Copyright ©2017 Pearson Education, Ltd.

Managing Human Resources 7 Managing Human Resources Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Learning Outcomes Describe the key components of the human resource management process and the important influences on that process. Discuss the tasks associated with identifying and selecting competent employees. Explain how employees are provided with needed skills and knowledge. After studying this chapter, you will be able to: Describe the key components of the human resource management process and the important influences on that process. Discuss the tasks associated with identifying and selecting competent employees. Explain how employees are provided with needed skills and knowledge. Copyright ©2017 Pearson Education, Ltd.

Learning Outcomes (cont.) Describe strategies for retaining competent, high-performing employees. Discuss contemporary issues in managing human resources. After studying this chapter, you will be able to: Describe strategies for retaining competent, high-performing employees. Discuss contemporary issues in managing human resources. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Describe the key components of the human resource management process and the important influences on that process. 7-1 Copyright ©2017 Pearson Education, Ltd.

Human Resource Management The quality of an organization is, to a large degree, determined by the quality of the people it employs. Staffing and HRM decisions and actions are critical to ensuring that the organization hires and keeps the right people. Getting that done is what human resource management (HRM) is all about. Copyright ©2017 Pearson Education, Ltd.

HRM Process and Influences Exhibit 7-1 introduces the 8 important HRM activities. The first three activities in the HRM process address employment planning: adding staff through recruitment, reducing staff through downsizing, and the selection process. Once you select competent people, you need to help them adapt to the organization and ensure that their job skills and knowledge are kept current—which is accomplished by the next two activities in the HRM process: orientation and training. The last steps in the HRM process identify performance goals, correct performance problems if necessary, and help employees sustain a high level of performance over their entire work lives. The activities involved include performance appraisal, compensation and benefits. Notice that the entire process in Exhibit 7-1 is influenced by the external environment. Many of the factors introduced in Chapter 2 directly affect all management practices, but their effect is felt most in managing the organization’s human resources because whatever happens to an organization ultimately influences what happens to its employees. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. The Legal Environment The primary environmental force that affects an organization is the legal environment. HRM practices are governed by laws, which vary from country to country, and further vary within states or provinces. As a manager, it will be important for you to know what you legally can and cannot do. The primary U.S. Laws affecting HRM are seen here in Exhibit 7-2, which reflects the federal government’s expansion of influence over HRM since the mid-1960s in the areas of equal employment opportunity and discrimination, compensation and benefits, and health and safety. Since the mid-1960s, many state laws have added to the provisions of the federal laws. Therefore, today’s employers must ensure that equal employment opportunities exist for job applicants and current employees. Decisions regarding who will be hired, or which employees will be chosen for a management training program, must be made without regard to race, sex, religion, age, color, national origin, or disability. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Affirmative Action Programs that ensure that decisions and practices enhance the employment, upgrading, and retention of members of protected groups Trying to balance the “shoulds and should nots” of these laws often falls within the realm of affirmative action programs, which ensure that decisions and practices enhance the employment, upgrading, and retention of members of protected groups, such as minorities and females. Although these regulations have significantly helped to reduce employment discrimination and unfair employment practices, they have also reduced management’s control over HR decisions. Copyright ©2017 Pearson Education, Ltd.

Differences in HRM Laws Canada Mexico Australia Germany HRM laws vary greatly among countries, so you need to know the laws and regulations that apply in your locale. For example, Canadian HRM laws closely parallel those in the United States but Canada grants a larger degree of power for lawmaking to the individual provinces. As an example, discrimination on the basis of language is not prohibited anywhere in Canada—except in Quebec. Once heavily unionized, unionization rates have been declining in Mexico. One hiring law gives employers 28 days to evaluate a new employee’s work performance, after which the employee is granted job security and termination is both difficult and quite expensive. In Australia, discrimination laws were not enacted until the 1980s and generally apply to women (who need improved opportunities). Labor and industrial relations laws were overhauled in 1997 with the goal of increasing productivity and reducing union power. The Workplace Relations Bill gives employers greater flexibility to negotiate directly with employees on pay, hours, and benefits and also simplifies federal regulation of labor–management relations. German legislation requires companies to practice representative participation, the goal of which is to redistribute power within the organization, putting labor on a more equal footing with the interests of management and stockholders. The two most common forms of representative participation are work councils and board representatives. Work councils link employees with management. They are groups of nominated or elected employees who must be consulted when management makes decisions involving personnel. Board representatives are employees who sit on a company’s board of directors and represent the interest of the firm’s employees. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. 7-2 Discuss tasks associated with identifying and selecting competent employees. Copyright ©2017 Pearson Education, Ltd.

Identifying and Selecting Employees HRM Process: Employment planning Recruitment and downsizing Selection Every organization needs competent, talented people to do whatever work is necessary for doing what the organization is in business to do, so the first phase of the HRM process involves three tasks: Employment planning Recruitment and downsizing Selection Employment planning is the process by which managers ensure that they have the right number and kinds of people in the right places at the right times; people who are capable of effectively and efficiently completing those tasks that will help the organization achieve its overall goals. This process translates the organization’s mission and goals into an HR plan that allows the organization to achieve those goals by: Assessing current and future human resource needs. Developing a plan to meet those needs. Copyright ©2017 Pearson Education, Ltd.

Conducting Employee Assessments Managers conduct an employee assessment by first reviewing the current human resource status through generating a human resource inventory, which generally lists the name, education, training, prior employment, languages spoken, capabilities, and specialized skills of each employee in the organization. Another part of the assessment is job analysis, a process in which workflows are analyzed and the skills and behaviors necessary to perform jobs are identified. The job analysis helps determine the kinds of skills, knowledge, and attitudes needed to successfully perform each job. This information is then used to develop or revise job descriptions and job specifications. A job description is a written statement that describes what a job holder does, how it’s done, and why it’s done. It typically includes job content, job environment, and conditions of employment. The job specification states the minimum qualifications that a person must possess to perform a given job successfully. It identifies the knowledge, skills, and attitudes needed to do the job effectively. The job description and job specification are important documents as managers begin recruiting and selecting. They focus the manager’s attention on the list of necessary qualifications, assist in determining whether candidates are qualified, and help ensure that the hiring process does not discriminate. Copyright ©2017 Pearson Education, Ltd.

Determining Future Employment Needs Demand for human resources (employees) is a result of the demand for the organization’s products or services The organization’s strategic direction determines future human resource needs. Demand for employees comes from the demand for the organization’s products or services. Generally, managers attempt to establish the number and mix of people needed to reach that revenue by estimating total revenue. One exception is when there is a scarce supply of qualified candidates. This could limit the number of products produced or services provided – which decreases the amount of incoming revenue. After assessing both current capabilities and future needs, managers can estimate shortages—both in number and in kind—and highlight areas in which the organization is overstaffed. Then they can develop a plan that matches these estimates and projects future employee needs and availability. Once managers know their current staffing levels they can respond. If job openings exist, they can begin recruitment – that is, the process of locating, identifying, and attracting capable applicants. In contrast, if employment planning indicates a surplus, managers may want to reduce the labor supply and initiate downsizing or restructuring activities. Copyright ©2017 Pearson Education, Ltd.

Recruiting Applicants There are multiple sources of applicants, as seen here in Exhibit 7-3. The source used should reflect the local labor market, the type or level of position, and the size of the organization. Most studies show that the best applicants come from employee referrals. Because the recommenders know both the job and the person being recommended, and want to protect their reputation, they tend to only refer well-qualified applicants. However, managers shouldn’t always opt for the employee-referred applicant when such referrals may not increase the diversity and mix of employees. Copyright ©2017 Pearson Education, Ltd.

Selecting Job Applicants The selection process seeks to predict which applicants will be successful if hired. Any selection decision can result in the four possible outcomes shown in Exhibit 7-5. A decision is correct when: The applicant who was hired proved to be successful on the job, or When the applicant who was not hired would not have been able to do the job. When we reject applicants who would have performed successfully (called reject errors) or if we hired applicants who performed poorly (called accept errors). Reject errors mean increased selection costs because more applicants have to be screened but can also open the organization to charges of employment discrimination. Accept errors cost the organization in wasted training, the costs generated or profits forgone because of the employee’s incompetence, severance, and the additional recruiting and selection screening. The major intent of any selection activity is to reduce the probability of making reject errors and accept errors while increasing the probability of making correct decisions. We do this by using reliable and valid selection procedures. Copyright ©2017 Pearson Education, Ltd.

Reliability and Validity Reliability: the degree to which a selection device measures the same thing consistently. Validity: the proven relationship between a selection device and some relevant criterion. If a test is reliable, any individual’s score should remain fairly stable over time, assuming that the characteristic being measured is also stable. To be effective predictors, selection devices must possess an acceptable level of consistency. Any selection device that a manager uses must also demonstrate validity. Federal law prohibits managers from using any selection device that cannot be shown to be directly related to successful job performance. This constraint applies to entrance tests, too. Managers must be able to demonstrate that, once on the job, individuals with high scores on such a test outperform individuals with low scores. Consequently, the burden is on the organization to verify that any selection device it uses to differentiate applicants is related to job performance. Copyright ©2017 Pearson Education, Ltd.

Selection Devices: Tests Managers use a number of selection devices to reduce accept and reject errors. The best-known include written tests, performance-simulation tests, and interviews. Evidence shows that tests of intellectual ability, spatial and mechanical ability, perceptual accuracy, and motor ability are moderately valid predictors for many semiskilled and unskilled operative jobs in industrial organizations. However, an enduring criticism of written tests is that intelligence and other tested characteristics may not necessarily be good indicators of an applicant’s job performance. This criticism has led to an increased use of performance-simulation tests, which are made up of actual job behaviors. The best-known performance-simulation tests are work sampling (a miniature replica of the job) and assessment centers (which simulate real problems one may face on the job). The former is suited to persons applying for routine jobs; the latter to managerial personnel. Because its content is essentially identical to job content, performance simulation should be a better predictor of short-term job performance than written tests and should minimize potential employment discrimination allegations. Additionally, well-constructed performance-simulation tests are valid. Copyright ©2017 Pearson Education, Ltd.

Effective Interviewing The interview is the most universal selection device, along with the application form. Interviews can be reliable and valid selection tools when structured, well organized, and limited to relevant questioning. Research shows that potential biases can creep into interviews if they’re not well structured and standardized. The following are highlights from this research: The interviewer tends to hold a stereotype of what represents a good applicant. The interviewer tends to favor applicants who share his or her own attitudes. The order in which applicants are interviewed will influence evaluations. The order in which information is elicited during the interview will influence evaluations. Managers can make interviews more valid and reliable by reviewing the job description and job specification to help assess the applicant; preparing a structured set of questions to ask all applicants for the job; reviewing an applicant’s résumé before meeting him or her; asking questions and listening carefully to the applicant’s answers; and writing an evaluation of the applicant while the interview is still fresh. In behavioral or situation interview, applicants are observed not only for what they say but also for how they behave. Applicants are presented with situations and are asked to “deal” with the situation. Research shows that these behavioral interviews are nearly eight times more effective for predicting successful job performance than traditional interviews are. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Closing the Deal Interviewers who only expose an organization’s positive characteristics are likely to have a workforce that is dissatisfied and prone to high turnover. During the hiring process, every job applicant acquires a set of expectations about the company and job for which he or she is interviewing. When the information is inflated, mismatched applicants don’t self-eliminate and new hires are apt to become disillusioned, less committed, mistrustful, and to resign earlier. To increase job satisfaction among employees and reduce turnover, managers should consider a realistic job preview (RJP), which includes both positive and negative information about the job and the company. For managers, realistic job previews offer a major insight into the HRM process: It’s just as important to retain good people as it is to hire them in the first place. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. 7-3 Explain how employees are provided with the needed skills and knowledge. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Orientation Job orientation Work unit orientation Organization orientation An orientation process introduces new hires to the organization. The major goals are to: Reduce the initial anxiety all new employees feel as they begin a new job. Familiarize new employees with the job, the work unit, and the organization as a whole. Facilitate the outsider–insider transition. Job orientation expands on the information the employee obtained during the recruitment and selection stages, clarifies the new employee’s specific duties and responsibilities as well as how his or her performance will be evaluated, and corrects any unrealistic expectations new employees might hold about the job. Orientation is the time to correct any unrealistic expectations new employees might hold about the job. Work unit orientation familiarizes an employee with the goals of the work unit, makes clear how his or her job contributes to the unit’s goals, and provides an introduction to his or her coworkers. Organization orientation informs the new employee about the organization’s goals, history, philosophy, procedures, and rules. This information includes relevant HR policies such as work hours, pay procedures, overtime requirements, and benefits, and often a tour of the organization’s physical facilities. Managers are responsible for making the integration of a new employee into the organization as smooth and anxiety-free as possible. Copyright ©2017 Pearson Education, Ltd.

Providing Skills and Knowledge Employee training is a learning experience that seeks a relatively permanent change in employees by improving their ability to perform on the job. Training may involve what employees know, how they work, or their attitudes toward their jobs, coworkers, managers, and the organization. The questions in Exhibit 7-6 suggest the kinds of signals that can warn a manager when training may be necessary. Indications that job performance is declining include decreases in production numbers, lower quality, more accidents, and higher scrap or rejection rates, which might suggest that worker skills need to be fine-tuned—given that the decline is not related to lack of effort. Managers must also recognize that training may be required as a result of job redesign or a technological breakthrough. Copyright ©2017 Pearson Education, Ltd.

Employee Training Methods Most training takes place on the job because it’s simple and usually costs less, but many other training methods are available. The more popular on-the-job and off-the-job training methods are summarized here in Exhibit 7-7. Managers ensure that training is working by evaluating the results. That typically means that several managers, representatives from HRM, and a group of workers who have recently completed a training program are asked for their opinions. These reactions are not necessarily valid, so training must also be evaluated in terms of how much the participants learned; how well they are using their new skills on the job; and whether the training program achieved its desired results. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. 7-4 Describe strategies for retaining competent, high-performing employees. Copyright ©2017 Pearson Education, Ltd.

Retaining Competent Employees Retaining employees, especially competent, high-performing employees, is essential. Two HRM activities that play a role in this are managing employee performance and developing an appropriate compensation and benefits program. A performance management system establishes performance standards that are used to evaluate employee performance. Here in Exhibit 7-8 we see specific appraisal techniques for evaluating an employee’s performance. (a) through (f) are ways to evaluate employee performance against a set of established standards or absolute criteria, but (g), a multi-person comparison, is a way to compare one person’s performance with that of one or more individuals and is a relative, not absolute, measuring device. The three most popular forms of multi-person evaluations are: Group-order ranking: evaluator places employees into a particular classification, e.g. top fifth. The number of employees in each classification must be as equal as possible. Individual ranking: evaluator lists employees in order from highest to lowest performance levels. The difference between the first and second employee is the same as between any two other employees. Paired comparison: each employee is compared with every other employee in the comparison group and rated as either superior or weaker. This is an arduous task when assessing large numbers of employees. Copyright ©2017 Pearson Education, Ltd.

Issues with Performance Evaluation Systems Systems may be outdated due to: Downsizing Project teams When An Employee’s Performance is Not Up to Par Performance evaluation systems may be outdated due to downsizing, because supervisors may have more employees to manage, making it difficult to have extensive knowledge of each one’s performance. They also might be outdated due to the popularity of project teams and employee involvement. In such structures, others (not managers) may be better able to make accurate assessments. There are several reasons why an employee’s performance might not be up to par, and each has its own action. In the case of a job mismatch (hiring error), the individual can be reassigned to a better-matched job. If the employee has received inadequate training, training should be provided. An employee may also display a discipline problem, and lack the desire to do the job. In such a case, try employee counseling, a process designed to help employees overcome performance-related problems; attempt to uncover why employee has lost his/her desire or ability to work productively and find ways to fix the problem. Alternately, disciplinary/punitive action (verbal and written warnings, suspension, and even termination) may be warranted. Copyright ©2017 Pearson Education, Ltd.

Compensating Employees The goal of compensation administration is to design a cost-effective pay structure that attempts to ensure that pay levels will be perceived as fair by all employees. Essentially, the higher the knowledge, skills, and abilities (KSAs)—and the greater the authority and responsibility—the higher the pay. Factors that influence the compensation and benefit packages that different employees receive are summarized here in Exhibit 7-9. Skill-based pay systems reward employees for the job skills and competencies they demonstrate, and research shows that these systems tend to be more successful in manufacturing organizations and in organizations pursuing technical innovations. Many other organizations use variable pay systems, in which an individual’s compensation is contingent on performance. 90 percent of U.S. organizations use variable pay plans. When an organization designs its overall compensation package, it has to take into account employee benefits, which are nonfinancial rewards designed to enrich employees’ lives. Most organizations are legally required to provide Social Security and workers and unemployment compensation, but organizations may also provide benefits such as paid time off from work, life and disability insurance, retirement programs, and health insurance. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. 7-5 Discuss contemporary issues in managing human resources. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Managing Downsizing Today’s managers face downsizing, workforce diversity, sexual harassment, workplace spirituality, and HR costs. Downsizing is the planned elimination of jobs from an organization. When an organization has too many employees—which may happen when it’s faced with an economic crisis, declining market share, overly aggressive growth, or when it’s been poorly managed—one option for improving profits is to eliminate excess workers. A negative consequence is layoff-survivor sickness, a set of attitudes, perceptions, and behaviors of employees who survive involuntary staff reductions. Symptoms include job insecurity, perceptions of unfairness, guilt, depression, stress from increased workload, fear of change, loss of loyalty and commitment, reduced effort, and an unwillingness to do anything beyond the required minimum. Exhibit 7-10 summarizes some ways that managers can reduce the trauma associated with downsizing. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Workforce Diversity Nontraditional recruitment sources Non-discriminatory selection Accommodation of diverse needs Diversity consciousness workshops Mentoring programs Improving workforce diversity requires managers to widen their recruiting net and turn to nontraditional recruitment sources such as women’s job networks, over-50 clubs, urban job banks, and disabled people’s training centers. After a diverse set of applicants exists, selection must be non-discriminatory, applicants should be made comfortable with the organization’s culture, and management should express its desire to accommodate their needs. Many organizations provide special workshops to raise diversity consciousness among current employees, as well as programs for new employees that focus on diversity issues. Some companies also have special mentoring programs to deal with the reality that lower-level female and minority managers have few role models with whom to identify. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Sexual Harassment Any unwanted action or activity of a sexual nature that explicitly or implicitly affects an individual’s employment, performance, or work environment It’s estimated that sexual harassment is the single largest financial risk facing companies today and results in millions of dollars lost in absenteeism, low productivity, and turnover. Sexual harassment can occur between members of the opposite or of the same sex, and between employees of the organization or between employee and nonemployee. In 1993, the Equal Employment Opportunity Commission cited three situations in in which verbal or physical conduct toward an individual is considered sexual harassment: It creates an intimidating, offensive, or hostile environment. It unreasonably interferes with an individual’s work. It adversely affects an employee’s employment opportunities. Whether something is offensive depends on the people in the organization and the environment in which they work. We all must be attuned to what makes fellow employees uncomfortable—and ask if we don’t know. If an incident occurs, the courts will want to know: (1) Did the organization know about, or should the organization have known about, the alleged behavior?; and (2) What did the managers do to stop it? Organizations and managers must educate all employees on sexual harassment matters, have mechanisms available to monitor employees, and refrain from taking action against a harasser until a thorough investigation has been conducted and the results reviewed by an independent and objective individual. Copyright ©2017 Pearson Education, Ltd.

Copyright ©2017 Pearson Education, Ltd. Controlling HR Costs Health Care Pensions Since 2002, health care costs have risen, hitting $3.2 trillion in 2013, and in 2014 rising 5 percent over the previous year. The new federal health care mandates are expected to add to those costs. As a result, some organizations are instituting wellness programs and initiatives aimed at reducing obesity and smoking and promoting fitness through incentives. Employee pension plans are the other area where organizations are looking to control costs. Pension commitments have become such an enormous burden that most companies can no longer afford them. Obviously, the pension issue is one that directly affects HR decisions when organizations want to attract talented, capable employees by offering them desirable benefits. Copyright ©2017 Pearson Education, Ltd.