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MANAGING HUMAN RESOURCES

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MANAGING HUMAN RESOURCES

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E I G H T H E D I T I O N

Luis R. Gómez-Mejía University of Notre Dame

David B. Balkin University of Colorado, Boulder

Robert L. Cardy University of Texas at San Antonio

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ISBN 10: 0-13-302969-7

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Library of Congress Cataloging-in-Publication Data

GÓmez-Mejía, Luis R.

Managing human resources / Luis R. GÓmez-Mejía, David B. Balkin & Robert L. Cardy.—Eighth Edition.

pages cm

ISBN 978-0-13-302969-7—ISBN 0-13-302969-7

1. Personnel management. I. Balkin, David B., 1948- II. Cardy, Robert L., 1955- III. Title.

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To my wife Ana, my two sons Vince and Alex, and my daughter Dulce

—L.G.M.

To my parents, Daniel and Jeanne —D.B.B.

To my family for their endless support and to Todd Snider for the endless inspiration

—R.L.C.

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vii

Brief Contents

PART I Introduction 1 Chapter 1 Meeting Present and Emerging Strategic Human

Resource Challenges 1

PART II The Contexts of Human Resource Management 44 Chapter 2 Managing Work Flows and Conducting Job Analysis 44 Chapter 3 Understanding Equal Opportunity and the Legal

Environment 82 Chapter 4 Managing Diversity 118

PART III Staffing 149 Chapter 5 Recruiting and Selecting Employees 149 Chapter 6 Managing Employee Separations, Downsizing,

and Outplacement 181

PART IV Employee Development 203 Chapter 7 Appraising and Managing Performance 203 Chapter 8 Training the Workforce 235 Chapter 9 Developing Careers 261

PART V Compensation 286 Chapter 10 Managing Compensation 286 Chapter 11 Rewarding Performance 324 Chapter 12 Designing and Administering Benefits 360

PART VI Governance 399 Chapter 13 Developing Employee Relations 399 Chapter 14 Respecting Employee Rights and Managing Discipline 428 Chapter 15 Working with Organized Labor 464 Chapter 16 Managing Workplace Safety and Health 500 Chapter 17 International HRM Challenge 529

viii

Contents

Preface xix Acknowledgments xxv About the Authors xxvii

PART I Introduction 1

Chapter 1 Meeting Present and Emerging Strategic Human Resource Challenges 1 Human Resource Management: The Challenges 2

Environmental Challenges 3 Organizational Challenges 10 Competitive Position: Cost, Quality, or Distinctive Capabilities 10 Individual Challenges 17

Planning and Implementing Strategic HR Policies 20 The Benefits of Strategic HR Planning 21 The Challenges of Strategic HR Planning 22 Strategic HR Choices 24

Selecting HR Strategies to Increase Firm Performance 27 Fit with Organizational Strategies 28 Fit with the Environment 30 Fit with Organizational Characteristics 31 Fit with Organizational Capabilities 32 Choosing Consistent and Appropriate HR Tactics to Implement HR Strategies 33 HR Best Practices 33

The HR Department and Managers: An Important Partnership 34 Specialization in Human Resource Management 35

Summary and Conclusions 35 • Key Terms 36 • Discussion Questions 37 ■ YOU MANAGE IT! 1: EMERGING TRENDS

Electronic Monitoring to Make Sure That No One Steps Out of Line 38 ■ YOU MANAGE IT! 2: ETHICS/SOCIAL RESPONSIBILITY

Embedding Sustainability into HR Strategy 40 ■ YOU MANAGE IT! 3: DISCUSSION

Managers and HR Professional at Sands Corporation: Friends or Foes? 41

■ YOU MANAGE IT! 4: DISCUSSION The Enduring Wage Gap by Gender 42

PART II The Contexts of Human Resource Management 44

Chapter 2 Managing Work Flows and Conducting Job Analysis 44 Work: The Organizational Perspective 45

Strategy and Organizational Structure 45 Designing the Organization 46 Work-Flow Analysis 49 Business Process Reengineering 49

Work: The Group Perspective 50 Self-Managed Teams 50 Other Types of Teams 51

CONTENTS ix

Work: The Individual Perspective 53 Motivating Employees 53

Designing Jobs and Conducting Job Analysis 55 Job Design 55 Job Analysis 57 Job Descriptions 63

The Flexible Workforce 67 Contingent Workers 67 Flexible Work Schedules 72 The Mobile Workplace 73

Human Resource Information Systems 74 HRIS Applications 74 HRIS Security and Privacy 75

Summary and Conclusions 75 • Key Terms 76 • Discussion Questions 77 ■ YOU MANAGE IT! 1: ETHICS/SOCIAL RESPONSIBILITY

Are Companies Exploiting College Students Who Have Unpaid Internships? 78 ■ YOU MANAGE IT! 2: EMERGING TRENDS

Work–Life Balance Is the New Perk Employees Are Seeking 79 ■ YOU MANAGE IT! 3: TECHNOLOGY/SOCIAL MEDIA

Yahoo CEO Issues a Ban on Telecommuting for Employees 80 ■ YOU MANAGE IT! 4: CUSTOMER-DRIVEN HR

Writing a Job Description 81

Chapter 3 Understanding Equal Opportunity and the Legal Environment 82 Why Understanding the Legal Environment Is Important 84

Doing the Right Thing 84 Realizing the Limitations of the HR and Legal Departments 84 Limiting Potential Liability 84

Challenges to Legal Compliance 85 A Dynamic Legal Landscape 85 The Complexity of Laws 85 Conflicting Strategies for Fair Employment 85 Unintended Consequences 86

Equal Employment Opportunity Laws 86 The Equal Pay Act of 1963 87 Title VII of the Civil Rights Act of 1964 87 Defense of Discrimination Charges 89 Title VII and Pregnancy 90 Sexual Harassment 90 The Civil Rights Act of 1991 94 Executive Order 11246 95 The Age Discrimination in Employment Act of 1967 95 The Americans with Disabilities Act of 1990 96

EEO Enforcement and Compliance 99 Regulatory Agencies 99 Office of Federal Contract Compliance Programs (OFCCP) 100 Affirmative Action Plans 101

Other Important Laws 103 Avoiding Pitfalls in EEO 105

Provide Training 105 Establish a Complaint Resolution Process 105 Document Decisions 105 Be Honest 105 Ask Only for Information You Need to Know 106

x CONTENTS

Summary and Conclusions 109 • Key Terms 110 • Discussion Questions 110 ■ YOU MANAGE IT! 1: EMERGING TRENDS

Walgreens Leads the Way in Utilizing Workers with Disabilities 111 ■ YOU MANAGE IT! 2: CUSTOMER-DRIVEN HR

Can an Employer Refuse to Hire or Retain Employees Who Wear Tattoos? 112 ■ YOU MANAGE IT! 3: DISCUSSION

Are Women Breaking Through the Glass Ceiling? 113 ■ YOU MANAGE IT! 4: ETHICS/SOCIAL RESPONSIBILITY

Are Employee Noncompete Agreements Legally Enforceable? It Depends 114

Appendix to Chapter 3 116 Human Resource Legislation Discussed in This Text 116

Chapter 4 Managing Diversity 118 What Is Diversity? 119

Why Manage Employee Diversity? 120 Affirmative Action Versus Managing Employee Diversity 120 Demographic Trends 120 Diversity as Part of Corporate Strategy 124

Challenges in Managing Employee Diversity 124 Diversity Versus Inclusiveness 125 Individual Versus Group Fairness 125 Resistance to Change 125 Group Cohesiveness and Interpersonal Conflict 125 Segmented Communication Networks 125 Resentment 125 Retention 126 Competition for Opportunities 126

Diversity in Organizations 126 African Americans 126 Asian Americans 127 People with Disabilities 128 The Foreign Born 129 Homosexuals 130 Latinos (Hispanic Americans) 131 Older Workers 132 Religious Minorities 133 Women 135

Improving the Management of Diversity 137 Creating an Inclusive Organizational Culture 137 Top-Management Commitment to Valuing Diversity 138 Appraising and Rewarding Managers for Good Diversity Practices 138 Diversity Training Programs 138 Support Groups 139 Accommodation of Family Needs 139 Senior Mentoring Programs 141 Apprenticeships 141 Communication Standards 141 Diversity Audits 141 Management Responsibility and Accountability 141

Some Warnings 142 Avoiding the Appearance of “White Male Bashing” 142 Avoiding the Promotion of Stereotypes 142

Summary and Conclusions 142 • Key Terms 143 • Discussion Questions 143 ■ YOU MANAGE IT! 1: TECHNOLOGY/SOCIAL MEDIA

Hiring Who You Know as a Threat to Diversity 145

CONTENTS xi

■ YOU MANAGE IT! 2: EMERGING TRENDS Why Women Lag Behind in MBA Programs 145

■ YOU MANAGE IT! 3: ETHICS/SOCIAL RESPONSIBILITY Interpreting the Americans with Disabilities Act: The Hot Frontier of Diversity Management 146

■ YOU MANAGE IT! 4: DISCUSSION Conflict at Northern Sigma 147

PART III Staffing 149

Chapter 5 Recruiting and Selecting Employees 149 Human Resource Supply and Demand 150

A Simplified Example of Forecasting Labor Demand and Supply 152 Forecasting Techniques 154

The Hiring Process 155 Challenges in the Hiring Process 155

Determining Characteristics Important to Performance 156 Measuring Characteristics That Determine Performance 156 The Motivation Factor 156 Who Should Make the Decision? 157

Meeting the Challenge of Effective Staffing 157 Recruitment 157 Sources of Recruiting 158

Selection 163 Reliability and Validity 163 Selection Tools as Predictors of Job Performance 164 Combining Predictors 171 Selection and Person/Organization Fit 171 Reactions to Selection Devices 172

Legal Issues in Staffing 173 Discrimination Laws 173 Affirmative Action 173 Negligent Hiring 174

Summary and Conclusions 174 • Key Terms 175 • Discussion Questions 175 ■ YOU MANAGE IT! 1: CUSTOMER-DRIVEN HR

Women: Keeping the Supply Lines Open 176 ■ YOU MANAGE IT! 2: ETHICS/SOCIAL RESPONSIBILITY

What a Fraud! 177 ■ YOU MANAGE IT! 3: TECHNOLOGY/SOCIAL MEDIA

Social Media in the Hiring Process 178 ■ YOU MANAGE IT! 4: ETHICS/SOCIAL RESPONSIBILITY

Fitting in Social Responsibility 179 ■ YOU MANAGE IT! 5: EMERGING TRENDS

One Job, Many Roles 180

Chapter 6 Managing Employee Separations, Downsizing, and Outplacement 181 What Are Employee Separations? 182

The Costs of Employee Separations 182 The Benefits of Employee Separations 186

Types of Employee Separations 186 Voluntary Separations 186 Involuntary Separations 187

Managing Early Retirements 190 The Features of Early Retirement Policies 190 Avoiding Problems with Early Retirements 190

xii CONTENTS

Managing Layoffs 191 Alternatives to Layoffs 191 Implementing a Layoff 192

Outplacement 195 The Goals of Outplacement 196 Outplacement Services 196

Summary and Conclusions 196 • Key Terms 197 • Discussion Questions 197 ■ YOU MANAGE IT! 1: GLOBAL

Turnover: A Global Management Issue 198 ■ YOU MANAGE IT! 2: ETHICS/SOCIAL RESPONSIBILITY

Employment-at-Will: Fair Policy? 199 ■ YOU MANAGE IT! 3: CUSTOMER-DRIVEN HR

From Turnover to Retention: Managing to Keep Your Workers 200 ■ YOU MANAGE IT! 4: TECHNOLOGY/SOCIAL MEDIA

You’re Fired! 201

PART IV Employee Development 203

Chapter 7 Appraising and Managing Performance 203 What Is Performance Appraisal? 205

The Uses of Performance Appraisal 206 Identifying Performance Dimensions 206 Measuring Performance 207 Measurement Tools 208 Measurement Tools: Summary and Conclusions 214

Challenges to Effective Performance Measurement 215 Rater Errors and Bias 216 The Influence of Liking 217 Organizational Politics 217 Individual or Group Focus 219 Legal Issues 219

Managing Performance 220 The Appraisal Interview 221 Performance Improvement 223 Identifying the Causes of Performance Problems 223 Developing an Action Plan and Empowering Workers to Reach a Solution 225 Directing Communication at Performance 225

Summary and Conclusions 226 • Key Terms 226 • Discussion Questions 227 ■ YOU MANAGE IT! 1: ETHICS/SOCIAL RESPONSIBILITY

Rank and Yank: Legitimate Performance Improvement Tool or Ruthless and Unethical Management? 228

■ YOU MANAGE IT! 2: GLOBAL Competencies in a Global Environment 229

■ YOU MANAGE IT! 3: TECHNOLOGY/SOCIAL MEDIA Going Digital with Appraisal 230

■ YOU MANAGE IT! 4: ETHICS/SOCIAL RESPONSIBILITY Let’s Do It Right 231

■ YOU MANAGE IT! 5: CUSTOMER-DRIVEN HR Build on Their Strengths 232

Appendix to Chapter 7 233 The Critical-Incident Technique: A Method for Developing a Behaviorally Based Appraisal Instrument 233

Chapter 8 Training the Workforce 235 Key Training Issues 236 Training Versus Development 237 Challenges in Training 239

Is Training the Solution? 239

CONTENTS xiii

Are the Goals Clear and Realistic? 239 Is Training a Good Investment? 239 Will Training Work? 240

Managing the Training Process 241 The Needs Assessment Phase 241 Clarifying the Objectives of Training 243 The Training and Conduct Phase 244 The Evaluation Phase 253 Legal Issues and Training 254

A Special Case: Orientation and Socialization 254 Summary and Conclusions 255 • Key Terms 256 • Discussion Questions 256

■ YOU MANAGE IT! 1: TECHNOLOGY/SOCIAL MEDIA Social Media and Workplace Training 257

■ YOU MANAGE IT! 2: CUSTOMER-DRIVEN HR Costs and Benefits: Assessing the Business Case for Training 258

■ YOU MANAGE IT! 3: ETHICS/SOCIAL RESPONSIBILITY The Ethics Challenge 259

■ YOU MANAGE IT! 4: GLOBAL Training for Expatriates 260

Chapter 9 Developing Careers 261 What Is Career Development? 262 Challenges in Career Development 263

Who Will Be Responsible? 263 How Much Emphasis Is Appropriate? 265 How Will the Needs of a Diverse Workforce Be Met? 265

Meeting the Challenges of Effective Development 266 The Assessment Phase 266 The Direction Phase 270 The Development Phase 276

Self-Development 277 Development Suggestions 279 Advancement Suggestions 279

Summary and Conclusions 280 • Key Terms 281 • Discussion Questions 281 ■ YOU MANAGE IT! 1: CUSTOMER-DRIVEN HR

Be Strategic About Your Career 282 ■ YOU MANAGE IT! 2: TECHNOLOGY/SOCIAL MEDIA

Career Building with Social Media 283 ■ YOU MANAGE IT! 3: ETHICS/SOCIAL RESPONSIBILITY

Anchors II 283 ■ YOU MANAGE IT! 4: GLOBAL

Mentoring as Global Development 285

PART V Compensation 286

Chapter 10 Managing Compensation 286 What Is Compensation? 287 Designing a Compensation System 288

Internal Versus External Equity 289 Fixed Versus Variable Pay 291 Performance Versus Membership 293

Job Versus Individual Pay 294 Elitism Versus Egalitarianism 296 Below-Market Versus Above-Market Compensation 296 Monetary Versus Nonmonetary Rewards 297 Open Versus Secret Pay 299

xiv CONTENTS

Centralization Versus Decentralization of Pay Decisions 299 Summary 300

Compensation Tools 300 Job-Based Compensation Plans 300 Skill-Based Compensation Plans 311 Special Compensation Issues in Small Firms 311

The Legal Environment and Pay System Governance 312 The Fair Labor Standards Act 312 The Equal Pay Act 314 The Internal Revenue Code 315

Summary and Conclusions 315 • Key Terms 316 • Discussion Questions 316 ■ YOU MANAGE IT! 1: GLOBAL

Money Doesn’t Buy Happiness. Well, on Second Thought . . . 317 ■ YOU MANAGE IT! 2: ETHICS/SOCIAL RESPONSIBILITY

Helping Employees Take Care of Home Tasks 319 ■ YOU MANAGE IT! 3: DISCUSSION

An Academic Question 319 ■ YOU MANAGE IT! 4: EMERGING TRENDS

More Suits for Overtime Pay 320 ■ YOU MANAGE IT! 5: CUSTOMER-DRIVEN HR

A Challenge at Antle Corporation 322

Chapter 11 Rewarding Performance 324 Pay for Performance: The Challenges 325

The “Do Only What You Get Paid For” Syndrome 326 Unethical Behaviors 326 Negative Effects on the Spirit of Cooperation 326 Lack of Control 327 Difficulties in Measuring Performance 329 Psychological Contracts 329 The Credibility Gap 329 Job Dissatisfaction and Stress 329 Potential Reduction of Intrinsic Drives 329

Meeting the Challenges of Pay-for-Performance Systems 330 Develop a Complementary Relationship Between Extrinsic and Intrinsic Rewards 330 Link Pay and Performance Appropriately 331 Use Pay for Performance as Part of a Broader HRM System 331 Build Employee Trust 331 Promote the Belief That Performance Makes a Difference 331 Use Multiple Layers of Rewards 332 Increase Employee Involvement 332 Stress the Importance of Acting Ethically 333 Use Motivation and Nonfinancial Incentives 333

Types of Pay-for-Performance Plans 334 Individual-Based Plans 334 Team-Based Plans 337 Plantwide Plans 339 Corporatewide Plans 341

Designing Pay-for-Performance Plans for Executives and Salespeople 344 Executives 344 Rewarding Excellence in Customer Service 350 Pay-For-Performance Programs in Small Firms 351

Summary and Conclusions 353 • Key Terms 354 • Discussion Questions 354 ■ YOU MANAGE IT! 1: GLOBAL

Is There a Downside to Meritocracy? 355

CONTENTS xv

■ YOU MANAGE IT! 2: DISCUSSION Loafers at Lakeside Utility Company 356

■ YOU MANAGE IT! 3: DISCUSSION How Should Incentive Money Be Distributed? 357

■ YOU MANAGE IT! 4: ETHICS/SOCIAL RESPONSIBILITY The Pitfalls of Merit Pay and Pay for Performance 358

Chapter 12 Designing and Administering Benefits 360 An Overview of Benefits 361

Basic Terminology 363 The Cost of Benefits in the United States 363 Types of Benefits 364

The Benefits Strategy 366 The Benefits Mix 366 Benefits Amount 367 Flexibility of Benefits 367

Legally Required Benefits 367 Social Security 367 Workers’ Compensation 369 Unemployment Insurance 370 Unpaid Leave 372

Voluntary Benefits 373 Health Insurance 373 Retirement Benefits 380 Insurance Plans 384 Paid Time Off 385 Employee Services 387

Administering Benefits 389 Flexible Benefits 389 Benefits Communication 390

Summary and Conclusions 391 • Key Terms 392 • Discussion Questions 392 ■ YOU MANAGE IT! 1: GLOBAL

Australia’s ‘Super’ Retirement Program is a Source of National Pride 393

■ YOU MANAGE IT! 2: ETHICS/SOCIAL RESPONSIBILITY Should Employers Penalize Employees Who Do Not Adopt Healthy Habits? 394

■ YOU MANAGE IT! 3: ETHICS/SOCIAL RESPONSIBILITY Google’s On-Site Child-Care Policy Stirs up a Controversy 396

■ YOU MANAGE IT! 4: CUSTOMER-DRIVEN HR IBM’s 401(k) Plan Sets the Standard 397

PART VI Governance 399

Chapter 13 Developing Employee Relations 399 The Roles of the Manager and the Employee Relations Specialist 400 Developing Employee Communications 401

Types of Information 401 How Communication Works 401

Encouraging Effective Communications 403 Information Dissemination Programs 403 The Employee Handbook 404 Electronic Communications 406 Employee Feedback Programs 413 Employee Assistance Programs 415

xvi CONTENTS

Employee Recognition Programs 418 Suggestion Systems 418 Recognition Awards 419

Summary and Conclusions 421 • Key Terms 421 • Discussion Questions 422 ■ YOU MANAGE IT! 1: ETHICS/SOCIAL RESPONSIBILITY

Employees Don’t Always Speak Up When There Is Bad News to Communicate 423

■ YOU MANAGE IT! 2: CUSTOMER-DRIVEN HR Should Having Fun Be a Job Requirement? 424

■ YOU MANAGE IT! 3: ETHICS/SOCIAL RESPONSIBILITY Going Green Keeps New Belgium Brewing Company in the Black 425

■ YOU MANAGE IT! 4: GLOBAL In Praise of Nepotism? 426

Chapter 14 Respecting Employee Rights and Managing Discipline 428 Employee Rights 429

Statutory Rights 430 Contractual Rights 430 Other Rights 431

Management Rights 434 Employment at Will 434

Employee Rights Challenges: A Balancing Act 435 Random Drug Testing 435 Electronic Monitoring 437 Whistle-Blowing 440 Restrictions on Moonlighting 442 Restrictions on Office Romance 442

Disciplining Employees 444 Progressive Discipline 445 Positive Discipline 446

Administering and Managing Discipline 447 The Just Cause Standard of Discipline 448 The Right to Appeal Discipline 449

Managing Difficult Employees 450 Poor Attendance 450 Poor Performance 451 Insubordination 452 Workplace Bullying 452 Alcohol-Related Misconduct 454 Illegal Drug Use and Abuse 454

Preventing the Need for Discipline with Human Resource Management 455 Recruitment and Selection 455 Training and Development 455 Human Resource Planning 455 Performance Appraisal 456 Compensation 456

Summary and Conclusions 456 • Key Terms 457 • Discussion Questions 458 ■ YOU MANAGE IT! 1: CUSTOMER-DRIVEN HR

Incivility is a Growing Problem at the Workplace 458 ■ YOU MANAGE IT! 2: ETHICS/SOCIAL RESPONSIBILITY

Background Checks Can Misfire, Harming Employees’ Career Prospects 459 ■ YOU MANAGE IT! 3: ETHICS/SOCIAL RESPONSIBILITY

Employees Should Be Aware of the Risks Before They Attempt to Blow the Whistle 460

■ YOU MANAGE IT! 4: GLOBAL Illegal Immigrants in the Workforce: Opportunity or Challenge? 462

CONTENTS xvii

Chapter 15 Working with Organized Labor 464 Why Do Employees Join Unions? 465

The Origins of U.S. Labor Unions 466 The Role of the Manager in Labor Relations 466

Labor Relations and the Legal Environment 467 The Wagner Act 467 The Taft-Hartley Act 468 The Landrum-Griffin Act 469

Labor Relations in the United States 469 Business Unionism 470 Unions Structured by Type of Job 470 Focus on Collective Bargaining 470 Labor Contracts 470 The Adversarial Nature of Labor–Management Relations and Shrinking Union Membership 471 The Growth of Unions in the Public Sector 472

Labor Relations in Other Countries 472 How Unions Differ Internationally 473 Labor Relations in Germany 474 Labor Relations in Japan 475

Labor Relations Strategy 476 Union Acceptance Strategy 476 Union Avoidance Strategy 478

Managing the Labor Relations Process 479 Union Organizing 479 Collective Bargaining 483 Contract Administration 489

The Impact of Unions on Human Resource Management 491 Staffing 491 Employee Development 491 Compensation 492 Employee Relations 493

Summary and Conclusions 493 • Key Terms 494 • Discussion Questions 495 ■ YOU MANAGE IT! 1: EMERGING TRENDS

The Freelancers Union: A New Approach to Unionism? 495 ■ YOU MANAGE IT! 2: ETHICS/SOCIAL RESPONSIBILITY

Public Sector Unions in Wisconsin Have been Dealt a Major Setback with a New Law that Weakens Union Bargaining Rights 496

■ YOU MANAGE IT! 3: CUSTOMER-DRIVEN HR When Is a Team a Union? 497

■ YOU MANAGE IT! 4: ETHICS/SOCIAL RESPONSIBILITY Union Members Protest a 50 Percent Wage Cut at a General Motors Plant 498

Chapter 16 Managing Workplace Safety and Health 500 Workplace Safety and the Law 502

Workers’ Compensation 502

The Occupational Safety and Health Act (OSHA) 504 OSHA’s Provisions 504 The Occupational Safety and Health Administration 506

Managing Contemporary Safety, Health, and Behavioral Issues 510 AIDS 510 Violence in the Workplace 513 Cumulative Trauma Disorders 515 Hearing Impairment 515 Fetal Protection, Hazardous Chemicals, and Genetic Testing 516

xviii CONTENTS

Safety and Health Programs 517 Safety Programs 517 Employee Assistance Programs (EAPs) 520 Wellness Programs 521

Summary and Conclusions 522 • Key Terms 523 • Discussion Questions 523 ■ YOU MANAGE IT! 1: ETHICS/SOCIAL RESPONSIBILITY

Standing Up to Workplace Bullies 524 ■ YOU MANAGE IT! 2: EMERGING TRENDS

On the Tip of a Beryllium Iceberg? 525 ■ YOU MANAGE IT! 3: GLOBAL

Mental Health: A Global Concern 526 ■ YOU MANAGE IT! 4: CUSTOMER-DRIVEN HR

Keeping the Workplace Safe 527

Chapter 17 International HRM Challenge 529 The Stages of International Involvement 530

The Rise of Outsourcing 533 Falling Barriers 534 Small- and Medium-Size Enterprises Are Also Going Global 534 The Global Manager 535

Determining the Mix of Host-Country and Expatriate Employees 536 The Challenges of Expatriate Assignments 538

Why International Assignments End in Failure 538 Difficulties on Return 540

Effectively Managing Expatriate Assignments with HRM Policies and Practices 542

Selection 542 Training 544 Career Development 546 Compensation 548 Role of HR Department 549 Women and International Assignments 549

Developing HRM Policies in a Global Context 550 National Culture, Organizational Characteristics, and HRM Practices 550 EEO in the International Context 551 Important Caveats 553

Human Resources Management and Exporting Firms 556 Ethics and Social Responsibility 557 Dealing with Political Risks 558

Summary and Conclusions 559 • Key Terms 560 • Discussion Questions 560 ■ YOU MANAGE IT! 1: GLOBAL

American Universities Moving Overseas 561 ■ YOU MANAGE IT! 2: EMERGING TRENDS

Coping with Terrorism 562 ■ YOU MANAGE IT! 3: GLOBAL

Two Sides to Every Story 563 ■ YOU MANAGE IT! 4: ETHICS/SOCIAL RESPONSIBILITY

When in Rome Do as the Romans Do? The Case of Foreign Bribes 563 ■ YOU MANAGE IT! 5: GLOBAL

Are Culture-Specific HR Policies a Good Idea? 564

Appendix 566

Concise Dictionary of HR Terminology 569

Company, Name, and Product Index 577

Subject Index 586

Managing Human Resources, Eighth Edition, prepares all future managers with a business understanding of the need for human resource management skills. Since the first edition of Man- aging Human Resources was published, the general management perspective has become much more prevalent among practicing managers. Recent environmental and organizational forces have

contributed greatly to this trend. Organizations are becoming flatter. Globalized operations have

become the norm for most organizations once they reach a certain size, and now one often finds

that even firms with fewer than 50 employees may be engaged in cross-border activities. Organi-

zations face great pressure to demonstrate social responsibility and to engage in sustainable prac-

tices. In addition to greater diversity at home, this trend requires that managers be prepared to

work effectively with people with backgrounds very different from their own. Technology such

as the Internet fosters communication among all levels of personnel, and managers are expected

to be generalists, with a broad set of skills, including human resource management (HRM) skills.

Relatedly, social media is having a significant impact on HR practices, in particular recruitment

and selection. At the same time, fewer firms have a highly centralized, powerful human resource

(HR) department that acts as monitor, decision maker, and controller of HR practices throughout

the organization. The emergence of small businesses as the main employer of the majority of the

workforce in the United States and other countries has reinforced this trend. Thus, this eighth

edition explicitly covers special challenges in the management of human resources dealing with

ethics/social responsibility, technology/social media, globalization, customer satisfaction for the

users of HR services, and coping with new emerging trends.

The unprecedented economic upheavals on a global basis in the recent past have made

it even more clear that all managers should be able to deal effectively with HR issues such

as preparing labor reduction plans; identifying key employees that the firm must keep de-

spite declining profits; managing rising employee stress, anxiety, and depression; rewarding

individuals for achieving important milestones; inducing employees to take prudent risks

within their purview of responsibilities; cross-training employees so that they are capable

of fulfilling different roles; enabling employees to become culturally savvy so that they can

relate to diverse audiences both domestically and internationally; and treating employees in

an ethical manner.

Most employees are now being asked to make difficult choices regarding benefit plans, and

the new federal health insurance mandate has made these choices more complicated, at least in

the next few years. Employees are increasingly asked to participate in HR decisions concerning

recruitment and selection of new applicants, performance appraisals of peers and team members,

enforcement of ethics policies, and the like. We believe that the “nonfunctional” HR approach

used in this book makes HR relevant to anyone who has to deal with HR issues, including those

who do not hold the title of manager. All materials have been thoroughly updated since the

seventh edition (see Chapter-Specific Changes to the Eighth Edition), and we have incorpo-

rated new topical areas, in particular those concerning technology/social media and ethics/social

responsibility.

New to Eighth Edition Specific details regarding updates to the eighth edition can be found later in the preface. How-

ever, highlights of changes include the following:

■ 700 new references cited within text. ■ Most introductory vignettes are either new, substantially revised, or updated. ■ Approximately 75 percent of the end-of-chapter cases are new or have been extensively

revised and updated.

Preface

xix

■ More than 80 percent of the boxed features within the text have been replaced with new

ones or have been substantially revised and updated. ■ New coverage of the special human resource issues concerning social responsibility and

ethics as well as technology and social media. This is included in new topical sections of

most chapters as well as in new Manager’s Notebook features, discussion questions,

and cases. ■ Updated coverage of how firms respond to dynamic changes in their strategy as a result of

environmental jolts, and the important role that human resource management plays in this

process. ■ Updated coverage of the legal environment of HR such as the changing legal requirements

for companies to provide health insurance to employees and emerging regulations that

attempt to balance employee and employer rights to engage in religious practices in the

workplace.

Manager’s Notebooks The Manager’s Notebooks provide exposure to a variety of issues that managers confront

daily, from providing feedback during an appraisal session to preparing employees for a layoff.

Approximately half of the Manager’s Notebooks are new for this eighth edition, and many of the

remaining features have been updated with the most current information. Manager’s Notebooks

are divided into five categories:

■ New: Technology/Social Media notebooks discuss specific opportunities and challenges posed by technology and the rapid increase in the use of social media to the practice of

human resource management. ■ Customer-Driven HR notebooks demonstrate how managers and employees can benefit

by approaching employees as internal customers. ■ New: Ethics/Social Responsibility notebooks focus on the role of HR practices in promoting

social responsibility and ethical issues that challenge managers and employees. ■ Emerging Trends notebooks present new developments in HRM practice that are likely to

require increased attention in the near future. ■ Global notebooks focus on HR practices in different countries and offer lessons that can be

applied to diverse work contexts within the United States and elsewhere.

You Manage It! Cases In an effort to make the conceptual material discussed in each chapter come to life, we provide

“You Manage It!” case studies at the end of each chapter to support each of the major themes of

the book. For each case, we have included critical thinking questions, team exercises, and expe-

riential exercises. Many cases also include individual exercises for students who wish to or who

can only work individually as a member of a class (for instance, those taking online courses).

These cases are organized as follows:

■ New: Technology/Social Media cases deal with concrete situations where technology/ social media affect HR practices related to the subject matter discussed in that particular

chapter. ■ Customer-Driven HR cases illustrate how HRM can add value to an organization by

taking a customer-oriented perspective. ■ New: Ethics/Social Responsibility cases illustrate how managing people can

involve tough, real-life choices regarding the “right” actions that should be taken

and how organizations can act in a more socially responsible manner through appropriate

HR practices. ■ Emerging Trends cases illustrate HR-related issues that are likely to require increased

attention in the future. ■ Global cases draw students’ attention outside the boundaries of the United States and

illustrate that HR issues may be international in scope.

xx PREFACE

MyManagementLab Suggested Activities For the eighth edition we the author(s) are excited that Pearson’s MyManagementLab has been

integrated fully into the text. These new features are outlined below. Making assessment activi-

ties available on line for students to complete before coming to class will allow you the profes-

sor more discussion time during the class to review areas that students are having difficulty in

comprehending.

Watch It Recommends a video clip that can be assigned to students for outside classroom viewing or that

can be watched in the classroom. The video corresponds to the chapter material and is accompa-

nied by multiple choice questions that re-enforce student’s comprehension of the chapter content.

Assisted Graded Writing Questions These are short essay questions which the students can complete as an assignment and submit to

you the professor for grading.

Chapter-Specific Changes to the Eighth Edition Chapter 1, “Meeting Present and Emerging Strategic Human Resource Challenges,” provides new coverage of the effects of layoffs on losing talent to competitors, niche certification

for training, challenges and opportunities of rising diversity, the rise of the virtual workforce,

electronic monitoring, and an expanded section on ethics and social responsibility. Specific

changes and updates in this edition include a new vignette entry on giant Alcatel, a new note-

book on the offering of massive open online courses (MOOCs) aimed at meeting specific train-

ing needs, a new notebook on how Harley-Davidson has taken advantage of diversity to increase

sales, a new notebook on the use of personal information, and two new cases exploring electronic

monitoring and embedding sustainability into HR strategies.

Chapter 2, “Managing Work Flows and Conducting Job Analysis,” has new content that explains the use of professional employer organizations (PEOs) that provide human resource

management services on an outsourcing basis to smaller firms. A new Manager’s Notebook

looks at the emerging trend of “reshoring” manufacturing jobs to the U.S. that were previously

outsourced to China. Two new end-of-chapter cases examine the growing problem of companies

giving unpaid internships to students that use them to perform unskilled labor for free as well

as the implications from the restrictions on telecommuting at Yahoo announced by its CEO as a

controversial tactic to increase employee productivity and innovation.

Chapter 3, “Understanding Equal Opportunity and the Legal Environment,” has been updated to include new regulations that require mandatory sexual harassment training in

California for all supervisors in firms with more than 50 employees. New content has been added

that explains how companies avoid age discrimination by redesigning jobs for older employees

so they can work part-time while they extend their working lives to reflect longer spans of life.

A new Manager’s Notebook brings to light the rampant gender inequity in India and its implica-

tions for this emerging economy. Another new Manager’s Notebook discusses how to avoid legal

difficulties if companies need to install an English-only rule for communication at the workplace.

A new end-of-chapter case discusses the implications of having a company policy that forbids

employees from displaying visible tattoos at the workplace, which has become challenging be-

cause in recent years tattoos have become fashionable for younger-generation employees to dis-

play to express their individuality.

Chapter 4, “Managing Diversity,” provides updated information on demographic changes, based on recent census reports; new coverage of entrepreneurial firms launched by minorities;

coverage of the rapidly changing landscape for legal protection of homosexuals; expanded treat-

ment of religious diversity and recent EEOC religious-bias lawsuits; and expanded coverage of

special issues concerning the rapidly expanding Hispanic populations in the United States. All

notebooks have been updated or replaced and a new case has been added on technology/social

media and how it affects the management of diversity.

PREFACE xxi

xxii PREFACE

Chapter 5, “Recruiting and Selecting Employees,” includes a new opening vignette that describes a common retail situation that students can identify with, an updated Man-

ager’s Notebook focusing on the global supply and shortage of labor, an updated Manager’s

Notebook on customer-driven HR, a new Manager’s Notebook on technology/social media,

a new Manager’s Notebook focusing on social responsibility in recruitment and hiring, and

two new cases exploring employer uses of social media in the hiring process and the role

of social responsibility in business and potential impacts of a clear social responsibility

initiative.

Chapter 6, “Managing Employee Separations, Downsizing, and Outplacement,” includes a new chapter-opening vignette, a new Manager’s Notebook on voluntary employee

turnover in China, a new Manager’s Notebook focusing on termination of employees for using

social media, a new Manager’s Notebook focusing on the ethical/social responsibility aspects of

the effects of layoffs on survivors, a new Manager’s Notebook addressing management actions

to minimize the negative effects of a layoff, and two new cases that focus on the management of

voluntary turnover and policy that addresses terminations as a result of employee use of social

media.

Chapter 7, “Appraising and Managing Performance,” includes a new chapter opening with a vignette that illustrates a performance review interaction between a manager and a worker,

a new Manager’s Notebook focusing on competencies needed in a global workplace, a new

Manager’s Notebook that focuses on the use of technology in measuring and improving perfor-

mance, a new Manager’s Notebook on using a strength-based approach to provide performance

feedback, a new case on the strength-based approach to performance appraisal, and two exten-

sively revised cases on addressing global competencies and the use of technology in appraising

performance.

Chapter 8, “Training the Workforce,” includes a new chapter opener on employee train- ing, a new Manager’s Notebook on the use of technology and social media as a means to shift

training toward “learning on-the-fly,” a new Manager’s Notebook focusing on expatriate training

needs, a new Manager’s Notebook on customer-based training, and two new cases on the use of

social media in training and the training of expatriates.

Chapter 9, “Developing Careers,” includes a new Manager’s Notebook on the steps in- volved in international assignments and provides management suggestions for each step, a new

Managers Notebook that addresses social media as a skill and as a tool in career development,

and a new case that explores the use of social media in career development.

Chapter 10, “ Managing Compensation,” provides an expanded treatment of the dis- appearance of entitlements, tying rewards to socially responsible behaviors, the use of non-

monetary pay, the rise of telecommuting and compensation, job evaluation in small firms, and

updates of legislation concerning compensation. The revised chapter includes a new Manager’s

Notebook on rewarding employees with non-monetary rewards, a new Manager’s Notebook on

telecommuters, and a new case on pay and social responsibility.

Chapter 11, “Rewarding Performance,” offers new coverage of the effect of pay incen- tives on employee ethical behaviors, the pitfalls of merit pay and pay-for-performance systems,

the complementary relationship of extrinsic and intrinsic rewards, and special issues with pay

incentives in small firms. The chapter includes a new Manager’s Notebook on healthy living

incentives, a new Manager’s Notebook on the pros and cons of awarding long-term income, and

a new case on providing rewards for key contributors.

Chapter 12, “Designing and Administering Benefits,” has been thoroughly revised to include the latest information covering health and retirement benefits. New information on the

Patient and Affordable Care Act (PACA) has been added that gives a definition of a full-time

employee or part-time equivalent employee for whom employers are required to provide health

care coverage, as well as guidelines for the minimum percentage of employees’ health care

costs that must be paid for by the employer. New content introduces the increasingly popular

high-deductible health plan that provides employees with low-cost health coverage that cov-

ers only high-cost medical procedures. New laws in a few states that provide paid parental

PREFACE xxiii

leave that go beyond the unpaid parental leave standards of the FMLA at the federal level are

explained. A new Manager’s Notebook offers some ways that companies are using wellness

practices to lower their health care costs. A new end-of-chapter case explains the wildly popu-

lar Superannuation retirement program in Australia, which is similar to the 401(k) retirement

benefit in the United States but mandates sizeable minimum employee contributions to the

retirement account.

Chapter 13, “Developing Employee Relations,” offers new content on the use of work- place chaplains, ordained ministers who provide outreach to employees with personal problems,

as an alternative to Employee Assistance Programs (EAPs), which require employees to file a

complaint before they can receive access to counseling. A new Manager’s Notebook explains

how social media is being used to build corporate alumni networks that can be a powerful source

of competitive information. A new end-of-chapter case brings to light the fact that many em-

ployee feedback systems, which are designed to allow employees to have a voice to complain

about unfair treatment, remain unused by employees due to their fear of retaliation by managers.

The case challenges students to come up with ways to administer feedback systems that actually

get used by employees.

Chapter 14, “Respecting Employee Rights and Managing Discipline,” provides ex- panded content on whistle-blowing, including recent controversies over whether individuals who

disclose classified government documents to the WikiLeaks Web site should be considered to be

whistle-blowers or criminals. A new Manager’s Notebook introduces the emerging employment

practice of performing credit checks on applicants’ credit histories when they are being consid-

ered for a job, which some legal experts claim discriminates against minorities. A new end-of-

chapter case introduces the growing problem of incivility in the workplace where employees act

rude and disrespectful to each other on a regular basis. Blaming this bad conduct on higher stress

and increasing performance expectations, the case challenges students to think of ways to restore

civility back into the workplace.

Chapter 15, “Working with Organized Labor,” contains updated information on the percentage of the workforce that is unionized in the United States and other countries.

A new Manager’s Notebook examines how Chinese workers have recently asserted their

power and demanded to have unions that actually represent their interests to management

rather than act as a tool of the government to pacify the workers and keep them docile.

In a new end-of-chapter case, the recent setbacks of public sector unions in Wisconsin are

examined and students are challenged to think about whether unions are really necessary in

the public sector, which tends to have better job security and benefits than many private-

sector workplaces.

Chapter 16, “Managing Workplace Safety and Health,” has a new chapter opening that provides summaries of recent workplace safety infractions that resulted in major OSHA fines,

a new Manager’s Notebook on preventing workers’ compensation fraud, an updated Manager’s

Notebook on company actions regarding AIDS in South Africa, and a new Manager’s Notebook

on the use of social media in wellness programs.

Chapter 17, “International HRM Challenges,” provides new treatment of ethical con- cerns with outsourcing, new legislation around the world on the use of bribes, equal employment

opportunity in a global context, ways to keep the expatriate linked to the home country, and new

developments in cross-cultural training. The revised chapter also includes a Manager’s Notebook

on training expatriates on how to cope with political risks, a new Manager’s Notebook on the use

of toxic factories in China, and a new case on terrorism.

Instructor Resources Instructor’s Resource Center At the Instructor Resource Center, www.pearsonhighered.com/irc, instructors can easily register

to gain access to a variety of instructor resources available with this text in downloadable format.

If assistance is needed, our dedicated technical support team is ready to help with the media

supplements that accompany this text. Visit http://247.pearsoned.com for answers to frequently

asked questions and toll-free user support phone numbers.

The following supplements are available with this text:

■ Instructor’s Resource Manual ■ Test Bank ■ TestGen® Computerized Test Bank ■ PowerPoint Presentation

Video Library Additional videos illustrating the most important subject topics are available in MyManagementLab.

CourseSmart eTextbooks CourseSmart eTextbooks were developed for students looking to save the cost on required or

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online, print out reading assignments that incorporate lecture notes, and bookmark important

passages for later review. For more information or to purchase a CourseSmart eTextbook, visit

www.coursesmart.com.

xxiv PREFACE

xxv

The contributions of many people made this book possible. The support and contributions of the

editorial staff of Kris Ellis-Levy, Sarah Holle, and Bernard Ollila made a tremendous difference.

The production and manufacturing teams at Pearson Education also deserve special men-

tion. Project Managers Meghan DeMaio and Karalyn Holland handled the details, scheduling,

and management of this project with grace and aplomb. Many thanks also to Judy Leale. Without

their assistance, many visuals and text items would never have made their way into this book.

Our experience in working with everyone at Pearson Education has been superb. Every-

one at Pearson approached this book with commitment and enthusiasm. We were partners

with the Pearson staff and feel that we are part of a high-performance team. We appreciate the

commitment they displayed and would like to thank them for the experience. The authors would

like to acknowledge the following contributors, for writing assessment questions for the new

MyLab activities: Erikson Daniel Conkling, Ivy Tech Community College - Northeast, Gordon

Schmidt, Indiana University-Purdue University Fort Wayne.

We would also like to thank the many colleagues who have reviewed both the past editions

as well as the current edition and have offered valuable feedback.

Uzo Anakwe, Pace University

Kamala Arogyaswamy, University of South Dakota

Kristin Backhaus, SUNY New Paltz

Trevor Bain, University of Alabama

Murray Barrick, University of Iowa

Richard Bartlett, Muskingum Tech College

Kevin Bergin, Dutchess Community College

Deborah Bishop, Saginaw Valley State University

Jim Brakefield, Western Illinois University

Larry Brandt, Nova Southeastern University

Diane Bridge, American University

Mark Butler, San Diego State University

Felipe Chia, Harrisburg Area Community College

Steve Childers, East Carolina University

Denise Daniels, Seattle Pacific University

Kermit Davis, Auburn University

Kerry Davis, Auburn University

Michelle Dean, University of North Texas

Rebby Diehl, Salt Lake Community College

Karen McMillen Dielmann, Indiana University of Pennsylvania

Scott Donaldson, Northeastern Oklahoma A&M College

Cathy DuBois, Kent State University

Rebecca Ellis, California Polytechnic State University

Matt Farron, Schenectady County Community College

Anne Fiedler, Barry University

Hugh Findley, Troy State University

David Foote, Middle Tennessee State University

Acknowledgments

xxvi ACKNOWLEDGMENTS

Debbie Goodwin, Lewis-Clark State College

David A. Hofmann, Michigan State University

Harry Hollis, Belmont University

Deb Humphreys, California Polytechnic State University

Feruzan Irani, Georgia Southern University

David Kaplan, James Madison University

Tim Keaveny, Marquette University

Donald Knight, University of Maryland

Anachai Kongchan, Chulalongkor University

Gregory A. Laurence, University of Michigan—Flint

Lewis Lash, Barry University

Gregory A. Laurence, Syracuse University

Helen Lavan, DePaul University

Stan Malos, San Jose State University

Candice Miller, Brigham Young University—Idaho

Joe Mosca, Monmouth University

Paul Muchinsky, University of North Carolina at Greensboro

Frank Mullins, Syracuse University

Smita Oxford, Mary Washington College

Steve Painchaud, Southern New Hampshire University

Elaine Potoker, Maine Maritime Academy

Dr. Jim Sethi, University of Montana—Western

Marcia Simmering, Louisiana Tech University

Janice Smith, North Carolina A&T

Howard Stager, Buffalo State College

Lisa T. Stickney, University of Baltimore

Gary Stroud, Franklin University

Cynthia Sutton, Indiana University

Thomas Tang, Middle Tennessee State University

Tom Taveggia, University of Arizona

David Wade, Northern Illinois University

Edward Ward, St. Cloud State

Sandy Wayne, University of Illinois at Chicago

Les Wiletzky, Hawaii Pacific University

Carol Young, Wittenberg University

Finally, this book would not have been possible without the indulgence of family and

friends. We sincerely appreciate the patience and tolerance that were extended to us as we wrote

the eighth edition.

Luis R. Gómez-Mejía

David B. Balkin

Robert L. Cardy

Luis R. Gómez-Mejía holds the Ray and Milann Siegfried Professor of Management Chair in Business at the University of Notre Dame. Prior to that, he was the Benton Cocanougher Chair

at Texas A & M University as well as Council of 100 Distinguished Scholars at Arizona State

University (ASU), and held the Horace Steel Arizona Heritage Chair at ASU. He was a Regent’s

Professor at ASU and has recently received the Outstanding Alumni Award from the University

of Minnesota and was awarded the title of Doctor Honoris Causa at Carlos III University (Spain).

He is a Fellow of the Academy of Management and member of the “Hall of Fame” of the Acad-

emy of Management (which includes 33 members out of approximately 20,000 members in the

Academy of Management). He has published more than 250 articles and 12 books focused on

macro human resource issues. His work has appeared in the best management journals including:

Academy of Management Journal, Academy of Management Review, Strategic Management Journal, and Administrative Science Quarterly. He has received numerous awards for his re- search, including “best paper” in the Academy of Management Journal and “most impactful paper” in Administrative Science Quarterly. His publications have been cited approximately 16,000 times (Google), making him one of the most highly cited management scholars. He is

past president of the Human Resource Division of the Academy of Management and has served

as elected member of the Board of Governors of the Academy of Management. He also served

three terms as president of the Iberoamerican Academy of Management.

David B. Balkin is Professor of Management at the Leeds School of Business at the Uni- versity of Colorado at Boulder. He received his PhD in human resource management and in-

dustrial relations from the University of Minnesota. Prior to joining the University of Colorado,

he served on the faculties of Louisiana State University and Northeastern University. He has

published over 70 articles appearing in journals such as the Academy of Management Journal, Strategic Management Journal, Personnel Psychology, Journal of Organizational Behavior, Journal of Business Venturing, and Journal of Management Studies. One of his publications (coauthored with Luis R. Gómez-Mejía) was selected as the best article published in 1992 in the

Academy of Management Journal. Professor Balkin has written or edited several books on hu- man resources, the management of innovation, compensation, and other topics. He has served as

Chair of the Management Department at the University of Colorado and also served on advisory

boards of nonprofit organizations. Professor Balkin serves as the associate editor for Human Resource Management Review and has previously served on the editorial boards of the Academy of Management Journal and the Journal of Management. He has served as an expert witness on cases dealing with employment and pay discrimination. Professor Balkin has extensive in-

ternational experience as a scholar and teacher and was a visiting professor at the University of

Toulouse (France), Copenhagen Business School (Denmark), Helsinki University of Technology

(Finland), University of Regensburg (Germany), ESADE Business School (Spain), National

University of Singapore, Hong Kong University of Science and Technology, HEC Montreal

(Canada), and Indian School of Business (India).

Robert L. Cardy is a Professor in the Department of Management at the University of Texas at San Antonio. He received his PhD in industrial/organizational psychology from Virginia Tech

in 1982. He is an ad hoc reviewer for a variety of journals, including the Academy of Manage- ment Journal and the Academy of Management Review. He is editor and cofounder of the Journal

About the Authors

xxvii

of Quality Management. Professor Cardy has been recognized for his research, teaching, and service. He was ranked in the top 20 in research productivity for the decade 1980–1989 based on

the number of publications in the Journal of Applied Psychology. He was doctoral coordinator in Arizona State University’s management department for five years and received a University

Mentor Award in 1993 for his work with doctoral students. He served as department chair for

seven years at UTSA. He authored a regular column on current issues in HRM for over ten years

and received an Academy of Management certificate for outstanding service as a columnist for

the HR division newsletter. Professor Cardy was a 1992 recipient of a certificate for significant

contributions to the quality of life for students at ASU. His research focuses on performance

appraisal and effective HRM practices.

xxviii ABOUT THE AUTHORS

1

PA R T I INTRODUCTION

1 Understand the major challenges affecting HR. 2 Develop competence in planning and implementing

strategic HR policies.

3 Develop competence in selecting HR strategies to increase firm performance.

4 Become aware of HR best practices.

5 Understand the need to establish a close partnership between the HR department and managers.

6 Recognize career opportunities in various human resources management subfields.

CHAPTER

1 Meeting Present and

Emerging Strategic Human Resource Challenges

C H A L L E N G E S After reading this chapter, you should be able to deal more effectively with the following challenges:

When you see this icon, visit www.mymanagementlab.com for activities that are applied, personalized, and offer immediate feedback.

MyManagementLab®

W hether in a recession or during boom times, com- panies compete for talent. Those that are capable of attracting, retaining, and motivating good em-

ployees are more likely to achieve and sustain a competitive advantage. Let’s take three examples:

■ Giant Alcatel-Lucent employs about 72,000 employees world- wide, and it plans to cut ap - proximately 10,000 jobs during 2014 through 2016 to stem years of losses. While this move might be beneficial for the bottom line in the short term, many of its employees (even those who might not get the ax) are being syphoned away by competitors such as Ericsson, Huawei, and Nokia. This loss of talent might accelerate Alcatel-Lucent’s decline in the future.1

■ Not long ago, Google Inc. was considered the ideal place to work and it was repeatedly chosen by Fortune

in its annual pick of the best companies to work for. Google used to receive more than 1,000 applicants for every five jobs available, and very few employees left the company once they were hired. Yet the situ-

ation seems to be changing, making it much tougher for Google to attract and retain top talent despite the company’s name recognition and pres- tige. Google Inc. is now fight- ing off many growing Internet firms that are poaching its staff. During the years 2011–2015, Facebook, Zynga, and Twitter have increased their staffing by approximately 90 percent, and many of those employees are migrating from Google. To help attract new recruits and preempt

defections, all of Google’s employees (about 23,000) were given a 10 percent raise, at an estimated cost of $400 million.

Source: epa european pressphoto agency/Alamy.

2 PART I • INTRODUCTION

■ In recent years, Motorola has lost thousands of engineers, researchers, and design- ers to competitors such as Apple; Samsung; Research in Motion (RIM, the maker of the Blackberry); Nokia; Dell; and Sony Erickson. A group of software experts recently laid off by Motorola marketed themselves to Yahoo as a team, and all were quickly hired.2 Ironically, RIM now is also on the brink of disaster because the market for the Blackberry has dwindled and the company has been unable to muster the engineer- ing talent required to diversify its product offering. Nokia also finds itself in a similar situation—its inability to innovate in the cell phone market has made it a victim of Apple’s success in introducing a new stream of devices every year.

The Managerial Perspective

This book is about the people who work in an organization and their relationship with that organization. Different terms are used to describe these people: employees, associates (at Walmart, for instance), personnel, and human resources. None of these terms is better than the others, and they often are used interchangeably. The term we have chosen for the title of this text, and which we will use throughout, is human resources (HR).* This term has gained widespread acceptance over the last decade because it expresses the belief that workers are a valuable—and sometimes irreplaceable—resource. Effective human resource management (HRM) is a major component of any manager’s job.

A human resource strategy refers to a firm’s deliberate use of human resources to help it gain or maintain an edge against its competitors in the marketplace.3 It is the grand plan or general approach that an organization adopts to ensure that it effectively uses its people to accomplish its mission. A human resource tactic is a particular policy or program that helps to advance a firm’s strategic goal. Strategy precedes and is more important than tactics.

In this chapter, we focus on the general framework within which specific HR activities and programs fit. With the help of the company’s human resources department, managers implement the chosen HR strategies.4 In subsequent chapters, we move from the general to the specific and examine in detail the spectrum of HR strategies (for example, those regard- ing work design, staffing, performance appraisal, career planning, and compensation).5

human resources (HR) People who work in an organization. Also called personnel.

human resource strategy A firm’s deliberate use of human resources to help it gain or maintain an edge against its competitors in the marketplace. The grand plan or general approach an organization adopts to ensure that it effectively uses its people to accomplish its mission.

human resource tactic A particular HR policy or program that helps to advance a firm’s strategic goal.

manager A person who is in charge of others and is responsible for the timely and correct execution of actions that promote his or her unit’s success.

line employee An employee involved directly in producing the company’s good(s) or delivering the service(s).

staff employee An employee who supports line employees.

*All terms in boldface also appear in the Key Terms list at the end of the chapter.

Learn It!

If your professor has chosen to assign this go to www.mymanagementlab.com to see what you should particularly focus on, and take the chapter 1 warmup.

Human Resource Management: The Challenges Managers are people who are in charge of others and who are responsible for the timely and

correct execution of actions that promote their units’ successful performance. In this book, we

use the term unit broadly; it may refer to a work team, department, business unit, division, or corporation.

All employees (including managers) can be differentiated as line or staff. Line employees

are directly involved in producing the company’s good(s) or delivering the service(s). A line manager manages line employees. Staff employees are those who support the line function. For example, people who work in the HR department are considered staff employees because their

job is to provide supporting services for line employees. Employees may also be differentiated

according to how much responsibility they have. Senior employees are those who have been with the company longer and have more responsibility than junior employees. Exempt employees

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 3

(sometimes called salaried employees) are those who do not receive extra pay for overtime work (beyond 40 hours per week). Nonexempt employees do receive overtime compensation. This text is written primarily to help students who intend to be managers deal effectively with the chal-

lenges of managing people.

Figure 1.1 summarizes the major HR challenges facing today’s managers. Firms that deal

with these challenges effectively are likely to outperform those that do not. These challenges

may be categorized according to their primary focus: the environment, the organization, or the

individual.

Environmental Challenges Environmental challenges are the forces external to the firm. They influence organizational

performance but are largely beyond management’s control. Managers, therefore, need to monitor

the external environment constantly for opportunities and threats. They must also maintain the

flexibility to react quickly to challenges. One common and effective method for monitoring the

environment is to read the business press, including BusinessWeek, Fortune, and the Wall Street Journal. (The Appendix at the end of this book provides an annotated listing of both general business publications and more specialized publications on HR management and related topics.)

Eight important environmental challenges today are rapid change, the rise of the Internet,

workforce diversity, globalization, legislation, evolving work and family roles, skill shortages

and the rise of the service sector, and catastrophic events as a result of natural disasters and

terrorism.

RAPID CHANGE Many organizations face a volatile environment in which change is nearly constant.6 For this reason IBM’s ex-CEO, Sam Palmisano, tells his managers that he doesn’t

believe in forecasts longer than one week.7 If they are to survive and prosper, firms need to

adapt to change quickly and effectively. Human resources are almost always at the heart of an

effective response system.8 Here are a few examples of how HR policies can help or hinder a firm

grappling with external change:

j New company town As firms experience high pressure to become more productive and

deal with very short product life cycles (often measured in months), Americans are work-

ing longer, harder, and faster.9 As a result, the line between home and work is blurred

for many employees. To deal with this phenomenon, sociologist Helen Mederer of the

University of Rhode Island notes that “companies are taking the best aspects of home and

incorporating them into work.”10

environmental challenges Forces external to a firm that affect the firm’s performance but are beyond the control of management.

FIGURE 1.1 Key HR Challenges for Today’s Managers

Environment Rapid Change Rise of the Internet Workforce Diversity Globalization

• • • •

Legislation Evolving Work and Family Roles Skill Shortages and the Rise of the Service Sector Natural Disasters

• • •

•

Organization

Individual • •

• • • •

Matching People and Organization Ethical Dilemmas and Social Responsibility Productivity Empowerment Brain Drain Job Insecurity

Competitive Position: Cost, Quality, Distinctive Capabilities Decentralization Downsizing Organizational Restructuring

•

• • •

Self-Managed Work Teams Small Businesses Organizational Culture Technology Outsourcing

• • • • •

A QUESTION OF ETHICS How much responsibility does an organization have to shield its employees from the effects of rapid change in the environ- ment? What risks does this type of “shock absorber” approach to management entail?

4 PART I • INTRODUCTION

A survey of 975 employers by consulting firm Hewitt Associates found that an in-

creasing number of companies are providing “home at work” benefits. These include dry

cleaner/laundry service, company store, take-home meals, concierge service, oil changes/

autocare, hair salon, and pet care.11

According to a report in the New York Times:12

. . . things like nap rooms and massage recliners may sound out of place to some in

a working environment. But such perks can boost productivity when there are older

workers with sore backs, or young parents with sometimes sleepless nights. Musical

performance, too, may seem at first like an unnecessary distraction. But companies

trying them say that they can be done simply and inexpensively, and that they produce

better morale, increased motivation and less stress.

j Dealing with stress Rapid change and work overload can put employees under a great

deal of stress. The Bureau of Labor Statistics reported that 50 percent of the 19.8 million

Americans who say they work at home at least once a week aren’t compensated for it.

In other words, millions of employees must work at home just in order to catch up.13

Unless the organization develops support mechanisms to keep stress manageable,

both the firm and employees may pay a heavy price.14 In some extreme cases, workplace

violence may result. In 2014 the Centers for Disease Control calls workplace violence a

“national epidemic”; the most recent figures indicate that U.S. employees at work were

the victims of 18,104 injuries from assault and 609 homicides.15 Typically, however, the

observed results of poorly handled stress are more subtle, yet still highly destructive, cost-

ing the company substantial money. According to some estimates, stress-related ailments

cost companies about $200 billion a year in increased absenteeism, tardiness, and the loss

of talented workers.16 One survey reports that 67 percent of employees categorize their

work-related stress as high.17 The National Institute of Mental Health estimates that ap-

proximately 222.7 million days of work are lost annually due to absence and impairments

related to depression alone, costing employers (the majority of which are small firms)

$51.5 billion a year.18 Many firms, including Microsoft, Sysco Food Services, Apple,

IBM, General Motors, Google, Chrysler, Johnson & Johnson, Coors Brewing Company,

Citigroup Inc., Texas Instruments, and Hughes Aircraft (now merged into Raytheon),

among others, have introduced stress-control programs in recent years.

Throughout this book we emphasize how HR practices can enable a firm to respond

quickly and effectively to external changes. Two chapters (Chapter 13 on employee relations

and Chapter 16 on managing workplace safety and health) specifically deal with issues related

to employee stress.

THE INTERNET REVOLUTION The dramatic growth of the Internet in recent years probably represents the single most important environmental trend affecting organizations and their human resource

practices. In the mid-1990s, the term Web economy had not yet been coined.19 Now, almost all firms use the Internet as part of their normal business practices. The Internet is having a pervasive impact

on how organizations manage their human resources, as the following examples show:

j Necessitating greater written communication skills Companies have discovered that

Internet technology creates a high demand for workers who can deal effectively with

e-mail messages.20 This skill is key if companies want to keep fickle Internet customers

loyal, making them less likely to go to a competitor by simply tapping a few keystrokes.

E-mail writing may also involve legal issues. For instance, an employee’s e-mail

response to a customer complaint may be legally binding on the firm, and there is the

“written” record to prove it. Some jokes among employees may be used as evidence of

sexual harassment. Unlike regular mail, electronic communication is not considered private

and thus the company and employees may be open to scrutiny by government agencies as

well anyone with the basic skills required to access the system.

Although English is the main language of the Internet, almost half of Internet commu-

nication takes place in foreign languages, and only 7 percent of users on a global basis are

native English speakers.21 Major multimillion-dollar blunders due to language problems

have already been documented, such as the case of Juan Pablo Davila, a commodities

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 5

trader in Chile. He typed the word “buy” on the computer by mistake, instead of “sell.”

To rectify his mistake, he started a frenzy of buying and selling, losing 0.5 percent of his

country’s GNP. His name has become an Internet-related verb—“davilar”—meaning, “to

screw up royally.”22

j Dealing with information overflow Although executives spend an average of four hours a

day receiving, checking, preparing, and sending e-mails, they are still spending 130 minutes

a day in formal and informal face-to-face meetings. According to Neil Flett, CEO of a large

communication consulting firm, “Because e-mail consumes so much time it may just be

that it just adds to communication time rather than reducing it.”23

According to some estimates, almost one-third of e-mails received by employees

are not directly relevant to their jobs; considering that employees are now receiving an

average of 30 e-mails each day, this may translate into as much as one hour a day of lost

productivity.24

j Breaking down labor market barriers More than ever before, the Internet is creating an

open labor market where information about prospective employees and firms is avail-

able on a global basis and may be obtained quickly and inexpensively.25 Monster.com, for

instance, posted 85 million resumes in 2014.26 Thousands of specialized search engines

(such as Indeed.com, Simplyhired.com, Workzoo.com, and Jobsearch.org) now scan both well-known and obscure employment boards on the job seeker’s behalf.27 While more and

more organizations are relying on Web applications to recruit and screen employees, it is

unclear to what extent these highly efficient yet “cold” impersonal approaches to staff-

ing allows organizations to learn about candidates’ intangible qualities such as leader-

ship skills, work ethic, business acumen, and flexibility. Applicants often complain that

sophisticated computer programs tend to have a narrow focus, relying on numerical and/

or concrete criteria that may not truly capture what the person could contribute if given an

opportunity (see the Manager’s Notebook, “A Cold Way to Get a Job”).

A Cold Way to Get a Job

T he way people look for jobs has changed dramatically. Employers often require people to

submit applications via the Internet, and hiring managers sift through queries with special

computer programs. Unless you fit the precise algorithm that the computer program is look-

ing for, you may never get a prospective employer’s attention. For instance, you may have four

years, 351 days of experience, but not the five years the machine uses as a cutoff, and thus you

are out of luck. Or, failure to show evidence that you have used a particular skill during the past

two months may be grounds for an automatic rejection (even if maybe you did use the skill but

forgot to include it).

In a job market thick with candidates, employers have become extremely selective, and a

common complaint among applicants is that computer screening programs are totally inflexible,

leading to automatic rejections for small details. The computer makes a decision without giving

you a chance to make your case. If an application doesn’t make the cut, there is usually no rejec-

tion letter or feedback. The process may be efficient for the company, but it can be frustrating and

demoralizing to the applicant.

Sources: Based on www.employtest.com. (2014); www.articlesbase.com. (2014). Computer based recruitment software; Arizona Republic (2010, Oct. 31). Networking pays off to get old job back; Black, T. (2011). Every tool you need for hiring, www.inc.com. A-8. jj

Emerging Trends

j Using online learning Corporate training has always been dominated by traditional in-

house “paper-and-pencil” training programs. Over the last few years, however, there has

been a tremendous migration from classroom learning to online learning.28 For example,

99 percent of employees at the Mayo Clinic opted for online training to learn about new

M A N A G E R ’ S N O T E B O O K

6 PART I • INTRODUCTION

j Enabling HR to focus on management The Internet enables firms to handle many opera-

tional HR details much more quickly and efficiently. According to Philip Fauver, president

and CEO of Employease Inc., the Internet is “the enabler.”30 For a flat fee of about $5 to

$6 per employee, Employease manages HR information for 700 small-to-midsize compa-

nies. One of its clients is Amerisure Insurance Company in Farmington Hills, Michigan.

According to Derick Adams, Amerisure’s HR vice president, the Internet allows his

14-member HR department to devote more attention to important managerial challenges.

For instance, Adams notes that his department was able to “develop a variable pay plan

after handing off the department’s data entry work to Employease.”31

WORKFORCE DIVERSITY Managers across the United States are confronted daily with the increasing diversity of the workforce. In 2014, approximately 35 percent of the U.S. workforce

was from a minority group, including African Americans (12%), Asian Americans (4.7%),

Latinos (16%), and other minorities (2%).32 In many large urban centers, such as Miami,

Los Angeles, and New York, minorities comprise at least half of the area’s workforce. The

influx of women workers is another major change in the composition of the U.S. workforce.

Women with children under age 6 are now the fastest-growing segment of the workforce.

Currently, more than 76 percent of employed men have employed wives, versus 54 percent

in 1980.33

These trends are likely to accelerate in the future. By 2050, the U.S. population is expected to

increase by 50 percent, with minority groups comprising nearly half of the population. Nonwhite

immigrants, mostly Hispanics, will account for 60 percent of this population growth. Despite

fears that immigrants are not assimilating, children of immigrants actually do better than children

of natives in the same socioeconomic class.34

The Growth of Online Niche Certifications to Meet Training Needs

W hile the United States reportedly scores lower than most industrialized nations on math,

science, and writing, it is probably second to none when it comes to its pragmatic

approach to training. This is reflected in the rapid growth of new niche certifications

offered by providers of “massive open online courses,” or MOOCs, aimed at meeting specific

training needs at a fraction of the cost of a four-year degree. One of these providers is Udacity,

which already has 1.6 million students. It offers online courses in specific technical areas of com-

puter science, supply-chain management and “gamification” (the use of video-game mechanics

to solve problems). Many “Who’s Who” organizations are active participants in the creation

and dissemination of these online certification programs, making MOOC providers legitimate

education providers and not just diploma mills. These include, for example, Stanford University,

Massachusetts Institute of Technology, Google, AT&T, United Parcel Service, Procter &

Gamble, Walmart, and Yahoo, among others.

Sources: Based on www.trainingconference.com. (2014). Training 2014 Conference & Expo; Belkin, D., and Porter, C. (2013, September 27). Job market embraces massive online courses. Wall Street Journal, A-3; Porter, E. (2013, October 10). U.S. must acknowledge the skills gap of its workforce and bridge it. New York Times, Global Edition, A-2; Van Horn, C. E. (2013). What workers really want and need. HRMagazine, 58(10), 44-B; Leonard, B. (2013). On the latest talent war’s front lines. HRMagazine, 58(10), 42–44. jj

M A N A G E R ’ S N O T E B O O K

Technology/Social Media

rules on health care privacy (even though the clinic gave them the option to attend a tradi-

tional classroom seminar on company time covering the same material).29 One of the most

recent developments in HR is the entry of well-known firms into the online training busi-

ness for the general public, with a focus on “niche certifications” rather than degree pro-

grams (see the Manager’s Notebook, “The Growth of Online Niche Certifications to Meet

Training Needs”).

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 7

Furthermore, never before in history has such a large-scale mixing of the races occurred,

due to a sharp rise in the rate of intermarriage.35 “One day race will not be needed because it

will be obsolete,” notes Candy Mills, a magazine editor in Los Angeles, who is black. Candy is

married to a French-Hungarian with whom she has a child.36 The best example of this trend, of

course, is the current president of the United States, Barack Obama, who is of mixed race. The

U.S. Census Bureau has acknowledged this reality, incorporating “mixed” categories for future

population censuses.

All these trends present both a significant challenge and a real opportunity for managers.37

Firms that formulate and implement HR strategies that capitalize on employee diversity are more

likely to survive and prosper (see example in the Manager’s Notebook, “How Harley-Davidson

is Taking Advantage of a Diverse Customer Base”). Chapter 4 is devoted exclusively to the topic

of managing employee diversity. This issue is also discussed in several other chapters throughout

this book.

How Harley-Davidson Is Taking Advantage of a Diverse Customer Base

Harley-Davidson had been a highly successful American company by marketing its mo-torcycles to a particular segment of the market, namely middle-age white males. In the last few years, the company has come to the realization that—to be competitive in the long run—it has to expand its demographic customer base and has to use a more diverse work-

force in its dealerships to appeal to potential “non-traditional” buyers. Current sales are down

by a third from years past, and better diversity management may be a way to reverse this trend.

Keith Wadell, Harley-Davidson’s chief executive, recently declared that a major priority for the

company’s strategic plan in the near future is to target young adults, women, African Americans,

and Hispanics. He noted that these diversity efforts are already paying off with domestic sales

among these “non-core customers” growing at nearly twice the rate as sales to traditional buyers.

These domestic diversity efforts are also helping the company to expand sales outside of North

America, with sales in the recent past growing by 25.6% in Asia and by 39% in Latin America.

Sources: Based on www.harley-davidson.com. (2014). Workforce and dealer diversity at Harley-Davidson; Diversity Inc. (2014). Do white males really need diversity outreach? bestpractices.diversityinc.com; Irwin, N. (2013). How Harley-Davidson explains the U.S. economy. www.washingtonpost.com. jj

M A N A G E R ’ S N O T E B O O K

Customer-Driven HR

GLOBALIZATION One of the most dramatic challenges facing U.S. firms as they enter the second decade of the twenty-first century is how to compete against foreign firms, both domestically

and abroad. The Internet is fueling globalization, and most large firms are actively involved

in manufacturing overseas, international joint ventures, or collaboration with foreign firms on

specific projects. Currently the companies that make up the S&P 500 generate 46 percent of their

profits outside the United States, and for many of the biggest U.S. companies, the proportion is

much higher.

The implications of a global economy for human resource management are many. Here are

a few examples:

j Worldwide company culture Some firms try to develop a global company identity to

smooth over cultural differences between domestic employees and those in international

operations. Minimizing these differences increases cooperation and can have a strong

impact on the bottom line. For instance, the head of human resources at the European divi-

sion of Colgate Palmolive notes that the goal of the company is to “make all employees

Colgaters.”38

j Worldwide recruiting Some firms recruit workers globally, particularly in the high-

technology area, where specialized knowledge and expertise are not limited by national

8 PART I • INTRODUCTION

boundaries.39 For instance, Unisys (an e-business solutions company whose 37,000 em-

ployees help customers in 100 countries apply information technology) recruits between

5,000 and 7,000 people a year, 50 percent of whom are information technology (IT) profes-

sionals. Unisys is always looking across borders to try to find the best persons.40

Global recruitment, however, is no panacea, because good employees everywhere are

in high demand, and there may not be as much applicant information available to make the

appropriate selection decision.41 Kevin Barnes, technical director for Store Perform, with

facilities in Bangalore, India, notes that “top Indian engineers are world-class, but most are

taken. Anyone in India who can spell Java already has a job.” And the labor market attracts legions of unqualified candidates, Barnes says, making it harder to distinguish the good

from mediocre performers.42

j Industrial metamorphosis The proportion of the American labor force in the manufac-

turing sector has dropped to less than 10 percent, down from 25 percent about 30 years

ago. Similar drops have been experienced in several European countries, including

England, Germany, and France. According to the Economist, “It has happened because rich-world companies have replaced workers with new technology to boost productivity

and shifted production from labor-intensive products such as textiles to higher-tech, higher

value-added, sectors such as pharmaceuticals. Within firms, low-skilled jobs have moved

offshore.”43 Labor unions have lost much of their influence.44 For instance, in the 1950s

almost 40 percent of the U.S. workforce was unionized; by the time President Ronald

Reagan took office in the early 1980s this percentage had dropped by almost half (22%);

and by the time President Barrack Obama took office less than 20 years later (2009), this

proportion had dropped by more than two-thirds (to approximately 7% of the private-sector

workforce). j Global alliances International alliances with foreign firms require a highly trained and de-

voted staff. For instance, Philips (a Dutch lighting and electronics firm) became the largest

lighting manufacturer in the world by establishing a joint venture with AT&T and making

several key acquisitions, including Magnavox, parts of GE Sylvania, and the largest light-

ing company in France.45

j A virtual workforce Because of restrictive U.S. immigration quotas,46 U.S. firms are tap-

ping skilled foreign labor but not moving those workers to the United States. The Internet

is making this possible with little additional expense. For example, Microsoft Corp. and

RealNetworks Inc. use Aditi Corp., a Bangalore, India, company, to handle customer

e-mails.47 In addition, many “virtual” expatriates work abroad but live at home.48

j The global enterprise Internationalization is growing at warp speed, creating a powerful

new reality. For instance, most people think of Coca-Cola as emblematic of the United

States. Yet its CEO, Muhtar Kent, describes Coca Cola in the following terms: “We are a

global company that happens to be headquartered in Atlanta. We have a factory in Ramallah

that employs 2,000 people. We have a factory in Afghanistan. We have factories every-

where.” Nearly 80 percent of Coca-Cola’s revenue comes from 206 countries outside the

United States.49

j Wage competition Not too long ago, many U.S. blue-collar workers could maintain a solid

middle-class standard of living that was the envy of the rest of the world. This was sustained,

in part, by higher productivity and superior technological innovation in the United States and

because American manufacturers enjoyed a high market share with little foreign competition.

Unfortunately, this is no longer the case in many sectors, particularly the automobile indus-

try. As noted in a recent report, “While businesses have a way to navigate this new world of

technological change and globalization, the ordinary American worker does not. Capital and

technology are mobile; labor isn’t. American workers are located in America.”50

An entire chapter of this book (Chapter 17) is devoted to the HR issues firms face as they

expand overseas. We also include international examples throughout the book to illustrate how

firms in other countries manage their human resources.

LEGISLATION Much of the growth in the HR function over the past four decades may be attributed to its crucial role in keeping the company out of trouble with the law.51 Most firms are deeply

concerned with potential liability resulting from personnel decisions that may violate laws

enacted by the U.S. Congress, state legislatures, or local governments.52 Discrimination charges

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 9

filed by older employees, minorities, and the disabled, for instance, have been on the rise for

years. In some cases, such as charges of sex discrimination by Hispanic and Asian women, the

increase has exceeded 65 percent in the past 20 years.53

One legal area growing in importance is alleged misuse of “proprietary company informa-

tion” by ex-employees. Pitney Bowes, the world’s largest maker of postage meters and other

mailing equipment, recently sued eight ex-employees who opened a small competing firm called

Nexxpost. According to a Pitney Bowes’ spokesperson:

The company invests a great deal of time and money in areas of developing our intellec-

tual property, in marketing and training our sales force. We must protect our investment,

which also includes our customer lists, information about consumer preferences, as well

as pricing. All that has a significant competitive value. When a former employee wants to

challenge us, we take that breach very seriously and do what we need to do to protect it.54

Operating within the legal framework requires keeping track of the external legal environ-

ment and developing internal systems (for example, supervisory training and grievance proce-

dures) to ensure compliance and minimize complaints. Many firms are now developing formal

policies on sexual harassment and establishing internal administrative channels to deal with al-

leged incidents before employees feel the need to file a lawsuit. In a country where mass litiga-

tion is on the rise,55 these efforts may well be worth the time and money.

Legislation may differentiate between public- and private-sector organizations. (Public sec- tor is another term for governmental agencies; private sector refers to all other types of orga- nizations.) For instance, affirmative action requirements (see Chapter 3) are typically limited to

public organizations and to organizations that do contract work for them. However, much legisla-

tion applies to both public- and private-sector organizations. In fact, it is difficult to think of any

HR practices that are not influenced by government regulations. For this reason, each chapter of this book addresses pertinent legal issues, and an entire chapter (Chapter 3) provides an overall

framework that consolidates the main legal issues and concerns facing employers today.

EVOLVING WORK AND FAMILY ROLES The proportion of dual-career families, in which both wife and husband (or both members of a couple) work, is increasing every year.

More companies are introducing “family-friendly” programs that give them a competitive

advantage in the labor market.56 Companies use these HR tactics to hire and retain the best-

qualified employees, male or female. Through the Office of Personnel Management, the federal

government provides technical assistance to organizations that wish to implement family-friendly

policies. On its 2015 Web page (opm.gov), for instance, the office makes available numerous publications on issues such as adoption benefits, child care, elder-care resources, parenting sup-

port, and telework.

Family-friendly policies are discussed in detail in Chapter 12 under the heading “Employee

Services.” Special issues that women confront in the workplace are discussed in Chapter 4.

SKILL SHORTAGES AND THE RISE OF THE SERVICE SECTOR As noted earlier, U.S. manufacturing has dropped dramatically in terms of the percentage of employees who work in that sector. Most

employment growth has taken place in the service industry. The categories with the fastest growth

are expected to be professional specialties (27 percent) and technical occupations (22 percent).

The fastest-growing occupations demand at least two years of college training.57 Expansion

of service-sector employment is linked to a number of factors, including changes in consumer

tastes and preferences, legal and regulatory changes, advances in science and technology that

have eliminated many manufacturing jobs, and changes in the way businesses are organized and

managed.

Unfortunately, many available workers will be too unskilled to fill those jobs. Even now,

many companies complain that the supply of skilled labor is dwindling and that they must pro-

vide their employees with basic training to make up for the shortcomings of the public education

system.58 For example, 84 percent of the 23,000 people applying for entry-level jobs at Bell

Atlantic Telephone (formerly NYNEX) failed the qualifying test. Chemical Bank (now merged

with Chase) reported that it had to interview 40 applicants to find one proficient teller.59 David

Hearns, former chairman and CEO of Xerox, laments that “the American workforce is running

out of qualified people.”60

A QUESTION OF ETHICS What is the ethical responsibility of an employer to employees who lack basic literacy and numeracy skills? Should companies be required by law to provide training opportunities for such employees, as some have proposed?

10 PART I • INTRODUCTION

To rectify these shortcomings, companies spend at least $55 billion a year on a wide variety

of training programs. This is in addition to the $24 billion spent on training programs by the

federal government each year.61 On the employee-selection side, an increasing number of orga-

nizations are relying on job simulations to test for the “soft skills” needed to succeed in a service

environment, such as sound judgment in ambiguous situations, the ability to relate to diverse

groups of people, and effective handling of angry or dissatisfied customers.

The improving unemployment picture at the time of this writing makes the skill shortage

a greater challenge for U.S. firms. New York has become the first state in the nation to issue a

“work readiness” credential to high school students who pass a voluntary test measuring their

ability to succeed in entry-level jobs. An article in the New York Times notes, “Employers have complained for years that too many students leave high school without basic skills, despite the

battery of exams—considered among the most stringent in the nation—that New York requires

for graduation.”62 The test covers “soft skills,” including the ability to communicate, follow direc-

tions, negotiate and make basic decisions, in 10 broad areas. Chapter 8 focuses directly on train-

ing; Chapter 5 (staffing), Chapter 7 (appraising employee performance), and Chapter 9 (career

development) all discuss issues related to the skills and knowledge required to succeed on the job.

NATURAL DISASTERS AND TERRORISM A stream of recent disasters, including the 2011 Japanese earthquake; the early 2005 tsunami that killed over 250,000 people in Asia; the 2010 Haitian

earthquake and subsequent cholera epidemics during 2010–2012, which killed more than 200,000

people; the 2010 oil spill environmental disaster of British Petroleum in the Gulf of Mexico; and a

string of devastating hurricanes—most notably Katrina, which destroyed most of the city of New

Orleans in August 2005—have increased awareness among HR professionals of the importance

of having plans to deal with such catastrophes. A survey conducted by Mercer Human Resource

Consulting indicated that almost 3 million employees were affected in one way or another by

Katrina.63 Employers had to suddenly deal with HR issues to which they previously had given little

thought. These included: deciding whether to keep paying employees who were unreachable and

unable to report to work, paying for a variety of living expenses for displaced staffers in temporary

living quarters, providing telecommuting equipment for employees working from hotels, awarding

hazardous duty pay, hiring temporary employees (many of whom were undocumented workers) to

fill the labor void, and preventing the loss of key talent to competitors outside the disaster area.64

Time Warner Inc. waived medical deductibles and supported out-of-network medical coverage

for affected Katrina families. Walmart, with more than 34,000 employees displaced by Katrina,

guaranteed them work in any other U.S. Walmart store and created an “Associate Disaster Relief

Fund” for employees whose homes were flooded or destroyed.65 Surprisingly, even after Katrina,

almost half of firms don’t have HR policies to deal with major disasters.66 But this is likely to

change as new potential threats (such as avian flu, major earthquakes, chemical contamination,

and more hurricanes) loom on the horizon.67 Another issue of concern to many firms, particularly

multinationals, is terrorism, which we discuss later. Recent well-publicized terrorist incidents

such as the 2013 Boston Marathon bombings, numerous mass shootings on American soil in the

past five years, the 2013 attack on a major Nairobi (Kenya) shopping mall, and continued pirating

of ships along the Somalian coast are continuous reminders that organizations need to be prepared

to respond to potential terrorist threats.

Organizational Challenges Organizational Challenges are concerns or problems internal to a firm. Effective managers spot

organizational issues and deal with them before they become major problems. One of the themes

of this text is proactivity: the need for firms to take action before problems get out of hand. This can be done only by managers who are well informed about important HR issues and organiza-

tional challenges.

Competitive Position: Cost, Quality, or Distinctive Capabilities Human resources represent the single most important cost in many organizations. Organizational

labor costs range from 36 percent in capital-intensive firms, such as commercial airlines, to

80 percent in labor-intensive firms, such as the U.S. Postal Service. How effectively a company

uses its human resources can have a dramatic effect on its ability to compete (or survive) in an

increasingly competitive environment.

organizational challenges Concerns or problems internal to a firm; often a by-product of environmental forces.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 11

Effective HR policies can impact an organization’s competitive position by controlling costs,

improving quality, and creating distinctive capabilities.

j Controlling costs A compensation system that uses innovative reward strategies to control

labor costs can help the organization grow, as we discuss in Chapters 10 and 11. Other

ways to keep labor costs under control include making better employee selection decisions

(Chapter 5); training employees to make them more efficient and productive (Chapter 8);

attaining harmonious labor relations (Chapter 15); effectively managing health and safety

issues in the workplace (Chapter 16); and reducing the time and resources needed to

design, produce, and deliver quality products or services (Chapter 2). j Improving quality Many companies have implemented total quality management (TQM)

initiatives, designed to improve the quality of all the processes that lead to a final product

or service. Continuing evidence shows that firms that effectively implement quality pro-

grams tend to outperform those that don’t.68

j Creating distinctive capabilities The third way to gain a competitive advantage is to use

people with distinctive capabilities to create unsurpassed competence in a particular area

(for example, 3M’s competence in adhesives, Carlson Corporation’s leading presence in

the travel business, and Xerox’s dominance of the photocopier market). Chapter 5 (which

discusses the recruitment and selection of employees), Chapter 8 (training), and Chapter 9

(the long-term grooming of employees within the firm) are particularly relevant.

DECENTRALIZATION Organizations commonly centralize major functions, such as HR, marketing, and production, in a single location that serves as the firm’s command center. Multiple

layers of management execute orders issued at the top and employees move up the ranks over

time in what some have called the internal labor market.69 However, the traditional top-down form of organization is being replaced by decentralization, which transfers responsibility and

decision-making authority from a central office to people and locations closer to the situation

that demands attention. The Internet helps companies to decentralize even faster by improving

the communication flow among the workforce, reducing the need to rely on the traditional

organizational pyramid.70

The need for maintaining or creating organizational flexibility in HR strategies is addressed in

several chapters of this book, including those dealing with work flows (Chapter 2), compensation

(Chapters 10 and 11), training (Chapter 8), staffing (Chapter 5), and globalization (Chapter 17).

DOWNSIZING Periodic reductions in a company’s workforce to improve its bottom line—often called downsizing—are becoming standard business practice, even among firms that were once

legendary for their “no layoff ” policies, such as IBM, Kodak, and Xerox.71 Although U.S. firms

traditionally were far more willing than companies in other industrialized nations to resort to

layoffs as a cost-cutting measure, globalization is quickly closing the gap. Chinese, Korean, and

Indian firms have also experienced massive layoffs in the wake of the economic crisis at the end

of the last decade.72 In recent years, German companies—ranging from electronics giant Siemens

to chip-maker Infineon Technologies to Commerzbank—have announced thousands of layoffs.

Countries such as France, where authorities have repeatedly blocked management efforts to cut

costs via layoffs, often find that these well-intentioned efforts are counterproductive, leading to

a wave of bankruptcies. This was the fate of appliance maker Moulinex, once considered an icon

of French industry, which shut its doors in 2002, with almost 9,000 employees losing their jobs

as a result.73

In 2013, the socialist government in France passed a more restrictive law whereby the

state has the right to disapprove restructuring plans depending on a firm’s assets and economic

health. At the time of this writing, the French government is applying this new law by blocking

Alcatel-Lucent from laying off 900 French employees. Following a period of unprecedented

growth, Iceland has experienced since the end of the past decade what amounts to an economic

catastrophe, with almost a quarter of its workforce being laid off within a short time.74 More re-

cently, Ireland and Greece had a similar fate, with Italy, Portugal, and Spain not too far behind.

In 2014 the unemployment rate in Spain reached an unprecedented 27%, provoking a large

exodus of qualified personnel to other countries in Europe and Latin America (even though

unemployment figures are decreasing at the time of this writing, mostly due to temporary hires

in low-wage sectors).

total quality management (TQM) An organization-wide approach to improving the quality of all the processes that lead to a final product or service.

decentralization Transferring responsibility and decision-making authority from a central office to people and locations closer to the situation that demands attention.

downsizing A reduction in a company’s workforce to improve its bottom line.

12 PART I • INTRODUCTION

Chapter 6 is devoted to downsizing and how to manage the process effectively. Other rel-

evant chapters include those on benefits (Chapter 12), the legal environment (Chapter 3), labor

relations (Chapter 15), and employee relations and communications (Chapter 13).

ORGANIZATIONAL RESTRUCTURING Over the past two decades there has been a dramatic trans- formation in how firms are structured. Tall organizations that had many management levels are

becoming flatter as companies reduce the number of people between the chief executive officer

(CEO) and the lowest-ranking employee in an effort to become more competitive. Mergers and

acquisitions have been going on for decades. Often mergers fail because the cultures and HR systems

of the firms involved do not coalesce.75 A newer and rapidly growing form of interorganizational

bonding comes in the form of joint ventures, alliances, and collaborations among firms that remain

independent, yet work together on specific products to spread costs and risks.

To be successful, organizational restructuring requires effective management of human re-

sources.76 For instance, flattening the organization requires careful examination of staffing de-

mands, work flows, communication channels, training needs, and so on. Likewise, mergers and

other forms of interorganizational relations require the successful blending of dissimilar orga-

nizational structures, management practices, technical expertise, and so forth.77 Chapter 2 deals

specifically with these issues. Other chapters that focus on related issues are Chapter 5 (staffing),

Chapter 8 (training), Chapter 9 (career development), and Chapter 17 (international manage-

ment). Chapters 10 and 11 (compensation issues) address some of the growing controversies with

regard to pay inequities between top and lower levels as organizations become flatter.78

SELF-MANAGED WORK TEAMS The traditional system in which individual employees report to a single boss (who oversees a group of three to seven subordinates) is being replaced in some

organizations by the self-managed team system. Employees are assigned to a group of peers and,

together, they are responsible for a particular area or task. It has been estimated that 40 percent

of U.S. workers are operating in some kind of team environment.79

According to two experts on self-managed work teams, “Today’s competitive environment

demands intense improvement in productivity, quality, and response time. Teams can deliver this

improvement. Bosses can’t. . . . Just as dinosaurs once ruled the earth and later faded into extinc-

tion, the days of bosses may be numbered.”80

Very few rigorous scientific studies have been done on the effectiveness of self-managed

work teams. However, case studies do suggest that many firms that use teams enjoy impressive

payoffs. For example, company officials at General Motors’ Fitzgerald Battery Plant, which is

organized in teams, reported cost savings of 30 to 40 percent over traditionally organized plants.

At FedEx, a thousand clerical workers, divided into teams of 5 to 10 people, helped the company

reduce service problems by 13 percent.81

HR issues concerning self-managed work teams are discussed in detail in Chapter 2 (work

flows), Chapter 10 (compensation), and Chapter 11 (rewarding performance).

THE GROWTH OF SMALL BUSINESSES According to the U.S. Small Business Administration (SBA), the precise definition of a small business depends on the industry in which it operates. For

instance, to be considered “small” by the SBA, a manufacturing company can have a maximum

of 500 to 1,500 employees (depending on the type of manufacturing). In wholesaling, a company

is considered small if the number of its employees does not exceed 100.82

An increasing percentage of the 14 million businesses in the United States are considered to

be small.83 One study using tax returns as its source of data found that 99.8 percent of U.S. busi-

nesses have fewer than 100 employees and approximately 90 percent have fewer than 20 employ-

ees.84 Another study reports that approximately 85 percent of these firms are family owned.85 One

study found that Latinos and immigrants have substantially higher entrepreneurship rates than

U.S. natives, and that African Americans increasingly are becoming entrepreneurs.86

Unfortunately, small businesses face a high risk of failure. According to some estimates,

40 percent of them fail in the first year, 60 percent fail before the start of the third year, and only

10 percent survive an entire decade.87 To survive and prosper, a small business must manage its hu-

man resources effectively. For instance, a mediocre performance by one person in a 10- employee

firm can mean the difference between making a profit and losing money. In the eighth edition of

this book, each chapter has at least a section or a feature concerning special HR issues faced by

small businesses.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 13

ORGANIZATIONAL CULTURE The term organizational culture refers to the basic assumptions and beliefs shared by members of an organization. These beliefs operate unconsciously and define in

a basic “taken for granted” fashion an organization’s view of itself and its environment.88 The key

elements of organizational culture are:89

j Observed behavioral regularities when people interact, such as the language used and the rituals surrounding deference and demeanor

j The norms that evolve in working groups, such as the norm of a fair day’s work for a fair day’s pay

j The dominant values espoused by an organization, such as product quality or low prices j The philosophy that guides an organization’s policy toward employees and customers j The rules of the game for getting along in the organization—“the ropes” that a newcomer

must learn to become an accepted member j The feeling or climate that is conveyed in an organization by the physical layout and the way

in which members of the organization interact with one another, customers, and outsiders

Firms that make cultural adjustments to keep up with environmental changes are likely to

outperform those whose culture is rigid and unresponsive to external jolts. Campbell’s Soup

Company’s problems in the 2000s are often attributed to norms and values that had not kept up

with rapidly changing consumer tastes. As Khermouch wrote in BusinessWeek, “It’s definitely a risk-averse, control-oriented culture. It’s all about two things: financial control and how much

they can squeeze out of a tomato. Campbell needs to reward risk-taking, remove organizational

roadblocks, and summon up the courage to move bold initiatives from proposal to execution

quickly and regularly.”90

Changing an entrenched organizational culture is not easy. For example, Carly Fiorina, an

outsider with a nontechnical background, was brought into Hewlett-Packard (HP) in 1999 as

CEO in order to overhaul the company.91 Yet she was fired just six years later because her market-

ing focus, aggressiveness, autocratic style, flair for public drama, and what many thought was an

overblown ego alienated key HP employees, managers, and members of the board of directors.

TECHNOLOGY Although technology is changing rapidly in many areas, such as robotics, one area in particular is revolutionizing human resources: information technology.92 Telematics technologies—a broad array of tools, including computers, networking programs, telecommunications, and

fax machines—are now available and affordable to businesses of every size, even one-person

companies. These technologies—coupled with the rise of the Internet—have impacted businesses

in a number of ways, specifically:

j The rise of telecommuting Because technology makes information easy to store, retrieve,

and analyze, the number of company employees working at least part-time at home

(telecommuters) has been increasing by 15 percent annually. Because telecommuting arrangements are expected to continue to grow in the future, they raise many important

issues, such as performance monitoring and career planning. A recent survey uncovered

that almost half of off-site employees believe that people who work onsite get more recog-

nition than those who work off-site. On the same survey, more telecommuters than onsite

employees reported that they are unlikely to stay in their current position and firm if they

can find a suitable job elsewhere that pays them a similar amount.93 Instead of being easy

work, telecommuting makes it difficult for most telecommuters to draw a line between

personal and work life, sometimes making these jobs very stressful. j The ethics of proper data use Data control, data accuracy, the right to privacy, and ethics

are at the core of a growing controversy brought about by the new information technolo-

gies, particularly the Internet.94 Personal computers now make it possible to access huge

databases containing information on an individual’s credit files, work history, driving re-

cords, health reports, criminal convictions, and family makeup. One Web site, for example,

promises that in exchange for a $7 fee, it will scan “over two million records to create a

single report on an individual.”95 A critical observer notes: “Because of the large volume

of information errors may creep in and those who are negatively affected may not have

a chance to defend themselves.”96 The Manager’s Notebook, “What to Do with Personal

Information,” offers several examples of the ethical issues confronting human resource

professionals given easy access to personal data via modern technology.

organizational culture The basic assumptions and beliefs shared by members of an organization. These beliefs operate unconsciously and define in a basic taken-for-granted fashion an organization’s view of itself and its environment.

14 PART I • INTRODUCTION

j Electronic monitoring As illustrated in the You Manage It! case “Electronic Monitoring

to Make Sure That No One Steps Out of Line” at the end of this chapter, some companies

are experimenting with all sorts of sophisticated devices to measure employee productivity.

Approximately 40 percent of firms in 2014 were using artificial intelligence software that

monitors when, how, and why workers are using the Internet. According to Clares Voice,

a Dallas-based messaging security company, “We look at every piece of mail while it is in

motion.”97 E-mail messages are now used as evidence for all sorts of legal cases concern-

ing age discrimination, sexual harassment, price fixing, and the like.98 “Some 70 percent

of the evidence that we routinely deal with is in the form of electronic communication,”

says Garry G. Mathiason, a senior partner at Littler Mendelson, a prestigious legal firm in

San Francisco.99

j Medical testing Genetic testing, high-tech imaging, and DNA analysis may soon be avail-

able to aid in making employment decisions.100 Firms’ decisions about how to harness

the new information (to screen applicants, to establish health insurance premiums, to de-

cide who should be laid off, and the like) are full of ethical implications. IBM seems to

be on the forefront, recently announcing that it will not use genetic data for employment

decisions. This is one area where the legal system is still far behind technical advances.

A related issue concerns punishing employees who are exposed to health risks; with the

What to Do with Personal Information

One of the main ethical challenges facing HR professionals is how to interpret and put to use information about current and prospective employees that can be easily uncovered through the Web. And protecting the data of employees is becoming very difficult. Con- sider the following recent reports:

j Privacy Rights, an organization that keeps track of data breaches, has documented

613,508,411 records that were breached between 2005 and 2014, involving 3,954 data

bases.

j Jessica Bennett, a reporter for Newsweek, recently noted a simple experiment. She asked an Internet consultant to do a scrub of the Web giving this person her name and e-mail

address to go on. Without doing any hacking, within 30 minutes the consultant had her

Social Security number; in two hours, the consultant had identified her address, body type,

educational background, hometown, and health status.

j “Most people are still under the illusion that when they go online, they’re anonymous,”

says Nicholas Carr, author of The Shallows: What the Internet Is Doing to Our Brains. But in reality, as Carr notes, every key you press is being recorded into a database.

j “It is technically impossible for Yahoo! to be aware of all software or files that may be

installed on a user’s computer when they visit our site,” laments Anne Toth, Yahoo’s vice

president of global policy and head of privacy.

j Even though there is very little evidence that a credit score is a predictor of job per-

formance, a recent Society for Human Resource Management (SHRM) study showed

60  percent of employers used credit checks (obtained in seconds from the Internet) to vet

job candidates. Presumably, a lower credit score is interpreted as evidence of poor working

habits, irresponsible behaviors, a higher likelihood of committing fraud, and so forth (but

once again, these may be presumptions with little evidence to back them up).

Sources: Based on www.privacyrights.org. (2014). Online privacy; www.aclu.org. (2014); Murray, S. (2010, Oct. 15). Credit checks on job seekers by employers attract scrutiny. Wall Street Journal, A-5; Fowler, G. A., and Morrison, S. (2010, Nov. 4). Facebook expands mobile effort. Wall Street Journal, B-12; Vascellaro, J. E. (2010, Nov. 9). Websites rein in tracking tools. Wall Street Journal, B-1; Bennett, J. (2010, Nov. 1). Privacy is dead. Newsweek, 40; Stecklow, S., and Sonne, P. (2010, Nov. 24). Shunned profiling method on the verge of comeback. Wall Street Journal, A-14; Angwin, J., and Thurm, S. (2010, Oct. 8). Privacy defense mounted. Wall Street Journal, B-6; Fowler, G. A., and Steel, E. (2010). Facebook says user data sold to broker. Wall Street Journal, B-3. jj

Ethics/Social Responsibility

M A N A G E R ’ S N O T E B O O K

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 15

new health care law coming into effect, a growing number of firms are trying to “individu-

alize” the price of health insurance (see the Manager’s Notebook, “Watching Over Your

Shoulder: Paying a Price for Unhealthy Life Styles”).

Watching Over Your Shoulder: Paying a Price for Unhealthy Life Styles

As health care costs have increased over the years, more and more companies are impos-ing financial penalties (mostly in health care monthly premium payments) for workers who show evidence of “unhealthy life styles.” In 2015, approximately 20% of large firms had this type of program (including such household names as Home Depot, Pepsi-Co, Safe-

way, Lowe’s, and General Mills), a percentage expected to double or triple in the near future.

For instance, Walmart charges $2,000 per year for smokers. While penalizing “bad” behaviors

(such as smoking and drug and alcohol abuse) may be fair, demanding that employees who are

overweight, have high cholesterol, or have high blood pressure pay more is controversial. These

physical traits may not represent a personal choice and could be associated with such involuntary

factors as genetic predisposition, stress, and poverty. The new “Affordable Care Act” allows

companies to charge up to 30 percent more in insurance costs for an unhealthy lifestyle, although

presumably firms can charge workers higher fees only if they are provided with wellness pro-

grams. The problem is that federal rules are not explicit in defining wellness programs and many

companies are likely to interpret this requirement liberally.

Sources: Based on Society for Human Resource Management. (2014). More employers to penalize workers for unhealthy behaviors. www.shrm.org; www.medscape.com. (2014). Should people with unhealthy lifestyles pay higher health insurance? Abelson, R. (2013). The smokers surcharge. www.nytimes.com. jj

M A N A G E R ’ S N O T E B O O K

Ethics/Social Responsibility

j An increase in egalitarianism Because information is now available both instantaneously

and broadly, organizational structures are becoming more egalitarian, meaning that power and authority are spread more evenly among all employees. Groupware networks, which

enable hundreds of workers to share information simultaneously, can give office work-

ers corporate and business intelligence previously available only to their bosses.101 They

also enable the rank-and-file to join in online discussions with senior executives. In these

kinds of interactions, people are judged more by what they say than by their rank on the

corporate ladder.102

The challenges and implications of rapidly changing technologies—especially information

technologies—for human resources are discussed in every chapter of this book.

INTERNAL SECURITY The 9/11 attacks on the Twin towers and the Pentagon, the Boston Marathon massacre, and several subsequent plots and mass shootings since then have engendered a

collective obsession with security in the United States. Many consulting firms are now focusing

their attention on how to detect potential security problems, and a wide range of firms and industry

groups, from trucking associations to sporting-event organizers, have made security screening

a top priority.103 Apart from conducting background checks, HR departments are increasingly

involved in beefing up security details by scanning employees’ eyes and fingerprints for positive

identification, hiring armed guards to patrol facilities, identifying employees who might pose a

violence threat, and even spotting potential spies.104

Although few would question that security checks are necessary, one concern from a human

resource perspective is to ensure that applicants’ and employers’ rights are not violated and that

due process is followed whenever suspected problems are identified. For example, should a per-

son convicted of a drunken driving violation 15 years ago be denied a job as a flight attendant?

What about people whose past reveals some facts that may be warning signals, depending on

the bias of the evaluator (for instance, graduation from a Middle Eastern university, frequent job

16 PART I • INTRODUCTION

changes, multiple divorces, and the like)? Health sites offer tools used by medical professionals

and companies to track data, including test results from HIV and cancer exams.105 Should firms

use this type of information as part of their selection process?

According to a study conducted by Automatic Data Accessing, a computer-based security-

service firm, more than 40 percent of résumés misrepresent education or employment history.

The same survey shows that many companies are willing to overlook some degree of inaccu-

racy.106 In other words, how security-related information is used is a matter of interpretation,

except perhaps in the most grievous cases. Chapter 14, “Respecting Employee Rights and Man-

aging Discipline,” deals with these and related issues.

DATA SECURITY Numerous cases of unauthorized access to private data have been revealed during the past decade, in some situations leading to widespread identity fraud. (See the Manager’s

Notebook, “What to Do with Personal Information.” ) According to a recent New York Times report, a well-financed computer underground operates from countries with highly skilled technicians

that are subject to very little, if any, government control.107 “Right now the bad guys are improving

more quickly than the good guys,” says Patrick Lincoln, director of the computer science

laboratory at SRI International, a science and technology research group.108 The Privacy Rights

Clearinghouse, a consumer advocacy group in San Diego, counted over 80 major data breaches

involving the personal information of more than 50 million people.109 In one case, CardSystems

(a credit card processor) left the account information of more than 40 million shareholders exposed

to fraud.110 Such well-known organizations as Lexis/Nexis Group, ChoicePoint, Bank of America,

the United States Air Force, the Pentagon, and even the FBI experienced serious data breaches

during 2005–2012.111 The recent WikiLeaks dump into the Web of hundreds of thousands of U.S.

secrets as well as classified material from the military and the State Department represents the

most extreme case so far as to how even one low-level employee can use computer technology to

create major damage and embarrassment for an organization. Data security is not just a concern

for specialized computer experts; it should also involve HR policies to determine who has access

to sensitive information and monitoring systems to prevent abuses by managers and employees.

OUTSOURCING Many large firms now shift work once performed internally to outside suppliers and contractors, a process called outsourcing. The motivation is simple: Outsourcing saves

money. The Wall Street Journal reports that more than 40 percent of Fortune 500 companies have outsourced some department or service—everything from HR administration to computer

systems.112 A survey conducted by the WorldatWork Association (which has more than 10,000

outsourcing Subcontracting work to an outside company that specializes in and is more efficient at doing that kind of work.

Source: ©Ann Little/Alamy.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 17

members in responsible HR positions) found that the following HR practices are now completely

or partially outsourced by a large proportion of participating firms: health and welfare (79%),

pension plans (90%), payroll (62%), training (50%), and recruitment and selection (32%).113

Outsourcing creates several HR challenges for firms. Although it often helps companies

slash costs, employees may face layoffs when their jobs are farmed out to the lowest bidder.

For instance, UPS subcontracted 5,000 jobs at its 65 customer service centers.114 In addition,

customer dissatisfaction can result if subcontractors are not carefully watched and evaluated. For

instance, a group of former employees at now-liquidated Skillset Software Inc. filed suit against

its outside HR provider, TriNet Group Inc., for negligence in handling their claims. Part of the

problem is that these HR providers often don’t provide enough access and human interaction

(many rely extensively on the Web) to handle employee concerns and complaints.115 Subcontrac-

tors may take on more work than they can handle,116 and small businesses may not receive the

best available service and support. When subcontracting HR activities such as training, staffing,

and compensation, data security issues become paramount. The organization would have to trust

that the subcontractor can effectively protect personal data (such as Social Security numbers,

marital status, income level, performance problems, bank accounts) from misuse by insiders or

outsiders. Outsourcing that includes a foreign location (which is increasingly common) further

complicates the data security issue. Finally, outsourcing poses major difficulties for international

firms trying to enforce ethical HR standards among its subcontractors around the world. Nike

has been singled out in the press on numerous occasions for issues such as child labor, unsafe

working conditions, and slave wages among subcontractors in China, Vietnam, Indonesia, and

Thailand that produce 98 percent of its shoes at low cost. Walmart has also been singled out for

hiring subcontractors in Bangladesh with very poor working conditions, in one case leading to

the death of hundreds of women in a factory fire.

We discuss outsourcing and its challenges for HRM throughout this book. Chapter 2 dis-

cusses subcontracting within the context of downsizing, and Chapter 15, on labor relations, dis-

cusses how outsourcing affects unions.

PRODUCT INTEGRITY One complex issue that has received much media attention during the last three years is the extent to which firms can effectively monitor the integrity of products or

subcomponents that are made in foreign countries. For instance, traces of melamine, which could

be deadly for children, have been found in infant formula in the United States and Europe.117

Similar problems have been reported with bad ingredients imported from China that were used

by mainstream drug manufacturers as well as with counterfeit parts used by the U.S. military.118

The detection and prevention of these problems may require HR policies that involve carefully

selecting, training, and providing appropriate incentives for the responsible managers and

employees to acquire and monitor inputs from global suppliers (more on this in Chapter 17,

which examines international HR issues).

Individual Challenges Human resource issues at the individual level address the decisions most pertinent to specific

employees. These individual challenges almost always reflect what is happening in the larger

organization. For instance, technology affects individual productivity; it also has ethical ramifica-

tions in terms of how information is used to make HR decisions (for example, use of credit or

medical history data to decide whom to hire). How the company treats its individual employees is

also likely to affect the organizational challenges we discussed earlier. For example, if many key

employees leave the firm to join competitors, the organization’s competitive position is affected.

In other words, there is a two-way relationship between organizational and individual challenges.

This is unlike the relationship between environmental and organizational challenges, in which the

relationship goes only one way (see Figure 1.1); few organizations can have much impact on the

environment. The most important individual challenges today are matching people and organiza-

tions, ethics and social responsibility, productivity, empowerment, brain drain, and job security.

MATCHING PEOPLE AND ORGANIZATIONS Research suggests that HR strategies contribute to firm performance most when the firm uses these strategies to attract and retain the type

of employee who best fits the firm’s culture and overall business objectives. For example,

one study showed that fast-growth firms perform better with managers who have a strong

marketing and sales background, who are willing to take risks, and who have a high tolerance

individual challenges Human resource issues that address the decisions most pertinent to individual employees.

18 PART I • INTRODUCTION

for ambiguity. However, these managerial traits actually reduce the performance of mature

firms that have an established product and are more interested in maintaining (rather than

expanding) their market share.119

Chapter 5 deals specifically with the attempt to achieve the right fit between employees and

the organization to enhance performance.

ETHICS AND SOCIAL RESPONSIBILITY In previous editions of this book, we discussed the well- publicized scandals at Enron, Worldcom, Tyco, and Global Crossings, in which corruption

apparently became a way of life at the top. Since then, we can scarcely read any business periodical

without being bombarded by multiple cases of egregious unethical behaviors across a wide variety

of organizations. These include, for example, American International Group (or AIG, one of the

largest insurance companies, which artificially inflated its reserves by $500 million);120 Time

Warner (accused of fraudulent accounting);121 Bank of America (forced to pay $1 billion in fines

for ethical lapses);122 CitiGroup (several officers are being tried for alleged money laundering);123

Boeing (where top executives were sentenced in an Air Force procurement scandal involving

millions of dollars);124 ChoicePoint (one of the largest credit reporting agencies, which allegedly

kept hidden for a month information about an identity theft ring’s access to personal data on about

145,000 people, providing sufficient time for top executives to dump their ChoicePoint stock);125

Stratton Veterans Affairs Medical Center (at which certain employees posing as doctors conducted

unauthorized clinical research on cancer patients, leading to death in some cases);126 State

University of New York at Albany (whose president, Karen R. Hitchcock, was forced to resign after

accusations that she hired a contractor who promised to fund an endowed university professorship

just for her);127 the famous Getty Museum in Los Angeles (which is beset by charges of stolen

antiquities and profligate executive perks);128 drug makers accused of systematically hiding the

side effects of certain medicines;129 the ex-governor of Illinois, Rod R. Blagojevich, who brazenly

put up for sale his appointment of Barack Obama’s successor to the U.S. Senate;130 and Royal

Dutch Shell, found guilty of paying millions of dollars in bribes to secure contracts.131

We can safely assume that reported cases of unethical behavior represent only the tip of the

iceberg.132

In response to these concerns, people’s fears that their employers will behave unethically are

increasing,133 so much so that many firms and professional organizations have created codes of

ethics outlining principles and standards of personal conduct for their members. Unfortunately,

these codes often do not meet employees’ expectations of ethical employer behavior. In a poll

of Harvard Business Review readers, almost half the respondents indicated their belief that man- agers do not consistently make ethical decisions.134 To the common person on the street, the

economic crisis prompted by dubious financial instruments at the end of the first decade of the

twenty-first century and the large bonuses received by top executives during the subsequent deep

recession seem to have reinforced that image. President Obama called this situation “immoral.”

The widespread perceptions of unethical behavior may also be attributed to the fact that

managerial decisions are rarely clear-cut. Except in a few blatant cases (such as willful misrep-

resentation), what is ethical or unethical is open to debate. Even the most detailed codes of eth-

ics are still general enough to allow much room for managerial discretion. In fact, many of the

executives convicted of illegal activities thought they were just buying time to turn the company

around or that subordinates were too zealous in implementing “revenue enhancing” directives.135

Perhaps even more so than in other business areas, many specific decisions related to the manage-

ment of human resources are subject to judgment calls. Often these judgment calls constitute a

catch-22 because none of the alternatives is desirable.136

Some companies are using the Web to infuse employees and managers with ethical values. For

instance, many of Lockheed Martin’s 160,000 employees are required to take a step-by-step online

training program on ethics.137 CitiGroup started an online ethics training program that is mandatory

for all of its 300,000 employees.138 Other companies are using more traditional training methods to

implement so called “zero-tolerance policies.” For instance, at Goldman Sachs, the chief executive

(Henry M. Paulson, Jr., who later became U.S. Treasury Secretary) moderated seminars on various

business judgments and ethical issues with all the bank’s managing directors.139 One thing seems

certain: Failure to self-regulate leads to constraining legislation. A 2011 federal law, for instance,

provides financial incentives for employees to tell regulators directly about securities fraud and

other wrongdoings, thus bypassing the company’s HR department and management.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 19

A company that exercises social responsibility attempts to balance its commitments—not only to its investors, but also to its employees, its customers, other businesses, and the community

or communities in which it operates. For example, McDonald’s established Ronald McDonald

Houses years ago to provide lodging for families of sick children hospitalized away from home.

Sears and General Electric support artists and performers, and many local merchants support

local children’s sports teams. Philip Morris is trying to turn around its “ugly duckling” image

by entering the business of treating smoke-related illnesses and supporting research projects on

lung-disease prevention.140

An entire chapter of this book is devoted to employee rights and responsibilities (Chapter 13);

each chapter includes (at selected points) pertinent ethical questions for which there are no ab-

solute answers. Most chapters also include a Manager’s Notebook dealing with ethical issues

related to the specific topic of that chapter. See the accompanying box for this chapter.

PRODUCTIVITY Most experts agree that productivity gains from technology have altered the economic playing field since the mid-1990s. Productivity is a measure of how much value

individual employees add to the goods or services that the organization produces. The greater

the output per individual, the higher the organization’s productivity. For instance, U.S. workers

produce a pair of shoes in 24 minutes, whereas Chinese workers take three hours.141 Intangible

human capital comes in many forms, such as designers’ creativity at Intel Corp., the tenacity of

software architects at Sun Microsystems Inc., marketing knowledge at Procter & Gamble Co.,

and a friendly culture as in the case of Southwest Airlines.142 From an HR perspective, employee

productivity is affected by ability, motivation, and quality of work life.

Employee ability, competence in performing a job, can be improved through a hiring and

placement process that selects the best individuals for the job.143 Chapter 5 specifically deals with

this process. It can also be improved through training and career development programs designed

to sharpen employees’ skills and prepare them for additional responsibilities. Chapters 8 and 9

discuss these issues.

Motivation refers to a person’s desire to do the best possible job or to exert the maximum

effort to perform assigned tasks. Motivation energizes, directs, and sustains human behavior.

Several key factors affecting employee motivation are discussed in this book, including work

design (Chapter 2), matching of employee and job requirements (Chapter 5), rewards (Chapters 11

and 13), and due process (Chapter 14).

A growing number of companies recognize that employees are more likely to choose a firm

and stay there if they believe that it offers a high quality of work life. A high quality of work life

is related to job satisfaction, which, in turn, is a strong predictor of absenteeism and turnover.144

A firm’s investments in improving the quality of work life also pay off in the form of better cus-

tomer service.145 We discuss issues related to job design and their effects on employee attitudes

and behavior in Chapter 2.

EMPOWERMENT Many firms have reduced employee dependence on superiors, placing more emphasis on individual control over (and responsibility for) the work that needs to be done. This

process has been labeled empowerment because it transfers direction from an external source

(normally the immediate supervisor) to an internal source (the individual’s own desire to do well).

In essence, the process of empowerment entails providing workers with the skills and authority

to make decisions that would traditionally be made by managers. The goal of empowerment is an

organization consisting of enthusiastic, committed people who perform their work ably because

they believe in it and enjoy doing it (internal control). This situation is in stark contrast to an organization that gets people to work as an act of compliance to avoid punishment (for example,

being fired) or to qualify for a paycheck (external control). Empowerment can encourage employees to be creative and to take risks, which are key

components that can give a firm a competitive edge in a fast-changing environment. Empower-

ing employees is “the hardest thing to do because it means giving up control,” says Lee Fielder,

retired president of Kelly Springfield Tire Co., a unit of Goodyear. “But [according to Fielder],

managers who try to tell employees what and how to do every little thing will end up with only

mediocre people, because the talented ones won’t submit to control.”146 To encourage risk tak-

ing, General Electric past-CEO Jack Welch exhorted his managers and employees to “shake it,

shake it, break it.”147

productivity A measure of how much value individual employees add to the goods or services that the organization produces.

ability Competence in performing a job.

motivation A person’s desire to do the best possible job or to exert the maximum effort to perform assigned tasks.

quality of work life A measure of how safe and satisfied employees feel with their jobs.

empowerment Providing workers with the skills and authority to make decisions that would traditionally be made by managers.

20 PART I • INTRODUCTION

HR issues related to internal and external control of behavior are discussed in Chapter 2

(work flows).

BRAIN DRAIN With organizational success more and more dependent on knowledge held by specific employees, companies are becoming more susceptible to brain drain—the loss of

intellectual property that results when competitors lure away key employees. Important industries

such as semiconductors and electronics also suffer from high employee turnover when key

employees leave to start their own businesses. This brain drain can negatively affect innovation

and cause major delays in the introduction of new products.148

At a national level, brain drain has been a major problem for developing countries because

the best educated tend to leave. Universities and R&D labs in the United States are full of faculty

and graduate students from China, India, and other emerging economies. In some of the poorest

countries, such as Haiti, more than three-fourths of college-educated individuals have emigrated.

Even some developed economies like that of Spain have suffered an enormous brain drain in re-

cent years, with approximately 750,000 Spaniards (many with advanced degrees) emigrating to

other countries during 2011–2015 as the unemployment rate soared and most new jobs created at

the end of the recession were in low-wage, unskilled sectors. According to the National Academy

of Engineering, more than half of engineers with advanced degrees in the United States are for-

eign born, as are over one-third of Nobel-award winners during the past 15 years.149 At Microsoft,

more than 20 percent of employees are from India. This dependence on foreign talent places the

United States in a vulnerable position, particularly if giants such as China and India continue

their fast growth in the future.150 In fact, a new term has been coined for this phenomenon: re- verse brain drain. It refers to foreign-born Americans who decide to return to their homelands, particularly in rapidly growing emergent economies such as China, India, and Brazil.

Brain drain and measures for dealing with it effectively are discussed in several chapters

of this book, particularly in Chapter 3 (equal opportunity and the legal environment), Chapter 4

(managing diversity), Chapter 6 (employee separations and outplacement), and Chapter 11

(rewarding performance).

JOB INSECURITY As noted in the introduction, most workers cannot count on a steady job and regular promotions. Companies argue that regardless of how well the firm is doing, layoffs

have become essential in an age of cutthroat competition. For employees, however, chronic

job insecurity is a major source of stress and can lead to lower performance and productivity.

Reed Moskowitz, founder of a stress disorder center at New York University, notes that workers’

mental health has taken a turn for the worse because “nobody feels secure anymore.”151

The corporate crisis at the end of the last decade has produced huge losses in pension plans,

meaning that many older employees can no longer afford to retire and will therefore compete for

jobs with younger workers.152 An article in BusinessWeek labeled these older adults “the unre- tired”.153 Except in the public sector, the traditional retirement plans with a guaranteed income

for retirees has largely become a thing of the past and a high proportion of older workers in their

70s and beyond are now part of the labor market. Retirementjobs.com, a career site for people older than age 50, is currently handling about 600,000 visitors per month, more than double the

number just a short time ago.154

Paradoxically, voluntary employee turnover is still a problem for many employers (for in-

stance, an annual turnover rate of 50 percent or more in the restaurant and hospitality industry

is not unusual), and this can be very costly in terms of recruitment and training costs as well as

customer dissatisfaction.155 Recent crackdowns on illegal immigrants (who work in many of the

industries with high turnover, such as meat packing, agriculture, fast-food restaurants, and the

like) have made it much more difficult to replace those who quit.156

We discuss the challenges of laying off employees and making the remaining employees feel

secure and valued in Chapter 6. We discuss employee stress (and ways to relieve it) in Chapter 16.

We explore union–management relations in Chapter 15.

Planning and Implementing Strategic HR Policies To be successful, firms must closely align their HR strategies and programs (tactics) with envi-

ronmental opportunities, business strategies, and the organization’s unique characteristics and

distinctive competence.

brain drain The loss of high-talent key personnel to competitors or start-up ventures.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 21

The Benefits of Strategic HR Planning The process of formulating HR strategies and establishing programs or tactics to implement them

is called strategic human resource (HR) planning. When done correctly, strategic HR planning

provides many direct and indirect benefits for the company.

ENCOURAGEMENT OF PROACTIVE RATHER THAN REACTIVE BEHAVIOR Being proactive means looking ahead and developing a vision of where the company wants to be and how it can use

human resources to get there. In contrast, being reactive means responding to problems as they come up. Companies that are reactive may lose sight of the long-term direction of their business;

proactive companies are better prepared for the future. For instance, companies on the brink

of bankruptcy need to hold on to their key talent, perhaps offering special inducements for

star performers to persevere through hard times. Although it might appear counterintuitive to

spend money on employee compensation during economic difficulties, it is crucial to retain key

employees.157

EXPLICIT COMMUNICATION OF COMPANY GOALS Strategic HR planning can help a firm develop a focused set of strategic objectives that capitalizes on its special talents and know-how.

For instance, 3M has had an explicit strategy of competing through innovation, with the goal

of having at least 25 percent of revenues generated from products introduced during the past

five years. To achieve this goal, 3M’s human resource strategy may be summarized as “Hire

top-notch scientists in every field, give each an ample endowment, then stand back and let them

do their thing. The anything-goes approach has yielded thousands of new products over the de-

cades, from sandpaper and magnetic audio tape to Post-it notes and Thinsulate insulation.”158

One hundred years after its foundation, 3M clearly expresses the philosophy that guides its HR

practices: “Every day, 3M people find new ways to make amazing things happen.”

STIMULATION OF CRITICAL THINKING AND ONGOING EXAMINATION OF ASSUMPTIONS Managers often depend on their personal views and experiences to solve problems and make business

decisions. The assumptions on which they make their decisions can lead to success if they are

appropriate to the environment in which the business operates. However, serious problems can

arise when these assumptions no longer hold. For instance, in the 1980s IBM deemphasized sales

of its personal computers because IBM managers were afraid that PC growth would decrease

the profitability of the firm’s highly profitable mainframe products. This decision allowed

competitors to move aggressively into the PC market, eventually devastating IBM.159

Strategic HR planning can stimulate critical thinking and the development of new initiatives

only if it is a continuing and flexible process rather than a rigid procedure with a discrete begin-

ning and a specific deadline for completion. This is why many firms have formed an executive

committee, which includes an HR professional and the CEO, to discuss strategic issues on an

ongoing basis and periodically modify the company’s overall HR strategies and programs.

IDENTIFICATION OF GAPS BETWEEN CURRENT SITUATION AND FUTURE VISION Strategic HR planning can help a firm identify the difference between “where we are today” and “where we

want to be.” Despite a $1 billion budget and a staff of 7,000, 3M’s vaunted research laboratory was

not able in recent years to deliver fast growth, partly because some of the R&D lacked focus and

money wasn’t always wisely spent. To speed up growth, 3M announced a series of performance

objectives for individual business chiefs who had previously enjoyed much free rein. In addition,

3M introduced specially trained “black belts” to root out inefficiencies in departments ranging

from R&D to sales.160

ENCOURAGEMENT OF LINE MANAGERS’ PARTICIPATION For HR strategy to be effective, line managers at all levels must buy into it. If they do not, it is likely to fail. For example, a large

cosmetics manufacturing plant decided to introduce a reward program in which work teams would

receive a large bonus for turning out high-quality products. The bonus was part of a strategic plan

to foster greater cooperation among employees. But the plan, which had been developed by top

executives in consultation with the HR department, backfired when managers and supervisors

began hunting for individual employees responsible for errors. The plan was eventually dropped.

IDENTIFICATION OF HR CONSTRAINTS AND OPPORTUNITIES When overall business strategy planning is done in combination with HR strategic planning, firms can identify the potential

problems and opportunities with respect to the people expected to implement the business strategy.

strategic human resource (HR) planning The process of formulating HR strategies and establishing programs or tactics to implement them.

22 PART I • INTRODUCTION

A cornerstone of Motorola’s business strategy is to identify, encourage, and financially

support new-product ventures. To implement this strategy, Motorola relies on in-house venture

teams, normally composed of five to six employees, one each from research and development

(R&D), marketing, sales, manufacturing, engineering, and finance. Positions are broadly defined

to allow all employees to use their creativity and to serve as champions of new ideas.

CREATION OF COMMON BONDS A substantial amount of research shows that, in the long run, organizations that have a strong sense of “who we are” tend to outperform those that do not.

A strategic HR plan that reinforces, adjusts, or redirects the organization’s present culture can

foster values such as a customer focus, innovation, fast growth, and cooperation.

The Challenges of Strategic HR Planning In developing an effective HR strategy, the organization faces several important challenges.

MAINTAINING A COMPETITIVE ADVANTAGE Any competitive advantage enjoyed by an organization tends to be short-lived because other companies are likely to imitate it. This is as true for HR

advantages as for technological and marketing advantages. For example, many high-tech firms

have “borrowed” reward programs for key scientists and engineers from other successful high-

tech firms.

The challenge from an HR perspective is to develop strategies that offer the firm a sustained

competitive advantage. For instance, a company may develop programs that maximize present

employees’ potential through carefully developed career ladders (see Chapter 9), while at the

same time rewarding them generously with company stock with strings attached (for example, a

provision that they will forfeit the stock if they quit before a certain date). One company that takes

this very seriously is Zappos (whose name is a short form of the Spanish word zapatos) because its main business is to sell shoes online. All Zappos’ employees, regardless of their positions, are

required to undergo a four-week customer loyalty training course that includes at least two weeks

of talking on the phone with customers in the call center at full salary. After a week of training,

the new employees are offered $3,000 to leave the company immediately if they wish, no strings

attached. This is to ensure that people are there for the love of the job and not the money. Over

97 percent of new employees turn down the buyout. Zappos was recently purchased by Amazon

in a deal that was worth $1.2 billion. Zappos’ employees received $40 million in cash and stocks.

REINFORCING OVERALL BUSINESS STRATEGY Developing HR strategies that support the firm’s overall business strategy is a challenge for several reasons. First, top management may not always

be able to enunciate clearly the firm’s overall business strategy. Second, there may be much

Zappos online shopping Web site.

Source: © NetPhotos/Alamy.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 23

uncertainty or disagreement concerning which HR strategies should be used to support the overall

business strategy. In other words, it is seldom obvious how particular HR strategies will contribute

to the achievement of organizational strategies. Third, large corporations may have different

business units, each with its own business strategies. Ideally, each unit should be able to formulate

the HR strategy that fits its own business strategy best. For instance, a division that produces high-

tech equipment may decide to pay its engineering staff well above average to attract and retain the

best people, whereas the consumer products division may decide to pay its engineers an average

wage. Such differentials may cause problems if the engineers from the two divisions have contact

with each other. Thus, diverse HR strategies may spur feelings of inequity and resentment.

AVOIDING EXCESSIVE CONCENTRATION ON DAY-TO-DAY PROBLEMS Some managers are so busy putting out fires that they have no time to focus on the long term. Nonetheless, a successful HR

strategy demands a vision tied to the long-term direction of the business. Thus, a major challenge

of strategic HR planning is prodding people into stepping back and considering the big picture.

In many small companies, staffs are so absorbed in growing the business today that they

seldom pause to look at the big picture for tomorrow. Also, strategic HR planning in small com-

panies is often synonymous with the whims of the company owner or founder, who may not take

the time to formalize his or her plans.

DEVELOPING HR STRATEGIES SUITED TO UNIQUE ORGANIZATIONAL FEATURES No two firms are exactly alike. Firms differ in history, culture, leadership style, technology, and so on. The

chances are high that any ambitious HR strategy or program that is not molded to organizational

characteristics will fail.161 And therein lies one of the central challenges in formulating HR

strategies: creating a vision of the organization of the future that does not provoke a destructive

clash with the organization of the present.

COPING WITH THE ENVIRONMENT Just as no two firms are exactly alike, no two firms operate in an identical environment. Some must deal with rapid change, as in the computer industry;

others operate in a relatively stable market, as in the market for food processors. Some face a

virtually guaranteed demand for their products or services (for example, medical providers);

others must deal with turbulent demand (for example, fashion designers). Even within a very

narrowly defined industry, some firms may be competing in a market where customer service

is the key (IBM’s traditional competitive advantage), whereas others are competing in a market

driven by cost considerations (the competitive advantage offered by the many firms producing

cheap computers). A major challenge in developing HR strategies is crafting strategies that will

work in the firm’s unique environment to give it a sustainable competitive advantage.

SECURING MANAGEMENT COMMITMENT HR strategies that originate in the HR department will have little chance of succeeding unless managers at all levels—including top executives—support

them completely. To ensure managers’ commitment, HR professionals must work closely with

them when formulating policies.

TRANSLATING THE STRATEGIC PLAN INTO ACTION The acid test of any strategic plan is whether it makes a difference in practice. If the plan does not affect practice, employees and managers will

regard it as all talk and no action.

Cynicism is practically guaranteed when a firm experiences frequent turnover at the top,

with each new wave of high-level managers introducing their own freshly minted strategic plan.

Perhaps the greatest challenge in strategic HR planning lies not in the formulation of strategy,

but rather in the development of an appropriate set of programs that will make the strategy work.

COMBINING INTENDED AND EMERGENT STRATEGIES Debate continues over whether strategies are intended or emergent—that is, whether they are proactive, rational, deliberate plans designed to attain predetermined objectives (intended) or general “fuzzy” patterns collectively molded

by the interplay of power, politics, improvisation, negotiation, and personalities within the

organization (emergent).162 Most people agree that organizations have intended and emergent strategies, that both are necessary, and that the challenge is to combine the best aspects of the two.

Intended strategies can provide a sense of purpose and a guide for the allocation of resources.

They are also useful for recognizing environmental opportunities and threats and for mobilizing

top management to respond appropriately. On the downside, intended strategies may lead to a

top-down strategic approach that squashes creativity and widespread involvement.

24 PART I • INTRODUCTION

Emergent strategies also have their advantages and disadvantages. Among their benefits:

(1) They involve everyone in the organization, which fosters grassroots support; (2) they develop

gradually out of the organization’s experiences and, thus, can be less upsetting than intended

strategies; and (3) they are more pragmatic than intended strategies because they evolve to deal

with specific problems or issues facing the firm. On the negative side, emergent strategies may

lack strong leadership and fail to infuse the organization with a creative vision.163

Effectively combining intended and emergent strategies requires that managers blend the

benefits of formal planning (to provide strong guidance and direction in setting priorities) with

the untidy realities of dispersed employees who, through their unplanned activities, formulate

emergent strategies throughout the firm.

ACCOMMODATING CHANGE Strategic HR plans must be flexible enough to accommodate change.164 A firm with an inflexible strategic plan may find itself unable to respond to changes

quickly because it is so committed to a particular course of action. This may lead the organization

to continue devoting resources to an activity of questionable value simply because so much has

been invested in it already.165 The challenge is to create a strategic vision and develop the plans

to achieve it while staying flexible enough to adapt to change.

Strategic HR Choices A firm’s strategic HR choices are the options it has available in designing its human resources

system. Figure 1.2 shows a sampling of strategic HR choices. Keep three things in mind here:

First, the list is not exhaustive. Second, many different HR programs or practices may be used

separately or together to implement each of these choices. For example, if a firm chooses to

base pay on performance, it can use many different programs to implement this decision, in-

cluding cash awards, lump-sum annual bonuses, raises based on supervisory appraisals, and an

employee-of-the-month award. Third, the strategic HR choices listed in Figure 1.2 represent two

opposite poles on a continuum. Very few organizations fall at these extremes. Some organizations

will be closer to the right, some closer to the left, and others closer to the middle.

A brief description of the strategic HR choices shown in Figure 1.2 follows. We will exam-

ine these choices and provide examples of companies’ strategic decisions in these areas in later

chapters.

WORK FLOWS Work flows are the ways tasks are organized to meet production or service goals. Organizations face several choices in what they emphasize as they structure work flows

(Chapter 2). They can emphasize:

j Efficiency (getting work done at minimum cost) or innovation (encouraging creativity,

exploration, and new ways of doing things, even though this may increase production costs) j Control (establishing predetermined procedures) or flexibility (allowing room for

exceptions and personal judgment) j Explicit job descriptions (in which each job’s duties and requirements are carefully spelled

out) or broad job classes (in which employees perform multiple tasks and are expected to

fill different jobs as needed) j Detailed work planning (in which processes, objectives, and schedules are laid out well in

advance) or loose work planning (in which activities and schedules may be modified on

relatively short notice, depending on changing needs)

STAFFING Staffing encompasses the HR activities designed to secure the right employees at the right place at the right time (Chapter 5). Organizations face several strategic HR choices in

recruiting, selecting, and socializing employees—all part of the staffing process. These include:

j Promoting from within (internal recruitment) versus hiring from the outside (external recruitment)

j Empowering immediate supervisors to make hiring decisions versus centralizing these

decisions in the HR department j Emphasizing a good fit between the applicant and the firm versus hiring the most

knowledgeable individual regardless of interpersonal considerations j Hiring new workers informally or choosing a more formal and systematic approach to

hiring

strategic HR choices The options available to a firm in designing its human resources system.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 25

FIGURE 1.2 Strategic HR Choices

Innovation Flexibility Broad job classes Loose work planning

Efficiency Control Explicit job descriptions Detailed work planning

External recruitment HR department makes hiring decision Emphasis on applicants' technical qualifications and skills Formal hiring of new employees

Internal recruitment Supervisor makes hiring decision Emphasis on “fit” of applicant with firm culture Informal hiring of new employees

Work Flows (Chapter 2)

Staffing (Chapter 5)

Layoffs Recruit as needed Letting laid-off workers fend for themselves No preferential treatment

Voluntary inducements to retire Hiring freeze Continuing support for terminated employees Preferential rehiring policy

Employee Separations (Chapter 6)

Uniform appraisal procedures Control-oriented appraisals Narrow-focus appraisals Supervisory input only

Customized appraisals Developmental appraisals Multipurpose appraisals Multiple inputs for appraisals (supervisor, peers, subordinates)

Performance Appraisal (Chapter 7)

Bottom-up communication and feedback Union acceptance Enlightened management

Top-down communication Union suppression Adversarial approach

Emphasis on preventive action to reduce mistakes Emphasis on employee protection Explicit ethical codes and enforcement procedures

Emphasis on discipline to reduce mistakes Emphasis on employer protection Informal ethical standards

Adapt to local culture Rely on country nationals No formal repatriation agreement Country-specific company policies

Create global company culture Rely on expatriates Repatriation agreement Universal company policies

Employee Relations (Chapter 13) and Labor Relations (Chapter 15)

Employee Rights (Chapter 14)

International Management (Chapter 17)

Team-based training External training Generic training emphasizing flexibility “Make” skills by providing training to less experienced workers hired at a lower wage

Individual training On-the-job training Job-specific training “Buy” skills by hiring experienced workers at a higher wage

Training and Development (Chapters 8 and 9)

Variable pay Individual-based pay Performance-based pay Decentralized pay decisions

Fixed pay Job-based pay Seniority-based pay Centralized pay decisions

Compensation (Chapters 10, 11, and 12)

26 PART I • INTRODUCTION

A QUESTION OF ETHICS Experts in career development note that in today’s increasingly chaotic business and economic environ- ment, individual employees need to prepare themselves for job and career changes. Does an employer have an ethical duty to help employees prepare for the change that is almost certain to come?

EMPLOYEE SEPARATIONS Employee separations occur when employees leave the firm, either voluntarily or involuntarily (Chapter 6). Some strategic HR choices available to the firm for

handling employee separations are:

j Use of voluntary inducements (such as early retirement packages) to downsize a workforce

versus use of layoffs j Imposing a hiring freeze to avoid laying off current employees versus recruiting employees

as needed, even if doing so means laying off current employees j Providing continuing support to terminated employees (perhaps by offering them assis-

tance in securing another job) versus leaving laid-off employees to fend for themselves j Making a commitment to rehire terminated employees if conditions improve versus avoid-

ing any type of preferential hiring treatment for ex-employees

PERFORMANCE APPRAISAL Managers assess how well employees are carrying out their assigned duties by conducting performance appraisals (Chapter 7). Some strategic HR choices concerning

employee appraisals are:

j Developing an appraisal system that is customized to the needs of various employee groups

(for example, by designing a different appraisal form for each job family) versus using a

standardized appraisal system throughout the organization j Using the appraisal data as a developmental tool to help employees improve their perfor-

mance versus using appraisals as a control mechanism to weed out low producers j Designing the appraisal system with multiple objectives in mind (such as training, promo-

tion, and selection decisions) versus designing it for a narrow purpose (such as pay deci-

sions only) j Developing an appraisal system that encourages the active participation of multiple

employee groups (for example, supervisor, peers, and subordinates) versus developing

one that asks solely for the input of each employee’s supervisor

TRAINING AND CAREER DEVELOPMENT Training and career development activities are designed to help an organization meet its skill requirements and to help its employees realize their maximum

potential (Chapters 8 and 9). Some of the strategic HR choices pertaining to these activities are:

j Choosing whether to provide training to individuals or to teams of employees who may

come from diverse areas of the firm j Deciding whether to teach required skills on the job or rely on external sources for training j Choosing whether to emphasize job-specific training or generic training j Deciding whether to hire at a high wage people from outside the firm who already have the

required talents (“buy skills”) or to invest resources in training the firm’s own lower-wage

employees in the necessary skills (“make skills”)

COMPENSATION Compensation is the payment that employees receive in exchange for their labor. U.S. organizations vary widely in how they choose to compensate their employees (Chapters 10,

11, and 12). Some of the strategic HR choices related to pay are:

j Providing employees with a fixed salary and benefits package that changes little from year

to year (and, therefore, involves minimal risk) versus paying employees a variable amount

subject to change j Paying employees on the basis of the job they hold versus paying them for their individual

contributions to the firm j Rewarding employees for the time they have spent with the firm versus rewarding them for

performance j Centralizing pay decisions in a single location (such as the HR department) versus empow-

ering the supervisor or work team to make pay decisions

EMPLOYEE AND LABOR RELATIONS Employee and labor relations (Chapters 13 and 15) refer to the interaction between workers (either as individuals or as represented by a union) and

management. Some of the strategic HR choices facing the firm in these areas are:

j Relying on “top-down” communication channels from managers to subordinates versus

encouraging “bottom-up” feedback from employees to managers

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 27

j Actively trying to avoid or suppress union-organizing activity versus accepting unions as

representatives of employees’ interests j Adopting an adversarial approach to dealing with employees versus responding to employ-

ees’ needs so that the incentive for unionization is removed (enlightened management)

EMPLOYEE RIGHTS Employee rights concern the relationship between the organization and individual employees (Chapter 14). Some of the strategic choices that the firm needs to make in

this area are:

j Emphasizing discipline as the mechanism for controlling employee behavior versus proac-

tively encouraging appropriate behavior in the first place j Developing policies that emphasize protecting the employer’s interests versus policies that

emphasize protecting the employees’ interests j Relying on informal ethical standards versus developing explicit standards and procedures

to enforce those standards

INTERNATIONAL MANAGEMENT Firms that operate outside domestic boundaries face a set of strategic HR options regarding how to manage human resources on a global basis (Chapter 17).

Some of the key strategic HR choices involved in international management are:

j Creating a common company culture to reduce intercountry cultural differences versus

allowing foreign subsidiaries to adapt to the local culture j Sending expatriates (domestic employees) abroad to manage foreign subsidiaries versus

hiring local people to manage them j Establishing a repatriation agreement with each employee going abroad (carefully stipulat-

ing what the expatriate can expect upon return in terms of career advancement, compensa-

tion, and the like) versus avoiding any type of commitment to expatriates j Establishing company policies that must be followed in all subsidiaries versus decentral-

izing policy formulation so that each local office can develop its own policies

Selecting HR Strategies to Increase Firm Performance No HR strategy is “good” or “bad” in and of itself. Rather, an HR strategy’s effect on firm per-

formance depends on how well it fits with other factors. Most of the practitioner and scholarly

literature in HR suggests that fit leads to better performance, and lack of fit creates inconsisten-

cies that reduce performance.166 Fit refers to the compatibility between HR strategies and other important aspects of the organization.

Figure 1.3 depicts the key factors that firms should consider in determining which HR strat-

egies will have a positive impact on firm performance: organizational strategies, environment,

organizational characteristics, and organizational capabilities. As the figure shows, the relative

contribution of an HR strategy to firm performance increases:

j The better the match between the HR strategy and the firm’s overall organizational

strategies j The more the HR strategy is attuned to the environment in which the firm is operating

FIGURE 1.3 Effective HR Strategy Formulation and Implementation

Organizational Strategies

Consistency

HR Strategies

Co ns

is te

nc y

Consistency

Consistency

Environment

Organizational Characteristics

Organizational Capabilities

Improved Firm Performance

Fit Fit

Fit Fit

28 PART I • INTRODUCTION

j The more closely the HR strategy is molded to unique organizational features j The better the HR strategy enables the firm to capitalize on its distinctive competencies j The more the HR strategies are mutually consistent or reinforce one another

Fit with Organizational Strategies A corporation may have multiple businesses that are very similar to or completely different from

one another. Corporate strategy refers to the mix of businesses a corporation decides to hold and

the flow of resources among those businesses. The main strategic business decisions at the corpo-

rate level concern acquisition, divestment, diversification, and growth. Business unit strategies

refer to the formulation and implementation of strategies by firms that are relatively autonomous,

even if they are part of a larger corporation. For instance, AT&T as a corporate entity once owned

hundreds of largely independent firms, including perfume makers and Hostess Twinkies, each

with its own business strategy.167 Similarly, diversified giant DuPont combines businesses such

as drugs, agriculture, and chemicals under one roof.168 In firms that produce a single product or

highly related products or services, the business and corporate strategies are identical. For com-

panies that have distinct corporate and business unit strategies, it is important to examine each in

terms of its fit with HR strategies.

CORPORATE STRATEGIES There are two major types of corporate strategies and matching HR strategies. Corporations adopting an evolutionary business strategy engage in aggressive acquisitions of new businesses, even if these are totally unrelated to one another.169

In evolutionary firms, the management of change is crucial to survival. Entrepreneurship is

encouraged and control is deemphasized because each unit is relatively autonomous. HR strate-

gies that foster flexibility, quick response, entrepreneurship, risk sharing, and decentralization are

particularly appropriate. Because the evolutionary corporation is not committed to a particular

business or industry, it may hire workers from the external market as needed and lay them off to

reduce costs if necessary, with no promise of rehiring them. These HR strategies are appropriate

because they “fit” with the organizational reality that change is the only constant.

At the other end of the spectrum, corporations adopting a steady-state strategy are very choosy about how they grow. They avoid acquiring firms outside their industry or even compa-

nies within the industry that are very different from them. Top managers exercise a great deal of

direct control over the company, and internal development of new products and technologies and

interunit coordination are very important.170 This is the case at Rubbermaid, a company known

for producing such mundane products as trash cans and dustpans. Yet Rubbermaid’s record for

innovation is anything but mundane. The company brings out new products at the rate of one a

day.171 The HR strategies most appropriate to steady-state firms emphasize efficiency, detailed

work planning, internal grooming of employees for promotion and long-term career develop-

ment, centralization, and a paternalistic attitude.

PORTER’S BUSINESS UNIT STRATEGIES Two well-known business unit strategies were formulated by Porter172 and Miles and Snow173 to analyze which HR strategies represent the best fit with a

firm’s business strategy.

Porter has identified three types of business unit strategies that help a firm cope with com-

petitive forces and outperform other firms in the industry. For each of these strategies, a certain

set of HR strategies would fit best.174

The overall cost leadership strategy is aimed at gaining a competitive advantage through lower costs. Cost leadership requires aggressive construction of efficient plant facilities (which

requires sustained capital investment), intense supervision of labor, vigorous pursuit of cost

reductions, and tight control of distribution costs and overhead. Firms that have successfully

pursued a low-cost leadership strategy include Briggs & Stratton, Emerson Electric, Texas Instru-

ments, Black & Decker, and DuPont.175

Low-cost firms tend to emphasize structured tasks and responsibilities, products designed

for easy manufacture, and the need to predict costs with minimal margin of error. The HR strate-

gies that fit a low-cost orientation emphasize efficient, low-cost production; reinforce adherence

to rational, highly structured procedures to minimize uncertainty; and discourage creativity and

innovation (which may lead to costly experimentation and mistakes).

A firm with a differentiation business strategy attempts to achieve a competitive advantage by creating a product or service that is perceived as being unique. Some common characteristics of

A QUESTION OF ETHICS The dark side of strategic planning is that workers are sometimes thought of as numbers on a page or dollars in a budget rather than as flesh-and-blood human beings. When divisions are spun off or merged, individual employees are dramatically affected. What responsibility does the employer have toward its employees in situations like these?

corporate strategy The mix of businesses a corporation decides to hold and the flow of resources among those businesses.

business unit strategy The formulation and implementation of strategies by a firm that is relatively autonomous, even if it is part of a larger corporation.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 29

such firms are strong marketing abilities, an emphasis on product engineering and basic research,

a corporate reputation for quality products, and amenities that are attractive to highly skilled labor.

Approaches to differentiating can take many forms, including design or brand image (Fieldcrest

in top-of-the-line towels and linens, Mercedes-Benz in automobiles), technology (Hyster in lift

trucks, Coleman in camping equipment), features (Jenn-Air in electric ranges), customer service

(IBM in computers), and dealer networks (Caterpillar Tractor in construction equipment).

Differentiation provides a competitive advantage because of the brand loyalty it fosters. This

enables the differentiator to enjoy higher profit margins, which, in turn, allow it to invest in ex-

tensive research, experiment with new ideas and product designs, cater to the needs of different

customers, and support creative initiatives by managers and employees.

HR strategies that fit a differentiation strategy emphasize innovation, flexibility, renewal of

the workforce by attracting new talent from other firms, opportunities for mavericks, and rein-

forcement (rather than discouragement) of creative flair.

The focus strategy relies on both a low-cost position and differentiation, with the objective of serving a narrow target market better than other firms. The firm seeks to achieve differentiation

either from better meeting the needs of the particular target, or from lowering costs in serving this

target, or both.176 Firms that have used this strategy successfully include Illinois Tool Works (in

the specialty market for fasteners), Gymboree (a national franchise providing creative activities

and accessories for children under the age of 5), Fort Howard Paper (manufacturer of specialized

industrial grade papers), and Porter Paint (producer of paints for professional housepainters).

The HR strategies likely to fit the focus strategy best would be somewhere in the middle

of those described for low-cost producers and differentiators. At Illinois Tool Works (ITW),

for instance, the chairman stresses working hand-in-hand with customers both to find out what

they want and to learn how ITW can help them lower their operating costs. HR strategies re-

flect this focus by boosting efficiency to hold costs down. ITW’s business is decentralized into

200 fairly small operating units, headed by managers whose pay is largely tied to sales and

profits at their individual operations. The company’s workers are nonunion, which helps to

hold costs down. To keep ITW’s products geared to customer needs, management puts heavy

emphasis on R&D. ITW’s R&D spending of almost $40 million a year keeps creativity high;

ITW holds over 4,000 active patents.177

MILES AND SNOW’S BUSINESS STRATEGIES Miles and Snow created another well-known classification of business unit strategies.178 They characterize successful businesses as adopting

either a defender or a prospector strategy.

Defenders are conservative business units that prefer to maintain a secure position in rela- tively stable product or service areas instead of looking to expand into uncharted territory. De-

fenders tend to be highly formalized, emphasize cost control, and operate in a stable environment.

Many defenders develop an elaborate internal system for promoting, transferring, and rewarding

workers that is relatively isolated from the uncertainties of the external labor market. In exchange

for a long-term commitment to the firm, employees are rewarded with job security and the expec-

tation of upward mobility through the ranks.

A proposed set of HR strategies that best fit defenders’ needs, categorized according to

the six major strategic HR choices we saw in Figure 1.2 earlier, are summarized in Figure 1.4.

These strategies include work flows emphasizing managerial control and reliability, staffing and

employee separation policies designed to foster long-term employee attachment to the firm, per-

formance appraisals focused on managerial control and hierarchy, structured training programs,

and compensation policies that emphasize job security.

Unlike defenders, whose success comes primarily from efficiently serving a stable market,

prospectors emphasize growth and innovation, development of new products, and an eagerness to be the first in new-product or market areas, even if some of these efforts fail.179 The prospector’s

strategy is associated with flexible and decentralized organizational structures, complex products

(such as computers and pharmaceuticals), and unstable environments that change rapidly.

The HR strategies that match the strategic orientation of prospectors, also summarized in

Figure 1.4, include work flows that foster creativity and adaptability; staffing and employee

separation policies that focus on the external labor market; customized, participative employee

appraisals used for multiple purposes (including employee development); training strategies

targeting broad skills; and a decentralized compensation system that rewards risk taking and

performance.

30 PART I • INTRODUCTION

FIGURE 1.4 Selected HR Strategies That Fit Miles and Snow’s Two Major Types of Business Strategies Source: Gómez-Mejía, L. R. (2009). Compensation strategies and Miles and Snow’s business strategy taxonomy. Unpublished report. Management Department, Arizona State University. Reprinted with permission.

Strategic HR Area Defender Strategy Prospector Strategy

Work Flows • Efficient production • Control emphasis • Explicit job descriptions • Detailed work planning

• Innovation • Flexibility • Broad job classes • Loose work planning

Staffing • Internal recruitment • HR department makes selection decision • Emphasis on technical qualifications

and skills • Formal hiring and socialization process

• External recruitment • Coworkers help make selection decision • Emphasis on fit of applicant with culture • Informal hiring and socialization process of

new employees

Employee Separations

• Voluntary inducements to leave • Hiring freeze • Continuing concern for terminated

employee • Preferential rehiring policy

• Layoffs • Recruit as needed • Individual on his or her own • No preferential treatment for laid-off

workers

Performance Appraisal

• Uniform appraisal procedures • Used as control device • Narrow focus • High dependence on superior

• Customized appraisals • Used as developmental tool • Multipurpose appraisals • Multiple inputs for appraisals

Training • Individual training • On-the-job training • Job-specific training • “Make” skills

• Team-based or cross-functional training • External training • Generic training emphasizing flexibility • “Buy” skills

Compensation • Fixed pay • Job-based pay • Seniority-based pay • Centralized pay decisions

• Variable pay • Individual-based pay • Performance-based pay • Decentralized pay decisions

Fit with the Environment In addition to reinforcing overall organizational strategies, HR strategies should help the organi-

zation better exploit environmental opportunities or cope with the unique environmental forces

that affect it. We can examine the environment in terms of four major dimensions: (1) degree of uncertainty (how much accurate information is available to make appropriate business deci- sions), (2) volatility (how often the environment changes), (3) magnitude of change (how drastic the changes are), and (4) complexity (how many different elements in the environment affect the firm, either individually or together). For example, much of the computer and high-tech industry

is very high on all four of these dimensions:

j Degree of uncertainty Compaq thought consumers would continue to pay a premium price

for its high-performance computers. The company was proved wrong in the 1990s as low-

cost competitors such as Dell, Packard Bell, and AST quickly cut into Compaq’s market.

More recently thin Macs have taken over much of the PC market, BlackBerries have been

largely replaced by iPhones, and Nokia has seen much of its market taken over by Apple. j Volatility IBM paid dearly when demand for its mainframe computers declined drastically

in the late 1980s and it was caught unprepared. j Magnitude of change The advent of each successive new generation of computer micropro-

cessor chips (for example, Intel’s 386, 486, Pentium) has almost immediately rendered all pre-

viously sold machines obsolete. Polaroid was forced to declare bankruptcy as quick adoption

of digital cameras turned its main product (instant photography) obsolete almost overnight.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 31

j Complexity The number and variety of competitors in the computer industry, both domes-

tically and overseas, have grown dramatically in recent years. The life of a product seldom

extends more than three years now, as new innovations drive previous equipment and soft-

ware out of the market.

As Figure 1.5 shows, firms that are high on these four dimensions are more likely to benefit

from HR strategies that promote flexibility, adaptivity, quick response, transferability of skills, the

ability to secure external talent as needed, and risk sharing with employees through variable pay.

Conversely, firms facing environments that are low on uncertainty, volatility, magnitude of

change, and complexity benefit from HR strategies that allow for an orderly, rational, and rou-

tine approach to dealing with a relatively predictable and stable environment. The “old” AT&T

(before divestment), much of the airline and trucking industry before deregulation, utilities, and

government bureaucracies fall at the low end of the scale on these four dimensions. Figure 1.5

shows that the HR strategies that fit firms operating under these conditions tend to be rather

mechanistic: detailed work planning, job-specific training, fixed pay, explicit job descriptions,

centralized pay decisions, and the like.

Fit with Organizational Characteristics To be effective, HR strategies must be tailored to the organization’s personality. The features of

an organization’s personality can be broken down into five major categories.

THE PRODUCTION PROCESS FOR CONVERTING INPUTS INTO OUTPUT Firms with a relatively routine production process (such as large-volume steel mills, lumber mills, and automobile plants) tend to

benefit from HR strategies that emphasize control, such as explicit job descriptions and job-specific

training. The opposite is true for firms with nonroutine production processes (such as advertising firms,

custom printers, and biotechnology companies). These firms benefit from flexible HR strategies that

support organizational adaptability, quick response to change, and creative decision making. These

flexible strategies may include broad job classes, loose work planning, and generic training.

THE FIRM’S MARKET POSTURE Firms that experience a high rate of sales growth and engage in product innovation destined for a wide market segment tend to benefit from HR strategies that

support growth and entrepreneurial activities. These HR strategies include external recruitment

(“buying” skills), decentralized pay decisions, and customized appraisals. The opposite is true

FIGURE 1.5 Selected HR Strategies for Firms Low and High on Different Environmental Characteristics Source: Based on Gomez-Mejia, L. R., and Balkin, D. B. (2012). Management. Englewood Cliffs, NJ: Prentice-Hall; Gomez-Mejia, L. R., Berrone, P., and Franco-Santos, M. (2010). Compensation and organizational Performance. New York, NY: M.E. Sharpe.

Environmental Dimension Low High

Degree of Uncertainty • Detailed work planning • Job-specific training • Fixed pay • High dependence on superior

• Loose work planning • Generic training • Variable pay • Multiple inputs for appraisals

Volatility • Control emphasis • Efficient production • Job-specific training • Fixed pay

• Flexibility • Innovation • Generic training • Variable pay

Magnitude of Change • Explicit job descriptions • Formal hiring and socialization of

new employees • “Make” skills • Uniform appraisal procedures

• Broad job classes • Informal hiring and socialization of

new employees • “Buy” skills • Customized appraisals

Complexity • Control emphasis • Internal recruitment • Centralized pay decisions • High dependence on superior

• Flexibility • External recruitment • Decentralized pay decisions • Multiple inputs for appraisals

32 PART I • INTRODUCTION

for firms with low rates of growth and limited product innovation destined for a narrow market

segment. These firms tend to benefit more from HR strategies that emphasize efficiency, control,

and firm-specific knowledge. Such strategies include internal recruitment (“making” skills), on-

the-job training, and high dependence on superiors.

THE FIRM’S OVERALL MANAGERIAL PHILOSOPHY Companies whose top executives are averse to risk, operate with an autocratic leadership style, establish a strong internal pecking order, and are

inwardly rather than outwardly focused may find that certain HR practices match this outlook

best. The HR strategies most often used in these kinds of firms include seniority-based pay,

formal hiring and socializing of new employees, selection decisions made by the HR department,

and use of top-down communication channels. The HR strategies that fit a managerial philosophy

high on risk taking, participation, egalitarianism, and an external, proactive environmental

orientation include variable pay, giving supervisors a major role in hiring decisions, up-and-down

communication channels, and multiple inputs for performance appraisals.

THE FIRM’S ORGANIZATIONAL STRUCTURE Some HR strategies fit very well with highly formal- ized organizations that are divided into functional areas (for example, marketing, finance,

production, and so on) and that concentrate decision making at the top. The HR strategies

appropriate for this type of firm include a control emphasis, centralized pay decisions, explicit

job descriptions, and job-based pay. Firms whose organizational structures are less regimented

will benefit from a different set of HR strategies, including informal hiring and socializing of new

employees, decentralized pay decisions, broad job classes, and individual-based pay.

THE FIRM’S ORGANIZATIONAL CULTURE Companies that foster an entrepreneurial climate benefit from supporting HR strategies such as loose work planning, informal hiring and socializing of new

employees, and variable pay. Firms that discourage entrepreneurship generally prefer a control

emphasis, detailed work planning, formal hiring and socializing of new employees, and fixed pay.

A strong emphasis on moral commitment—the extent to which a firm tries to foster a long- term emotional attachment between the firm and its employees—is also associated with certain

supporting HR strategies. These include an emphasis on preventive versus remedial disciplinary

action to handle employee mistakes, employee protection, and explicit ethical codes to monitor

and guide behavior. Firms that are low on moral commitment usually rely on an authoritarian

relationship between employee and company. HR strategies consistent with this orientation in-

clude an emphasis on discipline or punishment to reduce employee mistakes, employment at will

(discussed in Chapters 3 and 14), and informal ethical standards.

Fit with Organizational Capabilities A firm’s organizational capabilities include its distinctive competencies, those characteristics

(such as technical ability, management systems, and reputation) that give the firm a competitive

edge. For instance, Mercedes-Benz automobiles are widely regarded as superior because of the

quality of their design and engineering. Walmart’s phenomenal success has been due, at least

in part, to its ability to track products from supplier to customer better than its competitors can.

HR strategies make a greater contribution to firm performance the greater the extent to which

(1) they help the company exploit its specific advantages or strengths while avoiding weaknesses and

(2) they assist the firm in better utilizing its own unique blend of human resource skills and assets.

The following examples illustrate how one type of HR strategy—compensation strategy—

may be aligned with organizational capabilities.180

j Firms known for excellence in customer service tend to pay their sales force only partially

on commission, thereby reducing their sales employees’ potential for abrasive behaviors

and overselling. j Smaller firms can use compensation to their advantage by paying low wages but being gen-

erous in offering stock to employees. This strategy allows them to use more of their scarce

cash to fuel future growth. j Organizations may take advantage of their unused capacity in their compensation strate-

gies. For example, most private universities offer free tuition to faculty and their immediate

family. With average tuition at private colleges exceeding $30,000 a year in 2014, this ben-

efit represents a huge cash savings to faculty members, thereby allowing private universi-

ties to attract and retain good faculty with minimal adverse impact on their cost structure.

distinctive competencies The characteristics that give a firm a competitive edge.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 33

Choosing Consistent and Appropriate HR Tactics to Implement HR Strategies Even the best-laid strategic HR plans may fail when specific HR programs are poorly chosen or

implemented.181 In addition to fitting with each of the four factors just described (organizational

strategy, environment, organizational characteristics, and organizational capabilities), a firm’s

HR strategies are more likely to be effective if they reinforce one another rather than work at

cross-purposes. For instance, many organizations are currently trying to improve their perfor-

mance by structuring work in teams. However, these same organizations often continue to use

a traditional performance appraisal system in which each employee is evaluated individually.

The appraisal system needs to be overhauled to make it consistent with the emphasis on team

performance.

Because it is not always possible to know beforehand whether an HR program will meet

its objectives, a periodic evaluation of HR programs is necessary. Figure 1.6 lists a series of im-

portant questions that should be raised to examine the appropriateness of HR programs. These

questions should be answered as new programs are being chosen and while they are in effect.

HR Best Practices Several authors have argued that certain HR practices are associated with sustained high firm

performance.182 Figure 1.7 shows the most common HR best practices. Debate continues among

academics about whether high firm performance leads to given HR practices, or vice versa (that

is, whether introducing particular HR practices causes better firm performance).183 For instance,

can firms that are doing well afford to provide higher wages and more job security, or do firms

that pay more and have a more stable workforce derive a performance premium by following

these practices? It is extraordinarily difficult to prove the casual relationship one way or the other,

yet it seems reasonable that organizations should consider implementation of those practices as-

sociated with the highest-performing firms.

FIGURE 1.6 But Will It Work? Questions for Testing the Appropriateness of HR Programs Before Implementation

HR programs that look good on paper may turn out to be disasters when implemented because they conflict too much with company realities. To avoid this kind of unpleasant surprise, it is important to ask the following questions before implementing a new HR program.

1. Are the HR Programs Effective Tools for Implementing HR Strategies? • Are the proposed HR programs the most appropriate ones for implementing the firm’s HR strategies? • Has an analysis been done of how each of the past, current, or planned HR programs contributes to or

hinders the successful implementation of the firm’s HR strategies? • Can the proposed HR programs be easily changed or modified to meet new strategic considerations without

violating either a “psychological” or a legal contract with employees? 2. Do the HR Programs Meet Resource Constraints?

• Does the organization have the capacity to implement the proposed HR programs? In other words, are the HR programs realistic?

• Are the proposed programs going to be introduced at a rate that can be easily absorbed, or will the timing and extent of changes lead to widespread confusion and strong employee resistance?

3. How Will the HR Programs Be Communicated? • Are the proposed HR programs well understood by those who will implement them (for example, line

supervisors and employees)? • Does top management understand how the proposed programs are intended to affect the firm’s strategic

objectives? 4. Who Will Put the HR Programs in Motion?

• Is the HR department playing the role of an internal consultant to assist employees and managers responsible for carrying out the proposed HR programs?

• Is top management visibly and emphatically committed to the proposed programs?

34 PART I • INTRODUCTION

The HR Department and Managers: An Important Partnership This book takes a managerial approach to human resources and HR strategy. All managers—

regardless of their functional area, their position in the hierarchy, and the size of the firm for

which they work—must deal effectively with HR issues because these issues are at the heart of

being a good manager. Furthermore, there has been a clear trend in the last decade or so of reduc-

ing the size of the Human Resource Department and instead delegating many of the traditional

HR duties (such as talent search, selection, and training) to line managers. Part of this trend may

be explained by an attempt to reduce “overhead” but perhaps more importantly by a belief that

line managers should be empowered and take ownership over major HR decisions in their units.

The role of a company’s human resources department is to support, not to supplant, managers’

HR responsibilities. For instance, the HR department may develop a form to help managers measure

the performance of subordinates, but it is the managers who conduct the actual evaluation. Stated

another way, the HR department is primarily responsible for helping the firm meet its business

objectives by designing HR programs, but managers must carry out these programs. This means that

every manager is a human resource manager.

Companies can take certain steps to foster an effective partnership between managers and

the HR department.184 Specifically, companies should:

j Analyze the people side of productivity rather than depend solely on technical solutions to

problems. This requires that managers be trained in certain HR skills and that they value

human resources as a key element in organizational performance. j View HR professionals as internal consultants who can provide valuable advice and

support that improve the management of operations. j Instill a shared sense of common fate in the firm rather than a win/lose perspective among

individual departments and units. j Require some managerial experience as part of the training of HR professionals. This require-

ment should make HR staff more sensitive to and cognizant of the problems managers face. j Actively involve top corporate and divisional managers in formulating, implementing, and

reviewing all HR plans and strategies in close collaboration with the HR department.

FIGURE 1.7 Select HR Best Practices

Sources: Based on www.best-in-classroom.com. (2014). Human resources best practices; www.hrdailyadvisor.blr.com. (2014). Top 10 best practices in HR management; Pfeffer, J. (1995). Producing sustainable competitive advantage through the effective management of people. Academy of Management Executive, 10, 55–72; Wright, P. M., Gardner, T. M., Moynihan, L. M., and Allen, M. R. (2005). The relationship between HR practices and firm performance: Examin-

ing causal order. Personnel Psychology, 68, 409–446; Chuang, C. H., and Liao, H. (2010). Strategic human resource management in service context. Personnel Psychology, 63(1), 153–196; Gomez-Mejia, L. R., and Balkin, D. B. (2011). Management: People, performance and change, Prentice-Hall.

• Offer high employment security because this indicates that the firm is committed to the employee’s welfare • Develop a good selection program that can screen the best applicants • Offer wages that are highly competitive as this helps reduce employee turnover and helps in the attraction

of high-quality employees • Recognize employees by providing monetary and non-monetary rewards • Make employees part-owners of the firm by providing them with stock in the firm • Communicate effectively with employees so that they are kept informed of major issues confronting the

organization and any major initiatives • Encourage employee involvement so that there is strong “buy-in” of human resource practices and important

managerial initiatives • Encourage teamwork so that employees are more willing to collaborate with each other • Invest in training programs to improve employee skills • Provide opportunities for learning at work so that employees are “stretched” in the use of their skills • Give a higher priority to internal candidates for promotion because this enhances employee motivation by

providing future career opportunities

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 35

j Require senior HR executives to participate on an equal basis with other key managers from

the various functional areas (marketing, finance) in charting the enterprise’s strategic direction.

Companies should also periodically conduct an HR audit to evaluate how effectively they

are using their human resources. The audit, which is typically conducted by the HR department,

deals with a broad set of questions, including:

j Is the turnover rate exceptionally low or high? j Are the people who quit good employees who are frustrated in their present job, or are they

marginal performers? j Is the firm receiving a high return on the money it spends on recruitment, training, and

pay-for-performance plans? j Is the firm complying with government regulations? j How well is the company managing employee diversity? j Is the HR department providing the services that line managers need? j Are HRM policies and procedures helping the firm accomplish its long-term goals?

The HR audit addresses these and other important issues systematically so that effective programs

can be maintained and ineffective programs corrected or eliminated.

Specialization in Human Resource Management While the size of the typical HR department has been shrinking in recent years, the use of exter-

nal HR consultants has increased considerably. This probably reflects both the growth and com-

plexity of government regulations and a greater awareness that HR issues are important to the

achievement of business objectives. It probably reflects as well the need, as noted earlier, to have

line managers take ownership of major HR decisions with the assistance of HR advisers (who

are often external consultants that might be engaged in program design for personnel selection,

incentive systems, training, and the like).

Many colleges and universities now offer specialized degrees in human resources at the as-

sociate’s, bachelor’s, master’s, and doctoral levels. The Society for Human Resource Manage-

ment (SHRM), which at the time of this writing represents 260,000 individual members in over

125 countries, has set up a certification institute to offer HR professionals the opportunity to be

certified officially at the PHR (Professional Human Resources) or SPHR (Senior Professional Hu-

man Resources) level. SHRM certification requires a certain amount of experience and mastery of

a body of knowledge as indicated by successful completion of a comprehensive examination. (For

additional information and application materials, write to the Society at 1800 Duke Street, Alexan-

dria, VA 22314 or visit the Web site at shrm.org.) Other organizations whose members specialize in a particular area of HRM are WorldatWork (previously the American Compensation Association),

the Human Resource Planning Society, and the American Society for Training and Development.185

In recent years, the compensation of HR specialists has increased faster than other jobs, and

for some HR jobs pay is sharply on the rise, reflecting greater professionalization and increasing

awareness by business that a well-managed HR function may help the firm achieve a sustain-

able competitive advantage. In 2014, experienced HR directors earned approximately $101,000 a

year on average; those with the title of vice president for human resources earned approximately

$225,000 a year on average, with bonuses as high as $140,000 per year. These are only averages,

however. Those at the 90th percentile earn approximately $340,000 per year in base pay. In some

of the largest firms, the top job in this field paid more than $900,000. Among the specialized

subfields (such as executive trainers, corporate compensation directors, benefit directors, and

corporate security managers) average salaries exceeded $135,000.186

HR audit A periodic review of the effectiveness with which a company uses its human resources. Frequently includes an evaluation of the HR department itself.

Summary and Conclusions Human Resource Management: The Challenges The major HR challenges facing managers today can be divided into three categories: environ-

mental challenges, organizational challenges, and individual challenges.

The environmental challenges are rapid change, the rise of the Internet, workforce diversity,

economic globalization, legislation, evolving work and family roles, skill shortages and the rise

of the service sector, and catastrophic events as a result of natural disasters and terrorism.

36 PART I • INTRODUCTION

Key Terms ability, 19

brain drain, 20

business unit strategy, 28

corporate strategy, 28

decentralization, 11

distinctive competencies, 32

downsizing, 11

empowerment, 19

environmental challenges, 3

HR audit, 35

human resources (HR), 2

human resource strategy, 2

human resource tactic, 2

individual challenges, 17

line employee, 2

manager, 2

motivation, 19

organizational challenges, 10

organizational culture, 13

outsourcing, 16

productivity, 19

quality of work life, 19

staff employee, 2

strategic HR choices, 24

strategic human resource (HR)

planning, 21

total quality management (TQM), 11

The organizational challenges are choosing a competitive position, decentralization,

downsizing, organizational restructuring, the rise of self-managed work teams, the increased

number of small businesses, organizational culture, advances in technology, and the rise of

outsourcing.

The individual challenges involve matching people with the organization, treating employ-

ees ethically and engaging in socially responsible behavior, increasing individual productivity,

deciding whether to empower employees, taking steps to avoid brain drain, and dealing with

issues of job insecurity.

Planning and Implementing Strategic HR Policies When done correctly, strategic HR planning provides many direct and indirect benefits for a

company. These include the encouragement of proactive (rather than reactive) behavior, explicit

communication of company goals, stimulation of critical thinking and ongoing examination of

assumptions, identification of gaps between the company’s current situation and its future vi-

sion, the encouragement of line managers’ participation in the strategic planning process, the

identification of HR constraints and opportunities, and the creation of common bonds within the

organization.

In developing an effective HR strategy, an organization faces several challenges. These

include putting in place a strategy that creates and maintains a competitive advantage for

the company and reinforces the overall business strategy, avoiding excessive concentration

on day-to-day problems, developing strategies suited to unique organizational features, cop-

ing with the environment in which the business operates, securing management commitment,

translating the strategic plan into action, combining intended and emergent strategies, and

accommodating change.

A firm’s strategic HR choices are the options available to it in designing its human resources

systems. Firms must make strategic choices in many HR areas, including work flows, staffing,

employee separations, performance appraisal, training and career development, compensation,

employee rights, employee and labor relations, and international management.

Selecting HR Strategies to Increase Firm Performance To be effective, HR strategies must fit with overall organizational strategies, the environment in

which the firm is operating, unique organizational characteristics, and organizational capabilities.

HR strategies should also be mutually consistent and reinforce one another.

The HR Department and Managers: An Important Partnership Responsibility for the effective use of human resources lies primarily with managers. Hence, all

managers are personnel managers. The role of HR professionals is to act as internal consultants

or experts, assisting managers to do their jobs better.

Over the past three decades, the number of HR professionals has increased considerably

(even though, ironically, HR departments have decreased in size because companies are subcon-

tracting many HR activities to external consultants). This increase reflects both the growth and

complexity of government regulations and a greater awareness that HR issues are important to

the achievement of business objectives.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 37

Discussion Questions

1-1. Go back to the Manager’s Notebook, “A Cold Way to Get a Job.” What do you see as

the main advantages and disadvantages of Internet-based recruiting? Explain.

1-2. Roughly two generations ago, many HR articles decried problems with performance

appraisal. A common complaint was that managers did not devote sufficient time to con-

ducting the appraisals and that biases were rampant. Another common complaint was

that most managers gave high ratings to all employees and did not bother to properly

differentiate and carefully document the performance evaluation of subordinates. Several

old surveys reported that three-quarters or more of employees “hated performance ap-

praisals and found them to be useless, increasing tension at work.”187 Today, performance appraisals are standard practice in American businesses and presumably these are used to

make key HR decisions, such as distributing merit pay and incentives, screening people

for promotions, providing feedback, choosing candidates for layoffs, ensuring equal pay

for equal work, and so on (Chapter 7 of this book is devoted to these issues). Many orga-

nizations have spent a lot of money in designing and redesigning appraisal systems, and

a specialized cadre of HR consultants, industrial psychologists, and other academics have

focused most of their efforts and/or research on improving appraisal systems (such as re-

ducing interpersonal biases in the evaluations). Surprisingly, a recent large-scale survey of

750 HR professionals conducted by New York–based consulting firm Sibson Consulting

Inc. and WorldatWork, a professional association, found that, if anything, dissatisfaction

with performance appraisal systems had gotten worst over the years. Only 3 percent of

human resource executives graded their own performance appraisal system as “A,” and

the majority rated it as “C” or below. In what seems like déjà vu, this new generation of

HR executives say they are frustrated that managers don’t have the courage to make truth-

ful appraisal decisions and to give constructive feedback to employees.188 How would

you explain this? Do you see this situation as a lack of progress or as an indication that

some faulty assumptions continue to be made by the HR professionals who design these

programs? Based on what you have learned in this chapter, what implications does this

have for HR practices that presumably rely on an accurate assessment of employee per-

formance (such as promotions and merit pay decisions)?189

1-3. Go back to Managers’ Notebook “How Harley-Davidson Is Taking Advantage of a

Diverse Customer Base.” If you were an HR manager of a company such as Harley-

Davidson, what human resource programs would you put in place to help the company

expand its customer base? Explain.

1-4. Of all the issues affecting HR practices discussed in this chapter, which three, in your

opinion, are the most important ones? Justify your answer.

1-5. In your opinion, which of the environmental, organizational, and individual challenges

identified in this chapter will be most important for human resource management in

the twenty-first century? Which will be least important? Use your own experiences

in your answer.

1-6. Go back to the Managers’ Notebook, “Watching Over Your Shoulders: Paying a Price

for Unhealthy Life Styles.” Do you think it is fair for a company to discipline employ-

ees by charging higher fees for those who show evidence of “unhealthy life styles”?

According to Dr. Kevin Volpp, Director of the Center for Health Incentives and Behav-

ioral Economics at the University of Pennsylvania, punitive surcharges and tough health

targets may hurt those who need assistance the most. Do you agree? Explain.

Watch It!

Patagonia: Human Resource Management. If your instructor has assigned this, go to mymanagementlab.com to watch a video case and answer questions.

38 PART I • INTRODUCTION

1-7. 3M’s competitive business strategy is based on innovation. 3M requires that at least

25 percent of its annual sales come from products introduced over the previous five

years, a goal it often exceeds. Specific HR programs adopted to implement this strategy

include the creation of a special fund that allows employees to start new projects or fol-

low up on ideas. 3M’s “release time” program, in which workers are given time off dur-

ing the day to pursue their own interests, is given credit for the creation of new products

that management would not have thought of by itself. In addition, 3M’s appraisal pro-

cess encourages risk taking. A senior manager at 3M says, “If you are threatened with

dismissal after working on a project that fails, you will never try again.” What other

types of HR policies might 3M institute to spur product innovation?

1-8. Many believe that top managers care little about human resources compared to such

areas as marketing, finance, production, and engineering. What might account for this

perception, and what would you do to change it?

MyManagementLab® If your instructor has assigned this, go to mymanagementlab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions:

1-9. Outline a set of issues that are most likely to pose a major challenge to the management of human resources during the next few decades. Based on the materials learned in this chapter, explain why you have chosen each of these issues.

1-10. A major complaint one often hears is that the human resource function still remains as one of the weakest and less prestigious functions in many organizations, with the stereotype that it is a “paper shuffling” unit with little impact on the

bottom line. Why do you think this is the case? What can the HR manager do to change this real or perceived state of

affairs? Explain.

1-11. Some scholars believe that there is a set of “best” human resource practices that advanced companies should follow (see Figure 1.7) while others believe that there is “no one best way” when it comes to HR practices and that these

should be adapted depending on organizational strategies, organizational characteristics, environment and organizational

capabilities (see Figure 1.3). Are these perspectives contradictory? Which of the two perspectives make the most sense

to you? Explain.

You Manage It! 1: Emerging Trends Electronic Monitoring to Make Sure That No One Steps Out of Line

More and more organizations rely on sophisticated yet inexpensive

technologies to keep track of what employees do. A few examples

follow:

Use of “Magic Glasses” by Police Officers Many police departments now use miniaturized video cameras and

microphones to record all interactions between police and civilians.

The cameras are generally unnoticeable to the untrained eye and

are placed on a pair of glasses or on a police cap. A central server

automatically uploads all videos, which become part of a reservoir

of digital evidence. This allows the department to keep track of any

police misconduct and also to avoid any bogus complaints.

Motorola Arm-Mounted Terminals Motorola is marketing an arm band that allows a company to keep

track of how quickly an employee performs his or her job. It looks

like something between a Game Boy and a Garmin GPS device.

For example, Tesco, a British grocery store chain, uses the arm

bands to see how fast employees unload and set goods in a ware-

house, assigning a grade to each. It can even maintain a record of

when and how often employees take a bathroom break. Employees

who do not meet specific productivity score targets (those with a

grade of “C” or below) may be terminated. According to Tesco,

this has allowed the company to operate stores with 20 percent

fewer employees.

Intel Tracking System of Objectives and Key Results Intel has developed a device to continuously monitor employee

productivity. For instance, Zynga (a rapidly growing Internet-

startup provider of video games) uses the system to relentlessly

aggregate performance data, ranging from the cafeteria staff to the

top management team. CEO Mark Pincus purportedly devours all

the reports, using multiple spreadsheets and many performance in-

dicators to carefully keep track of the progress of Zynga’s roughly

3,000 employees.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 39

Computer Programs at Ann Taylor Stores Corp. Retailers have a new tool to turn up the heat on their salespeople:

computer programs that dictate which employees should work,

when, and for how long. Ann Taylor Stores Corp. has installed such a

system. When saleswoman Nyla Houser types her code number into

a cash register at the store, it displays her “performance metrics”: av-

erage sales per hour, units sold, and dollars per transaction. The sys-

tem schedules the most productive sellers to work the busiest hours.

By Building Mathematical Models of Its Own Employees, IBM Aims to Improve Productivity and Automate Management Samer Takriti, a Syrian-born mathematician, heads up a team that is

piecing together mathematical models of 50,000 of IBM’s tech con-

sultants. The idea is to inventory all of their skills and then calculate,

mathematically, how best to deploy them. Takriti and his colleagues

seek to turn IBM’s workers into numbers that track what they do.

To put together this system, Takriti requires mountains of

facts about each employee. While this sounds Orwellian, he has

unleashed some 40 PhDs, from data miners and statisticians to

anthropologists, to comb through workers’ data. Sifting through

resumes and project records, the team can assemble a profile of

each worker’s skills and experience. Online calendars show how

employees use their time and with whom they meet. By tracking

the use of cell phones and handheld computers, Takriti’s research-

ers may be able to map workers’ movements. Call records and

e-mails define the social networks of each consultant. Whom do they

copy on their e-mails? Do they send blind copies to certain people?

Creating a Numerical Profile for Recruitment Amanda Treeline is a manager at an executive recruitment firm

that specializes in sales talent, and she gets hundreds of resumes

a week. The firm has developed a numerical profile to screen can-

didates. She claims that their system allows them to screen large

databases to identify a small set of candidates on specific criteria

that hiring managers are interested in. On average, they are able to

decrease the number of candidates from over 1,000 potential hires

to just 20 qualified candidates, and then the line managers are sent

a detailed profile of each of these candidates including sales stats,

resume, LinkedIn profile, picture, and video resume.

Critical Thinking Questions 1-12. Do you think it is feasible to boil down human behavior to

a set of numbers? What are the potential advantages and

disadvantages of doing so? Explain.

1-13. What do you think are the main reasons for the trend to-

ward “managing by the numbers,” as discussed in the case?

Do you believe that this is happening in many organiza-

tions, or is it an isolated phenomenon? Will this trend grow

in the future, or is it another passing fad? Explain.

1-14. Is it possible to use quantitative assessments of the orga-

nization’s human resources to better link human resource

management to firm strategy? Explain.

Team Exercise 1-15. The class is divided into groups of five. Each team is to

provide a list of suggestions as to how an organization

can implement a numerical human resource system, as

discussed in the case. The team should discuss whether

such a system could be used to achieve a better fit be-

tween HR practices and organizational strategies, the

environment, organizational characteristics, and organi-

zational capabilities. Lastly, the team should discuss the

extent to which such a numerical system would clash

with the “HR best practices” summarized in Figure 1.7.

Depending on class size and available class time, each

team will be asked to present the results of its delibera-

tion, to be followed by open class discussion moderated

by the instructor.

Experiential Exercise: Team 1-16. The class is divided into groups of five. Each team is

to choose an organization (which could be a workplace

for one or more team members; a hypothetical firm in

an industry that is well-known to most people, such as a

restaurant; a firm where relatives are employed; and the

like). Each team is to provide a list of suggestions as to

how the organization can implement a system to “quantify

what employees do.” Then the team should discuss how

this information could be used to improve efficiency. The

team may also discuss potential problems that could arise

in gathering that information and using it in practice. The

instructor may ask each team to make a formal presentation

in class, to be followed by open class discussion moderated

by the instructor.

Experiential Exercise: Individual 1-17. Each student will interview a manager or an employee

(who might be a family member, a friend, or an acquain-

tance) to determine the extent to which the issues raised in

the case are represented in his or her organization and what

steps, if any, the firm has taken to make employees more

productive. The advantages and disadvantages of such a

plan may also be discussed. (Alternatively, if the student

has substantial work experience he or she may offer his or

her own views based on personal observation.) The instruc-

tor will moderate open class discussion based on the find-

ings brought to the class by students.

Sources: Based on Stross, R. (2013). Wearing a badge and a video camera. www.nytimes.com; Sudath, C. (2013). Tesco monitors employees with Motor- ola armbands. www.businessweek.com; Rushi, E. M. (2013). Zynga’s tough cul- ture risks a brain drain. http://dealbook.nytimes.com; Ryan, L. (2013). Because employees can’t be trusted. www.businessweek.com; Zakaria, F. (2010, Nov. 1). Restoring the American dream. Time, 30–35; www.inc.com. (2011). Every tool you need for hiring; Shambora, J. (2010, Sept. 27). The algorithm of love.

Fortune, 28; O’Connell, V. (2008, September 10). Retailers reprogram workers in efficiency push. Wall Street Journal, A-12; Baker, S. (2008, September 8). Management by the numbers. BusinessWeek, 32–38.

40 PART I • INTRODUCTION

You Manage It! 2: Ethics/Social Responsibility Embedding Sustainability into HR Strategy

Many companies are now starting to embed their sustainability ef-

forts into their HR programs so these become part of the employ-

ees’ everyday life. Companies who adopt this approach believe that

this should help employees become engaged in social and environ-

mental causes. A few examples follow:

j Alcatel-Lucent is committed to reducing 50 percent of the

company’s carbon emissions by 2020. The company has

asked the entire workforce to become involved and take

steps, no important how small, to accomplish this ambi-

tious goal. Each department (such as facilities operations,

logistics, and information technology) is asked to establish

specific emissions reduction objectives for the unit, ensuring

employee participation in the process. j Hitachi has announced a program to actively involve em-

ployees in corporate social responsibility activities. A cross-

functional committee of employees and HR managers has

been asked to help in the development of social responsibility

e-learning courses, launch global diversity efforts, and in-

troduce work/life balance initiatives. This committee reports

directly to the CEO. The company has also set up employee

teams to deal with a wide range of social responsibility prac-

tices and policies, from labor safety and business ethics to

discrimination prevention and protection of the environment. j Interface (a maker of modular carpets for commercial, in-

stitutional, and residential markets) has introduced a system

called Quality Using Employee Suggestions and Teamwork

(QUEST) to address contamination and unnecessary waste

and to reduce carbon footprints. Employees are actively

involved in the process and the company offers educational

programs to sensitize employees to these issues. The com-

pany also provides incentives for employee suggestions that

lead to reduced carbon emissions. j Pfizer (the world’s largest biopharmaceutical company) has

introduced a “Global Corporate Responsibility Network”

that brings together Pfizer employees from different parts of

the company to set up initiatives concerning a wide array of

social-responsibility issues such as disaster response, em-

ployee volunteerism, community health, and ethical business

practices. j Pepsi Cola is one of many firms that encourage employees

to engage in organic gardening on company premises. For

instance, the company has devoted a track of land in its

Purchase, New York, facility for this purpose and provides

assistance to employees who wish to participate in this effort.

Haberman (a public relations firm in Minneapolis) has rented

a plot of land for employee organic gardening and this effort

generates sufficient food to satisfy the needs of 30 employee

families. HomeStreet Bank in Washington has converted a

landscape bed into a vegetable garden that employees are

encouraged to cultivate during off-hours. TS Designs (a

small T-shirt design business) spends $3,000 to $5,000 a year

to maintain an organic garden for employees’ use, which

includes a beehive as well as a fence to keep out deer and

groundhogs.

Critical Thinking Questions 1-18. Would you like to work for a company that offers the sorts

of programs that are described in this case? Would this be

an important enticement for you to accept a job in such a

company and remain employed there? Explain.

1-19. Some skeptics argue that most sustainability programs

(such as the ones discussed above) represent an insincere

attempt to create a positive company image at low cost. Do

you agree or disagree? Do you think these types of pro-

grams help or hurt the company’s bottom line? Explain.

1-20. What role, if any, should HR professionals play in helping

a company become a leader in sustainability efforts? What

specific HR challenges is a company likely to face as it

tries to become socially responsible? Explain.

Team Exercise 1-21. The class is divided into groups of five. Team members

are asked to describe the HR challenges firms are likely

to face when trying to implement sustainability programs.

Specifically, considering the examples given above, the

team should discuss the main HR issues that a company

should take into account when implementing these types of

programs. For instance, some employees may feel subtle

pressures to participate in organic gardening even if this is

not something that they enjoy doing.

Experiential Exercise: Team 1-22. The class is divided into groups of five. Each team is asked to

role-play a group of employees charged with coming up with

a list of HR suggestions to make a hypothetical consumer-

products company more environmentally responsible (such

as, for instance, providing a bonus for energy savings). Each

team will have ten minutes to prepare the list. Depending on

class size and available time, the team will present its sugges-

tions to the entire class. The instructor (or another student)

will play the role of the HR manager and question the team

about the soundness of its recommendations. This will be fol-

lowed by open class discussion moderated by the instructor.

Experiential Exercise: Individual 1-23. Examine the Web pages of a sample of large firms (such as

those listed by Fortune in its annual rankings of “best com- panies to work for”) and see if you can identify a particular

set of social responsibility programs that involve HR poli-

cies. Try to draw some conclusions about the role played

by HR, if any, in the implementation of those policies.

Also, try to determine the rationale that different compa-

nies use for the implementation of these programs.

Sources: Based on Society for Human Resource Management (SHRM). (2013). Advancing sustainability: HR’s role: A research report on sustainability by

SHRM, BSR and Aurosoorya. www.shrm.org; SHRM. (2014). Company gar- dens reap intangible benefits. www.shrm.org; SHRM. (2014). Green jobs—Are they here yet? www.shrm.org; SHRM. (2014). Green initiatives during finan- cially challenging times. www.shrm.org.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 41

You Manage It! 3: Discussion Managers and HR Professionals at Sands Corporation: Friends or Foes?

Sands Corporation is a medium-sized company located in the

Midwest. It manufactures specialized computer equipment used in

cars, serving as a subcontractor to several automobile manufactur-

ers as well as to the military. Federal contracts are an important

part of Sands’ total sales. In 1985, the firm had 130 employees. At

that time, the personnel department had a full-time director (who

was a high-school graduate) and a part-time clerk. The department

was responsible for maintaining files, placing recruitment ads in

the newspaper at management’s request, processing employment

applications and payroll, answering phones, and handling other

routine administrative tasks. Managers and supervisors were re-

sponsible for most personnel matters, including whom to hire,

whom to promote, whom to fire, and whom to train.

Today Sands employs 700 people. Personnel, now called the

human resources department, has a full-time director with a mas-

ter’s degree in industrial relations, three specialists (with appropri-

ate college degrees and certifications: one in compensation, one

in staffing, and one in training and development), and four per-

sonnel assistants. Sands’ top management believes that a strong

HR department with a highly qualified staff can do a better job of

handling most personnel matters than line supervisors can. It is

also convinced that a good HR department can keep line managers

from inadvertently creating costly legal problems. One of Sands’

competitors recently lost a $5 million sex discrimination suit,

which has only strengthened Sands’ resolve to maintain a strong

HR department.

Some of the key responsibilities the company assigns to its HR

department are:

j Hiring The HR department approves all ads, screens all ap-

plicants, tests and interviews candidates, and so forth. Line

supervisors are given a limited list of candidates (usually no

more than three) per position from which to choose. j Workforce diversity The HR department ensures that the

composition of Sands’ workforce meets the government’s

diversity guidelines for federal contractors. j Compensation The HR department sets the pay range for

each job based on its own compensation studies and survey

data of salaries at similar companies. The department must

approve all pay decisions. j Employee appraisal The HR department requires all su-

pervisors to complete annual appraisal forms on their sub-

ordinates. The department scrutinizes these appraisals of

employees’ performance closely; it is not uncommon for

supervisors to be called on the carpet to justify performance

ratings that are unusually high or low. j Training The HR department conducts several training pro-

grams for employees, including programs in improving hu-

man relations, quality management, and the use of computer

packages. j Attitude surveys The HR department conducts an in-depth

attitude survey of all employees each year, asking them how

they feel about various facets of their job, such as satisfaction

with supervisor and working conditions.

Over the past few weeks several supervisors have complained

to top executives that the HR department has taken away many of

their management rights. Some of their gripes are:

j The HR department ranks applicants based on test scores

or other formal criteria (for example, years of experience).

Often the people they pick do not fit well in the depart-

ment and/or do not get along with the supervisor and

coworkers. j Excellent performers are leaving because the HR department

will not approve pay raises exceeding a fixed limit for the

job title held, even when a person is able to perform duties

beyond those specified in the job description. j It takes so long to process the paperwork to hire new employ-

ees that the unit loses good candidates to competitors. j Much of the training required of employees is not focused on

the job itself. These “canned” programs waste valuable em-

ployee time and provide few benefits to the company. j Supervisors are afraid to be truthful in their performance rat-

ings for fear of being investigated by the HR department. j Attitude survey data are broken down by department. The

HR department then scrutinizes departments with low scores.

Some supervisors feel that the attitude survey has become a

popularity contest that penalizes managers who are willing to

make necessary (but unpopular) decisions.

The HR department director rejects all of these accusations,

arguing that supervisors “just want to do things their way, not tak-

ing into account what is best for the company.”

Critical Thinking Questions 1-24. What seems to be the main source of conflict between

supervisors and the HR department at Sands Corporation?

Explain.

1-25. Do you believe that managers should be given more au-

tonomy to make personnel decisions such as hiring, ap-

praising, and compensating subordinates? If so, what are

some potential drawbacks to granting them this authority?

Explain.

1-26. How should Sands’ top executives deal with the complaints

expressed by supervisors? How should the director of the

HR department deal with the situation? Explain.

Team Exercise 1-27. The CEO of Sands Corporation has called a meeting of

four managers, all of whom have lodged some of the

complaints noted in the case, and four members of the HR

department (the director and three specialists). The in-

structor or a student acts as the CEO in that meeting. The

exercise is carried out as follows: (a) Each side presents

its case, with the CEO acting as moderator, and (b) the

two groups then try to agree on how Sands’ HR depart-

ment and managers can develop a closer working rela-

tionship in the future. The two groups and the CEO may

conduct this exercise in separate groups or in front of the

classroom.

42 PART I • INTRODUCTION

Experiential Exercise: Team 1-28. One student will role-play the HR department director and

three students will fill the roles of disgruntled supervisors.

The role-play will take place in front of the entire class for

approximately 10 to 15 minutes. At the end, the instructor

will moderate class discussion, focusing on key issues that

were raised by students during the role-play.

Experiential Exercise: Individual 1-29. Go online and visit the Web sites of the Society of Human

Resource Management (www.shrm.org) and WorldatWork (www.worldatwork.com). Identify a set of resources that may be helpful for the HR director in dealing with this

situation. Explain why you think this information might be

helpful.

You Manage It! 4: Discussion The Enduring Wage Gap by Gender

The Equal Pay Act of 1963 made it illegal for firms to pay dif-

ferential wages to women and men who perform equal jobs in the

same company, yet more than fifty years later, women still earn

77 percent of what men earn, according to the Bureau of Labor

Statistics. Compared to fifty-plus years ago, when most women

stayed at home, the proportion of men and women in the work-

force was almost equal in 2015, and the educational achievement

of women as a whole now exceeds that of men. According to June E.

O’Neill, a professor at Baruch College, the main reason for the

persistent gender wage gap is that women assume greater respon-

sibility for child-rearing than men. Because women look for jobs

that are compatible with meeting the demands of family responsi-

bilities, this generally implies accepting lower wages. In her recent

book, Reshaping the Work Family Debate, Joan C. Williams, a law professor at the University of California, summarizes research that

suggests that women are still expected to take primary responsibil-

ity for child care and that men are stigmatized at work for taking on

a share of that responsibility. She argues that, surprisingly, because

this goes against their expected roles in corporate America, men re-

port higher levels of work–family conflict than women do. The fact

that it is “politically incorrect” for men to admit this publicly, ac-

cording to her, makes this all the more stressful for men. Consistent

with Williams’s findings, a recent poll by the Pew Research Cen-

ter uncovered that even though the so-called women’s liberation

movement is over 50 years old, 67 percent of respondents expect

men to be primarily responsible to support a family financially.

Writing in 2014, Molly Edmonds, a consultant on women’s work-

place and family issues, discusses the “mommy wars,” referring to

stay-at-home moms who often accuse working moms of irrepara-

bly harming their children, implying that women more than men

face a difficult choice between earning more money and properly

attending to their children’s needs.

Critical Thinking Questions 1-30. Why do you think the pay gap between men and women

has been so persistent? Do you agree or disagree with the

explanations offered by the women who are cited in the

case? Explain.

1-31. What personal qualities do you think are necessary for

a couple with children to have successful careers? How

would you select for those qualities? Explain.

1-32. What role, if any, should the HR department play in reduc-

ing the pay gap between men and women? Explain.

Team Exercise 1-33. The class is divided into groups of five. Team members are

asked to make a list of reasons that explain the persistent

pay gap between men and women. The team will then de-

termine if the pay gap by gender and “equal pay for equal

work” are different concepts. Assuming that the entire team

works in an HR department, how would you research these

issues in the organization?

Experiential Exercise: Team 1-34. Five students will take the side of the two women profes-

sors mentioned in the case and five students will take

the opposite side. The two teams will debate in front of

the entire class for about 15 minutes. The debate may

be followed by open class discussion moderated by the

instructor.

Experiential Exercise: Individual 1-35. Under the existing Equal Pay Act, an employer can avoid

penalties by showing that pay differences by gender are

based on nondiscriminatory factors such as work experi-

ence and education. At the time of this writing, the Senate

may soon pass a bill—already passed in the House—that

limits the use of these bona fide factors to justify pay dif-

ferentials by gender by requiring that employers demon-

strate that they are job-related necessities (a harder burden

of proof). If you were asked for your informed opinion,

would you support this change in the law? Carefully justify

your answer.

Sources: Based on www.wsgr.com. (2014), Targeting employers for gender based pay and promotion; O’Neill, J. E. (2010, Nov. 10). Washington’s equal

pay obsession. Wall Street Journal, C-1; Luscombe, B. (2010, Oct. 18). Week on, week off parenting. Time. 67–68; Luscombe, B. (2010, Nov. 19). Marriage, What’s it good for? Time, 48–53; Edmonds, M. (2014). Are men and women’s roles in society changing? http://people.howstuffworks.com.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 43

Endnotes Scan for Endnotes or go to www.pearsonhighered.com/Gomez-Mejia.

References Ahmed, I. (2010). Effects of motivational factors on employees.

International Journal of Business and Management, 5(3), 15–29.

Deresky, H. (2011). International Management. Upper Saddle River, NJ: Prentice Hall.

Efrati, A., and Tarn, P. P. W. (2010, Nov. 11). Google battles to keep talent. Wall Street Journal, 3-1.

Ferraro, G. (2010). The cultural dimensions of international business. Englewood Cliffs, NJ: Pearson/Prentice-Hall.

Kim, J., MacDuffie, J. P., and Pil, F. K. (2010). Employee voice and organizational performance: team versus representative influence. Human Relations, 10, 1–24.

Luo, L. Cooper, C. L., Kao, S., Chang, T. T., Allen, T. D., Lapierre, L. M., O’Driscoll, M. P., Poelmans, S. A., Sanchez, J. I., and Spector, P. E. (2010). Cross-cultural differences on work-to-family conflict and role satisfaction. Human Resource Management, 49(1), 67–85.

McDonald, D. (2010, Oct. 18). Touched by scandal. Fortune, 158. Salary.com http://swz.salary.com.

PA R T I I THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

T he powerful forces of technology and global competi- tion are forcing managers to rethink all aspects of busi- ness. Work is in a state of flux as companies change

basic work processes, job requirements and expectations, and organizational structures to focus more on customers’ needs.

One important change is the practice of using work teams instead of individual workers as the basic work unit. Today, many workers spend much of their time on a team established to satisfy customers’ needs. For example:

■ At Whole Foods Market, a large purveyor of organic foods, teams are the basic unit of organization. Typi- cally, each store has eight teams that run departments such as produce, seafood, and checkout. Teams are given wide latitude with regard to what foods to stock on shelves and how to manage themselves, including the right to hire and fire team members. Information

on team performance is transparent, and pay is linked to team, rather than individual, performance.1

■ General Motors slashed the development time it takes to produce a full mock-up of a car from 12 weeks to only 2 weeks by using collaborative engineering teams that share design information between auto parts suppli- ers and engineering units within the company. The time saved frees up workers to think more creatively and to develop three or four more alternative designs per car.2

■ SAP, the German software firm, reduced the time required to produce new, usable application software upgrades from years to 90 days with the use of proj- ect teams staffed by some of the company’s top soft- ware programmers. The increased speed of software development provided by its teams lets SAP compete in more competitive market segments that provide new opportunities for growth, such as database and analytics.3

CHAPTER

2 Managing Work Flows and Conducting Job Analysis

When you see this icon, visit www.mymanagementlab.com for activities that are applied, personalized, and offer immediate feedback.

MyManagementLab®

44

1 Understand the organizational perspective of work. 2 Understand the group perspective of work. 3 Understand the individual perspective of work. 4 Develop competence in designing jobs and

conducting job analysis.

5 Have familiarity with the flexible workforce. 6 Maintain human resource information systems.

C H A L L E N G E S After reading this chapter, you should be able to deal more effectively with the following challenges:

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 45

The Managerial Perspective

This chapter is about managing work, which is a highly dynamic process. Managers design structures to organize work into departments, teams, and jobs so that work is performed efficiently and provides a valuable product or service for a customer. Human resource spe- cialists assist managers by keeping track of and documenting the changes for the content of each job through a process called job analysis. In this chapter, we explore why job analy- sis is important to managers and why it is the bedrock of most human resource programs.

Like work teams, organizations are fundamentally groups of people. The relationships among these people can be structured in different ways. In this chapter, we describe how top managers decide on the most appropriate structure for the organization as a whole and for the flow of work within the organization. Although you may never be asked to redesign your organization, it is likely that your company will eventually undergo structural change, because such change is necessary for survival. It is important that you understand structural issues so that you can see the big picture and take an active role in implementing changes.

Work can be viewed from three different perspectives: the entire organization, work groups, and individual employees. We examine each of these perspectives and their impli- cations for human resource management. We also discuss job analysis (a critical HR activ- ity) and the use of contingent workers and alternative work schedules to create a flexible workforce. An understanding of job analysis gives managers a tool to measure how much and what types of work are necessary to achieve organizational objectives. We conclude the chapter with a discussion of human resource information systems.

Learn It!

If your professor has chosen to assign this go to www.mymanagementlab.com to see what you should particularly focus on, and take the chapter 2 warmup.

Work: The Organizational Perspective Organizational structure refers to the formal or informal relationships between people in an

organization. Work flow is the way work is organized to meet the organization’s production or

service goals. In this section, we discuss the relationship between strategy and organizational

structure, the three basic organizational structures, and the uses of work-flow analysis.

Strategy and Organizational Structure An organization develops a business strategy by establishing a set of long-term goals based on

(1) an analysis of environmental opportunities and threats and (2) a realistic appraisal of how the

business can deploy its assets to compete most effectively. The business strategy selected by man-

agement determines the structure most appropriate to the organization.4 Whenever management

changes its business strategy, it should also reassess its organizational structure.

Recall from Chapter 1 that a company would select a defender strategy when it is competing in a stable market and has a well-established product. For example, a regulated electric utility

company might adopt such a strategy. Under a defender strategy, work can be efficiently orga-

nized into a structure based on an extensive division of labor, with hierarchies of jobs assigned

to functional units such as customer service, power generation, and accounting. Management

is centralized and top management has the responsibility for making key decisions. Decisions

are implemented from the top down via the chain of command. Workers are told what to do by

supervisors, who are handed directions from middle managers, who in turn take orders from the

company’s top executives.

A company would select a prospector strategy when operating in uncertain business envi- ronments that require flexibility. Companies that are experiencing rapid growth and launching

organizational structure The formal or informal relationships between people in an organization.

work flow The way work is organized to meet the organization’s production or service goals.

46 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

A QUESTION OF ETHICS Implicit in this chapter is the view that organizational change is necessary for survival. However, organizational change often places individual employees under con- siderable stress, particularly the stress resulting from constantly having to learn new skills and job requirements. Is the organization ethically responsible for protect- ing employees from these stressful changes?

bureaucratic organizational structure A pyramid-shaped organizational structure that consists of hierarchies with many levels of management.

many new products into a dynamic market are likely to select such a strategy. In companies with

a prospector strategy, control is decentralized so that each division has some autonomy to make

decisions that affect its customers. Workers who are close to the customer are allowed to respond

quickly to customers’ needs without having to seek approval from supervisors.

Management selects HR strategies to fit and support its business strategies and organiza-

tional structure. Here are some examples of strategic HR choices regarding structure and work

flows that companies have made to achieve cost efficiency and product quality.

j General Electric (GE) signed a 10-year maintenance deal with British Airways to perform

engine maintenance and overhaul work. The maintenance agreement helps British Airways

save costs by outsourcing this work to GE, which builds, designs, and maintains commer-

cial aircraft engines as a core business.5

j Abbey Life Insurance outsourced the claims-adjustment process for its 1.75 million poli-

cyholders to Unisys Corp. under a 10-year agreement. Abbey Life saves $80 million over

the life of the agreement. Error rates on claims have fallen from 5 percent to 2 percent, and

95 percent of claims are handled within 6 days, down from 10 days.6

Designing the Organization Designing an organization requires choosing an organizational structure that will help the com-

pany achieve its goals most effectively. The three basic types of organizational structure are

bureaucratic, flat, and boundaryless (see Figure 2.1).

BUREAUCRATIC ORGANIZATION Companies that adopt a defender business strategy are likely to choose the bureaucratic organizational structure. This pyramid-shaped structure consists

of hierarchies with many levels of management. It uses a top-down or “command-and-control”

approach to management in which managers provide considerable direction to and have

considerable control over their subordinates. The classic example of a bureaucratic organization

is the military, which has a long chain of command of intermediate officers between the generals

(who initiate combat orders) and the troops (who do the fighting on the battlefield).

A bureaucratic organization is based on a functional division of labor. Employees are di- vided into divisions based on their function. Thus, production employees are grouped in one

division, marketing employees in another, engineering employees in a third, and so on. Rigid

boundaries separate the functional units from one another. At a bureaucratic auto parts company,

for instance, automotive engineers would develop plans for a new part and then deliver its speci-

fications to the production workers.

Rigid boundaries also separate workers from one another and from their managers because

the bureaucratic structure relies on work specialization. Narrowly specified job descriptions clearly mark the boundaries of each employee’s work. Employees are encouraged to do only

the work specified in their job description—no more and no less. They spend most of their time

working individually at specialized tasks and usually advance only within one function. For

example, employees who begin their career in sales can advance to higher and higher positions

in sales or marketing, but cannot switch into production or finance.

The bureaucratic structure works best in a predictable and stable environment. It is highly

centralized and depends on frontline workers performing repetitive tasks according to managers’

orders. In a dynamic environment, this structure is less efficient and sometimes disastrous.

FLAT ORGANIZATION A company that selects the prospector business strategy is likely to choose the flat organizational structure. A flat organization has only a few levels of managers

and emphasizes a decentralized approach to management. Flat organizations encourage high

employee involvement in business decisions. Nucor (a Charlotte, North Carolina, steel company)

has a flat organizational structure. Although Nucor has over 20,000 employees, only a few levels

separate the frontline steel workers from the president of the company. Headquarters staff consists

of a mere 100 people in a modest cluster of offices.7

Flat organizations are likely to be divided into units or teams that represent different prod-

ucts, services, or customers. The purpose of this structure is to create independent small busi-

nesses that can respond rapidly to customers’ needs or changes in the business environment. For

example, Johnson & Johnson, a manufacturer of health care products, is organized into more than

250 operating companies that are located in 60 countries. Each operating company behaves like

flat organizational structure An organizational structure that has only a few levels of management and emphasizes decentralization.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 47

a minibusiness that is responsible for generating profits for the overall company, and employees

within each unit feel as if they are working for a small company. The flat organization structure

has fostered an entrepreneurial culture that has enabled Johnson & Johnson to innovate.

The flat organizational structure reduces some of the boundaries that isolate employees from

one another in bureaucratic organizations. Boundaries between workers at the same level are re-

duced because employees are likely to be working in teams. In contrast to workers at bureaucratic

organizations, employees of a flat organization can cross functional boundaries as they pursue

their careers (for instance, starting in sales, moving to finance, and then into production). In addi-

tion, job descriptions in flat organizations are more general and encourage employees to develop

a broad range of skills (including management skills). Boundaries that separate employees from

managers and supervisors also break down in flat organizations because employees are empow-

ered to make more decisions.

Flat organizational structures can be useful for organizations that are implementing a man-

agement strategy that emphasizes customer satisfaction. Implementing a customer-focused strat-

egy may require changing work processes so that customers can receive higher-quality products

and better service. For example, an auto insurance company may change its claims adjustment

process to speed up reimbursement to customers. Rather than using 25 employees who take

FIGURE 2.1 Organizational Structures

A Typical Law Firm

Chief Partner

Partners

Associates

Alliance of three companies that pool their resources to produce a new product, such as a computer chip.

Company A

Company B Company C

United States Army

General

Colonels

Majors

Captains and Lieutenants

Warrant Officers

Sergeants

Corporals

Privates

Flat • Decentralized management approach • Few levels of management • Horizontal career paths that cross functions • Broadly defined jobs • General job descriptions • Flexible boundaries between jobs and units • Emphasis on teams • Strong focus on the customer

Bureaucratic • Top-down management approach • Many levels of management • Hierarchical career paths within one function • Highly specialized jobs • Narrowly specified job descriptions • Rigid boundaries between jobs and units • Employees or individuals working independently

Boundaryless • Joint ventures with customers, suppliers, and competitors • Emphasis on teams whose members may cross organizational boundaries • Shares many characteristics of flat organizational structure

CharacteristicsOrganizational Structure

48 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

14 days to process a claim, the company may create a claims adjustment team that works closely

with the customer to take care of all the paperwork within 3 days.

The flat structure works best in rapidly changing environments because it enables manage-

ment to create an entrepreneurial culture that fosters employee participation.

BOUNDARYLESS ORGANIZATION A boundaryless organizational structure enables an organi- zation to form relationships with customers, suppliers, and/or competitors, either to pool organi-

zational resources for mutual benefit or to encourage cooperation in an uncertain environment.

Such relationships often take the form of joint ventures, which let the companies share talented

employees, intellectual property (such as a manufacturing process), marketing distribution channels

(such as a direct sales force), or financial resources. Boundaryless organizational structures are

most often used by companies that select the prospector business strategy and operate in a volatile

environment.

Boundaryless organizations share many of the characteristics of flat organizations. They

break down boundaries between the organization and its suppliers, customers, or competitors.

They also strongly emphasize teams, which are likely to include employees representing differ-

ent companies in the joint venture. For example, a quality expert from an automobile manufactur-

ing company may work closely with employees at one of the company’s auto parts suppliers to

train them in specific quality management processes.

Companies often use a boundaryless organizational structure when they (1) collaborate with

customers or suppliers to provide better-quality products or services, (2) are entering foreign

markets that have entry barriers to foreign competitors, or (3) need to manage the risk of de-

veloping an expensive new technology. The boundaryless organization is appropriate in these

situations because it is open to change, it facilitates the formation of joint ventures with foreign

companies, and it reduces the financial risk to any one organization. Here are some examples of

boundaryless organizational structures:

j Pixar, the animation studio, partnered with Walt Disney Pictures to produce a number of

highly successful animated feature films, including Toy Story, Monsters, Inc., Finding Nemo, and Cars. Finding Nemo generated $865 million in global box office revenue and received the Academy Award for Best Animated Feature Film. The partnership combined

Pixar’s expertise in computer animation with Disney’s strength in marketing to reduce the

risk of producing animated features.8

j Airbus Industries is a boundaryless organizational design that consists of a partnership of

European firms from four countries (France, Germany, England, and Spain) that worked

together to market and develop commercial jet aircraft to compete with Boeing and

become a leading producer of passenger jets. j Apple Inc. partners with Foxconn, a Taiwanese electronics firm, to manufacture Apple’s

iPods, iMacs, and iPhones in China. Apple designs and markets the products, and its Asian

partner builds and assembles them according to the design specifications and ships the fin-

ished products back to the United States.9 Apple Inc. also forms partnerships with numer-

ous independent, self-employed software programmers who design new applications to use

on Apple’s iPhones.

boundaryless organizational structure An organizational structure that enables an organization to form relationships with customers, suppliers, and/or competitors, either to pool organizational resources for mutual benefit or to encourage cooperation in an uncertain environment.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 49

Work-Flow Analysis We said earlier that work flow is the way work is organized to meet the organization’s production

or service goals. Managers need to do work-flow analysis to examine how work creates or adds

value to the ongoing business processes. (Processes are value-adding, value-creating activities such as product development, customer service, and order fulfillment.10) Work-flow analysis

looks at how work moves from the customer (who initiates the need for work) through the orga-

nization (where employees add value to the work in a series of value-creating steps) to the point

at which the work leaves the organization as a product or service for the customer.

Each job in the organization should receive work as an input, add value to that work by doing

something useful to it, and then move the work on to another worker. Work-flow analysis usually

reveals that some steps or jobs can be combined, simplified, or even eliminated. In some cases,

it has resulted in the reorganization of work so that teams rather than individual workers are the

source of value creation.

Work-flow analysis can be used to tighten the alignment between employees’ work and

customers’ needs. It can also help a company make major performance improvements through a

program called business process reengineering.

Business Process Reengineering The term reengineering was coined by Michael Hammer and James Champy in their pioneer- ing book Reengineering the Corporation. Hammer and Champy emphasize that reengineering should not be confused with restructuring or simply laying off employees in an effort to eliminate

layers of management.11 Business process reengineering (BPR) is not a quick fix but rather a

fundamental rethinking and radical redesign of business processes to achieve dramatic improve-

ments in cost, quality, service, and speed.12 Reengineering examines the way a company con-

ducts its business by closely analyzing the core processes involved in producing its product or

delivering its service to the customer. By taking advantage of computer technology and different

ways of organizing human resources, the company may be able to reinvent itself.13

BPR uses work-flow analysis to identify jobs that can be eliminated or recombined to im-

prove company performance. Figure 2.2 shows the steps in processing a loan application at IBM

Credit Corporation both before and after BPR. Before the BPR effort, work-flow analysis showed

that loan applications were processed in a series of five steps by five loan specialists, each of

whom did something different to the loan application. The entire process took an average of six

days to complete, which gave customers the opportunity to look elsewhere for financing.14 For

much of that time, the application was either in transit between the loan specialists or sitting on

someone’s desk waiting to be processed.

FIGURE 2.2 Processing a Loan Application at IBM Credit Corporation Before and After BPR

Work Flow Using Specialists

Customer Service

Receptionist

Credit Checker

Business Practices Specialist

Pricer Administrator To Customer

To Customer

Log in call from sales rep

Do credit check on customer

Modify standard loan covenant based on customer request

Compute interest rate on loan

Convert information into a quote letter

Work Flow After Business Process Reengineering

Deal Structurer

Use sophisticated computer program to process entire loan application

work-flow analysis The process of examining how work creates or adds value to the ongoing processes in a business.

business process reengineering (BPR) A fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed.

50 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Using BPR, the jobs of the five loan specialists were reorganized into the job of just one

generalist called the deal structurer. The deal structurer uses a new software program to print out a standardized loan contract, access different credit-checking databases, price the loan, and add

boilerplate language to the contract. With the new process, loan applications can be completed in

four hours instead of six days.15

Work: The Group Perspective We turn now to an examination of work from the perspective of employee groups. In the flat

and boundaryless organizational structures, teamwork is an imperative. Indeed, as we have seen,

teams are the basic building blocks of both structures.

What exactly is a team and how does it operate? A team is a small number of people with

complementary skills who work toward common goals for which they hold themselves mutu-

ally accountable.16 Teams can vary significantly in size, from 2 to 80 members. The upper range

may occur with virtual teams where members collaborate on large projects over the Internet.

Most teams have fewer than 10 members, with 5 to 6 members considered to be an optimal team

size.17 Unlike work groups, which depend on a supervisor for direction, a team depends on its own members to provide leadership and direction.18 Teams can also be organized as departments.

For example, a company may have a product development team, a manufacturing team, and a

sales team.

Several types of teams are used in organizations today. The type that is having the most im-

pact on U.S. companies is the self-managed team.

Self-Managed Teams Organizations are implementing self-managed work teams primarily to improve quality and

productivity and to reduce operating costs. Self-managed teams (SMTs) are responsible for

producing an entire product, a component, or an ongoing service. In most cases, SMT mem-

bers are cross-trained on the different tasks assigned to the team.19 Some SMTs have members

with a set of complex skills—for example, scientists and engineers with training in different

disciplines. Members of the SMT have many managerial duties, including work scheduling,

selecting work methods, ordering materials, evaluating performance, and disciplining team

members.20

One company that has switched over to SMTs is the San Diego Zoo. The zoo’s employ-

ees traditionally had very narrow and well-defined job responsibilities: Keepers did the keep-

ing and gardeners did the gardening. Then the zoo decided to develop bioclimatic zones, in

which plants and animals are grouped together in cageless enclosures that resemble their native

habitats. Because the zones themselves are interdependent, the employees who manage them

must work together. For instance, the humid 3.5-acre Tiger River exhibit is run by a seven-

member team of mammal and bird specialists, horticulturists, and maintenance and construc-

tion workers.21

HRM practices are likely to change in the following ways when SMTs are established:22

j Peers, rather than a supervisor, are likely to evaluate individual employee performance. j Pay practices are likely to shift from pay based on seniority or individual performance to

pay focused on team performance (for example, team bonuses).23

j Rather than being based solely on input from managers and HR staff, decisions on new

hires may include a decisive amount of input from team members. j Team leaders are likely to step forward and identify themselves. For example, SEI Invest-

ments encourages leaders to emerge on their own initiative in its self-managed teams.24

j High-performing SMTs often use a shared leadership style where team members take

turns acting as the team leader, depending on the team work context. Shared leadership is

common among teams of knowledge workers.25

Self-managed teams have made some impressive contributions to the bottom lines of com-

panies that have used them. For instance, after implementing SMTs, Shenandoah Life found it

could process 50 percent more applications and customer service requests with 10 percent fewer

team A small number of people with complementary skills who work toward common goals for which they hold themselves mutually accountable.

self-managed team (SMT) A team responsible for producing an entire product, a component, or an ongoing service.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 51

EXHIBIT 2.1 TEAMS AT GOOGLE

About half of Google’s 34,000 employees (all of those involved in product development) work in small teams, with an average of three engineers per team. Even a large project, such as Gmail, which might occupy 30 people, is broken into teams of three or four, each of which works on a specific service enhancement, such as building spam filters or improving the forwarding feature. Each team has an “über tech leader,” a responsibility that rotates among team members depending on shifting project requirements. Most engineers work on more than one team, and no one needs the permission of the HR department to switch teams. Organizations in the technology industry favor small teams because they are agile and can innovate more quickly.

Sources: Based on Hamel, G. (2007, October 1). Break free! Fortune, 124; Holstein, W. (2007, December 30). Orders from on high? That’s so yesterday. New York Times, Sunday Money, 6; Lindberg, O. (2009, October 11). The secrets of Google’s design team. www.techradar.com; Schrage, M. (2011, December 13). Smart innovators value smaller teams over better processes. HBR Blog Network. www.blogs.hbr.org/schrage/2011/12/quiet-but-unsubtle-innovation.html.

employees.26 Xerox plants using SMTs are 30 percent more productive than Xerox plants orga-

nized without them.27 Boeing used SMTs to reduce the number of engineering problems in the

development of the 777 passenger jet by more than half.28 For a look at how self-managed teams

work at Google, the Internet search–services company, see Exhibit 2.1.

Because team members often initially lack the skills necessary for the team to function suc-

cessfully, it may take several years for an SMT to become fully operational.29 A company can

hasten this evolution by using its HR department to train employees in the skills required of team

members. Three areas are important:30

1. Technical skills Team members must be cross-trained in new technical skills so that they

can rotate among jobs as necessary. Team members who are cross-trained give the team

greater flexibility and allow it to operate efficiently and with fewer workers.

2. Administrative skills Teams do much of the work done by supervisors in organizations

that don’t have teams. Therefore, team members need training in such management/

administrative skills as budgeting, scheduling, monitoring and evaluating peers, and

interviewing job applicants.

3. Interpersonal skills Team members need good communication skills to form an effective

team. They must be able to express themselves effectively in order to share information,

deal with conflict, and give feedback to one another.31

Other Types of Teams In addition to the SMT, businesses use other types of teams: the problem-solving team, the

special-purpose team, and the virtual team.32 The problem-solving team consists of volunteers

from a unit or department who meet one or two hours per week to discuss quality improvement,

cost reduction, or improvement in the work environment. The formation of problem-solving

teams does not affect an organization’s structure because these teams exist for only a limited

period; they are usually disbanded after they have achieved their objectives.

The special-purpose team, or task force, consists of members who span functional or orga- nizational boundaries and whose purpose is to examine complex issues—for example, introduc-

ing a new technology, improving the quality of a work process that spans several functional units,

or encouraging cooperation between labor and management in a unionized setting. An example

of a special-purpose team is the quality of work life (QWL) program, which consists of team

members (including union representatives and managers) who collaborate on making improve-

ments in all aspects of work life, including product quality. The QWL programs at Ford and Gen-

eral Motors have focused on improving product quality, whereas the QWL program between the

United Steel Workers of America and the major steel companies has concentrated on developing

new ways to improve employee morale and working conditions.33

For more on problem-solving teams, refer to the Manager’s Notebook titled “Tips on Man-

aging Problem-Solving Teams.”

problem-solving team A team consisting of volunteers from a unit or department who meet one or two hours per week to discuss quality improvement, cost reduction, or improvement in the work environment.

special-purpose team A team or task force consisting of workers who span functional or organizational boundaries and whose purpose is to examine complex issues.

52 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

The virtual team uses interactive computer technologies such as the Internet, groupware

(software that permits people at different computer workstations to collaborate on a project si-

multaneously), and computer-based videoconferencing to work together despite being separated

by physical distance.34 Virtual teams are similar to problem-solving teams because they do not

require full-time commitment from team members. The difference is that virtual team members

interact with each other electronically, rather than face-to-face.35

Because of their part-time nature and flexibility in accommodating distance, virtual teams

allow organizations to tap individuals who might not be otherwise available. For example, a

management consulting firm working on a project out of its San Francisco office for a local bank

includes financial specialists from its New York and Chicago offices on the project team. This

type of team also makes it possible for companies to cross organizational boundaries by linking

customers, suppliers, and business partners in a collaborative effort that can increase the quality

and speed with which the new product or service is brought to market. In writing this textbook,

the authors (university professors) formed a virtual team with the publishing company’s editors

and also with the design specialists who created the graphics and visual images for the text.

One of the best practices that has emerged from research on virtual teams is the use of a vir-

tual work space, which is essentially a Web site that only team members have access to, where the

team is reminded of its decisions, rationales, and commitments.36 The virtual team work space

has a home page with links to other “walls,” each of which is devoted to a specific aspect of the

team project. One wall, for example, contains information about all the people on the virtual

team, including contact information and profiles of their expertise and accomplishments. Another

wall displays information about teleconference meetings, such as when they are being held, who

is supposed to attend, the agendas, and the meeting minutes, which can be shared with team

members. Shell Chemicals, for example, has had success with the use of a virtual work space on

a company-wide project to develop a new cash-based approach to financial management.37

Tips on Managing Problem-Solving Teams

Managers should be able to use problem-solving teams consisting of employees with cross-functional skills to solve challenging organizational issues. In designing and managing such teams, the following are some important points to consider: j If the team is expected to implement new ideas, include members from different levels of

the organization. Creating a team with members from different levels (frontline employ-

ees and supervisors, for example) can also foster cooperation and reduce barriers between

employees and managers. j Monitor the team to ensure that the free exchange of ideas and creativity is not stifled if

managers and employees are on the same team. j Select members not only for their expertise and diverse perspectives but also for their

ability to compromise and solve problems collaboratively. j Allow the team enough time to complete its task. The more complex the problem, and the

more creative the solution needs to be, the more the members will need large blocks of

time. j Coordinate with other managers to free up time for the members. j Provide clear goals and guidelines on what you expect the team to do. Tell them what they

can and cannot address. j Schedule periodic team meetings to reinforce the process of solving problems collectively.

Such meetings can be used to evaluate the effectiveness of the team.

Sources: Based on Gratton, L., and Erickson, T. (2007, November). Eight ways to build collaborative teams. Harvard Business Review, 100–109; Kepcher, C. (2005, February). Collegial teams. Leadership Excellence, 7–8; Nahavandi, A., and Malekzadeh, A. R. (1999). Organizational behavior. Upper Saddle River, NJ: Prentice Hall, 276. jj

M A N A G E R ’ S N O T E B O O K

Customer-Driven HR

virtual team A team that relies on interactive technology to work together when separated by physical distance.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 53

Work: The Individual Perspective The third and final perspective from which we will examine work flows and structure is that of the

individual employee and job. We look first at the various theories of what motivates employees to

achieve higher levels of performance and then look at different ways jobs can be designed to maxi-

mize employee productivity. In the next section, we look at job analysis, which is the gathering

and organization of information concerning the tasks and duties of specific jobs. The section con-

cludes with a discussion of job descriptions, which are one of the primary results of job analysis.

Motivating Employees Motivation can be defined as that which energizes, directs, and sustains human behavior.38 In

HRM, the term refers to a person’s desire to do the best possible job or to exert the maximum

effort to perform assigned tasks. An important feature of motivation is that it is behavior directed

toward a goal.

Motivation theory seeks to explain why employees are more motivated by and satisfied with

one type of work than another. It is essential that managers have a basic understanding of work

motivation because highly motivated employees are more likely to produce a superior-quality

product or service than employees who lack motivation.

TWO-FACTOR THEORY The two-factor theory of motivation, developed by Frederick Herzberg, attempts to identify and explain the factors that employees find satisfying and dissatisfying about

their jobs.39 The first set of factors, called motivators, are internal job factors that lead to job satisfaction and higher motivation. In the absence of motivators, employees will probably not

be satisfied with their work or motivated to perform up to their potential. Some examples of

motivators are the work itself, achievement, recognition, responsibility, and opportunities for

advancement.

Notice that salary is not included in the motivator list. Herzberg contends that pay belongs

among the second set of factors, which he calls hygiene or maintenance factors. Hygiene factors are external to the job; they are located in the work environment. The absence of a hygiene factor

can lead to active dissatisfaction and demotivation and, in extreme situations, to avoidance of the

work altogether. Hygiene factors include the following:

j Company policies j Working conditions j Job security j Salary j Employee benefits j Relationships with supervisors and managers j Relationships with coworkers j Relationships with subordinates

According to Herzberg, if management provides the appropriate hygiene factors, employees will

not be dissatisfied with their jobs, but neither will they be motivated to perform at their full po-

tential. To motivate workers, management must provide some motivators.

Two-factor theory has two implications for job design: (1) Jobs should be designed to pro-

vide as many motivators as possible, and (2) making (external) changes in hygiene factors, such

as pay or working conditions, is not likely to sustain improvements in employee motivation over

the long run unless (internal) changes are also made in the work itself.

WORK ADJUSTMENT THEORY Every worker has unique needs and abilities. Work adjustment theory suggests that employees’ motivation levels and job satisfaction depend on the fit between their needs and abilities and the characteristics of the job and the organization.40 A poor fit between

individual characteristics and the work environment may lead to reduced levels of motivation.

Work adjustment theory proposes that:

j A job design that one employee finds challenging and motivating may not motivate an-

other employee. For example, a mentally disabled employee may find a repetitive job at a

fast-food restaurant highly motivating and challenging, but a college graduate may find the

same job boring.

motivation That which energizes, directs, and sustains human behavior. In HRM, a person’s desire to do the best possible job or to exert the maximum effort to perform assigned tasks.

54 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

j Not all employees want to be involved in decision making. Employees with low needs for

involvement may fit poorly on a self-managed team because they may resist managing

other team members and taking responsibility for team decisions.

GOAL-SETTING THEORY Goal-setting theory, developed by Edwin Locke, suggests that employees’ goals help to explain motivation and job performance.41 The reasoning is as follows: Because

motivation is goal-directed behavior, goals that are clear and challenging will result in higher

levels of employee motivation than goals that are ambiguous and easy.

Because it suggests that managers can increase employee motivation by managing the goal-

setting process, goal-setting theory has some important implications for managers:42

j Employees will be more motivated to perform when they have clear and specific goals.

A store manager whose specific goal is to “increase store profitability by 20 percent in the

next six months” will exert more effort than one who is told to “do the best you can” to increase profits.

j Employees will be more motivated to accomplish difficult goals than easy goals. Of

course, the goals must be attainable—otherwise the employee is likely to become frus-

trated. For example, an inexperienced computer programmer may promise to deliver a

program in an unrealistic amount of time. The programmer’s manager may work with

the programmer to establish a more realistic yet still-challenging deadline for delivering

the program. j In many (but not all) cases, goals that employees participate in creating for themselves are

more motivating than goals that are simply assigned by managers. Managers may establish

mutually agreed-upon goals with employees through a management by objectives (MBO)

approach (discussed in Chapter 7) or by creating self-managed teams that take responsibil-

ity for establishing their own goals. j Employees who receive frequent feedback on their progress toward reaching their goals

sustain higher levels of motivation and performance than employees who receive sporadic

or no feedback. For example, a restaurant manager can motivate servers to provide better

service by soliciting customer feedback on service quality and then communicating this

information to employees. The importance of providing feedback to employees for the im-

provement of their performance is discussed elsewhere in the text in the topic that covers

performance appraisal (Chapter 7).

JOB CHARACTERISTICS THEORY Developed by Richard Hackman and Greg Oldham, job characteristics theory states that employees will be more motivated to work and more satisfied with their jobs to the extent that jobs contain certain core characteristics.43 These core job

characteristics create the conditions that allow employees to experience critical psychological

states that are related to beneficial work outcomes, including high work motivation. The strength

of the linkage among job characteristics, psychological states, and work outcomes is determined

by the intensity of the individual employee’s need for growth (that is, how important the employee

considers growth and development on the job).

There are five core job characteristics that activate three critical psychological states. The

core job characteristics are:44

1. Skill variety The degree to which the job requires the person to do different things and

involves the use of a number of different skills, abilities, and talents.

2. Task identity The degree to which a person can do the job from beginning to end with a

visible outcome.

3. Task significance The degree to which the job has a significant impact on others—both

inside and outside the organization.

4. Autonomy The amount of freedom, independence, and discretion the employee has in

areas such as scheduling the work, making decisions, and determining how to do the job.

5. Feedback The degree to which the job provides the employee with clear and direct

information about job outcomes and performance.

The three critical psychological states affected by the core job characteristics are:45

1. Experienced meaningfulness The extent to which the employee experiences the work as

important, valuable, and worthwhile.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 55

2. Experienced responsibility The degree to which the employee feels personally responsible

or accountable for the results of the work.

3. Knowledge of results The degree to which the employee understands on a regular basis

how effectively he or she is performing the job.

As shown in Figure 2.3, skill variety, task identity, and task significance are all linked to ex-

perienced meaningfulness of work. Autonomy is related to experienced responsibility and feed-

back is related to knowledge of results.

A job with characteristics that enable an employee to experience all three critical psycholog-

ical states provides internal rewards that sustain motivation.46 These rewards come from having a

job where the person can learn (knowledge of results) that he or she has performed well on a task

(experienced responsibility) that he or she cares about (experienced meaningfulness).47 In addi-

tion, this situation results in certain outcomes that are beneficial to the employer: high-quality

performance, higher employee satisfaction, and lower turnover and absenteeism. Job characteris-

tics theory maintains that jobs can be designed to contain the characteristics that employees find

rewarding and motivating.

Designing Jobs and Conducting Job Analysis All the theories of employee motivation suggest that jobs can be designed to increase motivation

and performance. Job design is the process of organizing work into the tasks required to perform

a specific job.

Job Design There are three important influences on job design. One is work-flow analysis, which (you will

recall) seeks to ensure that each job in the organization receives work as an input, adds value to

that work, and then passes it on to another worker. The other two influences are business strategy

and the organizational structure that best fits that strategy. For example, an emphasis on highly

specialized jobs could be expected in a bureaucratic organizational structure because work in

bureaucratic organizations is built around the division of labor.

We will examine five approaches to job design: work simplification, job enlargement, job

rotation, job enrichment, and team-based job design.

WORK SIMPLIFICATION Work simplification assumes that work can be broken down into simple, repetitive tasks that maximize efficiency. This approach to job design assigns most of the thinking

aspects of work (such as planning and organizing) to managers and supervisors, while giving the

employee a narrowly defined task to perform. Work simplification can utilize labor effectively

to produce a large amount of a standardized product. The classic twentieth century automobile

FIGURE 2.3 The Job Characteristics Theory of Work Motivation

Core Job Characteristics

Critical Psychological States

Skill variety Task identity

Task significance

Experienced meaningfulness of the work

Autonomy

Feedback

Experienced responsibility for work outcomes

Knowledge of results from work activities

Strength of relationships is determined by intensity of

employee growth need

High internal work motivation

High-quality work performance

High satisfaction with the work

Low turnover and absenteeism

Personal and Work Outcomes

job design The process of organizing work into the tasks required to perform a specific job.

56 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

assembly line, where workers engaged in highly mechanical and repetitive tasks, exemplifies the

work simplification approach.

Although work simplification can be efficient in a stable environment, it is less effective in

a changing environment where customers demand custom-built products of high quality. More-

over, work simplification often leads to high levels of employee turnover and low levels of em-

ployee satisfaction. (In fact, where work simplification is used, employees may feel the need to

form unions to gain some control over their work.) Finally, higher-level professionals subjected

to work simplification may become so specialized in what they do that they cannot see how their

job affects the organization’s overall product or service. The result can be employees doing work

that has no value to the customer. Over the last decade, many professional employees in highly

specialized jobs became casualties of corporate restructurings, because organizations discovered

that such work did not provide value to consumers.

Work simplification is not to be confused with work elimination. Companies trying to elimi- nate work challenge every task and every step within a task to see if there is a better way to get

the work done. Even if parts of the work cannot be eliminated, some aspect of the job may be

simplified or combined with another job. Oryx, a Dallas, Texas–based oil and gas producer, saved

$70 million in operating costs in one year after it set up teams to take a fresh look at its opera-

tions. The teams discovered many procedures, reviews, reports, and approvals that had little to do

with Oryx’s business and could easily be eliminated. Work elimination is similar to BPR, though

it differs in that work elimination typically focuses on particular jobs and processes rather than

on overhauling the entire company.48

JOB ENLARGEMENT AND JOB ROTATION Job enlargement and job rotation are used to redesign jobs to reduce fatigue and boredom among workers performing simplified and highly specialized

work. Job enlargement expands a job’s duties. For example, auto workers whose specialized

job is to install carpets on the car floor may have their job enlarged to include the extra duties of

installing the car’s seats and instrument panel.49

Job rotation rotates workers among different narrowly defined tasks without disrupting the

flow of work. On an auto assembly line, for example, a worker whose job is installing carpets

would be rotated periodically to a second workstation where he or she would install only seats in

the car. At a later time period the worker might be rotated to a third workstation, where the job

would be to install only the car’s instrument panels. During the course of a day on the assembly

line, the worker might be shifted at two-hour intervals among all three workstations.

Both job enlargement and job rotation have limitations because these approaches focus

mainly on eliminating the demotivating aspects of work and, thus, improve only one of the five

core job characteristics that motivate workers (skill variety).

JOB ENRICHMENT Job enrichment is an approach to job design that directly applies job characteristics theory (see Figure 2.3) to make jobs more interesting and to improve employee

motivation. Job enrichment puts specialized tasks back together so that one person is responsible

for producing a whole product or an entire service.50

Job enrichment expands both the horizontal and the vertical dimensions of a job. Instead of

people working on an assembly line at one or more stations, the entire assembly line process is

abandoned to enable each worker to assemble an entire product, such as a kitchen appliance or

radio.51 For example, at Motorola’s Communications Division, individual employees are now

responsible for assembling, testing, and packaging the company’s pocket radio-paging devices.

Previously, these products were made on an assembly line that broke the work down into

100 different steps and used as many workers.52

Job enrichment gives employees more opportunities for autonomy and feedback. It also

gives them more responsibilities that require decision making, such as scheduling work, deter-

mining work methods, and judging quality.53 However, the successful implementation of job en-

richment is limited by the production technology available and the capabilities of the employees

who produce the product or service. Some products are highly complex and require too many

steps for one individual to produce them efficiently. Other products require the application of so

many different skills that it is not feasible to train employees in all of them. For example, it could

take an employee a lifetime to master all the skills necessary to assemble a Boeing 777 aircraft.

Job enrichment can provide opportunities for increased interactions with customers and

others who are affected by the results of the work. A job design that has provisions for contact

job enlargement The process of expanding a job’s duties.

job rotation The process of rotating workers among different narrowly defined tasks without disrupting the flow of work.

job enrichment The process of putting specialized tasks back together so that one person is responsible for producing a whole product or an entire service.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 57

with customers is likely to increase the meaningfulness of an employee’s work when he or she

learns in the customer’s own voice how the customer uses the product and how it affects him or

her.54 For example, putting software engineers in contact with groups of customers on a frequent

basis to see how they use the software can motivate the software engineers to create a future

version of the software that is easier to use and that has more applications that customers want.

Another way to enrich a job is for a company to sponsor an employee in a routine job with the

opportunity to do volunteer work in the local community while on the company payroll. The

Limited, a women’s clothing retailer, has sponsored its employees to provide kindergarten tutor-

ing to local schools.

TEAM-BASED JOB DESIGNS Team-based job designs focus on giving a team, rather than an individual, a whole and meaningful piece of work to do.55 Team members are empowered to

decide among themselves how to accomplish the work.56 They are cross-trained in different

skills, then rotated to do different tasks within the team. Team-based job designs match best with

flat and boundaryless organizational structures.

McDonald’s uses team-based job designs in the operations of a fast-food restaurant. A team

of McDonald’s employees performs various functions such as food preparation; order taking;

operating the cash register; keeping the kitchen and customer areas of the restaurant clean; taking

out the trash; and refilling dispensers with napkins, straws, and utensils for the customers to use.

Team members are cross-trained on different functions and participate in determining the alloca-

tion of work responsibilities for each work shift.

Job Analysis After a work-flow analysis has been done and jobs have been designed, the employer needs to

define and communicate job expectations for individual employees. This is best done through

job analysis, which is the systematic gathering and organization of information concerning jobs.

Job analysis puts a job under the microscope to reveal important details about it. Specifically, it

identifies the tasks, duties, and responsibilities of a particular job.

j A task is a basic element of work that is a logical and necessary step in performing a job duty.

j A duty consists of one or more tasks that constitute a significant activity performed in a job.

j A responsibility is one or several duties that identify and describe the major purpose or reason for the job’s existence.

Thus, for the job of administrative assistant, a task might be completing a travel authoriza-

tion form, which is part of the duty to keep track of the department’s travel expenses, which is

part of the responsibility to manage the departmental budget.

Job analysis provides information to answer the following questions: Where does the work

come from? What machines and special equipment must be used? What knowledge, skills, and

abilities (KSAs) does the job holder need to perform the job? How much supervision is neces-

sary? Under what working conditions should this job be performed? What are the performance

expectations for this job? On whom must the job holders depend in order to perform this job?

With whom must they interact? Job analysis can answer these questions, thereby giving manag-

ers valuable information that can help them develop more effective HRM policies and programs,

as described in the remaining chapters of this text.

WHO PERFORMS JOB ANALYSIS? Depending on the technique selected, job analysis is performed either by a member of the HR department or by the job incumbent (the person who is currently assigned to the job in question). In some businesses a manager may perform the job analysis.

METHODS OF GATHERING JOB INFORMATION Companies use several methods to gather job information: interviews, observation, diaries, and questionnaires. Factors such as cost and job

complexity will influence the choice of method.

j Interviews The interviewer (usually a member of the HR department) interviews a repre-

sentative sample of job incumbents using a structured interview. The structured interview

includes a series of job-related questions that is presented to each interviewee in the

same order.

job analysis The systematic process of collecting information used to make decisions about jobs. Job analysis identifies the tasks, duties, and responsibilities of a particular job.

58 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

j Observation An individual observes the job incumbent actually performing the job and

records the core job characteristics from observation. This method is used in cases where

the job is fairly routine and the observer can identify the job essentials in a reasonable

amount of time. The job analyst may videotape the job incumbent in order to study the job

in greater detail. j Diaries Several job incumbents may be asked to keep diaries or logs of their daily job

activities and record the amount of time spent on each activity. By analyzing these diaries

over a representative period of time (perhaps several weeks), a job analyst is able to capture

the job’s essential characteristics. j Questionnaires The job incumbent fills out a questionnaire that asks a series of questions

about the job’s knowledge, skill, and ability requirements; duties; and responsibilities.

Each question is associated with a quantitative scale that measures the importance of the

job factor or the frequency with which it occurs. A computer can then tally the scores on

the questionnaires and create a printout summarizing the job’s characteristics. j Internet-based data collection The human resource department puts a job analysis ques-

tionnaire on an intranet Web site and instructs employees to complete the questionnaire by

a certain date. A software program evaluates the responses and summarizes the job char-

acteristics using standardized descriptors that can be generalized across many different job

categories. The Internet-based collection of job data takes less time than many of the other

methods, such as face-to-face interviews and direct observation. The U.S. Department of

Labor developed the Occupational Information Network (O*NET) as an Internet-based

data collection method for collecting job information for over 800 occupations.57 O*NET

provides information on tasks; job-related behaviors; and knowledge, skills, and abilities

needed to perform the job.

THE USES OF JOB ANALYSIS Job analysis measures job content and the relative importance of different job duties and responsibilities. Having this information helps companies comply with

government regulations and defend their actions from legal challenges that allege unfairness or

discrimination. As we will see in Chapter 3, the generic defense against a charge of discrimination

is that the contested decision (to hire, to give a raise, to terminate) was made for job-related

reasons. Job analysis provides the documentation for such a defense. For instance:

j A company may be able to defend its policy of requiring sales representatives to have a

valid driver’s license if it can show via job analysis that driving is an essential activity in

the sales rep’s job. Otherwise, under the Americans with Disabilities Act (see Chapter 3),

the employer may be asked to make a reasonable accommodation for a blind job applicant

who asserts his rights to be considered for the job. j The owner of a fast-food restaurant who pays an assistant manager a weekly salary (with-

out any overtime pay) may be able to defend herself from charges of an overtime pay viola-

tion with a job analysis proving that the assistant manager job is exempt from the overtime

provisions of the Fair Labor Standards Act (see Chapter 10). The owner can prove this by

showing that most of the job duties and responsibilities entail supervising and directing

others rather than preparing food and providing service to customers.

In addition to establishing job relatedness for legal purposes, job analysis is also useful for

the following HR activities:

j Recruitment Job analysis can help the HR department generate a higher-quality pool of

job applicants by making it easy to describe a job in newspaper ads that can be targeted to

qualified job applicants. Job analysis also helps recruiters screen college-student job appli-

cants because it tells them what tasks, duties, and responsibilities the job entails. j Selection Job analysis can be used to determine whether an applicant for a specific job

should be required to take a personality test or some other kind of test. For example, a per-

sonality test that measures extroversion (the degree to which someone is talkative, sociable,

active, aggressive, or excitable) may be justified for selecting a life insurance sales repre-

sentative. (Such a job is likely to emphasize customer contact, which includes making “cold

calls” on potential new accounts.) Job analysis may also reveal that the personality test

measuring extroversion has a weak relationship to the job content of other jobs (for

example, lab technician) and should not be used as part of the selection process for those jobs.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 59

j Performance appraisal The performance standards used to judge employee performance

for purposes of promotion, rewards, discipline, or layoff should be job related. Under fed-

eral law, a company is required to defend its appraisal system against lawsuits and prove

the job relatedness of the performance criteria used in the appraisal. j Compensation Job analysis information can be used to compare the relative worth of each

job’s contributions to the company’s overall performance. The value of each job’s contribu-

tion is an important determinant of the job’s pay level. In a typical pay structure, jobs that

require mastery of more complex skills or jobs that have greater levels of responsibility pay

more than jobs that require only basic skills or have low amounts of responsibility. j Training and career development Job analysis is an important input for determining train-

ing needs. By comparing the knowledge, skills, and abilities that employees bring to the

job with those that are identified by job analysis, managers can identify their employees’

skill gaps. Training programs can then be put in place to improve job performance.

THE TECHNIQUES OF JOB ANALYSIS Figure 2.4 lists eight major techniques of job analysis. Detailed descriptions of these techniques are beyond the scope of this book. However, we briefly

describe four of them—task inventory analysis, the critical incident technique, the position

analysis questionnaire, and functional job analysis—to give you a sense of what job analysis

entails. For a set of general guidelines on conducting a job analysis effectively, see the Manager’s

Notebook titled “Guidelines for Conducting a Job Analysis.”

Task Inventory Analysis Task inventory analysis is actually a collection of methods that are offshoots of the U.S. Air Force task inventory method.58 The technique is used to determine the

knowledge, skills, and abilities (KSAs) needed to perform a job successfully. The analysis has

three steps: (1) interview, (2) survey, and (3) generation of a task by KSA matrix.

The interview step focuses on developing lists of tasks that are part of the job. Interviews are

conducted both with workers who currently hold the job and with their managers. The goal of

the interviews is to generate specific descriptions of individual tasks that can be used in the task

inventory survey.

The survey step involves generating and administering a survey consisting of task statements

and rating scales. The survey might ask respondents—the current job holders—to rate each task

on importance, frequency, and training time needed. Whether the survey is sent to a sample of

the workers or to all of them will depend on the number of workers and the economic constraints

on the job analysis.

The final step is the creation of a task by KSA matrix, which is used to rate the extent to

which a variety of KSAs are important for the successful completion of each task. An abbrevi-

ated example of a KSA rating matrix is presented in Figure 2.5. Ratings in the matrix are usually

determined by subject matter experts, who might include supervisors, managers, consultants, and

job incumbents.

Task inventory analysis has two major advantages. First, it is a systematic means for ana-

lyzing the tasks in a particular situation. Second, it uses a tailor-made questionnaire rather

than an already prepared stock questionnaire. Managers can use the technique to develop job

descriptions and performance appraisal forms, as well as to develop or identify appropriate

selection tests.

Critical Incident Technique The critical incident technique (CIT) is used to develop behavioral descriptions of a job.59 In CIT, supervisors and workers generate behavioral incidents of job

performance. The technique uses the following four steps: (1) generate dimensions, (2) generate

incidents, (3) retranslate, and (4) assign effectiveness values. In the generating dimensions step,

supervisors and workers identify the major dimensions of a job. “Dimensions” are simply aspects

of performance. For example, interacting with customers, ordering stock, and balancing the

cash drawer are the major dimensions of a retail job. Once they have agreed on the job’s major

dimensions, supervisors and workers generate “critical incidents” of behavior that represent high,

moderate, and low levels of performance on each dimension. An example of a critical incident of

high performance on the dimension “interacting with customers” might be:

When a customer complained to the clerk that she could not find a particular item, seeing

no one else was in line, this clerk walked with the customer back to the shelves to find

the item.

knowledge, skills, and abilities (KSAs) The knowledge, skills, and abilities needed to perform a job successfully.

60 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

FIGURE 2.4 The Techniques of Job Analysis

Technique

Employee Group Focused on

Data Collection Method

Analysis Results

Description

1. Task Inventory Analysis

Any—large number of workers needed

Questionnaire Rating of tasks Tasks are rated by job incumbent,* supervisor, or job analyst. Ratings may be on characteristics such as importance of task and time spent doing it.

2. Critical Incident Technique

Any Interview Behavioral description

Behavioral incidents representing poor through excellent performance are generated for each dimension of the job.

3. Position Analysis Questionnaire (PAQ)

Any Questionnaire Rating of 194 job elements

Elements are rated on six scales (for example, extent of use, importance to job). Ratings are analyzed by computer.

4. Functional Job Analysis (FJA)

Any Group interview/ questionnaire

Rating of how job incumbent relates to people, data, and things

Originally designed to improve counseling and placement of people registered at local state employment offices. Task statements are generated and then presented to job incumbents to rate on such dimensions as frequency and importance.

5. Methods Analysis (Motion Study)

Manufacturing Observation Time per unit of work

Systematic means for determining the standard time for various tasks. Based on observation and timing of work tasks.

6. Guidelines- Oriented Job Analysis

Any Interview Skills and knowledge required

Job incumbents identify duties as well as knowledge, skills, physical abilities, and other characteristics needed to perform the job.

7. Management Position Description Questionnaire (MPDQ)

Managerial Questionnaire Checklist of 197 items

Managers check items descriptive of their responsibilities.

8. Hay Plan Managerial Interview Impact of job on organization

Managers are interviewed regarding such issues as their responsibilities and accountabilities. Responses are analyzed according to four dimensions: objectives, dimensions, nature and scope, accountability.

*The term job incumbent refers to the person currently filling a particular job.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 61

An example of low performance on the same dimension might be:

When a customer handed the clerk a large number of coupons, the clerk complained out

loud to the bagger that he hated dealing with coupons.

The last two steps, retranslation and assigning effectiveness values, involve making sure that

the critical incidents generated in the first two steps are commonly viewed the same way by other

employees.

The CIT provides a detailed behavioral description of jobs. It is often used as a basis for

performance appraisal systems and training programs, as well as to develop behaviorally based

selection interview questions. The appendix to Chapter 7 gives you the opportunity to develop

critical incidents.

FIGURE 2.5 Sample Task by KSA Matrix

1 Very Low

2 Low

3 Medium

Rating Scale Importance of characteristics for successful performance of task

4 High

5 Very High

1. Reviews production schedules to deter- mine correct job sequencing

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Job Task

Worker Characteristics

2. Identifies problem jobs and takes corrective action

3. Determines need for and provides special work orders

4. Maintains log book and makes required assignments

5. Negotiates with foremen to determine critical dates for emergency situations

6. Analyzes material availability and performs order maintenance

9. Negotiates with Purchasing to ensure material availability

10. Determines product availability for future customer orders

11. Determines promise dates and pro- vides to customer

12. Determines adequacy of materials given document forecast

7. Prepares job packets

8. Maintains customer order file

62 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Position Analysis Questionnaire (PAQ) The PAQ is a job analysis questionnaire that contains 194 different items. Using a five-point scale, the PAQ seeks to determine the degree to which the

different items, or job elements, are involved in performing a particular job.60 The 194 items are

organized into six sections:

1. Information input Where and how a worker gets information needed to perform the job.

2. Mental processes The reasoning, decision-making, planning, and information-processing

activities involved in performing the job.

3. Work output The physical activities, tools, and devices used by the worker to perform the job.

4. Relationships with other persons The relationships with other people required in perform-

ing the job.

5. Job context The physical and social contexts in which the work is performed.

6. Other characteristics The other activities, conditions, and characteristics relevant to the job.

Guidelines for Conducting a Job Analysis

Conducting a job analysis requires managers to take five steps: 1. Determine the desired applications of the job analysis. For example, if used as a basis for

performance appraisal, job analysis should collect data that are representative of differing

levels of job performance. If used as a basis for determining training needs, then job analy-

sis should collect information on the necessary knowledge, skills, and abilities that lead to

effective job performance.

2. Select the jobs to be analyzed. Factors that make specific jobs appropriate for job analysis

include the stability or obsolescence of job content (rapidly changing jobs require more

frequent job analysis). Entry-level jobs (which require selection tools that determine who

gets hired and who gets rejected) are also analyzed regularly.

3. Gather the job information. Within budget constraints, collect the desired information

using the most appropriate job-analysis technique.

4. Verify the accuracy of the job information. Both the job incumbents and their immedi-

ate supervisors should review the job information to ensure that it is representative of the

actual job.

5. Document the job analysis by writing a job description. Document the job-analysis infor-

mation in a job description that summarizes the job’s essential duties and responsibilities,

as well as the knowledge, skills, and abilities necessary for the job. This document allows

managers to compare different jobs on various dimensions and is an important part of

many HR programs.

Sources: Based on Gatewood, R. D., Field, H. S., and Barrick, M. R. (2011). Human resource selection (7th ed.). Mason, OH: South-Western; How to write a job analysis and description. (2010). www.entrepreneur.com; Cascio, W. F. and Aguinis, H. (2011). Applied psychology in human resource management (7th ed.). Upper Saddle River, NJ: Prentice Hall. jj

Customer-Driven HR

A computer analyzes the completed PAQ and generates a score for the job and a profile of

its characteristics.

Functional Job Analysis Functional job analysis, a technique used in the public sector, can be done by either interview or questionnaire.61 This technique collects information on the following

aspects of the job:62

1. What the job incumbent does to people, data, and things.

2. The methods and techniques the job incumbent uses to perform the job.

3. The machines, tools, and equipment used by the job incumbent.

4. The materials, projects, or services produced by the job incumbent.

M A N A G E R ’ S N O T E B O O K

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 63

The results of functional job analyses are published by the U.S. Department of Labor in the

Occupational Information Network (O*NET), which is a free online database containing hun-

dreds of occupational definitions.63

JOB ANALYSIS AND THE LEGAL ENVIRONMENT Because job analysis can be the basis on which a firm wins or loses a lawsuit over how it selects or appraises employees, it is important that

organizations carefully document their job-analysis efforts.

There are two important questions regarding job analysis. The first of these questions is:

Which job analysis method is best? Although there are many job-analysis techniques, there is no

clear choice as to which is best. Some, like task inventory analysis and Guidelines-Oriented Job

Analysis, were developed to satisfy legal requirements, but there is no legal basis to prefer one to

another. The Uniform Guidelines published by the Equal Employment Opportunity Commission state that a job analysis should be done, but do not specify a preferred technique.

As a general rule, the more concrete and observable the job-analysis information, the better.

Thus, job-analysis approaches that provide specific task or behavioral statements, such as task

inventory analysis or CIT, may be preferable. CIT can be very expensive because of the time

commitment required of supervisors and workers.

Given the lack of a single best technique, the choice of job-analysis technique should, within

economic constraints, be guided by the purpose of the analysis. For example, if the major purpose

for the analysis is the redesign of jobs, then an analysis focusing on tasks would probably be

best. But if the major purpose is the development of a training program, a behaviorally focused

technique would probably be best.

JOB ANALYSIS AND ORGANIZATIONAL FLEXIBILITY The second question regarding job analysis is: How does detailed job-analysis information fit into today’s organizations, which need to be

flexible and innovative to remain competitive?

Whatever technique is used, job analysis is a static view of the job as it currently exists, and

a static view of jobs is at odds with current organizational trends emphasizing flexibility and

innovativeness.64 For instance, US Airways attempts to keep labor costs down by having employ-

ees do a variety of tasks. The same person may be a flight attendant, ticket agent, and baggage

handler, all in the same week. And almost all jobs today are affected by the constant advances in

information and communication technologies. Such factors can render even the most thorough

job analysis virtually useless after a very short time.

In an organizational environment of change and innovation, it is better to focus job analyses

on worker characteristics than on job characteristics. The required tasks in jobs may change, but such employee characteristics as innovativeness, team orientation, interpersonal skills, and

communication skills will likely remain critical to organizational success. Unfortunately, most

job-analysis techniques are not focused on discovering worker characteristics unless the charac-

teristics are directly related to the immediate tasks. But, because the importance of fit with the

organization is being increasingly recognized as a factor that should be considered in selection,65

job analysis may become more focused on underlying employee factors.66 Toyota (USA) and

AFG Industries are organizations that have expanded job analysis to emphasize fit between pro-

spective employees and the organization.

Job Descriptions A job description is a summary statement of the information collected in the job-analysis pro-

cess. It is a written document that identifies, defines, and describes a job in terms of its duties,

responsibilities, working conditions, and specifications. There are two types of job descriptions:

specific job descriptions and general job descriptions.

A specific job description is a detailed summary of a job’s tasks, duties, and responsi- bilities. This type of job description is associated with work-flow strategies that emphasize

efficiency, control, and detailed work planning. It fits best with a bureaucratic organizational

structure with well-defined boundaries that separate functions and the different levels of man-

agement. Figure 2.6 shows an example of a specific job description for the job of service and

safety supervisor. Note that this job description closely specifies the work that is unique to a

person who will supervise safety employees. The specific job knowledge of safety regulations and Red Cross first-aid procedures included in this job description make it inappropriate for any

other type of supervisor (for example, a supervisor at a local supermarket).

job description A written document that identifies, defines, and describes a job in terms of its duties, responsibilities, working conditions, and specifications.

64 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

FIGURE 2.6 Example of a Specific Job Description

Source: Jones, M. A. (1984, May). Job descriptions made easy. Personnel Journal. Copyright May 1984. Reprinted with the permission of Personnel Journal. ACC Communications, Inc., Costa Mesa, California; all rights reserved.

Job Title: Service and Safety Supervisor DIVISION: Plastics DEPARTMENT: Manufacturing SOURCE(S): John Doe WAGE CATEGORY: Exempt JOB ANALYST: John Smith VERIFIED BY: Bill Johnson DATE ANALYZED: 12/26/14 DATE VERIFIED: 1/5/15

Job Summary The SERVICE AND SAFETY SUPERVISOR works under the direction of the IMPREGNATING & LAMINATING MANAGER: schedules labor pool employees; supervises the work of gardeners, cleaners, waste disposal, and plant security personnel; coordinates plant safety programs; maintains daily records on personnel, equipment, and scrap.

Job Duties and Responsibilities 1. Schedules labor employees to provide relief personnel for all manufacturing departments; prepares

assignment schedules and assigns individuals to departments based on routine as well as special needs in order to maintain adequate labor levels through the plant; notifies Industrial Relations Department weekly about vacation and layoff status of labor pool employees, contractual disputes, and other employment-related developments.

2. Supervises the work of gardeners, cleaners, waste disposal, and plant security personnel; plans yard, cleanup, and security activities based on weekly determination of needs; assigns tasks and responsibilities to employees on a daily basis; monitors progress or status of assigned tasks; disciplines employees.

3. Coordinates plant safety programs; teaches basic first-aid procedures to security, supervisory, and lease personnel in order to maintain adequate coverage of medical emergencies; trains employees in fire fighting and hazardous materials handling procedures; verifies plant compliance with new or changing OSHA regulations; represents division during company-wide safety programs and meetings.

4. Maintains daily records on personnel, equipment, and scrap; reports amount of waste and scrap to cost accounting department; updates personnel records as necessary; reviews maintenance checklists for towmotors.

5. Performs other miscellaneous duties as assigned.

Job Requirements 1. Ability to apply basic principles and techniques of supervision.

a. Knowledge of principles and techniques of supervision. b. Ability to plan and organize the activities of others. c. Ability to get ideas accepted and to guide a group or individual to accomplish the task. d. Ability to modify leadership style and management approach to reach goal.

2. Ability to express ideas clearly both in written and oral communications. 3. Knowledge of current Red Cross first-aid operations. 4. Knowledge of OSHA regulations as they affect plant operations. 5. Knowledge of labor pool jobs, company policies, and labor contracts.

Minimum Qualifications Twelve years of general education or equivalent; one year supervisory experience; and first-aid instructor’s certification.

OR

Substitute 45 hours classroom supervisory training for supervisory experience.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 65

The general job description, which is fairly new on the scene, is associated with work- flow strategies that emphasize innovation, flexibility, and loose work planning. This type of job

description fits best with a flat or boundaryless organizational structure in which there are few

boundaries between functions and levels of management.67

Only the most generic duties, responsibilities, and skills for a position are documented in the

general job description.68 Figure 2.7 shows a general job description for the job of “supervisor.”

Note that all the job duties and responsibilities in Figure 2.7 apply to the job of any supervisor— one who supervises accountants, engineers, or even the safety employees managed by the service

and safety supervisor in Figure 2.6.

FIGURE 2.7 Example of a General Job Description

Source: Jones, M. A. (1984, May). Job descriptions made easy. Personnel Journal. Reprinted by permission of the author.

Job Title: Supervisor DIVISION: Plastics DEPARTMENT: Manufacturing SOURCE(S): John Doe, S. Lee WAGE CATEGORY: Exempt JOB ANALYST: John Smith VERIFIED BY: Bill Johnson DATE ANALYZED: 12/26/14 DATE VERIFIED: 1/5/15

Job Summary The SUPERVISOR works under the direction of the MANAGER: plans goals; supervises the work of employees; develops employees with feedback and coaching; maintains accurate records; coordinates with others to achieve optimal use of organizational resources.

Job Duties and Responsibilities 1. Plans goals and allocates resources to achieve them; monitors progress toward objectives and adjusts plans as

necessary to reach them; allocates and schedules resources to assure their availability according to priority. 2. Supervises the work of employees; provides clear instructions and explanations to employees when giving

assignments; schedules and assigns work among employees for maximum efficiency; monitors employees’ performance in order to achieve assigned objectives.

3. Develops employees through direct performance feedback and job coaching; conducts performance apprais- als with each employee on a regular basis; provides employees with praise and recognition when performance is excellent; corrects employees promptly when their performance fails to meet expected performance levels.

4. Maintains accurate records and documents actions; processes paper work on a timely basis, and with close attention to details; documents important aspects of decisions and actions.

5. Coordinates with others to achieve the optimal use of organizational resources; maintains good working relationships with colleagues in other organizational units; represents others in unit during division or corporate-wide meetings.

Job Requirements 1. Ability to apply basic principles and techniques of supervision.

a. Knowledge of principles and techniques of supervision. b. Ability to plan and organize the activities of others. c. Ability to get ideas accepted and to guide a group or individual to accomplish the task. d. Ability to modify leadership style and management approach to reach goal.

2. Ability to express ideas clearly in both written and oral communications.

Minimum Qualifications Twelve years of general education or equivalent; and one year supervisory experience.

OR

Substitute 45 hours classroom supervisory training for supervisory experience.

66 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

The driving force behind a move toward general job descriptions may be a customer- focused

management strategy or BPR.69 For example, the Arizona Public Service (APS), a public utility,

moved toward general job descriptions after discovering that it had 1,000 specific job descriptions

for its 3,600 workers.70 This massive number of specific job descriptions erected false barriers

among work functions, choked off change, and prevented APS from providing high levels of

customer service. By using general job descriptions, APS was able to reduce the number of its

job descriptions to 450.

An even more impressive application of general job descriptions is seen at Nissan, the

Japanese auto manufacturer. Nissan has only one general job description for all its hourly wage

production employees.71 By comparison, some of the divisions of General Motors have a va-

riety of specific job descriptions for their hourly production workforce. This fact is partially

explained by the vigilance of the United Auto Workers’ Union (UAW) in defending the rights of

its members to work in specific jobs.

ELEMENTS OF A JOB DESCRIPTION Job descriptions have four key elements: identification information, job summary, job duties and responsibilities, and job specifications and minimum

qualifications.72 Figures 2.6 and 2.7 show how this information is organized on the job description.

To comply with federal law, it is important that job descriptions document only the essential

aspects of a job. Otherwise, qualified women, minorities, and persons with disabilities may be

unintentionally discriminated against for not meeting specified job requirements. For example, a

valid driver’s license should not be put in the job description if the job can be modified so that it

can be performed by a person with physical disabilities without a driver’s license.

Identification Information The first part of the job description identifies the job title, location, and source of job-analysis information; who wrote the job description; the dates of the job

analysis and the verification of the job description; and whether the job is exempt from the

overtime provision of the Fair Labor Standards Act or subject to overtime pay rates. To be certain

that the identification information ensures equal employment opportunities, HR staff should:

j Make sure the job titles do not refer to a specific gender. For example, use the job title

“sales representative” rather than “salesman.” j Make sure job descriptions are updated regularly so that the date on the job description is

current. Job descriptions more than two years old have low credibility and may provide

flawed information. j Avoid inflating a job title to give the job a more impressive-sounding status than it

deserves. For example, use the title “sales representative” rather than “sales executive” for

a job that does not have executive duties such as supervising a staff of salespeople.73

j Ensure that the supervisor of the job incumbent(s) verifies the job description. This is a good

way to ensure that the job description does not misrepresent the actual job duties and respon-

sibilities. (A manager who is familiar with the job may also be used to verify the description.)

Job Summary The job summary is a short statement that summarizes the job’s duties, responsibilities, and place in the organizational structure.

Job Duties and Responsibilities Job duties and responsibilities explain what is done on the job, how it is done, and why it is done.74

Each job description typically lists the job’s three to five most important responsibilities.

Each responsibility statement begins with an action verb. For example, the job of supervisor in

Figure 2.7 has five responsibilities that start with the following action verbs: plans, supervises,

develops, maintains, and coordinates. Each responsibility is associated with one or more job du-

ties, which also start with action verbs. For example, the supervisor job in Figure 2.7 has two job

duties associated with the responsibility of “plans goals”: (1) monitors progress toward objec-

tives and (2) allocates and schedules resources. The job duties and responsibilities statement is

probably the most important section of the job description because it influences all the other parts

of the job description. Therefore, it must be comprehensive and accurate.

Job Specifications and Minimum Qualifications The job specifications section lists the worker characteristics (KSAs) needed to perform a job successfully. The KSAs represent the things that

an employee who has mastered the job can do.

job specifications The worker characteristics needed to perform a job successfully.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 67

When documenting KSAs it is important to list only those that are related to successful job

performance. For example, a current computer programmer may have mastered some program-

ming languages that are not necessary for job performance. These should not be included in the

job description.

The minimum qualifications are the basic standards a job applicant must have achieved to be considered for the job. These can be used to screen job applicants during the recruit-

ing and selection process. Here are some things to watch for when documenting minimum

qualifications:

j A college degree should be a minimum qualification only if it is related to the successful

performance of the job. For example, a bachelor’s degree may be a minimum qualification

for an accountant in a major accounting firm, but it is not likely to be necessary for the job

of shift supervisor in a fast-food restaurant. j Work experience qualifications should be carefully specified so that they do not discrimi-

nate against minorities or persons with disabilities. For example, the job description in

Figure 2.7 provides for a substitution of 45 classroom hours of supervisory training for the

one year of supervisory experience minimum qualification. This provision allows people

who have been excluded from employment opportunities in the past to be considered for

the position. This flexibility allows the company to consider diverse job applicants, who

are less likely to meet the supervisory experience qualification.

JOB OR WORK? In this chapter, we saw that in some situations it is more accurate to focus on the work that an employee performs rather than the job, because some jobs lack clearly defined boundaries due to rapidly changing work responsibilities and duties.75

Some companies deal with this dynamic environment by letting teams be responsible for

a larger unit of work so that a team member can be deployed on different tasks that the team

decides need to be performed, depending on the demands on a given day. Other companies

use a general job description—for example, a job with the all-purpose title of “associate”—to

provide employees flexibility in interpreting their roles based on the best way to serve a particu-

lar customer. For instance, bus drivers serving some of the dangerous neighborhoods of Paris,

France, found that their job involved managing hostile customers or ending fights between bus

passengers. However, these conflict management skills were not included in the job description

of a bus driver. Bus drivers learned to interpret their work role broadly in order to provide a

safe environment for their passengers. Thus, although in some cases it may be more accurate to

describe what an employee does for an employer as work rather than a job, we expect that the need to assign employees to perform jobs is going to remain an important feature of the work

environment into the foreseeable future. This means that translating the duties and responsibili-

ties of employees’ work into job descriptions will continue to be useful and beneficial to both

managers and employees.

The Flexible Workforce We have seen how organizations can be structured and jobs designed to maximize flexibility. In

this section, we examine two additional strategies for ensuring flexibility: contingent workers

and flexible work schedules.

Contingent Workers There are two types of workers: core workers and contingent workers. A company’s core

workers have full-time jobs and enjoy privileges not available to contingent workers. Many

core workers expect a long-term relationship with the employer that includes a career in the or-

ganization, a full array of benefits, and job security. In contrast, the jobs of contingent workers

are based on the employer’s convenience and efficiency needs. Firms hire contingent workers

to help them deal with temporary increases in their workload or to do work that is not part of

their core set of capabilities. When the business cycle moves into a downturn, the contingent

workers are the first employees to be discharged. They thus provide a buffer zone of protection

for the core workers. For example, in some large Japanese corporations core workers’ jobs are

core workers An organization’s full-time employees.

contingent workers Workers hired to deal with temporary increases in an organization’s workload or to do work that is not part of its core set of capabilities.

68 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

protected by a large contingent workforce that can be rapidly downsized when business condi-

tions change.

Contingent workers include temporary employees, part-time employees, outsourced subcon-

tractors, contract workers, and college interns. According to the U.S. Bureau of Labor Statistics

in the United States, contingent workers made up 26 percent of the total labor force in 2010. This

number includes approximately 27 million part-time employees, 10 million contract workers,

and 1.2 million temporary employees. The jobs held by contingent workers are diverse, ranging

from secretaries, security guards, sales clerks, and assembly-line workers to doctors, college

professors, engineers, managers, and even chief executives.

TEMPORARY EMPLOYEES Temporary employment agencies provide companies with temporary employees (or “temps”) for short-term work assignments. Temps work for the temporary employment agency and are simply reassigned to another employer when their current job ends.

ManpowerGroup, the largest U.S. temporary employment agency, placed 3.5 million people in

positions in 2011.76

Temporary employees provide employers with two major benefits:

j Temps on average receive less compensation than core workers. They are not likely to

receive health insurance, retirement, or vacation benefits from the company that uses their

services. A majority of temporary employees do not receive these benefits from the tempo-

rary agency because they must meet a minimum service requirement of several months or

longer of continuous employment with the agency to qualify for the benefits. For example,

as layoffs mounted in the 1990s, the total payroll for professionals and managers employed

by temporary firms more than tripled.77 However, many managers working at temp jobs

earn 50 percent less than they earned as core workers.78 j Temporary employees may be highly motivated workers, because many employers choose

full-time employees from the ranks of the top-performing temps. Because temps can be

screened for long-term career potential in an actual work setting and be easily dismissed if

the company determines that they have low potential, hiring temps helps employers reduce

the risk of selecting employees who prove to be a poor fit.

Employers should understand the legal limits of using a temporary worker on a long-term

basis. Several thousand Microsoft temps who held long-term positions but were employed

through a temporary agency (“permatemps”) filed a class action lawsuit, claiming that Microsoft

treated them as full-time workers in every way except in terms of compensation and benefits.

A  federal court of appeals ruled that workers who were on Microsoft’s payroll for more than a

few months—even if placed by temporary agencies—should be considered common-law em-

ployees who are entitled to the same benefits that permanent employees receive.79

Temporary employees are being used with increasing regularity throughout the world. In

France, one in five workers is on a temporary or part-time contract, and in Britain more than

25 percent of the workforce is part-time. Almost 33 percent of new jobs created in Spain were for

temporary workers. During the height of the recession in 2010, 26 percent of all private-sector

jobs in the United States were temporary positions.80

PART-TIME EMPLOYEES Part-time employees work fewer hours than full-time core employees and receive far fewer employee benefits, thus providing substantial savings to employers.

According to the U.S. Bureau of Labor Statistics, a part-time employee is defined as an individual

who works less than 35 hours per week due to economic, voluntary, or involuntary reasons.81

Traditionally, part-timers have been employed by service businesses that have a high variance

in demand between peak and off-peak times. For example, restaurants and markets hire many

part-time employees to provide service to customers during peak hours (usually evenings and

weekends).

Companies are finding many new applications for part-time workers. For example, UPS has

created 25-hour-per-week part-time jobs for shipping clerks and supervisors who sort packages

at its distribution centers. Companies that downsize their workforces to reduce payroll costs have

been known to restructure full-time core jobs into part-time positions.

In a special type of part-time employment called job sharing, a full-time job is divided be-

tween two or more people to create two part-time jobs. During a downscaling of its workforce,

job sharing A work arrangement in which two or more employees divide a job’s responsibilities, hours, and benefits among themselves.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 69

DuPont used job sharing between employees in its management, research, and secretarial areas

to avoid layoffs.82 Employees who decide to be partners in a job-sharing arrangement must oper-

ate as a team and communicate the details of their daily activities to each other so that the quality

of service or job output is not affected by the handoffs that occur when the job-sharing partners

come and go.83

Companies are increasingly using part-time work as a way to reverse the “brain drain” of

highly skilled female professionals who need greater work–life balance to provide more time for

their family. Johnson & Johnson, the large health care products company, allows professional

women with substantial work experience to take a reduced-hour option so the company won’t

lose them. Pfizer, the pharmaceutical giant, offers part-time work to its pharmaceutical sales

professionals who are highly trained in product knowledge and have developed valuable relation-

ships with doctors who are their clients. Sales representatives choosing the part-time option work

60 percent of the hours of full-time employees and can structure their working day around chil-

dren’s school hours. Ninety-three percent of those selecting part-time work at Pfizer are working

mothers, and these individuals remain eligible for promotion and may return to full-time status

at their discretion.84

OUTSOURCING/SUBCONTRACTING As we saw in Chapter 1, outsourcing (sometimes called subcontracting) is the process by which employers transfer routine or peripheral work to another organization that specializes in that work and can perform it more efficiently. Employers that

outsource some of their nonessential work gain improved quality and cost savings. Outsourcing

agreements may result in a long-term relationship between an employer and the subcontractor,

though it is the employer who has the flexibility to renew or end the relationship at its

convenience.85

Outsourcing is the wave of the future as more and more companies look to the “virtual cor-

poration” as an organizational model.86 A virtual company consists of a small core of permanent employees and a constantly shifting workforce of contingent employees.

Consistent with the outsourcing trend, human resource activities are being outsourced by

organizations. For example, payroll, benefits, training, and recruiting are often outsourced to

external service providers.87 Previously, these outsourced activities were performed in-house.

In fact, human resource outsourcing is a fast-growing $103 billion industry, and total annual

industry revenues recently increased 70 percent over a five-year period.88 Although outsourcing

routine human resource activities such as payroll produces efficiencies, the outsourcing of criti-

cal HR systems such as training or performance evaluation may lead to a loss of control over

important systems or a loss of opportunity to learn from one’s best human resource practices

that could achieve fundamental improvements in other human resource activities. A firm that

provides a wide array of human resource services on an outsourcing basis to small businesses is

called a professional employer organization (PEO). PEOs provide small businesses with a bundle of human resource management services such as training, benefits administration, and staffing

that larger firms have in-house, so that managers in small businesses can focus on achieving

strategic business goals.

Establishing the right relationship with service vendors is very important for companies

that decide to outsource. Although some companies view their outsourced vendors as strategic

partners, others caution that, ultimately, company and vendor do not have identical interests.

For example, UOP, an Illinois-based engineering firm that develops technology used to build oil

refineries, sued Andersen Consulting, the information-technology firm UOP had hired to stream-

line and improve some of its work processes. UOP sued for $100 million in damages, alleging

breach of contract.89 The lesson here is that it pays to communicate clearly and specifically with

vendors from the beginning.90

One company that relies on outsourcing as a source of competitive advantage is Benetton,

the Italian multinational corporation that makes clothing sold in 110 countries. Benetton views

itself as a “clothing services” company rather than as a retailer or manufacturer.91 The company

outsources a large amount of clothes manufacturing to local suppliers but makes sure to provide

its subcontractors with the clothes-making skills that Benetton views as crucial to maintaining

quality and cost efficiency.92

The Manager’s Notebook, “Advantages and Disadvantages of Outsourcing an HR Activity,”

provides some useful information on factors to consider before outsourcing.

A QUESTION OF ETHICS Many employees and union repre- sentatives complain bitterly about the practice of outsourcing work, particularly to foreign countries. Part of the complaint is that com- panies do this to avoid paying fair wages and providing employee benefits that U.S. workers expect. Is this an ethical issue? If so, on what basis should companies make outsourcing decisions?

70 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

M A N A G E R ’ S N O T E B O O K

Emerging Trends

Advantages and Disadvantages of Outsourcing an HR Activity

Outsourcing an HR activity to a firm that specializes in providing an HR service to cus-tomers has both advantages and disadvantages. Here are some important factors to consider: Outsourcing Advantages

j An outsourcing firm can provide better-quality people and the most current practices and

information pertaining to an activity or task. Because the HR activity is the core mission

of the outsourcing firm, it can specialize in doing it very well. For example, a firm that

specializes in training employees on the use of word processing software is likely to be

able to train employees to use the most recent upgrades on the software that contains the

newest features and applications. Further, the complexities of meeting the requirements of

the Patient Protection and Affordable Care Act—which will require U.S. employers with

more than 50 employees to provide health insurance in 2015 (explained in detail in

Chapter 12)—can overwhelm employers, who may decide to turn to HR outsourcing firms

that specialize in benefits for assistance in complying with the law. j Outsourcing certain tasks can result in a reduction in administrative costs because the

outsourcer can do the task more efficiently and gain economies of scale by virtue of having

a large network of customers. j Outsourcing specific activities and employees that do not fit with company culture may

be useful to preserve a strong culture or employee morale. An example is outsourcing

the benefits administration activity at a law firm, where the law-firm culture is shared by

people who are trained as attorneys.

Outsourcing Disadvantages j Deploying an HR activity to an outsourcing firm may lead to loss of control over an

important activity, which can be a costly problem. For example, by outsourcing employee

recruiting to an external recruiting firm, the client company may experience missed deadlines

on time-sensitive projects if the recruiting firm has other, more important clients to serve. j Outsourcing an HR activity may result in losing the opportunity to gain knowledge and

information that could benefit other company processes and activities. For example, out-

sourcing executive training and development to a company that provides a standardized

training package can result in a lost opportunity to learn about the unique aspects of a

firm’s way of shaping leadership with respect to its own culture.

Sources: Based on Korkki, P. (2012, December 2). When the HR office leaves the building. New York Times, Sun- day Business section, 8; Miller, S. (2007, December). Relationship advice for HR outsourcing buyers. HRMagazine, 55–56; Smith, S. (2005, May 9). Look before you leap into HR outsourcing. Canadian HR Reporter, 13; Kaplan, J. (2002, January 14). The realities of outsourcing. Network World, 33; Baron, J. and Kreps, D. (1999). Strategic human resources: Frameworks for general managers. New York: John Wiley & Sons. jj

Offshore Outsourcing The spectacular economic growth of China and India during the first decade of the twenty-first century has created lucrative opportunities for companies in North

America, Europe, and Asia to take advantage of the professional skills and low labor costs provided

by outsource firms in those two countries.93 The labor-cost savings these offshore outsource firms

can offer are impressive. For example, an information technology (IT) professional with three-to-

five years of work experience would earn an annual salary of around $26,000 in India compared

to about $75,000 in the United States. A call-center employee in India would earn around $2,000 a

year, compared to $20,000 in Britain.94 Offshore outsourcing, sometimes referred to as offshoring, refers to the use of international outsource providers to gain competitive advantage in the market.95

Offshore outsource providers in India are particularly competitive in offering services

such as call centers, IT consulting, and software development. For example, Indian call-center

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 71

providers handle customer-service calls and process insurance claims, loans, travel bookings, and

credit-card bills.96

China has developed a high level of expertise in manufacturing. Chinese outsource firms

manufacture a broad range of products for clients. These products range from consumer electron-

ics such as television sets and DVDs to memory chips, to consumer goods such as microwave

ovens, dishwashers, and toys for children, as well as autos and trucks. Currently, a large por-

tion of the inventory of the goods sold in Walmart, the world’s largest retail store, comes from

Chinese suppliers who partner with Walmart. Additional information on offshore outsourcing can

be found in Chapter 17 (“International HRM Challenge”).

The Manager’s Notebook, “Foreign Manufacturing Is Returning to the United States Due

to the ‘Reshoring’ Trend,” suggests that companies may have overlooked some of the pitfalls in

outsourcing their factories to overseas locations.

Global Foreign Manufacturing Is Returning to the United States

Due to the “Reshoring” Trend

In a surprising turn of events, some U.S. manufacturers who had outsourced their manufactur-ing work to China and other low-wage countries have shifted some of their factory production back to the United States—a trend that is called “reshoring.” For example, Apple Inc. recently announced it would start manufacturing some of its Mac computers in a newly built American

facility. General Electric has opened a U.S. factory in Louisville, Kentucky, to make water heat-

ers that had been made in China and refrigerators that were previously made in Mexico. Here are

some of the reasons why factories are being relocated to the United States:

j Wages in China and India have increased at a rate of 10 to 20 percent per year in the last

decade while wages in the United States and Europe have remained flat over the same

period. Consequently, the wage advantage of doing work offshore has declined. j Some American firms such as Apple Inc. and General Electric have realized that they

went too far in sending their manufacturing overseas and decided they needed to make a

correction to achieve a better balance in their supply chain systems. j Offshoring companies have discovered unexpected costs that result from long lead times to

bring products to market from an offshore production facility, as well as quality-control is-

sues resulting from the separation of manufacturing from design and engineering teams. Case

in point: The Boeing 787 Dreamliner aircraft has suffered numerous electrical system flaws

in addition to the battery problems that led to its grounding in 2013. The engineers at Boeing

blame the 787’s outsourced supply chain, indicating that poor quality components coming

from subcontractors outside Boeing’s control are the source of the aircraft’s problems.

Sources: Based on The Economist (2013, January 19). Special report: Outsourcing and offshoring, 3–5; Smith, A. (2013, March). Foreign factories come back home. Kiplinger’s Personal Finance, 11; Gates, D. (2013, February 2). Boeing 787’s problems blamed on outsourcing, lack of oversight. Seattle Times. www.seattletimes.com; Denning, S. (2013, January 17). The Boeing debacle: Seven lessons every CEO must learn. Forbes. www.forbes.com. jj

M A N A G E R ’ S N O T E B O O K

CONTRACT WORKERS Contract workers are employees who develop work relationships directly with an employer (instead of with a subcontractor through an outsourcing arrangement) for

a specific piece of work or time period.97 They are likely to be self-employed, supply their

own tools, and determine their hours of employment. Sometimes contract workers are called

consultants or freelancers. Many professionals with specialized skills become contract workers.98 Hospitals use con-

tract workers as emergency room physicians. Universities use them as adjunct professors to teach

basic courses. Small businesses also are likely to use contract workers. When things get too busy

for its 30 full-time employees, Ippolita, a New York City jewelry manufacturer, brings in a small

army of freelancers—fashion experts, sculptors of miniature models, designers, and marketers.

The biggest challenge is managing the relationship between freelancers and full-time employees.

72 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Management has found it very beneficial to have written job descriptions for both full-time

employees and contract workers so that everyone knows his or her specific assignment.99

Contract workers can often be more productive and efficient than in-house employees, be-

cause freelancers’ time is usually not taken up with the inevitable company bureaucracy and

meetings. They can also give companies a fresh outsider’s perspective. However, it is not always

easy to motivate a freelancer for whom you are one of several clients, each with urgent projects

and pressing deadlines.

COLLEGE INTERNS One of the newest developments in the contingency work area is the use of college interns, college students who work on full-time or part-time assignments of short duration (usually for one academic semester or summer) to obtain work experience. Some interns are paid,

some are not. Employers use interns to provide support to professional staff. Sometimes interns

work a trial run for consideration as a potential core employee after graduation from college. Large

companies that use college interns include IBM and General Electric (which have internships for

electrical engineers), the Big Four accounting firms (which use interns on auditing engagements

with clients), and Procter & Gamble (which uses interns in its sales and marketing areas).

College interns are also used extensively by small companies that want to attract employees

who will grow with the company. For instance, at Seal Press, a small publishing company in

Seattle, Washington, a woman who started as a marketing intern went on to become marketing

assistant and is now marketing director. Editorial interns log in and read unsolicited manuscripts,

write detailed reader’s reports, and sometimes attend staff meetings. Because the work is chal-

lenging, there is a long waiting list of applicants.

Flexible Work Schedules Flexible work schedules alter the scheduling of work while leaving intact the job design and

the employment relationship. Employers may get higher levels of productivity and job satisfac-

tion.100 Employees may feel that they are trusted by management, which can improve the quality

of employee relations (see Chapter 13).101 Employees with flexible work schedules may also

experience less stress by avoiding rush hour traffic.

The three most common types of flexible work schedules are flexible work hours, compressed

workweeks, and telecommuting.

FLEXIBLE WORK HOURS Flexible work hours give employees control over the starting and ending times of their daily work schedules. Employees are required to put in a full 40-hour workweek

at their onsite workstations, but have some control over the hours when they perform the work.

Flexible work hours divide work schedules into core time, when all employees are expected to

be at work, and flexible time (flextime), when employees can choose to organize work routines around personal activities.

Hewlett-Packard’s policy gives workers the flexibility to arrive at work between 6:30 a.m.

and 8:30 a.m. and leave after they put in eight hours of work. Hewlett-Packard’s core hours are

between 8:30 a.m. and 2:30 p.m.102 Meetings and team activities take place in this core time.

COMPRESSED WORKWEEKS Compressed workweeks alter the number of workdays per week by increasing the length of the workday to 10 or more hours. One type of compressed workweek

schedule consists of four 10-hour workdays. Another consists of four 12-hour workdays in a

four-days-on/four-days-off schedule. This schedule gives workers two 4-day blocks of time off

every 16 days.103

Compressed workweeks create less potential for disruptions to businesses that provide

24-hour-per-day services, such as hospitals and police forces. They also lower absenteeism and

tardiness at companies with work sites in remote locations that require long commutes to work

(for example, off-shore oil-drilling platforms).

The major advantage of compressed workweeks for employees is that they are given three- or

four-day weekends to spend with their families or to engage in personal interests. However, em-

ployees who work a compressed workweek may experience increased levels of stress and fatigue.104

Figure 2.8 shows the length of the workweek for full-time employment in different coun-

tries. Notice that the workweek ranges from 35 hours in France to 48 hours in Hong Kong.

TELECOMMUTING Personal computing devices, smartphones, fax machines, e-mail, and the Internet have created the opportunity for millions of people in the United States to work from a

flexible work hours A work arrangement that gives employees control over the starting and ending times of their daily work schedules.

core time Time when all employees are expected to be at work. Part of a flexible work hours arrangement.

flextime Time during which employees can choose not to be at work. Part of a flexible work hours arrangement.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 73

FIGURE 2.8 The Length of the Workweek in Selected Countries

Sources: Based on Briscoe, D., and Schuler, R. 2004. International human resource management (2nd ed.). New York: Routledge Press; Counting the

hours. OECD Observer (2010) www .oecdobserver.org; Workweek and weekend. Wikipedia (2010) www .wikipedia.org.

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work–life balance The balance between an individual’s work and personal life.

home office or telecommute.105 Telecommuting allows employees to cultivate tailored lifestyles

while working a full-time job.106

Telecommuting gives employers the flexibility to hire talented employees who might not

otherwise be able to offer their services. Employers also save on office space costs with telecom-

muting. However, telecommuting does present several challenges to managers. We discuss these

in detail in Chapter 13.

The Mobile Workplace The widespread use of laptops and cell phones and the availability of Wi-Fi hot spots in many

public places have given rise to a new work environment, one where employees can work from

many different locations. Employees no longer have to be tethered to the office in order to work.

Technology has freed employees to work in many different spatial locations, including team

spaces, remote work centers, a home office, or the neighborhood coffee shop.107

Companies that have embraced the mobile workplace concept include clothing retailer GAP

Outlet, Yum Brands, and the retailer Best Buy. The HR staff at Best Buy’s corporate headquarters

in Minneapolis implemented in 2005 a policy called “results-only work environment,” or ROWE,

which evaluates employees on output rather than the number of hours spent in the office. The

ROWE policy has freed employees to do their work at the location of their choice. One employee

was able to spend a few days a week at his vacation home in the woods; another manager was able

to leave the office at 2:30 p.m. to pick up her young son from school. Employees viewed the ROWE

policy as improving their work–life balance, and Best Buy reported that employee productivity in

departments that switched to ROWE increased by an average 41 percent between 2005 and 2007,

saving the company $16 million a year.108 However, in 2013 the new CEO of Best Buy decided to

end the ROWE policy as a way to assert more control as the company struggled to meet financial

targets. Despite this reversal at Best Buy, ROWE has been implemented in over 40 companies.109

Work–life balance describes the balance between an individual’s work and personal life. The flex-

ible workplace provides opportunities for employees to lead lives with better work–life balance so

they can spend more time with their families and reduce work-related causes of stress.110

The Manager’s Notebook, “Improving Work–Life Balance with a Results-Only Work En-

vironment Policy,” provides suggestions on how to implement a policy that provides better work–

life balance for employees.

telecommuting A work arrangement that allows employees to work in their homes full-time, maintaining their connection to the office through smartphones and personal computing devices.

74 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

human resource information system (HRIS) A system used to collect, record, store, analyze, and retrieve data concerning an organization’s human resources.

The KPMG accounting firm offers its employees a whole menu of ways to achieve a better

work–life balance, including compressed workweeks, flexible hours of work, telecommuting, job

sharing, and even reduced workloads. The company also has a policy that provides eight weeks

of fully paid maternity leave that includes adoptive parents.111

Human Resource Information Systems Human resource information systems (HRIS) are systems used to collect, record, store, ana-

lyze, and retrieve data concerning an organization’s human resources.112 Because most of today’s

HRIS are computerized, we will briefly explore two relevant issues: the applications of HRIS and

the management of security and privacy issues related to HRIS.

HRIS Applications A computerized HRIS contains computer hardware and software applications that work together

to help managers make HR decisions.113 The software may be a custom-designed program or an

off-the-shelf (prepackaged) applications program.

Figure 2.9 shows some HRIS software applications currently available to business. These

include:

j An employee information program sets up a database that provides basic employee information: name, sex, address, phone number, date of birth, race, marital status, job title,

and salary. Other applications programs can access the data in the employee information

database for more specialized HR uses. j An applicant tracking program can automate some of the labor-intensive activities

associated with recruiting job applicants. These include storing job applicant information

so that multiple users can access it and evaluate the applicant, scheduling interviews with

different managers, updating the personal status of the job applicant, generating correspon-

dence (for example, a job offer or a rejection letter), and producing the necessary equal

employment opportunity (EEO) records required by the government. j A skills inventory keeps track of the supply of job skills in the employer’s workforce

and searches for matches between skill supply and the organization’s demand for

job skills.

Improving Work–Life Balance with a Results-Only Work Environment Policy

Here are some tips for achieving better work–life balance with a results-only work environ-ment (ROWE) policy so that employees can do whatever they want, whenever they want, as long as the job gets done. j Set measureable goals. Create clear, written expectations for every employee, and track

progress weekly. However, it is important to let employees decide how and when work will

get done. j Eradicate toxic language. Snide remarks about the number of hours people are putting

in at the office can undermine a results-only effort. Managers should challenge the parties

who make these discouraging comments as soon as they occur. j Set an example. To get the ball rolling on a results-only effort, a manager should take the

afternoon off. Although a manager may have good reasons to spend a lot of time at the

office, it is a good idea to set an example of having work–life balance so that employees

get the message that it is really OK to leave the office.

Sources: Based on Wescott, S. (2008, August). Beyond flextime: Trashing the workweek, Inc., 1; Cullen, L. (2008, May 30). Finding freedom at work. Time Online. http://content.time.com/time/business/article/0,8599,1810690,00.html. jj

Emerging Trends

M A N A G E R ’ S N O T E B O O K

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 75

j A payroll applications program computes gross pay, federal taxes, state taxes, Social Security, other taxes, and net pay. It can also be programmed to make other deductions

from the paycheck for such items as employee contributions to health insurance, employee

contributions to a tax-deferred retirement plan, and union dues. j A benefits application program can automate benefits record-keeping, administer various

benefit programs, or provide advice about benefit choices. Benefits software can also

provide an annual benefits statement for each employee. j An employee time management program tracks the way each employee uses time on the

job. The program monitors employee attendance, absenteeism, and tardiness.114

HRIS Security and Privacy The HR department must develop policies and guidelines to protect the integrity and security of

the HRIS. Unauthorized users of HRIS can create havoc. In one case, an executive who worked

for a brokerage house tapped into her company’s HRIS to get employee names and addresses for

her husband, a life insurance agent who used the information to mail solicitations to his wife’s

colleagues. The solicited employees brought a million-dollar class-action suit against the com-

pany for invasion of privacy.115 In another case, a computer programmer tapped into a computer

company’s HRIS, detected the salaries of a number of employees (including top managers and

executives), and disclosed this information to other employees. The situation became very dis-

ruptive when angry employees demanded to know why large pay discrepancies existed.116

To maintain the security and privacy of HRIS records, companies should:

j Limit access to the HRIS by controlling access to the computer and its data files and

locking the areas where they are stored and encrypting the data. j Permit limited access to different portions of the database with the use of passwords and

special codes. j Grant permission to access employee information only on a need-to-know basis. j Develop policies and guidelines that govern the utilization of employee information and

notify employees how this policy works. j Allow employees to verify and correct their personal records.

FIGURE 2.9 Selected Human Resource Information Systems Applications

Applicant tracking Basic employee information Benefits administration Bonus and incentive management Career development/ planning Compensation budgeting EEO/AA compliance Employment history

Flexible benefits enrollment system Goal-setting system Health and safety Health insurance utilization Hiring procedures HR planning and forecasting Job descriptions/analysis Job evaluation Job posting Labor relations planning

Payroll Pension and retirement Performance management Short- and long-term disabilities Skills inventory Succession planning Time and attendance Travel costs Turnover analysis

Sources: Based on Dzamba, A. (2001, January). What are your peers doing

to boost HRIS performance? HR Fo- cus, 5–6; Kavanagh, M., Gueutal, H., and Tannenbaum, S. (1990). Human resource information systems: Devel- opment and application, 50. Boston: PWS-Kent; Brown, S. (2010). Human

resource information systems–HRIS.

Ezine articles. www.ezinearticles.com.

Summary and Conclusions Work: The Organizational Perspective A firm’s business strategy determines how it structures its work. Under a defender strategy, work

can be efficiently organized into a functional structure based on division of labor, with hierar-

chies of jobs assigned to functional units. Under a prospector strategy, decentralization and a

low division of labor are more appropriate. The bureaucratic organizational structure is likely

to be most effective when an organization is operating in a stable environment. The flat and the

boundaryless organizational structures are more likely to be effective when organizations operate

in uncertain environments that require flexibility.

76 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Work-flow analysis examines how work creates or adds value to ongoing business processes.

It helps managers determine if work is being accomplished as efficiently as possible. Work-flow

analysis can be very useful in customer-focused programs and business-process reengineering.

Work: The Group Perspective Flat and boundaryless organizational structures are likely to emphasize the use of self-managed

teams (SMTs), small work units (between 6 and 18 employees) that are responsible for produc-

ing an entire product, a component, or an ongoing service. Businesses also use two other types

of team designs. Problem-solving teams consist of volunteers from a unit or department who

meet one or two hours per week to discuss quality improvement, cost reduction, or improvement

in the work environment. Special-purpose teams consist of members who span functional or

organizational boundaries and whose purpose is to examine complex issues. Virtual teams allow

geographically separated employees to collaborate together on projects or special problems by

interacting on the computer or via other technology.

Work: The Individual Perspective Motivation theory seeks to explain how different job designs can affect employee motivation.

Four important work motivation theories are the two-factor, work adjustment, goal-setting, and

job characteristics theories.

Designing Jobs and Conducting Job Analysis Job design is the process of organizing work into the tasks required to perform a specific job.

Different approaches to job design are work simplification, job enlargement, job rotation, job

enrichment, and team-based job designs.

Job analysis is the systematic process of gathering and organizing information concerning the

tasks, duties, and responsibilities of jobs. It is the basic building block of many important HR activi-

ties. Job analysis can be used for purposes of legal compliance, recruitment, selection, performance

appraisal, compensation, and training and career development. Given the lack of a single best job-

analysis technique, the choice of technique should be guided by the purposes of the analysis.

Job descriptions are statements of a job’s essential duties, responsibilities, working condi-

tions, and specifications. They are derived from job analysis. Job descriptions, which can be

specific or general, have four elements: identification information, job summary, job duties and

responsibilities, and job specifications and minimum qualifications.

The Flexible Workforce Flexible work designs help managers deal with unexpected jolts in the environment and accom-

modate the needs of a diverse workforce. To maintain flexibility in the workforce, employers can

use contingent workers (temporary employees, part-time employees, outsourced subcontractors,

contract workers, and college interns). They can also alter work with flexible work schedules

(flexible work hours, compressed workweeks, and telecommuting). Employees benefit from

flexible work schedules by attaining greater work–life balance.

Human Resource Information Systems Human resource information systems (HRIS) are systems used to collect, record, store, analyze,

and retrieve relevant HR data. HRIS data matched with the appropriate computer software have

many applications that support HR activities. These include applicant tracking, skills inventories,

payroll management, and benefits administration. It is important that the HR department develop

policies to protect the security of the HRIS data and the privacy rights of its employees.

Key Terms boundaryless organizational

structure, 48

bureaucratic organizational

structure, 46

business process reengineering

(BPR), 49

contingent workers, 67

core time, 72

core workers, 67

flat organizational structure, 46

flexible work hours, 72

flextime, 72

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 77

Discussion Questions

2-1. Are managers likely to question the work commitment of their contingent workers?

What might be the consequences for management when the majority of a company’s

workforce consists of temporary employees and contract workers?

2-2. What are the drawbacks to using flexible work hours from the organization’s perspec-

tive? Compressed workweeks? Telecommuting? How should the HR department deal

with these challenges?

2-3. Some management experts do not think that a virtual team is really a team at all. Based

on the definition of a team, what properties of a virtual team satisfy the definition of a

team? Do any aspects of a virtual team give rise to doubts over whether it satisfies the

definition of a true team? Suppose you needed to organize a virtual team of consultants

working in different cities to do an important project for a client. What human resource

management practices could you apply that would influence the virtual team members to

behave as if they were on a true team, such as a self-managed or problem-solving team?

2-4. A recent trend that more and more companies are embracing is to outsource all or most

of their human resource management activities. Do you agree or disagree with this

trend? What risks is a company taking when it decides to outsource its entire set of

human resource management activities? Try to describe a situation in which it is more

beneficial to retain most of the human resource management activities within a com-

pany so that HR is provided by the human resource management department.

2-5. In recent years, there has been an increase in the number of companies that have wrongly

classified an “employee” as a “contract worker” and, consequently, were taken to court by

workers who believed they were entitled to certain rights and privileges enjoyed by individ-

uals who were given “employee” status. What are some of the rights and privileges that are

given to employees but not to contract workers? What advantages do employers gain with

contract workers over regular employees? How could a contract worker prove to the courts

that he or she is really an employee and was wrongly classified as a contract worker?

human resource information system

(HRIS), 74

job analysis, 57

job description, 63

job design, 55

job enlargement, 56

job enrichment, 56

job rotation, 56

job sharing, 68

job specifications, 66

knowledge, skills, and abilities

(KSAs), 59

motivation, 53

organizational structure, 45

problem-solving team, 51

self-managed team (SMT), 50

special-purpose team, 51

team, 50

telecommuting, 73

virtual team, 52

work flow, 45

work-flow analysis, 49

work–life balance, 73

MyManagementLab®

If your instructor has assigned this, go to mymanagementlab.com for Auto-graded writing questions as well as the following Assisted- graded writing questions:

2-6. Are job descriptions really necessary? Provide several of the advantages (at least three) to a company that decides to avoid using job descriptions. Next, briefly describe some situations that would be most favorable for a company that

decides to avoid using job descriptions. Include factors such as company size, industry, organization design, work flow,

and use of teams in your analysis.

Watch It!

Weather Channel: Talent Management. If your instructor has assigned this, go to mymanagementlab.com to watch a video case and answer questions.

78 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

You Manage It! 1: Ethics/Social Responsibility Are Companies Exploiting College Students Who Have Unpaid Internships?

More than half of college students who graduate have had one or

more internships, according to the National Association of Colleges

and Employers. From one-fourth to one-half of the internships for

college students are unpaid. Unpaid internships exist in for-profit

firms for students to gain entry into careers that receive many job

applicants, such as in fashion, book and magazine publishing, art

galleries, sports management, and film and television. Internships

give college students an opportunity to gain valuable job skills

that can lead to job offers after they graduate. According to U.S.

Department of Labor regulations, when private-sector companies

provide unpaid internships for college students, the internship is

expected to benefit the intern and be similar to vocational train-

ing so that useful job skills are imparted to the intern. In practice,

for-profit firms consider unpaid internships to be legitimate as long

as the students receive academic credit for their work. This college-

credit loophole has tempted some companies to pile on their in-

terns a large amount of unskilled work.

Many students have reported that they have held internships

that involved noneducational and menial work. It is not unusual for

unpaid internships to involve some menial work; however, when

most of the work consists of unskilled labor, the unpaid internship

can be in violation of the law. In one such case, a student at an Ivy

League university said she devoted most of her time during an un-

paid internship at a magazine publisher packaging and shipping 20

or more apparel samples per day back to fashion houses that had

provided them for fashion shoots. In another case, a children’s film

company provided an unpaid internship to a New York University

student who had hoped to work in animation at the film company.

Instead, this student was told to work in the facilities department

and was ordered to wipe the door handles each day to minimize the

spread of swine flu.

It is true that some unpaid internships can provide useful job

skills to college students that they can put on their resumes to at-

tract an employer’s attention. However, as illustrated by the ex-

amples in this case, some unpaid internships end up being little

more than a collection of routine tasks and do little to improve a

student’s professional skill set. With the current high levels of U.S.

and European youth unemployment, some companies are tempted

to take advantage of unpaid internships as a low-cost source of

exploitable labor.

Critical Thinking Questions 2-9. Although it is illegal for profit-based companies to create

unpaid internships that require college interns to perform

primarily menial tasks, unfortunately this is happening with

increasing regularity. What can students do to avoid the expe-

rience of having an unpaid internship that consists of mostly

menial work with few opportunities to learn new skills?

2-10. Does the university have a responsibility to ensure that a

student’s unpaid internship will be a legitimate learning

experience that earns college credits toward graduation?

How can the university ensure that a company provides the

unpaid intern a legitimate learning experience while still

giving the company the flexibility to deploy the unpaid

intern in ways that are useful to the company?

Team Exercise 2-11. Form a small group with several of your class members and

take turns sharing your experiences with paid and unpaid

internships. Which internships provided better learning

experiences—the ones that were paid or the ones that were

unpaid by the sponsoring company? After each person in

the group has had the opportunity to share their internship

experiences, the group will collectively develop a list of

three or four practices that students should follow to avoid

having a bad experience in an unpaid internship. Be pre-

pared to present your findings to other members of the class.

Experiential Exercise: Team 2-12. Find a partner to enact the following role-play situation

related to an unpaid internship for a college student at

a local television station. One of the two roles is that of

the college student who is seeking to gain some experi-

ence working as a news reporter at a local television

station. The other role is that of the television station

news manager. The person taking the role of the student

devises a plan that outlines the skills that he or she hopes

2-7. Companies are currently attempting to develop policies that offer more flexible work arrangements that allow employees to achieve better work–life balance. Briefly describe several popular approaches that could be considered

for helping employees achieve work–life balance and indicate the advantages and disadvantages of each work–life

balance option.

2-8. Large U.S. companies such as Accenture, AOL, and Dell have outsourced customer-service call centers to India. Customers use these call centers for help when they are having difficulty using the services provided by these

companies. Many of the outsourced jobs at the call centers were entry-level jobs that had the potential to lead to

higher-skilled jobs at those firms. Provide at least three ethical employment issues that managers who use offshore

outsource suppliers in India or other low–labor cost countries should be concerned about.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 79

improve his or her chances of having a successful unpaid

college internship.

Sources: Based on Greenhouse, S. (2012, May 5). Jobs few, grads flock to unpaid internships. New York Times. www.nytimes.com; Chatzky, J. (2011, November 21). The great American internship swindle, Newsweek, 22; Guerrero, A. (2013, April 3). Should you take an unpaid internship? U.S. News & World Report. http://money.usnews.com/money/careers/articles/2013/04/03/ should-you-take-an-unpaid-internship; Greenhouse, S. (2010, April 2). The un- paid intern, legal or not. New York Times. www.nytimes.com.

to learn about television news reporting from the unpaid

internship. The person in the role of the television station

news manager reacts to the student’s ideas in a manner

consistent with how a manager would likely react if that

manager had responsibility for broadcasting morning

and evening local news in a manner that keeps television

viewers informed of breaking news stories. The parties in

both roles need to come to an agreement on the key work

duties of the unpaid intern. Be prepared to report back to

the class some useful approaches that a student can use to

You Manage It! 2: Emerging Trends Work–Life Balance Is the New Perk Employees Are Seeking

Joe (not his real name) has risen through the corporate ranks to be-

come an executive at a major bank. He thought his workload would

become lighter as he moved up, but the opposite has occurred. He

now works 6 or 7 days a week, from multiple locations. He keeps

an apartment in New York and is on the road another 3 or 4 days per

week. Only on weekends does he see his wife and three children,

who live in Connecticut.

Does this sound like fun to you? No? Well, you are not alone.

Although some ambitious individuals are willing to sacrifice

their personal life to satisfy their ambition, a growing number are

not. According to a recent survey by the Association of Executive

Search Consultants (AESC), 85 percent of recruiters have seen

candidates reject a job offer because it lacked work–life balance.

For companies competing for talent, it is becoming increas-

ingly important to provide work–life balance in the positions they

are seeking to fill. The AESC survey revealed that two-thirds of

companies are developing programs to help top recruits increase

their family time without sacrificing their careers.

Job candidates are learning that they can bargain with their em-

ployer for more than money. Lisa Patten, a director at the account-

ing firm PricewaterhouseCoopers (PwC), proved this point when

she was being recruited from her previous employer. Because she

was not dissatisfied with her former employer, she compiled a list

of requests to PwC that included a 4-day workweek so she could

spend more time with her children, and the flexibility to work from

home if not on a client visit. PwC did not hesitate to approve these

flexible work conditions for Patten.

Although Patten’s productivity in terms of billable hours and

new business brought to the firm increased, PwC has found that

flexible work is not a good fit for every employee. It reports that

employees most likely to be given flexibility in work hours and

location are those who are disciplined and self- motivated and

have a clear set of performance measures to ensure accountability.

Critical Thinking Questions 2-13. Which types of jobs are best suited for flexibility with

regard to hours and office location? Which types of

jobs are less likely to afford this type of flexibility?

Explain.

2-14. Earlier in this chapter, you learned that most work in to-

day’s workplace is now being done by teams of employees.

In your opinion, does the intensive use of self-managed

teams make it easier or more difficult for employees to

achieve work–life balance? Explain.

Team Exercise 2-15. Form a small group with several class members and discuss

the following scenario: The owner-manager of a small,

four-person consulting firm works long hours on multiple

projects and expects his three associates to spend most of

their time in the office to learn consulting skills from him

and to attend meetings with clients that take place at the of-

fice. What objections would the owner-manager have if the

three associates requested policies promoting greater work–

life balance? How could the associates present their interest

for greater work flexibility in a way that is likely to receive

a positive outcome? Be prepared to present your answers to

the whole class.

Experiential Exercise: Individual 2-16. Think about your own goals to achieve work–life balance

in your work life. How will these goals influence the type

of career choices that you make? What about the type of

company or industry that you will seek out for employ-

ment? What trade-offs are you willing to make to achieve

your goals for work–life balance with regards to salary, am-

bition, or geographic location? Be prepared to share your

answers to these questions with the class if called on by the

instructor.

Sources: Based on Ridge, S. (2007, March 19). Balance: The new workplace perk. Forbes.com. www.forbes.com/2007/03/19/work-life-health-lead- careers- worklife07-cz_sr_0319ridge.html; Hewlett, S., and Luce, C. (2006, December). Extreme jobs: The dangerous allure of the 70-hour workweek. Harvard Business Review, 49–59; Shipman, C., and Kay, K. (2009, June 1). A saner workplace. Businessweek, 66–69.

80 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

You Manage It! 3: Technology/Social Media Yahoo CEO Issues a Ban on Telecommuting for Employees

In February 2013 Yahoo CEO Marissa Mayer decided that start-

ing in June, all Yahoo employees would be expected to come to

their offices each day to perform their jobs. In effect, this deci-

sion resulted in a ban on telecommuting, impacting the work lives

of many Yahoo employees who had been working at home. CEO

Mayer made this decision after noticing the high number of vacant

spaces in the Yahoo corporate parking lot and the scarcity of people

occupying cubicles in the building. Yahoo’s financial performance

had been disappointing for several years prior to announcing the

telecommuting ban, and consequently the previous CEO had been

dismissed by the board of directors before Ms. Mayer was recruited

from Google in 2012 to assume the top job. The justification for the

restriction on telecommuting was that by requiring employees to

be present at the office, Yahoo would benefit from an anticipated

increase in productivity and innovation that should stimulate

Yahoo’s performance in the competitive technology industry.

The restriction on employee telecommuting runs counter to

the conventional wisdom accepted in many companies that giv-

ing employees the freedom to work at a location of their choice

would have benefits for the company as well as for the employee.

Currently, 20 to 30 million Americans work from home at least

once a week. For example, IBM is a company in which just under

50 percent of its employees do not have a regular office; instead,

they telecommute and occasionally use hoteling offices, which con-

sist of company-owned office space that can be reserved depend-

ing on where an employee is situated at a particular time. Under

this arrangement IBM—with a global workforce of over 300,000

employees—achieves significant savings on the cost of leasing

and maintaining office space. Cisco, a giant technology company

based in Silicon Valley, California, claimed in 2009 that it saved

$277 million a year by allowing its employees to telecommute.

The decision to tether Yahoo employees to their company offices

also generated mixed comments from other executives. Sir Richard

Branson, founder of Virgin Atlantic Airways and Virgin Records,

wrote a critical blog post that the decision was “a backwards step

in an age when remote working is easier and more effective than

ever.” Taking an opposing position was Donald Trump, chairman

and president of The Trump Organization, founder of Trump Enter-

tainment Resorts, and star of the NBC reality show The Apprentice, who indicated on Twitter that CEO Mayer was “right to expect

Yahoo employees to come to the workplace versus working at home.”

Critical Thinking Questions 2-17. Do you agree or disagree with the CEO’s decision to ban

employees from telecommuting at Yahoo? What is the basis

of your position?

2-18. Critics of the decision to restrict telecommuting at Yahoo

point to the poor financial and stock market performance

of Yahoo in the years prior to this order, and they sug-

gest that the CEO’s motive was to impress investors by

displaying more control over Yahoo employees. It is likely

that the CEO expected—by mandating that employees be

present in the office on a regular basis—that they would

have more fortuitous conversations in the corridors of

Yahoo that would likely lead to increased levels of in-

novation and new product development. Can you think of

alternative ways that the company could engage employee

innovation and creativity without restricting their freedom

to work at home?

Team Exercise 2-19. Form a small group of four or five students and discuss

your preference for the type of learning environment in

which you can take a human resource management course

for university credit and learn most effectively. Choose be-

tween (a) an online learning course, or (b) taking the course

in a traditional classroom setting with other students and a

professor who teaches the course. What are the advantages

and disadvantages of online learning versus learning in a

regular classroom environment? What situational factors

(type of course, number of students, student learning styles)

are most favorable to online learning? Which factors are

most favorable to classroom learning? What insights does

this comparison between online learning and traditional

classroom learning provide regarding the decision at Yahoo

to restrict all employees from telecommuting? Be prepared

to share your insights with other students in the class.

Experiential Exercise: Individual 2-20. Assume that you are employed at Yahoo as a marketing

analyst and you have just been told that you no longer are

allowed to telecommute from your home office. Instead,

you will now be expected to do all of your work at the

headquarters in Sunnyvale, California, in Silicon Valley.

The traffic is very heavy during your commute from your

home in San Jose to the office in Sunnyvale, and you dis-

like making the 40-minute commute each way to the office.

You enjoyed working at your home office two or three days

per week, and now that privilege has been taken away by

the new HR policy at Yahoo restricting telecommuting.

Which of the following three tactics would you most likely

choose if you found yourself in the situation described

in this exercise? Would you (a) remain as an employee at

Yahoo and voice your feelings to management; (b) remain

as an employee at Yahoo and keep silent; or (c) start a job

search to find employment at a company that is more sup-

portive of telecommuters? Explain the reasons for your

choice of tactics and be prepared to share with other stu-

dents the thinking behind your decision.

Sources: Based on The Economist. (2013, March 2). Corralling the Yahoos, 61; Weise, E. (2013, February 26). Telecommuters to Yahoo: Boo. USA Today, 1A; Lawler, E. E. (2011). Creating a new employment deal: Total rewards and the

new workforce. Organizational Dynamics, 40, 302–309; Suddath, C. (2013, March 4). Work-from-home truths, half-truths, and myths. Bloomberg Busi- nessweek, 75; The Economist. (2013, March 2). Mayer culpa, 14; Miller, C., and Rampell, C. (2013, February 26). Yahoo orders home workers back to the

office. New York Times, A1, A3.

CHAPTER 2 • MANAGING WORK FLOWS AND CONDUCTING JOB ANALYSIS 81

Writing a Job Description

Job descriptions are useful tools that document job content and that

can aid decisions for recruitment, staffing, training, compensation,

and human resource planning. The purpose of this skill-building

activity is to give you some experience writing a job description.

In preparation, carefully read the section in this chapter titled “Job

Descriptions” and refer to the figures in that section that provide

examples of a specific job description and a general job description.

Next, select a job and write a job description. Ideally, your job

description should be based on a job you are familiar with—the best

candidate for this exercise is one at which you are currently employed

or recently experienced. It could be a part-time or full-time job. If you

have no work experience to draw from for this exercise, then ask a

friend or relative to provide detailed information about his or her job.

Once you have chosen the job for this exercise you are ready

to begin.

Critical Thinking Questions 2-21. What do you see as the main differences between a specific

job description and a general job description?

2-22. Suppose several people are employed in the same job as

the one for which you are writing a job description. Would

it be necessary to write a different job description for each

person who works in the same job? Explain.

2-23. Carefully follow the format for the “Specific Job

Description” provided in Figure 2.6 when writing the job

description for the job you selected. Make sure that you

include in your job description the following elements:

(1) job title and identification information, (2) job

summary, (3) job duties and responsibilities, (4) job re-

quirements, and (5) minimum qualifications. Check your

work to make sure the style of your job description matches

the example in the text as closely as possible.

Team Exercise 2-24. Work with a partner or a small group of three to four people

and exchange job descriptions with your partner or a group

You Manage It! 4: Customer-Driven HR member. Read each other’s job descriptions and make sug-

gestions for improvements based on the example provided

in the text. Take turns discussing the suggested revisions

with your partner or group so that each person receives

some feedback on his or her job description. Make revi-

sions to your job description as needed to improve it. It is

normal for a job description to go through several revisions

before the document is finished. Now examine the job

description you just wrote and revised. Discuss with your

partner or group how this job description could be applied

to making decisions in the organization that offers the job.

Next, discuss what additional steps would be needed to fi-

nalize the job description before it could actually be used as

a basis for employment decisions in a company.

Experiential Exercise: Individual 2-25. The purpose of this experiential exercise is to learn how

managers actually use job descriptions in their organiza-

tions. First, you will need to get the names and contact

information for three to five managers you know either

from your work experience or from personal contact. Or,

ask a professor or someone in the career development of-

fice at your school for the names of a few managers. You

can contact the managers in person, by e-mail, or on the

telephone. Ask each manager what uses they have for job

descriptions in their organizations. Also, ask the manag-

ers how important job descriptions are for making human

resource decisions in their organizations—and follow up

one more time by asking them to explain why they think

that job descriptions are important (or not). Record the

responses and summarize your findings. Be prepared

to share your findings with other members of the class.

Did you find a diversity of opinion from the managers

about how they use job descriptions and how important

they find them to be? If you did find a diverse set of

responses, what do you think accounted for this variety

of opinions?

Endnotes Scan for Endnotes or go to www.pearsonhighered.com/Gomez-Mejia.

82

CHAPTER

3 Understanding Equal

Opportunity and the Legal Environment

When you see this icon, visit www.mymanagementlab.com for activities that are applied, personalized, and offer immediate feedback.

MyManagementLab®

Source: [source to come]

1 Recognize why understanding the legal environment is important.

2 Become aware of conflicting strategies for fair employment.

3 Gain mastery of the equal employment opportunity laws.

4 Understand EEO enforcement and compliance. 5 Have familiarity with other important laws. 6 Ensure avoiding pitfalls in EEO.

C H A L L E N G E S After reading this chapter, you should be able to deal more effectively with the following challenges:

D iscrimination claims are always difficult for companies, so it is important to stay current with trends in the le- gal environment. An emerging trend involves claims

of employment discrimination based on an employee’s ap- pearance. Being aware of the legal standards that are used in such cases can help you prevent a company’s employees from tak- ing their discrimination claims to court. The following are some ex- amples of cases related to personal appearance:

■ While many people wear tat- toos as a form of personal expression, some companies are not tolerant of visible tat- toos in the workplace. Walmart has a standard dress code policy in its stores that requires employees with tattoos to keep them concealed. At Red Robin Gourmet Burgers, an employee was fired for violating a dress code prohib- iting visible tattoos on his wrists. However, the tattoos

contained religious symbols and the company agreed to pay the discharged employee $150,000 in an out-of- court settlement.1

■ In California, a female employee refused to wear makeup as required by her employer. The employee

alleged that the employer was engaging in gender stereotyping by requiring female beverage serv- ers to wear makeup. Although the employee was unable to provide enough evidence to prevail in this case, in other legal jurisdictions, such as Madison, Wisconsin, city laws forbid discrimination based on physical appearance.

■ Debrahlee Lorenzana was fired from her job as a banker at a Citibank branch in New York City because her appearance was too distracting to the men around her, who could

not concentrate on their work. Ms. Lorenzana’s bosses ordered her to wear modest clothing, and she was forbid- den to wear turtleneck sweaters, three-inch heels, or fitted

Source: © Hero Images Inc./Alamy.

82

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 83

business suits. Ms. Lorenzana claimed that her female colleagues wore far more revealing clothing than she did, and she refused to let her bosses dictate what clothes she could wear to work. She sued the company based on the discriminatory treatment she is alleged to have received. Ultimately the case never went to court and the plaintiff decided to drop the lawsuit.

Employers can avoid legal entanglements by developing employment policies and prac- tices that avoid the discriminatory treatment of employees. For example, appearance policies should not place an undue burden on one gender and not on the other. In addition, appear- ance requirements should be applied to employees only when they are necessary to achieve a specific business purpose. If the employers who forced their employees to wear makeup or hide religious symbols had instead considered how to minimize their exposure to employment discrimination, they could have avoided having to defend their employment practices in court.2

The Managerial Perspective

Managers must understand the legal issues that affect the practice of HRM because many of their decisions are constrained to some extent by law. They should consider legal issues when making the following decisions:

■ Which employees to hire ■ How to compensate employees ■ What benefits to offer ■ How to accommodate employees with dependents ■ How and when to fire employees

Legal constraints on HR practices have become increasingly more complex, in large part because of new employment laws and recent court decisions that interpret existing laws. The new employment laws mainly affect people with disabilities and those who seek a medical leave of absence from work. The court decisions relate to numerous issues such as worker safety and sexual harassment. Changes in the law have made HR decisions more difficult and risky—thereby increasing the cost of poor decisions.

HR managers consult and advise managers about the legal aspects of a personnel deci- sion. Legal concerns are not the only priority in employment decisions, but they are heavily considered along with other factors such as timeliness, product quality, and economic effi- ciency. The dynamism of the legal environment means that managers must seek the advice of HR specialists who, in turn, add value to management decisions with their expertise in employment laws and regulations.

In this chapter, we examine the various aspects of HR law and regulation. First, we look at why managers must understand the HR legal environment. Next we explore several chal- lenges that managers face when they try to comply with the law. Then we discuss equal employment opportunity (EEO) law, the enforcement mechanisms in place to ensure com- pliance, and several other laws that affect HRM. Finally, we describe ways for the effective manager to avoid potential legal pitfalls.

We need to start with a caveat. As with any legal issue you face, you should seek the advice of a qualified attorney to grapple with specific legal questions or problems relating to HRM. Many lawyers specialize in labor and employment law. However, you should not feel that you cannot make any decisions without specific legal counsel, and it is a mistake to let legal considerations become so important that you end up making poor business decisions. One goal of this chapter is to give you enough information to know when you need to seek legal counsel.

Learn It!

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84 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Why Understanding the Legal Environment Is Important Understanding and complying with HR law is important for three reasons. It helps you to do the

right thing, realize the limitations of your firm’s HR and legal departments, and minimize your

firm’s potential liability.

Doing the Right Thing First and foremost, compliance with the law is important because it is the right thing to do.

Although you may disagree with the specific applications of some of the laws we discuss, the

primary requirement of all these laws is to mandate good management practice. The earliest

of the EEO laws requires that male and female employees who do the same job for the same

organization receive the same pay. This is the right thing to do. A more recent EEO law requires

that applicants or employees who are able to perform a job should not be discriminated against

because of a disability. This, too, is the right thing to do.

Operating within these laws has benefits beyond simple legal compliance. Compensation

practices that discriminate against women not only create potential legal liability, but also lead to

poor employee morale and low job satisfaction, which can, in turn, lead to poor job performance.

Discriminating against qualified employees with disabilities makes no sense; in discriminating,

the organization hurts itself by not hiring and retaining the best employees. McDonald’s has

taken the lead in hiring youth with learning disabilities. This is socially responsible and has cre-

ated a positive impression among many customers.3

Realizing the Limitations of the HR and Legal Departments A firm’s HR department has considerable responsibilities with respect to HR law. These

include keeping records, writing and implementing good HR policies, and monitoring the

firm’s HR decisions. However, if managers make poor decisions, the HR department will not

always be able to resolve the situation. For instance, if a manager gives a poor employee an

excellent performance rating, the HR department cannot undo the damage and provide the

documentation necessary to support a decision to terminate the employee.

Nor can a firm’s legal department magically solve problems created by managers. One of

the key functions of legal counsel, whether internal or external, is to try to limit damage after it

has occurred. Managers should work to prevent the damage from happening in the first place.

Members of the HR department support managers who have to make HR decisions with

legal implications. HR staff may monitor managers’ decisions or act as consultants. For example:

j A supervisor wants to discharge an employee for unexcused absences and consults the HR

department to determine whether there is enough evidence to discharge this person for

“just cause.” The HR department can help the manager and the company avoid a lawsuit

for “wrongful discharge.” j A manager receives a phone call from a company that is inquiring about the qualifications

of a former employee. The manager is not sure how of much information in the former

employee’s work history to reveal, so she seeks the HR department’s advice. HR can help

the manager and the company avoid a lawsuit for defamation (damage to an employee’s

reputation as a result of giving out false information to a third party).

Limiting Potential Liability Considerable financial liabilities can occur when HR laws are broken or perceived to be bro-

ken. Typical court awards to victims of age, sex, race, or disability discrimination range from

$50,000 to $300,000, depending on the size of the employer. Nonetheless, individual awards can

actually be much larger.4 In 2001, the U.S. federal appeals court upheld a jury verdict awarding

Troy Swinton $1.03 million for punitive damages, back wages, and emotional stress for racial

discrimination suffered at U.S. Mat in Woodinville, Washington. The only African American of

140 employees, Swinton was subjected to a regular stream of racial “jokes” and slurs during his

six months of employment.5

Organizations may also face a public relations nightmare when discrimination charges are

publicized. In highly publicized cases in the early 1990s, several individual store managers

and employees of Denny’s restaurant chain were alleged to have discriminated against African

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 85

American customers. Not only did the company subsequently have to pay $46 million to African

American patrons and $8.7 million in legal fees to settle these complaints, but the company’s

image with customers was damaged as well.6 In recent years, though, Denny’s has made ma-

jor strides: As of 2007, minorities owned 43 percent of Denny’s 1,030 franchised restaurants.

African Americans owned 23, Hispanics owned 60, and Asians owned 359. In 1993, only one

franchised restaurant was owned by an African American. Further, Fortune has consistently rec- ognized Denny’s at the top ranks of its survey of “America’s 50 Best Companies for Minorities.”7

Challenges to Legal Compliance Several challenges confront managers attempting to comply with HR law. These include a dy-

namic legal landscape, the complexity of regulations, conflicting strategies for fair employment,

and unintended consequences.

A Dynamic Legal Landscape A quick scan of the Appendix to this chapter clearly demonstrates that many laws affect the practice

of HRM. Several have been passed in the last decade.

The opinions handed down in court cases add to this dynamic environment. For example, in

1971 the Supreme Court handed down a landmark civil rights decision in a case titled Griggs v. Duke Power.8 Among other things, this decision placed a heavy burden of proof on the employer in an employment discrimination case. Normally, a Supreme Court decision sets a precedent that the

Court is then very reluctant to overturn. However, in a 1989 case the Court revised the standard it

had set in Griggs, making it more difficult for an employee to win a discrimination case.9 Then, in 1991, Congress passed a lengthy amendment to the Civil Rights Act of 1964 (discussed later in this

chapter) that returned to the burden-of-proof standard established in the Griggs decision. These rapid changes are not limited to issues of courtroom procedure. Sexual harassment reg-

ulations were adopted by the Equal Employment Opportunity Commission (EEOC) in the early

1980s and accepted by the Supreme Court in 1986. Since then, companies, lawyers, and judges

have been attempting to figure out just what they mean and require. Opinions on these issues vary

widely, which means that different courts have made differing decisions about what constitutes

sexual harassment. Until the Supreme Court makes several more rulings, or Congress clarifies the

underlying law, managers will need to pay close attention to the unfolding developments.

The Complexity of Laws HR law, like most other types of law, is very complex. Each individual law is accompanied by a

set of regulations that can be lengthy. For instance, the Americans with Disabilities Act (1990) is

spelled out in a technical manual that is several hundred pages long. To make matters even more

complex, one analysis has concluded that there may be as many as 1,000 different disabilities

affecting over 43 million Americans.10 It is very difficult for an expert in HR law, much less a

manager, to understand all the possible implications of a particular law.

Nonetheless, the gist of most HR law is fairly straightforward. Managers should be able to

understand the basic intention of all such laws without too much difficulty and easily obtain the

working knowledge they need to comply with those laws in the vast majority of situations.

Conflicting Strategies for Fair Employment Society at large, political representatives, government employees, and judges all have different

views regarding the best ways to achieve equitable HR laws. One of the major debates in this area

centers on the competing strategies used to further the goal of fair employment—the situation

in which employment decisions are not affected by illegal discrimination. The plain language

of most civil rights law prohibits employers from making decisions about employees (hiring,

performance appraisal, compensation, and so on) on the basis of race, sex, or age. Thus, one

strategy to reach the goal of fair employment is for employment decisions to be made without

regard to these characteristics. A second strategy, affirmative action, aims to accomplish the

goal of fair employment by urging employers to hire certain groups of people who were discrimi-

nated against in the past. Thus, affirmative action programs require that employment decisions

be made, at least in part, on the basis of characteristics such as race, sex, or age. Obviously, there

fair employment The goal of EEO legislation and regulation: a situation in which employment decisions are not affected by illegal discrimination.

affirmative action A strategy intended to achieve fair employment by urging employers to hire certain groups of people who were discriminated against in the past.

86 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

is a conflict between these two strategies—one proposing that only “blind” hiring practices are

fair, the other proposing that fairness requires organizations to make an effort to employ certain

categories of people (Figure 3.1).

While the battle resulting from these competing strategies is being played out throughout

society, the main legal struggle has occurred in the Supreme Court. Based on a series of Supreme

Court decisions, the following conclusions seem warranted:

j The affirmative action strategy has been upheld. Specifically, employers are permitted

to base employment decisions, in part, on a person’s race, sex, age, and certain other

characteristics. j To be permissible, the employment decision cannot be made solely on the basis of these

characteristics. Further, the people considered for the position should be “essentially

equally qualified” on job-relevant characteristics before these other characteristics are

permitted to play a role in the employment decision. j The one situation in which affirmative action is not permitted is during layoffs. For

instance, a white teacher should not be laid off to save the job of a Latino teacher, even if

this means that minorities will be underrepresented in the postlayoff workforce.

Unintended Consequences It is very common for a law, a government program, or an organizational policy to have numer-

ous unanticipated consequences, some of which turn out to be negative. HR law is certainly not

immune to this phenomenon. For example, the Americans with Disabilities Act (ADA) was pri-

marily intended to increase the possibility of employment for people with physical and/or mental

disabilities. However, since the law has gone into effect, job applicants have filed relatively few

ADA complaints. Rather, current employees injured on the job have filed the majority of com-

plaints. Traditionally, state workers’ compensation laws (see Chapter 12) regulate the benefits

given to employees injured on the job, including income continuation. Nobody intended the ADA

to become a national workers’ compensation law, but that appears to be just what is happening.

The challenge to managers is to anticipate and deal with both the intended and unintended con-

sequences of law.

Equal Employment Opportunity Laws The laws that affect HR issues can be divided into two broad categories: (1) equal employment

opportunity laws and (2) everything else. We will spend the bulk of this chapter on the EEO

laws because these are the ones that most affect a manager’s day-to-day behavior. In addition,

the EEO laws cut across almost every other issue that we discuss in this text. The other laws

tend to be more specifically focused, and we discuss them in the context in which they apply.

For instance, we discuss the laws governing union activities in Chapter 15 and the Occupational

Safety and Health Act (OSHA) in Chapter 16.

FIGURE 3.1 Competing Strategies for Fair Employment

Ideal Behavior Strategy

Goal: Fair

employment

Affirmative Action Strategy

Best way to achieve fair employment is to make decisions without regard to: • Race • Sex • Religion • National origin • Color • Age • Disability

Best way to achieve fair employment is to make decisions, at least in part, on the basis of: • Race • Sex • Religion • National origin • Color • Age • Disability

A QUESTION OF ETHICS Is it ethical to refuse to give pref- erential treatment to minorities and women, who have been widely discriminated against in the past?

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 87

The major EEO laws are the Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964,

the Age Discrimination in Employment Act of 1967, and the Americans with Disabilities Act of

1990. The Civil Rights Act of 1964 has been amended through the years, most recently in 1991.

The theme that ties these laws together is simple: Employment decisions should not be based on

characteristics such as race, sex, age, or disability.

The Equal Pay Act of 1963 The first of the civil rights laws was the Equal Pay Act, which became law in 1963. It requires

that men and women who do the same job in the same organization should receive the same pay.

“Same pay” means that no difference is acceptable.

Determining whether two employees are doing the same job can be difficult. The law

specifies that jobs are the same if they are equal in terms of skill, effort, responsibility, and

working conditions. Thus, it is permissible to pay one employee more than another if the first

employee has significant extra job duties, such as supervisory responsibility. Pay can also

be different for different work shifts. The law also specifies that equal pay is required only

for jobs held in the same geographic region. This allows an organization to make allowances

for the local cost of living and the fact that it might be harder to find qualified employees in

some areas.

The law contains several explicit exceptions. First, it does not prohibit the use of a merit

pay plan. That is, an employer can pay a man more if he is doing a better job than his female

coworker. In addition, companies are permitted to pay for differences in quantity and quality of

production. Seniority plans also are exempted; a company that ties pay rates to seniority can pay

a man more if he has been with the company longer than a female employee. Finally, the law

indicates that any factor other than sex may be used to justify different pay rates.11

When the Equal Pay Act was passed, the average female employee earned only about 59 cents

for each dollar earned by the average male worker. While this gap has narrowed in the intervening

years, to about 83 cents in 2010,12 this average differential remains troubling, and in some jobs it

is much higher. For instance, 30-year-old male sales representatives earned an average of $60,000

in 2001, whereas their female counterparts in sales, doing the same amount and same kind of

work, earned only an average of $36,000 at the same age.13 Some states, such as Washington and

Illinois, have responded to this issue by requiring that civil service employers pay equally for work

of comparable worth.14 Understanding equal pay and comparable worth requires more knowledge

of compensation decisions, so we will return to these issues in Chapter 10.

Title VII of the Civil Rights Act of 1964 Although not the oldest of the civil rights laws, Title VII of the Civil Rights Act of 1964 is

universally seen as the most important passed to date. This law was enacted in the midst of the

seething civil rights conflicts of the 1960s, one year after the civil rights march on Washington at

which Dr. Martin Luther King, Jr., delivered his “I Have a Dream” speech.

Before passage of the Civil Rights Act of 1964, open and explicit discrimination based on

race, particularly against African Americans, was widespread. Jim Crow laws legalized racial segregation in many southern states. The act itself had several sections, or titles, all of which aim

to prohibit discrimination in various parts of society. For instance, Title IX applies to educational

institutions. Title VII applies to employers that have 15 or more employees, as well as to employ-

ment agencies and labor unions.

GENERAL PROVISIONS Title VII prohibits employers from basing employment decisions on a person’s race, color, religion, sex, or national origin. The heart of the law, Section 703(a), is

reprinted in Figure 3.2. Note that employment decisions include “compensation, terms, conditions,

or privileges of employment.”

Title VII clearly covers persons of any race, any color, any religion, both sexes, and any

national origin. However, as court cases and regulations have grown up around this law, so has

the legal theory of a protected class. This theory states that groups of people who suffered dis-

crimination in the past require, and should be given, special protection by the judicial system.

Under Title VII, the protected classes are African Americans, Asian Americans, Latinos, Native

Americans, and women. Although it is not impossible for a nonprotected-class plaintiff to win a

Title VII case, it is highly unusual.

Equal Pay Act (1963) The law that requires the same pay for men and women who do the same job in the same organization.

Title VII Section of the Civil Rights Act of 1964 that applies to employment decisions; mandates that employment decisions not be based on race, color, religion, sex, or national origin.

protected class A group of people who suffered discrimination in the past and who are given special protection by the judicial system.

88 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

DISCRIMINATION DEFINED Despite the negative connotation the word has acquired, discrimination simply means making distinctions—in the HR context, distinctions among people. Therefore,

even the most progressive companies are constantly discriminating when they decide who

should be promoted, who should receive a merit raise, and who should be laid off. What

Title VII prohibits is discriminating among people based on their race, color, religion, sex, or

national origin.

Specifically, Title VII makes two types of discrimination illegal. The first type of discrimina-

tion, disparate treatment, occurs when an employer treats an employee differently because of his

or her protected-class status. Disparate treatment is the kind of treatment that you probably first

think of when considering discrimination. For instance, Robert Frazier, a bricklayer’s assistant and

an African American, was fired after quarreling with a white bricklayer. However, Frazier’s em-

ployer did not discipline the white bricklayer at all, even though he had injured Frazier by throw-

ing a broken brick at him. A federal court judge ruled that Frazier had been treated more harshly

because of his race and thus suffered from disparate treatment discrimination.15

The second type of discrimination, adverse impact (also called disparate impact), occurs when the same standard is applied to all applicants or employees, but that standard affects a pro-

tected class more negatively (adversely). For example, most police departments around the United

States have dropped the requirement that officers be of a minimum height because the equal ap-

plication of that standard has an adverse impact on women, Latinos, and Asian Americans (that

is, any given height standard will rule out more women than men, and more Latinos and Asian

Americans than African Americans and nonminority individuals).

The adverse impact definition of discrimination was confirmed in a very important 1971

Supreme Court case that we have already discussed, Griggs v. Duke Power.16 Griggs was an African American employee of the Duke Power Company in North Carolina. He and other

African American employees were refused promotions because Duke Power, on the day that

Title VII took effect, had implemented promotion standards that included a high school di-

ploma and passing scores on two tests, one of general intellectual ability and one of mechani-

cal ability. The Supreme Court ruled that such standards, even though applied equally to all

employees, were discriminatory because (1) they had an adverse impact on a protected class

(in this case, African Americans) and (2) Duke Power was unable to show that the standards

were related to subsequent job performance.

Griggs v. Duke Power has some important implications. Under the Griggs ruling, courts may find that a company is acting in a discriminatory manner even though it works hard to ensure that

its HR decision processes are applied equally to all employees. If the outcome is such that a pro-

tected class suffers from adverse impact, then the organization may be required to demonstrate

that the standards used in the decision process were related to the job. In October 1993, Domino’s

Pizza lost a case in which it attempted to defend a “no-beard policy.” The appellate court ruled

that the policy had an adverse effect on African Americans because almost half of male African

Americans suffer from a genetic condition that makes shaving very painful or impossible. Almost

no white men suffer from this malady. Therefore, African Americans are more adversely affected

by this requirement than whites are.17 Domino’s could have won this case if it had shown that

not having a beard was necessary for good job performance. It could not, so the court ruled the

no-beard policy a violation of Title VII.

discrimination The making of distinctions. In HR context, the making of distinctions among people.

disparate treatment Discrimination that occurs when individuals are treated differently because of their membership in a protected class.

adverse impact Discrimination that occurs when the equal application of an employment standard has an unequal effect on one or more protected classes. Also called disparate impact.

FIGURE 3.2 Title VII of the Civil Rights Act of 1964

Section 703. (a) It shall be an unlawful employment practice for an employer—

1. to fail or refuse to hire or to discharge any individual, or otherwise to discrimi- nate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or

2. to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 89

In an earlier (1975) case, Albemarle Paper Company v. Moody, the Supreme Court estab- lished procedures to help employers determine when it is appropriate to use employment tests as

a basis for hiring or promoting employees. The Court ruled that employers can use an employ-

ment test only when they can demonstrate that the test is a valid predictor of job performance.

Thus, Albemarle places the burden of proof on the employer to prove that a contested test (for example, a test that has an adverse impact on a protected class) or other selection tool is a valid

predictor of job success.18

Defense of Discrimination Charges When a discrimination case makes it to court, it is the responsibility of the plaintiff (the person

bringing the complaint) to show reasonable evidence that discrimination has occurred. The legal

term for this type of evidence is prima facie, which means “on its face.” In a disparate treatment lawsuit, to establish a prima facie case the plaintiff only needs to show that the organization did

not hire her (or him), that the plaintiff appeared to be qualified for the job, and that the company

continued to try to hire someone else for the position after rejecting the plaintiff. This set of

requirements, which originated from a court case brought against the McDonnell-Douglas Cor-

poration, is often called the McDonnell-Douglas test.19 In an adverse impact lawsuit, the plaintiff only needs to show that a restricted policy is in effect—that is, that a disproportionate number of

protected-class individuals were affected by the employment decisions.

One important EEOC provision for establishing a prima facie case that an HR prac-

tice is discriminatory and has an adverse impact is the four-fifths rule. The four-fifths rule

comes from the EEOC’s Uniform Guidelines on Employee Selection Procedures, an impor- tant document that informs employers how to establish selection procedures that are valid

and, therefore, legal.20

The four-fifths rule compares the hiring rates of protected classes to those of majority groups

(such as white men) in the organization. It assumes that an HR practice has an adverse impact if

the hiring rate of a protected class is less than four-fifths the hiring rate of a majority group. For

example, assume that an accounting firm hires 50 percent of all its white male job applicants for

entry-level accounting positions. Also assume that only 25 percent of all African American male job

applicants are hired for the same job. Applying the four-fifths rule, prima facie evidence indicates

that the accounting firm has discriminatory hiring practices because 50 percent × 4/5 = 40 percent, and 40 percent exceeds the 25 percent hiring rate for African American men.

Once the plaintiff has established a prima facie case, the burden of proof switches to the

organization. In other words, the employer is then placed in a position of proving that illegal

discrimination did not occur. This can be very tough to prove. Suppose that a sales manager in-

terviews two applicants for a sales position, a man and a woman. Their qualifications look very

much the same on paper. However, in the interview the man seems to be more motivated. He is

hired, and the rejected female applicant files a disparate treatment discrimination suit. She can,

almost automatically, establish a prima facie case (she was qualified, she was not hired, and the

company did hire someone else). Now the sales manager has to prove that the decision was based

on a judgment about the applicant’s motivation, not on the applicant’s sex.

Although these cases can be difficult, employers do win their share of them. There are four

basic defenses that an employer can use:

j Job relatedness The employer has to show that the decision was made for job-related rea-

sons. This is much easier to do if the employer has written documentation to support and

explain the decision. In our example, the manager will be asked to give specific job-related

reasons for the decision to hire the man for the sales job. As we noted in Chapter 2, job de-

scriptions are particularly useful for documenting the job-related reasons for any particular

HR decision. j Bona fide occupational qualification A bona fide occupational qualification (BFOQ)

is a characteristic that must be present in all employees for a particular job. For instance, a

film director is permitted to consider only females for parts that call for an actress. An air-

line company must apply a compulsory age ceiling for pilots, according to Federal Aviation

Agency rules, so that age is a BFOQ for airline pilots. j Seniority Employment decisions that are made in the context of a formal seniority sys-

tem are permitted, even if they discriminate against certain protected-class individuals.

four-fifths rule An EEOC provision for establishing a prima facie case that an HR practice is discriminatory and has an adverse impact. A practice has an adverse impact if the hiring rate of a protected class is less than four-fifths the hiring rate of a majority group.

bona fide occupational qualification (BFOQ) A characteristic that must be present in all employees for a particular job.

90 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

However, this defense requires the seniority system to be well established and applied

universally, not just in some circumstances. j Business necessity The employer can use the business necessity defense when the em-

ployment practice is necessary for the safe and efficient operation of the organization and

there is an overriding business purpose for the discriminatory practice. For example, an

employee drug test may adversely impact a disadvantaged minority group, but the need for

safety (to protect other employees and customers) may justify the drug-testing procedure.

Of these four defenses, the job-relatedness defense is the most common because of the strict

limitations courts have placed on the BFOQ, seniority, and business-necessity defenses.

When an employer requires employees to speak only English at all times on the job, this

speak-English-only rule may violate EEOC law, unless the employer can show that the rule is necessary for conducting business.21 Similarly, an employer may not deny an individual an em-

ployment opportunity, such as a job or promotion, if the individual speaks with an accent, unless

the employer can show that speaking with an accent has a detrimental effect on job performance.

Title VII and Pregnancy In 1978, Congress amended Title VII to state explicitly that women are protected from discrimi-

nation based either on their ability to become pregnant or on their actual pregnancy. The Preg- nancy Discrimination Act of 1978 requires employers to treat an employee who is pregnant in the same way as any other employee who has a medical condition.22 For instance, an employer

cannot deny sick leave for pregnancy-related illnesses such as morning sickness if the employer

allows sick leave for other medical conditions such as other illnesses that cause nausea. The law

also states that a company cannot design an employee health benefit plan that provides no cover-

age for pregnancy. These are strict requirements, as evidenced by the following cases.

In one case that applied the Pregnancy Discrimination Act, a woman who worked at the

U.S. Postal Service (USPS) claimed she was subjected to pregnancy discrimination when she

was not reappointed after she had served a one-year appointment. The USPS cited her ab-

sences from work and that she was considered a high-risk pregnancy and should be doing only

light-duty work. However, the EEOC found the complainant was treated less favorably than

comparative employees based on her pregnancy. The basis of the EEOC’s ruling was that the

law requires the employer to treat pregnant employees just as it treats other employees with

temporary impairments.23

A female police officer in Pinellas Park, Florida, claimed she experienced pregnancy dis-

crimination when she was demoted to dispatcher after becoming pregnant and requesting light

duty. She showed evidence that her male supervisor informed her that he was forced to hire

women, and he specifically gave women the least desirable shifts and days off to punish them if

they became pregnant. The city settled in favor of the complainant and reinstated her as a police

officer.24

Sexual Harassment The Title VII prohibition of sex-based discrimination has also been interpreted to prohibit sexual

harassment. In contrast to protection for pregnancy, sexual harassment protection was not an

amendment to the law but rather a 1980 EEOC interpretation of the law.25 The EEOC’s definition

of sexual harassment is given in Figure 3.3. Also shown in the figure is the definition of general

harassment that the EEOC issued in 1993. The majority of harassment cases filed to date have

dealt with sexual harassment, but this may change in the future.26 Courts appear to be extending

sexual harassment definitions to other protected classes, such as race, age, and disability.

There are two broad categories of sexual harassment. The first, quid pro quo sexual

harassment, covers the first two parts of the EEOC’s definitions. It occurs when sexual activ-

ity is demanded in return for getting or keeping a job or job-related benefit.27 For instance,

a buyer for the University of Massachusetts Medical Center was awarded $1 million in 1994

after she testified that her supervisor had forced her to engage in sex once or twice a week

over a 20-month period as a condition of keeping her job.28

The second category, hostile work environment sexual harassment, occurs when the be-

havior of coworkers, supervisors, customers, or anyone else in the work setting is sexual in nature

and the employee perceives the behavior as offensive and undesirable.29

quid pro quo sexual harassment Harassment that occurs when sexual activity is required in return for getting or keeping a job or job-related benefit.

hostile work environment sexual harassment Harassment that occurs when the behavior of anyone in the work setting is sexual in nature and is perceived by an employee as offensive and undesirable.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 91

Consider this example from a Supreme Court case decided in 1993.30 Teresa Harris was a

manager at Forklift Systems, Inc., an equipment rental firm in Nashville, Tennessee. Her boss was

Charles Hardy, the company president. Throughout the two and one-half years that Harris worked

at Forklift, Hardy made such comments to her as “You’re a woman, what do you know?” and “We

need a man as the rental manager.” He suggested in front of other employees that the two of them

“go to the Holiday Inn to negotiate her raise.” When Harris asked Hardy to stop, he expressed sur-

prise at her annoyance but did not apologize. Less than one month later, after Harris had negotiated

a deal with a customer, Hardy asked her in front of other employees, “What did you do, promise

the guy . . . some [sex] Saturday night?” Harris quit her job at the end of that month.

The issue the Court had to decide was whether Hardy violated the sexual harassment regula-

tions based on Title VII. Lower courts had held that Hardy’s behavior was certainly objection-

able, but that Harris had not suffered serious psychological harm and that Hardy had not created

a hostile work environment. The Supreme Court disagreed, holding that the behavior only needed

to be such that a “reasonable person” would find it to create a hostile or abusive work environ-

ment. Figure 3.4 lists the tests that the Supreme Court said should be considered by judges and

juries in deciding whether certain conduct creates a “hostile work environment” and is thus pro-

hibited by Title VII.

Some cases of sexual harassment have involved groups of employees who have lodged

hostile work environment claims. In 1998, Mitsubishi Motor Manufacturing of America paid

out $34 million to settle a sexual harassment case brought by the EEOC on behalf of more

than 300 female employees. Among their complaints were their being groped, gestured to,

A QUESTION OF ETHICS Some businesses thrive on a sexual theme. For example, “Hooters” attracts customers by marketing a sexual environment. Many ad campaigns have explicit sexual themes. Are such marketing efforts ethical? What effect might these public images have on the working environment at the company that uses them?

FIGURE 3.3 EEOC Definitions of Harassment

1980 Definition of Sexual Harassment Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when:

1. submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment;

2. submission to or rejection of such conduct by an individual is used as a basis for employment decisions affecting such individual; or

3. such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment.

1993 Definition of Harassment Unlawful harassment is verbal or physical conduct that denigrates or shows hostility or aversion toward an individual because of his or her race, color, religion, gender, national origin, age or disability, or that of his/her relatives, friends, or associates, and that:

1. has the purpose or effect of creating an intimidating, hostile, or offensive working environment;

2. has the purpose or effect of unreasonably interfering with an individual’s work performance; or

3. otherwise adversely affects an individual’s employment opportunities.

FIGURE 3.4 Do You Have a Hostile Work Environment?

The Supreme Court listed these questions to help judges and juries decide whether verbal and other nonphysical behavior of a sexual nature create a hostile work environment:

• How frequent is the discriminatory conduct? • How severe is the discriminatory conduct? • Is the conduct physically threatening or humiliating? • Does the conduct interfere with the employee’s work performance?

92 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

urged to reveal their sexual preferences, and exposed to sexually explicit pic-

tures.31 In 1999, Ford Motor Company achieved a settlement with women in

two Chicago area factories in regard to their sexual harassment complaints.

The female employees claimed a long-term pattern of groping, name- calling,

and partying with strippers and prostitutes. The carmaker agreed to set aside

$7.5 million to compensate victims of harassment and $10 million more to

provide diversity training to managers and male workers.32 Mitsubishi changed

its image from a leader in corporate forgiveness of sexual harassment in 1998

to a model corporate citizen four years later in 2002. Mitsubishi made improve-

ments that included a zero-tolerance policy for sexual harassment and provid-

ing training for all employees about the illegality of harassment and how to

investigate complaints when they arise.33

Sexual harassment cases are not only expensive, but they also can be highly

disruptive to business and political organizations. Consider the disruption to the ex-

ecutive branch of the U.S. government when Paula Jones sued President Clinton for

sexual harassment. She alleged that the president made an unwanted sexual advance

toward her in 1991 while he was the governor of Arkansas and she was a state em-

ployee. In 1999, President Clinton paid $850,000 to settle the suit.34

More recently, in 2007 a jury found that Madison Square Garden and New

York Knicks coach and president for basketball operations Isiah Thomas sexually

harassed and discriminated against Anucha Browne Sanders, a former senior vice

president of the Knicks, and ordered that the company pay her $11.6 million in

punitive damages.35

Although most sexual harassment cases involve women as victims, the number of cases in

which men are the victims is increasing.36 In 1995, a federal judge awarded a man $237,257

for being sexually harassed by a female supervisor at a Domino’s Pizza restaurant. The female

supervisor made unwelcome sexual advances to the male subordinate, creating a hostile work

environment. When the man threatened to report the supervisor’s inappropriate conduct to top

management, he was fired.37

Courts also consider same-sex harassment improper work-related behavior. Joseph Oncale,

an oil-rig worker who alleged that fellow male workers physically and verbally abused him with

sexual taunts and threats, was allowed to bring a sexual harassment lawsuit against his employer.

Despite arguments to the contrary, a court reviewing the Oncale case ruled in 1998 that same-sex harassment, not just harassment occurring between the sexes, can be the basis for a sexual harass-

ment lawsuit.38

As Figure 3.5 indicates, sexual harassment is a major EEO issue for employers. An ABC

News/Washington Post poll found that 25 percent of women and 10 percent of men reported

that they had been sexually harassed in the workplace.39 According to the EEOC, plaintiffs filed

11,364 cases of sexual harassment with federal and state agencies in 2011 (Figure 3.5). Men

filed approximately 16 percent of those cases.

The Manager’s Notebook titled “Reducing Potential Liability for Sexual Harassment” spells

out some ways to prevent or correct instances of sexual harassment.

FIGURE 3.5 Number of Sexual Harassment Charges in the United States from 1992 to 2011

Source: The U.S. Equal Employment Opportunity Commission (2012).

www.eeoc.gov/eeoc/statistics/ enforcement/sexual_harassment.cfm.

N um

be r

of C

as es

Year

10,000 1994

11,000

12,000

13,000

14,000

15,000

16,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2009 201119931992

Anucha Brown Sanders, former senior vice president of the Knicks, settled her sexual harassment lawsuit against the organization and former coach Isiah Thomas for $11.6 million.

Source: Julie Stapen/Newscom.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 93

Reducing Potential Liability for Sexual Harassment

M A N A G E R ’ S N O T E B O O K

Customer-Driven HRTo reduce the potential liability of a sexual harassment suit, managers should: j Establish a written policy prohibiting harassment. j Communicate the policy and train employees in what constitutes harassment. j Screen potential employees before hiring to make sure they do not have a history of

sexually harassing others. j Establish an effective complaint procedure. j Quickly investigate all claims. j Take remedial action to correct past harassment. j Make sure that the complainant does not end up in a less desirable position if he or she

needs to be transferred. j Follow up to prevent continuation of harassment.

Sources: Based on Kleiner, K. (2012, September/October). What you need to know about sexual harassment. Nonproprofitworld.org, 12–13; Commerce Clearing House. (2008). Sexual harassment prevention training manual (4th ed.). Chicago: Commerce Clearing House; Equal Employment Opportunity Commission. (2010). Questions and answers for small employers on employer liability for harassment by supervisors. www.eeoc.gov/policy/docs/ harassment-facts.html. jj

Recent U.S. Supreme Court sexual harassment rulings directly affect employer liability in

sexual harassment cases. First, an employer may be held liable for the actions of supervisors to-

ward their subordinate employees even if the offense is not reported to top management. Second,

the Supreme Court has established an employer defense against sexual harassment claims. The

employer must prove two items: (1) It exercised reasonable care to prevent and correct sexual ha-

rassment problems in a timely manner,40 and (2) the plaintiff failed to use the internal procedures

for reporting sexual harassment.41

If the employee reasonably believes that reporting the offensive conduct is not a viable op-

tion, then the employer cannot take advantage of the defense. The internal procedures, then,

must consist of fair investigations.42 The Manager’s Notebook entitled “How to Handle a Sexual

Harassment Investigation ” provides some guidelines.

How to Handle a Sexual Harassment Investigation

Failure to investigate a sexual harassment complaint can result in an employer liability if the case goes to court. Here are some guidelines for conducting an investigation into sexual harassment: j Timeliness Managers should respond quickly, within 24 to 48 hours of a complaint of

sexual harassment. Reacting later than that risks a charge of negligence. j Documentation Managers should ask open-ended questions to get as much detail as pos-

sible about the harassment. Notes taken during the interview should be rewritten or typed

after the meeting is concluded. The manager should write the report based on notes from

the interview with the complainant. j Employee agreement After documenting the facts in the report, the manager should

go over the events with the complainant and document the employee’s agreement with

the report.

M A N A G E R ’ S N O T E B O O K

Customer-Driven HR

94 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

quotas Employer adjustments of hiring decisions to ensure that a certain number of people from a certain protected class are hired.

punitive damages Fines awarded to a plaintiff in order to punish the defendant.

compensatory damages Fines awarded to a plaintiff to compensate for the financial or psychological harm the plaintiff has suffered.

To safeguard against sexual harassment claims, experts recommend that employers develop

a zero-tolerance sexual harassment policy, successfully communicate the policy to employees,

and ensure that victims can report abuses without fear of retaliation.43 Furthermore, proactive

companies schedule sexual harassment training workshops with mandatory attendance required

for all employees. Sexual harassment workshops explain what sexual harassment behaviors look

like with role plays or video clips, explain how the company policy works for reporting sexual ha-

rassment incidents, and offer opportunities for employees to ask questions. For example, a state

law in California requires all employees with supervisory responsibilities in firms with more than

50 employees to take two hours of sexual harassment training at two year intervals.44

The Civil Rights Act of 1991 In 1991, believing that the Supreme Court was beginning to water down Title VII, Congress

passed a comprehensive set of amendments to it. Together, these amendments are known as the

Civil Rights Act of 1991. Although the legal aspects of these amendments are fairly technical, their impact on many organizations is very real. Among the most important effects of the 1991

amendment are:

j Burden of proof As we noted earlier, the employer bears the burden of proof in a

discrimination case. Once the applicant or employee files a discrimination case and shows

some justification for it, the organization has to defend itself by proving that it had a

good job- related reason for the decision it made. This standard was originally established

in the Griggs v. Duke Power decision in 1971. Then a 1989 Supreme Court case, Wards Cove Packing Co. v. Antonio, had the effect of placing more of the burden of proof on the plaintiff.45 The 1991 law reinstates the Griggs standard.

j Quotas To avoid adverse impact, many organizations (including the Department of Labor)

had developed a policy of adjusting scores on employment tests so that a certain percentage

of protected-class applicants would be hired. The 1991 law amending Title VII prohibits

quotas, which are employer adjustments of hiring decisions to ensure that a certain number

of people from a certain protected class are hired. Thus, quotas, which had received mixed

reviews in Supreme Court decisions before 1991, are now explicitly forbidden. Employ-

ers that have an affirmative action program giving preference to protected-class candidates

have to walk a very fine line between “giving preference” (which is permissible) and

“meeting a quota” (which is forbidden). j Damages and jury trials The original Title VII law allowed successful plaintiffs to col-

lect only back pay awards. However, racial minorities were also able to use an 1866 law to

collect punitive and/or compensatory damages. Punitive damages are fines awarded to a

plaintiff to punish the defendant. Compensatory damages are fines awarded to a plaintiff

to compensate for the financial or psychological harm the plaintiff has suffered as a result

j Resolution Managers should ask what end result the employee is seeking. Those with a

genuine complaint usually say they want the harassment to stop. Those with a personal

vendetta are often looking to have the alleged perpetrator fired. j Findings of fact The manager should interview witnesses who can corroborate or discredit

the allegations of sexual harassment. The manager should then interview the alleged

harasser. The accused should have the opportunity to defend himself or herself. A “findings

of fact” document should be recorded to represent all the facts in the complaint; when this

document is completed, the investigation is considered completed. j Remedy The employer is obligated only to take steps reasonably likely to stop the

harassment and has the right to determine an appropriate course of action. An effective

sexual harassment policy gives managers the flexibility to choose from a range of various

sanctions, from a written warning to the harasser to stop, to a transfer or demotion,

to termination of the harasser.

Sources: Based on Willness, C., Steele, P., and Lee, K. (2007). A meta-analysis of the antecedents and consequences of workplace sexual harassment. Personnel Psychology, 127–162; Covey, A. (2001, July). How to handle harassment complaints. HR Focus, 5–6; Segal, J. (2001, October). HR as judge, jury, prosecutor and defender. HRMagazine, 141–154. jj

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 95

of the discrimination. The 1991 law extended the possibility of collecting punitive and

compensatory damages to persons claiming sex, religious, or disability-based discrimina-

tion. Such damages are capped at $50,000 to $300,000, depending on the size of the em-

ployer.46 In addition, the law allows plaintiffs to request a trial by jury.

Some believe that by expressly forbidding quotas, the Civil Rights Act of 1991 has pro-

hibited a very useful mechanism for reducing discrimination in employment decisions. Many

organizations had found that the best way to prevent adverse impact was to use a combination of

quotas and cognitive ability testing. That is, the employer would select a certain percentage of

applicants from various groups, and then choose the highest performers on cognitive ability tests

from each group. This employment strategy resulted in both the maintenance of a high-quality

workforce and greater participation of minorities in that workforce. Yet, by outlawing quotas, the

Civil Rights Act of 1991 has prohibited this option.47

Executive Order 11246 Executive orders are policies that the president establishes for the federal government and or-

ganizations that contract with the federal government. Executive Order 11246 (as amended by

Executive Order 11375) was issued by President Johnson in 1965 and is not part of Title VII. It does, however, prohibit discrimination against the same categories of people that Title VII

protects. In addition, it goes beyond the Title VII requirement of no discrimination by requiring

covered organizations (firms with government contracts over $50,000 and 50 or more employees)

to develop affirmative action programs to promote the employment of protected-class members.

For instance, government contractors such as Boeing and Lockheed Martin are required to have

active affirmative action programs.

The Age Discrimination in Employment Act of 1967 The Age Discrimination in Employment Act (ADEA) prohibits discrimination against people

who are 40 or older. When first enacted in 1967, it protected people aged 40 to 65. Subsequently,

it was amended to raise the age to 70, and in 1986 the upper age limit was removed entirely.

The majority of ADEA complaints are filed by employees who have been terminated. For

instance, a 57-year-old computerized-control salesman for GE Fanuc Automation was the only

employee terminated during a “reduction in force”; he was replaced by six younger sales repre-

sentatives. He brought a lawsuit, claiming that he was fired because of his age, and a Detroit jury

awarded him $1.1 million in damages and lost wages and benefits.48 Employers can also lose law-

suits as a result of ill-informed workplace humor. Employers have lost several age discrimination

cases because terminated employees had evidence that supervisors had told jokes about old age.49

One age-discrimination case involved 1,697 former employees laid off by Sprint Nextel and was

settled in 2005 for $57 million for the plaintiffs. In 2012, the EEOC received 22,857 complaints

of age discrimination.50

An important amendment to the ADEA is the Older Workers Protection Act (OWPA) of 1990, which makes it illegal for employers to discriminate in providing benefits to employees

based on age. For example, it would be illegal for employers to provide disability benefits only

to employees who are age 60 or younger or to require older employees with disabilities to take

early retirement. Another OWPA provision makes it more difficult for firms to ask older workers

in downsizing and layoff situations to sign waivers in which they give up their right to any future

age-discrimination claims in exchange for a payment.51

Some companies value older employees and develop policies that help older workers extend

their working lives. One such company is Deere & Company, an industrial-equipment man-

ufacturer based in Moline, Illinois. About 35 percent of its 46,000 employees are older than

50 years of age and a number are in their 70s. Deere & Company spends a lot of effort incorpo-

rating ergonomics into its factories, making jobs less tiring, which enables older employees to

stay on the job longer.52 With longer life expectancies, there will be greater numbers of employ-

ees who will prefer to keep on working beyond their mid-sixties when they qualify for Social

Security retirement income and Medicare benefits. Companies will need to rethink how they

design careers for older workers who plan to postpone retirement and remain employed. One

approach being used to manage older employees is to treat retirement as a process rather than a

sudden event and offer older workers “bridge jobs” that provide a transition between full-time

executive order A presidential directive that has the force of law. In HR context, a policy with which all federal agencies and organizations doing business with the federal government must comply.

Age Discrimination in Employment Act (ADEA) The law prohibiting discrimination against people who are 40 or older.

96 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

employment and retirement. Mercy Health Systems uses such an approach by giving older em-

ployees the opportunity to work on jobs during seasonal periods of high demand and then offer

long periods of unpaid leave during which these older employees can retain their benefits.53

The Americans with Disabilities Act of 1990 The most recent of the major EEO laws is the Americans with Disabilities Act (ADA). Signed

into law in 1990 and gradually implemented since then, ADA has three major sections. Title I

contains the employment provisions; Titles II and III concern the operation of state and local

governments and places of public accommodation such as hotels, restaurants, and grocery stores.

The ADA applies to all employers with 15 or more employees.54

The central requirement of Title I of the ADA is as follows:

Employment discrimination is prohibited against individuals with disabilities who are able to perform the essential functions of the job with or without reasonable accommodation.

Three parts of this requirement need definition.

INDIVIDUALS WITH DISABILITIES For the purposes of ADA, individuals with disabilities are people who have a physical or mental impairment that substantially affects one or more major

life activities. Some examples of major life activities are:55

j Walking j Speaking j Breathing j Performing manual tasks

j Sitting j Lifting j Seeing j Hearing

j Learning j Caring for oneself j Working j Reading

Obviously, persons who are blind, hearing impaired, or wheelchair bound are individu-

als with disabilities. But the category also includes people who have a controlled impair-

ment. For instance, a person with epilepsy is disabled even if the epilepsy is controlled

through medication. The impairment must be physical or mental and not due to environ-

mental, cultural, or economic disadvantages. For example, a person who has difficulty read-

ing due to dyslexia is considered disabled, but a person who cannot read because he or she

dropped out of school is not. Persons with communicable diseases, including those who are

HIV-positive (infected with the virus that causes AIDS), are included in the definition of

individuals with disabilities.

The ADA Amendments Act (ADAAA) of 2008 is a law that added amendments to the ADA and broadened the definition of a disability so that it is considered to be less than

substantially limiting and more than moderately limiting to one or more major life activi- ties. The ADAAA adds more life activities for consideration and includes activities such as

bending and communicating, and also includes bodily functions such as immune system,

bladder, circulatory, endocrine, neurological, and digestive functions.56 Under the ADAAA,

AutoZone was taken to court when it failed to provide a reasonable accommodation for a

disabled sales manager who was unable to perform what the court deemed as non-essential

job functions (mopping floors and other cleaning tasks) due to back and neck impairments.

Even after AutoZone was provided evidence of these impairments, it refused to provide an

accommodation and ordered the employee to continue performing cleaning activities that

led to additional injury and the need for medical leave. The court awarded the employee a

$600,000 settlement and the possibility of obtaining additional back pay.57

In addition, the ADA protects persons who are perceived to be disabled. For instance, an employee might suffer a heart attack. When he tries to return to work, his boss may be scared that

the workload will be “too much” and refuses to let him come back. The employer would be in

violation of the ADA because he perceives the employee as disabled and is discriminating against

him on the basis of that perception.

Two particular classes of people are explicitly not considered disabled: individuals whose current use of alcohol is affecting their job performance and those who use illegal drugs (whether

they are addicted or not). However, those who are recovering from their former use of either

alcohol or drugs are covered by ADA.

Individuals who are considered morbidly obese, defined as weighing 100 or more

pounds above their ideal body weight, may or may not be covered under the ADA. Currently,

9 million U.S. adults are morbidly obese, and many suffer from medical conditions such as

Americans with Disabilities Act (ADA) The law forbidding employment discrimination against people with disabilities who are able to perform the essential functions of the job with or without reasonable accommodation.

individuals with disabilities Persons who have a physical or mental impairment that substantially affects one or more major life activities.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 97

hypertension, heart disease, stroke, cancer, depression, rheumatoid arthritis, osteoarthritis,

and diabetes. Recent court cases do not consider morbid obesity to be an inherently ADA-

eligible condition. To be eligible for ADA coverage, an individual’s morbid obesity would

require a physiological cause. The individual making a case for ADA coverage would need

to provide medical evidence to the employer that he or she was overweight due to physi-

ological causes. For example, if a medical examination revealed that a person was morbidly

obese because of overeating and lack of exercise, the employer would be able to deny ADA

coverage to the employee seeking it.58

INTELLECTUAL DISABILITIES In 2005, the EEOC provided guidelines to address challenges faced by employers in hiring, accommodating, and preventing harassment of employees with intel-

lectual disabilities. The EEOC estimates that within the United States about 2.5 million

individuals have intellectual disabilities that occur when: (1) the person’s intellectual function level (IQ) is below 70–75; (2) the person has significant limitations in adaptive skill areas as

expressed in conceptual, social, and practical adaptive skills; and (3) the disability originated

before the age of 18. Adaptive skills are the basic skills needed for everyday life. They include communication; self-care; home living; social skills; leisure; health and safety; self-direction;

functional academics (reading, writing, basic math); and work.59

Not everyone with an intellectual impairment is covered by the ADA. An individual’s intel-

lectual impairment must substantially limit one or more major life activities, such as walking,

seeing, hearing, thinking, speaking, learning, concentrating, performing manual tasks, caring for

oneself, and working. The following is an example of someone who has an intellectual impair-

ment that would be covered under the ADA:

An individual with an intellectual impairment is hired as part of a crew of employees

that works at a concession stand at a movie theater. He helps stock the counter with

candy and snacks; at closing time, he cleans the counters and equipment and restocks

the concession stand with supplies. However, he cannot perform the function of accu-

rately counting money at closing time, nor is he capable of accurately making change

for customers from the cash register. This individual is limited in his intellectual abil-

ity to perform basic math skills and therefore has a disability that qualifies for ADA

coverage.

ESSENTIAL FUNCTIONS The EEOC separates job duties and tasks into two categories: essential and marginal. Essential functions are job duties that every employee must do or must be able

to do to be an effective employee. Marginal functions are job duties that are required of only some employees or that are not critical to job performance. The following examples illustrate the

difference between essential and marginal functions:

j A company advertises a position for a “floating” supervisor to substitute when regular su-

pervisors on the day, night, and graveyard shifts are absent. The ability to work any time of

the day or night is an essential job function. j A company wishes to expand its business with Japan. In addition to sales experience,

it requires all new hires to speak fluent Japanese. This language skill is an essential job

function. j In any job requiring computer use, it is essential that the employee have the ability to

access, input, or retrieve information from the computer terminal. However, it may

not be essential that the employee be capable of manually entering or visually retriev-

ing information because technology exists for voice recognition input and auditory

output. j A group of chemists working together in a lab may occasionally need to answer the tele-

phone. This is considered a marginal job duty because if not every one of the chemists can

answer the phone, the other chemists can do so.

ADA requires that employers make decisions about applicants with disabilities solely on the

basis of their ability to perform essential job functions. Thus, an employer should not make pre-

employment inquiries about a job candidate’s disability, although an employer may ask questions

about the job candidate’s ability to perform essential job functions.

essential functions Job duties that each person in a certain position must do or must be able to do to be an effective employee.

98 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

REASONABLE ACCOMMODATION Organizations are required to take some reasonable action to allow employees with disabilities to work for them. The major aspects of this requirement are:

j Employers must make reasonable accommodation for the known disabilities of applicants

or employees so that people with disabilities enjoy equal employment opportunity.60 For

example, an applicant who uses a wheelchair may need accommodation if the interviewing

site is not wheelchair accessible. j Employers cannot deny a person with disabilities employment to avoid providing the reason-

able accommodation, unless providing the accommodation would cause an “undue hardship.”

Undue hardship is a highly subjective determination, based on the cost of the accommodation

and the employer’s resources. For instance, an accommodation routinely provided by large

employers (such as specialized computer equipment) may not be required of small employers

because the small employers do not have the large employer’s financial resources. j No accommodation is required if the individual is not otherwise qualified for the position. j It is usually the obligation of the disabled individual to request the accommodation. j If the cost of the accommodation would create an undue hardship for the employer, the dis-

abled individual should be given the option of providing the accommodation. For instance,

if a visually impaired person applies for a computer operator position in a small company

that cannot afford to accommodate the applicant, then the applicant should be given the

option to provide the accommodating technology. (Note, though, that the President’s Com-

mittee on Employment of People with Disabilities reports that 20 percent of accommoda-

tions do not cost anything at all, and less than 4 percent cost more than $5,000.61)

A wide variety of accommodations is possible, and they can come from some surprising

sources. For example, Kreonite, Inc., a small family-owned business of about 250 employees

that manufactures specialized photographic film, has been committed to employing persons

with disabilities and has several employees who are deaf. Kreonite turned to a local not-for-

profit training center for someone to teach sign language to its hearing employees. The training

was free, and 30 Kreonite employees volunteered to attend.62

Some additional examples of potential reasonable accommodations that the EEOC has sug-

gested are reassigning marginal job duties, modifying work schedules, modifying examinations

or training materials, providing qualified readers and interpreters, and permitting use of paid

or unpaid leave for treatment.63 An accommodation the EEOC has suggested for people with

intellectual disabilities is to provide a job coach on a temporary basis to assist in training the

employee to perform the essential functions of the job.64

As we noted earlier in the chapter, the main focus of the ADA and its accompanying regula-

tions is the hiring process. However, the majority of complaints filed so far involve situations

in which current employees have become disabled on the job. According to the EEOC, the total

number of disability cases filed under the ADA in 2009 was 21,451. The two largest categories of

cases were emotional and psychiatric impairments and back injuries, both of which are difficult

to diagnose and treat.65 Managers need to be prepared to deal with a set of issues not anticipated

by the lawmakers and regulators who created and passed the ADA.

THE VOCATIONAL REHABILITATION ACT OF 1973 The Vocational Rehabilitation Act is the precursor to the ADA. However, this act applies only to the federal government and its contractors. Like Executive

Order 11246, the Vocational Rehabilitation Act not only prohibits discrimination (in this case, on the

basis of disability), but also requires that the covered organizations have an affirmative action plan

to promote the employment of individuals with disabilities. Familiarity with this law is useful to

organizations attempting to comply with the ADA because it has led to over 30 years’ worth of court

and regulatory decisions based on the same central prohibition against disability-based discrimination.

THE VIETNAM ERA VETERANS READJUSTMENT ACT OF 1974 One additional EEO law deserves brief mention. The Vietnam Era Veterans Readjustment Act of 1974 prohibits discrimination against Vietnam-era veterans (those who served in the military between August 5, 1964, and May 7,

1975) by federal contractors. The law also protects the rights of military veterans who served

on active duty during a war, campaign, or expedition for which a campaign badge has been

authorized, which includes subsequent military campaigns such as the Gulf War (1991), the war

in Iraq (2003–2011), and the war in Afghanistan (2001–2015). It also requires federal contractors

to take affirmative action to hire Vietnam-era veterans and those from more recent campaigns.

reasonable accommodation An action taken to accommodate the known disabilities of applicants or employees so that disabled persons enjoy equal employment opportunity.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 99

EEO Enforcement and Compliance The enforcement of EEO laws is the responsibility of the executive branch of government, which

is headed by the president. In this section, we describe the regulatory agencies that enforce the

various EEO laws, as well as some of the plans that have been used to comply with affirmative

action requirements.

Regulatory Agencies Two agencies are primarily responsible for the enforcement of EEO law: the Equal Employment

Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs

(OFCCP).

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (EEOC) The Equal Employment Opportunity Commission (EEOC), which was created by Title VII, has three major functions. The first is

processing discrimination complaints. The second is issuing written regulations. The third is

information gathering and dissemination.66

In processing discrimination complaints, the EEOC follows a three-step process:

j Investigation An applicant or employee who thinks that he or she has been discriminated

against begins the process by filing a complaint with the EEOC. The EEOC then notifies

the company that a complaint has been filed, and the company becomes responsible for

ensuring that any records relating to the complaint are kept safe. The EEOC usually finds

itself with a backlog, so it may take up to two years to begin investigating the complaint. In

2012, 99,412 cases were filed with the EEOC, compared to 62,100 in 1990.

Of the 99,412 total charges filed with the EEOC in 2012, the common types of

discrimination among all filings were:67

j Race: 33,512 (33.7 percent) j Sex/Gender: 30,356 (30.5 percent) j Age: 22,857 (23.0 percent) j Disability: 26,374 (26.5 percent) j National Origin: 10,883 (10.9 percent) j Religion: 3,811 (3.8 percent) j Equal Pay: 1,082 (1.1 percent)

The average processing time for private-sector charge filings at the EEOC was 180 days.

After conducting the investigation, the EEOC determines whether it is likely that the

company did in fact violate one or more EEO laws. Complainants are always free to file a

lawsuit, but the courts are unlikely to rule in their favor without the EEOC’s backing. j Conciliation If the EEOC finds that an EEO law was probably violated, it attempts to

resolve the case through conciliation. Conciliation consists of negotiation among the three

parties involved: the complainant, the employer, and the EEOC. The goal of conciliation is

to reach a fair settlement while avoiding a trial. j Litigation If conciliation is not possible, the EEOC can choose between two courses of

action. The EEOC does not have the power to compel an employer to pay compensation

or any other kind of damages; this can be done only as the result of a court’s decision.

Because pursuing a lawsuit is very expensive, the EEOC takes this course of action only in

a relatively small percentage of cases. If the EEOC chooses not to pursue the case, it issues

a right-to-sue letter to the complainant, who is then free to pursue court action with the

blessing (if not the financial or legal support) of the EEOC.

In addition to resolving complaints, the EEOC is responsible for issuing regulations and

guidelines. These documents put “meat on the bones” of the individual laws. For instance, when

the EEOC decided that sexual harassment was prohibited by Title VII, it issued regulations defin-

ing what sexual harassment is (see Figure 3.3) and what it expects employers to do in response to

employee complaints of harassment. Similarly, when the ADA was signed into law in 1990, the

EEOC was given the responsibility of issuing regulations that would inform employers exactly

what they would (and would not) be expected to do to comply with the law. The EEOC Web site

(www.eeoc.gov) also provides a list of its regulations. Figure 3.6 lists some of the most prominent EEOC regulations.

Equal Employment Opportunity Commission (EEOC) The federal agency responsible for enforcing EEO laws.

conciliation An attempt to reach a negotiated settlement between the employer and an employee or applicant in an EEO case.

100 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

The EEOC also gathers information to monitor the hiring practices of organizations. It does this

by requiring organizations with 100 or more employees to file an annual report (EEO-1) indicating

the number of women and minorities who hold jobs in nine different job categories. The EEOC

examines this information to identify patterns of discrimination that may exist in organizations.

Finally, the EEOC disseminates posters to employers. These posters explain to workers how

to protect themselves from employment discrimination and how to file a complaint. The EEOC

requires employers to display the posters in a prominent place (such as the company cafeteria).

Office of Federal Contract Compliance Programs (OFCCP) The Office of Federal Contract Compliance Programs (OFCCP) is responsible for enforcing

the laws and executive orders that apply to the federal government and its contractors. Specifi-

cally, it enforces Executive Order 11246 and the Vocational Rehabilitation Act, which both go be-

yond prohibiting discrimination to requiring affirmative action programs by covered employers.

Many of the regulations written by the OFCCP are very similar to those issued by the EEOC.

However, there are two major differences between the enforcement activities of the two agencies.

First, in contrast to the EEOC, the OFCCP actively monitors compliance with its regulations. That

is, it does not wait for an employee or applicant to file a complaint. Rather, it requires covered

employers to submit annual reports on the state of their affirmative action programs. Second, un-

like the EEOC, the OFCCP has considerable enforcement power. Being a government contractor

is considered a privilege, not a right. The OFCCP can take away that privilege if it determines that

an employer is not complying with the law. It can also levy fines and other forms of punishment.

Office of Federal Contract Compliance Programs (OFCCP) The federal agency responsible for monitoring and enforcing the laws and executive orders that apply to the federal government and its contractors.

FIGURE 3.6 Principal EEOC Regulations

Source: Based on EEOC Regulations (April, 2014). www.eeoc.gov.

Age: An employment policy or practice that applies to everyone, regardless of age, can be illegal if it has a negative impact on applicants or employees age 40 or older and is not based on a reasonable factor other than age (RFOA). Disability: The law requires an employer to provide reasonable accommodation to an employee or job applicant with a disability, unless doing so would cause significant difficulty or expense for the employer. Compensation: The law requires that men and women be given equal pay for equal work in the same establishment. The jobs need not be identical, but they must be substantially equal. Genetic data: It is illegal to discriminate against employees or applicants because of genetic information. Bullying: The employer is automatically liable for harassment by a supervisor that results in a negative employment action such as termination, failure to promote or hire, and loss of wages. If the supervisor’s harassment results in a hostile work environment, the employer can avoid liability only if it can prove that: (1) it reasonably tried to prevent and promptly correct the harassing behavior; and (2) the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer. National origin: The law makes it illegal for an employer or other covered entity to use an employment policy or practice that applies to everyone, regardless of national origin, if it has a negative impact on people of a certain national origin and is not job-related or necessary to the operation of the business. Pregnancy: The law forbids discrimination based on pregnancy when it comes to any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, fringe benefits, such as leave and health insurance, and any other term or condition of employment. Adverse impact: An employment policy or practice that applies to everyone, regardless of race or color, can be illegal if it has a negative impact on the employment of people of a particular race or color and is not job-related and necessary to the operation of the business. Religion: The law requires an employer or other covered entity to reasonably accommodate an employee’s religious beliefs or practices, unless doing so would cause more than a minimal burden on the operations of the employer’s business. Gender discrimination: Sex discrimination involves treating someone (an applicant or employee) unfavorably because of that person’s sex. Sexual harassment: It is unlawful to harass a person (an applicant or employee) because of that person’s sex. Harassment can include “sexual harassment” or unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 101

Affirmative Action Plans An affirmative action plan is required of all government agencies and businesses that do a sig-

nificant amount of work for the government. There are three steps to developing an affirmative

action plan: conducting a utilization analysis, establishing goals and timetables, and determining

action options.

UTILIZATION ANALYSIS The first step in developing an affirmative action plan is conducting a utilization analysis to describe the organization’s current workforce relative to the pool of qualified workers in the labor force. There are two parts to conducting this analysis. The first

involves determining the demographic composition of the current workforce by dividing all the

jobs in the organization into classifications. For instance, all management jobs are placed in one

classification, all clerical and secretarial jobs in a second, all sales positions in a third, and so on.

The percentage of persons from each protected class working in each of these classifications is

then determined.

The second part is determining the percentage of those same protected classes in the avail-

able labor market. In gathering this information, organizations need to consider the eight dif-

ferent pieces of information listed in Figure 3.7. For instance, what percentage of qualified and

available managers are women? What percentage are African Americans? What percentage are

Asian Americans? The OFCCP offers guidelines for determining these figures. If the available

figures are significantly higher than the currently employed in any category, the protected groups

are said to be underutilized in that job category.

GOALS AND TIMETABLES The second step is setting goals and timetables for correcting under- utilization. The OFCCP explicitly requires that rigid numerical quotas not be set. Rather, the employer should take into consideration the size of the underutilization, how fast the workforce

turns over, and whether the workforce is growing or contracting. Another consideration in setting

goals and timetables is the types of actions the employer intends to take.

ACTION PLANS The final step in developing an affirmative action plan is deciding exactly what affirmative actions to take. The OFCCP suggests the following guidelines:

j Recruiting protected-class members. j Redesigning jobs so that the underrepresented workers are more likely to be qualified. j Providing specialized training sessions for underprepared applicants. j Removing any unnecessary barriers to employment. For instance, a company located in

an area not served by public transportation might consider providing van service from cer-

tain areas so that potential applicants who do not have reliable transportation can become

employees.

The central concern for organizations is determining how much (if any) preference they

should give to applicants who belong to an underutilized protected class. For instance, a few

decades ago there was a job opening in the transportation department of Santa Clara County,

California. After going through the normal selection process, the candidates for promotion

FIGURE 3.7 Components of an Eight-Factor Availability Analysis

Determine the percentage of protected-class members for each of the following groups of people:

• Local population • Local unemployed workers • Local labor force • Qualified workers in the local labor market • Qualified workers in the labor market from which you recruit • Current employees who might be promoted into the job classification • Graduates of local education and training programs that prepare people for

this job classification • Participants in training programs sponsored by the employer

102 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

were ranked according to their performance on tests and in interviews. County rules allowed

any of the top seven candidates to be chosen. The supervisors were poised to choose the

employee ranked second—Paul Johnson, a white man. Diane Joyce, a white woman who

was ranked fourth, called the county’s affirmative action officer and ended up with the job.

Johnson filed suit. His argument was straightforward: Title VII prohibits discrimination

based on sex, and he did not get the job because he is a man. This is a classic case of alleged

reverse discrimination, discrimination that occurs as the result of an attempt to recruit and hire

more people from the protected classes. In this case, the job classification to which the person

was to be promoted had 238 positions, none of which were held by women. Johnson pursued his

case all the way to the U.S. Supreme Court. In 1987, the Court ruled that Santa Clara County’s

decision was permissible.68

The Supreme Court has decided over a dozen reverse discrimination cases since the first

one in 1977.69 Although the Court has favored the affirmative action strategy side of the tension

outlined in Figure 3.1, almost all these cases were decided by 6–3 or 5–4 margins. Because new

justices are added to the Supreme Court fairly regularly, the way these kinds of cases will be

decided in the future is very much an open question.

In a landmark 2003 case involving the University of Michigan’s affirmative action policies,

the U.S. Supreme Court upheld the right of affirmative action in university admissions decisions.

First, in upholding the policy of the law school at the University of Michigan, it ruled that race

can be one of many factors considered by colleges when selecting their students because it fur-

thers “a compelling interest in obtaining the educational benefits that flow from a diverse student

body.” Second, it ruled that the University of Michigan’s undergraduate admissions policy, which

was based on a formula that gave extra points to minorities, needed to be modified because, un-

like the law school, it did not take into consideration individual aspects of applicants concerning

admission to the university.70

The United States is not the only country with affirmative action. Other countries have created

similar policies to provide employment or educational opportunities for disadvantaged groups. For

example, India has tried to improve the status of the untouchables, the lowest caste in its society,

by providing them with preferential treatment in employment and education. This policy has had

mixed results because it has enraged some members of the higher castes. Malaysia has favored the

Islamic Malays over the Chinese (who on average are wealthier and more highly educated than the

Malays) for jobs and higher education opportunities. Significant numbers of Chinese Malaysians

have responded to this policy by emigrating to Asia and North America.71 Other countries have

disadvantaged groups in their population but have decided not to create employment policies

favorable to these groups. For example, France has a large minority of Muslims from North Africa

who have been historically disadvantaged, but it has avoided remedying the high Muslim unem-

ployment rate with a policy similar to affirmative action in the United States. In Great Britain, the

government’s Commission for Racial Equality concluded that most British firms do little to ensure

equal employment opportunity beyond giving verbal support to the idea.72

Cultural values can influence how minorities or disadvantaged groups are treated on the

basis of equality in countries outside the United States, as described in the Manager’s Notebook

titled “In India, Gender Inequity in the Workplace Is Widespread.”

reverse discrimination Discrimination against a nonprotected-class member resulting from attempts to recruit and hire members of protected classes.

In India, Gender Inequity in the Workplace Is Widespread

While India is the world’s largest democracy and is rapidly expanding economically, the participation of Indian women has lagged the levels of other rapidly developing countries such as China. The proportion of women in the workforce in India is only 24 percent compared to a 70 percent female participation rate in China. A 2012 Global Gender

Gap Report ranked women in 135 countries on economic participation and political empower-

ment. The report gave India a ranking of 105, which was below countries such as Cambodia,

Burkina Faso, and Belize.

M A N A G E R ’ S N O T E B O O K

Global

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 103

Other Important Laws We have concentrated on equal employment opportunity laws in this chapter because they

have a broad effect on almost all HR issues and are highly likely to influence managers’

behavior. The other HR laws, listed in the Appendix to this chapter and discussed elsewhere

in the book, are much more narrowly focused. These include laws that affect compensation

and benefit plans (state workers’ compensation laws, the Social Security Act, the Fair Labor

Standards Act, the Employee Retirement and Income Security Act, the Consolidated Omni-

bus Budget Reconciliation Act, and the Family and Medical Leave Act); union–management

relations (the Wagner Act, the Taft-Hartley Act, and the Landrum-Griffin Act); safety and

health issues (the Occupational Safety and Health Act); and layoffs (the Worker Adjustment

and Retraining Act).

Four laws deserve brief mention. The Immigration Reform and Control Act of 1986 was in- tended to reduce the inflow of illegal immigrants to the United States. The law has one provision that

affects employers. To discourage the hiring of illegal immigrants, the law mandates that employers

hire only people who can document that they are legally permitted to work in the United States.

A QUESTION OF ETHICS Is it ethical for a U.S. employer to require all employees to speak only English at the workplace?

India’s low female labor participation rate is linked to cultural pressure due to expectations

from the family on the role of a married woman. Indian married women are expected to be home

taking care of the family, and often that includes taking care of their in-laws as well.

As a result of some well-publicized acts of violence toward women in India, a workplace

sexual harassment law was enacted in 2013 that is supposed to prevent acts of sexual harassment

of women in the workplace. The law requires that employers with more than 10 employees form

an “Internal Complaints Committee” to which a woman who alleges harassment can take her

complaint. This committee is supposed to mediate between the complainant and the accused to

reach a settlement and will start an investigation only if mediation fails. Critics object to the pro-

vision that requires mediation before a formal inquiry takes place because it acts as a deterrent to

women coming forward with a complaint.

Sources: Based on Kolhatkar, S. (2013, February 4). Arrested development: India’s miserable record on women’s rights threatens to stunt its economic growth. Bloomberg Businessweek, 6–7; Vasant, K. (2013, April 29). New work- place sexual harassment law ‘already out of date.’ India Realtime. www.blogs.wsj.com/indiarealtime/2013/04/29; Pathak, M. (2012, March 28). India takes steps toward gender equity. Gazelle Index. www.gazelleindex.com/ archives/5410. jj

The Uniformed Services Employment and Reemployment Rights Act of 1994 protects the jobs of employees who take leave to serve in the military reserve. Employers often find the skills that reservists gain through their service are valuable in the workplace.

Source: Shelly Perry/Thinkstock.

104 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Military Reservists Who Have Returned from Iraq and Afghanistan Are Finding Their Skills in High Demand

Reservists have made up a significant percentage of active duty troops who have served in Iraq and Afghanistan—the largest number of reservists to see combat since World War II. Their average age at the time of their deployment was 32, four years older than the average soldier. Employers are finding that reservists have returned from duty in Iraq and Afghanistan with

seasoned management, people, and communication skills. They also have returned with leader-

ship skills that have been honed in combat. Army Major David Wood, a 41-year-old reservist,

commanded a helicopter squadron in Iraq and Afghanistan. Wood says his soldiers always seemed

more enthusiastic about a mission when they knew a senior officer was taking part. Back home,

as a vice president at Jay Group, a packaging company in Pennsylvania, Wood says he now often

goes down to the plant floor to pack and ship products alongside workers. “You can’t be what we

call a coffee-cup commander,” Wood says. “You have to be on the field, leading from the front.”

Recognizing the value of skills obtained in the context of military combat, employers are

going out of their way to recruit and retain reservists. Although employers are required by law to

give returning reservists back their jobs with the same responsibility and pay, some employers go

even further than the law requires, offering them such perks as continued pay and benefits while

on military duty. Here are a few examples:

j Adolph Coors makes up the difference between a reservist’s regular salary and military pay

for up to one year of active duty. An internal volunteer organization works with reservists’

families, boxing and shipping donated items to the troops. j American Express provides full pay and benefits for up to five years as well as cash contri-

butions to the employee’s retirement plan. j General Electric pays one month of full salary and makes up the difference in pay for up

to three years. GE has a military recruiting division and leadership programs for military

members transitioning to the corporate world.

Sources: Based on Palmeri, C. (2004, December 13). Served in Iraq? Come work for us. BusinessWeek, 78–80; Dance, S. (2010, February 15). Returning soldiers, employers face post-war challenges. Baltimore Business Journal. www .bizjournals.com. jj

M A N A G E R ’ S N O T E B O O K

Emerging Trends

The Employment Eligibility Verification (I-9) form specifies which documents employers need to

see from new employees. It appears that the major impact of the Immigration Reform and Control

Act has been the creation of a market for fake documents.

The Immigration Act of 1990 was legislated to make it easier for skilled immigrants to enter the United States. This law represents a modification of previous U.S. immigration policy, which favored

immigrants who either (1) had family members who are U.S. citizens or (2) were leaving a country

that was assigned a large quota of immigrants to the United States based on historical trends.73

The Drug-Free Workplace Act of 1988 requires that government contractors try to ensure that their workplaces are free from drug use. Employers are required to prevent the use of illegal

drugs at their work sites and to educate their employees about the hazards of drug use. Although

the law does not mandate drug testing, it—along with other more narrowly focused laws and

regulations—has led to a general acceptance of drug testing, both of current employees and ap-

plicants, across the United States.74 About 98 percent of Fortune 200 companies now conduct

some form of drug testing.75

The Uniformed Services Employment and Reemployment Rights Act of 1994 protects the rights of people who take short leaves from a private-sector employer to perform military service

(such as reserve duty). The law protects these employees’ seniority rights and benefits. It also pro-

tects them from employer discrimination in hiring, promotion, or layoff decisions. Some employ-

ers have been giving military reservists returning from combat duty in Iraq perks and benefits that

exceed what is legally required, as described in the Manager’s Notebook titled “Military Reserv-

ists Who Have Returned from Iraq and Afghanistan Are Finding Their Skills in High Demand.”

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 105

Avoiding Pitfalls in EEO The great majority of employees and job applicants in the United States fall into one or more

protected classes. This means that almost any decision made by a manager that affects a work-

er’s employment status can be challenged in a court of law. In most cases, sound management

practices will not only help managers avoid EEO lawsuits, but also contribute to the organiza-

tion’s bottom line. Five specific management practices are recommended: providing training,

establishing a complaint resolution process, documenting decisions, being honest, and asking

applicants for only needed information.

Provide Training One of the best ways to avoid EEO problems is to provide training.76 Two types of training are

appropriate. First, the HR department should provide supervisors, managers, and executives

with regular updates on EEO and other labor issues, because this area of law is in a constant

state of flux.77 The Supreme Court regularly decides cases that affect HR practice. Although

managers can try to read periodicals or search the Web to obtain current information, most find

their everyday demands too taxing to allow time for this. Regular, focused training sessions

conducted by the HR department are the most efficient method of communicating this informa-

tion to managers.

Second, employers should focus on communicating to employees their commitment to a

discrimination-free work environment. For instance, all employees need to be instructed in what

sexual harassment is, how to stop it before it becomes a problem, and what to do if it does become

a problem. Honeywell has a council of employees with disabilities, one function of which is to

promote awareness of disability issues throughout the company.78

Establish a Complaint Resolution Process Every organization should establish a process for the internal resolution of EEO and other types

of employee complaints. It is much less expensive to resolve these concerns if the EEOC, OFCCP,

and legal counsel are not involved. More important, employee morale and satisfaction can be im-

proved when employees are able to pass along their concerns to upper-level management. (We

describe complaint resolution systems in detail in Chapters 13 and 15.)

Once in place, the complaint resolution process should be followed correctly. AT&T

avoided liability in a sexual harassment case because it was able to show that it had acted

promptly to remedy the problem once management had been informed of it.79 Exhibit 3.1,

“Alternative Dispute Resolution Methods at Marriott and the EEOC,” describes how Marriott

and the EEOC have taken the lead in experimenting with new ways to resolve employee EEO

complaints.

Document Decisions Financial transactions and decisions need to be well documented so they can be audited and sum-

marized, problem areas identified, and solutions implemented.80 The same rationale applies to

decisions made about employees. The nature of any HR decision, and the rationale for it, should

be clearly documented. Both the EEOC and OFCCP have certain reporting requirements. Em-

ployers that have a sound human resource information system in place do not find it difficult to

comply with these requirements.

Be Honest Typically, applicants and employees will not file an EEO complaint unless they think they

have been mistreated. Perceptions of mistreatment often result from situations in which

employees’ or applicants’ expectations have not been met. Imagine the following scenario:

A 50-year-old employee has consistently received excellent performance evaluations over a

20-year period. He is then abruptly terminated by his manager for poor work performance.

This employee is likely to file a lawsuit, because over time he has developed the expecta-

tion that he is a valued employee and he now believes that the only possible reason for

his termination is his age. Although it may be painful in the short term, providing honest

feedback to employees is a good management practice that may reduce legal problems in

the long run.

106 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Ask Only for Information You Need to Know Companies should ask only for information that is related to job performance.81 For instance, you

should not ask about an applicant’s religious affiliation, although you may ask whether a person

can work on specific days of the week. Similarly, you can ask whether the applicant is capable

of performing the essential physical aspects of the job (preferably specifically listed), but asking

general questions about health would probably be interpreted as a violation of the ADA. Figure 3.8

gives examples of appropriate and inappropriate questions to ask on an application form or dur-

ing an interview.

A final point to consider in this chapter is that the EEOC rules affect the language that is

spoken at the workplace. As described in the Manager’s Notebook titled “Employers Should

Be Careful When Using English-Only Policies at the Workplace,” employers cannot enforce an

English-only policy at the workplace unless there is a business necessity to justify that employees

speak English on their job.

EXHIBIT 3.1 ALTERNATIVE DISPUTE RESOLUTION METHODS AT MARRIOTT AND THE EEOC

Ron Wilensky, vice president for employee relations for Marriott International, was not satisfied with the company’s “Guarantee of Fair Treatment” program, which instructed employees with complaints to go first to their immediate supervisor, then to the supervisor’s manager, and so on up the ladder, if necessary. Based on his experience with three Fortune 500 companies that had similar policies, he estimated that 75 percent of employees bypass such a policy and consult an attorney. To verify his hunch, he established a committee to examine employee satisfaction with the Guarantee of Fair Treatment. The results indicated that employees did not trust the policy. Instead, they wanted a system that would give those with grievances a chance to air their con- cerns before impartial listeners and have those concerns addressed promptly—without fear of retribution.

To give employees what they want, Wilensky and his committee have been experimenting with three dispute resolution systems.

1. Mutual agreement through mediation A neutral person, typically an expert in dispute resolution, meets with both parties to the conflict and tries to arrange a negotiated settlement. Because 80 to 90 percent of litigation is settled out of court anyway, the goal is to reduce attor- ney fees and other associated costs.

2. A helping hotline Wilensky found that it was difficult to track employee grievances across so many different geographic locations, so Marriott uses a toll-free 800-number hotline at 300 of its food service locations. Available 24 hours a day, 7 days a week, the hotline is intended to be used only to report cases of perceived wrongful discharge, discrimination, and harassment. Marriott promises to initiate an investigation within three days of receiving the complaint.

3. A panel of peers In 50 Marriott locations, employees have an opportunity to air their grievance before a panel of their peers. The panel is chosen at random from a group of specially trained volunteers. The panel has the authority to make final, binding decisions on all grievances brought before it.a

The EEOC also uses alternative dispute resolution systems. It relies on mediation to achieve faster resolution of its large backlog of cases. The EEOC chairwoman, Ida L. Castro, made a strong commitment to use mediation by increasing the mediation budget by $13 million in 1999 to expand the use of mediation in each EEOC district office. Between 1999 and 2010 about 136,000 mediations at the EEOC took place and almost 70 percent of them were successfully resolved.b

Sources: aWilensky, R., and Jones, K. M. (1994, March). Quick response key to resolving complaints. HRMagazine, 42–47. Copyright 1999 by Society for Human Resource Management (SHRM). Reproduced with permission of Society for Human Resource Management (SHRM) in the format Textbook & Other book via Copyright Clearance Center. bLeonard, B. (1999, February). A new era at the EEOC. HRMagazine, 54–62; EEOC Web site. (2014). History of the EEOC mediation program. www.eeoc.gov/eeoc/mediation/history.cfm.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 107

FIGURE 3.8 Examples of Acceptable and Unacceptable Questions Asked on Application Forms or During Interviews

Subject of Questions

Examples of Acceptable Questions

Examples of Unacceptable Questions Comments

Name “What is your name?” “Have you worked for this company under another name?”

“What was your maiden name?” Questions about an applicant’s name that may indicate marital status or national origin should be avoided.

Age “Are you at least 18 years old?” “Upon employment, all employees must submit legal proof of age. Can you furnish proof of age?”

“What is your date of birth?” “What is your age?” “When did you graduate from high school?”

A request for age-related data may discourage older workers from applying.

Race, Ethnicity, and Physical Characteristics

“After employment, the com- pany must have a photograph of all employees. If employed, can you furnish a photograph?” “Do you read, speak, or write a foreign language?”

“What is your race?” “What are your height and weight?” “Would you please submit a photograph with your application for identification purposes?” “What language do you commonly use?”

Information relative to physical characteristics may be associated with sexual or racial group membership.

Religion A statement may be made by the employer of the days, hours, and shifts worked.

“What is your religious faith?” “Does your religion keep you from working on weekends?” “What holidays will you need off?”

Questions that determine applicants’ availability have an exclusionary effect be- cause of some people’s reli- gious practices.

Gender, Marital Status, and Family

“If you are a minor, please list the name and address of a parent or guardian.” “Please provide the name, address, and telephone number of someone who should be contacted in case of an emergency.”

“What is your sex?” “Describe your current marital status.” “List the number and ages of your children.” “If you have children, please describe the provisions you have made for child care.” “With whom do you reside?”

Direct or indirect questions about marital status, children, pregnancy, and childbearing plans frequently discriminate against women and may be a violation of Title VII.

Physical Conditions

“Are you willing to take a physical exam if the nature of the job for which you are applying requires one?”

“Do you have any physical disabilities, defects, or handicaps?” “How would you describe your general physical health?” “When was your last physical exam?”

A blanket policy excluding the disabled is discriminatory. Where physical condition is a requirement for employment, employers should be able to document the business necessity for questions on the application form relating to physical condition.

Military Service “Please list any specific educational or job experiences you may have acquired during military service that you believe would be useful in the job for which you are applying.”

“Please list the dates and type of discharge you may have received from military service.”

Minority service members have a higher percentage of undesirable military discharges. A policy of rejecting those with less than an honorable discharge may be discriminatory.

(continued)

108 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Subject of Questions

Examples of Acceptable Questions

Examples of Unacceptable Questions Comments

Hobbies, Clubs, and Organizations

“Do you have any hobbies that are related to the job for which you are making application?” “Please list any clubs or organiza- tions in which you are a member that relate to the job for which you are applying.”

“Please list any hobbies you may have.” “Please list all clubs and other organizations in which you are a member.”

If questions on club/ organization memberships are asked, a statement should be added that applicants may omit those organizations associated with age, race, sex, or religion.

Credit Rating None. “Do you own your own car?” “Do you own or rent your residence?”

Use of credit rating questions tends to have an adverse impact on minority group applicants and has been found unlawful. Unless shown to be job related, questions on car ownership, home ownership, length of residence, garnishments of wages, etc., may violate Title VII.

Arrest Record “Have you ever been convicted of a crime related to the job you will be expected to perform?” Example: A conviction of embezzlement is related to the job of bank loan officer.

“Have you ever been arrested for a crime?”

Asking if an applicant has ever been arrested violates the applicant’s Title VII rights because such questions adversely affect minority applicants.

Ethics/Social Responsibility

Employers Should Be Careful When Using English-Only Policies at the Workplace

Under EEOC rules, it may be unlawful to enforce English-only policies at the workplace. Such policies can be a form of national-origin discrimination against employees who prefer to speak the language of their ethnic background. However, an English-only rule may be justified in the following situations:

j Communications with customers, coworkers, or supervisors who only speak English

j In emergencies or other situations in which workers must speak a common language to

promote safety

j For cooperative work assignments in which the English-only rule is needed to promote

efficiency

j To enable a supervisor who only speaks English to monitor the performance of an

employee whose job duties require communication with coworkers or customers

M A N A G E R ’ S N O T E B O O K

FIGURE 3.8 (Continued)

Sources: Based on HR Focus. (2008, March). Interview with questions that should be on every company’s ‘don’t’ list, 9; Gatewood, R. D., and Feild, H. S. (2001). Human resource selection, 5th ed. Fort Worth, TX: Harcourt College Publishers. Copyright © 2001 by the Harcourt College Publishers, reproduced by permission of the publisher; and Bland, T., and Stalcup, S. (1999, March). Build a legal employment application. HRMagazine, 129–133.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 109

Even if justified by business necessity in the situations that are listed above, an English-only

policy should not be applied to casual conversations between employees who are not performing

their job.

Sources: Based on Tuschman, R. (2012, November 15). English-only policies in the workplace: Are they legal? Are they smart? Forbes. www.forbes.com; Brook, J. (2012, February 15). Are workplace English-only rules legal? Continuing Education of the Bar Blog. www.blog.ceb.com; Wilson Elser LLP Web Site. (2010, May). Whether and when English- only rules in the workplace are discriminatory. www.wilsonelser.com. jj

Summary and Conclusions Why Understanding the Legal Environment Is Important Understanding and complying with human resource law is important because (1) it is the right

thing to do, (2) it helps you realize the limitations of your firm’s HR and legal departments, and

(3) it helps you minimize your firm’s potential liability.

Challenges to Legal Compliance HR law is challenging for four reasons. Laws, regulations, and court decisions are all part of a dy-

namic legal landscape. The laws and regulations are complex. The strategies for fair employment

required by the laws and regulations sometime compete with, rather than reinforce, one another.

And laws often have unanticipated or unintended consequences.

Equal Employment Opportunity Laws The following are the most important EEO laws: (1) Equal Pay Act of 1963—prohibits dis-

crimination in pay between men and women performing the same job in the same organization.

(2) Title VII of the Civil Rights Act of 1964—prohibits employers from basing employment

decisions on a person’s race, color, religion, sex, or national origin. It has been amended or

interpreted to prohibit discrimination based on pregnancy (the Pregnancy Discrimination Act

of 1978) and sexual harassment. Most recently, it has been amended by the Civil Rights Act

of 1991, which places the burden of proof in a discrimination case squarely on the defendant

(employer), prohibits the use of quotas, and allows for punitive and compensatory damages

as well as jury trials. Executive Order 11246 prohibits discrimination against the same cat-

egories of people that Title VII protects, but also requires that government agencies and con-

tractors take affirmative action to promote the employment of persons in protected classes.

(3) Age Discrimination in Employment Act of 1967—prohibits discrimination against em-

ployees who are 40 years old or older. (4) Americans with Disabilities Act of 1990—prohibits

discrimination against individuals with disabilities who can perform the essential functions of

a job with or without reasonable accommodation. The Vocational Rehabilitation Act of 1973,

the precursor to ADA, applied only to government agencies and contractors. (5) Vietnam

Era Veterans Readjustment Act of 1974—prohibits discrimination against Vietnam-era veter-

ans by federal contractors and requires federal contractors to take affirmative action to hire

Vietnam-era veterans.

EEO Enforcement and Compliance Two main agencies are responsible for enforcing EEO laws. The Equal Employment Opportunity

Commission (EEOC) enforces EEO laws. It processes discrimination complaints, issues written

regulations, and gathers and disseminates information. The Office of Federal Contract Compli-

ance Programs (OFCCP) enforces the laws and executive orders that apply to the federal govern-

ment and its contractors. The OFCCP also monitors the quality and effectiveness of affirmative

action plans.

Other Important Laws The Immigration Reform and Control Act of 1986 requires employers to document the legal work

status of their employees. The Immigration Act of 1990 makes it easier for skilled immigrants to

110 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

enter the United States. The Drug-Free Workplace Act of 1988 requires that government contrac-

tors try to ensure that their workplaces are free of drug use. The Uniformed Services Employment

and Reemployment Act of 1994 protects the rights of private sector employees who take short

leaves to perform military service.

Avoiding Pitfalls in EEO Employers can avoid many pitfalls associated with HR law by engaging in sound management

practices. Among the most important of these practices are training, establishing an employee

complaint resolution system, documenting decisions, communicating honestly with employees,

and asking job applicants only for information the employer needs to know.

Key Terms adverse impact, 88

affirmative action, 85

Age Discrimination in Employment Act

(ADEA), 95

Americans with Disabilities Act

(ADA), 96

bona fide occupational qualification

(BFOQ), 89

compensatory damages, 94

conciliation, 99

discrimination, 88

disparate treatment, 88

Equal Employment Opportunity

Commission (EEOC), 99

Equal Pay Act (1963), 87

essential functions, 97

executive order, 95

fair employment, 85

four-fifths rule, 89

hostile work environment sexual

harassment, 90

individuals with disabilities, 96

Office of Federal Contract Compliance

Programs (OFCCP), 100

protected class, 87

punitive damages, 94

quid pro quo sexual harassment, 90

quotas, 94

reasonable accommodation, 98

reverse discrimination, 102

Title VII (Civil Rights Act of

1964), 87

Watch It!

UPS: Equal Opportunity Employment. If your instructor has assigned this, go to mymanagementlab.com to watch a video and answer questions.

Discussion Questions 3-1. Explain why HR decisions are heavily regulated. Based on your analysis of current

social forces, what new laws or regulations do you think will be passed or issued in the

next few years?

3-2. You own a small construction business. One of your workers is 55 years old and had

heart bypass surgery about six months ago. He wants to come back to work, but you are

concerned that he will not be able to handle the job’s physical tasks. What should you

do? What are you prohibited from doing? What laws apply in this case?

3-3. What is adverse impact? How does it differ from adverse treatment?

3-4. How can an individual show prima facie evidence for adverse impact discrimination?

How would an employer defend itself from this evidence?

3-5. Many companies in the United States have recently put an end to the practice of giving

an annual employee Christmas party due to complaints by employees with non-Christian

religious backgrounds or spiritual values who claimed the Christmas party was a dis-

criminatory employment practice. These employees argued that the employer who

celebrated by paying for an employee Christmas party favored Christianity over other

religions and belief systems. Do you think non-Christian employees are treated illegally

or unethically when the employer decides to give a Christmas party for all the employees?

Why? What reasonable accommodation could an employer make to satisfy both the

Christian and non-Christian employees?

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 111

MyManagementLab® If your instructor has assigned this, go to mymanagementlab.com for Auto-graded writing questions as well as the following Assisted- graded writing questions:

3-6. Kate has severe diabetes that seriously limits her ability to eat. Even when taking insulin to help manage her diabetes, Kate must test her blood sugar several times a day and strictly monitor the availability of food, the time she eats, and the

type and quantity of food she eats to avoid serious medical consequences. Does Kate have a disability under the ADA?

Explain your answer.

3-7. Under the ADA, is an obese individual considered to have a disability and therefore be eligible for coverage? Explain. 3-8. What are bona fide occupational qualifications (BFOQ)? What is a business necessity? Can race be a BFOQ? Can it be a

business necessity? Why or why not?

You Manage It! 1: Emerging Trends Walgreens Leads the Way in Utilizing Workers with Disabilities

In 2008, Walgreens, one of the nation’s largest drugstore retailers,

opened a state-of-the-art distribution center in Windsor, Connecticut. It

is the company’s second facility designed specifically to employ people

with disabilities and is patterned after a similar one that opened in 2007

in South Carolina. Managers at both facilities share a goal of having

people with disabilities fill at least one-third of the available jobs.

Walgreens has developed a reputation as a company that offers

meaningful jobs to people with diverse backgrounds, with equal

opportunities for advancement and job mobility. Company leaders

intend to open more distribution centers that employ workers with

disabilities and plan to use the experience in the facilities in Connecti-

cut and South Carolina to provide managers in other units with infor-

mation that will result in the hiring of more people with disabilities.

The South Carolina distribution center has a workforce of 400,

with 50 percent having a disclosed physical or cognitive disability.

Yet the facility’s efficiency increased by 20 percent since its open-

ing, after technology and process changes originally intended to

accommodate workers with disabilities improved everyone’s jobs.

According to one of Walgreens’ corporate executives of human

resources, the experience of creating a disability-friendly environ-

ment in its distribution centers has been a transforming event for

the company. Walgreens’ success in hiring people with disabilities

to work at its distribution centers has influenced more than a dozen

U.S. companies, including Lowe’s, Procter & Gamble, and Best

Buy, to follow Walgreens’ model.

Many employers do not share or practice Walgreens’ level of

long-term commitment and investment in hiring people with disabili-

ties, but demographic trends suggest that more companies should—

and ultimately will have to—as growth of the traditional labor pool

slows, the workforce ages, and disability rates increase. As more busi-

ness executives recognize and support the hiring and development

of workers with disabilities, a chronically underemployed group, the

business benefits of tapping this talent pool becomes clear.

Critical Thinking Questions 3-9. What are the tangible and intangible benefits that

Walgreens receives by being a leader in hiring employees

with disabilities?

3-10. Only about half of the people with disabilities who want to

work are employed. What barriers do people with disabili-

ties face in obtaining employment that are not concerns of

other groups protected by the EEOC, such as minorities,

women, or the aged?

Team Exercise 3-11. A serious barrier to employment of people with disabilities

continues to be a perception problem. Managers and co-

workers lack knowledge, awareness, and comfort in work-

ing with employees with disabilities. Form a team with

three or four classmates and develop a strategy to overcome

misperceptions surrounding utilizing employees with dis-

abilities. Be ready to present your team’s ideas to the rest

of the class when called on by the instructor.

Experiential Exercise: Individual 3-12. The purpose of this exercise is to raise your self-awareness

of some of the problems faced by employees with disabili-

ties in the workforce. Assume that you have had an acci-

dent that will restrict your mobility for a year and that you

will need to use a wheelchair while you recover from the

accident. Consider how the restrictions on your mobility

would affect your life as a student. What accommodations

would your teachers need to make for you so you could at-

tend your classes during the academic year? If you are em-

ployed on a part-time job, would you be able to continue

doing this job as before in a wheelchair? If not, would the

employer be able to restructure the job in a way so you

could make a significant contribution as an employee?

How would the job change? How could you convince your

employer that you should be retained in your job? Be pre-

pared to share your answers to these questions with other

members of the class.

Sources: Based on Otto, B. (2013, January 14). Walgreens is not always the an- swer. Huffington Post. www.huffingtonpost.com; Wells, S. (2008, April). Counting on workers with disabilities: The nation’s largest minority remains an underused

resource. HRMagazine, 45–49; Medical News Today. (2006, July 8). Walgreens recruits employees with disabilities through new highly accessible web site. www .medicalnewstoday.com.

112 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

You Manage It! 2: Customer-Driven HR Can an Employer Refuse to Hire or Retain Employees Who Wear Tattoos?

The wearing of tattoos has become increasingly popular—

particularly so with younger people—as a form of personal expres-

sion. A survey conducted by the Pew Research Center estimated

that 36 percent of people 18 to 25 years of age, and 40 percent

of those from 26 to 40, have had at least one tattoo. Despite the

growing popularity of tattoos, many companies are not tolerant of

the display of visible tattoos on employees in the workplace. For

example, according to research from CareerBuilder, 42 percent of

corporate managers indicated that their opinion of a job applicant

would change for the worse if the individual displayed a tattoo.

Tattoos are viewed as unacceptable in some professions or jobs as

a consequence of corporate dress codes that forbid the display of

visible tattoos. In the medical field, for example, many health care

organizations limit the display of tattoos. This policy is in line with

the need to demonstrate professionalism to patients in order to gain

their trust. The Cleveland Clinic requires that tattoos must be cov-

ered during working hours to ensure a professional appearance.

The EEOC laws do not provide protection to persons who are

discriminated against by employers in the workplace for wearing

visible tattoos. Employers are free to establish dress codes that re-

strict employees from having visible tattoos if they believe that a

tattoo will harm a company’s professional image.

If a company decides to limit the display of tattoos in the

workplace, it must do so in a fair and consistent manner, or it

can be subject to legal actions from tattoo-wearing employees

or job applicants. There should be a written personal appearance

policy that covers the wearing of tattoos and it should be enforced

consistently across different units and locations. If a continuing

employee obtains a tattoo while employed, the employer should

attempt to make a reasonable accommodation with the employee

in order to retain that employee. For example, an employee may

be asked to wear long pants to cover a large tattoo on the leg as a

reasonable accommodation that makes the tattoo less visible to the

public. Employers who act overly harsh in enforcing a policy that

restricts wearing tattoos may find themselves in court and will be

required to defend their practices.

Critical Thinking Questions 3-13. If a corporation restricts its employees from displaying

visible tattoos in the workplace and faces a court challenge

of employment discrimination under EEOC regulations,

on what basis can the corporation defend its employment

practice? Refer to the information in this case as well as in

this chapter in the section on “Defense of Discrimination

Charges ” to answer this question.

3-14. A company’s sales representative obtained a highly vis-

ible tattoo on her neck after being employed at that com-

pany. The company has a dress code policy that restricts

the display of visible tattoos for work that has close

contact with customers. What would be a reasonable

accommodation to present to this employee that would

balance the need for enforcement of the dress code policy

with a goal of being fair and acting in good faith to com-

pany employees?

Team Exercise 3-15. Companies that have dress code policies should balance

the company need for regulating the appearance of em-

ployees and how it reflects on the company image with

the employees’ needs to appear in a way that reflects their

individual identities. Form a team with several classmates

and develop a policy covering the display of tattoos for the

Cleveland Clinic, a health care facility, which is referred

to in this case. In the policy for tattoos in the workplace,

cover the following issues: (1) defining the employees who

are covered (and not covered) by the policy; (2) the display

of visible tattoos; (3) reasonable accommodations for em-

ployees with visible tattoos; (4) sanctions for employees

who violate the tattoo policy within the dress code. Be

ready to report your team’s findings to the rest of the class

when called on by the instructor.

Experiential Exercise: Individual 3-16. The purpose of this exercise is to reflect on the implica-

tions on a person’s career when planning on getting a

tattoo. Assume that a friend of yours informed you that

she is planning on getting a tattoo. She will be graduating

soon from a university with a degree in business and will

be looking for a job in marketing, which is the field that

she concentrated on for her business degree. What advice

would you give to your friend concerning the tattoo she

is about to obtain? Your advice will cover the following

aspects of getting a tattoo: (1) locations for the tattoo on a

person’s body that could limit an individual’s opportunity

to obtain a job offer or promotion into management in the

marketing field; (2) images or topics for a tattoo which

could be considered controversial or offensive to employ-

ers or customers and could limit career advancement; and

(3) size and prominence of the tattoo, which can make a

strong first impression during interviews. Be prepared to

share the advice you gave to the friend with your fellow

classmates when called upon by the instructor.

Sources: Based on Green, S. (2013, February 8). Making tattoos and piercings a workplace issue without breaking the law. Corporate Counsel. www.law.com/ corporatecounsel; Hennessey, R. (2013, February 27). Tattoos no longer a kiss of death in the workplace. Forbes. www.forbes.com; Lebros, A. (2010, February 18). Discrimination based on tattoos, a sad reality for those who embrace their

permanent inked bodies. The Famuan. www.thefamuanonline.com; Fuller, S. (2013). Effects of tattoos on jobs. eHow. www.ehow.com.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 113

You Manage It! 3: Discussion Are Women Breaking Through the Glass Ceiling?

“Glass ceiling” refers to invisible or artificial barriers that prevent

women and people of color from advancing above a certain level in

an organization. In the United States, women represent 30 percent

of all managers but less than 5 percent of executives.

The glass ceiling does not represent a typical form of discrimination

that consists of entry barriers to women and minorities within organiza-

tions. Rather, it represents a subtle form of discrimination that includes

gender stereotypes, lack of opportunities for women to gain job experi-

ences necessary for advancement, and lack of top-management com-

mitment to providing resources to promote initiatives that support an

environment for women to advance to the top executive ranks.

As an invisible barrier, the glass ceiling is difficult to crash

through legislation. Informal networking and mentoring are often

mentioned as ways of increasing opportunities for women to be-

come executives. However, cross-gender relationships between a

male mentor and a female employee may be discouraged by the

sexual tensions that arise in such relationships, because they can

become close, blurring the distinction between their professional

and personal lives. In some instances, a mentoring relationship

with a younger female may threaten the established male with the

potential for a career-wrecking allegation of sexual harassment in

which the woman is viewed as the victim, because she ranks lower

in the hierarchy. Although same-gender female mentoring relation-

ships are less likely to be as problematic as the cross-gender ones,

they depend on the availability of senior female executives willing

and able to nurture high-potential women.

Despite the glass ceiling, by 2012 the number of women who

achieved the position of chief executive officer (CEO) or chair-

man of a major Fortune 500 corporation in the United States was

much greater than the number of women who were top executives

in large corporations in 1997. Here are some women executives

who have clearly broken through the glass ceiling, as of 2012:

j Ginni Rometty, CEO and Chairman of IBM j Indra Nooyi, CEO and Chairperson of PepsiCo j Irene Rosenfeld, CEO and Chairman of Mondelēz

International, Inc. j Ursula Burns, CEO and Chairman of Xerox j Meg Whitman, CEO of Hewlett-Packard j Ellen Kullman, CEO and Chairman of DuPont

Critical Thinking Questions 3-17. Go to the Web sites of IBM (www.ibm.com), PepsiCo

(www.pepsico.com), and Xerox (www.xerox.com) and ex- plore those sites to learn more about the women who are

either the CEO or chairperson at these companies. Several

of the Web sites have a “biography of executives” feature

to learn more about the CEO and other top executives.

Another possibility to gather some background on the ca-

reers of executive women is to use a search engine such as

Yahoo! and search on the company name and name of the

CEO or chairperson. Based on the information you gather,

develop a rationale to explain how these women overcame

the “glass ceiling” and attained the top executive role in a

major U.S. corporation.

3-18. Some male senior executives avoid becoming mentors to

younger women because of their fear of possible sexual ha-

rassment claims against them (as retribution for a romantic

relationship that ends badly) or office gossip suggesting

the mentoring pair are having a romance. Do you think it

is reasonable for male executives to have fears about what

could evolve or be suggested about professional relation-

ships with female managers? How could a woman seeking

a mentor go about cultivating a mentoring relationship with

a male senior executive, being aware that some men have

reservations about establishing close professional relation-

ships with women due to office gossip or the possibility of

a romantic relationship that results in the male having to

defend himself against charges of sexual harassment?

Team Exercise 3-19. With a team of four or five students, develop an HR plan to

break down some of the glass-ceiling barriers in an organiza-

tion that is male dominated at the upper ranks. Some exam-

ples of male-dominated industries include high technology

(Intel, Texas Instruments, and Cisco Systems, for example),

defense (Boeing, Lockheed Martin, and General Dynamics,

for example), and energy (Exxon, BP-Amoco, and Chevron,

for example). Think of specific HR activities that could “add

value” to the firm by breaking down barriers to women who

are seeking to become executives in the organization. Some

HR functions that could provide fruitful sources include

training, recruitment and selection, compensation, benefits,

work systems, HR planning, performance appraisal, em-

ployee relations, and discipline. Be prepared to present and

defend your plan to other members of your class.

Experiential Exercise: Individual 3-20. Some women avoid the glass ceiling by becoming entrepre-

neurs. Contact three female entrepreneurs or business owners

and ask them some questions that pertain to owning their own

business. Start with your own network of family and friends

and the entrepreneurship center at the business school at your

university or a professor who teaches entrepreneurship. You

could also contact the Chamber of Commerce in your city.

Here are some questions to pose in your interviews: Why

did you decide to start your own business? What have you

learned from the experience of being an entrepreneur? When

is the best time in one’s career to start a business? Why do you

think there is a growing trend among professional women to

start their own businesses? Now that more women are becom-

ing CEOs of large corporations, do you think there are fewer

obstacles for women to advance to the top of organizations?

114 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

After you complete your interviews, summarize the re-

sults. What seem to be the key advantages of being a busi-

ness owner? Do you think that male entrepreneurs would

provide the same answers to your questions? Did any of

the women you spoke with bring up gender issues related

to their former employer as motivations for their career

change? Be prepared to share your findings with other

members of the class.

Sources: Based on Kowitt, B., Leahey, C., and VanderMey, A. (2012, October 8). The 50 most powerful women. Fortune, 128–134; Petrecca, L. (2011, October 27). More women on top to lead top companies. USA Today, 3B; Morris, B. (2005, January 10). How corporate America is betraying women. Fortune, 64–74; Bell, M., McLaughlin, M., and Sequeira, J. (2002, April). Discrimination,

harassment, and the glass ceiling: Women executives as change agents. Journal of Business Ethics, 65–76; and Haben, M. (2001, April/May). Shattering the glass ceiling. Executive Speeches, 4–10.

You Manage It! 4: Ethics/Social Responsibility Are Employee Noncompete Agreements Legally Enforceable? It Depends

Once reserved for job-hopping executives and entrepreneurs,

noncompete agreements are being used in a range of businesses.

From engineering firms in Massachusetts to companies that

paint lines on Virginia highways, businesses of all sorts are push-

ing new hires to sign noncompete agreements that legally restrict

them from working for competitors.

When billionaire Ross Perot sold his company Electronic Data

Systems to General Motors for $2.4 billion in 1984, he signed a non-

compete agreement that restricted him from competing against his

former company for four years, after which he started Perot Systems.

Although putting employment restrictions on an executive or entre-

preneur, who is likely to know sensitive trade secrets, from competing

against a former employer is probably necessary, why should ordi-

nary employees be required to sign noncompete agreements that restrict

their employability if they leave their employer? Don’t employees have

a right to make a living, even after they stop working for their employer?

Noncompete agreements are the most stringent legal barrier

that restricts an employee’s right to practice his or her profession.

Alternatively, some companies ask employees to sign less onerous

confidentiality agreements or nonsolicitation agreements, which

simply prevent employees from taking company secrets or client

relationships when they change jobs.

At Space Care Interiors, a Berkeley, Michigan, office-furniture

company, sales employees were asked to sign noncompete agree-

ments to prevent them from taking company clients with them when

they changed jobs. The noncompete agreement the employees signed

required that employees would not work for a competitor within a

50-mile radius of the company for one to two years after leaving the

firm. When a former employee violated the noncompete agreement

by working for a nearby competitor shortly after quitting Space Care

Interiors, the company threatened legal action and received a nego-

tiated cash settlement from the former employee. The factors that

were favorable to the company’s interests in this case were that the

noncompete agreement was narrowly confined to only 50 miles and

one to two years, and that the courts in Michigan are likely to enforce

these agreements, as are courts in Florida, Texas, and New Jersey.

Sometimes a judge will decide to throw out an entire noncom-

pete agreement if its terms are too broad. In the recent case of Spivey

Pavement Markings, in Chesapeake, Virginia, a Spivey supervisor

quit in 2006 and soon started a foreman job at a similar company,

Mid-Atlantic Pavement Markings. A year later Spivey sued the su-

pervisor, trying to enforce its noncompete agreement, which was

intended to prevent the former employee from taking such a job.

Spivey claimed that the supervisor received training in a specific

method of painting and road markings and that the firm did not

want him sharing his knowledge of the technique with a competitor.

However, the judge refused to enforce Spivey’s noncompete agree-

ment, calling it “overbroad, ambiguous and vague.” The noncompete

agreement banned the former employee from doing any kind of work

for a competing company, even janitorial work. A legal expert who

commented on the decision thought that the noncompete agreement

would have been enforceable if it had been written so that it focused

on an employee’s specific job duties.

Noncompete agreements are less likely to be enforced in a few

states that are friendlier to the interests of employees. The states

where it is difficult to enforce a noncompete agreement include

California, Wisconsin, Georgia, Oregon, and Colorado.

Critical Thinking Questions 3-21. What is the purpose of a noncompete agreement? Do you think

it is ethical for a company to require its employees to sign a

noncompete agreement as a condition of employment? Under

what conditions do you consider it to be acceptable for an em-

ployer to ask an employee to sign a noncompete agreement?

3-22. What are alternative ways to manage employee behavior so

they do not harm their former employer after they quit? Are

there any HR practices that could be used to achieve this

outcome?

Team Exercise 3-23. Form a team with several students and develop a generic

noncompete agreement that could be used by a company.

Describe the company where the noncompete agreement

will be used. Which types of jobs will the noncompete

agreement cover? How many years will employees who

quit the employer be restricted from using their job knowl-

edge at another company? How large a geographic area

will the noncompete agreement encompass? What indus-

tries will the employees be restricted from working in un-

der the noncompete agreement? Be prepared to share your

team’s results with other members of the class when called

upon by the instructor.

Experiential Exercise: Individual 3-24. Assume that you have verbally accepted an offer of em-

ployment as a pharmaceutical sales representative of one of

the leading pharmaceutical companies and the management

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 115

has just informed you that you will be expected to accept

the terms of a noncompete agreement that forbids you to

work for any of the company’s competitors if you leave

the company. Management indicates that they will train

you how to use some proprietary sales techniques that are

considered trade secrets, and they do not want competi-

tors to learn these practices. The terms of the noncompete

agreement restricts you from working as a pharmaceutical

sales representative for four years within the United States

for any other company. What will you do? Be careful to

explain what you will do and your reason for doing it.

Sources: Based on Morris, S. (2008, February). Protecting company secrets: More business owners are forcing their new hires to sign noncompetes. Should

you? Inc. Magazine, 38–39; Workplace Fairness. (2008). Noncompete agree- ments. www.workplacefairness.org.

Endnotes Scan for Endnotes or go to www.pearsonhighered.com/Gomez-Mejia.

116

A P P E N D I X T O

LAW YEAR DESCRIPTION CHAPTER(S)

Workers’ Compensation Laws Various State-by-state laws that establish insurance plans to

compensate employees injured on the job

12, 15, 16

Social Security Act 1935 Payroll tax to fund retirement benefits, disability and

unemployment insurance

12

Wagner Act 1935 Legitimized labor unions and established the National

Labor Relations Board

14, 15

Fair Labor Standards Act 1938 Established minimum wage and overtime pay 10, 15

Taft-Hartley Act 1947 Provided some protections for employers and limited

union power; permitted states to enact right-to-work

laws

15

Landrum-Griffin Act 1959 Protects union members’ right to participate in union

affairs

15

Equal Pay Act 1963 Prohibits unequal pay for same job 3, 10

Title VII of Civil Rights Act 1964 Prohibits employment decisions based on race, color,

religion, sex, and national origin

3, 4, 5, 7, 14, 16, 17

Executive Order 11246 1965 Same as Title VII; also requires affirmative action 3

Age Discrimination in Employment Act 1967 Prohibits employment decisions based on age when

person is 40 or older

3, 5

Occupational Safety and Health Act 1970 Establishes safety and health standards for

organizations to protect employees

14, 16

Employee Retirement Income

Security Act (ERISA)

1974 Regulates the financial stability of employee benefit

and pension plans

12

Vietnam-Era Veterans Readjustment Act 1974 Prohibits federal contractors from discriminating

against Vietnam-era veterans and encourages

affirmative action plans to hire Vietnam veterans

3

Pregnancy Discrimination Act 1978 Prohibits employers from discriminating against

pregnant women

3, 16

Human Resource Legislation

Discussed in This Text

CHAPTER

3 The laws are listed in chronological order.

CHAPTER 3 • UNDERSTANDING EQUAL OPPORTUNITY AND THE LEGAL ENVIRONMENT 117

LAW YEAR DESCRIPTION CHAPTER(S)

Job Training Partnership Act 1982 Provides block money grants to states, which pass

them on to local governments and private entities that

provide on-the-job training

8

Consolidated Omnibus Budget

Reconciliation Act (COBRA)

1985 Requires continued health insurance coverage (paid by

employee) following termination

12

Immigration Reform and Control Act 1986 Prohibits discrimination based on citizenship status;

employers required to document employees’ legal

work status

3, 17

Worker Adjustment and Retraining Act

(WARN)

1988 Employers required to notify workers of impending

layoffs

6

Drug-Free Workplace Act 1988 Covered employers must implement certain policies

to restrict employee drug use

3, 16

Americans with Disabilities Act (ADA) 1990 Prohibits discrimination based on disability 3, 4, 5, 14, 16

Civil Rights Act 1991 Amends Title VII; prohibits quotas, allows for

monetary punitive damages

3, 5

Family and Medical Leave Act 1993 Employers must provide unpaid leave for childbirth,

adoption, illness

12, 15

Uniformed Services Employment and

Reemployment Rights Act

1994 Employers must not discriminate against individuals

who take leave from work to fulfill military service

obligations

3

Health Insurance Portability and

Accountability Act

1996 Employees are allowed to transfer their coverage of

existing illnesses to new employer’s insurance plan

12

Pension Protection Act 2006 Employees are given greater flexibility to diversify out

of company stock in their 401(k) plan

12

ADA Amendments Act 2008 Broadens coverage of ADA to more people 3

Patient Protection and

Affordable Care Act

2010 Extends health care coverage to more people and

makes it more affordable

12

Laws discussed briefly:

Byrnes Anti-Strikebreaking Act—Chapter 15

Coal Mine Health and Safety Act—Chapter 16

Employee Polygraph Protection Act—Chapter 5

Immigration Act of 1990—Chapter 3

Norris-LaGuardia Act—Chapter 15

Older Workers Protection Act of 1990—Chapter 3

Railway Labor Act—Chapter 15

T he second-grade school teacher posed a simple problem to the class: “There are four blackbirds sitting in a tree. You take a slingshot and shoot one of them. How many

are left?” “Three,” answered the seven-

year-old European with certainty. “One subtracted from four leaves three.”

“Zero,” answered the seven- year-old African with equal cer- tainty. “If you shoot one bird, the others will fly away.”

Which child answered correctly? Clearly, the answer depends on your cultural point of view. For the first child, the birds in the problem repre- sented a hypothetical situation that required a literal answer. For the second child, the birds in the problem had a relationship to known behavior that could be expected to occur.1

The Managerial Perspective

To succeed as a manager in the twenty-first century, you must work effectively with people who are different from

you. The labor force is becoming more diverse in terms of ethnicity, race, sex, sexual orientation, disability, and other cultural factors. The managerial challenge is learning how

to take advantage of this diversity while fostering cooperation and cohesiveness among dissimilar employees. The HR department can help you meet this chal- lenge by developing training pro- grams, offering assistance and advice, establishing fair selection procedures, and the like. But in the end, the line manager is the person who interacts face-to- face with diverse employees on a daily basis. In this chapter, we explore diversity issues that affect

managers and the skills needed to make employee diversity a source of competitive advantage.

The blackbird story clearly illustrates one of the most important truths of HRM: People with different life expe- riences may interpret reality very differently. By the time people enter an organization, their cognitive structure— the way they perceive and respond to the world around

1 Understand the meaning of diversity. 2 Develop familiarity with major challenges

in managing employee diversity.

3 Become aware of major elements of diversity in organizations.

4 Learn how to improve the management of diversity in organizations.

5 Learn how to avoid potential pitfalls in diversity management programs.

After reading this chapter, you should be able to deal more effectively with the following challenges:C H A L L E N G E S

When you see this icon, visit www.mymanagementlab.com for activities that are applied, personalized, and offer immediate feedback.

MyManagementLab®

Managing Diversity4 CHAPTER

Source: © Maureen Ruddy Burkhart/Alamy.

118

CHAPTER 4 • MANAGING DIVERSITY 119

What Is Diversity? Although definitions vary, diversity simply refers to human characteristics that make people dif-

ferent from one another. The English language has well over 23,000 words to describe personal-

ity2 (such as “outgoing,” “intelligent,” “friendly,” “loyal,” “paranoid,” and “nerdy”). The sources

of individual variation are complex, but they can generally be grouped into two categories: those

over which people have little or no control and those over which they have some control.3

Individual characteristics over which a person has little or no control include biologically

determined characteristics such as race, sex, age, and certain physical attributes, as well as the

family and society into which he or she is born. These factors exert a powerful influence on indi-

vidual identity and directly affect how a person relates to others.

In the second category are characteristics that people can adopt, drop, or modify during their

lives through conscious choice and deliberate efforts. These include work background, income,

marital status, military experience, political beliefs, geographic location, and education.

It is important to keep in mind the distinction between the sources of diversity and the diversity

itself. Without this distinction, stereotyping tends to occur. Essentially, stereotyping is assuming that group averages or tendencies are true for each and every member of that group. For instance,

employees who have had significant military experience are generally more accepting of an author-

itarian management style than those who have not had such experience. However, if you conclude

that all veterans favor authoritarian leadership, you will be wrong. Although veterans on average are more accepting of authority, there may be, as Figure 4.1 shows, very wide differences among

veterans on this score. True, veterans on the whole show this characteristic to a greater degree than nonveterans, but the differences within each group are far greater than the average difference be- tween groups. In fact, many veterans develop a distaste for authoritarian management because of their military experience, and many nonveterans prefer an authoritarian leadership style.

If you take this example and substitute any two groups (male–female, young–old, and so on)

and any individual characteristic (aggressiveness, flexibility, amount of education), you will find

in the vast majority of cases that the principle illustrated by Figure 4.1 holds true. In fact, it is very

difficult to identify individual characteristics that do not have a substantial overlap between two groups. The main point of this discussion is to emphasize that, although employees are diverse, a

relatively small amount of this diversity is explained by their group membership.

them—has been largely determined. This cognitive structure is shaped both by unique personal experiences (with family, peers, school system) and by the socializing influences of the person’s culture, and it operates both at home and in the workplace.

Learn It!

If your professor has chosen to assign this go to www.mymanagementlab.com to see what you should particularly focus on, and take the chapter 4 warmup.

diversity Human characteristics that make people different from one another.

Low High Acceptance of Authority

A B C D E F

VeteransNonveterans FIGURE 4.1 Group Versus Individual Differences on Acceptance of Authoritarian Leadership

120 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

Why Manage Employee Diversity? To survive and prosper in an increasingly heterogeneous society, organizations must capitalize

on employee diversity as a source of competitive advantage. For example, Computer Associ-

ates International hires software developers from many nationalities, filling jobs where there is

an extreme shortage of personnel.4 Because many of these employees are non-English speak-

ers, Computer Associates offers free courses in English as a second language.5 Avon Products

provides another example of how firms capitalize on diversity. Avon uses its diversity to cre-

ate a competitive advantage, using feedback from its workforce to adapt to women’s changing

needs quickly and effectively. The input of Avon’s minority employees—almost one-third of

its workforce—helped the firm find a successful niche in an industry that tends to ignore the

beauty needs of women of color.6 AT&T provides formal recognition and support to employee

networks formed around a characteristic of diversity (such as the Asian Pacific Islanders’ Busi-

ness Resource Group) if the networks present a business plan to management showing their value

to the company.7 Procter & Gamble has a strong multicultural marketing approach, and it views

the diversity of its 38,000-plus employees as a key factor in this regard. According to one top

company executive, “Diverse organizations are better connected to their markets.”8 A monthly

publication, DiversityInc., offers many examples on the most recent diversity initiatives taken by major employers such as Marriott, IBM, Bank of America, Cox, PriceWaterhouse Coopers,

Johnson & Johnson, and Ernst & Young.

Affirmative Action Versus Managing Employee Diversity Many people perceive management of diversity as a new label for affirmative action. In reality, these are two very distinct concepts.9 Affirmative action first emerged from government pres- sures on business to provide greater opportunities for women and minorities. Management of

diversity, in contrast, recognizes that traditional firms, where white men are the majority, are

becoming a thing of the past. There is a growing awareness that a key factor in corporate per-

formance is how well women and minorities can be fully integrated and work effectively with

one another and with their white male counterparts. Given demographic trends, companies can

no longer ignore issues of diversity if they are to be successful. For this reason, many organiza-

tions (such as the Society for Human Resource Management, Microsoft, Texas Instruments, and

Computer Sciences Corporation) specify diversity as the ability to effectively use the talents of

people from various backgrounds, experiences, and perspectives.10 Another term that is currently

used to refer to diversity management is inclusiveness, or making all employees feel that they are an integral part of the same organization and that they share a common desire to make the firm

succeed regardless of their race, gender, age, and so on.11

Demographic Trends In the next decade or so, we will see a dramatic growth rate in people aged 55 or older (46.6% growth

rate). Asian Americans, Hispanic Americans, and other ethnic minorities have shown very rapid

growth rates since 1990, and these are projected to continue at a fast pace into the end of the de-

cade. In 2014, approximately 16 percent of the U.S. population was considered Hispanic, surpass-

ing the percentage of African Americans (13.0%), Asian Americans

(5.6%), and other minority groups (2.0%). All of these groups have

registered increases in workforce participation in recent years, and

these are also expected to continue. White Americans still made up

a substantial majority of the population in the year 2012 (72%), but

less of a majority than in 1990 (79.1%). At current growth rates, in

20-plus years or so white Americans will be a minority (less than

50 percent of the total U.S. population). Women’s labor force par-

ticipation rates (currently 47  percent versus 53  percent for males)

are expected to keep rising, and men’s participation rates to go on

declining.

Note that the data previously described is national. If we focus

on the larger metropolitan areas, where most business takes place, the

changes have been even more dramatic. Of the top 25 markets, “mi-

norities” now make up a majority of the population in at least 20.12

In Los Angeles, for example, half of the population is foreign born,

management of diversity The set of activities involved in integrating nontraditional employees (women and minorities) into the workforce and using their diversity to the firm’s competitive advantage.

Source: © Megapress/Alamy.

CHAPTER 4 • MANAGING DIVERSITY 121

mostly Asian and Hispanic. Most corporations are located within or near these metropolitan ar-

eas and are highly dependent on the local nonwhite labor supply to meet their needs.13 In some

states—most notably California, where nonwhites account for more than half the population—

the future is already here.

The idea that individuals can be pigeonholed into racial categories—which goes back centu-

ries to unscientific racist notions of “pure blood” that were incorporated into law by many states

well into the 1960s (in part of the South, for instance, even one-eighth black parentage automati-

cally classified a person as being of African descent rather than white)—is likely to crumble in the

coming decades. Many first-, second-, and third-generation Americans are descended from im-

migrants who were mixed race themselves (usually a combination of European, Native American,

and/or black). In addition, the number of interracial marriages has increased, and as a result close

to half of the mixed-race population is under age 18.14 One prime example, of course, is U.S. Presi-

dent Barack Obama, the offspring of a white woman and an African father. Currently 16 percent of

blacks, 26 percent of Hispanics, and 31 percent of Asians marry outside their race/ethnicity in the

United States.15 In the western states of the United States, almost one-fourth of all new weddings

take place across race and ethnic lines. Eventually this will serve to blur the stereotypical classifica-

tion of people into racial groupings.

Other statistics provide a glimpse of what the near future will look like in terms of labor

force characteristics. In 2014, minority children younger than age five are close to becoming

the majority nationally, but this is already the case in the nation’s fastest-growing states, such

as Florida, Nevada, Georgia, Maryland, New York, Texas, and Arizona. Recent immigration is

part of the reason for this trend, but it is not the most important. Although about 15  percent more

births than deaths have been recorded among whites since 2000, more than eight times as many

Hispanics, four times as many Asians, and twice as many blacks have been born than have died.16

In the most recent 2010 kindergarten class, one out of four five-year-olds was Hispanic, meaning

that approximately 25 percent of high school graduates in 2024 will be Hispanic.17 Since the last

edition of this book was published, the annual inflow of undocumented workers has decreased

significantly. However, this may well be a temporary phenomenon as a result of the severe reces-

sion experienced by the United States during 2008–2011 and the relatively high unemployment

rate since then.18 One interesting development uncovered by the 2010 census is that the Hispanic

population grew far greater than expected in states with smaller and newer immigrant popu-

lations. For instance, the Hispanic population increased by more than 10 percent in Alabama,

Louisiana, Kansas, Maryland, Delaware, and Minnesota when compared to the 2000 census.19

Of the more than 20 million jobs projected to be created over the next decade, 75 percent will

be filled by women and minorities. This means that firms must actively compete to attract and retain

educated and talented workers from those groups: Most large corporations across different indus-

tries are eagerly trying to create receptive environments for nontraditional employees. For instance,

Lucent Technologies, Chase Manhattan, Marriott International, FedEx, Xerox, Sun Microsystems,

Colgate, Palmolive, Merck, and DuPont, among others, have at least one minority member on their

board of directors and close to one-fifth of officials and managers who are minority group members.20

At the same time more than one-third of small businesses are started by women and mi-

norities.21 This is important because small businesses employ more than three-fourths of the

U.S. population. Many of these businesses become success stories (see the Manager’s Notebook,

“ Recent Success Stories of Small Businesses Launched by Women and Minorities”).

Recent Success Stories of Small Businesses Launched by Women and Minorities

Lexington Consulting, El Cajon, California (35 employees)

T his company has revenues exceeding $15 million with a three-year growth rate of 14,017.7

percent. The founder and CEO is Jamie Arundell Latshaw. Latshaw spent eight years in ac-

tive duty with the U.S. Army. Toward the end of her career as an officer, Latshaw noticed

that the military was training soldiers in a new way, setting up mock Afghani and Iraqi villages

M A N A G E R ’ S N O T E B O O K

Emerging Trends

122 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

around the United States so soldiers could experience cultural immersion before they deployed.

Based on her observations, Latshaw founded Lexicon Consulting (www.inc.com/inc5000/

profile/ Lexicon-Consulting), which hires Afghani and Iraqi natives living in the United States to

be role players in the mock villages. She attributes Lexicon’s growth to the role players’ passion.

“They’re really responsible for our success, because they want the soldiers to be successful.”

Pursuit of Excellence (11 employees) This company has annual revenues of approximately $11 million with a three-year growth rate of

7,054.4 percent. The founder and CEO is Marie Diaz, who is Mexican American. Diaz’s father

died when she was three years old, so she learned a lot about being a strong female from her

single mother. After spending years at a Fortune 500 company, Diaz started her own business, a

human resources services company, so that she, too, could have a strong presence in her sons’

lives. “I was traveling most of the month and never seeing my children,” she says. “You have to

keep in mind what your priorities are. Plan your life before your life plans you.” At Pursuit of

Excellence (www.inc.com/inc5000/profile/Pursuit-of-Excellence), Diaz still works around the

clock, but being a business owner affords her flexibility she never had before.

A10 Clinical Solutions, Cary, North Carolina (17 employees) This company has annual revenues exceeding $1 million with a three-year growth rate of

22,714.29 percent. The founder and CEO is Leah Brown, a black entrepreneur. When one of

Brown’s close relatives passed away from AIDS, she was inspired to start A10 Clinical Solutions

(www.inc.com/inc5000/profile/A10-Clinical-Solutions), which manages and oversees clinical

trial processes in humans to get drugs approved by the Food and Drug Administration (FDA).

Focusing on ailments prominent within minority communities, Brown’s company has also started

opening medical checkup centers at businesses, airports, and bus stations.

Zempleo, Lafayette, California (41 employees) This company has annual revenues exceeding $60 million and has experienced a three-year

growth rate of 3,466.1 percent. The founder and CEO is Ramiro Zeron, who immigrated to the

United States from Nicaragua when he was 29 years old. Although he didn’t speak any English

when he arrived, Zeron later earned an MBA and worked his way up from a clerical position at

AT&T to an executive director. In 2005, working nights and weekends while he was still at his

former employer, he founded Zempleo (www.inc.com/inc5000/profile/Zempleo), a staffing and

HR company that also provides consulting for business process outsourcing.

Sources: Based on entrepreneurial success stories listed in www.inc.com. (2014); Minority Business Entrepreneurs. (2014). www.mbemag.com; Minority and Women in Business. (2014). www.mwb.com. jj

At some firms, including such blue-chip companies as Johnson & Johnson, Xerox, General

Mills, and Walt Disney, at least one-fourth of the board of directors are nonwhite.22 At many

Fortune 1000 firms, which not too long ago were almost all white, diversity now permeates every

facet of management and technical operations. Recent figures confirm this. At Coca-Cola, ap-

proximately 40 percent of managers receiving promotions are African American, Latino, Native

American, or Asian, and approximately 60 percent were women. At JPMorgan Chase, more than

half of new hires are African American, Asian American, Latino, or Native American. At Ernst &

Young, almost half of its most recent management promotions went to women, and one-third

went to African American, Latino, Asian American, or Native American employees. At AT&T,

half of new hires are nonwhite; 27 percent are African American and 15 percent are Latino. The

corporate giant IBM has received hundreds of awards for its diversity initiatives in recent years;

it has a worldwide executive council to guide specific corporate-wide diversity initiatives. The

examples could go on and on. The basic point is that a growing number of firms realize that a

changing labor force requires the active recruitment, retention, and advancement of all talents.

In some respects the changes that have occurred since the first edition of this book in

the mid-1990s have been remarkable. For instance, in 1995 not one of the Fortune 500 CEOs

was a person of color. Today, 21 Fortune 500 companies are run by people of color, including

CHAPTER 4 • MANAGING DIVERSITY 123

six blacks, seven Hispanics and eight Asians.23 And it is now commonplace to have one or more

senior executives who is a woman or a minority, something that was rare in the mid-1990s.

Currently 21 of the Fortune 500 firms are led by women.24

DIVERSITY AS AN ASSET An enormous amount of research on diversity-related issues has been conducted in recent years, with the number of publications doubling every five years.25

For instance, since 2007 most of the major journals dealing with human resource topics have

dedicated at least one full issue to this subject, and in some cases more than one.

Two conclusions may be drawn from this research. The first, and perhaps the most obvious, is that

managing employee diversity is not a passing fad or just “politically correct” words. Firms must deal

with it on a day-to-day basis, given the demographic trends discussed earlier. If anything, this issue will

continue to grow in importance. Second, as recently summarized by two leading researchers, “It is now

known that diversity’s effects on organizations and groups can be positive, negative or neutral.”26 It all

depends on how this diversity is managed. In this section, we discuss the positive aspects of diversity,

followed by some of the challenges that organizations face in managing that diversity. Later in the

chapter, we discuss approaches that firms can use to improve the management of diversity.

Employee diversity can improve organizational functioning by stimulating greater creativity,

better problem solving, and greater system flexibility.27 Rosabeth Kanter, a well-known business

consultant based at Harvard University, notes that “most innovative firms purposely establish

heterogeneous work groups to bring a multiplicity of points of views on a particular problem.”28

Employee diversity offers a number of other benefits.

j Greater creativity Employee diversity can stimulate consideration of less obvious

alternatives. Consider the following true story:

A Hispanic man and a white woman were members of a task force advising the CEO on

a planned organizational downsizing. These two people suggested that the recommenda-

tion of the task force majority to lay off 10 percent of the workforce would devastate mo-

rale. Upon further consideration, the CEO decided not to lay off employees and opted

instead for a plan proposed by these two dissenters. The plan proposed to reduce labor

costs by offering early retirement, unpaid vacations, and stock in the firm to employees

in exchange for a 5-percent salary cut. Most employees reacted very positively to the

plan, with many reporting that it increased their loyalty and commitment to the firm.29

j Better problem solving Homogeneous groups are prone to a phenomenon called group- think, in which all members quickly converge on a mistaken solution because they share the same mind-set and view the problem through the lens of conformity.30 In a heteroge-

neous group with a broader and richer reservoir of experiences and cultural perspectives,

the potential for groupthink shrinks. j Greater system flexibility In today’s rapidly changing business environments, flexibility is an

important characteristic of successful firms. If properly managed, employee diversity can in-

fuse more flexibility into the firm. The existence of diversity at different levels generates more

openness to new ideas in general and greater tolerance for different ways of doing things. j Better information A more diverse workforce provides the organization with a broader scope

of information and set of skills that may be applied to a variety of situations. For example,

see the Manager’s Notebook, “Police Comb Their Ranks for Foreign-Language Speakers.”

MARKETING CONCERNS Most successful firms realize that effective management of a diverse workforce can lead to better marketing strategies for a multicultural, multiethnic population. For

example:

j Colgate acquires the top spot in the oral care market with Total toothpaste, which was

designed by a team led by older scientists intent on developing a toothpaste for a maturing

population. They discovered Triclosan (an ingredient in Total), a broad-spectrum antibiotic

used to fight gingivitis, a bleeding gum disease that people are prone to as they age.31

j The appearance of more women online is a boom for e-commerce. Women directly

influence more than 80 percent of all retail spending, according to BIGreseach LLC,

a market-research firm in Worthington, Ohio. When New York–based Bluefly Inc., a re-

tailer of upscale closeout clothing, was launched in mid-1998, the e-commerce market was

still a predominantly male place, and an apparel start-up looked like a sure loser. But the

124 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

company looked ahead to the day the Internet would attract more women. “We went after

this particular category based on the expected shifts,” says Jonathan Morris, executive vice

president. “We think that’s one of the reasons that we’re still here, after the dot.com bust.”32

Diversity as Part of Corporate Strategy Many firms now believe that effective management of employee diversity is an integral compo-

nent of their overall strategy and not just a set of programs run by the human resources function

to keep government regulators at bay. It has become standard practice in their annual reports for

CEOs of Fortune 1000 firms to explicitly mention diversity management as part of their firm’s

strategic objectives.33 In many of the Fortune 1000 firms, the person responsible for diversity is-

sues, often called chief diversity officer, now reports directly to the CEO.

Challenges in Managing Employee Diversity Although employee diversity offers opportunities that can enhance organizational performance,

it also presents managers with a new set of challenges. In other words, greater employee diversity

by itself does not ensure positive outcomes. A number of researchers have attempted to quantify

the effects of diversity.34 These challenges include appropriately valuing employee diversity, bal-

ancing individual needs with group fairness, dealing with resistance to change, ensuring group

cohesiveness and open communication, avoiding employee resentment and backlash, retaining

valued performers, and maximizing opportunity for all.

Police Comb Their Ranks for Foreign-Language Speakers

A t a recent graduation ceremony for the New York City Police Department (NYPD), 24 percent

of the newly minted officers were foreign born, representing 48 different countries, including

Turkey, Venezuela, Burma, and Albania. That was an increase over the preceding year, which

saw a graduating class that was only 20 percent foreign born, yet still represented 65 different countries.

“People are coming here from every corner of the world,” says NYPD Commissioner

Raymond W. Kelly. “It’s incumbent on us to be better positioned to identify them and to service

them and be aware of their issues.”

The NYPD has a staff of about 40 officers whose full-time job is to actively recruit from the

city’s immigrant communities. The recruiters work with an ad agency to spread the word that the

NYPD is interested in native-level speakers of at least 60 languages, including Kurdish, Pashto,

Mandarin, Arabic, and Cambodian. For instance, recruitment ads have appeared in Russian-,

Korean-, and Haitian-language papers published in the city. Diversity is “necessary to serve a diverse

community,” says the head of the Recruitment Section. “It builds trust.” Preferred consideration

is given to applicants who have skills in languages spoken by small minorities, such as Balochi,

Chechen, Laotian, Somali, Swahili, Tamil, Twi, and Wolof. Twenty percent of the workforce in

recent years was born overseas, and nearly one out of three of New York police officers is Hispanic.

The “language initiative” seems to be working. NYPD officials say that over the past several

years the demographic breakdown of police academy applicants has closely matched that of the

city’s population: about 35 percent white, 23 percent Hispanic, and 27 percent African American.

Hundreds of bilingual officers have been given assignments in community relations, the newly ex-

panded New Immigrant–Special Outreach section, and the antiterrorism unit. According to the New

York Police Department’s Web page “when the FBI, the Department of Defense, the Secret Service

and other Federal agencies need foreign language assistance, they often turn to the NYPD for help.”

Sources: Based on NYPD’s Foreign Language Outreach. (2014). www.nyc.gov; Long, G. (2009, February 9). New book takes readers inside the NYPD’s counterterrorism work, www.theepochtimes.com; Hays, T. (2007, July 18). “NYPD’s diversity reflects demographic shifts.” USA Today, http://usatoday.com; Buckley, C. (2007, May 31). New York City police seek trust among immigrants. New York Times, www.nytimes.com; New York Daily News. (2006, December 21). Grads make NYPD more melting pot, www.nydailynews.com; Porcaro, L. (2005, July 25). Defending the city. The New Yorker, www.newyorker.com; http://nypdrecruit.com. Accessed March, 2011. jj

M A N A G E R ’ S N O T E B O O K

Customer-Driven HR

CHAPTER 4 • MANAGING DIVERSITY 125

Diversity Versus Inclusiveness In recent years, there has been some debate about the benefits of emphasizing diversity rather than inclusiveness, which some see as a way of bringing people together. Although the difference between the two might be one of semantics, it often means that the management of diversity is

highly charged and politicized. As recently noted by a leading diversity expert:

Organizations have expended significant resources in this area in an effort to improve the

bottom line, to become an employer of choice, to avoid lawsuits, and to do the right thing.

Diversity is also one of the most difficult initiatives to implement in organizations because

there are such diverse views on what diversity is and how deeply it should be woven into an

organization’s culture. Diversity can be difficult also because the dimensions of diversity

are closely tied to an individual’s personal beliefs, perceptions, and life experiences. These

personal beliefs often present barriers to full inclusion and participation in the workforce.35

Individual Versus Group Fairness The extent to which a universal concept of management, which leads to standardized manage-

ment practices, should be replaced by a cultural relativity concept of management, which

calls for molding management practices to the workforce’s different sets of values, beliefs, at-

titudes, and patterns of behaviors, is an extraordinarily complex question. The proponents of

universalism believe that fitting management practices to a diverse workforce sows the seeds for

a permanent culture clash in which perceived inequities lead to intense workplace conflict. For

instance, when the Lotus software company extended benefits coverage to homosexual couples,

unmarried heterosexual employees living with a partner felt that they had been unfairly left out.

Conversely, the proponents of relativity argue that failure to adapt HR practices to the needs of a

diverse population may alienate much of the workforce and reduce their potential contributions.

Resistance to Change Although employee diversity is a fact of life, the dominant groups in organizations are still com-

posed of white men. Some argue that a long-established corporate culture is very resistant to

change and that this resistance is a major roadblock for women and minorities seeking to survive

and prosper in a corporate setting.

Group Cohesiveness and Interpersonal Conflict Although employee diversity can lead to greater creativity and better problem solving, it can also

lead to open conflict and chaos if there is mistrust and lack of respect among groups. This means

that as organizations become more diverse, they face greater risks that employees will not work

together effectively. Interpersonal friction rather than cooperation may become the norm.

Segmented Communication Networks Shared experiences are often strongly reinforced by segmented communication channels in the workplace. One study found that most communication within organizations occurs between

members of the same sex and race. This was found to be true across all professional categories,

even at the top, where the number of women and minorities is very small.36

The presence of segmented communication poses three major problems to businesses. First,

the organization cannot fully capitalize on the perspectives of diverse employees if they remain

confined to their own groups. Second, segmented communication makes it more difficult to es-

tablish common ground across various groups.37 Third, women and minorities often miss op-

portunities or are unintentionally penalized for not being part of the mainstream communication

networks. The case at the end of this chapter “Hiring Who You Know as a Threat to Diversity”

suggests that heavy reliance on employee referrals and the use of social media to identify pro-

spective employees may inadvertently reinforce segmented communication networks and limit

an organization’s diversity efforts.

Resentment Equal employment opportunity (EEO) was imposed by government in the 1960s rather than self-

initiated. In the vast majority of U.S. organizations, it was a forced change rather than a voluntary

one. One side effect of forced compliance has been the reinforcement of a belief among some

universal concept of management The management concept holding that all management practices should be standardized.

cultural relativity concept of management The management concept holding that management practices should be molded to the different sets of values, beliefs, attitudes, and behaviors exhibited by a diverse workforce.

A QUESTION OF ETHICS Many managers and executives use golfing as an opportunity to combine business and pleasure. How could this practice damage an organization’s diversity efforts? Are there any recreational activi- ties that could enhance diversity efforts?

126 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

managers and mainstream employees that organizations have to compromise their standards to

comply with EEO laws. Some have seen EEO laws as legislation of a “forced diversity” that

favors political solutions over performance and/or competence.

Given this background, it is perhaps not surprising that twice as many white men as women

and minorities feel that promotions received by the latter groups can be attributed to affirmative ac-

tion.38 This belief presents two problems. First, women and minorities in positions of authority and

responsibility may not be taken as seriously as white men are. Second, the belief that white men

are getting the short end of the stick may provoke some of them to vent their frustration against

those employees (women and minorities) whom they believe are getting an unfair advantage.

It is important that managers deal with these issues, because affirmative action is here to

stay, even though political and legal support for this type of program may be waning as it nears

its 50th birthday. Most current polls confirm that big business’s commitment to affirmative ac-

tion continues to be strong, even though most firms now prefer to use the term “diversity” and

recently the term “inclusiveness” is generally paired with diversity.39

At many large companies, CEOs regularly meet with top managers to ensure that diversity

goals are being met. These include firms such as Bank of America (187,000 employees), IBM

(387,000 employees), Marriott (151,000 employees), JPMorgan Chase (183,000 employees),

Ernst & Young (121,000 employees), AT&T (302,000 employees), and Xerox (54,000 employees).40

Retention The main complaint among female and minority employees is that they lack career growth op-

portunities. The perception that their upward mobility is thwarted grows stronger at higher levels

as women and minorities bump up against the glass ceiling, an invisible barrier in the organiza-

tion that prevents them from rising to any higher position. Lower job satisfaction translates into

higher resignation rates, with a resulting loss of valuable talent and greater training costs because

of high turnover.

Competition for Opportunities As minorities grow both proportionately and absolutely in the U.S. population, competition for

jobs and opportunities is likely to become much stronger. Already there are rising tensions among

minorities jockeying for advancement. Employers are being put into the uncomfortable position

of having to decide which minority is most deserving.41 Consider these examples:

j “Blacks have been too successful at the expense of everyone else,” grumbles Peter Rogbal,

a Mexican American captain in the San Francisco Fire Department. “Other groups have

been ignored to placate the black community.” j African Americans fear that newly arrived blacks from places such as Nigeria, Ethiopia,

Somalia, Ghana, and Kenya will take away job opportunities from U.S.-born blacks. In the

words of Columbia University historian Eric Foner, “Historically, every immigrant group has

jumped over American-born blacks. The final irony would be if African immigrants did, too.”42

There are no fail-proof techniques for effectively handling these challenges. There is, how-

ever, one principle that managers should always keep in mind: Treat employees as individuals,

not as members of a group. Many of these challenges then become much more manageable.

Diversity in Organizations The elements of diversity—such as race, ethnicity, and sex—tend to have a profound impact on

how people relate to one another. In this section, we discuss (in alphabetical order) the groups

that are most likely to be “left out” of the corporate mainstream. Of course, one individual may

belong to several of these groups. For this reason, the Census Bureau in 2000 and 2010 allowed

Americans to classify themselves into multiple racial categories.

African Americans African Americans constitute approximately 13 percent of the U.S. workforce. Since the passage

of the Civil Rights Act of 1964, the number of African American officials, managers, technicians,

and skilled craftspeople has tripled while the number in clerical positions has quadrupled and the

glass ceiling The intangible barrier in an organization that prevents female and minority employees from rising to positions above a certain level.

A QUESTION OF ETHICS What ethical problems might arise from giving preferential treatment to certain employees based on their group membership?

CHAPTER 4 • MANAGING DIVERSITY 127

number in professional jobs has doubled.43 However, a significant percentage of African Ameri-

cans (perhaps as high as 15%) are among the “hardcore” unemployed.

African Americans face two major problems in organizations. First, explicit, intentional rac-

ism still exists 50 plus years after the first civil rights victories, even though we now have the first

African American president and six of the Fortune 500 CEOs are black, something that not long

ago would have almost been considered science fiction.44 The movie The Butler, which came out in 2013, does a great job of illustrating for younger generations how much things have changed

in the treatment of African Americans and how difficult the change process has been. African

Americans are not the only group to suffer from blatant racism, but it is safe to say that they are

the group that suffers the most. The persistence of the Ku Klux Klan and other white supremacy

organizations serves as a constant reminder, to both African Americans and U.S. society as a

whole, that the struggle for civil rights is not over. This is part of the reason why in 2008 the

Florida Legislature formally apologized for the state’s “shameful” history of slavery, joining five

other states that have expressed public regret for what President Obama calls America’s “Original

sin.”45 Managers need to be careful to reassure their African American employees, and the entire

organization, that racist views will not be tolerated in the workplace. Marriott International, for

instance, relies on the film 42, about Jackie Robinson breaking major league baseball’s color line, to make this point. Marriott launched a major campaign in 2013 involving Facebook content,

special screenings of the movie, and the showing of “42” (Robinson’s number) on hotel rooms

and employee lounges.46

The second problem African Americans face as a group is less educational preparation than

whites.47 This is not an issue unique to blacks. Both blacks and Hispanics showed approximately

half the college graduation rate of whites. Because of the increasing importance of technol-

ogy and information in the U.S. economy, the discrepancy between the wage rates of college-

educated and non–college-educated workers is growing. Therefore, the differential in educational

preparation between African Americans (and Hispanic Americans) and whites puts the former at

a major disadvantage in the labor market.

There is, however, reason for optimism. An analysis of 291 metropolitan areas indicated that

all but 19 were more integrated than in 1990. Whereas in 1972 relatively few whites reported reg-

ular interactions with blacks, by 2008 almost two-thirds of whites said they had personal contacts

with blacks often or daily.48 Over the past 50 years, the number of black households at or near the

poverty line has fallen by almost one-third, controlling for inflation. Approximately 41 percent

of blacks are now solid middle class, making between $42,000 and $108,000 a year, with almost

20 percent considered prosperous (earning more than $108,000 more a year).49 These positive

figures are tamed by a faster dip in median black family income relative to whites following the

deepest recession since World War II and the first such significant decline since the 1940s.50

In 1980, barely one of two blacks over age 25 held a high school diploma. In 2011, nearly four out

of five, or just under 80 percent, had a high school diploma; for blacks in the 25–29 age group, it

was 86 percent, which was the same as for whites. And in less than 20 years, the number of black

college graduates has doubled.51 African Americans’ share of management jobs has increased at

least fivefold since 1966.52 For all of these reasons, a 2008 front-page article in the Wall Street Journal concluded that “The growth of the black middle class and integration of the workplace didn’t only reshape the black community, it transformed the attitudes of many whites as well.”53

Asian Americans Americans of Asian descent constitute approximately 5.6 percent of the U.S. workforce. Their

representation in the labor force increased by approximately 63 percent from 1990 to 2014 and is

projected to double by 2050.54 Just as the term “Hispanics” applies to a range of people, “Asian

Americans” include a wide variety of races, ethnic groups, and nationalities (for instance, Japanese,

Chinese, Koreans, Indians, and Pakistanis).55 Although Asian Americans have done well in tech-

nical fields and are very well represented in institutions of higher education, they are underrep-

resented in top corporate positions. Employer discrimination probably accounts for this to some

extent, because Asian Americans are often stereotyped as being too cautious and reserved to

lead.56 They also suffer from the belief held in some quarters that, because of their educational

attainments, they are an advantaged group and, therefore, do not deserve special consideration in

hiring and promotion decisions. As a result, they are less likely to benefit from programs intended

to improve the employment conditions of women and other minorities. Finally, one survey found

128 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

that 40 percent of African Americans and Hispanic Americans and 27 percent of whites saw

Asian Americans as “unscrupulous, crafty, and devious in business.”57 For all these reasons, some

Asian Americans are relegated to technical and support positions that require minimal interper-

sonal interactions and offer limited opportunities for advancement.

John Yang, a vice president at Hewlett-Packard, notes that although Asians are well repre-

sented in the high-technology industry, they seldom make it to the upper echelons. Those Asians

who are at the top rung of high-tech companies often started their own companies, like Charles

Wang, founder and ex-CEO of New York’s Computer Associates.58

Most Asian immigrants to the United States today are from the Philippines, Indonesia, Sri

Lanka, and Thailand, with a growing number from mainland China. At least half of these immi-

grants are women, many of whom end up working for very low wages in high-pressure industries

such as the garment business.59 However, we should be cautious of making generalizations. For

instance, most Indians who come to the United States are professionals whose average incomes

exceed that of native-born Americans.60 One example is that of Indra Krishnamurthy Nooyi,

who grew up in Chennai (formerly Madras) on the southeast coast of India and is now CEO of

PepsiCo, a quintessential American company. According to one reporter, “As a vegetarian, she is

not who you’d think would be leading the maker of sugary soda and salty snacks.”61 Inc. maga- zine, which focuses on small businesses, has developed a special category listing Indian entre-

preneurs who have launched successful companies, many of them in the high-technology sector.

People with Disabilities There are approximately 43.5 million people with disabilities in the United States, 15 million of

whom are actively employed and 6 million of whom subsist on Social Security payments and

disability insurance.62 At least 3.7 million people with severe disabilities are at work.63 The re-

mainder are either unemployed (presumably supported by their families) or under working age.

People who are physically disabled face four main problems at work.

First, social acceptance of disabilities has not advanced much since the Dark Ages.64 Many

people still view people with disabilities with suspicion, even scorn, feeling that those who are

physically impaired should stay away from the work world and let “normal” people assume their

duties. At a more subtle level, coworkers may not befriend employees with disabilities because

they simply do not know how to relate to them. Even extroverts can suddenly become shy in front

of a person with a disability.

Second, people with disabilities are often seen as being less capable than others. This mis-

conception persists even though people who are legally blind and deaf can perform many tasks

just as well as those with normal sight and hearing, and modern technology allows many para-

lyzed people to run computers.

Third, many employers are afraid to hire people with disabilities or put them in responsible

positions for fear that they may quit when work pressures mount. This myth persists despite the

fact that absenteeism and turnover among such employees are only a fraction of those of other

employees. For instance, Marriott International reports that turnover among employees with dis-

abilities is only 8 percent annually, compared to 105 percent for workers in general.65 Pizza Hut

has also found a huge difference in turnover rates: 20 percent for employees with disabilities

versus more than 200 percent for employees without disabilities.66

Fourth, ever since the passage of the Americans with Disabilities Act in 1990, many employ-

ers have overestimated the costs of accommodating employees with disabilities. In fact, employ-

ers have found that accommodations are usually simple and cheap, costing on average between

$200 and $500 across different firms.67 For instance, Griener Engineering, Inc., in Irving, Texas,

installed a lighter-weight door on the women’s restroom and raised a drafting table by putting

bricks under its legs.

The U.S. Supreme Court has established a clear distinction between a physical impairment

and a disability under the Americans with Disabilities Act (ADA). For example, Ella Williams, an

assembly-line worker at a Toyota plant, was unable to work with power tools after she developed

crippling pain in her wrists, neck, and shoulders from repetitive motions. The Sixth Circuit Court

of Appeals in Cincinnati said her injury was akin to having “damaged or deformed limbs,” and it

ruled Toyota should have accommodated her by giving her work as an inspector. Toyota appealed

the decision to the U.S. Supreme Court. Citing the so-called “toothbrush test,” the Supreme Court

ruled that to be disabled a worker must have difficulties in doing everyday tasks. According to

CHAPTER 4 • MANAGING DIVERSITY 129

Justice O’Connor, “Even after [Williams’s] condition worsened, she could still brush her teeth,

wash her face, bathe, tend her flower garden, fix breakfast, do laundry and pick up around the

house.” This suggests that Williams did not have a true disability but rather a physical impair-

ment. Thus, she was not entitled to the antidiscrimination protection of ADA.68

The Americans with Disabilities Act, passed almost 25 years ago, has succeeded in opening

access to buildings and providing legal protection, yet significant employment barriers remain.

A recent U.S. Bureau of Labor Statistics report covering the recent 2008–2011 recession reveals

that, at any one point during the recession, the percentage of disabled people actively looking

for work but unable to find employment was almost 70 percent higher than for their nondisabled

counterparts.69

The Foreign Born Approximately 14 percent of the U.S. population is foreign born, although in some areas, such

as California, southern Texas, southern Florida, and in New York City, the proportion reaches

close to one-third of the population.70 Reliable statistics are hard to find, because of illegal im-

migration and census undercounts (fearing legal reprisal, many undocumented workers wish to

remain incognito), but at least 30 million immigrants have come to the United States over the past

30 years.71 U.S. Census Bureau data estimates the number of non-naturalized immigrants, both

legal and illegal, currently living in the United States at 21.8 million.72 In addition, half a million

foreign students on temporary visas are attending U.S. universities at any one time, spending

about $11 billion a year on tuition and living expenses.73 Many of these people remain in the

United States after obtaining their degrees. Although the rate of illegal immigrants seemed to

have slowed down considerably during the recent recession, the Pew Research Center estimates

that if current trends continue, 19 percent of the U.S. population will be foreign born by 2050.74

Regardless of their parents’ legal status, all children born in the United States are automati-

cally U.S. citizens under the U.S. Constitution. However, American children of undocumented

immigrants face an uncertain future.75 As noted by one analyst, “As the government steps up its

enforcement of immigration laws, the fate of American children is often an afterthought.”76 As of

2014, there are probably about 12 million undocumented immigrants in the United States, com-

pared with 8.4 million in 2000 and 3.5 million in 1990. Mexicans account for about 57 percent

of undocumented immigrants, with an additional 24 percent coming from elsewhere in Latin

America.77 A high proportion of these undocumented workers are of childbearing age and they

have four children on average (in comparison to two for the rest of the population). This means

that a growing percentage of young Americans are raised by parents with few legal rights and

who could be subject to immediate deportation. Another major issue that remains unresolved is

the legal status of people who came to the United States as children (through no fault of their

own) and think of themselves as Americans. President Obama launched a controversial executive

order preventing deportation of this group, but nevertheless at the time of this writing they remain

in a legal limbo, and some states (such as Arizona) will not issue state-sanctioned IDs to them.

Partly because of security concerns after 9/11 and partly because of a growing belief that our

“borders are out of control,” public policy has tended toward tightening immigration laws, mak-

ing it more difficult, for instance, for illegal aliens to obtain a driver’s license or even temporary

jobs. In one of the largest public-works projects in history, the United States is erecting miles of

new fences along much of the Mexican border. Despite these restrictions, it appears that undocu-

mented workers (those who, by definition, cannot achieve legal status) will continue to enter the

United States as long as there is demand for their services. In the past, obtaining a “green card”

(legal permanent residency) has been an arduous process, and for unskilled workers, a nearly

impossible dream.

As of 2014, federal immigration policy is in disarray, and states and local jurisdictions are

rushing to fill in the gap. Since the last edition of this book, state legislatures have passed several

hundred pieces of immigration legislation. In Arizona, for instance, an employer can lose its

license if it knowingly hires an illegal alien.78 In 2010, Arizona also approved a highly controver-

sial law (being fought in court at the time of this writing) defining all undocumented aliens in the

state as “criminals.” In Connecticut City (which boasts a population that is 34% foreign born),

the Common Council requires local police to work with U.S. Immigration and Customs Enforce-

ment in rounding up workers who are in the country illegally. On the opposite side, a handful of

states (such as Illinois, New Jersey, Massachusetts, and Washington) have passed humanitarian

130 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

legislation that makes integration of immigrants a priority, focusing on language, job, and citi-

zenship training, as well as access to services such as health care and public safety.79 Likewise

California (which hosts at least 3.5 million undocumented people within its borders) recently

enacted legislation allowing all residents regardless of immigration status to be jurors and to

qualify for state-issued driver licenses. Because many employers find it difficult to do business

without access to an immigrant labor force (particularly in agriculture, the hospitality industry,

the food and beverage industry, and construction) this confusing situation is creating hardships

for firms and foreign workers alike.

Although Americans tend to see immigration as a problem limited to the United States, it

has become a major issue in a globalized economy, where approximately 200 million people

work outside the country where they were born, with a high percentage living in a legal limbo.

In many Western European countries, for instance, which until a few decades ago were largely

homogeneous, the proportion of foreign-born residents exceeds 10 percent of the population.

Moroccans alone amount to 4,000,000 of those foreign-born residents. A similar situation can

be found in Asia (for instance, in Taiwan); in the Middle East (for instance, in Saudi Arabia); in

Africa (where, for example, 2 million Indians live); and in Latin America (for instance, in the Do-

minican Republic where 1 million Haitians live).80 Recently, the civil war in Syria has provoked

the exodus of millions of people into neighboring countries.

Controversial actions by foreign governments in response to immigration pressures are be-

coming more common. For instance, France has deported hundreds of Romanian Gypsies back

to Romania, even though Romania is part of the European Union (EU) and, legally, all citizens of

EU member states presumably have the right to settle anywhere they choose within the 27-country

EU territory.

The United States has always depended on skilled immigrants to staff science and engineer-

ing jobs. In fact, foreigners now account for about 40 percent of all science and engineering PhD

holders working in the United States, and more than 50 percent in math and computer fields.

In several business fields, 30 percent or more of faculty and doctoral students are foreign born.

Fifty-two percent of Silicon Valley startups had immigrant founders. Much of the space program,

including the trips to the moon, would not have been possible without teams of German scientists

who immigrated to the United States after World War II. For a complex set of reasons, including

visa restrictions in the United States, multiyear delays in processing visa applications, and attrac-

tive opportunities in other countries (such as Germany, China, India, Korea, and Brazil), a sub-

stantial number of highly skilled immigrants are going elsewhere. Unless this trend is reversed,

this is likely to create a talent vacuum for the United States in the upcoming decades.

Homosexuals Although early research dating from the 1940s suggested that about 10 percent of the population

is gay, there is considerable debate about the true percentage, with estimates ranging from 1 to 2

percent to 10 percent.81 In recent years, gay advocacy groups have become very outspoken about

their rights, arguing that sexual preference should not be a criterion for personnel-related deci-

sions. But open homosexuality is still taboo in many workplaces.

Federal legislation in the United States offers little legal protection based on sexual orien-

tation at present. Although no federal law prevents overt discrimination against homosexuals,

a growing number of states and local jurisdictions have such antidiscrimination laws on their

books. An interesting phenomenon is the voluntary decision on the part of a growing number of

organizations to embrace employees that do not have a heterosexual orientation (often referred

to as lesbian, gay, bisexual and transgender employees, or LGBT). A large number of blue-chip

firms and public institutions sponsor gay/lesbian groups in their workforce (including American

Express, Deloitte LLP, Prudential, Novartis, General Motors, and Xerox); provide benefits to

“domestic partners” (such as Arizona State University, Wachovia Bank, Monsanto, and Micro-

soft); or do both (such as Microsoft and Monsanto).82 Even some mainstream religious denomi-

nations and organizations, such as the Episcopal Church and the Jewish Theological Seminary,

are now accepting openly gay individuals to the ministry and into the seminary.83 The same is

true for the British military. The U.S. military has also abolished the “don’t ask, don’t tell policy”

that was put in place during the Clinton administration. The IRS now allows homosexual couples

to file joint tax returns even if their state does not allow gay marriage. Several predominantly

Catholic countries (such as Spain, Mexico, and Argentina) now allow weddings for people of the

CHAPTER 4 • MANAGING DIVERSITY 131

same gender, giving them the identical legal rights, including the same access to fringe benefits,

as heterosexual couples. When the first edition of this book was published in the mid-1990s,

much of this would have been unthinkable. The Manager’s Notebook, “Employee Inclusiveness

and Sexual Orientation,” addresses this dramatic change.

Employee Inclusiveness and Sexual Orientation

A lthough clearly there is no social consensus on this issue, and many people disapprove of

the use of sexual orientation to receive legal protection on discrimination grounds, much

has changed in the past 10 years or so for the so-called LGBT group. Almost one-third

of the states now recognize gay marriage; the “don’t ask, don’t tell” policy that explicitly barred

openly gay people from the military has been repealed; 21 states, the District of Columbia, and

more than 160 cities and counties have laws prohibiting employment discrimination based on

sexual orientation; and 88 percent of Fortune 500 firms have voluntarily adopted antidiscrimina-

tion policies for LGBT employees, including allowance of a “significant other” in lieu of a het-

erosexual spouse in their benefit program. These firms include such household names as Aetna

Inc., Alcatel-Lucent, Apple Inc., Eastman Kodak Co., Nike Inc., JPMorgan Chase & Co., and

Xerox Corp. However one still finds large firms that do not share this view. For instance, Exxon

Mobil has had an implacable opposition to including sexual orientation in its employment poli-

cies and will only do so when mandated by law (such as in Belgium). For many firms, the federal

government’s refusal to allow anything other than a heterosexual marriage to be recognized for

visa purposes continues to pose a major challenge when it comes to global recruitment.

Sources: Based on Stewart, J.B. (2013). Exxon defies calls to add gays to antibias policy, www.nytimes.com; Hirsch, E. (2014). Young gay workers predict workplace challenges, www.shrm.org; Hastings, R.R. (2014). Companies celebrate gay and transgender equality, www.shrm.org. jj

M A N A G E R ’ S N O T E B O O K

Ethics/Social Responsibility

Latinos (Hispanic Americans) People from Latin America have traditionally used cultural self-definition to distinguish their

cultural identity from that of non-Latino North Americans. The label Hispanic, the official name used by the U.S. government, is “essentially a label used by administrative agencies and

researchers.”84

Latinos include people of European descent (there are at least 70 million of them in Latin

America) and people of African descent (there are at least 25 million living in the Spanish-

speaking Antilles and the Caribbean basin), as well as Latin Indians (who make up a very large

proportion of the Mexican and Andean population); Asians (there are probably 10 million Asians

of Hispanic descent); and a very large number of people of mixed origin. In fact, over half of

Latinos identified themselves as “white” when it came to race in the 2010 Census (which allowed

for two separate choices, one on ethnic status and one on race), probably reflecting the fact that

in most countries south of the border racial lines are blurred.85

There are at least 50 million Latinos in the United States, with some estimates as high as

60 million.86 The boom in the Hispanic population, 60 percent of which is native born, continues

to be the driving force in U.S. demographics.87 Latino immigrants have birth rates twice as high

as those of the rest of the U.S. population. The United States is now the largest Spanish-speaking

country in the world except for Mexico.88 Between now and 2030, Latinos are expected to ac-

count for about half of the growth of the U.S. workforce.89 Many Latinos are professionals and

entrepreneurs; others are unskilled laborers and farmers. At the high end of the scale are upper-

and middle-class Cubans who came to the United States in the aftermath of the 1959 Cuban

Revolution; on the low end are migrant workers.90

Latinos face a number of problems in the U.S. workplace. One is language.91 Second, cultural

clashes may occur because of value differences. Some Latinos see non-Latino North Americans

as unemotional, insensitive, self-centered, rigid, and ambitious. Meanwhile, non-Latinos often

132 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

complain that with Latinos “Scheduling, planning, punctuality and attendance might be less rigid

than among other employees.”92

Third, Latinos of African or Latin American Indian descent (many of whom migrate to the

United States because of their extreme poverty at home) often face an additional hurdle: racial

discrimination because of their skin color. Latinos in the United States have become the target in

recent years of anti-immigrant feelings, which are often fueled by politicians who see this as an

issue that can win votes for them.

These challenges do not negate the noteworthy progress that Latinos have made in recent

years. The largest 500 Latino-owned firms in the United States export more than $1 billion worth

of goods each year, generating many U.S. jobs in the process.93 Almost a quarter of the Fortune

1000 firms have some Latino senior executives, with 70 serving as executive officers and seven

who are now CEOs of Fortune 500 firms. Latinos occupy approximately 200 board seats in these

companies, double the 1993 number. Hispanic middle-class households (those earning $40,000

to $140,000 annually) have grown 74 percent during the past 23 years, with 15 percent of Latino

families reporting incomes of more than $75,000. Total Hispanic purchasing power now exceeds

$500 billion. The proportion of college graduates is now over 20 percent, an increase of 45 per-

cent over two decades.94 There are in excess of 1.5 million Hispanic-owned businesses, and they

are forming at a rate three times faster than the U.S. national average.95

To quell the fears of those who believe Latinos do not assimilate as well as prior Euro-

pean immigrants assimilated, the evidence shows that the first generation is mostly bilingual

and English becomes dominant in the second generation.96 For this reason, marketers are now

starting to focus their attention on the second generation. For instance, Microsoft’s MSN Latino,

a Spanish-language Web site with about 11 million monthly visitors, now offers marketers an ad

service in English that targets second-generation Hispanics.97 Furthermore, most Latinos do not

live in densely packed, highly homogeneous, Spanish-language communities. Rather, most live

in neighborhoods with non-Hispanic majorities.98 Contrary to stereotypes of lack of assimilation,

a high proportion of Hispanics marry and establish families with spouses of a different ethnic

group, particularly starting in the second generation. As has always been the case throughout

history, cultural elements tend to blend, with the dominant culture absorbing what originally was

viewed as “foreign.” For instance, Mexican restaurants are now common in most neighborhoods

and Mexican dishes (with an Americanized twist, sometimes called Tex-Mex) are now part of

the American diet. And by the second generation, English rather than Spanish often becomes the

main language spoken at home.

Older Workers The U.S. workforce is getting older. The average U.S. worker is close to age 39 and is expected

to reach close to 43 by the year 2020. Forty-seven percent of employees are currently over the

age of 40. This is not unique to the United States; in fact, this trend is more pronounced in other

developed countries. For instance, in the European Union, close to 40 percent of employees are

now over the age of 50.99 Older workers face several important challenges in the workplace. First,

the United States is a youth-oriented culture that has not yet come to terms with its changing

demographics.100 Starting around the age of 40, but particularly after the age of 50, employees

encounter a number of stereotypes that may block their career advancement. Partly because of

this, the number of age bias claims against private sector employers filed with the Equal Em-

ployment Opportunity Commission increased dramatically in recent years.101 In 2005, the U.S.

Supreme Court opened a new door for older workers to sue for age discrimination. The Court

ruled that workers over 40 years old could bring charges when the firm’s action has a “disparate

negative impact” on their age group; they do not have to meet the tougher standard of proving

that the employer actually intended to discriminate.102 Apart from legal considerations, one of the

growing ethical issues in human resource management is the extent to which older workers have

become easy targets for efforts to reduce salary and health insurance costs.

The economic crisis during 2008–2011, tepid economic growth in subsequent years, and the

aging of the baby boom generation (most of whom do not have enough saved for comfortable

retirement) have pushed age to the forefront of diversity issues. Most retirement plans are linked

to the fortunes of the stock market and few firms now offer a guaranteed monthly payment when

an employee reaches retirement age. High rates of divorce and remarriage mean that more and

more people start new families in middle age. Because of all of these factors, millions of older

CHAPTER 4 • MANAGING DIVERSITY 133

workers have changed their minds about quitting their jobs, and some who had already retired

decided to reenter the labor market.

To take advantage of this experienced labor pool, a group of employers, including Home De-

pot, Principal Financial Group, and MetLife, created the National Employer Team, together with

the AARP (a national association for people over 50), to endorse “older worker friendly policies.”

AARP members can access open positions at the companies through the association’s Web site.103

In other words, age is becoming one of the main concerns in human resources when it comes to

diversity and inclusiveness (see Manager’s Notebook, “The Rise of the Older Worker”).

The Rise of the Older Worker

B etween 1977 and 2014, the employment of workers 65 and older has more than doubled, a

trend that is likely to accelerate as the baby boom generation enters the golden years. The

majority of these individuals have less than $200,000 in retirement accounts, not enough to

last for more than 10 years living frugally. As a result of this trend, old stereotypes of older work-

ers lacking the speed, technological skills, and stamina of younger workers are quickly fading.

Most jobs in the 21st century do not require heavy physical exertion and thus physical impair-

ments are seldom a problem when it comes to age. For this reason, companies such as Google

and AT&T publicly proclaim that “we value maturity” and thus will consider older applicants.

At Tofulli, a dairy-free product maker, one third of the employees are over 50 and the company

advertises itself as an “older worker friendly company.” AARP publishes a list every two years of

the “Best Employers for Workers Over 50.” Despite these changes, in comparison to many other

countries the United States remains a youth-oriented culture in which the wisdom of older age is

not valued as much. Many managers are still prejudiced when it comes to hiring older applicants

because of fears that they might have lower performance, higher absenteeism, and less ability to

learn new things and solve problems.

Sources: Based on Sedensky, M. (2013, September 14). Some employers see benefits to hiring older workers, www .theeagle.com; AARP. (2014). About the best employers program, www.aarp.org; Hennekam, S., and Hersbach, O. (2013). HRM practices and low occupational status of older workers. Employee Relations, 35(3), 339–355. jj

M A N A G E R ’ S N O T E B O O K

Emerging Trends

At the same time, the so-called “generation gap” is creating a challenge for many firms.104

Citing research at companies such as IBM and Lockheed Martin Corp., one observer notes that

“companies worldwide are grappling with generational differences in their workforces. Manag-

ers and consultants say they see new workplace problems arising from differing mindsets and

communication styles of workers born in different eras. The frictions are aggravated by new

technology and work patterns that mix workers of different ages in ever-changing teams.”105

A 2008 survey by the World at Work Association showed that one-third of companies responding

now have “generational initiatives” in place to promote better interaction “among the four differ-

ent generations currently in the workplace.”106

Among the most common negative assumptions about older workers are that they are less

motivated to work hard, that they are “dead wood,” that they are resistant to change and cannot

learn new methods, and that they are “fire proof.”107 These negative characterizations are not

supported by research. Some recent research shows that the absenteeism rate for those 55 and

over (4.2 days per year) was almost identical to the absenteeism rate of other age groups (3.9 per

year).108 Recent studies also show that older workers are just as committed to their jobs as younger

workers.109 Many successful companies have implemented programs to use the knowledge and

wisdom of older workers to mentor employees. That way they can leverage senior workers as

knowledge champions.110

Religious Minorities Although the Jewish population as a percentage of the total population has remained relatively

stable in both the United States and Europe, other non-Christian minorities have grown rapidly.

134 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

In the United States, approximately 4 million Americans profess Islamic, Hindu, Taoist, or other

non-Christian beliefs. In Western Europe, the Muslim population represents the largest minor-

ity group, hovering somewhere between 6 and 15 percent of the population in such countries as

France, Holland, Spain, Germany, and the United Kingdom.

The tragic events of September 11, 2001, in New York City and Washington, D.C.; the bomb-

ings in Boston, Madrid, and London; and multiple other actual or alleged terrorist incidents in the

United States and Europe have severely tested tolerance toward people of certain religious back-

grounds. The fact that some well-publicized terrorist acts have been carried out by Western-born

religious extremists (such as the 2013 attack on a shopping mall in Kenya) adds to this problem.

A survey by the Society for Human Resource Management revealed that so-called “ethnic reli-

gions” such as Islam now come just after race and gender in U.S. perceptions of “otherness.”111

A 2010 survey conducted by Time magazine in the United States revealed that, while only 37 percent of Americans know a Muslim American, 46 percent believe that Islam is more likely than

other faiths to encourage violence.112 In Europe, with a much higher Muslim representation and

a short history of immigration, blaming Arab minorities for crime, unemployment, and govern-

ment budget deficits has become commonplace.113 In Europe, for example, it is not unusual even

for mainstream politicians to use language to refer to religious minorities that in the United States

probably would be considered as hateful. Rising intolerance is likely to fuel discrimination in

the workplace (see the Manager’s Notebook, “Religious Differences Moving to the Forefront of

Inclusiveness”).

Religious Differences Moving to the Forefront of Inclusiveness

A growing concern in the United States and Western Europe is the extent to which religion

has become a source of conflict in the workplace. Firms are now forced to respond to

religious tensions as employees (as well as firm owners) openly express their religious

sentiments. A few examples follow:

j Employers in France may fire employees for wearing burkas and other full-body robes

worn by Muslim women. Similar well-publicized cases have recently occurred in the

United States. For instance, Abercrombie & Fitch has been sued for violating federal

discrimination laws after it fired an employee for wearing a hijab, or an Islamic religious

scarf. j Some employee groups express open dissatisfaction with certain paid holidays that have

religious roots even though they are now part of the secular culture (such as Christmas,

Halloween, Good Friday, and St. Valentine’s Day). j A growing number of firms are incorporating an interfaith calendar as part of their HR

policies to show that they are aware of holidays that are important to some employees.

Employees may then request time off for the holidays (such as Yon Kippur and Ramadan)

that are important to their faith. j Nearly one-third of respondents to a national survey report that they can identify religious

biases in their workplace, and one half of those (15% of the total) claim that they find these

perceived biases an offense to their personal beliefs. j Religious beliefs are coming into conflict with work schedules at some companies.

Rent-a-Car Center Inc., for example, has been sued by Seventh-Day Adventists who

believe they are discriminated against by being forced to work on Saturday (their day

of religious observation). j Some firms are not including contraceptive pills or assisted reproduction as part of their

health benefit packages, even though this comes into conflict with federal regulations under

so called “Obamacare.”

M A N A G E R ’ S N O T E B O O K

Emerging Trends

CHAPTER 4 • MANAGING DIVERSITY 135

Some of this tension has exploded into violence, as in various cities in France and southern

Spain. Turkey, which is overwhelmingly Muslim but officially secular, experienced a number of

skirmishes during 2010–2014 on the issue of whether women are allowed Islamic head scarves

in Turkey’s universities.114 And in 2008, the Vatican publicly condemned physical attacks against

religious minorities in Italy, in particular Muslims. On this side of the Atlantic, two issues of

Muslim practice—whether the call to prayer should ring out across Harvard Yard and whether the

university should grant women separate gym hours—have unleashed small waves of controversy

over how Harvard practices tolerance.115

Some of this tension may also be found within the Islamic community itself as it tries to

adapt to Western society. For instance, there are now more than 200 Muslim student association

chapters on U.S. college campuses. One expert notes, “Gender issues, specifically the extent to

which men and women should mingle, are the most fraught topic as Muslim students wrestle

with the yawning gap between American college traditions and those of Islam.”116

Unfortunately, as noted by Helen Sanhan, executive director of the Arab-American Institute

Foundation, “often the Arab community is negatively displayed in the media.”117 Security fears

due to terrorist threats in the United States and Europe have led to many complaints of “racial

profiling” and discrimination lodged by people of Arab descent, as well as those who may be

mistaken for Muslims, such as some people of East Indian background. Many firms on both sides

of the Atlantic are now grappling with policies to cover such issues as permissible garments at

work, religious holidays, potential harassment or ridicule based on one’s faith, and the display of

religious symbols on company premises.118 The bombing of the Boston Marathon in 2013 by two

white Chechen Islamists who had become naturalized American citizens brought the point home

that stereotypes based on physical appearances can be misleading.

Women The projected participation rate for women in the workforce is expected to be about equal that

of males.119 Unfortunately, women’s earnings have not mirrored their rising participation trend.

After falling to a low of 59 percent of male earnings in 1975, the female-to-male earnings ratio

rose slowly and is now approximately 73 percent, just 10 points above its level in 1920, when

only 20 percent of women were in the labor force.120 Over three-quarters of people who earn over

$120,000 a year are men.121

There may be reason for optimism, however. Women’s share of top-management jobs has

increased at least threefold during the last three decades.122 In the past edition of this book,

13 women were CEOs of Fortune 500 firms; at the time of this writing (2014) there are 21. These

include some of the most important companies in the world such as Margaret Whitman at Hewlett

Packard, Virginia Rometty at IBM, Indra Nooyi at PepsiCo, Marilyn Hewson at Lockheed, Phebe

Novakovic at General Dynamics, and Ursula Burns at Xerox.123 And 55 percent of employed

women bring in half or more of their total household income,124 a trend that has accelerated dur-

ing the hard economic times of 2008–2012 because many men have lost highly paid jobs in the

manufacturing and construction sectors.

Approximately 52 percent of women now hold managerial positions, up from about 12 per-

cent in the early 1970s.125 Outside the corporate arena, we now have many powerful female role

models who were almost totally absent a generation ago. These include, for instance, Oprah

Winfrey (one of the richest persons in the world and a very successful entrepreneur), House Speaker

Nancy Pelosi, former Secretary of State Hillary Clinton, German Chancellor Angela Merkel, and

Janet Yellen, Chair of the Board of Governors of the U.S. Federal Reserve System.126 In some

countries, such as Spain, Norway, and Finland, the cabinet has more women than men,127 and

j Hobby Lobby openly sponsors evangelical causes, promoting the owners’ faith wherever

it operates. For instance, unlike most large retail establishments, it closes on Sundays to

give employees a biblical day of rest. Hobby Lobby has recently files a suit against some

contraceptive provisions of the Affordable Care Act.

Sources: Based on Leonard, B. (2014). EEOC files two religious bias lawsuits, www.shrm.org; Hastings, R. (2014). Religious inclusion requires year-round attention, www.shrm.org; Keller, B. (2013). The conscience of a corporation. New York Times, www.nytimes.com. jj

136 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

in the United States it has gone from zero in the 1960s to almost a fourth in recent years. Even in

South Korea, which did not ban gender discrimination until 2000, many senior positions in the

judiciary, international trade administration, and startups are now held by women.128

Still, there is no doubt that most women continue to earn considerably less than their male

counterparts, and that 50 years after the women’s liberation movement started in the 1960s, males

still occupy more than 90 percent of positions on boards of directors, on top management teams,

in CEO roles, and other key places in Fortune 1000 firms, even though the gap in educational

achievement by gender has largely disappeared. Accordingly, a 2010 large-scale survey of 1,834

business professionals by consulting firm Bain and Co. reveals a huge gap in perceptions as to

who has more opportunities in business: men or women. Eighty-one percent of men said that

there is no discrimination by gender when it comes to promotions to managerial ranks, compared

to 52 percent of women. Similarly, 66 percent of men said that, given equal backgrounds and

performance levels, women have an equal chance to be promoted to the top executive levels,

versus 30 percent of women.129 Other than overt sex discrimination (which is, of course, illegal),

several factors may account for the earnings differential between women and men and women’s

lack of upward mobility. These include biological constraints and social roles, a male-dominated

corporate culture, exclusionary networks, and sexual harassment.

BIOLOGICAL CONSTRAINTS AND SOCIAL ROLES After five decades of feminism, women continue to encounter a fairly rigid set of expectations regarding their roles and behavior that extend

far beyond biological constraints. Women are still primarily responsible for taking care of the

children and performing most household duties. A study conducted in the late 1990s estimates

that full-time working women still spend three times the amount of time spent by men on

household duties.130 In the words of one woman entrepreneur, who left Dell to start up her own

company (the wedding Web site “Weddings Channel”) so that she could enjoy more flexibility,

“I got pregnant with my first child during my time at Dell. I’ve always been one of those people

who is very driven about work, but I also always wanted to be a mom. All your priorities change

when you are shifting your career to accommodate a family.”131

Perhaps reflecting these societal norms, only a tiny proportion of companies provide day care

and other support options (such as job sharing and reduced work hours for employees with young

children). For this reason, many talented and highly educated women are forced to curtail their career

aspirations and/or quit the organization in their late 20s or early-to-mid 30s—crucial years in one’s

career—if they wish to have a family. In a recent study that followed the career path of 1,000 women

who got Harvard degrees back in the early 1990s, almost one-third of MBA graduates were full-time

mothers 15 years later versus 6 percent of doctors. Doctors said they could arrange flexible hours, but

most of the women with MBAs agreed that “the infrastructure is not there in the business world.”132

A MALE-DOMINATED CORPORATE CULTURE Most sex differences are not related to performance, particularly in white-collar occupations, where sheer physical strength is seldom required.

A number of studies have shown that men tend to emerge in leadership positions in U.S.

culture because they are more likely than women to exhibit traits believed to “go hand-in-hand”

with positions of authority. These include (1) more aggressive behaviors and tendencies; (2) ini-

tiation of more verbal interactions; (3) focusing of remarks on “output” (as opposed to “process”)

issues; (4) less willingness to reveal information and expose vulnerability; (5) a greater task (as

opposed to social) orientation; and (6) less sensitivity, which presumably enables them to make

tough choices quickly.133 Thus, cultural expectations may create a self-fulfilling prophecy, with

those individuals who exhibit the “female traits” of focusing on process, social orientation, and

so on more likely to be relegated to operational and subordinate roles.

Of course, the United States is not alone in this regard. A well-known Japanese author,

Marika Bando, notes that “Japanese society hasn’t matured enough yet to accept independent and

aggressive women. For instance, male managers often address younger workers by adding the

diminutive ‘chan’ or ‘kun’ to their names instead of ‘san.’ But female managers should refrain

from following that practice because Japanese men are very sensitive about their positions.”134

EXCLUSIONARY NETWORKS Many women are hindered by lack of access to the old boys’ network, the informal relationships formed between male managers and executives. Because

most high-level positions are filled by men, women are often left out of the conversations that

help men get ahead.135

old boys’ network An informal social and business network of high-level male executives that typically excludes women and minorities. Access to the old boys’ network is often an important factor in career advancement.

CHAPTER 4 • MANAGING DIVERSITY 137

SEXUAL HARASSMENT Women have to confront sexual harassment to a much greater extent than men do. Approximately one in five civil suits now concerns harassment or discrimination,

compared with one in twenty two decades ago. Sexual harassment litigation is also occurring

in Europe.136 Currently, more than 100 insurance firms in the United States offer employment

practice liability insurance, which covers employers’ legal costs, damages, and settlements in

lawsuits for discrimination and harassment.137

Businesses have been getting tougher on this issue by crafting stronger sexual harassment

policies and setting up intensive seminars for employees. These educational efforts are particu-

larly important because men and women often have different notions of what kinds of behavior

constitute sexual harassment.

Improving the Management of Diversity Organizations that have made the greatest strides in successfully managing diversity tend to share

a number of characteristics. These factors include the creation of a culture that supports inclu-

siveness, a commitment from top management to valuing diversity, diversity training programs,

employee support groups, accommodation of family needs, senior mentoring and apprenticeship

programs, communication standards, organized special activities, diversity audits, and a policy of

holding management responsible for the effectiveness of diversity efforts.

In recent years, Fortune has published a list of the “50 Best Companies for Asians, Blacks, and Hispanics.”138 DiversityInc., a print and online journal dedicated to diversity issues, also publishes an annual list of the best companies for minorities and women. The judges consider

many of the factors just mentioned. Here is a sample of some effective diversity practices enacted

by the top companies:

j Johnson & Johnson offers a wide variety of family-friendly policies to employees,

including retirement transitions for older workers, paid time off for volunteering, a work/

life resource and referral program, elder care and adult-management services, child care

discounts, resources and referrals and onsite day care, and resources for parenting and

grandparenting. The company also encourages the formation and active participation

of employees in diversity groups such as the Association of Middle and North African

Heritage, South Asian Professional Network, and Veteran’s Leading Council. Twenty

percent of employees belong to these diversity groups. j McDonald’s makes a concerted effort to purchase from minorities, who now represent half

of its vendors. j Nordstrom weighs minority retention rates as a key factor in manager performance evalua-

tions. The company also has an outreach program to involve minority-owned firms in new

store construction.

DiversityInc. also puts together an annual list of the top ten companies for specific groups such as blacks, Latinos, Asian, the disabled, and women. For instance, in 2010, the following

widely recognized company names made this list for blacks: Marriott International, AT&T,

Sodexo, Northrop Grumman, Altria, McDonald’s, Verizon Communications, Southern Company,

Intercontinental Hotels Group, and Target.139 These companies, on average, have:

j 20 percent blacks in their workforce, compared with 14 percent nationally j 23 percent black women in their workforce, compared with 8 percent nationally j 17 percent black women among their managers, compared with 3 percent nationally j 8.2 percent contractor expenditures spent on minority business enterprises, compared with

2 percent nationally

Creating an Inclusive Organizational Culture As we discussed in Chapter 1, the shared values, beliefs, expectation, and norms prevalent in or-

ganizations are likely to have a major influence on the effectiveness of human resource manage-

ment policies, and the management of employee diversity is particularly sensitive to this culture.

In a recent comprehensive review of several hundred diversity studies, two well-known diversity

scholars, Susan E. Jackson and Aparna Joshi, concluded that “empirical studies that examined

the effects of dissimilarity (employee diversity) in organizations with different cultures seem to

138 PART II • THE CONTEXTS OF HUMAN RESOURCE MANAGEMENT

support the general argument that organizations with cultures that reflect a belief that diversity is

a valuable resource are more likely to realize the potential benefits of team diversity. . . . [O]n the

other hand, organizational cultures that endorse a so-called color-blind approach may reinforce

majority dominance and result in disengagement by minority employees.”140 As discussed next,

several factors go into creating an inclusive culture. Although organizational culture is an elusive

concept, it seems clear that some firms are more welcoming and supportive of diversity than

others. This also seems to be the case at the industry level. For instance, in the finance industry

women have had little luck in breaking through the glass ceiling and it continues to be dominated

by entrenched male networks.141

Top-Management Commitment to Valuing Diversity It is unlikely that division managers, middle managers, supervisors, and others in positions of

authority will become champions of diversity unless they believe that the chief executive officer

and those reporting to the CEO are totally committed to valuing diversity. Xerox, DuPont, Corn-

ing, Procter & Gamble, Avon, the Miami Herald, Digital Equipment Corporation, U.S. West, and other pacesetters in the successful management of diversity all have CEOs who are fully

dedicated to putting this ideal into practice. For example, Avon has established a multicultural

participation council (which includes the CEO) that meets regularly. Similarly, in a startling

10-page color brochure, the CEO of Corning announced that management of diversity is one

of Corning’s three top priorities, alongside total quality management and a higher return to

shareholders.142

Appraising and Rewarding Managers for Good Diversity Practices Many companies now explicitly provide or withdraw incentives to managers depending on how

well they fare on diversity initiatives. This is based on the idea that what gets measured and

rewarded gets done. At Sodexo, for instance, the company links up to 25 percent of managerial

compensation to diversity goals. At Wachovia Bank, the CEO personally signs off on senior

managers’ bonuses tied to meeting diversity goals. Ernst & Young uses a complex system to

measure managerial performance in terms of diversity outcomes; these include 20 quantitative

and qualitative indicators of retention, promotions, flexible work arrangements, employee sat-

isfaction, and the like. Wells Fargo has mandatory annual reviews that measure team members

against four core competencies, one of which is diversity. Time Warner Cable (with a workforce

that is approximately 45 percent black, Latino, Asian American, and American Indian) has its

CEO personally sign off on annual bonuses and raises tied to the success of diversity initiatives in

the managers’ responsibility areas. Other companies that use metrics to assess and reward diver-

sity efforts include Novartis, General Mills, Sprint, Abbott, Kaiser Permanente, General Motors,

CSX, Hilton Hotels Corporation, and Johnson & Johnson.143

Diversity Training Programs Supervisors need to learn new skills that will enable them to manage and motivate a diverse

workforce. Ortho-McNeil Pharmaceutical, Hewlett-Packard, Wells Fargo, Kaiser Permanente,

Microsoft, and other companies have developed extensive in-house diversity training programs

that provide awareness training and workshops to educate managers and employees on specific

cultural and sex differences and how to respond to these in the workplace.144

Much experimentation in this type of training is occurring around the United States.145

DuPont has sponsored an all-expense-paid conference for African American managers to discuss

the problems they encounter and how they can contribute more to the firm. AT&T has offered

seminars designed to help straight employees feel comfortable working alongside openly gay

employees and to eliminate offensive jokes and insults from the workplace.146 Corning has intro-

duced a mandatory four-day awareness training program for some 7,000 salaried employees—a

day and a half for gender awareness, two and a half days for ethnic awareness.147

This provides an excellent opportunity for senior management and staff to learn about diver-

sity. SHRM suggests that effective diversity training programs need to confront complex issues

that have more to do with human behavior than with race, gender, age, and the like. For instance,

according to SHRM, diversity training needs to consider the fact that human beings find comfort

and trust in likeness. However, this report also notes that frequently these programs fall short of

diversity training programs Programs that provide diversity awareness training and educate employees on specific cultural and sex differences and how to respond to these in the workplace.

CHAPTER 4 • MANAGING DIVERSITY 139

expectations. The editors of a special issue of the Academy of Management Learning and Educa- tion journal came to the same conclusion:

The most reliable effects [of diversity training] are observed in the impact of knowledge;

even the relatively short workshops conducted in organizational settings appear to increase

training knowledge. Effects of training on attitudes, which were the most frequently used

criteria, are less consistent. Although diversity education appears to affect attitudes toward

diversity in general, effects on attitudes toward specific demographic or social groups are

less consistent.148

Several factors undermine the effectiveness of these programs.149 First, the training may

have come at a time when employees were preoccupied with more urgent priorities (such as

downsizing, increased work level, or launching a new product under tight deadlines). Second,