Memo of no more than 1,050 words

1. Can behavior costing help improve our business?

2. If I want to know how much money employee turnover is costing us each year, what factors should I consider?

3. How do employees' attitudes relate to customer satisfaction and revenue growth?

4. What's the business case for work-life programs?

5. Is there evidence that high-performance work policies are associated with improved financial performance?

Source: Harter, J. K., Schmidt, F. L., & Hayes, T. L. (2002). Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis. Journal of Applied Psychology, 87, 268-279. Micco, L. (1998, Sept.). Gallup study links worker beliefs, increased productivity. HR News, p. 16.

An in-depth study by The Gallup Organization, the Princeton, New Jersey—based polling and research firm, identified 12 worker beliefs (measures of employee satisfaction-engagement) that play the biggest role in triggering a profitable, productive workplace. Its multiyear study was based on an analysis of data from more than 100,000 employees in 12 industries. A subsequent meta-analysis (quantitative cumulation of research results across studies) included data from almost 8,000 business units in 36 companies.

Analysis showed a consistent, reliable relationship between the 12 beliefs and outcomes such as profits, productivity, employee retention, and customer loyalty. For example, work groups that have these positive attitudes are 50 percent more likely to achieve customer loyalty and 44 percent more likely to produce above-average profitability.

At the level of the business unit, those in the top quartile on employee engagement had, on average, from $80,000 to $120,000 higher monthly revenues or sales than those in the bottom quartile. Even an $80,000 difference per month per business unit translates into $960,000 per year per business unit.

Gallup analyzed employee data to determine how well the respondents' organizations support the 12 employee statements. Organizations whose support of the statements ranked in the top 25 percent averaged 24 percent higher profitability, 29 percent higher revenue, and 10 percent lower employee turnover than those that scored lowest on the statements. Here are the 12 basic belief statements that underlie the most important worker attitudes:

1. I know what is expected of me at work.

2. I have the materials and equipment I need to do my work right.

3. At work I have the opportunity to do what I do best every day.

4. In the last seven days I have received recognition or praise for doing good work.

5. My supervisor, or someone at work, seems to care about me as a person.

6. There is someone at work who encourages my development.

7. In the last six months someone at work has talked to me about my progress.

8. At work, my opinions seem to count.

9. The mission/purpose of my company makes me feel my job is important.

10. My fellow employees are committed to doing quality work.

11. I have a best friend at work.

12. This last year I have had opportunities at work to learn and grow.

For instance, consider belief number 4. Although it requires long-term commitment, managers can deliver on this, at very little cost. Belief number 7 is even less time consuming. Interestingly, researchers found significant variances between work groups or operating units within the same company. “What becomes clear from this investigation is that while we tend to celebrate great companies, in reality there are only great managers,” Coffman said. In fact, it is on the front line that the hard work of building a stronger workplace gets done. Gallup has studied thousands of great managers and has identified the key behaviors that the best managers seem to share in helping to trigger these beliefs. In the conclusion to this chapter-opening vignette, we will consider what these key behaviors might be.

Challenges

1. What kinds of organizational policies might help to support these beliefs?

2. What can a manager do in his or her everyday behavior to encourage these beliefs?

3. Why is it that work groups that hold these beliefs are 50 percent more likely to achieve customer loyalty? What might be the link?

In business settings, it is hard to be convincing without data. If the data are developed systematically and comprehensively and are analyzed in terms of their strategic implications for the business or business unit, they are more convincing. The chapter-opening vignette demonstrates how the beliefs of workers on 12 issues affect company profitability and turnover. In this chapter we will examine methods used to assess the costs and benefits of HR activities in six key areas: high-performance work practices, employee attitudes, absenteeism, turnover, work-life programs, and training.

As emphasized earlier, the focus of this book is not on training HR specialists. Rather, it is on training line managers who must, by the very nature of their jobs, manage people and work with them to accomplish organizational objectives. Consequently, the purpose of this chapter is not to show how to measure the effectiveness of the HR department; the purpose is to show how to assess the costs and benefits of relevant HR activities. The methods can and should be used in cooperation with the HR department, but they are not the exclusive domain of that department. They are general enough to be used by any manager in any department to measure the costs and benefits of employee behavior.

Do you find it surprising that the market capitalization of Microsoft, that is, the price per share times the number of shares outstanding, was about $300 billion (U.S.) in late 2004, while the total value of its tangible, physical assets, such as computers, buildings, and infrastructure, was only about $20 billion? The $280 billion (U.S.) difference lies in its intangible assets, such as brand equity and human talent, sometimes referred to as human capital, which includes the quality of management and the knowledge, skills, and abilities of its employees to solve problems that customers think are important. Indeed, the new economic paradigm that emphasizes speed, innovation, cycle time, quality, and customer satisfaction makes the relevance and importance of intangible assets even more significant.

From the perspective of managers, the overarching question is this: “How does my organization create value from its human capital?” The answer does not lie in traditional, transaction-based measures of human resources activities, such as the number of tests administered, the number of insurance claims processed, or the number of employee suggestions made. Such measures show only that the HR department has been busy; they do not indicate in any way that it has been effective.

So the most fundamental question is, “What should we measure?” Surely it does no good, and in fact it may harm the credibility of the HR department, to collect information about HR initiatives that senior managers do not care about. The answer to the question, “What should we measure?” is simple: “What's important?” That is, measure outcomes that really matter, especially those where the behavior of employees makes a difference. In short, to demonstrate its strategic contribution to senior managers, HR needs a measurement system that focuses on two dimensions:

· Cost control—driving out costs in the HR function and enhancing operational efficiency outside of HR.

· Value creation—ensuring that the HR architecture1—the continuum from HR professionals within the HR function, to the system of HR-related policies and practices, through the competencies, motivations, and associated behaviors of the firm's employees-intersects with the process of implementing strategy in the organization.

· Evidence—to establish that the effects of HR are indeed significant enough to merit intensive measurement and study.

· Explanation—to provide a logical reason to suggest why and how human resources create their significant effects on organizations.

· Purpose—the goals of measurement systems must consider the effects of measures on key stakeholders within and outside the organization.

· Method—a model and framework to support developing better HR measures.

To be most useful, HR metrics should focus on outcomes that are directly relevant to the strategic objectives of a business. They should guide decisions about employees and programs, and they should be expressed in language that key decision makers find meaningful. Our objectives, therefore, are to develop a set of HR measures that indicate clearly how people create value. In the language of corporate finance, they do so in at least three different ways:3

1. By enhancing return—that is, the expected performance in a position, as defined by a competency model. Firms do this by selecting for specific skills and by training for specific skills.

2. By reducing risk—by lowering the variability in performance, and by reducing or eliminating factors that might derail performance. Firms use selection methods to screen out counterproductive behaviors and employee assistance programs to help troubled employees, and they implement policies and controls to ensure compliance with employment laws.

3. By increasing liquidity—that is, improving the flexibility to adapt to changing business needs. Firms do this by providing training in transferable skills, by selecting for skills that are not task specific (e.g., organizational citizenship behaviors), and by selecting people based on their adaptability and ability to learn.

Let us begin our treatment by examining the financial impact of high-performance work practices on organizational outcomes. We will present two macro-level assessments of the financial impact of high-performance work practices, one focusing on organizational culture and the other on how HR factors affect the probability of survival of initial public offerings (IPOs). The focus will be on methods and outcomes rather than on alternative HR management approaches that might be used to reduce costs or increase profits in each area. (We discuss such approaches elsewhere in the book.)

In an effort to enhance their competitiveness, some firms have instituted high-performance work practices. At a general level, such practices include the following five features:4

· Increasing the emphasis on line managers as HR managers.

· Instilling learning as a priority in all organizational systems.

· Decentralizing decision making to autonomous units and employees.

· Linking performance measures for employees to financial performance indicators.

If managers are to be able to argue forcefully for greater investments in people, they must be able to demonstrate that the benefits of implementing such practices outweigh the costs. That is, they must provide evidence of the effectiveness of these practices. Do they pay off?

A substantial amount of research has been conducted on the relationship between productivity and high-performance work practices, such as the use of valid staffing procedures, organizational cultures that emphasize team orientation and respect for people, employee involvement in decision making, compensation linked to firm or worker performance, and training. The evidence indicates that such practices are usually associated with increases in productivity (defined as output per worker), as well as with a firm's long-term financial performance.5 However, these effects are most pronounced when such work practices are implemented together as a system.6 As an example, let us consider the impact of organizational culture on employee retention and HR costs.

Does organizational culture matter to new employees? That was the research question in a study that investigated the retention rates of 904 college graduates hired by six public accounting firms over a six-year period.7 Organizational culture values varied considerably across the six firms, from high task orientation (i.e., high orientation toward detail and stability) to high interpersonal orientation (i.e., high concern for a team orientation and respect for individuals).

New employees stayed an average of 45 months in the cultures emphasizing interpersonal relationships, but only 31 months in the cultures emphasizing work task values (see Figure 2-1). This is a 14-month difference in median survival time. The next task was to translate the difference in time into a measure of profits forgone (i.e., opportunity losses).

(Source: J. E. Sheridan. (1992). Organizational culture and employee retention, Academy of Management Journal, 35, p. 1049.)

Using the firms' average billing fees, along with hiring, training, and compensation costs, means profits per professional employee ranged from $58,000 during the first year of employment to $67,000 during the second year and $105,000 during the third. A firm therefore incurs an opportunity loss of only $9,000 ($67,000 $58,000) when a new employee replaces a two-year employee, but a $47,000 loss ($105,000 $58,000) when a new employee replaces a three-year employee.

Evidence that management practices affect performance comes from a study of the five-year survival rate of 136 nonfinancial companies that initiated their public offerings in the U.S. stock market in 1988.8 By 1993, some five years later, only 60 percent of these companies were still in existence. Empirical analysis controlled statistically for factors such as size, industry, and even profits. Results showed that both the value the firm placed on human resources—such as whether the company cited employees as a source of competitive advantage—and how the organization rewarded people—such as stock options for all employees and profit sharing—were significantly related to the probability of survival.

As Figure 2-2 demonstrates, the results were important in a practical sense as well. The difference in survival probability for firms one standard deviation above and one standard deviation below the mean (those in the upper and lower 16 percent of all firms in the sample, respectively) on valuing human resources was almost 20 percent. The difference in survival depending on where the firm scored on rewards was even more dramatic, with a difference in five-year survival probability of 42 percent between firms in the upper and lower tails of the distribution.

(Source: Based on information from T. Welbourne & A. Andrews. (1996). Predicting performance of initial public offering firms: Should HRM be in the equation? Academy of Management Journal, 39, 910-911.)

The extent to which these practices actually will pay off depends on the skill and care with which the many HR practices available are implemented to solve real business problems and to support a firm's operating and strategic initiatives.

The next section describes a general approach to attaching economic estimates to the consequences of employee behaviors. This method is known as behavior costing. We then apply it in five key areas.

This approach assigns dollar estimates to behaviors, such as the absenteeism, turnover, and job performance, of employees and managers. Behavior costing does not measure the value of an employee or manager as an asset, but rather it considers the economic consequences of his or her behavior. This is an expense model of HR accounting,11 and, contrary to popular belief, there are methods for determining the costs of employee behavior in all HR management activities—behaviors associated with the attraction, selection, retention, development, and utilization of people in organizations. It is the approach taken in this chapter to assessing the costs and benefits of the activities of all employees, managerial as well as nonmanagerial. We will apply standard cost-accounting procedures to employee behavior. To do this, we must first identify each of the elements of behavior to which we can assign a cost, and each behavioral cost element must be separate and mutually exclusive from the others. To begin, let's consider the definitions of some key terms.

Direct measures refer to actual costs, such as the accumulated, direct cost of recruiting.

Indirect measures do not deal directly with cost; they are usually expressed in terms of time, quantity, or quality.12 In many cases indirect measures can be converted to direct measures. For example, if we know the length of time per pre-employment interview plus the interviewer's hourly pay, it is a simple matter to convert time per interview into cost per interview.

Source: B. A. Macy & P. H. Mirvis, Evaluation Review, 6 (3), Figure 4-5. Copyright © 1982 by Sage Publications, Inc. Reprinted by permission.

The point is that in human resource costing, the objective is not simply to measure costs but also to reduce the costs of human resources by devoting resources to the more “controllable” factors. To do this, we must do two things well:

1. Identify, for each HR decision, which costs are controllable and which are not.

2. Measure these costs at Time 1 (prior to some intervention designed to reduce controllable costs) and then again at Time 2 (after the intervention).

Hence the real payoff from determining the cost of employee behaviors lies in being able to demonstrate a financial gain from the wise application of human resource management methods. The following sections present both hypothetical and actual company examples of behavior costing in the areas of employee attitudes, absenteeism, turnover, work-life programs, and training.

Attitudes are internal states that focus on particular aspects of or objects in the environment. They include three elements: cognition, the knowledge an individual has about the focal object of the attitude; the emotion an individual feels toward the focal object; and an action tendency, a readiness to respond in a predetermined manner to the focal object.14

For example, job satisfaction is a multidimensional attitude; it is made up of attitudes toward pay, promotions, coworkers, supervision, the work itself, and so on.15 Another attitude is organizational commitment—a bond or linking of an individual to the organization that makes it difficult to leave.16

Managers are interested in employees' job satisfaction and commitment principally because of the relationship between attitudes and behavior. They assume that employees who are dissatisfied with their jobs and who are not committed strongly to their organizations will tend to be absent or late for work, to quit more often, and to place less emphasis on customer satisfaction than those whose attitudes are positive. Poor job attitudes therefore lead to lowered productivity and organizational performance. Evidence indicates that this is, in fact, the case, and that management's concern is well placed.17

Over two quarters Sears managers collected survey data from employees and customers and financial data from 800 of its stores. A team of consulting statisticians then factor-analyzed the data into meaningful clusters and used causal pathway modeling to assess cause/effect relationships. Based on initial results, Sears adjusted the model and continued to collect data for a new iteration at the end of the next quarter.

How did Sears benefit from the model? It could see how employee attitudes drove not just customer service, but also employee turnover and the likelihood that employees would recommend Sears and its merchandise to friends, family, and customers. It discovered that an employee's ability to see the connection between his or her work and the company's strategic objectives was a driver of positive behavior. It also found that asking customers whether Sears is a “fun place to shop” revealed more than a long list of more specific questions would. It began to see exactly how a change in training or business literacy affected revenues.

Although Sears used a 70-item questionnaire to assess employees' attitudes, it found that a mere 10 of those questions captured the predictive relationship between employee attitudes, behavior toward the customer, and customer satisfaction. Items such as the following predicted an employee's attitude about his or her job:

· I like the kind of work I do.

· I am proud to say I work at Sears.

· How does the way you are treated by those who supervise you influence your overall attitude about your job?

Items such as the following predicted an employee's attitude about the company:

· I feel good about the future of the company.

· I understand our business strategy.

· Do you see a connection between the work you do and the company's strategic objectives?

In summary, Sears produced a model, revised it three times, and created a kind of balanced scorecard for the company—the Sears Total Performance Indicators, or TPI—that showed pathways of causation all the way from employee attitudes to profits. The company conducts interviews and collects data continually, assembles its information quarterly, and recalculates the impacts on its model annually to stay abreast of the changing economy, changing demographics, and changing competitive circumstances. The revised model (see Figure 2-4) helps Sears managers run the company.

(Source: A. J. Rucci, S. P. Kirn, & R. T. Quinn. (1998, Jan.-Feb.). The employee-customer-profit chain at Sears, Harvard Business Review, p. 91. Used with permission.)

In a revolutionary step, Sears now bases all long-term executive incentives on the TPI. Such incentives are now based on nonfinancial as well as on financial performance—one-third on employee measures, one-third on customer measures, and one-third on traditional investor measures. At the level of the firm, employee satisfaction on Sears' TPI rose 4 percent, and customer satisfaction by almost 4 percent in one year. The 4 percent improvement translated into more than $200 million in additional revenues for that year. That increased Sears's market capitalization (price per share times the number of shares outstanding) by nearly 0.25 billion.

It is important to note, however, that across other types of organizations, the direction of causality may not be as clear as it is in retailing. In fact, it may well be the case that the financial performance of a firm predicts satisfaction with security and overall satisfaction, rather than vice versa. This is precisely what one study found in an analysis of employee attitudes and financial performance for 35 companies over eight years.18

In any human resource costing application, it is important first to define exactly what is being measured. From a business standpoint, absenteeism is any failure of an employee to report for or to remain at work as scheduled, regardless of reason. The term “as scheduled” is very significant, for it automatically excludes vacations, holidays, jury duty, and the like. It also eliminates the problem of determining whether an absence is “excusable” or not. Medically verified illness is a good example. From a business perspective, the employee is absent and is simply not available to perform his or her job; that absence will cost money. How much money? In 2003 the cost of unscheduled absences in U.S. workplaces was about $800 per employee per year.20 For every 100 employees, that's $80,000. On the other hand, workers who come to work sick, when they should stay home instead, cost their employers an average of $255 per year in reduced productivity due to “presenteeism.” In the aggregate, economists estimate that presenteeism costs U.S. businesses $180 billion annually.21 Figures like that get management's attention.

Would it surprise you to learn that the leading causes of absenteeism are family-related issues? Personal illness, the reason you might expect to be the main justification for calling in sick, is actually true only in about one in five cases. Other causes are personal needs (about one in five cases), stress (about one in six cases), and entitlement mentality (about one in six cases).22

Before we begin costing absenteeism, one important qualification is necessary. Specifically, if workers can vary their work time to fit their personal schedules, if they need not “report” to a central location, and if they are accountable only in terms of results, then the concept of “absenteeism” may not have meaning. Teleworkers often fit this description.

To the extent that absenteeism is a legitimate concern in a given work situation, Figure 2-5 may prove useful. Figure 2-5 is a flowchart that shows how to estimate the total cost of employee absenteeism over any period. To illustrate the computation of each cost element in the figure, let us use as an example a hypothetical 1,800-employee firm called Mini-Mini-Micro Electronics; hour and dollar amounts for each element are shown in Table 2-2. An item-by-item explanation follows.

(Source: W. F. Cascio. (2000). Costing human resources: The financial impact of behavior in organizations [4th ed.], South-Western College Publishing, Cincinnati, OH, p. 63. Used with permission.)

Item 1: Total Hours Lost.

Assume that employee absenteeism accounts for 1.5 percent of scheduled work hours (the median U.S. absence rate in 2004),23 which will be applied to total scheduled work hours. Also assume an eight-hour day and a five-day week. Hours of scheduled work time per employee per year may be determined by subtracting two weeks' vacation hours and five paid holidays from total work hours:

To determine total work hours lost to absenteeism, multiply total scheduled hours by 1.5 percent:

Item 2: Weighted-Average Wage or Salary per Hour per Absent Employee.

Employers who have systems in place for employees to report their absences can determine the exact wage or salary per hour per absent employee. Others might use the following procedure to estimate a weighted-average wage or salary per hour per absentee:

Item 3: Cost of Employee Benefits per Hour per Absent Employee.

Item 4: Total Compensation Lost per Hour per Absent Employee.

This amount is determined by adding the weighted-average hourly wage and the hourly cost of benefits (assuming that absent workers are paid). Some firms (e.g., Honda USA) do not pay absentees: “No work, no pay.” In such instances, only the cost of benefits should be included in the estimate of total compensation lost per hour per absent employee. For Mini-Mini-Micro, where absent workers are paid, the compensation lost per hour for each absent employee is

Item 5: Total Compensation Lost to Absent Employees.

This amount is simply total hours lost multiplied by total compensation lost per hour:

Note that the first five items shown in Figure 2-5 refer to the costs associated with absentees themselves. The next three items refer to the firm's costs of managing employee absenteeism.

Item 6: Total Supervisory Hours Lost in Dealing with Employee Absenteeism.

Three factors determine this category of lost time:

The supervisor's time is “lost” because, instead of planning, scheduling, and troubleshooting productivity problems, he or she must devote time to nonproductive activities associated with managing absenteeism problems. The actual amount of time lost can be determined by having supervisors keep diaries indicating how they spend their time or by conducting structured interviews with experienced supervisors.

Item 7: Average Hourly Supervisory Wage, Including Benefits.

For those supervisors who deal regularly with absenteeism problems, assume that their average hourly wage is $25.75 plus 35 percent benefits ($9.013), or $34.763 per hour.

Item 8: Total Cost of Supervisory Salaries Lost to Managing Problems of Absenteeism.

To determine this cost, multiply the total supervisory hours lost by the total hourly supervisory wage:

Item 9: All Other Absenteeism-Related Costs Not Included in Items 1 through 8.

Assume that Mini-Mini-Micro spends $300,000 per year in absenteeism-related costs that are not associated either with absentees or with supervisors. These costs are associated with elements such as overtime premiums, wages for temporary help, machine downtime, production losses, inefficient materials usage by temporary substitute employees, and, for very large organizations, permanent labor pools to fill in for absent workers.

Item 10: Total Cost of Employee Absenteeism.

This cost is the sum of the three costs determined thus far: costs associated with absent employees (item 5) plus costs associated with the management of absenteeism problems (item 8) plus other absenteeism-related costs (item 9). For Mini-Mini-Micro Electronics, the total yearly cost is

Item 11: Per-Employee Cost of Absenteeism.

This amount is the total yearly cost divided by the number of employees:

Remember that the dollar figure just determined (we will call it the “Time 1” figure) becomes meaningful as a baseline from which to measure the financial gains realized as a result of a strategy to reduce absenteeism. At some later time (we will call this “Time 2”), the total cost of absenteeism should be measured again. The difference between the Time 2 figure and the Time 1 figure, minus the cost of implementing the strategy to reduce absenteeism, represents net gain.

Another question that often arises at this point is, “Are these dollars real? Since supervisors are drawing their salaries anyway, what difference does it make if they have to manage absenteeism problems?” True, but what is the best possible gain from them for that pay? Let's compare two firms, A and B, identical in regard to all resources and costs—supervisors get paid the same, work the same hours, manage the same size staff, and produce the same kind of product. But absenteeism in A is very low, and in B it is very high. The paymasters' records show the same pay to supervisors, but the accountants show higher profits in A than in B. Why? Because the supervisors in firm A spend less time managing absenteeism problems. They are more productive because they devote their energies to planning, scheduling, and troubleshooting. Instead of putting in a 10- or 12-hour day (which the supervisors in firm B consider “normal”), they wrap things up after only 8 hours. In short, reducing the number of hours that supervisors must spend managing absenteeism problems has two advantages: It allows supervisors to maximize their productivity, and it reduces the stress and the wear and tear associated with repeated 10- to 12-hour days, which, in turn, enhances the quality of work life of supervisors.

Organizations need a practical procedure for measuring and analyzing the costs of employee turnover, especially because top managers view the costs of hiring, training, and developing employees as investments that must be evaluated just like other corporate resources. The objective in costing human resources is not just to measure the relevant costs, but also to develop methods and programs to reduce the costs of human resources by managing the more controllable aspects of those costs.

Turnover may be defined as any permanent departure beyond organizational boundaries26—a broad and ponderous definition. Not included as turnover within this definition, therefore, are transfers within an organization and temporary layoffs. The rate of turnover in percent over any period can be calculated by the following formula:

High performers who are difficult to replace represent dysfunctional turnovers; low performers who are easy to replace represent functional turnovers. The crucial issue in analyzing turnover, therefore, is not how many employees leave but rather the performance and replaceability of those who leave versus those who stay.28

In costing employee turnover, first determine the total cost of all turnover and then estimate the percentage of that amount that represents controllable, dysfunctional turnover—resignations that represent a net loss to the firm and that the firm could have prevented. Thus, if total turnover costs $1 million and 50 percent is controllable and dysfunctional, $500,000 is the Time 1 baseline measure. To determine the net financial gain associated with the strategy adopted prior to Time 2, compare the total gain at Time 2 (say, $700,000) minus the cost of implementing the strategy to reduce turnover (say, $50,000) with the cost of turnover at Time 1 ($500,000). In this example, the net gain to the firm is $150,000. Now let's see how the total cost figure is derived.

There are three broad categories of costs in the basic turnover costing model: separation costs, replacement costs, and training costs. This section presents only the cost elements that make up each of these three broad categories. Those who wish to investigate the subject more deeply may seek information on the more detailed formulas that are available.29

Following are four cost elements in separation costs:

1. Exit interview, including the cost of the interviewer's time and the cost of the terminating employee's time.

2. Administrative functions related to termination, for example, removal of the employee from the payroll, termination of benefits, and turn-in of company equipment.

3. Separation pay, if applicable.

The sum of these four cost elements represents the total separation costs for the firm.

The eight cost elements associated with replacing employees who leave are the following:

1. Communicating job availability.

2. Preemployment administrative functions, for example, accepting applications and checking references.

3. Entrance interview, or perhaps multiple interviews.

4. Testing and/or other types of assessment procedures.

5. Staff meetings, if applicable, to determine if replacements are needed, to recheck job analyses and job specifications, to pool information on candidates, and to reach final hiring decisions.

6. Travel and moving expenses, for example, travel for all applicants and travel plus moving expenses for all new hires.

7. Postemployment acquisition and dissemination of information, for example, all the activities associated with in-processing new employees.

8. Medical examinations, if applicable, either performed in-house or contracted out.

The sum of these eight cost elements represents the total cost of replacing those who leave.

This third component of turnover costs includes three elements:

1. Informational literature, for example, an employee handbook.

2. Instruction in a formal training program.

3. Instruction by employee assignment, for example, on-the-job training.

The sum of these three cost elements represents the total cost of training replacements for those who leave.

Note two important points. One, if there is a formal orientation program, the per-person costs associated with replacements for those who left should be included in the first cost element, informational literature. This cost should reflect the per-person, amortized cost of developing the literature, not just its delivery. Do not include the total cost of the orientation program unless 100 percent of the costs can be attributed to employee turnover.

Note: The learning period for the average broker trainee is two years, although the cost to the firm is generally incurred only in the first year. It is not until the end of the second year that the average broker trainee is fully productive.

The sum of the three component costs—separation, replacement, and training—represents the total cost of employee turnover for the period in question. Other factors could also be included in the tally, such as the uncompensated performance differential between leavers and their replacements, but that is beyond the scope of this book.30

Remember, the purpose of measuring turnover costs is to improve management decision making. Once turnover figures are known, managers have a sound basis for choosing between current turnover costs and instituting some type of turnover-reduction strategy. These might include actions such as the following: Appoint a retention czar whose job is to help build a supportive culture and employee commitment,31 provide realistic job previews, conduct and follow up on employee surveys, and institute merit-based rewards to retain high performers.32

Consider the impact of a simple, nonfinancial strategy to improve retention. Managers at NationsBank realized that voluntary turnover rates among backoffice workers were much higher than those in the rest of the bank. After instituting a one-on-one communications program, the bank reduced voluntary turnover by 25 percent. How? By having line managers come in at off-hours (e.g., 1 A.M.) to meet with night-shift employees and thoroughly explain benefits the employees were unaware of. The managers were trained to communicate with workers in problem-solving manner—not “tell and sell”—and their efforts paid off.33

Obviously, there are opportunities in this area for enterprising managers to make significant bottom-line contributions to their organizations. For example, one way to reduce turnover, especially among employees who seek opportunities for personal growth and professional development, is to provide training. Indeed, among employees who say their company offers poor training, 41 percent plan to leave within a year, versus only 12 percent of those who rate their firm's training opportunities as excellent.36 At firms such as Hewlett-Packard, IBM, and Edward Jones & Company, training is an important component of each firm's competitive strategy. We will describe methods of assessing the costs and benefits of training in a later section.

Although originally termed “work-family” programs, this book uses the term “work-life” programs to reflect a broader perspective of this issue. “Work-life” recognizes the fact that employees at every level in an organization, whether parents or nonparents, face personal or family issues that can affect their performance on the job. A work-life program includes any employer-sponsored benefit or working condition that helps an employee to balance work and nonwork demands.37 At a general level, such programs span five broad areas:38

1. Child and dependent care benefits (e.g., onsite or near-site child or elder care programs, summer and weekend programs for dependents).

2. Flexible working conditions (e.g., flextime, job sharing, teleworking, part-time work, compressed work weeks).

3. Leave options (e.g., maternity, paternity, adoption leaves, sabbaticals, phased reentry or retirement schemes).

4. Information services and HR policies (e.g., cafeteria benefits, life-skill educational programs such as parenting skills, health issues, financial management, retirement, exercise facilities, professional and personal counseling).

5. Organizational cultural issues (e.g., an organizational culture that is supportive with respect to the nonwork issues of employees, coworkers and supervisors who are sensitive to family issues).

Who Adopts Work-Life Programs?

A recent study sought to identify characteristics of organizations that are associated with the adoption of work-life programs.39 Five such characteristics were investigated: organizational size (measured on a 10-point scale from 1, fewer than 25 employees, to 10, more than 8,000 employees), the percentage of women in the organization, the percentage of employees under age 35 in the organization, public-versus private-sector ownership, and the organization's track record in HR management (good versus poor).

For purposes of illustration, we will consider the financial effects of only three of the many possible work-life interventions: child care, elder care, and stress. Then we will examine stock market reactions to work-life initiatives.

Company-sponsored child care is a valuable work-life program for many parents.

A study at a major aerospace firm reported the following savings in the first year of operation of a child care center.43

· Reduced absences arising from child care breakdowns: 5.28 days saved per employee, or $243,302.

· Reduced tardiness due to child care problems: 8.37 times late or left early per employee (multiplied by 2 hours), or $96,422.

· Reduced work time spent looking for child care: 7 hours per employee, or $12,900.

The total estimated net savings for this very large employer were $352,624.

Finally, a study of the return on investment (ROI) of backup child care (i.e., child care used in emergencies or when regular child care is unavailable) at Chase Manhattan Bank revealed the following. Child care breakdowns were the cause of 6,900 days of potentially missed work by parents. Because backup child care was available, these lost days were not incurred. When multiplied by the average daily salary of the employee in question, gross savings were $1,523,175. The annual cost of the backup child care center was $720,000, for a net savings of $803,175, and an ROI (economic gains divided by program costs) of better than 110 percent.44

As the workforce ages and life spans increase, elder care is projected to have an increasing effect on the workplace.45 At the national level, a study by Metropolitan Life Insurance Company of employer costs for elder care provided by full-time employees found that the aggregate cost to U.S. employers was almost $400 million per year. This was based on the number of full-time caregivers by gender, the median weekly wage in the United States by gender, and a finding that 10.5 percent of employed caregivers were absent a minimum of six days per year performing caregiving responsibilities, such as taking their older relative to the doctor or other health care visits, visiting them, or arranging for services.46

Some caregivers find that their elder care responsibilities are so great that they have to quit their jobs. In the MetLife study, more than 17 percent of care-givers fell into that category. At a broader level, Johnson & Johnson found that policies on time and leave were very significant in employees' decisions to stay with the firm, even if they personally had not used them. This is not atypical, and it is consistent with other published research.48 The fact is that people are more committed to organizations that offer work-life programs, regardless of the extent to which they personally might benefit from them. In one group of employers with work-life programs, 78 percent reported that the programs helped their companies retain valuable employees. At NationsBank, two-thirds of employees on flexible schedules said they would have left without these policies.49

In a study of organizations with and without work-life programs, Northwestern Mutual Life found employees in companies that did not have supportive policies were twice as likely to report burnout and stress.50 Employer-sponsored work-life programs do not erase the difficulties of balancing responsibilities, but they do provide resources for employees to manage and solve their own problems.

Open communication policies and supportive work environments combine to reduce work-life stress. Thus, a recent study found that the top five drivers of retention were (1) career-development opportunities, (2) confidence in the future, (3) feelings of accomplishment, (4) amount of joy at work, and (5) sense of job security.51

It is not just the policies, but also the environment in which they are implemented that make the biggest difference for employees. Thus, an evaluation of Johnson & Johnson's work-life programs found that while employees appreciated and made use of the company's array of progressive policies, the factors most often associated with people's ability to balance work and nonwork roles were a supportive supervisor and workplace culture.52

A recent study examined stock market effects of 130 announcements among Fortune 500 companies of work-life initiatives in The Wall Street Journal.53 The study examined changes in share prices the day before, the day of, and the day after such announcements. The average share-price reaction over the three-day window was 0.39 percent, and the average dollar value of such changes was approximately $60 million per firm. Apparently investors anticipate that firms will have access to more resources (e.g., higher quality talent) following the adoption of a work-life initiative. There is a difference, however, between announcements and actual implementation. Only firms that do what they say are likely to reap the benefits of work-life initiatives.

1. Recognize that no one set of facts and figures will make the case for all firms. It depends on the priorities of the organization in question—is it primarily attraction and public image, retention of talent, or the costs versus benefits of alternative programs?

2. Don't rely on isolated facts to make the business case. Considered by itself, any single study or fact is only one piece of the total picture. It is important to develop a dynamic understanding of the importance of the relationship between work and personal life. Doing so requires a focus on an organization's overall culture and values, not just on programs or statistics. Often a combination of quantitative information along with employees' experiences, in their own words (qualitative information that brings statistics to life), is most effective.

3. Don't place work-life initiatives under an unreasonable burden of proof. Decision makers may well be skeptical even after all the facts and costs have been presented to them. That suggests that more deeply rooted attitudes and beliefs may underlie the skepticism—such as a belief that addressing personal concerns may erode service to clients or customers or that people will take unfair advantage of the benefits or that work-life issues are just women's issues. Constructing a credible business case means addressing attitudes and values as well as assembling research.54

At the most basic level, the task of evaluation is counting—counting clients, counting errors, counting dollars, counting hours, and so forth. The most difficult tasks of evaluation are deciding which things should be counted and developing routine methods for counting them. Managers should count the things that will provide the most useful feedback.

Managers assess the results of training to determine whether it is worth the cost. Training valuation (in financial terms) is not easy, but the technology to do it is available and well developed.55 Evidence indicates that managers prefer to receive information about the financial results of training programs, rather than anecdotal information, regardless of the overall impact of such programs (low, average, or high).56 Such information may be derived in two types of situations: one in which only indirect measures of dollar outcomes are available and one in which direct measures of dollar outcomes are available.

A large, U.S.-based, multinational firm conducted a four-year investigation of the effect and utility of its corporate managerial and sales/technical training functions. The study is noteworthy because it adopted a strategic focus by comparing the payoffs from different types of training in order to assist decision makers in allocating training budgets and specifying the types of employees to be trained.58

The CEO, a former research scientist, requested a report on the dollar value of training. He indicated that training should be evaluated experimentally, strategically aligned with the business goals of the organization, and thus demonstrated to be a worthwhile investment for the company. Thus, the impetus for this large-scale study came from the top of the organization.

In a project of this scope and complexity, it is necessary to address several important methodological issues. The first concerns the outcomes or criteria to use in judging each program's effectiveness. Training courses that attempt to influence the supervisory style of managers may affect a large percentage of the tasks that comprise that job. Conversely, a course designed to affect sales of a specific product may only influence a few of the tasks in the sales representative's job. The researchers corrected for this issue to ensure that the estimate of economic payoff for each training program only represented the value of performance on specific job elements.

A second issue that must be considered when assessing the effectiveness of alternative training programs is the transfer of trained skills from the training to the job. For the training to have value, skills must be generalized to the job (i.e., exhibited on the job), and such transfer must be maintained for some period of time. To address the issue of transfer, the measure of performance on all training programs was behavioral performance on the job. Performance was assessed by means of a survey completed by each trainee's supervisor (for most courses), peers (i.e., hazardous energy control), or subordinates (i.e., team building) before and after training.

Because it was not possible to assess the length of training's effects in this study, decision makers assumed that training's effect (and economic utility) was maintained without decay or growth for precisely one year. In addition, the researchers calculated break-even values, which indicate the length of time the observed effect would need to be maintained in order to recover the cost of the training program.59

A sample of 18 high-use or high-cost courses was selected based on the recommendation of the training departments throughout the organization. Managerial training courses were defined as courses developed for individuals with managerial or supervisory duties. Sales training courses were defined as programs designed to enhance the performance of sales representatives by affecting sales performance or support of their own sales. Technical training courses (e.g., hazardous energy control, in-house time management) were defined as courses not specifically designed for sales or supervisory personnel.

Results.

Over all 18 programs, assuming a normal distribution of performance on the job, the average improvement was about 17 percent (0.54 of a standard deviation, or SD). However, for technical/sales training it was higher (0.64 SD), and for managerial training it was lower (0.31 SD). Thus, training in general was effective.

The mean return on investment (ROI) was 45 percent for the managerial training programs, and 418 percent for the sales/technical training programs. However, one inexpensive time-management program developed in-house had an ROI of nearly 2,000 percent. When the economic utility of that program is removed, the overall average ROI of the remaining training programs was 84 percent and the ROI of sales/technical training was 156 percent.

Time to Break-Even Values.

There was considerable variability in these values. Break-even periods ranged from a few weeks (e.g., time management, written communications) to several years (supervisory skills, leadership skills). Several programs were found to have little positive or even slightly negative effects, and thus would never yield a financial gain.

This study compared the effectiveness and economic utility of different types of training across sales, technical, and managerial jobs. The estimated cost of the four-year project, including the fully loaded cost of rater time, as well as the cost of consulting, travel, and materials, was approximately $500,000. This number may seem large. However, over the same time period, the organization spent more than $240 million on training. Thus the cost of the training program evaluation was approximately 0.2 percent of the training budget during the same period. Given budgets of this magnitude, some sort of accountability is prudent.

Despite the overall positive effects and utility of the training, there were some exceptions. The important lesson to be learned is that it is necessary to evaluate the effect and utility of each training program before drawing overall conclusions about the impact of training. It would be simplistic to claim that “training is a good investment” or that “training is a waste of time and money.”60

When direct measures of training outcomes are available, standard valuation methods are appropriate. The following study valued the results of a behavior-modeling training program (described more fully below) for sales representatives in relation to the program's effects on sales performance.61

The training program was then introduced in seven stores, one in each of the matched pairs, and not in the other seven stores. Other kinds of ongoing sales training programs were provided in the control-group stores, but the behavior-modeling approach was used only in the seven experimental-group stores. In the experimental-group stores, 58 sales associates received the training, and their job performance was compared with that of 64 sales associates in the same departments in the control-group stores.

As in most sales organizations, detailed sales records for each individual were kept on a continuous basis. These records included total sales as well as hours worked on the sales floor. Because all individuals received commissions on their sales and because the value of the various products sold varied greatly, it was possible to compute a job performance measure for each individual in terms of average commissions per hour worked.

There was considerable variation in the month-to-month sales performance of each individual, but sales performance over six-month periods was more stable. In fact, the average correlation between consecutive sales periods of six months each was about 0.80 (where 1.00 equals perfect agreement). Hence, the researchers decided to compare the sales records of participants for six months before the training program was introduced with the results achieved during the same six months the following year, after the training was concluded. All sales promotions and other programs in the stores were identical, since these were administered on an areawide basis.

The program focused on specific aspects of sales situations, such as “approaching the customer,” “explaining features, advantages, and benefits,” and “closing the sale.” The training itself proceeded according to the following procedure. First the trainers presented guidelines (or “learning points”) for handling each aspect of a sales interaction. Then the trainees viewed a videotaped situation in which a “model” sales associate followed the guidelines in carrying out that aspect of the sales interaction with a customer. The trainees then practiced the same situation in role-playing rehearsals. Their performance was reinforced and shaped by their supervisors, who had been trained as their instructors.

Of the original 58 trainees in the experimental group, 50 were still working as sales associates one year later. Of the remaining 8 associates, 4 had been promoted during the interim, and 4 others had left the company. In the control-group stores, only 49 of the original 64 were still working as sales associates one year later. Only 1 had been promoted, and 14 others had left the company. Thus, the behavior-modeling program may have had a substantial positive effect on turnover since only about 7 percent of the trained group left during the ensuing year, in comparison with 22 percent of those in the control group. (This result had not been predicted.)

The program also had an important secondary effect on turnover. Because all sales associates are given considerable training (which represents an extensive investment of time and money), it appears that the behavior modeling contributed to cost savings in addition to increased sales. As noted in the previous discussion of turnover costs, an accurate estimate of these cost savings requires that the turnovers be separated into controllable and uncontrollable, because training can affect only controllable turnover.

Finally, the use of objective data as criterion measures in a study of this kind does entail some problems. As pointed out earlier, the researchers found that a six-month period was required to balance out the month-to-month variations in sales performance resulting from changing work schedules, sales promotions, and similar influences that affected individual results. It also took some vigilance to ensure that the records needed for the study were kept in a consistent and conscientious manner in each store. According to the researchers, however, these problems were not great in relation to the usefulness of the study results. “The evidence that the training program had a measurable effect on sales was certainly more convincing in demonstrating the value of the program than would be merely the opinions of participants that the training was worthwhile.”62

There is a growing consensus among managers in many industries that the future success of their firms may depend more on the skill with which human problems are handled than on the degree to which their firms maintain leadership in technical areas. For example, consider the average return to shareholders by Fortune magazine's list of the 100 Best Companies to Work for in America. Of the 61 firms in the group that are publicly traded, they outperformed the Russell 3000, an index of large and small companies that mirrors the 100 Best over both 5- and 10-year periods. Over 5 years, the 100 Best returned an average of 27.5 percent versus 17.3 percent for the Russell 3000. Over 10 years, the 100 Best returned an average of 23.4 percent versus 14.8 percent for the Russell 3000.

While it could be that well-treated employees who enjoy a high quality of work life make companies successful, it is equally likely that successful companies provide a high QWL by treating their employees well. According to a recent report from Ernst & Young, institutional investors are now more likely to buy stock based on a company's ability to attract talented people. Talented people want challenging work, opportunities for professional growth and development, and high QWL. Institutional investors are betting cash that companies providing that kind of an environment will be successful in the marketplace.63

Human Resource Management in Action: Conclusion

The very best managers seem to share four key behaviors that help to trigger the 12 worker beliefs that underlie a profitable, productive workplace.

1. Select for talent. Gallup defines talents as patterns of thoughts, feelings, and behaviors that come naturally to an individual. The best managers identify talents that are needed for a particular position and then find people who fit the role. This means looking beyond a person's knowledge and skills to size up whether a job really “fits” the person. For example, positions involving sales or customer service require “woo,” or the talent for establishing trust with someone quickly upon meeting them. In filling these jobs great managers look for people who possess “woo.”

2. Define the right outcomes. Managers who do this best establish very clear objectives (so employees know exactly what they need to attain), they make sure that employees have the resources to do their jobs well (e.g., equipment, information, budget, staff), and then they allow employees to pave their own paths. The best managers don't define the steps for their employees or legislate style.

4. Find the right fit. According to Coffman, “Talent never becomes ‘talented’ without being given a role for it to shine.” The best managers continually encourage their employees to look in the mirror and assess themselves in order to find the kind of work that will bring out their best talents.

ETHICAL DILEMMA Survey Feedback: Nice or Necessary?

Is it unethical to ask employees for their opinions, attitudes, values, or beliefs on an attitude survey and then subsequently not give them any feedback about the results? We know that survey results that are not fed back to employees are unlikely to be translated into action strategies, and that it is poor management practice to fail to provide feedback.65 Is it unethical as well? (Hint: See the definition of ethical decision making in Chapter 1.)

IMPLICATIONS FOR MANAGEMENT PRACTICE

How can such substantial gains in productivity, quality, and profits as we have described in this chapter occur? They happen because high-performance management practices provide a number of sources for enhanced organizational performance:66

1. People work harder because of the increased involvement and commitment that comes from having more control and say in their work. Managers who adopt democratic leadership styles influence employees' perceptions of personal control over their work.

2. People work smarter because they are encouraged to build skills and competence. Managers have considerable influence over the opportunities for professional growth and development of their employees.

3. Finally, people work more responsibly because more responsibility is placed in the hands of employees farther down in the organization. Again, managers who delegate responsibility appropriately can foster such feelings of responsibility on the part of their subordinates. These practices work not because of some mystical process, but because they are grounded in sound social science principles that are supported by a great deal of evidence. Managers should use them to create win-win scenarios for themselves and for their people.

The chapter then considered the financial impact of high-performance work practices on organization-level outcomes. Firms that implement more of these practices tend to be more profitable and to provide higher returns to shareholders than those that implement fewer or none of them. However, these effects are most pronounced when such work practices are implemented together as a system.

To illustrate this, we examined two longitudinal studies, one on organization culture and one on the survival of a sample of firms after their initial public offerings (IPOs). In both cases, management practices had a causal effect on the performance of firms.

To identify the financial impact of specific HR issues, we adopted the methodology of behavior costing. Behavior costing does not measure the value of employees and managers as assets but rather the economic consequences of their behavior, for example, to be absent or to quit. Applying behavior costing methodology properly requires that both direct and indirect costs be considered. However, the objective is not simply to measure these costs; it is also to reduce them by devoting resources to show costs that are controllable. The chapter presented behavior-costing methods in five key areas of employee behavior: employee attitudes, absenteeism, turnover, work-life programs, and training and development.

· human capital metrics

· high-performance work practices

· behavior costing

· direct measures

· indirect measures

· controllable costs

· uncontrollable costs

· attitudes

· job satisfaction

· organizational commitment

· absenteeism

· turnover

· work-life program

· return on investment

· indirect measures of training outcomes

· criteria

· transfer of trained skills

· break-even values

· control group design

· pretest—posttest only design

· direct measures of training outcomes

ONO Inc. is an auto-supply company with 11 employees. In addition, there are two supervisors and Fred Donofrio, the owner and general manager. Last year, ONO did $5 million in business and earned $250,000 in profits ($375,000 before taxes). The auto-supply business is extremely competitive, and owners must constantly be on the lookout for ways to reduce costs to remain profitable.

Employee salaries at ONO average $21.00 an hour, and benefits add another 33 percent to these labor costs. The two supervisors earn an average of $28.00 an hour, with a similar level (percentage) of benefits. Employees receive two weeks of vacation each year and 12 days of paid sick leave.

Over the last two years, Fred Donofrio has noted an increasing rate of absenteeism among his 11 employees (there seems to be no similar problem with the two supervisors). Last week, he asked Cal Jenson, his most senior supervisor, to go through the records from last year and determine how much absenteeism had cost ONO. Further, he asked Cal to make any recommendations to him that seemed appropriate depending on the magnitude of the problem.

Cal determined that ONO lost a total of 539 employee labor-hours (67.375 days) to absenteeism last year (this figure did not, of course, include vacation time). Further, he estimated that he and the other supervisor together averaged 1.5 hours in lost time whenever an employee was absent for a day. This time was spent dealing with the extra problems (rescheduling work, filling in for missing workers, etc.) that an absence created. On several occasions last year, ONO was so short of help that temporary workers had to be hired or present employees had to work overtime. Cal determined that the additional costs of overtime and outside help last year totaled $3,100. Cal is now in the process of preparing his report to Fred Donofrio.

Questions

1. What figure will Cal Jenson report to Fred Donofrio for the amount that absenteeism cost ONO last year?

2. Is absenteeism a serious problem at ONO? Why or why not?

3. What recommendations for action could Cal Jenson make to Fred Donofrio?

1Becker, B. E., Huselid, M. E., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy, and performance. Boston: Harvard Business School Press.

2Boudreau, J. W. (1998). Strategic human resource management measures: Key linkages and the PeopleVantage model. Journal of Human Resource Costing and Accounting, 3 (2), 21-40.

3Boudreau, J. W., & Ramstad, P. M. (1998). Human resource metrics: Can measures be strategic? Cornell University, Center for Advanced Human Resource Studies, Working Paper, 98-10. Ithaca, NY: CAHRS.

4Paauwe, J., Williams, R., & Keegan, A. (2002). The importance of the human resource management function in organizational change. Working Paper, Department of Business and Organization, Rotterdam School of Economics, Erasmus University, Rotterdam, The Netherlands.

5Schneider, B., Hanges, P. J., Smith, B., & Salvaggio, A. N. (2003). Which comes first: Employee attitudes or organizational financial and market performance? Journal of Applied Psychology, 88, 836-851. Pfeffer, J. (1998). The human equation: Building profits by putting people first. Boston: Harvard Business School Press. Terpstra, D. E., & Rozell, E. J. (1993). The relationship of staffing practices to organizational-level measures of performance. Personnel Psychology, 46, 27-48. Gerhart, B., & Milkovich, G. T. (1990). Organizational differences in managerial compensation and firm performance. Academy of Management Journal, 33, 663-691.

6Becker, Huselid, & Ulrich, op. cit. See also Ferris, G. R., Hochwarter, W. A., Buckley, M. R., Harrell-Cook, G., & Frink, D. (1999). Human resources management: Some new directions. Journal of Management, 25, 385-415. Delery, J. E., & Doty, D. H. (1996). Modes of theorizing in strategic human resource management: Tests of universalistic, contingency, and configurational performance predictions. Academy of Management Journal, 39, 802-835.

7Sheridan, J. E. (1992). Organizational culture and employee retention. Academy of Management Journal, 35, 1036-1056.

8Welbourne, T. M., & Andrews, A. O. (1996). Predicting the performance of initial public offerings: Should human resource management be in the equation? Academy of Management Journal, 39, 891-919.

9Davidson, W. N., III, Worrell, D. L., & Fox, J. B. (1996). Early retirement programs and firm performance. Academy of Management Journal, 39, 970-984.

10Huselid, M. A., & Becker, B. E. (1997). The impact of high performance work systems, implementation effectiveness, and alignment with strategy on shareholder wealth. Unpublished paper, Rutgers University, pp. 18-19.

11Mirvis, P. H., & Macy, B. A. (1976). Measuring the quality of work and organizational effectiveness in behavioral-economic terms. Administrative Science Quarterly, 21, 212-226.

12Kravetz, D. J. (2004). Measuring human capital. Mesa, AZ: KAPublishing. See also Fitz-enz, J. (1984). How to measure human resources management. New York: McGraw-Hill.

13For more on this issue see Sonnentag, S., & Frese, M. (2003). Stress in organizations. In W. C. Borman, D. R. Ilgen, & R. J. Klimoski (eds.), Handbook of psychology, vol. 12, Industrial and organizational psychology, pp. 453-491. Hoboken, NJ: Wiley. DeFrank, R. S., & Ivancevich, J. M. (1998). Stress on the job: An executive update. Academy of Management Executive, 12, 55-66. See also DeFrank, R. S., Konopaske, R., & Ivancevich, J. M. (2000). Executive travel stress: Perils of the road warrior. Academy of Management Executive, 14 (2), 58-71.

14Beckler, S. J. (1984). Empirical validation of affect, behavior, and cognition as distinct components of attitude. Journal of Personality and Social Psychology, 47, 1191-1205.

15Hulin, C. L., & Judge, T. A. (2003). Job attitudes. In W. C. Borman, D. R. Ilgen, & R. J. Klimoski (eds.), Handbook of psychology, vol. 12, Industrial and organizational psychology, pp. 255-276. Hoboken, NJ: Wiley.

16Mathieu, J. E., & Zajac, D. M. (1990). A review and meta-analysis of the antecedents, correlates, and consequences or organizational commitment. Psychological Bulletin, 108 (2), 171-194.

17Ryan, A. M., Schmit, M. J., & Johnson, R. (1996). Attitudes and effectiveness: Examining relations at an organizational level. Personnel Psychology, 49, 853-883. See also Cohen, A. (1993). Organizational commitment and turnover: A metaanalysis. Academy of Management Journal, 36, 1140-1157. See also Ostroff, C. (1992). The relationship between satisfaction, attitudes, and performance: An organizational-level analysis. Journal of Applied Psychology, 77, 963-974.

18Schneider et al. (2003), op. cit.

19Rucci, A. J., Kirn, S. P., & Quinn, R. T. (1998, Jan.-Feb.). The employee-customer-profit chain at Sears. Harvard Business Review, pp. 82-97.