Human Resources Management

HRM Questions To Consider Why is HRM not just “personnel” anymore? Should you “promote from within” or look for “new blood?” What tools will best help you select a job candidate? What are the keys to running a good interview? Should you measure employee performance using objective or subjective measures? How do you give feedback effectively?

Human resource management and competitive advantage Big trend in the past two decades to link human resource practices, strategy and performance “Strategic” HRM: managing the HRM system to support the organization’s strategy and goals Work closely with the “line” organization to improve efficiency, quality, innovation, and responsiveness. Support high performance work practices E.g., Cross-functional and self-managed work teams, TQM, employee involvement, training, information sharing Contrast with HRM as “personnel” – administering policies

HRM Systems and Market Value $410,000 Market Value in Dollars per Employee $390,000 $370,000 $350,000 $330,000 $310,000 $290,000 $270,000 $250,000 Lowest Quintile Middle Quintile Top Quintile Firms with excellent HRM Systems have greater market value per employee Quality of the HRM System

The HRM Process Environment Compensation and Benefits Career Development Performance Management Human Resource Planning Recruitment Derecruitment Selection Identification and selection of competent employees Orientation Training Adapted and competent employees with up-to-date skills and knowledge Competent employees who are capable of sustaining high performance over the long term Environment

Recruitment: A dizzying variety of methods

Internal vs. External Recruitment Pros & Cons External Recruiting – seeking outside the firm Pro: Brings in new skills and ideas Con: Outsider’s actual capabilities and fit (e.g., with organizational culture) are relatively unknown Internal Recruiting – moving people in the firm Pro: Job candidates and qualifications are relatively better known Pro: “Promotion from within” motivates employees Con: Often costly if job skills must be learned on the job A balance is typically most effective

Selection: The prediction exercise Selection: Assessing applicant’s qualifications in order to hire the most appropriate candidates Tools for selection: Resumes Interviews Tests and Simulations Key issue: Validity of tools varies

Each selection tool has strengths and weaknesses Standard Tools: Resumes and application forms – initial screening Interviews – almost universal, reasonably valid Written tests - measure intelligence, ability, personality, interest, etc. – popular; validity varies Reference checks – tough to get negative information Performance-simulation tests Work sampling - perform key tasks (non-managerial jobs) Assessment center - simulate challenges of managerial jobs Most valid Most expensive

Suggestions For Interviewing Structure the interview to maximize validity of information: Structured (job-related questions) interviews in preference to unstructured (conversational) interviews Use multiple interviews rather than just a single one Get detailed answers about actual job behaviors rather than generalities about job responsibilities Take notes during the interview – things blend together! Avoid over-talking; practice active listening Watch cognitive biases (stereotyping; same-as-me; halo) Ask appropriate questions

Training and Development Training (individual performers and managers): Helping employees be effective performers in their current jobs: Example: Learn technical, interpersonal, problem-solving skills. Development (usually managers or professionals): Enabling employees to take on new challenges: Example: Varied job experience is key developmentally

Employee Performance Management Performance appraisals are often done poorly They are put off because of “today’s crisis” Managers often don’t deliver negative feedback well High-performing organizations put enormous attention on “fixing” these problems with performance management Through systems and through training

Doing performance appraisal well What basis to evaluate performance on? Subjectively (manager’s perceptions) Rich information Potential for favoritism of certain employees Potential for inconsistency across managers Potential for biased perceptions (think cognitive biases) Objectively (measurable results) (Apparently) less bias Information not as rich Recommendation: Incorporate both types of evaluation

Doing performance appraisal well To use subjective evaluation effectively: Evaluate behaviors rather than traits Describe specific, important job-related behaviors rather than making overall judgments or citing outlying incidents. To use objective evaluation effectively: Work with employees to set goals Consider degree to which employee efforts controls goal achievement

Example of subject evaluation: Graphic Rating Scale Evaluates poorly by the subjective evaluation criteria

Better subjective evaluation: Behaviorally Anchored Rating Scale

Additional evaluation techniques: Forced Rankings The Problem: Every employee gets rated as high-performing, so it is not possible to differentiate between employees. Potential Solution: Forced ranking Each manager is required to categorize employees using a pre-set, fixed scheme Example: Managers must rate 10% as excellent; 20% as exceeds requirements; 50% meets requirements; 20% below requirements Sometimes coupled with additional rules (two consecutive below requirement ratings = dismissal required). Pros: Better differentiation of high and low performers Deters retention of low performers Cons: Assumes each department has equal # of high / low performers Employees feel they are in competition with each other Labels often leave good employees uncomfortable (“I’m average?”)

Delivering Feedback Effectively The recommended imagery is joint problem-solving rather than chewing someone out. What: Be specific and focus on correctable behavior. How: Focus on problem-solving / improvement, not criticism. When: Set a timetable for agreed changes. Treat subordinates with respect. Express confidence in worker’s ability to improve. Use both formal and informal feedback opportunities. Obviously, chewing someone out has its uses, at times.

Compensation And Benefits Compensation trends are following the move towards flat, flexible, responsive organizations: Reduce number of pay levels – “bands” not levels Skill-based pay Pay for performance Benefits Legally required: social security, workers’ compensation Voluntary: health insurance, retirement, day care Cafeteria-style benefits plans

Pay for performance Traditional model: Salary with (permanent) increases based on individual performance Pay-for-performance: Variable compensation based on individual, group and/or organization performance. For example, commissions; bonuses; employee stock options Benefits of pay-for-performance: Increased motivational leverage Large changes (tied to current performance) rather than small Encourage focus on team or organizational goals Flexible Allows costs to naturally vary with firm success Reduced need for downsizing or salary “cuts”.