PowerPoint Presentation by Charlie Cook The University of West Alabama © 2010 South-Western, Cengage Learning, Inc. All rights reserved. Managing Human Resources PART 5 Managing Growth in the Small Business

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–2 1.Explain the importance of employee recruitment and list some sources that can be useful in finding suitable applicants. 2.Identify the steps to take in evaluating job applicants. 3.Describe the roles of training and development for both managerial and nonmanagerial employees in a small business. 4.Explain the various types of compensation plans, including the use of incentive plans. 5.Discuss the human resource issues of co-employment, legal protection, labor unions, and the formalizing of employer–employee relationships. Looking Ahead After studying this chapter, you should be able to:

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–3 Recruiting Personnel The Need for Quality EmployeesThe Need for Quality Employees  Employee performance directly or indirectly affects the capability of the firm to service customer needs.  Employee performance affects profitability.  Payroll costs affect firm’s bottom line.  Quality of employees determines the long-term competitive potential of the firm.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–4 The Lure of Entrepreneurial Firms Advantages of Employment in Small FirmsAdvantages of Employment in Small Firms  Quicker movement to decision-making levels of management  Greater managerial freedom  More opportunities for broad-based managerial experience  Flexibility in work scheduling and job sharing

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–5 Sources of Employees Help-Wanted Advertising Public Employment Offices Employee Referrals Walk-ins Private Employment Agencies Internet Recruiting Schools Executive Search Firms Temporary Help Agencies

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–6 Diversity in the Workforce Workforce DiversityWorkforce Diversity  Differences among employees in terms of such dimensions as gender, age, and race.  Diversity is increasing with higher proportions of women, older workers, and racial minorities entering the workforce.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–7 Job Descriptions Job DescriptionJob Description  A written summary of the essential duties required by a specific job  Aids in personnel recruitment.  Helps focus employees on their work.  Provides direction in training.  Serves as the basis for performance review. Job SpecificationJob Specification  A list of the knowledge, skills and abilities needed by the job holder to successfully perform a specific job  Aids in selecting the most qualified job applicant.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–8 Evaluating Prospects and Selecting Employees 1 Testing the applicant Interviewing the applicant Steps in Recruiting Employees Using application forms Checking references and background information 234 Requiring physical examinations 5

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–9 Evaluating Job Applicants Telephone Screening Credit Checks Skills Assessment Face-to-Face Interviews Drug Screening Motor Vehicle Record Checks Background Checks Personality and Behavior Testing Physical Examinations

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–10 Testing the Applicant Job-Related TestingJob-Related Testing  The U.S. Supreme Court has upheld the Equal Employment Opportunity Commission’s requirement that any test used in making employment decisions must be job-related. ValidityValidity  The extent to which a test assesses true job performance ability. ReliabilityReliability  The consistency of a test in measuring job performance ability.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–11 Types of Training and Development Orientation of New Personnel Development of Managers and Professionals Training to Improve Quality Training of Nonmanagerial Employees Training and Development

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–12 Training and Developing Employees Purposes of Training and DevelopmentPurposes of Training and Development  Prepare new recruit to perform the duties of the job.  Improve the performance of current employees.  Prepare employees for career advancement.  Improve morale of current employees.  Serve as an inducement to potential applicants.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–13 Exhibit 20.1 Steps in Job Instruction Training

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–14 From Training to Implementation Suggestions for Training Efforts:Suggestions for Training Efforts:  Put it (an employee’s personal action plan) on paper  Measure results (increased productivity) of training  Involve peers to support and reinforce training  Involve supportive superiors  Provide access to experts to fill in training gaps

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–15 Training and Developing Employees (cont’d) Development of Managerial and Professional EmployeesDevelopment of Managerial and Professional Employees  Determining the need for training  Creating a plan for training  Setting a timetable for training  Providing employee counseling

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–16 Compensation and Incentives for Employees Wage or Salary LevelsWage or Salary Levels  Competitive compensation  Time- or output-based compensation Financial IncentivesFinancial Incentives  Commission systems  Piecework  Group incentives and team awards  Bonus and profit-sharing plans

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–17 Compensation and Incentives for Employees (cont’d) Performance-Based Compensation PlansPerformance-Based Compensation Plans  Keys to developing an effective bonus plan:  Set attainable goals.  Include employees in planning.  Keep updating goals.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–18 Stock Incentives Stock OptionsStock Options Employee Stock Ownership Plans (ESOPs)Employee Stock Ownership Plans (ESOPs)  Plans through which a firm is sold either in part or in total to its employees.  Employees’ performance is motivated by their sharing of ownership in the firm.  Owners can cash out and withdraw without selling to outsiders.  ESOPs offer tax advantages to owners and employees.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–19 Compensation and Incentives for Employees (cont’d) Employee BenefitsEmployee Benefits  Supplements to compensation designed to be attractive and beneficial to employees.  Benefits are a substantial portion of payroll costs.  Small firms tend to provide fewer benefits.  Use of flexible benefit plans is growing.  Small firms are increasingly outsourcing the administration of their benefits programs.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–20 Special Issues in HRM Co-Employment AgreementsCo-Employment Agreements  Outsourcing burdensome administrative processes to a fee-for-services organization (PEO) that handles payroll and benefit administration for those employees.  Allows small firms to provide improved employee benefits.  Makes small firms subject to additional government regulations affecting larger firms.  Professional Employment Organization (PEO)  A company that sets up co-employment agreements, assisting businesses with the administrative demands of keeping employees on their payrolls.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–21 Legal Protection of Employees Civil Rights Act (1964) as amendedCivil Rights Act (1964) as amended  Legislation prohibiting discrimination based on race, color, religion, sex, or national origin.  Applies to all employers of more than 15 people. Americans with Disabilities Act (1990)Americans with Disabilities Act (1990)  Legislation prohibiting discrimination against persons with disabilities; requires firms make “reasonable accommodations” in the employment of disabled persons.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–22 Legal Protection of Employees (cont’d) Sexual harassment policy guidelines:Sexual harassment policy guidelines:  Establish clear policies and procedures regarding sexual harassment in the workplace.  Require employees to report incidents of harassment to management immediately.  Investigate any and all complaints of sexual harassment fairly and thoroughly.  Take appropriate action against violators and maintain claimant confidentiality.  If a lawsuit is to be filed, contact an attorney.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–23 Legal Protection of Employees (cont’d) Occupational Safety and Health Act (1970)Occupational Safety and Health Act (1970)  Legislation that regulates the safety of workplaces and work practices.  Created the Occupational Safety and Health Administration (OSHA) to establish and enforce health and safety standards. Fair Labor Standards Act (FLSA)Fair Labor Standards Act (FLSA)  Federal law that establishes a minimum wage and provides for overtime pay for more than 40 hours per week.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–24 Legal Protection of Employees (cont’d) Family and Medical Leave Act (1993)Family and Medical Leave Act (1993)  Firms must provide up to 12 weeks of unpaid leave for childbirth and other family needs.  Firms must continue health-care coverage during the leave and guarantee that employee can return to the same or a comparable job. Labor UnionsLabor Unions  Participating in collective bargaining for labor contracts.  Implementing HR policies to minimize employees’ desire for organization and representation.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–25 Special Issues in HRM (cont’d) Formalizing Employer-Employee RelationshipsFormalizing Employer-Employee Relationships  Standardizing personnel policies and procedures  Avoiding the paralytic effects of excessive regulation while avoiding the increasing costs of informality  Establishing a performance review system based on SMART goals:  Specific  Measurable  Achievable  Realistic  Time-bound

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–26 Special Issues in HRM (cont’d) The Need for a Human Resource ManagerThe Need for a Human Resource Manager  Conditions favoring appointment of an HR manager:  A substantial number of employees (100 or more)  Unionized employees  High labor turnover rate  Need to recruit and select skilled/professional employees  Considerable need to train supervisors or operative employees  Poor employee morale  Strong competition for personnel

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.20–27 Key Terms headhunter headhunter workforce diversity workforce diversity job specification job specification behavioral interview behavioral interview validity validity reliability reliability employee training employee training management development management development Job Instruction Training Job Instruction Training piecework piecework employee benefits employee benefits co-employment co-employment professional employment organization (PEO) professional employment organization (PEO) Civil Rights Act Civil Rights Act Occupational Safety and Health Act Occupational Safety and Health Act Fair Labor Standards Act (FLSA) Fair Labor Standards Act (FLSA) Family and Medical Leave Act (FMLA) Family and Medical Leave Act (FMLA)