wistia.com/v1/medias/1361075/embed.

KEY TAKEAWAYS

 Personality traits are a key component to determining whether someone is a good fit for an

overseas assignment. Since 73 percent of overseas assignments fail, ensuring the right match up

front is important.

 The ideal expatriate is able to deal with change, is flexible, and has the support of his or her

family. Ideal expatriates are also organized, take risks, and are good at asking for help.

 The adjustment period an expatriate goes through depends on his or her initial preparation.

Blakeney said there are two levels of adjustment: psychological adjustment and sociocultural

adjustment. Although the psychological may take less time, it is the sociocultural adjustment

that will allow the assignment to be successful.

 Training is a key component in the HRM global plan, whether expatriates or host-country

nationals are to be hired. Both will require a different type of training. Training can reduce

culture shock and stress.

 Consideration of the expatriate’s family and their ability to adjust can make a more successful

overseas assignment

 Compensation is another consideration of a global business. The balance sheet approach pays

the expatriate extra allowances, such as living expenses, for taking an international assignment.

 Other considerations such as vacation days, health-care benefits, and profit-sharing programs

are important as well.

Saylor URL: http://www.saylor.org/books Saylor.org 500

 Laws of each country should be carefully evaluated from an HRM strategic perspective. Laws

relating to disabilities, pregnancy, and safety, for example, should be understood before doing

business overseas.

 Labor unions have different levels of involvement in different parts of the world. For example,

Germany has codetermination, a policy that requires companies to have employees sit on

various boards.

 The United States has treaties with forty-two countries to share information about expatriates.

The United States offers foreign tax credits to help expatriates avoid double taxation. However,

US citizens must file taxes every year, even if they have not lived in the United States during that

year.

 Logistical help can be important to ensuring the success of an overseas assignment. Help with

finding a place to live, finding a job for a spouse, and moving can make the difference between a

successful assignment and an unsuccessful one.

 The Visa Waiver Program (VWP) is a program in which nationals of thirty-six countries can enter

the United States for up to a ninety-day period. This type of visa may not work well for

expatriates, so it is important to research the type of visa needed from a particular country by

using that country’s embassy website.

EXERCISE

1. Research the country of your choice. Discuss at least five of the aspects you should know as an

HRM professional about doing business in that country.

[1] The Economist Intelligence Unit, Up or Out: Next Moves for the Modern Expatriate, 2010, accessed April 28,

2011, http://graphics.eiu.com/upload/eb/LON_PL_Regus_WEB2.pdf.

[2] Roger Blakeney, “Psychological Adjustment and Sociocultural Adaptation: Coping on International

Assignments” (paper, Annual Meeting of Academy of Management, Atlanta, GA, 2006).

[3] Jeff Thredgold, “English Is Increasingly the International Language of Business,” Deseret News, December 14,

2010, accessed August 11, 2011,http://www.deseretnews.com/article/700091766/English-is-increasingly-the-

international-language-of-business.html.

Saylor URL: http://www.saylor.org/books Saylor.org 501

[4] Sudipta Roy, “Brand Failures: A Consumer Perspective to Formulate a MNC Entry Strategy” (postgraduate

diploma, XLRI School of Business and Human Resources, 1998), accessed August 12,

2011, http://sudiptaroy.tripod.com/dissfin.pdf.

[5] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/.

[6] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/

[7] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/

[8] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/

[9] J. Cartland, “Reward Policies in a Global Corporation,” Business Quarterly, Autumn 1993, 93–96.

[10] Countries with Universal Healthcare (no date), accessed August 11,

2011,http://truecostblog.com/2009/08/09/countries-with-universal-healthcare-by-date/.

[11] Jeanne Sahadi, “Who Gets the Most (and Least) Vacation” CNN Money, June 14, 2007, accessed August 11,

2011, http://money.cnn.com/2007/06/12/pf/vacation_days_worldwide/.

[12] Wilke, Maack, und Partner, “Profit-Sharing,” Country Reports on Financial Participation in Europe, 2007,

worker-participation.eu, 2007, accessed August 12, 2011, http://www.worker-participation.eu/National-Industrial-

Relations/Across-Europe/Financial-Participation/Profit-sharing.

[13] George Whitfield, “Do as I Say, Not as I Do: Annual Performance Appraisal and Evaluation in Indonesia” n.d.,

Living in Indonesia, accessed August 11, 2011,http://www.expat.or.id/business/annualperformanceappraisal.html.

[14] Hal Gregersen, Julie Hite, and Steward Black, “Expatriate Performance Appraisal in US Multinational

Firms,” Journal of International Business Studies 27, no. 4 (1996): 711–38.

[15] Carrie Shearer, “Expat Performance Appraisal: A Two Tier Process?” October 8, 2004, Expatrica.com, accessed

August 12, 2011, http://www.expatica.com/hr/story/expat-performance-appraisal-a-two-tier-process-10529.html.

[16] Internal Revenue Service, “Foreign Tax Credit,” accessed August 13,

2011,http://www.irs.gov/businesses/article/0,,id=183263,00.html.

Saylor URL: http://www.saylor.org/books Saylor.org 502

[17] Maureen Minehan, “Six Job Search Tips for Expatriate Spouses,” n.d., Expatica, accessed August 12,

2011, http://www.expatica.com/nl/essentials_moving_to/essentials/six-job-search-tips-for-expatriate-spouses-

327_9125.html.

Saylor URL: http://www.saylor.org/books Saylor.org 503

14.4 Cases and Problems CHAPTER SUMMARY

 Offshoring is when a business relocates or moves part of its operations to a country different from the one

it currently operates in.

 Outsourcing is when a company contracts with another company to do some work for another. This can

occur domestically or in an offshoring situation.

 Domestic market means that a product is sold only within the country that the business operates in.

 An international market means that an organization is selling products in other countries, while

a multinational one means that not only are products being sold in a country, but operations are set up

and run in a country other than where the business began.

 The goal of any HRM strategy is to be transnational, which consists of three components. First,

the transnational scope involves the ability to make decisions on a global level rather than a domestic

one. Transnational representation means that managers from all countries in which the business operates

are involved in business decisions. Finally, a transnational processmeans that the organization can involve

a variety of perspectives, rather than only a domestic one.

 Part of understanding HRM internationally is to understand culture. Hofstede developed five dimensions

of culture. First, there is the individualism-collectivism aspect, which refers to the tendency of a country

to focus on individuals versus the good of the group.

 The second Hofstede dimension is power distance, that is, how willing people are to accept unequal

distributions of power.

 The third is uncertainty avoidance, which means how willing the culture is to accept not knowing future

outcomes.

 A masculine-feminine dimension refers to the acceptance of traditional male and female characteristics.

 Finally, Hofstede focused on a country’s long-term orientation versus short-term orientation in decision

making.

 Other aspects of culture include norms, values, rituals, and material culture.Norms are the generally

accepted way of doing things, and the values are those things the culture finds important. Every country

has its own set ofrituals for ceremonies but also for everyday interactions. Material culturerefers to the

material goods, such as art, the culture finds important.

Saylor URL: http://www.saylor.org/books Saylor.org 504

 Other HRM aspects to consider when entering a foreign market are the economics, the law, and the level

of education and skill level of the human capital in that country.

 There are three types of staffing strategies for an international business. First, in the home-country

national strategy, people are employed from the home country to live and work in the country. These

individuals are calledexpatriates. One advantage of this type of strategy is easier application of business

objectives, although an expatriate may not be culturally versed or well accepted by the host-country

employees.

 In a host-country strategy, workers are employed within that country to manage the operations of the

business. Visas and language barriers are advantages of this type of hiring strategy.

 A third-country national staffing strategy means someone from a country, different from home or host

country, will be employed to work overseas. There can be visa advantages to using this staffing strategy,

although a disadvantage might be morale lost by host-country employees.

 Personality traits are a key component to determining whether someone is a good fit for an overseas

assignment. Since 73 percent of overseas assignments fail, ensuring the right match up front is important.

 The ideal expatriate is able to deal with change, is flexible, and has the support of his or her family. Ideal

expatriates are also organized, take risks, and are good at asking for help.

 The adjustment period an expatriate goes through depends on his or her initial preparation. Blakeney said

there are two levels of adjustment: psychological adjustment and sociocultural adjustment. Although the

psychological adjustment may take less time, it is the sociocultural adjustment that will allow the

assignment to be successful.

 Training is a key component in the HRM global plan, whether expatriates or host-country nationals are to

be hired. Both will require a different type of training. The expatriate should receive extensive training on

culture, language, and adjustment.

 Compensation is another consideration of a global business. Most companies keep a standard regional

salary but may offer allowances for some expenses. Cost of living, taxes, and other considerations are

important.

 Performance should be evaluated by both host-country and home-country managers and employees. The

criteria should be determined ahead of time.

Saylor URL: http://www.saylor.org/books Saylor.org 505

 Laws of each country should be carefully evaluated from an HRM strategic perspective. Laws relating to

disabilities, pregnancy, and safety, for example, should be understood before doing business overseas.

 Logistical help can be important to ensuring the successful overseas assignment. Help with finding a place

to live, finding a job for a spouse, and moving can make the difference between a successful assignment

and an unsuccessful one.

 The Visa Waiver Program (VWP) is a program in which nationals of thirty-six countries can enter the

United States for up to a ninety-day period. This type of visa may not work well for expatriates, so it is

important to research the type of visa needed from a particular country by using that country’s embassy

website.

CHAPTER CASE

Fish to Go Is Going Places

Your company, Fish to Go, is a quick service restaurant specializing in fish tacos. Your success in the

United States has been excellent, and your company has decided to develop an international strategy to

further develop your market share. As the vice president for human resources, you have been asked to

develop an international staffing strategy. The organization has decided that it makes the most sense to

hire host-country nationals to manage the restaurants. Your current Fish to Go managers earn upwards of

$45,000 per year, plus 2 percent profit sharing. The organization is also looking to you to determine and

develop a comprehensive training program for your host-country managers. A training program is also

needed for employees, but you have decided to wait and develop this with input from the host-country

managers. Fish to Go has identified Mexico and the UK as the first two countries that will be entered.

Perform the necessary research to prepare a PowerPoint presentation to the board of directors.

1. What are the advantages of choosing a host-country national staffing strategy?

2. Develop a compensation plan for each of the two countries, revising the current compensation for

managers in the United States, if necessary. The compensation plan should include salary, benefits, and

any fringe benefits to attract the most qualified people. The plan should also address any legal

compensation requirements for both countries.

3. Develop an outline for a training plan, making reasonable assumptions about the information a new

manager would need to know at Fish to Go.

TEAM ACTIVITY

Saylor URL: http://www.saylor.org/books Saylor.org 506

1. What are four major considerations for aligning the HRM strategy with an overall globalization strategy?

Discuss each and rank them in order of importance.

2. Find a team with an even number of members. Split each team into “reasons for localized compensation”

and “reasons for regional or global compensation.” Be prepared to debate the issue with prepared points.