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Chapter 7
Recruiting, Motivating, and
Keeping Quality Employees
The Grounds of a Great Work Environment Howard Schultz has vivid memories of his father slumped on the couch with his leg in a
cast. [1]
The ankle would heal, but his father had lost another job—this time as a driver
for a diaper service. It was a crummy job; still, it put food on the table, and if his father
couldn’t work, there wouldn’t be any money. Howard was seven, but he understood the
gravity of the situation, particularly because his mother was seven months pregnant,
and the family had no insurance.
This was just one of the many setbacks that plagued Schultz’s father throughout his
life—an honest, hard-working man frustrated by a system that wasn’t designed to cater
to the needs of common workers. He’d held a series of blue-collar jobs (cab driver, truck
driver, factory worker), sometimes holding two or three at a time. Despite his willingness
to work, he never earned enough money to move his family out of Brooklyn’s federally
subsidized housing projects. Schultz’s father died never having found fulfillment in his
work life—or even a meaningful job. It was the saddest day of Howard’s life.
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Howard Schultz toasts at the launch of their new ―everyday‖ brew, Pike Place Roast,
April 8, 2008, in Bryant Park in New York City.
Photo by Mario Tama/Getty Images
As a kid, did Schultz ever imagine that one day he’d be the founder and chairman of
Starbucks Coffee Company? Of course not. But he did decide that if he was ever in a
position to make a difference in the lives of people like his father, he’d do what he could.
Remembering his father’s struggles and disappointments, Schultz has tried to make
Starbucks the kind of company where he wished his father had worked. ―Without even a
high school diploma,‖ Schultz admits, ―my father probably could never have been an
executive. But if he had landed a job in one of our stores or roasting plants, he wouldn’t
have quit in frustration because the company didn’t value him. He would have had good
health benefits, stock options, and an atmosphere in which his suggestions or
complaints would receive a prompt, respectful response.‖ [2]
Schultz is motivated by both personal and business considerations: ―When employees
have self-esteem and self-respect,‖ he argues, ―they can contribute so much more: to
their company, to their family, to the world.‖ [3]
His commitment to his employees is
embedded in Starbuck’s mission statement, whose first objective is to ―provide a great
work environment and treat each other with respect and dignity.‖ [4]
Those working at
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Starbucks are called partners because Schultz believes working for his company is not
just a job, it’s a passion. [5]
[1] Introductory material on Howard Schultz and Starbucks comes from Howard Schultz and Dori Jones Yang, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time (New York: Hyperion, 1997), 3–8. [2] Howard Schultz and Dori Jones Yang, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time (New York: Hyperion, 1997), 138. [3] Howard Schultz and Dori Jones Yang, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time (New York: Hyperion, 1997), 6–7. [4] ―Our Starbucks Mission Statement,‖ Starbucks, http://www.starbucks.com/about-us/company- information/mission-statement (accessed October 8, 2011). [5] ―Our Starbucks Mission Statement,‖ Starbucks, http://www.starbucks.com/about-us/company- information/mission-statement (accessed October 8, 2011).
7.1 Human Resource Management
L E A R N I N G O B J E C T I V E
1. Define human resource management and explain how managers develop and implement a human resource plan.
Employees at Starbucks are vital to the company’s success. They are its public face,
and every dollar of sales passes through their hands. [1]
According to Howard Schultz,
they can make or break the company. If a customer has a positive interaction with an
employee, the customer will come back. If an encounter is negative, the customer is
probably gone for good. That’s why it’s crucial for Starbucks to recruit and hire the right
people, train them properly, motivate them to do their best, and encourage them to stay
with the company. Thus, the company works to provide satisfying jobs, a positive work
environment, appropriate work schedules, and fair compensation and benefits. These
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activities are part of Starbucks’s strategy to deploy human resources in order to gain
competitive advantage. The process is called human resource management (HRM),
which consists of all actions that an organization takes to attract, develop, and retain
quality employees. Each of these activities is complex. Attracting talented employees
involves the recruitment of qualified candidates and the selection of those who best fit
the organization’s needs. Development encompasses both new-employee orientation
and the training and development of current workers. Retaining good employees means
motivating them to excel, appraising their performance, compensating them
appropriately, and doing what’s possible to retain them.
Human Resource Planning
How does Starbucks make sure that its worldwide retail locations are staffed with just
the right number of committed employees? How does Walt Disney World ensure that it
has enough qualified ―cast members‖ to provide visitors with a ―magical‖ experience?
How does Norwegian Cruise Lines make certain that when the Norwegian Dawn pulls
out of New York harbor, it has a complete, fully trained crew on board to feed, entertain,
and care for its passengers? Managing these tasks is a matter of strategic human
resource planning—the process of developing a plan for satisfying an organization’s
human resources (HR) needs.
A strategic HR plan lays out the steps that an organization will take to ensure that it has
the right number of employees with the right skills in the right places at the right times.
HR managers begin by analyzing the company’s mission, objectives, and strategies.
Starbucks’s objectives, for example, include the desire to ―develop enthusiastically
satisfied customers‖ [2]
as well as to foster an environment in which employees treat
both customers and each other with respect. Thus, the firm’s HR managers look for
people who are ―adaptable, self-motivated, passionate, creative team members.‖
[3] Likewise, Disney’s overall objectives include not only making all visitors feel as if
they’re special in a special place but also ensuring that employees’ appearance reflects
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a special image (there’s even a forty-seven-page book on the subject). [4]
Disney looks
for people who best fulfill these job requirements. The main goal of Norwegian Cruise
Lines—to lavish passengers with personal attention—determines not only the type of
employee desired (one with exceptionally good customer-relation skills and a strong
work ethic) but also the number needed (one for every two passengers on
the Norwegian Dawn). [5]
Job Analysis
To develop an HR plan, HR managers must obviously be knowledgeable about the jobs
that the organization needs performed. They organize information about a given job by
performing a job analysis to identify the tasks, responsibilities, and skills that it entails,
as well as the knowledge and abilities needed to perform it. Managers also use the
information collected for the job analysis to prepare two documents:
A job description, which lists the duties and responsibilities of a position
A job specification, which lists the qualifications—skills, knowledge, and abilities—
needed to perform the job
HR Supply and Demand Forecasting
Once they’ve analyzed the jobs within the organization, HR managers must forecast
future hiring (or firing) needs. This is the three-step process summarized in Figure 7.1
"How to Forecast Hiring (and Firing) Needs".
Figure 7.1 How to Forecast Hiring (and Firing) Needs
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Starbucks, for instance, might find that it needs three hundred new employees to work
at stores scheduled to open in the next few months. Disney might determine that it
needs two thousand new cast members to handle an anticipated surge in visitors.
The Norwegian Dawn might be short two dozen restaurant workers because of an
unexpected increase in reservations.
After calculating the disparity between supply and future demand, HR managers must
draw up plans for bringing the two numbers into balance. If the demand for labor is
going to outstrip the supply, they may hire more workers, encourage current workers to
put in extra hours, subcontract work to other suppliers, or introduce labor-saving
initiatives. If the supply is greater than the demand, they may deal with overstaffing by
not replacing workers who leave, encouraging early retirements, laying off workers, or
(as a last resort) firing workers.
Recruiting Qualified Employees
Armed with information on the number of new employees to be hired and the types of
positions to be filled, the HR manager then develops a strategy for recruiting potential
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employees. Recruiting is the process of identifying suitable candidates and encouraging
them to apply for openings in the organization.
Before going any further, we should point out that, in recruiting and hiring, managers
must comply with antidiscrimination laws; violations can have legal consequences.
Discrimination occurs when a person is treated unfairly on the basis of a characteristic
unrelated to ability. Under federal law, it’s illegal to discriminate in recruiting and hiring
on the basis of race, color, religion, sex, national origin, age, or disability. (The same
rules apply to other employment activities, such as promoting, compensating, and
firing.) [6]
TheEqual Employment Opportunity Commission (EEOC) enforces a number of
federal employment laws, including the following:
Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination
based on race, color, religion, sex, or national origin. Sexual harassment is also a
violation of Title VII.
The Equal Pay Act of 1963, which protects both women and men who do
substantially equal work from sex-based pay discrimination.
The Age Discrimination in Employment Act of 1964, which protects individuals who
are forty or older.
Title I and Title V of the Americans with Disabilities Act of 1990, which prohibits
employment discrimination against individuals with disabilities. [7]
Where to Find Candidates
The first step in recruiting is to find qualified candidates. Where do you look for them,
and how do you decide whether they’re qualified? Let’s start with the second part of the
question first. A qualified person must be able to perform the duties listed in the job
description and must possess the skills, knowledge, and abilities detailed in the job
specification. In addition, he or she must be a good ―fit‖ for the company. A Disney
recruiter, for example, wants a candidate who fits a certain image—someone who’s
clean-cut and ―wholesome‖ looking. The same recruiter might also favor candidates with
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certain qualities—someone who has a ―good attitude,‖ who’s a ―go-getter‖ and a ―team
player,‖ and who’s smart, responsible, and stable. [8]
Internal versus External Recruiting
Where do you find people who satisfy so many criteria? Basically, you can look in two
places: inside and outside your own organization. Both options have pluses and
minuses. Hiring internally sends a positive signal to employees that they can move up in
the company—a strong motivation tool and a reward for good performance. In addition,
because an internal candidate is a known quantity, it’s easier to predict his or her
success in a new position. Finally, it’s cheaper to recruit internally. On the other hand,
you’ll probably have to fill the promoted employee’s position. Going outside gives you
an opportunity to bring fresh ideas and skills into the company. In any case, it’s often
the only alternative, especially if no one inside the company has just the right
combination of skills and experiences. Entry-level jobs usually have to be filled from the
outside.
How to Find Candidates
Whether you search inside or outside the organization, you need to publicize the
opening. If you’re looking internally in a small organization, you can alert employees
informally. In larger organizations, HR managers generally post openings on bulletin
boards (often online) or announce them in newsletters. They can also seek direct
recommendations from various supervisors.
Recruiting people from outside is more complicated. It’s a lot like marketing a product to
buyers: in effect, you’re marketing the virtues of working for your company. Starbucks
uses the following outlets to advertise openings:
A dedicated section of the corporate Web site (―Job Center,‖ which lists openings,
provides information about the Starbucks experience, and facilitates the submission
of online applications)
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College campus recruiting (holding on-campus interviews and information sessions
and participating in career fairs)
Internships designed to identify future talent among college students
Announcements on employment Web sites
like Monster.com, Vault.com,Glassdoor.com, and SimplyHired.com
Newspaper classified ads
Facebook and Twitter
Local job fairs
In-store recruiting posters
Informative ―business cards‖ for distribution to customers [9]
When asked what it takes to attract the best people, Starbucks’s senior executive Dave
Olsen replied, ―Everything matters.‖ Everything Starbucks does as a company bears on
its ability to attract talent. Accordingly, everyone is responsible for recruiting, not just HR
specialists. In fact, the best source of quality applicants is the company’s own labor
force. [10]
The Selection Process
Recruiting gets people to apply for positions, but once you’ve received applications, you
still have to select the best candidate—another complicated process.
The selection process entails gathering information on candidates, evaluating their
qualifications, and choosing the right one. At the very least, the process can be time-
consuming—particularly when you’re filling a high-level position—and often involves
several members of an organization.
Let’s examine the selection process more closely by describing the steps that you’d
take to become a special agent for the Federal Bureau of Investigation (FBI). [11]
Most
business students don’t generally aspire to become FBI agents, but the FBI is quite
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interested in business graduates—especially if you have a major in accounting or
finance. With one of these backgrounds, you’ll be given priority in hiring. Why?
Unfortunately, there’s a lot of white-collar crime that needs to be investigated, and
people who know how to follow the money are well suited for the task.
Application
The first step in becoming a gun-toting accountant is, obviously, applying for the job.
Don’t bother unless you meet the minimum qualifications: you must be a U.S. citizen, be
age twenty-three to thirty-seven, be physically fit, and have a bachelor’s degree. To
provide factual information on your education and work background, you’ll submit
an application, which the FBI will use as an initial screening tool.
Employment Tests
Next comes a battery of tests (a lot more than you’d take in applying for an everyday
business position). Like most organizations, the FBI tests candidates on the skills and
knowledge entailed by the job. Unlike most businesses, however, the FBI will also
measure your aptitude, evaluate your personality, and assess your writing ability. You’ll
have to take a polygraph (lie-detector) test to determine the truthfulness of the
information you’ve provided, uncover the extent of any drug use, and disclose potential
security problems.
Interview
If you pass all these tests (with sufficiently high marks), you’ll be granted an interview. It
serves the same purpose as it does for business recruiters: it allows the FBI to learn
more about you and gives you a chance to learn more about your prospective employer
and your possible future in the organization. The FBI conducts structured interviews—a
series of standard questions. You’re judged on both your answers and your ability to
communicate orally.
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Physical Exam and Reference Checks
Let’s be positive and say you passed the interview. What’s next? You still have to pass
a rigorous physical examination (including a drug test), as well as background and
reference checks. Given its mission, the FBI sets all these hurdles a little higher than
the average retail clothing chain. Most businesses will ask you to take a physical exam,
but you probably won’t have to meet the fitness standards set by the FBI. Likewise,
many businesses check references to verify that applicants haven’t lied about (or
exaggerated) their education and work experience. The FBI goes to great lengths to
ensure that candidates are suitable for law-enforcement work.
Final Decision
The last stage in the process is out of your control. Will you be hired or rejected? This
decision is made by one or more people who work for the prospective employer. For a
business, the decision maker is generally the line manager who oversees the position
being filled. At the FBI, the decision is made by a team at FBI headquarters. If you’re
hired as a special agent, you’ll spend twenty-one weeks of intensive training at the FBI
Academy in Quantico, Virginia.
Contingent Workers
Though most people hold permanent, full-time positions, there’s a growing number of
individuals who work at temporary or part-time jobs. Many of these are contingent
workers hired to supplement a company’s permanent workforce. Most of them are
independent contractors, consultants, or freelancers who are paid by the firms that hire
them. Others are on-call workers who work only when needed, such as substitute
teachers. Still others are temporary workers (or ―temps‖) who are employed and paid by
outside agencies or contract firms that charge fees to client companies.
The Positives and Negatives of Temp Work
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The use of contingent workers provides companies with a number of benefits. Because
they can be hired and fired easily, employers can better control labor costs. When
things are busy, they can add temps, and when business is slow, they can release
unneeded workers. Temps are often cheaper than permanent workers, particularly
because they rarely receive costly benefits. Employers can also bring in people with
specialized skills and talents to work on special projects without entering into long-term
employment relationships. Finally, companies can ―try out‖ temps: if someone does well,
the company can offer permanent employment; if the fit is less than perfect, the
employer can easily terminate the relationship. There are downsides to the use of
contingent workers, including increased training costs and decreased loyalty to the
company. Also, many employers believe that because temps are usually less committed
to company goals than permanent workers, productivity suffers.
What about you? Does temporary work appeal to you? On the plus side, you can move
around to various companies and gain a variety of skills. You can see a company from
the inside and decide up front whether it’s the kind of place you’d like to work at
permanently. If it is, your temporary position lets you showcase your skills and talents
and grab the attention of management, which could increase the likelihood you’ll be
offered a permanent position. There are also some attractive lifestyle benefits. You
might, for example, work at a job or series of jobs for, say, ten months and head for the
beach for the other two. On the other hand, you’ll probably get paid less, receive no
benefits, and have no job security. For most people, the idea of spending two months a
year on the beach isn’t that appealing.
K E Y T A K E A W A Y S
The process of human resource management consists of all the actions that an organization takes to attract, develop, and retain quality employees.
To ensure that the organization is properly staffed, managers engage in strategic human resource planning—the process of developing a plan for satisfying the organization’s human resource needs.
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Managers organize information about a given job by performing a job analysis, which they use to prepare two documents: a job description listing the duties and responsibilities of a position and a job specification, which lists the qualifications— skills, knowledge, and abilities—needed to perform the job.
After analyzing the jobs that must be performed, the HR manager forecasts future hiring needs and begins the recruiting process to identify suitable candidates and encourage them to apply.
In recruiting and hiring, managers must comply with antidiscrimination laws enforced by the Equal Employment Opportunity Commission (EEOC).
Discrimination occurs when a person is treated unfairly on the basis of a characteristic unrelated to ability, such as race, color, religion, sex, national origin, age, or disability.
Once a pool of suitable candidates has been identified, managers begin the selection process, reviewing information provided by candidates on employment applications and administering tests to assess candidates’ skills and knowledge.
Candidates who pass this stage may be granted an interview and, perhaps, offered a job.
E X E R C I S E
You’re the chairperson of the management department at your college. Describe the steps you’d take to ensure that your department has enough qualified faculty to meet its needs.
[1] Howard Schultz and Dori Jones Yang, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time (New York: Hyperion, 1997), 125. [2] ―Our Starbucks Mission Statement,‖ Starbucks, http://www.starbucks.com/about-us/company- information/mission-statement (accessed October 8, 2011). [3] ―25 Top MBA Employers,‖ CNNMoney,http://money.cnn.com/galleries/2007/fortune/0704/gallery.MBA_employers.fortune/14.html (a ccessed October 8, 2011). [4] ―How Disney Puts the Magic in Recruiting,‖ Vault,http://www.vault.com/nr/newsmain.jsp?nr_page=3&ch_id=400&article_id=51875&cat_id =1083 (accessed May 6, 2006). [5] ―Overview of Careers on Cruise Ships,‖ Career Prospects in Virginia,http://www3.ccps.virginia.edu/career_prospects/briefs/PS/SummaryCruise.shtml(accessed May 6, 2006). [6] The U.S. Equal Employment Opportunity Commission, ―Discriminatory Practices,‖http://www.eeoc.gov/laws/practices/index.cfm (accessed October 8, 2011). [7] The U.S. Equal Employment Opportunity Commission, ―Federal Equal Employment Opportunity (EEO) Laws,‖ http://www.eeoc.gov/laws/statutes/index.cfm (accessed October 8, 2011). [8] Bob Nelson and Peter Economy, Managing for Dummies, 2nd ed. (New York: Wiley, 2003), 60.
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[9] ―Target Your Recruitment Market,‖ InFocus: Recruiter News, http://www.net- temps.com/recruiters/infocus/article.htm?op=view&id=662 (accessed October 6, 2011). [10] David Lee, ―Becoming a Talent Magnet: Your First Task as a Recruiter: Recruit Senior Management onto Your Team,‖ http://www.humannatureatwork.com/Recruiting-Employees.htm (accessed October 8, 2011). [11] The information in this section comes from two sources: Federal Bureau of Investigation, ―Jobs: Special Agents,‖ http://www.fbijobs.gov/ (accessed October 9, 2011); ―Special Agent Application and Hiring Process,‖ Federal Bureau of Investigations,http://www.fbijobs.gov/112.asp, (accessed October 9, 2011).
7.2 Developing Employees
L E A R N I N G O B J E C T I V E
1. Explain how companies train and develop employees, and discuss the importance of a diverse workforce.
Because companies can’t survive unless employees do their jobs well, it makes
economic sense to train them and develop their skills. This type of support begins when
an individual enters the organization and continues as long as he or she stays there.
New-Employee Orientation
Have you ever started your first day at a new job feeling upbeat and optimistic only to
walk out at the end of the day thinking that maybe you’ve taken the wrong job? If this
happens too often, your employer may need to revise its approach to orientation—the
way it introduces new employees to the organization and their jobs. Starting a new job
is a little like beginning college; at the outset, you may be experiencing any of the
following feelings:
Somewhat nervous but enthusiastic
Eager to impress but not wanting to attract too much attention
Interested in learning but fearful of being overwhelmed with information
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Hoping to fit in and worried about looking new or inexperienced [1]
The employer who understands how common such feelings are is more likely not only
to help newcomers get over them but also to avoid the pitfalls often associated with
new-employee orientation:
Failing to have a workspace set up for you
Ignoring you or failing to supervise you
Neglecting to introduce you to coworkers (or introducing you to so many people that
you have no chance of remembering anybody’s name)
Assigning you no work or giving you busywork unrelated to your actual job
Swamping you with facts about the company [2]
A good employer will take things slowly, providing you with information about the
company and your job on a need-to-know basis while making you feel as comfortable
as possible. You’ll get to know the company’s history, traditions, policies, and culture
over time. You’ll learn more about salary and benefits and how your performance will be
evaluated. Most importantly, you’ll find out how your job fits into overall operations and
what’s expected of you.
Training and Development
It would be nice if employees came preprogrammed with all the skills they need to do
their jobs. It would also be nice if job requirements stayed the same: once you’ve
learned how to do a job (or been preprogrammed), you’d know how to do it forever. In
reality, new employees must be trained; moreover, as they grow in their jobs or as their
jobs change, they’ll need additional training. Unfortunately, training is costly and time-
consuming.
How costly? On average, for every $1 in payroll, large companies spend close to $0.03
in employee training and development. [3]
The consulting firm Booz Allen Hamilton
invests almost $0.08 in employee training and development. At Pfizer, the world’s
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largest pharmaceutical company, the total is $0.14 out of every payroll dollar. [4]
What’s
the payoff? Why are such companies willing to spend so much money on their
employees? Pfizer, whose motto is ―Succeed through People,‖ regards employee
growth and development as its top priority. At Booz Allen Hamilton, consultants
specialize in finding innovative solutions to client problems, and their employer makes
sure that they’re up-to-date on all the new technologies by maintaining a ―technology
petting zoo‖ at its training headquarters. It’s called a ―petting zoo‖ because employees
get to see, touch, and interact with new and emerging technologies. For example, those
attending the ―petting zoo‖ several years ago got to try out the Segway Human
Transporter even before it hit the market. [5]
At Booz Allen Hamilton’s technology ―petting zoo,‖ employees are receiving off-the-
job training. This approach allows them to focus on learning without the distractions that
would occur in the office. More common, however, is informal on-the-job training, which
may be supplemented with formal training programs. This is the method, for example,
by which you’d move up from mere coffee maker to a full-fledged ―barista‖ if you worked
at Starbucks. [6]
You’d begin by reading a large spiral book (titled Starbucks University)
on the responsibilities of the barista. After you’ve passed a series of tests on the reading
material, you’ll move behind the coffee bar, where a manager or assistant manager will
give you hands-on experience in making drinks. According to the rules, you can’t
advance to a new drink until you’ve mastered the one you’re working on; the process,
therefore, may take a few days (or even weeks). Next, you have to learn enough about
different types of coffee to be able to describe them to customers. (Because this course
involves drinking a lot of coffee, you don’t have to worry about staying awake.)
Eventually, you’ll be declared a coffee connoisseur, but there’s still one more set of
skills to master: you must complete a customer-service course, which trains you in
making eye contact with customers, anticipating their needs, and making them feel
welcome. [7]
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Diversity in the Workplace
The makeup of the U.S. workforce has changed dramatically over the past 50 years. In
the 1950s, more than 60 percent was composed of white males. [8]
Today’s workforce,
however, reflects the broad range of differences in the population—differences in
gender, race, ethnicity, age, physical ability, religion, education, and lifestyle. As you
can see in Table 7.1 "Employment by Gender and Ethnic Group", more women and
minorities have entered the workforce, and white males now make up only 36 percent of
the workforce. [9]
Their percentage representation diminished as more women and
minorities entered the workforce.
Most companies today strive for diverse workforces. HR managers work hard to recruit,
hire, develop, and retain a workforce that’s representative of the general population. In
part, these efforts are motivated by legal concerns: discrimination in recruiting, hiring,
advancement, and firing is illegal under federal law and is prosecuted by the
EEOC. [10]
Companies that violate antidiscrimination laws not only are subject to severe
financial penalties but also risk damage to their reputations. In November 2004, for
example, the EEOC charged that recruiting policies at Abercrombie & Fitch, a national
chain of retail clothing stores, had discriminated against minority and female job
applicants between 1999 and 2004. The employer, charged the EEOC, had hired a
disproportionate number of white salespeople, placed minorities and women in less
visible positions, and promoted a virtually all-white image in its marketing efforts. Six
days after the EEOC filed a lawsuit, the company settled the case at a cost of $50
million, but the negative publicity will hamper both recruitment and sales for some time
to come. [11]
Table 7.1 Employment by Gender and Ethnic Group
Group Total (%) Males (%) Females (%)
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Group Total (%) Males (%) Females (%)
All employees 100 52 48
White 68 36 32
African American 14 6 8
Hispanic or Latino 13 7 5
Asian/Pacific Islander/Other 5 3 3
There’s good reason for building a diverse workforce that goes well beyond mere
compliance with legal standards. It even goes beyond commitment to ethical standards.
It’s good business. People with diverse backgrounds bring fresh points of view that can
be invaluable in generating ideas and solving problems. In addition, they can be the key
to connecting with an ethnically diverse customer base. If a large percentage of your
customers are Hispanic, it might make sense to have a Hispanic marketing manager. In
short, capitalizing on the benefits of a diverse workforce means that employers should
view differences as assets rather than liabilities.
K E Y T A K E A W A Y S
The process of introducing new employees to their jobs and to the company is called orientation.
An effective approach is to take things slowly, providing new employees with information on a need-to-know basis while making them feel as comfortable as possible.
New employees will need initial training to start their jobs, and they’ll need additional training as they grow in or change their jobs.
Off-the-job training allows them to focus on learning without the distractions that would occur in the office, but on-the-job training is more common.
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In addition to having well-trained employees, it’s important that a workforce reflects the broad range of differences in the population.
The efforts of HR managers to build a workforce that’s representative of the general population are driven in part by legal concerns: discrimination is illegal, and companies that violate antidiscrimination laws are subject to prosecution.
But ensuring a diverse workforce goes well beyond both legal compliance and ethical commitment. It’s good business, because a diverse group of employees can bring fresh points of view that may be valuable in generating ideas and solving problems.
Additionally, people from varied backgrounds can help an organization connect with an ethnically diverse customer base.
E X E R C I S E S
1. (AACSB) Reflective Skills
Think about a full-time or part-time job that you’ve held. Was your orientation to the job satisfactory? If not, how would you have improved the process? Did you receive any training? Was it useful? What additional training would have helped you do a better job? How would it have benefited the company?
2. (AACSB) Diversity
While visiting a mall in Los Angeles, you noticed two stores located side by side selling electronic-entertainment products—CDs, DVDs, and so on. All the employees in one store were white males. The mix of workers in the other store—which happened to be more profitable—was more diverse. Why do you think the store with the diverse workforce did more business? In terms of diversity, what would be your ideal workforce in a store similar to these in Los Angeles?
[1] ―Induction: Orienting the New Employee,‖ HRM Guide Network,http://www.bestbooks.biz/learning/induction.html (accessed October 9, 2011). [2] Susan Heathfield, ―Top Ten Ways to Turn Off a New Employee,‖ About, Inc.,http://humanresources.about.com/library/weekly/aa022601a.htm (accessed October 9, 2011). [3] ―2010 Training Industry Report,‖ Training Magazine, November 2010,http://www.trainingmag.com/article/2010-training-industry-report (accessed October 9, 2011). [4] ―Top 100: Top Five Profile and Rank,‖ Training Magazine, March 2004, 42. [5] Tammy Galvin, ―The 2003 Training Top 100,‖ Training Magazine, March 2003, 2. [6] Brooke Locascio, ―Working at Starbucks: More Than Just Pouring Coffee,‖ Tea and Coffee, January/February 2004, http://www.teaandcoffee.net/0104/coffee.htm (accessed October 9, 2011). [7] Howard Schultz and Dori Jones Yang, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time (New York: Hyperion, 1997), 250–51.
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[8] Judith Lindenberger and Marian Stoltz-Loike, ―Diversity in the Workplace,‖ The Economics and Policy Resource Center, http://www.zeromillion.com/econ/workplace-diversity.html (accessed October 9, 2011). [9] U.S. Equal Employment Opportunity Commission, ―Occupational Employment in Private Industry by Race/Ethnic Group/Sex, and by Industry, United States, 2006,‖http://archive.eeoc.gov/stats/jobpat/2006/national.html (accessed October 10, 2011). [10] U.S. Equal Employment Opportunity Commission, ―Federal Laws Prohibiting Job Discrimination: Questions and Answers,‖ Federal Equal Employment Opportunity (EEO) Laws, http://www.eeoc.gov/facts/qanda.html (accessed October 9, 2011). [11] U.S. Equal Employment Opportunity Commission, ―EEOC Agrees to Landmark Resolution of Discrimination Case Against Abercrombie & Fitch,‖http://www.eeoc.gov/press/11-18-04.html (accessed October 10, 2011).
7.3 Motivating Employees
L E A R N I N G O B J E C T I V E
1. Define motivation and describe several theories of motivation.
Motivation refers to an internally generated drive to achieve a goal or follow a particular
course of action. Highly motivated employees focus their efforts on achieving specific
goals; those who are unmotivated don’t. It’s the manager’s job, therefore, to motivate
employees—to get them to try to do the best job they can. But what motivates
employees to do well? How does a manager encourage employees to show up for work
each day and do a good job? Paying them helps, but many other factors influence a
person’s desire (or lack of it) to excel in the workplace. What are these factors? Are they
the same for everybody? Do they change over time? To address these questions, we’ll
examine four of the most influential theories of motivation: hierarchy-of-needs theory,
two-factor theory, expectancy theory, and equity theory.
Hierarchy-of-Needs Theory
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Psychologist Abraham Maslow’s hierarchy-of-needs theory proposed that we are
motivated by the five unmet needs, arranged in the hierarchical order shown in Figure
7.3 "Maslow’s Hierarchy-of-Needs Theory", which also lists examples of each type of
need in both the personal and work spheres of life. Look, for instance, at the list of
personal needs in the left-hand column. At the bottom are physiological needs (such
life-sustaining needs as food and shelter). Working up the hierarchy we experience
safety needs (financial stability, freedom from physical harm), social needs (the need to
belong and have friends), esteem needs (the need for self-respect and status), and self-
actualization needs (the need to reach one’s full potential or achieve some creative
success).
Figure 7.3 Maslow’s Hierarchy-of-Needs Theory
23
There are two things to remember about Maslow’s model:
1. We must satisfy lower-level needs before we seek to satisfy higher-level needs.
2. Once we’ve satisfied a need, it no longer motivates us; the next higher need takes
its place.
Let’s say, for example, that you’ve just returned to college and that for a variety of
reasons that aren’t your fault, you’re broke, hungry, and homeless. Because you’ll
probably take almost any job that will pay for food and housing (physiological needs),
you go to work repossessing cars. Fortunately, your student loan finally comes through,
and with enough money to feed yourself, you can look for a job that’s not so risky
(a safety need). You find a job as a night janitor in the library, and though you feel
secure, you start to feel cut off from your friends, who are active during daylight hours.
You want to work among people, not books (a social need). So now you join several of
your friends selling pizza in the student center. This job improves your social life, but
even though you’re very good at making pizzas, it’s not terribly satisfying. You’d like
something that will let you display your intellectual talents (an esteem need). So you
study hard and land a job as an intern in the governor’s office. On graduation, you move
up through a series of government appointments and eventually run for state senator.
As you’re sworn into office, you realize that you’ve reached your full potential (a self-
actualization need) and you comment to yourself, ―It doesn’t get any better than this.‖
Needs Theory and the Workplace
What implications does Maslow’s theory have for business managers? There are two
key points: (1) Not all employees are driven by the same needs, and (2) the needs that
motivate individuals can change over time. Managers should consider which needs
different employees are trying to satisfy and should structure rewards and other forms of
recognition accordingly. For example, when you got your first job repossessing cars,
you were motivated by the need for money to buy food. If you’d been given a choice
between a raise or a plaque recognizing your accomplishments, you’d undoubtedly
24
have opted for the money. As a state senator, by contrast, you may prefer public
recognition of work well done (say, election to higher office) to a pay raise.
Two-Factor Theory
Another psychologist, Frederick Herzberg, set out to determine which work factors
(such as wages, job security, or advancement) made people feel good about their jobs
and which factors made them feel bad about their jobs. He surveyed workers, analyzed
the results, and concluded that to understand employee satisfaction (or dissatisfaction),
he had to divide work factors into two categories:
Motivation factors. Those factors that are strong contributors to job satisfaction
Hygiene factors. Those factors that are not strong contributors to satisfaction but that
must be present to meet a worker’s expectations and prevent job dissatisfaction
Figure 7.5 "Herzberg’s Two-Factor Theory" illustrates Herzberg’s two-factor theory.
Note that motivation factors (such as promotion opportunities) relate to the nature of the
work itself and the way the employee performs it. Hygiene factors (such as physical
working conditions) relate to the environment in which it’s performed. (Note, too, the
similarity between Herzberg’s motivation factors and Maslow’s esteem and self-
actualization needs.)
Figure 7.5 Herzberg’s Two-Factor Theory
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Two-Factor Theory and the Workplace
We’ll ask the same question about Herzberg’s model as we did about Maslow’s: What
does it mean for managers? Suppose you’re a senior manager in an accounting firm,
where you supervise a team of accountants, each of whom has been with the firm for
five years. How would you use Herzberg’s model to motivate the employees who report
to you? Let’s start with hygiene factors. Are salaries reasonable? What about working
conditions? Does each accountant have his or her own workspace, or are they
crammed into tiny workrooms? Are they being properly supervised or are they left on
their own to sink or swim? If hygiene factors like these don’t meet employees’
expectations, they may be dissatisfied with their jobs.
As you can see in Figure 7.5 "Herzberg’s Two-Factor Theory", fixing problems related to
hygiene factors may alleviate job dissatisfaction, but it won’t necessarily improve
anyone’s job satisfaction. To increase satisfaction (and motivate someone to perform
better), you must address motivation factors. Is the work itself challenging and
stimulating? Do employees receive recognition for jobs well done? Will the work that an
26
accountant has been assigned help him or her to advance in the firm? According to
Herzberg, motivation requires a twofold approach: eliminating dissatisfiers and
enhancing satisfiers.
Expectancy Theory
If you were a manager, wouldn’t you like to know how your employees decide to work
hard or goof off? Wouldn’t it be nice to know whether a planned rewards program will
have the desired effect—namely, motivating them to perform better in their jobs?
Wouldn’t it be helpful if you could measure the effect of bonuses on employee
productivity? These are the issues considered by psychologist Victor Vroom in
his expectancy theory, which proposes that employees will work hard to earn rewards
that they value and that they consider obtainable.
As you can see from Figure 7.6 "Vroom’s Expectancy Theory", Vroom argues that an
employee will be motivated to exert a high level of effort to obtain a reward under three
conditions:
1. The employee believes that his or her efforts will result in acceptable performance.
2. The employee believes that acceptable performance will lead to the desired
outcome or reward.
3. The employee values the reward.
Figure 7.6 Vroom’s Expectancy Theory
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Expectancy Theory and the Workplace
To apply expectancy theory to a real-world situation, let’s analyze an automobile-
insurance company with one hundred agents who work from a call center. Assume that
the firm pays a base salary of $2,000 a month, plus a $200 commission on each policy
sold above ten policies a month. In terms of expectancy theory, under what conditions
would an agent be motivated to sell more than ten policies a month?
1. The agent would have to believe that his or her efforts would result in policy sales
(that, in other words, there’s a positive link between effort and performance).
2. The agent would have to be confident that if he or she sold more than ten policies in
a given month, there would indeed be a bonus (a positive link between performance
and reward).
3. The bonus per policy—$200—would have to be of value to the agent.
Now let’s alter the scenario slightly. Say that the company raises prices, thus making it
harder to sell the policies. How will agents’ motivation be affected? According to
expectancy theory, motivation will suffer. Why? Because agents may be less confident
that their efforts will lead to satisfactory performance. What if the company introduces a
policy whereby agents get bonuses only if buyers don’t cancel policies within ninety
28
days? How will this policy affect motivation? Now agents may be less confident that
they’ll get bonuses even if they do sell more than ten policies. Motivation will decrease
because the link between performance and reward has been weakened. Finally, what
will happen if bonuses are cut from $200 to $25? Obviously, the reward would be of less
value to agents, and, again, motivation will suffer. The message of expectancy theory,
then, is fairly clear: managers should offer rewards that employees value, set
performance levels that they can reach, and ensure a strong link between performance
and reward.
Equity Theory
What if you spent thirty hours working on a class report, did everything you were
supposed to do, and handed in an excellent assignment (in your opinion). Your
roommate, on the other hand, spent about five hours and put everything together at the
last minute. You know, moreover, that he ignored half the requirements and never even
ran his assignment through a spell-checker. A week later, your teacher returns the
reports. You get a C and your roommate gets a B+. In all likelihood, you’ll feel that
you’ve been treated unfairly relative to your roommate.
Your reaction makes sense according to the equity theory of motivation, which focuses
on our perceptions of how fairly we’re treated relative to others. Applied to the work
environment, this theory proposes that employees analyze their contributions or job
inputs (hours worked, education, experience, work performance) and their rewards or
job outcomes (salary, benefits, recognition). Then they create a contributions/rewards
ratio and compare it to those of other people. The basis of comparison can be any one
of the following:
Someone in a similar position
Someone holding a different position in the same organization
Someone with a similar occupation
29
Someone who shares certain characteristics (such as age, education, or level of
experience)
Oneself at another point in time
When individuals perceive that the ratio of their contributions to rewards is comparable
to that of others, they perceive that they’re being treated equitably; when they perceive
that the ratio is out of balance, they perceive inequity. Occasionally, people will perceive
that they’re being treated better than others. More often, however, they conclude that
others are being treated better (and that they themselves are being treated worse). This
is what you concluded when you saw your grade. You’ve calculated your ratio of
contributions (hours worked, research and writing skills) to rewards (project grade),
compared it to your roommate’s ratio, and concluded that the two ratios are out of
balance.
What will an employee do if he or she perceives an inequity? The individual might try to
bring the ratio into balance, either by decreasing inputs (working fewer hours, refusing
to take on additional tasks) or by increasing outputs (asking for a raise). If this strategy
fails, an employee might complain to a supervisor, transfer to another job, leave the
organization, or rationalize the situation (perhaps deciding that the situation isn’t so bad
after all). Equity theory advises managers to focus on treating workers fairly, especially
in determining compensation, which is, naturally, a common basis of comparison.
K E Y T A K E A W A Y S
Motivation describes an internally generated drive that propels people to achieve goals or pursue particular courses of action.
There are four influential theories of motivation: hierarchy-of-needs theory, two- factor theory, expectancy theory, and equity theory.
Hierarchy-of-needs theory proposes that we’re motivated by five unmet needs— physiological, safety, social, esteem, and self-actualization— and must satisfy lower- level needs before we seek to satisfy higher-level needs.
30
Two-factor theory divides work factors into motivation factors (those that are strong contributors to job satisfaction) and hygiene factors (those that, though not strong contributors to satisfaction, must be present to prevent job dissatisfaction). To increase satisfaction (and motivate someone to perform better), managers must address motivation factors.
Expectancy theory proposes that employees work hard to obtain a reward when they value the reward, believe that their efforts will result in acceptable performance, and believe that acceptable performance will lead to a desired outcome or reward.
Equity theory focuses on our perceptions of how fairly we’re treated relative to others. This theory proposes that employees create contributions/rewards ratios that they compare to those of others. If they feel that their ratios are comparable to those of others, they’ll perceive that they’re being treated equitably.
E X E R C I S E
This chapter describes four theories of motivation: hierarchy-of-needs theory, two-factor theory, expectancy theory, and equity theory. Briefly describe each theory. Which one makes the most intuitive sense to you? Why do you find it appealing?
7.4 What Makes a Great Place to Work?
L E A R N I N G O B J E C T I V E
1. Identify factors that make an organization a good place to work, including competitive compensation and benefits packages.
Every year, the Great Places to Work Institute analyzes comments from thousands of
employees and compiles a list of ―The 100 Best Companies to Work for in America,‖
which is published in Fortune magazine. Having compiled its list for more than twenty
years, the institute concludes that the defining characteristic of a great company to work
for is trust between managers and employees. Employees overwhelmingly say that they
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want to work at a place where employees ―trust the people they work for, have pride in
what they do, and enjoy the people they work with.‖ [1]
They report that they’re motivated
to perform well because they’re challenged, respected, treated fairly, and appreciated.
They take pride in what they do, are made to feel that they make a difference, and are
given opportunities for advancement. [2]
The most effective motivators, it would seem,
are closely aligned with Maslow’s higher-level needs and Herzberg’s motivating factors.
Job Redesign
The average employee spends more than two thousand hours a year at work. If the job
is tedious, unpleasant, or otherwise unfulfilling, the employee probably won’t be
motivated to perform at a very high level. Many companies practice a policy
of job redesign to make jobs more interesting and challenging. Common strategies
include job rotation, job enlargement, and job enrichment.
Job Rotation
Specialization promotes efficiency because workers get very good at doing particular
tasks. The drawback is the tedium of repeating the same task day in and day out. The
practice of job rotation allows employees to rotate from one job to another on a
systematic basis, eventually cycling back to their original tasks. A computer maker, for
example, might rotate a technician into the sales department to increase the employee’s
awareness of customer needs and to give the employee a broader understanding of the
company’s goals and operations. A hotel might rotate an accounting clerk to the check-
in desk for a few hours each day to add variety to the daily workload. Rotated
employees develop new skills and gain experience that increases their value to the
company, which benefits management because cross-trained employees can fill in for
absentees, thus providing greater flexibility in scheduling.
Job Enlargement
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Instead of a job in which you performed just one or two tasks, wouldn’t you prefer a job
that gave you many different tasks? In theory, you’d be less bored and more highly
motivated if you had a chance at job enlargement—the policy of enhancing a job by
adding tasks at similar skill levels (see Figure 7.7 "Job Enlargement versus Job
Enrichment"). The job of sales clerk, for example, might be expanded to include gift-
wrapping and packaging items for shipment. The additional duties would add variety
without entailing higher skill levels.
Figure 7.7 Job Enlargement versus Job Enrichment
Job Enrichment
As you can see from Figure 7.7 "Job Enlargement versus Job Enrichment", merely
expanding a job by adding similar tasks won’t necessarily ―enrich‖ it by making it more
challenging and rewarding. Job enrichment is the practice of adding tasks that increase
both responsibility and opportunity for growth. It provides the kinds of benefits that,
according to Maslow and Herzberg, contribute to job satisfaction: stimulating work,
sense of personal achievement, self-esteem, recognition, and a chance to reach your
potential.
33
Consider, for example, the evolving role of support staff in the contemporary office.
Today, employees who used to be called ―secretaries‖ assume many duties previously
in the domain of management, such as project coordination and public relations.
Information technology has enriched their jobs because they can now apply such skills
as word processing, desktop publishing, creating spreadsheets, and managing
databases. That’s why we now hear such a term as administrative assistant instead
of secretary. [3]
Work/Life Quality
Building a career requires a substantial commitment in time and energy, and most
people find that they aren’t left with much time for nonwork activities. Fortunately, many
organizations recognize the need to help employees strike a balance between their
work and home lives. [4]
By helping employees combine satisfying careers and fulfilling
personal lives, companies tend to end up with a happier, less-stressed, and more
productive workforce. The financial benefits include lower absenteeism, turnover, and
health care costs.
Alternative Work Arrangements
The accounting firm KPMG, which has made the list of the ―100 Best Companies for
Working Mothers‖ for twelve years, [5]
is committed to promoting a balance between its
employees’ work and personal lives. KPMG offers a variety of work arrangements
designed to accommodate different employee needs and provide scheduling
flexibility. [6]
Flextime
Employers who provide for flextime set guidelines that allow employees to designate
starting and quitting times. Guidelines, for example, might specify that all employees
must work eight hours a day (with an hour for lunch) and that four of those hours must
be between 10 a.m. and 3 p.m. Thus, you could come in at 7 a.m. and leave at 4 p.m.,
34
while coworkers arrive at 10 a.m. and leave at 7 p.m. With permission you could even
choose to work from 8 a.m to 2 p.m., take two hours for lunch, and then work from 4
p.m. to 6 p.m.
Compressed Workweeks
Rather than work eight hours a day for five days a week, you might elect to earn a
three-day weekend by working ten hours a day for four days a week.
Part-Time Work
If you’re willing to have your pay and benefits adjusted accordingly you can work fewer
than forty hours a week.
Job Sharing
Under job sharing, two people share one full-time position, splitting the salary and
benefits of the position as each handles half the job. Often they arrange their schedules
to include at least an hour of shared time during which they can communicate about the
job.
Telecommuting
Telecommuting means that you regularly work from home (or from some other nonwork
location). You’re connected to the office by computer, fax, and phone. You save on
commuting time, enjoy more flexible work hours, and have more opportunity to spend
time with your family. A study of 5,500 IBM employees (one-fifth of whom telecommute)
found that those who worked at home not only had a better balance between work and
home life but also were more highly motivated and less likely to leave the
organization. [7]
Though it’s hard to count telecommuters accurately, some estimates put the number of
people who work at home at least one day a week at 20 percent. This estimate includes
35
2 percent of workers who run home-based businesses and 2 percent who work
exclusively at home for other companies. [8]
Telecommuting isn’t for everyone. Working
at home means that you have to discipline yourself to avoid distractions, such as TV,
personal phone calls, home chores, or pets, and some people feel isolated from social
interaction in the workplace.
Family-Friendly Programs
In addition to alternative work arrangements, many employers, including KPMG, offer
programs and benefits designed to help employees meet family and home obligations
while maintaining busy careers. KPMG offers each of the following benefits. [9]
Dependent Care
Caring for dependents—young children and elderly parents—is of utmost importance to
some employees, but combining dependent-care responsibilities with a busy job can be
particularly difficult. KPMG provides on-site child care during tax season (when
employees are especially busy) and offers emergency backup dependent care all year
round, either at a provider’s facility or in the employee’s home. To get referrals or
information, employees can call KPMG’s LifeWorks Resource and Referral Service.
KPMG is by no means unique in this respect: more than eight thousand companies
maintain on-site day care, [10]
and 18 percent of all U.S. companies offer child-care
resources or referral services. [11]
Paid Parental Leave
Any employee (whether male or female) who becomes a parent can take two weeks of
paid leave. New mothers also get time off through short-term disability benefits.
Caring for Yourself
Like many companies, KPMG allows employees to aggregate all paid days off and use
them in any way they want. In other words, instead of getting, say, ten sick days, five
36
personal days, and fifteen vacation days, you get a total of thirty days to use for
anything. If you’re having personal problems, you can contact the Employee Assistance
Program. If staying fit makes you happier and more productive, you can take out a
discount membership at one of more than nine thousand health clubs.
Unmarried without Children
You’ve undoubtedly noticed by now that many programs for balancing work and
personal lives target married people, particularly those with children. Single individuals
also have trouble striking a satisfactory balance between work and nonwork activities,
but many single workers feel that they aren’t getting equal consideration from
employers. [12]
They report that they’re often expected to work longer hours, travel more,
and take on difficult assignments to compensate for married employees with family
commitments.
Needless to say, requiring singles to take on additional responsibilities can make it
harder for them to balance their work and personal lives. It’s harder to plan and keep
personal commitments while meeting heavy work responsibilities, and establishing and
maintaining social relations is difficult if work schedules are unpredictable or too
demanding. Frustration can lead to increased stress and job dissatisfaction. In several
studies of stress in the accounting profession, unmarried workers reported higher levels
of stress than any other group, including married people with children. [13]
With singles, as with married people, companies can reap substantial benefits from
programs that help employees balance their work and nonwork lives: they can increase
job satisfaction and employee productivity and reduce turnover. PepsiCo, for example,
offers a ―concierge service,‖ which maintains a dry cleaner, travel agency, convenience
store, and fitness center on the premises of its national office in Somers, New
York. [14]
Single employees seem to find these services helpful, but what they value
most of all is control over their time. In particular, they want predictable schedules that
37
allow them to plan social and personal activities. They don’t want employers assuming
that being single means that they can change plans at the last minute. It’s often more
difficult for singles to deal with last-minute changes because, unlike married coworkers,
they don’t have the at-home support structure to handle such tasks as tending to elderly
parents or caring for pets.
Compensation and Benefits
Though paychecks and benefits packages aren’t the only reasons why people work,
they do matter. Competitive pay and benefits also help organizations attract and retain
qualified employees. Companies that pay their employees more than their competitors
generally have lower turnover. Consider, for example, The Container Store, which
regularly appears on Fortune magazine’s list of ―The 100 Best Companies to Work
For.‖ [15]
The retail chain staffs its stores with fewer employees than its competitors but
pays them more—in some cases, three times the industry average for retail workers.
This strategy allows the company to attract extremely talented workers who, moreover,
aren’t likely to leave the company. Low turnover is particularly valuable in the retail
industry because it depends on service-oriented personnel to generate repeat business.
In addition to salary and wages, compensation packages often include other financial
incentives, such as bonuses and profit-sharing plans, as well as benefits, such as
medical insurance, vacation time, sick leave, and retirement accounts.
Wages and Salaries
The largest, and most important, component of a compensation package is the payment
of wages or salary. If you’re paid according to the number of hours you work, you’re
earning wages. Counter personnel at McDonald’s, for instance, get wages, which are
determined by multiplying an employee’s hourly wage rate by the number of hours
worked during the pay period. On the other hand, if you’re paid for fulfilling the
responsibilities of a position—regardless of the number of hours required to do it—
you’re earning a salary. The McDonald’s manager gets a salary for overseeing the
38
operations of the restaurant. He or she is expected to work as long as it takes to get the
job done, without any adjustment in compensation.
Piecework and Commissions
Sometimes it makes more sense to pay workers according to the quantity of product
that they produce or sell. Byrd’s Seafood, a crab-processing plant in Crisfield, Maryland,
pays workers on piecework: Workers’ pay is based on the amount of crabmeat that’s
picked from recently cooked crabs. (A good picker can produce fifteen pounds of
crabmeat an hour and earn about $100 a day.) [16]
If you’re working on commission,
you’re probably getting paid for quantity of sales. If you were a sales representative for
an insurance company, like The Hartford, you’d get a certain amount of money for each
automobile or homeowner policy that you sell. [17]
Incentive Programs
In addition to regular paychecks, many people receive financial rewards based on
performance, whether their own, their employer’s, or both. At computer-chip maker
Texas Instruments (TI), for example, employees may be eligible for bonuses, profit
sharing, and stock options. All three plans are incentive programs: programs designed
to reward employees for good performance. [18]
Bonus Plans
TI’s year-end bonuses—annual income given in addition to salary—are based on
company-wide performance. If the company has a profitable year, and if you contributed
to that success, you’ll get a bonus. If the company doesn’t do well, you’re out of luck,
regardless of what you contributed.
Bonus plans have become quite common, and the range of employees eligible for
bonuses has widened in recent years. In the past, bonus plans were usually reserved
for managers above a certain level. Today, however, companies have realized the value
39
of extending plans to include employees at virtually every level. The magnitude of
bonuses still favors those at the top. High-ranking officers (such as CEOs and CFOs)
often get bonuses ranging from 30 percent to 50 percent of their salaries. Upper-level
managers may get from 15 percent to 25 percent and middle managers from 10 percent
to 15 percent. At lower levels, employees may expect bonuses from 3 percent to 5
percent of their annual compensation. [19]
Profit-Sharing Plans
TI also maintains a profit-sharing plan, which relies on a predetermined formula to
distribute a share of the company’s profits to eligible employees. Today, about 40
percent of all U.S. companies offer some type of profit-sharing program. [20]
TI’s plan,
however, is a little unusual: while most plans don’t allow employees to access profit-
sharing funds until retirement or termination, TI employees get their shares
immediately—in cash.
TI’s plan is also pretty generous—as long as the company has a good year. Here’s how
it works. An employee’s profit share depends on the company’s operating profit for the
year. If profits from operations reach 10 percent of sales, the employee gets a bonus
worth 4 percent of his or her salary. If operating profit soars to 20 percent, the employee
bonuses go up to 26 percent of salary. But if operating profits fall short of a certain
threshold, nobody gets anything. [21]
Stock-Option Plans
Like most stock-option plans, the TI plan gives employees the right to buy a specific
number of shares of company stock at a set price on a specified date. At TI, an
employee may buy stock at its selling price at the time when he or she was given the
option. So, if the price of the stock goes up, the employee benefits. Say, for example,
that the stock was selling for $30 a share when the option was granted in 2007. In 2011,
40
it was selling for $40 a share. Exercising his or her option, the employee could buy TI
stock at the 2007 price of $30 a share—a bargain price. [22]
At TI, stock options are used as an incentive to attract and retain top people. Starbucks,
by contrast, isn’t nearly as selective in awarding stock options. At Starbucks, all
employees can earn ―Bean Stock‖—the Starbucks employee stock-option plan. Both
full- and part-time employees get options to buy Starbucks shares at a set price. If the
company does well and its stock goes up, employees make a profit. CEO Howard
Schultz believes that Bean Stock pays off: because employees are rewarded when the
company does well, they have a stronger incentive to add value to the company (and so
drive up its stock price). Shortly after the program was begun, the phrase ―bean-
stocking‖ became workplace lingo for figuring out how to save the company money.
Benefits
Another major component of an employee’s compensation package is benefits—
compensation other than salaries, hourly wages, or financial incentives. Types of
benefits include the following:
Legally required benefits (Social Security and Medicare, unemployment insurance,
workers’ compensation)
Paid time off (vacations, holidays, sick leave)
Insurance (health benefits, life insurance, disability insurance)
Retirement benefits
Unfortunately, the cost of providing benefits is staggering. According to the Employee
Benefit Research Institute, it costs an employer 30 percent of a worker’s salary to
provide the same worker with benefits. If you include pay for time not worked (while on
vacation or sick and so on), the percentage increases to 41 percent. So if you’re a
manager making $100,000 a year, your employer is also paying out another $41,000 for
your benefits. The most money goes for health care (8 percent of salary costs), paid
time off (11 percent), and retirement benefits (5 percent). [23]
41
Some workers receive only benefits required by law, including Social Security,
unemployment, and workers’ compensation. Low-wage workers generally get only
limited benefits and part-timers often nothing at all. [24]
Again, Starbucks is generous in
offering benefits. The company provides benefits even to the part-timers who make up
two-thirds of the company’s workforce; anyone working at least twenty hours a week
gets medical coverage.
K E Y T A K E A W A Y S
Employees report that they’re motivated to perform well when they’re challenged, respected, treated fairly, and appreciated.
Other factors may contribute to employee satisfaction. Some companies use job redesign to make jobs more interesting and challenging.
Job rotation allows employees to rotate from one job to another on a systematic basis.
Job enlargement enhances a job by adding tasks at similar skill levels.
Job enrichment adds tasks that increase both responsibility and opportunity for growth.
Many organizations recognize the need to help employees strike a balance between their work and home lives and offer a variety of work arrangements to accommodate different employee needs.
Flextime allows employees to designate starting and quitting times, compress workweeks, or perform part-time work.
With job sharing, two people share one full-time position.
Telecommuting means working from home. Many employers also offer dependent care, paid leave for new parents, employee-assistance programs, and on-site fitness centers.
Competitive compensation also helps.
Workers who are paid by the hour earn wages, while those who are paid to fulfill the responsibilities of the job earn salaries.
42
Some people receive commissions based on sales or are paid for output, based on a piecework approach.
In addition to pay, many employees can earn financial rewards based on their own and/or their employer’s performance.
They may receive year-end bonuses, participate in profit-sharing plans (which use predetermined formulas to distribute a share of company profits among employees), or receive stock options (which let them buy shares of company stock at set prices).
Another component of many compensation packages is benefits—compensation other than salaries, wages, or financial incentives. Benefits may include paid time off, insurance, and retirement benefits.
E X E R C I S E
(AACSB) Analysis
1. Describe the ideal job that you’d like to have once you’ve finished college. Be sure to explain the type of work schedule that you’d find most satisfactory, and why. Identify family-friendly programs that you’d find desirable and explain why these appeal to you.
2. Describe a typical compensation package for a sales manager in a large organization. If you could design your own compensation package, what would it include?
[1] ―What Is a Great Workplace?,‖ Great Place to Work Institute,http://www.greatplacetowork.com/our- approach/what-is-a-great-workplace (accessed October 10, 2011). [2] ―What do Employees Say?‖ Great Place to Work Institute,http://www.greatplacetowork.com/great/employees.php (accessed May 6, 2006). [3] Sandra Kerka, ―The Changing Role of Support Staff,‖ http://calpro- online.com/eric/docgen.asp?tbl=archive&ID=A019 (accessed October 10, 2011). [4] Jeffrey Greenhaus, Karen Collins, and Jason Shaw, ―The Relationship between Work-Family Balance and Quality of Life,‖ Journal of Vocational Behavior 63, 2003, 510–31. [5] KPMG firm Web site, Careers Section,http://www.kpmgcareers.com/whoweare/awards.shtml (accessed October 11, 2011). [6] For information on KPMG’s programs and benefits, see ―Career,‖ KPMG,http://www.kpmgcareers.com/index.shtml (accessed October 10, 2011). [7] Reported in Work-Life and Human Capital Solutions, The Business Case for Telecommuting (Minnetonka, MN: WFC Resources),http://worklifeexpo.com/EXPO/docs/The_Business_Case_for_Telecommuting- WFCResources.pdf, (accessed October 10, 2011). [8] ―How Many People Telecommute?,‖ Telework Research Network,http://www.teleworkresearchnetwork.com/research/people-telecommute (accessed October 11, 2011). [9] ―Career,‖ KPMG, http://www.kpmgcareers.com/index.shtml (accessed October 11, 2011).
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[10] Bonnie Harris, ―Child Care Comes to Work,‖ Los Angeles Times, November 19, 2000,http://articles.latimes.com/2000/nov/19/news/wp-54138, (accessed October 11, 2011). [11] ―New List of Best Companies for Mom,‖ CNNMoney, September 23, 2003http://money.cnn.com/2003/09/23/news/companies/working_mother/?cnn=yes (accessed October 11, 2011). [12] See Karen Collins and Elizabeth Hoover, ―Addressing the Needs of the Single Person in Public Accounting,‖ Pennsylvania CPA Journal, June 1995, 16. [13] Data was obtained from 1988 and 1991 studies of stress in public accounting by Karen Collins and from a 1995 study on quality of life in the accounting profession by Collins and Jeffrey Greenhaus. Analysis of the data on single individuals was not separately published. [14] ―Concierge Service Is A Surprisingly Low Cost Solution That Can Meet A Variety Of Needs With A Single Provider,‖ Lifestyle Concierge Services,http://www.lifestyleconciergeservices.com/Corporate- Concierge-Service-for-businesses.html (accessed October 11, 2011). [15] ―The 100 Best Companies to Work For,‖ Fortune,http://money.cnn.com/magazines/fortune/bestcompanies/2011/index.html (accessed October 10, 2011). [16] See ―Crab Pickers,‖ Crisfield Off the Beaten Path,http://www.crisfield.com/sidestreet/ickers.html (accessed May 6, 2006); Neil Learner, ―Ashore, A Way of Life Built around the Crab,‖ Christian Science Monitor, June 26, 2000,http://csmonitor.com/cgi- bin/durableRedirect.pl?/durable/2000/06/26/fp15s1-csm.shtml(accessed May 6, 2006). [17] ―Benefits,‖ The Hartford, http://thehartford.com/utility/careers/career-benefits(accessed October 11, 2011). [18] Texas Instruments, ―Benefits,‖ http://www.ti.com/recruit/docs/benefits.shtml(accessed October 11, 2011). [19] Jeff D. Opdyke, ―Getting a Bonus Instead of a Raise,‖ Wall Street Journal, December 29, 2004, http://online.wsj.com/article/SB110427526449111461.html, (accessed October 7, 2011). [20] Lee Ann Obringer, ―How Employee Compensation Works—Stock Options/Profit Sharing,‖ HowStuffWorks, http://money.howstuffworks.com/benefits.htm (accessed October 11, 2011). [21] Texas Instruments, ―Benefits,‖ http://www.ti.com/recruit/docs/profit.shtml (accessed October 11, 2011). [22] Texas Instruments, ―Benefits,‖ http://www.ti.com/recruit/docs/profit.shtml (accessed October 11, 2011). [23] ―FAQs About Benefits—General Overview,‖ Employee Benefit Research Institute,http://www.ebri.org/publications/benfaq/?fa=fullfaq (accessed October 10, 2011). [24] National Compensation Survey: Employee Benefits in Private Industry, 2003, U.S. Department of Labor, Bureau of Labor Statistics, March 2003, 2,http://www.bls.gov/ncs/ebs/home.htm (accessed October 9, 2011).
7.5 Performance Appraisal
L E A R N I N G O B J E C T I V E
1. Explain how managers evaluate employee performance and retain qualified employees.
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Employees generally want their managers to tell them three things: what they should be
doing, how well they’re doing it, and how they can improve their performance. Good
managers address these issues on an ongoing basis. On a semiannual or annual basis,
they also conduct formal performance appraisals to discuss and evaluate employees’
work performance.
The Basic Three-Step Process
Appraisal systems vary both by organization and by the level of the employee being
evaluated, but as you can see in Figure 7.8 "How to Do a Performance Appraisal", it’s
generally a three-step process:
1. Before managers can measure performance, they must set goals and performance
expectations and specify the criteria (such as quality of work, quantity of work,
dependability, initiative) that they’ll use to measure performance.
2. At the end of a specified time period, managers complete written evaluations that
rate employee performance according to the predetermined criteria.
3. Managers then meet with each employee to discuss the evaluation. Jointly, they
suggest ways in which the employee can improve performance, which might include
further training and development.
Figure 7.8 How to Do a Performance Appraisal
45
It sounds fairly simple, but why do so many managers report that, except for firing
people, giving performance appraisals is their least favorite task? [1]
To get some
perspective on this question, we’ll look at performance appraisals from both sides,
explaining the benefits and identifying potential problems with some of the most
common practices.
Among other benefits, formal appraisals provide the following:
An opportunity for managers and employees to discuss an employee’s performance
and to set future goals and performance expectations
A chance to identify and discuss appropriate training and career-development
opportunities for an employee
Formal documentation of the evaluation that can be used for salary, promotion,
demotion, or dismissal purposes [2]
As for disadvantages, most stem from the fact that appraisals are often used to
determine salaries for the upcoming year. Consequently, meetings to discuss
performance tend to take on an entirely different dimension: the manager appears
46
judgmental (rather than supportive), and the employee gets defensive. It’s the
adversarial atmosphere that makes many managers not only uncomfortable with the
task but also unlikely to give honest feedback. (They tend to give higher marks in order
to avoid delving into critical evaluations.) HR professionals disagree about whether
performance appraisals should be linked to pay increases. Some experts argue that the
connection eliminates the manager’s opportunity to use the appraisal to improve an
employee’s performance. Others maintain that it increases employee satisfaction with
the process and distributes raises on the basis of effort and results. [3]
360-Degree and Upward Feedback
Instead of being evaluated by one person, how would you like to be evaluated by
several people—not only those above you in the organization but those below and
beside you? The approach is called 360-degree feedback, and the purpose is to ensure
that employees (mostly managers) get feedback from all directions—from supervisors,
reporting subordinates, coworkers, and even customers. If it’s conducted correctly, this
technique furnishes managers with a range of insights into their performance in a
number of roles.
Some experts, however, regard the 360-degree approach as too cumbersome. An
alternative technique, called upward feedback, requires only the manager’s
subordinates to provide feedback. Computer maker Dell uses this approach as part of
its manager-development plan. Every six months, forty thousand Dell employees
complete a survey in which they rate their supervisors on a number of dimensions, such
as practicing ethical business principles and providing support in balancing work and
personal life. Like most companies using this technique, Dell uses survey results for
development purposes only, not as direct input into decisions on pay increases or
promotions. [4]
Retaining Valuable Employees
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When a valued employee quits, the loss to the employer can be serious. Not only will
the firm incur substantial costs to recruit and train a replacement, but it also may suffer
temporary declines in productivity and lower morale among remaining employees who
have to take on heavier workloads. Given the negative impact of turnover—the
permanent separation of an employee from a company—most organizations do
whatever they can to retain qualified employees. Compensation plays a key role in this
effort: companies that don’t offer competitive compensation packages (including
benefits) tend to lose employees. But other factors come into play, some of which we
discussed earlier, such as training and development, as well as helping employees
achieve a satisfying work/nonwork balance. In the following sections, we’ll look at a few
other strategies for reducing turnover and increasing productivity. [5]
Creating a Positive Work Environment
Employees who are happy at work are more productive, provide better customer
service, and are more likely to stay with the company. A study conducted by Sears, for
instance, found a positive relationship between customer satisfaction and employee
attitudes on ten different issues: a 5 percent improvement in employee attitudes results
in a 1.3 percent increase in customer satisfaction and a 0.5 percent increase in
revenue. [6]
The Employee-Friendly Workplace
What sort of things improve employee attitudes? The twelve thousand employees of
software maker SAS Institute fall into the category of ―happy workers.‖ They choose the
furniture and equipment in their own (private) offices; eat subsidized meals at one of
three on-site restaurants; enjoy free soft drinks, fresh fruit on Mondays, M&M’s on
Wednesdays, and a healthy breakfast snack on Fridays in convenient break rooms; and
swim and work out at a seventy-seven-thousand-square-foot fitness center. They set
their own work hours, and they’re encouraged to stay home with sick children. They
also have job security: no one’s ever been laid off because of an economic downturn.
48
The employee-friendly work environment helps SAS employees focus on their jobs and
contribute to the attainment of company goals. [7]
Not surprisingly, it also results in very
low 3 percent turnover.
Recognizing Employee Contributions
Thanking people for work done well is a powerful motivator. People who feel
appreciated are more likely to stay with a company than those who don’t. [8]
While
personal thank-yous are always helpful, many companies also have formal programs for
identifying and rewarding good performers. The Container Store, a national storage and
container retailer, rewards employee accomplishments in a variety of ways. Recently,
for example, twelve employees chosen by coworkers were rewarded with a Colorado
vacation with the company’s owners, and the seven winners of a sales contest got a trip
to visit an important supplier—in Sweden. [9]
The company is known for its supportive
environment and has frequently been selected as one of the top U.S. companies to
work for.
Involving Employees in Decision Making
Companies have found that involving employees in decisions saves money, makes
workers feel better about their jobs, and reduces turnover. Some have found that it pays
to take their advice. When General Motors asked workers for ideas on improving
manufacturing operations, management was deluged with more than forty-four
thousand suggestions during one quarter. Implementing a few of them cut production
time on certain vehicles by 15 percent and resulted in sizable savings. [10]
Similarly, in 2001, Edward Jones, a personal investment company, faced a difficult
situation during the stock-market downturn. Costs had to be cut, and laying off
employees was one option. Instead, however, the company turned to its workforce for
solutions. As a group, employees identified cost savings of more than $38 million. At the
same time, the company convinced experienced employees to stay with it by assuring
them that they’d have a role in managing it. [11]
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Why People Quit
As important as such initiatives can be, one bad boss can spoil everything. The way a
person is treated by his or her boss may be the primary factor in determining whether
an employee stays or goes. People who have quit their jobs cite the following behavior
by superiors:
Making unreasonable work demands
Refusing to value their opinions
Failing to be clear about what’s expected of subordinates
Rejecting work unnecessarily
Showing favoritism in compensation, rewards, or promotions [12]
Holding managers accountable for excessive turnover can help alleviate the ―bad-boss‖
problem, at least in the long run. In any case, whenever an employee quits, it’s a good
idea for someone—someone other than the individual’s immediate supervisor—to
conduct an exit interview to find out why. Knowing why people are quitting gives an
organization the opportunity to correct problems that are causing high turnover rates.
Involuntary Termination
Before we leave this section, we should say a word or two about termination—getting
fired. Though turnover—voluntary separations—can create problems for employers,
they’re not nearly as devastating as the effects of involuntary termination on employees.
Losing your job is what psychologists call a ―significant life change,‖ and it’s high on the
list of ―stressful life events‖ regardless of the circumstances. Sometimes, employers lay
off workers because revenues are down and they must resort to downsizing—to cutting
costs by eliminating jobs. Sometimes a particular job is being phased out, and
sometimes an employee has simply failed to meet performance requirements.
Employment at Will
50
Is it possible for you to get fired even if you’re doing a good job and there’s no economic
justification for your being laid off? In some cases, yes—especially if you’re not working
under a contract. Without a formal contract, you’re considered to be employed at will,
which means that both you and your employer have the right to terminate the
employment relationship at any time. You can quit whenever you want (which is good
for you), but your employer can fire you whenever it wants (which is obviously bad for
you).
Fortunately for you, over the past several decades, the courts have undercut employers’
rights under the employment-at-will doctrine. [13]
By and large, management can no
longer fire employees at will: usually, employers must show just cause for termination,
and in some cases, they must furnish written documentation to substantiate the reasons
for terminating an employee. If it’s a case of poor performance, the employee is
generally warned in advance that his or her current level of performance could result in
termination. As a rule, managers give employees who have been warned a reasonable
opportunity to improve performance. When termination is unavoidable, it should be
handled in a private conversation, with the manager explaining precisely why the action
is being taken.
K E Y T A K E A W A Y S
Managers conduct performance appraisals to evaluate work performance, usually following a three-step process:
1. Setting goals and performance expectations and specifying the criteria for measuring performance
2. Completing written evaluations to rate performance according to predetermined criteria
3. Meeting with employees to discuss evaluations and ways to improve performance
Turnover—the permanent separation of an employee from a company—has a negative effect on an organization.
51
In addition to offering competitive compensation, companies may take a variety of steps to retain qualified employees:
1. Providing appropriate training and development
2. Helping employees achieve a satisfying work/nonwork balance in their lives
3. Creating a positive work environment
4. Recognizing employee efforts
5. Involving employees in decision making
On the other hand, employers may have to terminate the employment of (that is, fire) some workers.
1. They may lay off workers because revenues are down and they have to downsize— to cut costs by eliminating jobs.
2. Sometimes a job is phased out, and sometimes an employee simply fails to meet performance requirements.
If there’s no written employment contract, the employment relationship falls under the principle of employment-at-will, by which an employer can end it at any time. Usually, however, the employer must show just cause.
E X E R C I S E S
1. What steps does a manager take in evaluating an employee’s performance? Explain the benefits of performance appraisals, and identify some of the potential problems entailed by the performance-evaluation process.
2. As an HR manager, what steps would you take to retain valuable employees? Under what circumstances would you fire an employee? Can you fire someone without giving that person a warning?
[1] Susan Heathfield, ―Performance Appraisals Don’t Work,‖ About,http://humanresources.about.com/cs/perfmeasurement/l/aa061100a.htm (accessed October 11, 2011). [2] Bob Nelson and Peter Economy, Managing for Dummies, 2nd ed. (New York: Wiley, 2003), 140. [3] Archer North & Associates, ―Reward Issues,‖ Performance Appraisal,http://www.performance- appraisal.com/rewards.htm (accessed October 11, 2011). [4] ―Culture of Winning/Tell Dell,‖ Dell, Inc.,http://i.dell.com/sites/content/corporate/corp- comm/en/Documents/dell-fy11-cr-report.pdf (accessed October 11, 2011). [5] Gregory P. Smith, ―How to Attract, Keep and Motivate Your Workforce,‖ Business Know- How, http://www.businessknowhow.com/manage/attractworkforce.htm (accessed October 10, 2011).
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[6] ―Companies Are Finding It Really Pays to Be Nice to Employees,‖ Wall Street Journal, July 22, 1998, B1, http://www.octanner.com/news/July1998.html (accessed May 6, 2006). [7] Morley Safer, CBS 60 Minutes, interview with Jim Goodnight, president and founder of SAS Institute, April 20, 2003,http://www.cbsnews.com/stories/2003/04/18/60minutes/main550102.shtml (accessed October 9, 2011); ―2011—100 Best Companies to Work For,‖ Fortune,http://money.cnn.com/magazines/fortune/bestcompanies/2011/snapshots/1.html(accessed October 11, 2011). For a description of the company’s work/life initiatives, visit its Web site at http://www.sas.com/corporate/worklife/index.html (accessed October 11, 2011). [8] Robert McGarvey, ―A Tidal Wave of Turnover,‖ American Way, December 15, 2004, 32–36. [9] The Container Store, ―Careers,‖http://www.containerstore.com/careers/index.jhtml;jsessionid=0C2Q2LP3RTG0XQFIAIMCM44 AVABBMJVC (accessed October 11, 2011). [10] Freda Turner, ―An Effective Employee Suggestion Program Has a Multiplier Effect,‖ WebPro News, March 4, 2003, http://www.webpronews.com/an-effective-employee-suggestion-program-has-a-multiplier- effect-2003-03 (accessed October 11, 2011). [11] Richard L. Daft and Dorothy Marcic, Understanding Management (Florence, KY: Cengage Learning, 2006), 219, http://books.google.com/books?id=xWxmFNMKXhEC&dq=isbn:9781439042328 (accessed October 11, 2011). [12] Gregory P. Smith, ―Top Ten Reasons Why People Quit Their Jobs,‖ Business Know- How,http://www.businessknowhow.com/manage/whyquit.htm, (accessed October 11, 2011). [13] Charles J. Muhl, ―The Employment-at-Will Doctrine: Three Major Exceptions,‖ Monthly Labor Review, January 2001, 1–11, http://www.bls.gov/opub/mlr/2001/01/art1full.pdf(accessed October 11, 2011).
7.6 Labor Unions
L E A R N I N G O B J E C T I V E
1. Explain why workers unionize and how unions are structured, and describe the collective-bargaining process.
As we saw earlier, Maslow believed that individuals are motivated to satisfy five levels
of unmet needs (physiological, safety, social, esteem, and self-actualization). From this
perspective, employees should expect that full-time work will satisfy at least the two
lowest-level needs: they should be paid wages that are sufficient for them to feed,
house, and clothe themselves and their families, and they should have safe working
conditions and some degree of job security. Organizations also have needs: they need
53
to earn profits that will satisfy their owners. Sometimes, the needs of employees and
employers are consistent: the organization can pay decent wages and provide workers
with safe working conditions and job security while still making a satisfactory profit. At
other times, there is a conflict—real, perceived, or a little bit of both—between the
needs of employees and those of employers. In such cases, workers may be motivated
to join a labor union—an organized group of workers that bargains with employers to
improve its members’ pay, job security, and working conditions.
Figure 7.10 "Labor Union Density, 1930–2010" charts labor-union density—union
membership as a percentage of payrolls—in the United States from 1930 to 2010. As
you can see, there’s been a steady decline since the mid-1950s, and, today, only about
12 percent of U.S. workers belong to unions. [1]
Only membership among public workers
(those employed by federal, state, and local governments, such as teachers, police, and
firefighters) has grown. In the 1940s, 10 percent of public workers and 34 percent of
those in the private sector belonged to unions. Today, this has reversed: 36 percent of
public workers and 7 percent of those in the private sector are union members. [2]
Figure 7.10 Labor Union Density, 1930–2010
54
Why the decline in private sector unionization? Many factors come into play. The poor
economy has reduced the number of workers who can become union members. In
addition, we’ve shifted from a manufacturing-based economy characterized by large,
historically unionized companies to a service-based economy made up of many small
firms that are hard to unionize. Finally, there are more women in the workforce, and
they’re more likely to work part-time or intermittently. [3]
Union Structure
Unions have a pyramidal structure much like that of large corporations. At the bottom
are locals that serve workers in a particular geographical area. Certain members are
designated as shop stewards to serve as go-betweens in disputes between workers and
supervisors. Locals are usually organized into national unions that assist with local
contract negotiations, organize new locals, negotiate contracts for entire industries, and
lobby government bodies on issues of importance to organized labor. In turn, national
unions may be linked by a labor federation, such as the American Federation of Labor
and Congress of Industrial Organizations (AFL-CIO), which provides assistance to
member unions and serves as the principal political organ for organized labor.
Collective Bargaining
In a nonunion environment, the employer makes largely unilateral decisions on issues
affecting its labor force, such as salary and benefits. Management, for example, may
simply set an average salary increase of 3 percent and require employees to pay an
additional $50 a month for medical insurance. Typically, employees are in no position to
bargain for better deals. (At the same time, however, for reasons that we’ve discussed
earlier in this chapter, employers have a vested interest in treating workers fairly. A
reputation for treating employees well, for example, is a key factor in attracting talented
people.)
55
The process is a lot different in a union environment. Basically, union representatives
determine with members what they want in terms of salary increases, benefits, working
conditions, and job security. Union officials then tell the employer what its workers want
and ask what they’re willing to offer. When there’s a discrepancy between what workers
want and what management is willing to give—as there usually is—union officials serve
as negotiators to bring the two sides together. The process of settling differences and
establishing mutually agreeable conditions under which employees will work is called
collective bargaining.
The Negotiation Process
Negotiations start when each side states its position and presents its demands. As in
most negotiations, these opening demands simply stake out starting positions. Both
parties expect some give-and-take and realize that the final agreement will fall
somewhere between the two positions. If everything goes smoothly, a tentative
agreement is reached and then voted on by union members. If they accept the
agreement, the process is complete and a contract is put into place to govern labor-
management relations for a stated period. If workers reject the agreement, negotiators
go back to the bargaining table.
Mediation and Arbitration
If negotiations stall, the sides may call in outsiders. One option is mediation, under
which an impartial third party assesses the situation and makes recommendations for
reaching an agreement. A mediator’s advice can be accepted or rejected. If the two
sides are willing to accept the decision of a third party, they may opt instead
for arbitration, under which the third party studies the situation and arrives at a binding
agreement.
Grievance Procedures
56
Another difference between union and nonunion environments is the handling
of grievances—worker complaints on contract-related matters. When nonunion workers
feel that they’ve been treated unfairly, they can take up the matter with supervisors, who
may or may not satisfy their complaints. When unionized workers have complaints
(such as being asked to work more hours than stipulated under their contract), they can
call on union representatives to resolve the problem, in conjunction with supervisory
personnel. If the outcome isn’t satisfactory, the union can take the problem to higher-
level management. If there’s still no resolution, the union may submit the grievance to
an arbitrator.
When Negotiations Break Down
At times, labor and management can’t resolve their differences through collective
bargaining or formal grievance procedures. When this happens, each side may resort to
a variety of tactics to win support for its positions and force the opposition to agree to its
demands.
Union Tactics
The tactics available to the union include striking, picketing, and boycotting. When they
go on strike, workers walk away from their jobs and refuse to return until the issue at
hand has been resolved. As undergraduates at Yale discovered when they arrived on
campus in fall 2003, the effects of a strike can engulf parties other than employers and
strikers: with four thousand dining room workers on strike, students had to scramble to
find food at local minimarkets. The strike—the ninth at the school since 1968—lasted
twenty-three days, and in the end, the workers got what they wanted: better pension
plans.
Though a strike sends a strong message to management, it also has consequences for
workers, who don’t get paid when they’re on strike. Unions often ease the financial
pressure on strikers by providing cash payments. (Some unionized workers, by the way,
57
don’t have the right to strike. Strikes by federal employees, such as air-traffic
controllers, are illegal because they jeopardize the public interest.)
When you see workers parading with signs outside a factory or an office building (or
even a school), they’re probably picketing. The purpose of picketing is informative—to
tell people that a workforce is on strike or to publicize some management practice that’s
unacceptable to the union. In addition, because other union workers typically won’t
cross picket lines, marchers can interrupt the daily activities of the targeted
organization. How would you like to show up for classes to find faculty picketing outside
the classroom building? In April 2001, faculty at the University of Hawaii, unhappy about
salaries, went on strike for thirteen days. Initially, many students cheerfully headed for
the beach to work on their tans, but before long, many more—particularly graduating
seniors—began to worry about finishing the semester with the credits they needed to
keep their lives on schedule. [4]
The final tactic available to unions is boycotting, in which union workers refuse to buy a
company’s products and try to get other people to follow suit. The tactic is often used by
the AFL-CIO, which maintains a national ―Don’t Buy or Patronize‖ boycott list. In 2003,
for example, at the request of two affiliates, the Actor’s Equity Association and the
American Federation of Musicians, the AFL-CIO added the road show of the Broadway
musical Miss Saigon to the list. Why? The unions objected to the use of nonunion
performers who worked for particularly low wages and to the use of a ―virtual orchestra,‖
an electronic apparatus that can replace a live orchestra with software-generated
orchestral accompaniment. [5]
Management Tactics
Management doesn’t sit by passively, especially if the company has a position to defend
or a message to get out. One available tactic is the lockout—closing the workplace to
workers—though it’s rarely used because it’s legal only when unionized workers pose a
58
credible threat to the employer’s financial viability. Another tactic is replacing striking
workers with strikebreakers—nonunion workers who are willing to cross picket lines to
replace strikers. Though the law prohibits companies from permanently replacing
striking workers, it’s often possible for a company to get a court injunction that allows it
to bring in replacement workers.
Lockout tactics were used in the 2011 labor dispute between the National Football
League (NFL) and the National Football League Players Association when club owners
and players failed to reach an agreement on a new contract. Prior to the 2011 season,
the owners imposed a lockout, which prevented the players from practicing in team
training facilities. Both sides had their demands: The players wanted a greater
percentage of the revenues, which the owners were against. The owners wanted the
players to play two additional season games, which the players were against. With the
season drawing closer, an agreement was finally reached in July 2011 bringing the 130-
day lockout to an end and ensuring that the 2011 football season would begin on
time. [6]
The Future of Unions
As we noted earlier, union membership in the United States is declining. So, what’s the
future of organized labor? Will membership continue to decline and unions lose even
more power? The AFL-CIO is optimistic about union membership, pointing out recent
gains in membership among women and immigrants, as well as health care workers,
graduate students, and professionals. [7]
But convincing workers to unionize is still more difficult than it used to be and could
become even harder in the future. For one thing, employers have developed strategies
for dissuading workers from unionizing—in particular, tactics for withholding job security.
If unionization threatens higher costs for wages and benefits, they can resort to part-
time or contract workers. They can also outsource work, eliminating jobs entirely, and
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more employers are now investing in technology designed to reduce the amount of
human labor needed to produce goods or offer services.
KEY TAKEAWAYS
Some workers belong to labor unions—organized groups of workers that bargain with employers to improve members’ pay, job security, and working conditions.
Unions have a pyramidal structure. At the bottom are locals, who serve workers in a particular geographical area.
1. Locals are usually organized into national unions that assist with local contract negotiations and negotiate industry-wide contracts.
2. Nationals may be linked by a labor federation, such as the AFL-CIO, which provides assistance to member unions and serves as the principal political organ for organized labor.
When there’s a discrepancy between what workers want in terms of salary increases, benefits, working conditions, and job security and what management is willing to give, the two sides engage in a process called collective bargaining.
1. If everything goes smoothly, a contract is soon put into place.
2. If negotiations break down, the sides may resort to mediation (in which an impartial third party makes recommendations for reaching an agreement) or arbitration (in which the third party imposes a binding agreement).
When unionized workers feel that they’ve been treated unfairly, they can file grievances—complaints over contract-related matters that are resolved by union representatives and employee supervisors.
If labor differences can’t be resolved through collective bargaining or formal grievance procedures, each side may resort to a variety of tactics. The union can do the following:
1. Call a strike (in which workers leave their jobs until the issue is settled)
2. Organize picketing (in which workers congregate outside the workplace to publicize their position)
3. Arrange for boycotting (in which workers and other consumers are urged to refrain from buying an employer’s products)
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Management may resort to a lockout—closing the workplace to workers—or call in strikebreakers (nonunion workers who are willing to cross picket lines to replace strikers).
E X E R C I S E S
1. You’ve just gotten a job as an autoworker. Would you prefer to work in a unionized or nonunionized plant? Why? If you were hired as a high-level manager in the company, would you want your workers to be unionized? Why, or why not? What’s your opinion on the future of organized labor? Will union membership grow or decline in the next decade? Why, or why not?
2. What happens in a unionized company when negotiations between labor and management break down? Identify and describe the tactics that unions can use against management and those that management can use against unions.
[1] ―Union Members 2010,‖ Bureau of Labor Statistics, U.S. Department of Labor, January 21, 2011, http://www.bls.gov/news.release/pdf/union2.pdf, (accessed October 10, 2011). [2] ―Labor Unions in the United States,‖ Wikipedia, October 7, 2011,http://en.wikipedia.org/wiki/Labor_unions_in_the_United_States#Membership (accessed October 10, 2011). [3] Kris Maher, ―Union Membership Drops 10%,‖ Wall Street Journal, January 10, 2010,http://online.wsj.com/article/SB10001424052748703822404575019350727544666.html, (accessed October 10, 2011); Steven Greenhouse, ―Union Membership in U.S. Fell to a 70-Year Low Last Year,‖ The New York Times, January 21, 2011,http://www.nytimes.com/2011/01/22/business/22union.html (accessed October 10, 2011). [4] ―Hawaii Professors End Strike,‖ USA Today, June 19, 2001,http://www.usatoday.com/news/nation/2001-04-18-hawaii.htm (accessed October 11, 2011). [5] Union Label and Service Department, AFL-CIO, ―AFL-CIO National Boycott List,‖ November– December 2004, http://www.unionlabel.org/boycott.jsp (accessed May 6, 2006). [6] Vinnie Iyer and Clifton Brown, ―NFL Lockout Ends as Owners, Player Reps Agree to 10-Year CBA,‖ Sporting News, http://aol.sportingnews.com/nfl/feed/2010-09/nfl-labor-talks/story/nfl-lockout-ends- owners-nflpa-10-year-deal-2011-season-cba-labor-agreement (accessed October 11, 2011). [7] Bureau of Labor Statistics, Economic News Release, ―Union Members Summary,‖ news release, January 27, 2012, http://www.bls.gov/news.release/union2.nr0.htm (accessed January 29, 2012); Unions 101, A Quick Study of How Unions Help workers Win a Voice on the Job, What kinds of workers are forming unions today?http://www.aflcio.org/joinaunion/union101.cfm (accessed January 29, 2012).
7.7 Cases and Problems
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L E A R N I N G O N T H E W E B ( A A C S B )
What’s Your (Emotional) IQ?
If you were an HR manager, on what criteria would you base a hiring decision— intelligence (IQ), education, technical skills, experience, references, or performance on the interview? All these can be important determinants of a person’s success, but some experts believe that there’s an even better predictor of success. It’s called emotional intelligence (or EI), and it gained some currency in the mid-1990s thanks to Daniel Goleman’s book Emotional Intelligence: Why It Can Matter More Than IQ. EI is the ability to understand both our own emotions and those of others, as well as the ability to use that understanding in managing our behavior, motivating ourselves, and encouraging others to achieve goals.
An attractive aspect of EI is that, unlike IQ, it’s not fixed at an early age. Rather, its vital components—self-awareness, self-management, social awareness, and relationship management—can be strengthened over time. To assess your level of EI, go to the Web site maintained by the Hay Group, a management-consulting firm, and take the ten-item test that’s posted there (http://psychology.about.com/library/quiz/bl_eq_quiz.htm?questnum=6&cor=2399). After completing the test, you’ll get your EI score, some instructions for interpreting it, and an answer key.
When you’ve finished with the test, rank the following items according to the importance that you’d give them in making a hiring decision: intelligence, education, technical skills, experience, references, interview skills, and emotional intelligence. Explain your ranking.
C A R E E R O P P O R T U N I T I E S
Are You a People Person?
You might not like the idea of sitting across the desk from a corporate college recruiter and asking for a job, but what if you were on the other side of the desk? As a recruiter, you’d get to return to campus each year to encourage students to join your company. Or, maybe you’d like to help your company develop a new compensation and benefits program, implement a performance-evaluation system, or create a new training program. All these activities fall under the umbrella of HR.
To learn more about the field of HR, go to the WetFeet Web site (http://wetfeet.com/Careers-and-Industries/Industries/Human- Resources.aspx#jobdescriptions) and read the page ―Human Resources Overview.‖ Then answer these questions:
1. What is the human resources field like?
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2. What do HR professionals like about their jobs? What do they dislike?
3. Are job prospects in the HR field positive or negative? Which HR areas will experience the fastest growth?
4. Based on the job descriptions posted, which specific HR job would you want?
Finally, write a paragraph responding to this question: Do you find the HR field interesting? Why, or why not?
E T H I C S A N G L E ( A A C S B )
Misstating the Facts
Life couldn’t get much better for George O’Leary when he was named the head football coach at Notre Dame. Unfortunately, he barely had time to celebrate his new job before he was ruled ineligible: after just a week on the job, he was forced to resign, embarrassing himself, his family, his friends, and Notre Dame itself. Why? Because of a few lies that he’d put on his résumé twenty years earlier.
To get the facts behind this story, go to the Sports Illustrated Web site (http://sportsillustrated.cnn.com/football/college/news/2001/12/14/oleary_notredame/) and read the article ―Short Tenure: O’Leary Out at Notre Dame After One Week.‖ Then, answer the following questions:
1. Was O’Leary’s punishment appropriate? If you were the athletic director at Notre Dame, would you have meted out the same punishment? Why, or why not?
2. False information on his résumé came back to haunt O’Leary after twenty years. Once he’d falsified his résumé, was there any corrective action that he could have taken? If so, what?
3. If O’Leary had told Notre Dame about the falsifications before they came to light, would they have hired him?
4. Would his previous employer take him back?
5. O’Leary was later hired as a head coach by the University of Central Florida. Will the episode involving his résumé undermine his ability to encourage players to act with integrity? Will it affect his ability to recruit players?
6. What’s the lesson to be learned from O’Leary’s experience? In what ways might a few (theoretical) misstatements on your résumé come back to haunt you?
T E A M - B U I L D I N G S K I L L S ( A A C S B )
Dorm Room Rescue
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Any night of the week (at least as of this writing), you can relax in front of the TV and watch a steady stream of shows about how to improve your living space—such as New Spaces. You like the concept of these programs well enough, but you’re tired of watching them in a tiny, cluttered dorm room that’s decorated in early barracks style. Out of these cramped conditions, however, you and a team of friends come up with an idea. On graduation, you’ll start a business called Dorm Room Rescue to provide decorating services to the dorm dwellers who come after you. You’ll help college students pick colors and themes for their rooms and select space-saving furniture, storage materials, area rugs, and wall decorations. Your goal will be to create attractive dorm rooms that provide comfort, functionality, and privacy, as well as pleasant spaces in which students can relax and even entertain.
The team decides to develop a plan for the HR needs of your future company. You’ll need to address the following issues:
1. HR plan
Number of employees
Job descriptions: duties and responsibilities for each type of employee
Job specifications: needed skills, knowledge, and abilities
2. Recruitment of qualified employees
Recruitment plan: how and where to find candidates
Selection process: steps taken to select employees
3. Developing employees
New-employee orientation
Training and development
4. Compensation and benefits
Wages, salaries, and incentive programs
Benefits
5. Work/Life quality
Work schedules and alternative work arrangements
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Family-friendly programs
6. Performance appraisal
Appraisal process
Retaining valuable employees
You might want to divide up the initial work, but you’ll need to regroup as a team to make your final decisions on these issues and to create a team-prepared report.
T H E G L O B A L V I E W ( A A C S B )
Sending Ed to China
You’re the HR manager for a large environmental consulting firm that just started doing business in China. You’ve asked your top engineer, Ed Deardon, to relocate to Shanghai for a year. Though China will be new to Deardon, working overseas won’t be; he’s already completed assignments in the Philippines and Thailand; as before, his wife and three children will be going with him.
You’ve promised Deardon some advice on adapting to living and working conditions in Shanghai, and you intend to focus on the kinds of cultural differences that tend to create problems in international business dealings. Unfortunately, you personally know absolutely nothing about living in China and so must do some online research. Here are some promising sites:
Executive Planet (http://www.executiveplanet.com/index.php?title=China)
China Window (http://china-window.com)
Los Angeles Chinese Learning Center (http://chinese-school.netfirms.com)
Instructions
Prepare a written report to Deardon in which you identify and explain five or six cultural differences between business behavior in the United States and China, and offer some advice on how to deal with them.
