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Managing Human Resources

CHAPTER

6.1

Describe the key

components of the HRM process

and what influences it.

Discuss the tasks

associated with identifying

and selecting competent employees.

6.2

Describe strategies for

retaining competent,

high-performing employees.

6.4

Discuss contemporary

issues in managing

human resources.

6.5

6.3

Explain how

employees are provided with needed

skills and knowledge.

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p.166

p.158 p.173

p.169

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Fundamentals of Management: Essential Concepts and Applications, Seventh Edition, by Stephen P. Robbins, David A. DeCenzo, and Mary Coulter. Published by Prentice Hall. Copyright © 2011 by Pearson Education, Inc.

It’s probably one of the hardest things that a manager may have to do.1 Telling an employee that he or she is being laid off. And some 7.2 million Americans who have been laid off since the economic recession began in early 2008 have been given that news by some- one. In smaller businesses, it’s especially difficult to do because it’s often more personal and employees are more like family. In carrying out such an assignment, managers may fear that employ- ees will get highly emotional or angry, although those reactions don’t happen often. Such reactions are more likely when workers have no notice that layoffs are coming. That’s when the situation can become very raw as those being laid off respond with expres- sions of shock and disbelief and sometimes crying.

At Ram Tool, a small family-owned manufacturing company in Grafton, Wisconsin, the task fell to Shelly Polum (see photo on right), the company’s vice president of administration. After the nine- member management team met to consider which employees would be laid off, Shelly had to inform

four workers that they were being let go. “When it was over, trying to maintain her composure, she rushed back to her office and shut the door quickly. Then she sank

to the floor and burst into tears.” At Shuqualak Lumber in Shuqualak, Mississippi, vice president Charlie Thomas

started his speech to employees announcing that nearly a quarter of them were going to be laid off. He had to stop to go back to his office and regain his composure. He

says, “I couldn’t get it out. It just killed me.” And it’s not just American managers facing the emotional challenge of laying off employees.

In Ditzingen, Germany, at TRUMPF, a laser machine tools manufac- turer, company president Nicola Leibinger-Kammüller says, “The respon-

sibility I have for our employees is what is dearest to my heart.” However, the worldwide economic recession has severely

impacted the company’s exports and revenues and TRUMPF executives are contemplating employee layoffs for the first time in 20 years. Says Leibinger-Kammüller, “What vexes me day and night is the idea that I would have to lay people off.”

Studies of managers involved with layoffs have shown that those who must tell people they’ve been laid off also experi- ence stress, poor sleep, and even health problems. In one study, managers called the layoffs “gut-wrenching” and “devastating.” And these problems often can linger. In that same study, those managers had mostly regained their emotional health up to six years after the layoffs, but were still more likely than other managers to have stress- related health problems.

Managers who’ve had to deal several times with telling employees they’re laid off say that, “It gets a

little easier with experience.” They soon learned how to tell people in the least hurtful way and to emphasize that it

was the job that was being eliminated. However, one manager who has laid off several dozen workers during her 25 years at Union Oil

Company says, “It’s not that you ever lose the butterflies in your stomach or that sinking feeling, but you get better at handling it

as something that is not personal.”

153

Shedding Workers and Tears

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154

6.1

Describe the key

components of the HRM

process and what

influences it.

With the organization’s structure in place, managers have to find people to fill the jobs that

have been created or to remove people from the jobs if business circumstances require that.

That’s where human resource management (HRM) comes in. It’s an important task that involves

having the right number of the right people in the right place at the right time. In this chapter,

we’ll look at the process managers use to do just that. In addition, we’ll look at some contem-

porary HRM issues facing managers.

What Is the Human Resource Management Process and What Influences It? The quality of an organization is to a large degree determined by the qual- ity of the people it employs. Success for most organizations depends on

finding the employees with the skills to successfully perform the tasks required to attain the company’s strategic goals. Staffing and human resource

management decisions and methods are critical to ensuring that the organiza- tion hires and keeps the right people.

Some of you may be thinking, “Sure, personnel decisions are important. But aren’t most of them made by people who specifically handle human resource issues?” It’s true that, in many organizations, a number of the activities grouped under the label human resource management (HRM) are done by specialists. In other cases, HRM activities may be outsourced to companies, domestic or global. Not all managers have HRM staff support, though. Many small business managers, for instance, frequently must do their own hiring without the assistance of HRM specialists. Even managers in larger organizations are often involved in recruiting candidates, reviewing application forms, interviewing applicants, ori- enting new employees, making decisions about employee training, providing career advice to employees, and evaluating employees’ performance. So, even if an organization provides HRM support activities, every manager is involved with human resource decisions in his or her unit.2

Exhibit 6-1 introduces the key components of an organization’s HRM process. It rep- resents eight activities (the gold boxes) that, if properly executed, will staff an organization with competent, high-performing employees who are capable of sustaining their perform- ance level over the long term.

After an organization’s strategy has been established and the organization structure designed, it’s time to add the people. That’s one of the most critical roles for HRM and one that has increased the importance of human resource managers to the organization. The first three activities in the HRM process represent employment planning: the addition of staff through recruitment, the reduction in staff through downsizing, and selection. When exe- cuted properly, these steps lead to the identification and selection of competent employees and assist organizations in achieving their strategic directions.

Once you select competent people, you need to help them adapt to the organization and ensure that their job skills and knowledge are kept current. These next two activities in the HRM process are accomplished through orientation and training. The last steps in the HRM process are designed to identify performance goals, correct performance problems if neces- sary, and help employees sustain a high level of performance over their entire work life. The activities involved include performance appraisal, and compensation and benefits. HRM also includes safety and health issues, but we’re not covering those topics in this book.

Notice in Exhibit 6-1 that the entire process is influenced by the external environment. Many of the factors introduced in Chapter 2 directly affect all management practices, but their effect is felt the most in managing the organization’s human resources, because what- ever happens to an organization ultimately influences what happens to its employees. So, before we review the HRM process, let’s examine one primary environmental force that affects it—the legal environment, and especially, employment and discrimination laws.

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CHAPTER 6 | MANAGING HUMAN RESOURCES 155

Recruitment and

downsizing

Orientation

Identification and selection of competent

employees

Adapted and competent

employees with up-to-date skills, knowledge, and

abilities

Competent and high- performing employees

who are capable of sustaining high

performance over the long term

Safety and

health

Performance management

Compensation and

benefits

Strategic human

resource planning

Selection

Training and

development Legislation

Diversity

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R es

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tu rin

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wn siz

ing

Environment

Unions

EXHIBIT 6-1 The Human Resource Management Process

What Is the Legal Environment of HRM? HRM practices are governed by laws, which vary from country to country. Within countries, state or provincial and local regulations further influence specific practices. Consequently, it’s impossible to provide you with all the information you need about the relevant regulatory envi- ronment. As a manager, it will be important for you to know what you can and cannot do, legally.

WHAT ARE THE PRIMARY U.S. LAWS AFFECTING HRM? Since the mid-1960s, the federal government in the United States has greatly expanded its influence over HRM by enacting a number of laws and regulations (see Exhibit 6-2 for examples). Although we’ve not seen

human resource management (HRM) The management function concerned with getting, training, motivating, and keeping competent employees.

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YEAR LAW OR REGULATION DESCRIPTION

1963 Equal Pay Act Prohibits pay differences based on sex for equal work

1964 (amended, Civil Rights Act, Title VII Prohibits discrimination based on race, color, religion, national in 1972) origin or sex

1967 (amended Age Discrimination in Employment Act Prohibits age discrimination against employees between 40 in 1978) and 65 years of age

1973 Vocational Rehabilitation Act Prohibits discrimination on the basis of physical or mental disabilities

1974 Privacy Act Gives employees the legal right to examine letters of reference concerning them

1978 Pregnancy Discrimination Act, Title VII Prohibits dismissal because of pregnancy alone and protects job security during maternity leaves

1978 Mandatory Retirement Act Prohibits the forced retirement of most employees before the age of 70; later amended to eliminate upper limit

1986 Immigration Reform and Control Act Prohibits unlawful employment of aliens and unfair immigration-related employment practices

1988 Polygraph Protection Act Limits an employer’s ability to use lie detectors

1988 Worker Adjustment and Retraining Requires employers to provide 60 days’ notice before a Notification Act facility closing or mass layoff

1990 Americans with Disabilities Act Prohibits employers from discriminating against and requires reasonable accommodation of essentially qualified individuals with physical or mental disabilities or the chronically ill

1991 Civil Rights Act Reaffirms and tightens prohibition of discrimination; permits individuals to sue for punitive damages in cases of intentional discrimination

1993 Family and Medical Leave Act Permits employees in organizations with 50 or more workers to take up to 12 weeks of unpaid leave each year for family or medical reasons

2002 Sarbanes–Oxley Act Establishes requirements for proper financial record keeping for public companies and penalties for noncompliance

2007 Federal Minimum Wage Bill Increases federal minimum wage rates—$5.85 summer of 2007; $6.55 summer of 2008; and $7.25 in summer 2009

2009 Lilly Ledbetter Fair Pay Act Changes the statute of limitations on pay discrimination to 180 days from each paycheck

EXHIBIT 6-2 Major U.S. Federal HRM Laws

many laws enacted recently at the federal level, many state laws have been passed that add to the provisions of the federal laws. For instance, in many states today, it’s illegal to dis- criminate against an individual based on sexual orientation. As a result, today’s employers must ensure that equal employment opportunities exist for job applicants and current employees. Decisions regarding who will be hired, for example, or which employees will be chosen for a management training program must be made without regard to race, sex, religion, age, color, national origin, or disability. Exceptions can occur only when special circumstances exist. For instance, a community fire department can deny employment to a firefighter applicant who is confined to a wheelchair, but if that same individual is apply- ing for a desk job, such as a fire department dispatcher, the disability cannot be used as a reason to deny employment. The issues involved, however, are rarely that clear-cut. For example, employment laws protect most employees whose religious beliefs require a spe- cific style of dress—robes, long shirts, long hair, and the like. However, if the specific style of dress may be hazardous or unsafe in the work setting (e.g., when operating machin- ery), a company could refuse to hire a person who would not adopt a safer dress code.

Trying to balance the “shoulds and should nots” of these laws often falls within the realm of affirmative action programs. Many organizations operating in the United States have affirmative action programs to ensure that decisions and practices enhance the employ- ment, upgrading, and retention of members from protected groups such as minorities and

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CHAPTER 6 | MANAGING HUMAN RESOURCES 157

From the Past to the Present• • Hugo Munsterberg was a pioneer in the field of industrial psy- chology and is “generally credited with creating the field.”3 As an admirer of Frederick W. Taylor and the scientific manage- ment movement, Munsterberg stated that “Taylor had intro- duced most valuable suggestions which the industrial world cannot ignore.” Drawing on Taylor’s works, Munsterberg stressed “the importance of efficiently using workers to achieve economic production.” His research and work in showing organizations ways to improve the performance and well-being of workers was fundamental to the emerging field of management in the early 1900s.

Today, industrial-organizational psychology is defined as the scientific study of the workplace. Industrial-organizational

(I/O) psychologists use scientific principles and research- based designs to generate knowledge about workplace issues. (Check out the Society for Industrial and Organiza- tional Psychology at www.siop.org.) They study organiza- tional topics such as job performance, job analysis, performance appraisal, compensation, work/life balance, work sample tests, employee training, employment law, per- sonnel recruitment and selection, and so forth. Their research has contributed much to the field that we call human resource management. And all of this is due to the early work done by Hugo Munsterberg.

females. That is, the organization refrains from discrimination and actively seeks to enhance the status of members from protected groups.

U.S. managers are not completely free to choose whom they hire, promote, or fire. Although these regulations have significantly helped to reduce employment discrimination and unfair employment practices, they have, at the same time, reduced management’s dis- cretion over HR decisions.

ARE HRM LAWS THE SAME GLOBALLY? HRM laws aren’t the same globally. You need to know the laws and regulations that apply in your locale. To illustrate our point that laws and regulations shape HRM practices, we highlight some of the federal legislation in countries such as Canada, Mexico, Australia, and Germany.

Canadian laws pertaining to HRM practices closely parallel those in the United States. The Canadian Human Rights Act prohibits discrimination on the basis of race, religion, age, marital status, sex, physical or mental disability, or national origin. This act governs practices throughout the country. Canada’s HRM environment, however, is somewhat dif- ferent from that in the United States in that it involves more decentralization of lawmaking to the provincial level. For example, discrimination on the basis of language is not prohib- ited anywhere in Canada except in Quebec.

In Mexico, employees are more likely to be unionized than they are in the United States. Labor matters in Mexico are governed by the Mexican Federal Labor Law. One hiring law states that an employer has 28 days to evaluate a new employee’s work performance. After that period, the employee is granted job security and termination is quite difficult and expen- sive. Those who violate the Mexican Federal Labor Law are subject to severe penalties, including criminal action that can result in steep fines and even jail sentences for employ- ers who fail to pay, for example, the minimum wage.

Australia’s discrimination laws were not enacted until the 1980s, and generally apply to discrimination and affirmative action for women. Yet, gender opportunities for women in Australia appear to lag behind those in the United States. In Australia, however, a signifi- cant proportion of the workforce is unionized. The higher percentage of unionized workers has placed increased importance on industrial relations specialists in Australia, and reduced

affirmative action programs Programs that ensure that decisions and practices enhance the employment, upgrading, and retention of members of protected groups.IS

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158 PART THREE | ORGANIZING

the control of line managers over workplace labor issues. However, in 1997, Australia over- hauled its labor and industrial relations laws with the objective of increasing productivity and reducing union power. The Workplace Relations Bill gives employers greater flexibil- ity to negotiate directly with employees on pay, hours, and benefits. It also simplifies fed- eral regulation of labor-management relations.

Our final example, Germany, is similar to most Western European countries when it comes to HRM practices. Legislation requires companies to practice representative partic- ipation, in which the goal is to redistribute power within the organization, putting labor on a more equal footing with the interests of management and stockholders. The two most common forms of representative participation are work councils and board representatives. Work councils link employees with management. They are groups of nominated or elected employees who must be consulted when management makes decisions involving personnel. Board representatives are employees who sit on a company’s board of directors and repre- sent the interest of the firm’s employees.

How Do Managers Identify and Select Competent Employees? Every organization needs people to do whatever work is necessary for doing what the organization is in business to do. How do organizations get those people? And more importantly what can they do to ensure they get competent, talented people? This first phase of the HRM process involves three tasks:

employment planning, recruitment and downsizing, and selection.

What Is Employment Planning? In the first four months of 2009, Boeing cut more than 3,000 jobs, mostly from its commer- cial airplanes unit. During the same time, it added 106 employees to its defense unit and was looking for several hundred more.4 Like most companies, Boeing was juggling its supply of human resources to meet demand.

Employment planning is the process by which managers ensure that they have the right number and kinds of people in the right places at the right times, people who are capable of effectively and efficiently completing those tasks that will help the organization achieve its overall goals. Employment planning, then, translates the organization’s mission and goals into an HR plan that will allow the organization to achieve those goals. The process can be condensed into two steps: (1) assessing current human resources and future human resource needs, and (2) developing a plan to meet those needs.

HOW DOES AN ORGANIZATION CONDUCT AN EMPLOYEE ASSESSMENT? Managers begin by reviewing the current human resource status. This review is typically done by gen- erating a human resource inventory. It’s not difficult to generate an inventory in most organizations since the information for it is derived from forms completed by employees. Such inventories might list the name, education, training, prior employment, languages spo- ken, capabilities, and specialized skills of each employee in the organization. This inventory allows managers to assess what talents and skills are currently available in the organization.

Another part of the current assessment is job analysis. Whereas the human resources inventory is concerned with telling management what individual employees can do, job analy- sis is more fundamental. It’s typically a lengthy process, one in which workflows are analyzed and skills and behaviors that are necessary to perform jobs are identified. For instance, what does an international reporter who works for the Wall Street Journal do? What minimal knowl- edge, skills, and abilities are necessary for the adequate performance of this job? How do the job requirements for an international reporter compare with those for a domestic reporter or for a newspaper editor? Job analysis can answer these questions. Ultimately, the purpose of job analysis is to determine the kinds of skills, knowledge, and attitudes needed to successfully per- form each job. This information is then used to develop or revise job descriptions and job specifications.

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CHAPTER 6 | MANAGING HUMAN RESOURCES 159

An organization’s strategic direction determines its future human resource needs. Following Target Corporation’s growth strategy, the discount retailer plans to add about 100 stores a year through 2011, although the actual number may fluctuate depending on economic conditions. Each of Target’s three different store formats requires a different number of employees: general merchandise from 100 to 250; general merchandise with an expanded food format from100 to 250; and Super Target with full grocery, deli, and bakery from 200 to 300. Knowing the number of planned stores and the type of format helps Target managers determine its human resource needs.

A job description is a written statement that describes the job—what a job holder does, how it’s done, and why it’s done. It typically portrays job content, environment, and conditions of employment. The job specification states the minimum qualifications that a person must possess to perform a given job successfully. It focuses on the person and identifies the knowledge, skills, and attitudes needed to do the job effectively. The job description and job specifica- tion are important documents when managers begin recruiting and selecting. For instance, the job description can be used to describe the job to potential candi- dates. The job specification keeps the manager’s attention on the list of qualifi- cations necessary for an incumbent to perform a job and assists in determining whether candidates are qualified. Furthermore, hiring individuals on the basis of the information contained in these two documents helps ensure that the hiring process does not discriminate.

HOW ARE FUTURE EMPLOYEE NEEDS DETERMINED? Future human resource needs are determined by the organization’s strategic direction. Demand for human resources (employees) is a result of demand for the organization’s products or services. On the basis of an estimate of total revenue, managers can attempt to establish the number and mix of people needed to reach that revenue. In some cases, however, the situation may be reversed. When particular skills are necessary and in scarce supply, the availability of needed human resources determines revenues. For example, managers of an upscale chain of assisted-living retirement facilities who find them- selves with abundant business opportunities are limited in building revenues by their ability to locate and hire a qualified nursing staff to fully meet the needs of the residents. In most cases, however, the overall organizational goals and the resulting revenue forecast provide the major input in determining the organization’s HR requirements.

After it has assessed both current capabilities and future needs, managers are able to estimate shortages—both in number and in kind—and to highlight areas in which the organization is overstaffed. A plan can then be developed that matches these estimates with forecasts of future labor supply. Employment planning not only guides current staffing needs but also projects future employee needs and availability.

HOW DO ORGANIZATIONS RECRUIT EMPLOYEES? Once managers know their current staffing levels—whether understaffed or overstaffed—they can begin to do something about it. If one or more vacancies exist, they can use the information gathered through job analysis to guide them in recruitment—that is, the process of locating, identifying, and attracting capable applicants. On the other hand, if employment planning indicates a surplus, managers will want to reduce the labor supply within the organization and will initiate downsizing or restructuring activities.

WHERE DOES A MANAGER RECRUIT APPLICANTS? Applicants can be found by using several sources, including the Internet. Exhibit 6-3 offers some guidance. The source that’s used should reflect the local labor market, the type or level of position, and the size of the organization.

board representatives Employees who sit on a company’s board of directors and represent the interest of employees.

work councils Groups of nominated or elected employees who must be consulted when management makes decisions involving personnel.

job specification A written statement of the minimum qualifications that a person must possess to perform a given job successfully.

job description A written statement that describes a job.

job analysis An assessment that defines jobs and the behaviors necessary to perform them.

human resource inventory A report listing important information about employees such as name, education, training, skills, languages spoken, and so forth.

employment planning The process by which managers ensure they have the right numbers and kinds of people in the right places at the right time.

recruitment Locating, identifying, and attracting capable applicants.

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SOURCE ADVANTAGE DISADVANTAGE

Internal searches Low cost; build employee Limited supply; may not morale; candidates are increase proportion of protected familiar with organization group employees

Advertisements Wide distribution can be Generate many targeted to specific groups unqualified candidates

Employee referrals Knowledge about the May not increase the diversity organization provided by and mix of employees current employees; can generate strong candidates because a good referral reflects on the recommender

Public employment Free or nominal cost Candidates tend to be lower agencies skilled, although some skilled

employees available

Private employment Wide contacts; careful High cost agencies screening; short-term

guarantees often given

School placement Large, centralized body Limited to entry-level positions of candidates

Temporary help services Fill temporary needs Expensive

Employee leasing Fill temporary needs but Little commitment to an and independent usually for more specific, organization other than contractors longer-term projects current project

EXHIBIT 6-3 Recruiting Sources

Do certain recruiting sources produce superior applicants? The answer is generally yes. The majority of studies have found that employee referrals generally produce the best applicants.5

The explanation for this finding is intuitively logical. First, applicants referred by current employees are prescreened by those employees. Because the recommenders know both the job and the person being recommended, they tend to refer well-qualified applicants.6 Second, because current employees often feel that their reputation in the organization is at stake with a referral, they tend to make referrals only when they are reasonably confident that the referral won’t make them look bad. However, managers shouldn’t always opt for the employee-referred applicant since such referrals may not increase the diversity and mix of employees.

How Does a Manager Handle Layoffs? In the past decade, and especially during the last year, most global organizations, as well as many government agencies and small businesses, have been forced to shrink the size of their workforce or restructure their skill composition. Downsizing has become a relevant strategy for meeting the demands of a dynamic environment.

WHAT ARE DOWNSIZING OPTIONS? Obviously, people can be fired, but other restructur- ing choices may be more beneficial to the organization. Exhibit 6-4 summarizes a manag- er’s major downsizing options. Keep in mind that, regardless of the method chosen, employees may suffer. We discuss downsizing more fully—for both victims and sur- vivors—later in this chapter.

How Do Managers Select Job Applicants? Once the recruiting effort has developed a pool of applicants, the next step in the HRM process is to determine who is best qualified for the job. In essence, then, the selection process is a prediction exercise: It seeks to predict which applicants will be “successful” if hired; that is, who will perform well on the criteria the organization uses to evaluate its

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OPTION DESCRIPTION

Firing Permanent involuntary termination

Layoffs Temporary involuntary termination; may last only a few days or extend to years

Attrition Not filling openings created by voluntary resignations or normal retirements

Transfers Moving employees either laterally or downward; usually does not reduce costs but can reduce intraorganizational supply–demand imbalances

Reduced workweeks/ Having employees work fewer hours per week, share jobs, or furloughs perform their jobs on a part-time basis

Early retirements Providing incentives to older and more-senior employees for retiring before their normal retirement date

Job sharing Having employees, typically two part-timers, share one full-time position

EXHIBIT 6-4 Downsizing Options

employees. In filling a network administrator position, for example, the selection process should be able to predict which applicants will be capable of properly installing, debugging, and managing the organization’s computer network. For a position as a sales representative, it should predict which applicants will be successful at generating high sales volumes. Consider, for a moment, that any selection decision can result in four possible outcomes. As shown in Exhibit 6-5, two outcomes would indicate correct decisions, and two would indi- cate errors.

A decision is correct (1) when the applicant who was predicted to be successful (was accepted) and later proved to be successful on the job, or (2) when the applicant who was predicted to be unsuccessful (was rejected) and, if hired, would not have been able to do the job. In the former case, we have successfully accepted; in the latter case, we have success- fully rejected. Problems occur, however, when we reject applicants who, if hired, would have

selection process Screening job applicants to ensure that the most appropriate candidates are hired.

Reject error

Correct decision

Accept error

Reject

Selection Decision

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EXHIBIT 6-5 Selection Decision Outcomes

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performed successfully on the job (called reject errors) or accept those who subsequently perform poorly (accept errors). These problems are, unfortunately, far from insignificant. A generation ago, reject errors only meant increased selection costs because more applicants would have to be screened. Today, selection techniques that result in reject errors can open the organization to charges of employment discrimination, especially if applicants from pro- tected groups are disproportionately rejected. Accept errors, on the other hand, have obvi- ous costs to the organization, including the cost of training the employee, the costs generated or profits forgone because of the employee’s incompetence, and the cost of severance and the subsequent costs of additional recruiting and selection screening. The major intent of any selection activity is, therefore, to reduce the probability of making reject errors or accept errors while increasing the probability of making correct decisions. We do this by using selection procedures that are both reliable and valid.

WHAT IS RELIABILITY? Reliability addresses whether a selection device measures the same characteristic consistently. For example, if a test is reliable, any individual’s score should remain fairly stable over time, assuming that the characteristics it is measuring are also stable. The importance of reliability should be self-evident. No selection device can be effective if it’s low in reliability. Using such a device would be the equivalent of weighing yourself every day on an erratic scale. If the scale is unreliable—randomly fluctuating, say, 10 to 15 pounds every time you step on it—the results will not mean much. To be effective predictors, selection devices must possess an acceptable level of consistency.

WHAT IS VALIDITY? Any selection device that a manager uses—such as application forms, tests, interviews, or physical examinations—must also demonstrate validity. Validity is based on a proven relationship between the selection device used and some relevant measure. For example, we mentioned earlier a firefighter applicant who was wheelchair bound. Because of the physical requirements of a firefighter’s job, someone confined to a wheelchair would be unable to pass the physical endurance tests. In that case, denying employment could be con- sidered valid, but requiring the same physical endurance tests for the dispatching job would not be job related. Federal law prohibits managers from using any selection device that cannot be shown to be directly related to successful job performance. That constraint goes for entrance tests, too; managers must be able to demonstrate that, once on the job, individuals with high scores on such a test outperform individuals with low scores. Consequently, the burden is on the organization to verify that any selection device it uses to differentiate appli- cants is related to job performance.

MANAGING DIVERSITY | Diversity and Discrimination

Data released by the Equal Employment Opportunity Commission in early 2009 stated that more people experi- enced workplace discrimination in 2008 than ever before.7 More than 95,400 job-bias claims were filed, an increase of 15 percent over the previous year. All major categories of workplace discrimination saw increases although age and retaliation claims increased the most. Charges of age discrimination jumped by 28.7 percent, while complaints about retaliation were up 22.6 percent. The acting chairperson of the agency said, “The EEOC has not seen an increase of this magnitude in charges filed for many years. While we do not know if this signifies a trend, it is clear that employment discrimination remains a persistent problem.”

What seems to be driving these numbers? The major reason, according to analysts, is likely to be the current economic conditions. “The economy is in meltdown mode and from the point of view of the company, if you lay off an older worker, the cost savings are greater than if you lay off a younger worker.” However, another reason, experts believe, is a greater awareness of EEOC policy. That can be considered a sign of the impact that equal employment opportunity advocates have had.

Managers have the responsibility of ensuring that their HRM policies and practices don’t violate discrimination laws and regulations. It’s especially critical in today’s environ- ment where employees are facing stress and uncertainty over personal and work issues.

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HOW EFFECTIVE ARE TESTS AND INTERVIEWS AS SELECTION DEVICES? Managers can use a number of selection devices to reduce accept and reject errors. The best- known devices include written and performance-simulation tests and interviews. Let’s briefly review each device, giving particular attention to its validity in predicting job performance.

Typical written tests include tests of intelligence, aptitude, ability, and interest. Such tests have long been used as selection devices, although their popularity has run in cycles. Written tests were widely used after World War II, but beginning in the late 1960s, they fell out of favor. They were frequently characterized as discriminatory, and many organizations could not validate that their written tests were job related. Today, written tests have made a comeback although most of them are now Internet based.8

Managers are increasingly aware that poor hiring decisions are costly and that properly designed tests can reduce the likelihood of making such decisions. In addition, the cost of developing and validating a set of written tests for a specific job has declined significantly.

A review of the evidence finds that tests of intellectual ability, spatial and mechani- cal ability, perceptual accuracy, and motor ability are moderately valid predictors for many semiskilled and unskilled operative jobs in industrial organizations.9 However, an endur- ing criticism of written tests is that intelligence and other tested characteristics can be somewhat removed from the actual performance of the job itself.10 For example, a high score on an intelligence test is not necessarily a good indicator that the applicant will perform well as a computer programmer. This criticism has led to an increased use of performance-simulation tests.

What better way to find out whether an applicant for a technical writing position at Google can write technical manuals than to ask him or her to do it? That’s why there’s an increasing interest in performance-simulation tests. Undoubtedly, the enthusiasm for these tests lies in the fact that they’re based on job analysis data and, therefore, should more easily meet the requirement of job relatedness than do written tests. Performance- simulation tests are made up of actual job behaviors rather than substitutes. The best- known performance-simulation tests are work sampling (a miniature replica of the job) and assessment centers (simulating real problems one may face on the job). The former is suited to persons applying for routine jobs, the latter to managerial personnel.

The advantage of performance simulation over traditional testing methods should be obvious. Because its content is essentially identical to job content, performance simulation should be a better predictor of short-term job performance and should min- imize potential employment discrimination allegations. Additionally, because of the nature of their content and the methods used to determine content, well-constructed performance-simulation tests are valid predictors.

The interview, along with the application form, is an almost universal selection device. Few of us have ever gotten a job without undergoing one or more interviews. The irony of this is that the value of an interview as a selection device has been the subject of considerable debate.11

Interviews can be reliable and valid selection tools, but too often they’re not. When interviews are structured and well organized, and when interviewers are held to

validity The proven relationship between a selection device and some relevant criterion.

reliability The degree to which a selection device measures the same thing consistently.

performance-simulation tests Selection devices based on actual job behaviors.

The job interview is an almost universal selection device. Air China used professional job interviewers for the process of selecting 300 new stewardesses. Formal, structured, and well organized, the interviews evaluated candidates on their proficiency in English and knowledge of the airline and the industry. In China, the behavioral interview is prevalent, with candidates being carefully observed on how they behave. Interviewers look for behaviors such as speaking with a calm voice, never speaking or acting in an aggressive manner, maintaining good posture, showing modesty and respect for seniority and rank, demonstrating good etiquette, never sitting down unless invited to, and never interrupting the interviewer.

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relevant questioning, interviews are effective predictors.12 But those conditions don’t charac- terize many interviews. The typical interview in which applicants are asked a varying set of essentially random questions in an informal setting often provides little in the way of valuable information.

All kinds of potential biases can creep into interviews if they’re not well structured and standardized. To illustrate, a review of the research leads us to the following conclusions:

� Prior knowledge about the applicant will bias the interviewer’s evaluation. � The interviewer tends to hold a stereotype of what represents a good applicant. � The interviewer tends to favor applicants who share his or her own attitudes. � The order in which applicants are interviewed will influence evaluations. � The order in which information is elicited during the interview will influence evaluations. � Negative information is given unduly high weight. � The interviewer may make a decision concerning the applicant’s suitability within the

first four or five minutes of the interview. � The interviewer may forget much of the interview’s content within minutes after its

conclusion. � The interview is most valid in determining an applicant’s intelligence, level of motivation,

and interpersonal skills. � Structured and well-organized interviews are more reliable than unstructured and unor-

ganized ones.13

What can managers do to make interviews more valid and reliable? A number of suggestions have been made over the years. We list some in the “Developing Your Inter- viewing Skill” box.

One last modification to interviews that’s now popular is the behavioral or situation interview.14 In this type of interview, applicants are observed not only for what they say, but also how they behave. Applicants are presented with situations—often complex problems involving role playing—and are asked to “deal” with the situation. This type of interview provides an opportunity for interviewers to see how a potential employee will behave and how he or she will react under stress. Proponents of behavioral interviewing indicate such a process is much more indicative of an applicant’s performance than simply having the individual tell the interviewer what he or she has done. In fact, research in this area indicates that behavioral interviews are nearly eight times more effective for predicting successful job performance.15

HOW CAN YOU “CLOSE THE DEAL”? Interviewers who treat the recruiting and hiring of employees as if the applicants must be sold on the job and exposed only to an organiza- tion’s positive characteristics are likely to have a workforce that is dissatisfied and prone to high turnover.16

During the hiring process, every job applicant acquires a set of expectations about the company and about the job for which he or she is interviewing. When the informa- tion an applicant receives is excessively inflated, a number of things happen that have potentially negative effects on the company. First, mismatched applicants are less likely to withdraw from the search process. Second, because inflated information builds unre- alistic expectations, new employees are likely to become quickly dissatisfied and to resign prematurely. Third, new hires are prone to become disillusioned and less commit- ted to the organization when they face the unexpected harsh realities of the job. In many cases, these individuals feel that they were misled during the hiring process and may become problem employees.

To increase job satisfaction among employees and reduce turnover, managers should consider a realistic job preview (RJP).17 An RJP includes both positive and negative infor- mation about the job and the company. For example, in addition to the positive comments typically expressed in the interview, the applicant is told of the less attractive aspects of the job. For instance, he or she might be told that there are limited opportunities to talk to coworkers during work hours, that chances of being promoted are slim, or that work

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Developing Your Skill

About the Skill Every manager needs to develop his or her interviewing skills. The following discussion highlights the key behaviors associated with this skill.

Steps in Practicing the Skill 1 Review the job description and job specification.

Reviewing pertinent information about the job pro- vides valuable information about how to assess the candidate. Furthermore, relevant job requirements help to eliminate interview bias.

2 Prepare a structured set of questions to ask all applicants for the job. By having a set of prepared questions, you ensure that the information you wish to elicit is attainable. Furthermore, if you ask all applicants similar questions, you’re better able to compare their answers against a common base.

3 Before meeting an applicant, review his or her application form and résumé. Doing so helps you to create a complete picture of the applicant in terms of what is represented on the résumé or application and what the job requires. You will also begin to identify areas to explore in the interview. That is, areas that are not clearly defined on the résumé or application but that are essential for the job will become a focal point of your discussion with the applicant.

4 Open the interview by putting the applicant at ease and by providing a brief preview of the topics to be discussed. Interviews are stressful for job appli- cants. By opening with small talk (e.g., the weather), you give the person time to adjust to the interview set- ting. By providing a preview of topics to come, you’re giving the applicant an agenda that helps the individ- ual begin framing what he or she will say in response to your questions.

5 Ask your questions and listen carefully to the appli- cant’s answers. Select follow-up questions that natu- rally flow from the answers given. Focus on the responses as they relate to information you need to ensure that the applicant meets your job require- ments. Any uncertainty you may still have requires a follow-up question to probe further for the information.

6 Close the interview by telling the applicant what’s going to happen next. Applicants are anxious about the status of your hiring decision. Be honest with the applicant regarding others who will be interviewed and the remaining steps in the hiring process. If you plan to make a decision in two weeks or so, let the indi- vidual know what you intend to do. In addition, tell the applicant how you will let him or her know about your decision.

7 Write your evaluation of the applicant while the interview is still fresh in your mind. Don’t wait until the end of your day, after interviewing several appli- cants, to write your analysis of each one. Memory can fail you. The sooner you complete your write-up after an interview, the better chance you have of accu- rately recording what occurred in the interview.

Practicing the Skill Review and update your résumé. Then have several friends critique it who are employed in management-level positions or in management training programs. Ask them to explain their comments and make any changes to your résumé that they think will improve it. Now inventory your interper- sonal and technical skills and any practical experiences that do not show up in your résumé. Draft a set of leading questions you would like to be asked in an interview that would give you a chance to discuss the unique qualities and attributes you could bring to the job.

realistic job preview (RJP) A preview of a job that provides both positive and negative information about the job and the company.

hours fluctuate so erratically that employees may be required to work during what are usually off hours (nights and weekends). Research indicates that applicants who have been given a realistic job preview hold lower and more realistic job expectations for the jobs they will be performing and are better able to cope with the frustrating elements of the job than are applicants who have been given only inflated information. The result is fewer unexpected resignations by new employees. For managers, realistic job previews offer a major insight into the HRM process. That is, it’s just as important to retain good

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Explain how

employees are provided with needed

skills and knowledge.

166 PART THREE | ORGANIZING

people as it is to hire them in the first place. Presenting only positive job aspects to an applicant may initially entice him or her to join the organization, but it may be a decision that both parties quickly regret.

How Are Employees Provided with Needed Skills and Knowledge? If we’ve done our recruiting and selecting properly, we should have hired competent individuals who can perform successfully on the job. But suc- cessful performance requires more than possessing certain skills. New hires

must be acclimated to the organization’s culture and be trained and given the knowledge to do the job in a manner consistent with the organization’s goals.

To achieve this, HRM uses orientation and training.

How Are New Hires Introduced to the Organization? Once a job candidate has been selected, he or she needs to be introduced to the job and organization. This introduction is called orientation.18 The major goals of orientation are to reduce the initial anxiety all new employees feel as they begin a new job; to familiarize new employees with the job, the work unit, and the organization as a whole; and to facilitate the outsider–insider transition. Job orientation expands on the information the employee obtained during the recruitment and selection stages. The new employee’s specific duties and responsibilities are clarified as well as how his or her performance will be evaluated. Orientation is also the time to correct any unrealistic expectations new employees might hold about the job. Work unit orientation familiarizes an employee with the goals of the work unit, makes clear how his or her job contributes to the unit’s goals, and provides an introduction to his or her coworkers. Organization orientation informs the new employee about the organization’s goals, history, philosophy, procedures, and rules. This information includes relevant HR policies such as work hours, pay procedures, overtime requirements, and benefits. A tour of the organization’s physical facilities is often part of this orientation.

Managers have an obligation to make the integration of a new employee into the organization as smooth and anxiety-free as possible. Successful orientation, whether for- mal or informal, results in an outsider–insider transition that makes the new member feel comfortable and fairly well-adjusted, lowers the likelihood of poor work performance, and reduces the probability of a surprise resignation by the new employee only a week or two into the job.19

HR AND IT

HR has gone digital. 20 Using software

that automates many basic HR

processes associated with recruiting,

selecting, orienting, training, appraising per-

formance, and storing and retrieving employee

information, HR departments have cut costs

and optimized service. The main area where IT

has had a significant impact is in training.

In a survey by the American Society for

Training and Development, 95 percent of the

responding companies reported using some

form of e-learning. Using technology to

deliver needed knowledge, skills, and atti-

tudes has had many benefits. As one

researcher said, “The ultimate purpose of e-

learning is not to reduce the cost of training,

but to improve the way your organization

does business.” And in many instances, it

seems to do that! For example, when

Hewlett-Packard looked at how its customer

service was affected by a blend of e-learning

and other instructional methods, rather than

just classroom training, it found that “sales

representatives were able to answer ques-

tions more quickly and accurately, enhanc-

ing customer-service provider relations.” And

Unilever found that after e-learning training

for sales employees, sales increased by

several million dollars.

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What Is Employee Training? On the whole, planes don’t cause airline accidents, people do. Most collisions, crashes, and other airline mishaps—nearly three-quarters of them—result from errors by the pilot or air traffic controller, or from inadequate mainte- nance. Weather and structural failures typically account for the remaining accidents.21 We cite these statistics to illustrate the importance of training in the airline industry. Such maintenance and human errors could be prevented or significantly reduced by better employee training, as shown by the amazing “landing” of US Airways Flight 1549 in the Hudson River in January 2009 with no loss of life. Pilot Captain Chesley Sullenberger attrib- uted the positive outcome to the extensive and intensive training that all pilots and flight crews undergo.22

Employee training is a learning experience that seeks a relatively perma- nent change in employees by improving their ability to perform on the job. Thus, training involves changing skills, knowledge, attitudes, or behavior.23 This change may involve what employees know, how they work, or their attitudes toward their jobs, coworkers, managers, and the organization. It’s been estimated, for instance, that U.S. business firms spend billions each a year on formal courses and training programs to develop workers’ skills.24 Managers, of course, are responsible for deciding when employees are in need of training and what form that training should take.

Determining training needs typically involves answering several questions. If some of these questions sound familiar, you’ve been paying close attention. It’s precisely the type of analysis that takes place when managers develop an organizational structure to achieve their strategic goals—only now the focus is on the people.25

The leading questions in Exhibit 6-6 suggest the kinds of signals that can warn a manager when training may be necessary. The more obvious ones are related directly to productivity. Indications that job performance is declining include decreases in produc- tion numbers, lower quality, more accidents, and higher scrap or rejection rates. Any of these outcomes might suggest that worker skills need to be fine-tuned. Of course, we’re assuming that an employee’s performance decline is in no way related to lack of effort. Managers, too, must also recognize that training may be required because the workplace is constantly evolving. Changes imposed on employees as a result of job redesign or a technological breakthrough also require training.

HOW ARE EMPLOYEES TRAINED? Most training takes place on the job. Why? It’s simple and it usually costs less. However, on-the-job training can disrupt the workplace and result in an increase in errors while learning takes place. Also, some skill training is too complex to learn on the job and must take place outside the work setting.

Many different types of training methods are available. For the most part, we can classify them as on-the-job or off-the-job training. The more popular training methods are summarized in Exhibit 6-7.

HOW CAN MANAGERS ENSURE THAT TRAINING IS WORKING? It’s easy to develop a new training program, but if training efforts aren’t evaluated, any can be rationalized. It would be nice if all companies could boast the returns on investments in training that Neil Huffman Auto Group executives do; they claim they receive $230 in increased productivity for every dollar spent on training.26 But such a claim cannot be made unless training is properly evaluated.

orientation Introducing a new employee to the job and the organization.

Customer service training for new employees of Seven and I Holdings, Japan’s largest retail group, includes teaching recruits how to assist blind, disabled, and elderly customers. Trainees also learn sign language so they can communicate with hearing-impaired shoppers. This training is a learning experience designed to permanently change employees’ abilities to perform on the job. It involves changing their skills in learning proper techniques in helping customers and changing their attitudes in making them aware of and more sensitive to the special needs of shoppers who require assistance.

employee training A learning experience that seeks a relatively permanent change in employees by improving their ability to perform on the job.

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SAMPLE ON-THE-JOB TRAINING METHODS

Job rotation Lateral transfers allowing employees to work at different jobs. Provides good exposure to a variety of tasks.

Understudy assignments Working with a seasoned veteran, coach, or mentor. Provides support and encouragement from an experienced worker. In the trades industry, this may also be an apprenticeship.

SAMPLE OFF-THE-JOB TRAINING METHODS

Classroom lectures Lectures designed to convey specific technical, interpersonal, or problem-solving skills.

Films and videos Using media to explicitly demonstrate technical skills that are not easily presented by other training methods.

Simulation exercises Learning a job by actually performing the work (or its simulation). May include case analyses, experiential exercises, role-playing, and group interaction.

Vestibule training Learning tasks on the same equipment that one actually will use on the job but in a simulated work environment.

EXHIBIT 6-7 Typical Training Methods

How are training programs typically evaluated? The following approach is probably generalizable across organizations: Several managers, representatives from HRM, and a group of workers who have recently completed a training program are asked for their opinions. If the comments are generally positive, the program may get a favorable evaluation and it’s continued until someone decides, for whatever reason, that it should be eliminated or replaced.

Such reactions from participants or managers, while easy to acquire, are the least valid. Their opinions are heavily influenced by factors that may have little to do with the training’s effectiveness—difficulty, entertainment value, or the personality characteris- tics of the instructor. However, trainees’ reactions to the training may, in fact, provide

What deficiencies, if any, do job holders have in terms

of skills, knowledge, or abilities required to

exhibit the essential and necessary job behaviors?

What behaviors are necessary for each job holder

to complete his or her job duties?

Is there a need for training?

What are the organization's

strategic goals?

What tasks must be

completed to achieve

organizational goals?

EXHIBIT 6-6 Determining Whether Training Is Needed

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Describe strategies for

retaining competent,

high-performing employees.

CHAPTER 6 | MANAGING HUMAN RESOURCES 169

performance management system A system that establishes performance standards that are used to evaluate employee performance.

feedback on how worthwhile the participants viewed the training to be. Beyond general reactions, however, training must also be evaluated in terms of how much the participants learned; how well they are using their new skills on the job (did their behavior change?); and whether the training program achieved its desired results (reduced turnover, increased customer service, etc.).27

How Do Organizations Retain Competent, High-Performing Employees? Once an organization has invested significant dollars in recruiting, select- ing, orienting, and training employees, it wants to keep them, especially the competent, high-performing ones! Two HRM activities that play a role in this are managing employee performance and developing an appropriate compensation and benefits program.

What Is a Performance Management System? It’s important for managers to get their employees to achieve performance levels that the organization considers desirable. How do managers ensure that employees are performing as well as they’re supposed to? In organizations, the formal means of assessing the work of employees is through a systematic performance appraisal process.

A performance management system is a process of establishing performance stan- dards and evaluating performance in order to arrive at objective human resource decisions— such as pay increases and training needs—as well as to provide documentation to support any personnel actions. But how do you evaluate an employee’s performance? We list specific appraisal techniques in Exhibit 6-8.

The written essay requires no complex forms or extensive training to complete. However, a “good” or “bad” appraisal may be determined as much by the evaluator’s writing skill as

METHOD ADVANTAGE DISADVANTAGE

Written essay Simple to use More a measure of evaluator’s writing ability than of employee’s actual performance

Critical incidents Rich examples; Time-consuming; lack behaviorally based quantification

Graphic rating scales Provide quantitative Do not provide depth of job data; less time-consuming behavior assessed than others

BARS Focus on specific Time-consuming; difficult to and measurable job develop measures behaviors

Multiperson Compares employees Unwieldy with large number with one another of employees

MBO Focuses on end goals; Time-consuming results oriented

360° appraisal More thorough Time-consuming

EXHIBIT 6-8 Performance Appraisal Methods

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by the employee’s actual level of performance. The use of critical incidents focuses the evaluator’s attention on critical or key behaviors. The appraiser writes down anecdotes describing whatever the employee did that was especially effective or ineffective. The key here is that specific behaviors are cited, not vaguely defined personality traits. One of the oldest and most popular methods of appraisal is by graphic rating scales. This method lists a set of performance factors such as quantity and quality of work, job knowledge, cooper- ation, loyalty, attendance, honesty, and initiative. The evaluator then goes down the list and rates each factor on an incremental scale. An approach that has received renewed attention involves behaviorally anchored rating scales (BARS).28 These scales combine major elements from the critical incident and graphic rating scale approaches. The appraiser rates an employee according to items along a numerical scale, but the items are examples of actual behavior on a given job rather than general descriptions or traits.29

Finally, an appraisal device that seeks performance feedback from such sources as the person being rated, bosses, peers, team members, customers, and suppliers has become popular in organizations. It’s called the 360-degree appraisal.30 It’s being used in approx- imately 90 percent of Fortune 1000 firms, including such companies as Otis Elevator, DuPont, Nabisco, Pfizer, ExxonMobil, Cook Children’s Health Care System, General Electric, UPS, and Nokia.31

In today’s dynamic organizations, traditional performance evaluation systems may be archaic.32 Downsizing has given supervisors greater responsibility and more employees who report directly to them. Accordingly, it may be next to impossible for supervisors to have extensive job knowledge of each of their employees. Furthermore, the growth of project teams and employee involvement places the responsibility for evaluation where people are better able to make accurate assessments.33

The 360-degree feedback process also has some positive benefits for development concerns.34 Many managers simply do not know how their employees view them and the work they have done. Research studies into the effectiveness of 360-degree performance appraisals report positive results including more accurate feedback, empowering employees, reducing the subjective factors in the evaluation process, and developing leadership in an organization.35

SHOULD PEOPLE BE COMPARED TO ONE ANOTHER OR AGAINST A SET OF STANDARDS? The methods previously identified have one thing in common. They require us to evaluate employees on the basis of how well their performance matches established or absolute criteria. Multiperson comparisons, on the other hand, compare one person’s performance with that of one or more individuals. These are relative, not absolute, measuring devices.

The three most popular forms of this method are group-order ranking, indi- vidual ranking, and paired comparison.

The group-order ranking requires the evaluator to place employees into a particular classification such as “top fifth” or “second fifth.” If a rater has 20 employees, only four can be in the top fifth, and, of course, four must be rele- gated to the bottom fifth. The individual ranking approach requires the evaluator to list the employees in order from highest to lowest. Only one can be “best.” In an appraisal of 30 employees, the difference between the first and second employee is assumed to be the same as that between the twenty-first and twenty- second. Even though some employees may be closely grouped, no ties are allowed. In the paired comparison approach, each employee is compared with every other employee in the comparison group and rated as either the superior or weaker member of the pair. After all paired comparisons are made, each employee is assigned a summary ranking based on the number of superior scores he or she achieved. Although this approach ensures that each employee is compared against every other employee, it can become unwieldy when large numbers of employ- ees are being assessed.

WHAT ABOUT MBO AS AN APPRAISAL APPROACH? We introduced man- agement by objectives during our discussion of planning in Chapter 4. However, MBO is also a mechanism for appraising performance.

At one time renowned for its excellent customer service, Home Depot had fallen in customer satisfaction surveys to one of the worst performing firms in the retail industry. In repairing its damaged reputation, Home Depot listed customer service as its number one strategic priority. One way that Home Depot is implementing the customer focus is by replacing its traditional performance evaluation system with a system that evaluates store employees almost entirely on how well they treat customers and satisfy their needs.

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Employees are evaluated by how well they accomplish a specific set of objectives that are critical to the successful completion of their jobs. As you’ll recall from our discussion in Chapter 4, these objectives need to be tangible, verifiable, and measurable. MBO’s pop- ularity among managerial personnel is probably due to its focus on end goals. Managers tend to emphasize such results-oriented outcomes as profit, sales, and costs. This emphasis meshes with MBO’s concern with quantitative measures of performance. Because MBO emphasizes ends rather than means, this appraisal method allows managers to choose the best path for achieving their goals.

What Happens If an Employee’s Performance Is Not Up to Par? So far this discussion has focused on the performance management system. But what if an employee is not performing in a satisfactory manner? What can you do?

If, for some reason, an employee is not meeting his or her performance goals, a man- ager needs to find out why. If it’s because the employee is mismatched for the job (a hir- ing error) or because he or she does not have adequate training, the fix is relatively simple. The manager can either reassign the individual to a job that better matches his or her skills or train the employee to do the job more effectively. If the problem is asso- ciated with an employee’s lack of desire to do the job, not with his or her abilities, it becomes a discipline problem. In that case, a manager can try counseling and, if neces- sary, take disciplinary action such as verbal and written warnings, suspensions, and even terminations.

Employee counseling is a process designed to help employees overcome perform- ance-related problems. Rather than viewing the performance problem from a punitive standpoint (discipline), employee counseling attempts to uncover why employees have lost their desire or ability to work productively. More importantly, it’s designed to find ways to fix the problem. In many cases, employees don’t go from being productive one day to being unproductive the next. Rather, the change happens gradually and may be a function of what’s occurring in their personal lives. Employee counseling attempts to assist employ- ees in getting help to resolve whatever is bothering them. The premise behind employee counseling is fairly simple: It’s beneficial to both the organization and the employee. Just as it’s costly to have an employee quit shortly after being hired, it’s costly to fire someone. The time spent recruiting and selecting, orienting, training, and developing employees translates into money. If, however, an organization can help employees overcome personal problems and get them back on the job quickly, it can avoid these costs. But make no mis- take about it, employee counseling is not intended to lessen the effect of an employee’s poor performance, nor is it intended to reduce his or her responsibility to change inappro- priate work behavior. If the employee can’t or won’t accept help, then disciplinary actions must be taken.

How Are Employees Compensated? Executives at Discovery Communications Inc. had an employee morale problem on their hands. Many of the company’s top performers were making the same salaries as the poorer performers, and the company’s compensation program didn’t allow for giving raises to peo- ple who stayed in the same position. The only way for managers to reward the top perform- ers was to give them a bonus or promote them to another position. Executives were discovering that not only was that unfair, it was counterproductive. So they overhauled the program.37

360-degree appraisal An appraisal device that seeks feedback from a variety of sources for the person being rated.

employee counseling A process designed to help employees overcome performance-related problems.

discipline Actions taken by a manager to enforce an organization’s standards and regulations.

percent of employees look for a positive attitude when hiring seasonal employees.

percent of layoff survivors say that their individual productivity has declined.

percent of managers rec- ognize the value of hiring people different from them-

selves and do what they can to meet this goal.

percent of interviewers say that the best way to “blow” your interview is by not

learning about the job or organization.

percent of participants in classroom training said that e-learning was convenient;

90 percent viewed it as a time-saver.

percent of U.S. employees say they’ve heard a sexually inappropriate comment at

work.

39 75 50

34 percent of HR execu- tives say their compa- nies have frozen or cut

salaries to save money instead of firing employees.

52.4

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Although there are exceptions, most of us work for money. What our jobs pay and what benefits we get fall under the heading of compensation and benefits. Determin- ing levels of compensation isn’t easy. However, most of us expect to receive appropri- ate compensation from our employer. Developing an effective and appropriate compensation system is an important part of the HRM process.38 It can help attract and retain competent and talented individuals who help an organization accomplish its mis- sion and goals. In addition, an organization’s compensation system has been shown to have an impact on its strategic performance.39 Managers must develop a compensation system that reflects the changing nature of work and the workplace in order to keep people motivated.

HOW ARE PAY LEVELS DETERMINED? How does management decide who gets paid $15.85 an hour and who receives $325,000 a year? The answer lies in compensation administration. The goals of compensation administration are to design a cost-effective pay structure that will attract and retain competent employees and to provide an incentive for these individuals to exert high energy levels at work. Compensation administration also attempts to ensure that pay levels, once determined, will be perceived as fair by all employ- ees. Fairness means that the established pay levels are adequate and consistent for the demands and requirements of the job. Therefore, the primary determination of pay is the kind of job an employee performs. Different jobs require different kinds and levels of skills, knowledge, and abilities, and these factors vary in their value to the organization. So, too, do the responsibility and authority of various positions. In short, the higher the skills, knowledge, and abilities—and the greater the authority and responsibility—the higher the pay.

So, how do managers determine who gets paid what? Several factors influence the com- pensation and benefit packages that different employees receive. Exhibit 6-9 summarizes these factors, which are job-based and business- or industry-based. One factor that’s criti- cal is the organization’s philosophy toward compensation. Some organizations, for instance,

Level of Compensation and Benefits

Employee’s Tenure and Performance

Size of Company

Kind of Job Performed

Company Profitability

Kind of Business

Geographical Location Unionization

Management Philosophy

Labor or Capital Intensive

How long has employee been with company and

how has he or she performed?

Does job require high levels of skills?

What industry is job in?

Is business unionized?

Is business labor or capital intensive?

How large is the company?

How profitable is the company?

Where is organization located?

What is management’s philosophy toward pay?

EXHIBIT 6-9 What Determines Pay and Benefits?

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compensation administration The process of determining a cost-effective pay structure that will attract and retain employees, provide an incentive for them to work hard, and ensure that pay levels will be perceived as fair.

employee benefits Nonfinancial rewards designed to enrich employees’ lives.

variable pay A pay system in which an individual’s compensation is contingent on performance.

skill-based pay A pay system that rewards employees for the job skills they demonstrate.

Discuss contemporary

issues in managing

human resources.

6.5

don’t pay employees any more than they have to. In the absence of a union contract that stipulates wage levels, those organizations only have to pay minimum wage for most of their jobs. On the other hand, some organizations are committed to a compensation philosophy of paying their employees at or above area wage levels in order to emphasize that they want to attract and keep the best pool of talent.

Many organizations are using alternative approaches to determine compensation includ- ing skill-based pay and variable pay. Skill-based pay systems reward employees for the job skills and competencies they can demonstrate. Under this type of pay system, an employee’s job title doesn’t define his or her pay category, skills do.40 Research shows that these types of pay systems tend to be more successful in manufacturing organizations than in service organizations and in organizations pursuing technical innovations.41 On the other hand, many organizations use variable pay systems, in which an individual’s compensation is contin- gent on performance—90 percent of U.S. organizations use variable pay plans, and 81 per- cent of Canadian and Taiwanese organizations do.42

WHY DO ORGANIZATIONS OFFER EMPLOYEE BENEFITS? When an organization designs its overall compensation package, it has to look further than just an hourly wage or annual salary. It has to take into account another element, employee benefits, which are nonfinan- cial rewards designed to enrich employees’ lives. They have grown in importance and vari- ety over the past several decades. Once viewed as “fringes,” today’s benefit packages reflect efforts to provide something that each employee values.

The benefits offered by an organization vary widely in scope. Most organizations are legally required to provide Social Security and workers’ and unemployment compensation, but organizations may also provide an array of benefits such as paid time off from work, life and disability insurance, retirement programs, and health insurance.43 The costs of some of these, such as retirement and health insurance benefits, may be paid by both the employer and the employee, although as you’ll see in the next section, organizations are cutting back or putting stipulations on these two costly benefits.

What Contemporary HRM Issues Face Managers? We’ll conclude this chapter by looking at several HR issues facing today’s managers including downsizing, workforce diversity, sexual harassment, workplace spirituality, and HR costs.

How Can Managers Manage Downsizing? Downsizing is the planned elimination of jobs in an organization. Because down- sizing typically involves shrinking the organization’s workforce, it’s an important issue in HRM. (Take another look at the chapter-opening story.) When an organization has too many employees—which may happen when it’s faced with an economic crisis, declining market share, too aggressive growth, or when it’s been poorly managed—one option for improving profits is to eliminate some of those excess workers. Over the last 18 months, many well- known companies have gone through several rounds of downsizing—Boeing, Volkswagen,

downsizing The planned elimination of jobs in an organization.

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Microsoft, Dell, General Motors, Unisys, Siemens, Merck, Toy- ota, among others. How can managers best manage a downsized workplace?

After downsizing, disruptions in the workplace and in employees’ personal lives are to be expected. Stress, frustration, anxiety, and anger are typical reactions of both individuals being laid off and the job survivors. And it may surprise you to learn that both victims and survivors experience those feelings.44 Many organizations have done a fairly good job of helping layoff vic- tims by offering a variety of job-help services, psychological counseling, support groups, severance pay, extended health insurance benefits, and detailed communications. Although some individuals react negatively to being laid off (the worst cases involve individuals returning to their former organization and committing a violent act), the assistance offered reveals that the organization does care about its former employees. The lay- off victims get to start over with a clean slate and a clear con- science. Survivors don’t. Unfortunately, too often, little is done for the “survivors” who retain their jobs and have the task of keeping the organization going or even of revitalizing it.

A new syndrome seems to be popping up in organizations: layoff-survivor sickness, a set of attitudes, perceptions, and behav- iors of employees who survive involuntary staff reductions.46

Symptoms include job insecurity, perceptions of unfairness, guilt, depression, stress from increased workload, fear of change, loss of loyalty and commitment, reduced effort, and an unwillingness to do anything beyond the required minimum.

To address survivor syndrome, managers may want to pro- vide opportunities for employees to talk to counselors about their guilt, anger, and anxiety.47 Group discussions can also provide an opportunity for the survivors to vent their feelings.

Some organizations have used downsizing as the spark to imple- ment increased employee participation programs such as empowerment and self-man- aged work teams. In short, to keep morale and productivity high, managers should make every attempt to ensure that those individuals still working in the organization know that they’re valuable and much-needed resources. Exhibit 6-10 summarizes some ways that managers can reduce the trauma associated with downsizing.48

How Can Workforce Diversity Be Managed? We’re discussing the changing makeup of the workforce in several places in this book, mostly through our “Managing Diversity” boxes. But workforce diversity also affects such basic HRM concepts as recruitment, selection, and orientation.49

174 PART THREE | ORGANIZING

• Communicate openly and honestly:

� Inform those being let go as soon as possible � Tell surviving employees the new goals and expectations � Explain impact of layoffs

• Follow any laws regulating severance pay or benefits

• Provide support/counseling for surviving employees

• Reassign roles according to individuals’ talents and backgrounds

• Focus on boosting morale:

� Offer individualized reassurance � Continue to communicate, especially one-on-one � Remain involved and available

EXHIBIT 6-10 Tips for Managing Downsizing

Right orWrong?

A report released by The Corporate Library says that many CEOs who vol- untarily didn’t take their salary for a year or only took a $1 in pay were actually well compensated.45 Such action by a CEO is usually intended to convey concern and commitment,but in many cases, it may have been largely a symbolic action. In 41 companies where the CEO had either no base salary or a salary of $1 for the year and no cash bonus,21 received some form of “all other compensation.” In 18 instances of these “dollar CEOs,” the individuals received a combined $6 billion in company stock alone.What do you think of this? What do such actions convey to employ- ees? To stockholders? To the general public?

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Improving workforce diversity requires managers to widen their recruiting net. For exam- ple, the popular practice of relying on current employee referrals as a source of new job appli- cants tends to produce candidates who have similar characteristics to those of present employees. So managers have to look for applicants in places where they haven’t typically looked before. To increase diversity, managers are increasingly turning to nontraditional recruitment sources such as women’s job networks, over-50 clubs, urban job banks, disabled people’s training centers, ethnic newspapers, and gay rights organizations. This type of outreach should enable an organization to broaden its pool of applicants.

Once a diverse set of applicants exists, efforts must be made to ensure that the selec- tion process does not discriminate. Moreover, applicants need to be made comfortable with the organization’s culture and be made aware of management’s desire to accommodate their needs. For instance, at TGI Friday’s, company managers work diligently to accommodate differences and create workplace choices for a diverse workforce; so, too, do companies such as Johnson & Johnson, Ernst & Young, Marriott International, IBM, and Bank of America.50

Finally, orientation is often difficult for women and minorities. Many organizations, such as Lotus and Hewlett-Packard, provide special workshops to raise diversity conscious- ness among current employees as well as programs for new employees that focus on diver- sity issues. The thrust of these efforts is to increase individual understanding of the differences each of us brings to the workplace. A number of companies also have special mentoring programs to deal with the reality that lower-level female and minority managers have few role models with whom to identify.51

What Is Sexual Harassment? Sexual harassment is a serious issue in both public and private sector organizations. More than 12,000 complaints are filed with the EEOC each year,52 with more than 15 percent of the complaints filed by males.53 Settlements in some of these cases incurred a substan- tial cost to the companies in terms of litigation. It’s estimated that sexual harassment is the single largest financial risk facing companies today—and can result in upward of a 30 percent decrease in a company’s stock price.54 At Mitsubishi, for example, the company paid out more than $34 million to 300 women for the rampant sexual harassment to which they were exposed.55 But it’s more than just jury awards. Sexual harassment results in millions lost in absenteeism, low productivity, and turnover.56 Sexual harassment, further- more, is not just a U.S. phenomenon. It’s a global issue. For instance, sexual harassment charges have been filed against employers in such countries as Japan, Australia, Nether- lands, Belgium, New Zealand, Sweden, Ireland, and Mexico.57 Even though discussions of sexual harassment cases often focus on the large awards granted by a court, employers face other concerns. Sexual harassment creates an unpleasant work environment for organization members and undermines their ability to perform their jobs. But just what is sexual harassment?

Any unwanted activity of a sexual nature that affects an individual’s employment can be regarded as sexual harassment. It can occur between members of the opposite or of the same sex—between employees of the organization or between employee and nonemployee.58

Although such an activity has been generally protected under Title VII (sex discrimination) in the United States, in recent years this problem has gained more recognition. By most accounts, prior to the mid-1980s, occurrences were generally viewed as isolated incidents, with the individual committing the act being solely responsible (if at all) for his or her actions.59 Since the beginning of the twenty-first century, however, charges of sexual harass- ment have continued to appear in the headlines on an almost regular basis.

layoff-survivor sickness A set of attitudes, perceptions, and behaviors of employees who survive layoffs.

sexual harassment Any unwanted action or activity of a sexual nature that explicitly or implicitly affects an individual’s employment, performance, or work environment.IS

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Much of the problem associated with sexual harassment is determining what constitutes this illegal behavior.60 In 1993, the EEOC cited three situations in which sexual harassment can occur. In these instances, verbal or physical conduct toward an individual:

1. Creates an intimidating, offensive, or hostile environment. 2. Unreasonably interferes with an individual’s work. 3. Adversely affects an employee’s employment opportunities.

For many organizations, it’s the offensive or hostile environment issue that’s problematic.61 What constitutes such an environment? Challenging hostile environment situations gained much support from the Supreme Court case of Meritor Savings Bank v. Vinson.62 This case stemmed from a situation in which Ms. Vinson initially refused the sexual advances of her boss. However, out of fear of reprisal, she ultimately conceded. But according to court records, it didn’t stop there. Vinson’s boss continued to harass Vinson, subjecting her to severe hostility that affected her job.63 In addition to supporting hostile environment claims, the Meritor case also identified employer liability; that is, in sexual harassment cases, an organization can be held liable for sexual harassment actions by its managers, employees, and even customers!64

Although the Meritor case has implications for organizations, how do organizational members determine whether something is offensive? For instance, does sexually explicit language in the office create a hostile environment? How about off-color jokes? Pictures of women totally undressed? The answer is it could! It depends on the people in the organ- ization and the environment in which they work. The point here is that we all must be attuned to what makes fellow employees uncomfortable—and if we don’t know, then we should ask! Organizational success will, in part, reflect how sensitive each employee is toward another in the company. At DuPont, for example, the corporate culture and diver- sity programs are designed to eliminate sexual harassment through awareness and respect for all individuals.65 It means understanding one another and, most importantly, respecting others’ rights. Similar programs exist at FedEx, General Mills, and Levi-Strauss, among other companies.

If sexual harassment carries with it potential costs to the organization, what can a com- pany do to protect itself?66 The courts want to know two things—did the organization know about, or should it have known about, the alleged behavior? And what did managers do to stop it?67 With the number and dollar amounts of the awards today, it’s even more important for organizations and managers to educate all employees on sexual harassment matters and to have mechanisms available to monitor employees. Furthermore, “victims” no longer have

to prove that their psychological well-being is seriously affected. The U.S. Supreme Court ruled in 1993, in the case of Harris v. Forklift Systems, Inc., that victims do not have to suffer substantial mental distress to receive a jury award. Furthermore, in June 1998, the Supreme Court ruled that sexual harassment may have occurred even if the employee had not experienced any “negative” job reper- cussions. In this case, Kimberly Ellerth, a marketing assistant at Burlington Industries, filed harassment charges against her boss because he “touched her, suggested she wear shorter skirts, and told her during a business trip that he could make her job ‘very hard or very easy.’” When Ellerth refused, the harasser never “punished” her; in fact, she even received a promotion during the time the harassment was ongoing. What the Supreme Court’s decision in this case indicates is that “harassment is defined by the ugly behavior of the manager, not by what happened to the worker subsequently.”68

Finally, in a sexual harassment matter, managers must remem- ber that the harasser may have rights, too.69 No action should be taken against someone until a thorough investigation has been con- ducted. Furthermore, the results of the investigation should be reviewed by an independent and objective individual before any action against the alleged harasser is taken. Even then, the harasser should be given an opportunity to respond to the allegation and have

Orientation training for cadets of the United States Air Force Academy emphasizes the academy’s zero- tolerance policy for assault and harassment misconduct. Recognizing that the academy fostered a culture and climate that tolerated sexual assault and harassment, an Air Force team was formed to identify weak points that needed correction and to recommend ways to improve the environment. Changes made based on the recommendations include the establishment of clear sexual-assault and harassment reporting procedures and formation of a new academy response team to review alleged offenses.

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a disciplinary hearing if desired. Additionally, an avenue for appeal should also exist for the alleged harasser—an appeal heard by someone at a higher level of management who is not associated with the case.

What Is Workplace Spirituality? What do organizations such as Southwest Airlines, Tom’s of Maine, Herman Miller, or Hewlett-Packard have in common? Among other characteristics, they’re among a growing number of organizations that have embraced workplace spirituality.

Workplace spirituality is not about organized religious practices.70 It’s not about theology or about one’s spiritual leader. Rather, workplace spirituality is about recogniz- ing that employees have an inner life that nourishes and is nourished by meaningful work that takes place in the context of an organizational community.71 Organizations that promote a spiritual culture recognize that employees have both a mind and a spirit, seek to find meaning and purpose in their work, and desire to connect with other employees and be part of a community.

WHY THE EMPHASIS ON SPIRITUALITY IN TODAY’S ORGANIZATIONS? Historical man- agement models had no room for spirituality.72 These models typically focused on organi- zations that were efficiently run without feelings toward others. Similarly, concern about an employee’s inner life had no role in managing organizations. But just as we’ve come to realize that the study of emotions improves our understanding of how and why people act the way they do in organizations, an awareness of spirituality can help one better under- stand employee work behavior in the twenty-first-century organization.

WHAT DOES A SPIRITUAL ORGANIZATION LOOK LIKE? The concept of spirituality draws on the ethics, values, motivation, work/life balance, and leadership elements of an organization. Spiritual organizations are concerned with helping employees develop and reach their full potential. They’re also concerned with addressing problems created by work/life conflicts.

What differentiates spiritual organizations from their nonspiritual counterparts? Although research is fairly new in this arena, several characteristics tend to be associated with a spiritual organization.73 We list them in Exhibit 6-11.

workplace spirituality A spiritual culture where organizational values promote a sense of purpose through meaningful work that takes place in the context of community.

CHARACTERISTIC DESCRIPTION

Strong sense of purpose Organizational members know why the organization exists and what it values.

Focus on individual Employees are valuable and need to be nurtured to help development them grow; this characteristic also includes a sense of

job security.

Trust and openness Organizational member relationships are characterized by mutual trust, honesty, and openness.

Employee empowerment Employees are allowed to make work-related decisions that affect them, highlighting a strong sense of delegation of authority.

Toleration of employee The organizational culture encourages employees to be expression themselves and to express their moods and feelings without

guilt or fear of reprimand.

EXHIBIT 6-11 Characteristics of a Spiritual Organization

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Although workplace spirituality has generated some interest in many organizations, it’s not without its critics. Those who argue against spirituality in organizations typically focus on two issues. First is the question of legitimacy. Specifically, do organizations have the right to impose spiritual values on their employees? Second is the question of economics. Are spirituality and profits compatible? Let’s briefly look at these issues.

The potential for an emphasis on spirituality to make some employees uneasy is clear. Critics argue that organizations have no business imposing spiritual values on employees. This criticism is undoubtedly valid when spirituality is defined as bringing religion and God into the workplace.74 However, the criticism appears less stinging when the goal is limited to helping employees find meaning in their work lives.

The issue of whether spirituality and profits are compatible goals is certainly relevant for anyone in business. The evidence, although limited, indicates that the two may be com- patible. Several studies show that organizations that have introduced spirituality into the workplace have witnessed improved productivity, reduced turnover, greater employee sat- isfaction, and increased organizational commitment.75

WHAT DOES HRM HAVE TO DO WITH SPIRITUALITY? Ironically, introducing spirituality into the organization is nothing new for HR. In actuality, many of the areas that HRM addresses, and has done so for many years, are many of the same things that support spiri- tuality.76 For instance, matters such as work/life balances, proper selection of employees, setting performance goals, and rewarding people for the work they do, are all components of making the organization more “spiritual.” In fact, as you review the characteristics of a spiritual organization, in every case, HRM is either the leader in making such things hap- pen, or is the vehicle by which the organization helps employees understand their respon- sibilities and offers the requisite training to make things happen. In the end, it’s HRM that will make the workplace a supportive work environment, one where communication abounds and employees feel free to express themselves.

How and Why Are Organizations Controlling HR Costs? HR costs are skyrocketing, especially those associated with employee health care and employee pensions. Organizations are looking for ways to control these costs.

WHAT ABOUT EMPLOYEE HEALTH CARE COSTS? Employees at Aetna can earn financial incentives up to $345 a year for participating in weight-management and fitness classes. Some 80 percent of employees at Fairview Health Services in Minneapolis participate in a comprehensive health-management program. Employees of King County in Seattle get health insurance discounts if they do not smoke, are not overweight, and do not speed when driving. At Alaska Airlines, employees must abide by a no-smoking policy, and new hires must submit to a urine test to prove they’re tobacco-free.77 All these examples illustrate how companies are trying to control skyrocketing employee health care costs. Since 2002, health care costs have risen an average of 15 percent a year and are expected to double by the year 2016 from the $2.2 trillion spent in 2007.78 And smokers cost companies even more—about 25 percent more for health care than nonsmokers do.79 However, the biggest health care cost for companies is obesity—an estimated $45 billion a year in medical expenditures and absenteeism.80 A study of manufacturing organizations found that presenteeism, which is defined as employees not performing at full capacity, was 1.8 percent higher for workers with moderate to severe obesity than for all other employees.81 The reason for the lost productivity is likely the result of reduced mobility because of body size or pain problems such as arthritis. Is it any wonder that organizations are looking for ways to control their health care costs? How? First, many organizations are providing opportunities for employ- ees to lead healthy lifestyles. From financial incentives to company-sponsored health and wellness programs, the goal is to limit rising health care costs. About 41 percent of compa- nies use some type of positive incentives aimed at encouraging healthy behavior, up from 34 percent in 1996.82 Another recent study indicated that nearly 90 percent of companies

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Chapter Summary

CHAPTER 6 | MANAGING HUMAN RESOURCES 179

surveyed planned to aggressively promote healthy lifestyles to their employees during the next three to five years.83 Many are starting sooner: Google, Yamaha Corporation of America, Caterpillar, and others are putting health food in company break rooms, cafeterias, and vending machines; providing deliveries of fresh organic fruit; and putting “calorie taxes” on fatty foods.84 In the case of smokers, however, some companies have taken a more aggressive stance by increasing the amount smokers pay for health insurance or by firing them if they refuse to stop smoking.

WHAT ABOUT EMPLOYEE PENSION PLAN COSTS? The other area where organizations are looking to control costs is employee pension plans. Corporate pensions have been around since the nineteenth century.85 But the days when companies could afford to give employees a broad-based pension that provided them a guaranteed retirement income have changed. Pension commitments have become such an enormous burden that companies can no longer afford them. In fact, the corporate pension system has been described as “fundamentally broken.”86 It’s not just struggling companies that have eliminated employee pension plans. Lots of reasonably sound companies—for instance, NCR, FedEx, Lockheed Martin, and Motorola—no longer provide pensions. Even IBM, which closed its pension plan to new hires in December 2004, told employees that their pension benefits would be frozen.87

Obviously, the pension issue is one that directly affects HR decisions. On the one hand, organizations want to attract talented, capable employees by offering them desirable bene- fits such as pensions. But on the other hand, organizations have to balance that with the costs of providing such benefits.

the creation of job descriptions and job specifica- tions. Then, if job needs are indicated, recruitment involves attempts to develop a pool of potential job candidates. Downsizing is used to reduce the labor supply. Selection involves determining who is best qualified for the job. Selection devices need to be both reliable and valid. Managers may want to give poten- tial employees a realistic job preview.

6.3 Explain how employees are provided with needed skills and knowledge. New hires must be acclimated to the organization’s culture and be trained and given the knowledge to do the job in a manner consistent with the organization’s goals. Orientation—job, work unit, and organizational—provides new employees with informa- tion to introduce them to the job. Training is used to help employees improve their ability to perform on the job.

6.4 Describe strategies for retaining competent, high-performing employees. Two HRM activities that play a role in this are managing employee performance and developing an appropriate compensation and benefits program. Managing employee performance involves establishing performance standards and then appraising

6.1 Describe the key components of the human resource management process and the important influences on that process. The HRM process consists of eight activities that will staff an organization with competent, high-performing employees who are capable of sustaining their performance level over the long term. The first three HR activities involve employment plan- ning and include recruitment, downsizing, and selection. The next two steps involve helping employees adapt to the organization and ensuring that their skills and knowl- edge are kept current, and include the HR activities of orienting and training. The last steps involve identifying performance goals, correcting performance problems, and helping employees sustain high levels of performance. These are done using the HR activities of performance appraisal, compensation and benefits, and safety and health. The main influences on the HRM process are legal although other environmental conditions such as restructuring, downsizing, diversity, and so forth can impact it as well.

6.2 Discuss the tasks associated with identifying and selecting competent employees. The first task is employment planning, which involves job analysis andIS

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Understanding the Chapter

1. How does HRM affect all managers?

2. Should an employer have the right to choose employ- ees without governmental interference? Support your position.

3. Some critics claim that corporate HR departments have outlived their usefulness and are not there to help employees but to shield the organization from legal problems. What do you think? What benefits are there to having a formal HRM process? What drawbacks?

4. Do you think it’s ethical for a prospective employer to delve into an applicant’s life by means of interviews, tests, and background investigations? What if those investigations involved looking at your Facebook page or personal blogs? Explain your position.

To check your understanding of learning outcomes 6.1 – 6.5 , go to

mymanagementlab.com and try the chapter questions.

5. Discuss the advantages and drawbacks of the various recruiting sources.

6. Discuss the advantages and drawbacks of the various selection devices.

7. What are the benefits and drawbacks of realistic job previews? (Consider this question from both the per- spective of the organization and the perspective of a potential employee.)

8. What, in your view, constitutes sexual harassment? Describe how companies can minimize sexual harass- ment in the workplace.

9. Research your chosen career by finding out what it’s going to take to be successful in this career in terms of education, skills, experience, and so forth. Write a personal career guide that details this information.

performance to see if those standards have been met. There are various performance appraisal techniques managers can use. If an employee’s performance is not up to par, managers need to assess why and take action. Compensation and benefits programs can help attract and retain competent and talented indi- viduals. Managers have to determine who gets paid what and what benefits will be offered.

6.5 Discuss contemporary issues in managing human resources. Downsizing is the planned elimination of jobs and must be managed from the perspective of

layoff victims and job survivors. Workforce diversity must be managed through HRM activities including recruitment, selection, and orientation. Sexual harassment is a significant concern of organizations and managers, which mean programs and mecha- nisms must be in place to educate all employees about it. Workplace spirituality involves attempts by organizations to make work more meaningful to employees. Finally, organizations are looking for ways to control HR costs, especially health care costs and pension costs.

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Understanding Yourself

How Much Do I Know About HRM? This scale measures how much you know about human resource management. Although it assesses your knowledge of some key findings within the HRM field, there are many other important things to know.

INSTRUMENT Below are a number of statements about research findings in human resource management. For each statement, indicate whether you think it is true or false.

0 = False

1 = True

1. Most managers give employees lower performance appraisals than they objectively deserve. 0 1

2. Poor performers are generally more realistic about their performance than good performers are. 0 1

3. Despite the popularity of drug testing, there is no clear evidence that applicants who score positive on drug tests are any less reliable or less productive employees. 0 1

4. Most people over-evaluate how well they perform on the job. 0 1

5. The most important determinant of how much training employees actually use on their jobs is how much they learned during training. 0 1

6. The most valid employment interviews are designed around each candidate’s unique background. 0 1

7. Although there are “integrity tests” that try to predict whether someone will steal, be absent, or otherwise take advantage of an employer, they don’t work well in practice because so many people lie on them. 0 1

8. On average, conscientiousness is a better predictor of job performance than is intelligence. 0 1

9. Most employees prefer to be paid on the basis of individual performance rather than on team or organizational performance. 0 1

10. There is a positive relationship between the proportion of managers receiving organizationally based pay incentives and company profitability. 0 1

Source: Based on S. L. Rynes, A. E. Colbert, and K. G. Brown, “HR Professionals’ Beliefs About Effective Human Resource Practices: Correspondence Between Research and Practice,” Human Resource Management (Summer, 2002), pp. 149–74.

SCORING KEY To score the measure, compare your answers to the correct answers, which are as follows: (1) False, (2) False, (3) False, (4) True, (5) False, (6) False, (7) False, (8) False, (9) True, and (10) True. Matches should be counted as one. Compute the number of correct responses. Scores will range from zero (all responses incorrect) to 10 (all responses correct).

ANALYSIS AND INTERPRETATION If you didn’t achieve a high score, don’t worry just yet. These questions were given to nearly 1,000 HR professionals in a variety of organi- zations. These professionals had an average of 14 years of work experience in HRM. How did they do? On some of the questions (such as, “Most managers give employees lower performance appraisals than they objectively deserve”), the vast majority gave the correct answer (which is false, by the way). On other questions, however, a much smaller percentage gave the correct answer. For example, for the statement: “On aver- age, conscientiousness is a better predictor of job performance than is intelligence,” only 18 percent of the HR professionals gave the correct response (false)!

Why the discrepancies? There are several reasons. It could be that practicing HR pro- fessionals are unaware of research findings, either because they don’t have time to read academic journals (or textbooks), or because the journals are so technically complex that it’s difficult to extract the main findings. It also could be that practicing professionals are aware of the research findings but choose not to utilize them because of factors such as political reasons, organizational inertia, or aversion to risk. In any event, closing the gap between research and practice is likely to be beneficial, as research has indicated that organizations that implement effective HRM practices perform better than those that don’t.

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FYIA (For Your Immediate Action)

Western Montana Power & Light

To: Sandra Gillies, Director of Human Resources From: William Munroney, CEO

Re: Sexual Harassment

Sandra, I think we might have a problem. It appears that some of our employees aren’t

clear about the practices and actions that do or do not constitute sexual harassment.

We can’t have any ambiguity or uncertainty about this, as you know. We need to

immediately develop a training program for all our employees and develop a workable

procedure to handle any complaints that might arise.

I want to make the issue of sexual harassment the primary topic at next month’s

executive board meeting. To facilitate discussion, I’d like for you to write a working

paper (no longer than two pages in length) describing (1) the content of an initial

two-hour employee workshop on sexual harassment and (2) an appropriate procedure

that all employees could follow if they believe that they have been the victims of sexual

harassment.

This fictionalized company and message were created for educational purposes only. It is not meant to reflect positively or negatively on management practices by any company that may share this name.

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CASE APPLICATION

L ike many companies today, ScottsMiracle-Gro is facing the dilemma ofpersuading employees to take better care of themselves without diminishing employee morale or getting hit with employee lawsuits. It’s on the leading edge of companies looking to monitor and change employee behavior. But sometimes that edge can be razor sharp.

Scotts’ CEO Jim Hagedorn (in photo) acknowledges that his company’s wellness program is controversial. In 2000, he, like many other CEOs, watched as his company’s health care costs skyrocketed. No help was in sight from either the government or from the health insurance industry, and the company’s employees were “bingeing on health care.” By February 2003, workers’ health care insurance premiums had doubled and employee morale had plummeted. Following his usual tell-it-like-it-is style, Hagedorn confronted the issue head-on with employees. He wanted them to know what they were up against—20 percent of the company’s net profits were going to health care. The company’s health-risk assessment showed that half of the 6,000 employees were overweight or morbidly obese and a quarter of them smoked. After seeing a CNN program late one night where a doctor was arguing that employers needed to get serious about employee obesity, smoking, and diabetes, Hagedorn knew what he had to do. Despite the late hour, he immediately called his HR chief and told her that he wanted to ban smoking and tackle obesity.

Getting that done wasn’t so easy. The legal department worried that the plan might violate federal laws. Other advisors told Hagedorn not to do it or that he was moving too fast. But he wasn’t easily dissuaded. He found a law firm that helped determine that in 21 states (including the company’s home base in Ohio) it wasn’t illegal to hire and fire people based on their smoking habits. Hagedorn also implemented a company-wide wellness program but real- ized that he needed a third-party to run it so managers couldn’t discriminate against employees based on their health.

Today, Scotts’ employees are encouraged to take exhaustive health-risk assessments. Those who don’t, pay $40 a month more in premiums. All employees are assigned a health coach, who works closely with those who are moderate to high risk. Those who don’t comply pay an additional $67 a month on top of the $40. Many employ- ees find the policy “intrusive.” Hagedorn hasn’t budged. He’s adamant about bringing down health care costs and getting employees all the help they need to be healthy and lead healthier lives. One employee who was fired on his 30th birthday because he failed a drug test for nicotine is suing the company. (The lawsuit is still proceeding through the courts system.) However, another employee who was prodded by his health coach to see a doctor had his life saved when surgeons found a 95 percent blockage in his heart that would have killed him within five days without the stents that were inserted.

Discussion Questions

1. What do you think about Hagedorn’s approach to controlling employee health care costs? Do you agree with it? Why or why not?

2. What benefits/drawbacks are there to this type of wellness program for (a) employees and (b) the company?

3. Research company wellness programs. What types of things are companies doing to encourage employee well- ness? Are there any things that you found that you might recommend that Hagedorn implement? Describe.

Sources: L. Alderman, “Getting Healthy, with a Little Help from the Boss,” New York Times Online, May 23, 2009; P. B. Kavilanz, “Unhealthy Habits Cost You More at Work,” CNNMoney.com, March 24, 2009; M. Freudenheim, “Seeking Savings, Employers Help Smokers Quit,” New York Times Online, October 26, 2007; and M. Conlin, “Get Healthy or Else,” BusinessWeek, February 26, 2007, pp. 58–69.

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The term career has several meanings. In popular usage, it can mean advancement (“she is on a management career track”), a profession (“he has chosen a career in accounting”), or a lifelong sequence of jobs (“his career has included 12 jobs in six organizations”). For our purposes, we define a career as the sequence of work positions held by a person during his or her lifetime. Using this definition, it’s apparent that we all have, or will have, a career. Moreover, the concept is as relevant to unskilled laborers as it is to software designers or physicians. But career development isn’t what it used to be!

What Was Career Development Like, Historically? Although career development has been an important topic in management courses for years, there have been some dramatic changes in the concept. Career development programs used to be designed to help employees advance their work lives within a specific organization. The focus of such programs was to provide employees the information, assessment, and training needed to help them realize their career goals. Career development was also a way for organizations to attract and retain highly talented people. This approach has all but disappeared in today’s workplace. Now, organizations that have such traditional career programs are few and far between. Downsizing, restructuring, and other organizational adjustments have brought us to one significant conclusion about career development: You— not the organization—will be responsible for designing, guiding, and developing your own career.

What Is Career Development Like, Now? This idea of increased personal responsibility for one’s career has been described as a boundaryless career. The challenge is that there are few hard-and-fast rules to guide you.

One of the first decisions you have to make is career choice. The optimum choice is one that offers the best match between what you want out of life and your interests, your abili- ties and personality, and market opportunities. Good career choices should result in a series of jobs that give you an opportunity to be a good performer, make you want to maintain your commitment to your career, lead to highly satisfying work, and give you the proper balance between work and personal life. A good career match, then, is one in which you are able to develop a positive self-concept, to do work that you think is important, and to lead the kind of life you desire. In a recent survey by Capital One Financial Corporation, 66 percent of college graduates said that a comprehensive benefits package (including, for example, health care, 401(k) program, child care, and domestic partner benefits) was the most important factor in their job search. Starting salary ranked second at 64 percent, with job location

boundaryless career When an individual takes personal responsibility for his or her own career.

career The sequence of work positions held by a person during his or her lifetime.

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ranked third at 60 percent. Today’s college grads are also looking to be rewarded or compensated (with comp time or matching donations, for instance) for their volunteer and philanthropic activities.

Once you’ve identified a career choice, it’s time to initiate the job search. However, we aren’t going to get into the specifics of job hunting, writing a résumé, or interviewing successfully, although those things are important. Let’s fast-forward through all that and assume that your job search was successful. It’s time to go to work! How do you survive and excel in your career?

How Can I Have a Successful Career? What can you do to improve your chances for career success? You’re already doing the most important thing: You’re getting a college education! It’s the surest way to increase your lifetime earnings. Currently, the average high school graduate earns $27,915 a year. His or her counterpart with a college degree earns $51,206. College graduates earn, on average, $800,000 more than high school graduates over their working career. Investing in your education and training is one of the best investments you’ll make in your lifetime. What else can you do? Here are some suggestions based on extensive research into career management:

Assess Your Personal Strengths and Weaknesses Where do your natural talents lie? What can you do, relative to others, that gives you a compet- itive advantage? Are you particularly good with numbers? Have strong people skills? Good with your hands? Write better than most people? Everyone has some things that they do better than others and some things where they’re weak. Play to your strengths.

Identify Market Opportunities Where are tomorrow’s job opportunities? Regardless of your strengths, certain job categories are likely to decline in the coming decades—for instance, bank tellers, small farmers, movie projectionists, travel agents, and secretaries. In contrast, there are likely to be abundant opportunities created by an increasingly aging society, continued emphasis on technology, increased spending on education and training, and concern with personal security. This is likely to create excellent opportunities for jobs in gerontological counseling, network administration, training consultants, and security-alarm installers.

Take Responsibility for Managing Your Own Career Historically, companies tended to assume responsibility for their employees’ careers. Today, this is the exception rather than the rule. Employees are increasingly expected to take responsibility for their own careers.

Think of your careers as your business and you’re its CEO. To survive, you have to monitor market forces, head off competitors, and be ready to quickly take advantage of opportunities when they surface. You have to protect your career from harm and position yourself to benefit from changes in the environment.

Develop Your Interpersonal Skills Interpersonal skills, especially the ability to communicate, top the list of almost every employer’s “must have” skills. Whether it’s getting a new job or a promotion, strong interpersonal skills are likely to give you a competitive edge.

Practice Makes Perfect There’s an increasing amount of evidence indicating that super-high achievers aren’t fundamentally different from the rest of us. They just work harder and smarter. It’s been found, based on studies of world-class performers in music, sports, chess, science, and

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business, that people like Tiger Woods, Mozart, and Bill Gates put in about 10,000 hours (or 10 years at 1,000 hours a year) of persistent, focused training and experience before they hit their peak performance level. If you want to excel in any field, you should expect to have to put in a lot of deliberate practice—consistently engaging in repeated activity specifically designed to improve performance beyond your current comfort and ability level.

Stay Up-to-Date In today’s dynamic world, skills can become obsolete quickly. To keep your career on track, you need to make learning a lifetime commitment. You should be continually “going to school”—if not taking formal courses, then reading books and journals to ensure that you don’t get caught with obsolete skills.

Network Networking refers to creating and maintaining beneficial relationships with others in order to accomplish your goals. It helps to have friends in high places. It also helps to have contacts who can keep you informed of changes that are going on in your organization and in your industry. Go to conferences. Maintain contact with former college friends and alumni. Get involved in community activities. Cultivate a broad set of relationships. And in today’s increasingly interconnected world, join online business networking groups like LinkedIn, spoke, and Talkbiznow.

Stay Visible Networking can increase your visibility. So, too, can writing articles in your professional journals, teaching classes or giving talks in your area of expertise, attending conferences and professional meetings, and making sure your accomplishments are properly promoted. You increase your mobility and value in the marketplace by keeping visible.

Seek a Mentor Employees with mentors are likely to have enhanced mobility, increased knowledge of the organization’s inside workings, greater access to senior executives, increased satisfaction, and increased visibility. For women and minorities, having mentors has been shown to be particularly helpful in promoting career advancement and success.

Leverage Your Competitive Advantage Develop skills that will give you a competitive advantage in the marketplace. Especially focus on skills that are important to employers, skills that are scarce, and areas where you have limited competition. Try to avoid a worst-case scenario: You have a job that anyone can learn in 30 minutes. Remember that the harder it is for you to learn and develop a highly prized skill, the harder it’ll also be for others to acquire it. Generally speaking, the more training necessary to do a job and the fewer people who have that training, the greater your security and influence.

Here’s an insight from many years as a student and a professor: To succeed in school, you have to be a generalist and excel at everything. For instance, to earn a 4.0 GPA, you need to be a star in English, math, science, geography, languages, etc. The “real world,” on the other hand, rewards specialization. You don’t have to be good at everything. You just need to be good at something that others aren’t and that society values. You can be lousy in math or science and still be a very successful opera singer, artist, salesperson, or writer. You don’t have to excel in English to be a computer programmer or electrician. The secret to life success is identifying your comparative advantage and then developing it. And, as we’ve noted previously, you need to invest approximately 10,000 hours in honing your skills to achieve optimum proficiency.IS

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Don’t Shun Risks Don’t be afraid to take risks, especially when you’re young and you don’t have much to lose. Going back to school, moving to a new state or country, or quitting a job to start your own business can be the decision that will set your life in a completely new direction. Great accomplishments almost always require taking the path less traveled; and the road to nowhere is paved with fears of the unknown.

It’s OK to Change Jobs Past generations often believed “you don’t leave a good job.” That advice no longer applies. In today’s fast-changing job market, staying put often only means that you’re staying behind. Employers no longer expect long-term loyalty. And to keep your skills fresh, your income increasing, and your job tasks interesting, it will be increasingly likely that you’ll need to change employers.

Opportunities, Preparation, and Luck = Success Successful people are typically ambitious, intelligent, and hardworking. But they are also lucky. It’s not by happenchance that many of the biggest technology success stories—Bill Gates and Paul Allen at Microsoft, Steve Jobs at Apple, Scott McNealy at Sun Microsystems, Eric Schmidt at Novell and Goggle—were born in a narrow three-year period between June 1953 and March 1956. They were smart. They were interested in computers and technology. But they were also lucky. They reached their teens and early 20s in 1975—at the dawn of the personal computer age. Those people with similar interests and talents but born in the mid-1940s were likely to have joined a firm like IBM out of college and been enamored with mainframe computers. Had they been born in the early 1960s, they would have missed getting in on the ground floor of the revolution.

Success is a matter of matching up opportunities, preparation, and luck. It’s been suggested that few of us get more than a couple of special opportunities in our lifetime. If you’re lucky, you will recognize those opportunities, have made the proper preparations, and then act on them.

You can’t control when you were born, where you were born, your parents’ finances, or the like. Those are the luck factors. But what you can control is your preparation and willingness to act when opportunity knocks.

Sources: “Managing Your Career Module” based on: J. H. Greenhaus, V. M. Godstalk, and G. A. Callahan, Career Management, 3rd ed. (Cincinnati, OH: South–Western, 2000); K. A. Ericsson, “Deliberate Practice and the Modifiability of Body and Mind,” International Journal of Sports Psychology (January–March 2007), pp. 4–34; J. P. Newport, “Mastery, Just 10,000 Hours Away,” Wall Street Journal, March 14–15, 2009, p. W6; “Capital One Survey Highlights What Today’s College Graduates Want from Employers,” http://www.businesswire.com (June 10, 2008); M. Gladwell, Outliers: The Story of Success (New York: Little, Brown, 2008); R. N. Boles, What Color Is Your Parachute? 2009: A Practical Manual for Job-Hunters and Career-Changers (Berkeley, CA: Ten Speed Press, 2009); D. E. Super and D. T. Hall, “Career Development: Exploration and Planning,” in M. R. Rosenzweig and L.W. Porter (eds.), Annual Review of Psychology, vol. 29 (Palo Alto, CA: Annual Reviews, 1978), p. 334; and M. B. Arthur and D. M. Rousseau, The Boundaryless Career: A New Employment Principle for a New Organizational Era (New York: Oxford University Press, 1996).

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Understanding Yourself

How Confident Am I in My Abilities to Succeed? As we indicated earlier, you have to work at being successful. One personal characteristic that can affect your chances at being successful includes how confident you are in you abilities to succeed.

INSTRUMENT Indicate the extent to which you agree or disagree with each of the following statements using the scale below.

1 = Strongly disagree

2 = Disagree

3 = Neutral

4 = Agree

5 = Strongly agree

Source: T. A. Judge, E. A. Locke, C. C. Durham, and A. N. Kluger, “Dispositional Effects on Job and Life Satisfaction: The Role of Core Evaluations,” Journal of Applied Psychology 83 (1998), pp. 17–34.

1. I am strong enough to overcome life’s struggles. 1 2 3 4 5

2. At root, I am a weak person. 1 2 3 4 5

3. I can handle the situations that life brings. 1 2 3 4 5

4. I usually feel that I am an unsuccessful person. 1 2 3 4 5

5. I often feel that there is nothing that I can do well. 1 2 3 4 5

6. I feel competent to deal effectively with the real world. 1 2 3 4 5

7. I often feel like a failure. 1 2 3 4 5

8. I usually feel I can handle the typical problems that come up in life. 1 2 3 4 5

SCORING KEY To score the measure, first reverse-code items 2, 4, 5, and 7 so that 1 = 5, 2 = 4, 3 = 3, 4 = 2, and 5 = 1. Then add up all your responses.

ANALYSIS AND INTERPRETATION Your score on this measure can range from 8 to 40. The higher your score, the more confidence you have in yourself to be successful. Confidence has an influence on many things we do. People who are confident have high self-efficacy that generalizes across a variety of situations. They believe that they have the capability to mobilize the motivation and resources required to perform successfully on different tasks or in different jobs. Ultimately, this confidence translates into better performance. Why? One reason is that successful individuals set more goals for themselves, are more committed to their goals, and even persist in achieving their goals in the face of failure. In fact, when individuals who are confident about themselves are given negative feedback (say, by a supervisor), they respond by increasing their effort and motivation. Perhaps not surprisingly, individuals with such positive self-concepts are more satisfied with their jobs and obtain higher levels of career success.

If you don’t have a great deal of confidence in yourself, there are several ways to increase it. One was is to simply gain experience with tasks that you are less confident about. Another way is to watch someone else, such as a friend, perform the task. For instance, if you don’t have confidence in your ability to hit a tennis ball, first observing someone else do it is likely to boost your confidence. Finally, being persuaded by someone else that you can do something (think motivational speaker) helps to increase the efficacy of individuals to perform a given task.

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