İntroduction to Business 2 BUS 102

İntroduction to Business 2 BUS 102
Erlan Bakiev, Ph. D. Zirve University BUS 102

Managing Human Resources
This chapter offers an overview of the human resources function, from planning a company’s staffing needs to recruiting and training new employees to appraising employee performance. You’ll also get a look at current practices in compensation and benefits, two topics that will surely interest you in the short term as an employee and in the long term as a manager or entrepreneur. The chapter concludes with a discussion of how companies manage changes in employment status, from the pleasant task of promoting employees to unpleasant task of terminating them. Excellence in Business, 3e

Human Resource Management (HRM)
Compensation Acquiring Maintaining Developing Evaluation Motivation Hiring the right people to help a company reach its goals and then overseeing their training and development, motivation, evaluation, and compensation is critical to a company’s success. These activities are known as human resources management (HRM), which encompasses all the tasks involved in acquiring, maintaining, and developing an organization’s human resources. Because of the accelerating rate at which today’s workforce, economy, corporate cultures, and legal environment are being transformed, the role of HRM is increasingly viewed as a strategic one. Training & Development Excellence in Business, 3e

Six Functions of Human Resources (HR)
Planning Recruiting and Hiring Training Appraisal Performance Administering Compensation and Benefits Overseeing changes in employment status

Functions of the Human Resources Department
Planning for Staffing Needs Recruiting and Hiring Training and Development Appraising and Retaining Human resources (HR) managers must figure out how to attract qualified employees from a shrinking pool of entry-level candidates; how to train less-educated, poorly skilled employees; how to keep experienced employees when they have few opportunities for advancement; and how to lay off employees equitably when downsizing is necessary. They must also retrain employees to cope with increasing automation and computerization, manage increasingly complex (and expensive) employee benefits programs, shape workplace policies to address changing workforce demographics and employee needs, and cope with the challenge of meeting government regulations in hiring practices and equal opportunity employment. In short, human resources managers and staff members help keep the organization running smoothly at every level by planning for a company’s staffing needs, recruiting and hiring employees, training and developing employees and managers, appraising employee performance, and retaining valuable employees. Excellence in Business, 3e

Planning for Staffing Needs
From Business Plan Estimate Demand for Employees Supply of Perform Job Analysis Write Job Descriptions Specifications To Hiring Process Evaluating Job Requirements Forecasting One of the six functions of the human resources staff members is to plan for a company’s staffing needs. Proper planning is critical because a miscalculation could leave a company without enough employees to keep up with demand, resulting in customer dissatisfaction and lost business. Yet if a company expands its staff too rapidly, profits may be eaten up by payroll, or the firm may have to lay off people who were just recruited and trained at considerable expense. The planning function consists of two steps: (1) forecasting supply and demand and (2) evaluating job requirements. Excellence in Business, 3e

Excellence in Business, 3e
Forecasting Demand Predicted sales Expected turnover rate Workforce’s skill level Impending strategic decisions Changes in technology Company’s financial status Status of key employees Planning begins with forecasting demand, the numbers and types of employees who will be needed at various times. HR managers consider a number of variables when estimating demand, including the following: Predicted sales of the company's goods and services The expected turnover rate, the percentage of the workforce that leaves every year The current workforce's skill level, relative to the company's future needs Impending strategic decisions that might affect the number and type of workers needed Changes in technology or other business factors that could affect the number and type of workers needed The company's current and project financial status In addition to overall workforce levels, every company has a numbers of employees and managers who are considered so critical to the company's ongoing operations that HR managers work with top executives to identify potential replacements in the event any of these people need to be replaced, a process known as succession planning. These plan can cover owners, senior executives, researchers, top sales staff, and other vital members of the organization. A replacement chart identifies these key employees and lists potential replacements, along with any current vacancies in key positions and other planning details. Excellence in Business, 3e

Forecasting Supply Existing Workers Temporary Workers Outsourcing With some idea of future workforce demands, the HR staff then tries to estimate the supply of available employees. In many cases, that supply is within the company already—perhaps existing workers just needing training to fill future requirements. To ensure a steady supply of experienced employees for new opportunities and to maintain existing operations, successful companies focus heavily on employee retention, the degree to which they are able to keep desired employees. If existing employees cannot be tapped for new positions, the HR team must determine how to find people outside the company who have the necessary skills. In addition to hiring permanent employees, either part time or full time, companies have several other options for meeting workforce needs, including temporary employees and outsourcing. More and more businesses try to save money and increase flexibility by augmenting their core workforces with temporary employees, or “temps,” whose schedules can be rearranged to suit the company’s needs. As a result, this segment of the labor force has increased by leaps and bounds in recent years. The temporary ranks include computer systems analysts, human resource managers, accountants, doctors, and even CEOs, with technical fields making up the fastest-growing segment of temporary employment. Some companies outsource an entire function, such as sales or human resources, whereas other outsource selected jobs or projects. In general, outsourcing is used to take advantage of outside expertise, to increase flexibility, or to benefit from the cost efficiencies offered by firms that specialize in a single business function. Outsourcing has many advantages: It gives companies access to new resources and world-class capabilities; it shares the risk of getting the work done; and it frees company resources for other purposes. Still, outsourcing has its share of risks, including loss of control, greater dependency on suppliers, and loss of in-house skills. Some companies have also experienced work delays, unhappy customers, and labor union battles as a result of outsourcing. Excellence in Business, 3e

Evaluating Job Requirements Job Analysis Job Specification Job Description The second step of the planning function is to evaluate job requirements. Management needs a formal and objective method of evaluating job requirements. That method is called job analysis. To obtain the information needed for a job analysis, the human resources staff asks employees or supervisors several questions: What is the purpose of the job? What tasks are involved in the job? What qualifications and skills are needed to do it effectively? In what kind of setting does the job take place? Is there much public contact involved? Does the job entail much time pressure? Sometimes they obtain job information by observing employees directly. Other times they ask employees to keep daily diaries describing exactly what they do during the workday. Once job analysis has been completed, the human resources staff develops a job description, a formal statement summarizing the tasks involved in the job and the conditions under which the employee will work. In most cases, the staff will also develop a job specification, a statement describing the skills, education, and previous experience that the job requires. Excellence in Business, 3e

Recruiting Employees Internal Searches Newspaper Ads Internet Ads Trade Shows Headhunters Referrals Employment Agencies Union Halls Colleges Having forecast a company’s supply and demand for employees and evaluated job requirements, the human resource manager’s next step is to match the job specification with an actual person or selection of people. This task is accomplished through recruiting, the process of attracting suitable candidates for an organization’s jobs. Recruiters are specialists on the human resources staff who are responsible for locating job candidates. They use a variety of methods and resources, including internal searches, newspaper and Internet advertising, public and private employment agencies, union hiring halls, college campuses and career offices, trade shows, corporate “headhunters” (people who try to attract people at other companies), and referrals from employees or colleagues in the industry. One of the fastest-growing recruitment resources for both large and small businesses is the Internet. Excellence in Business, 3e

How Employers and Job-Seekers Approach the Recruiting Process
Look Inside the Company Networking and Personal References Employment Agency or Search Firm Unsolicited Résumés Newspaper or Internet Want Ads Generally, employers prefer to look for candidates within their organizations. When hiring outside the company, they rely heavily on referrals from people they know and trust. Placing want-ads is often viewed as a last resort. In contrast, typical job seekers begin their job-search process from the opposite direction (starting with reading a newspaper or Internet ads). Job Seekers Excellence in Business, 3e

The Hiring Process Select Qualified Candidates 1 Screen the Candidates 2 Evaluate 4 Select the Best Candidate 6 Conduct In-Depth Interviews 3 Most companies go through the same basic stages in the hiring process as they sift through applications to come up with the person (or persons) they want. The first stage is to select a small number of qualified candidates from all of the applications received. The second stage in the hiring process is to interview each candidate to clarify qualifications and to fill in any missing information. After the initial prescreening interviews comes the third stage, when the best candidates may be asked to meet with someone in the human resources department who will conduct a more probing interview. For higher-level positions, candidates may go through a series of interviews with managers, potential co-workers, and the employees who will make up the successful candidate’s staff. After all the interviews have been completed, the process moves to the final stages. In the fourth stage, the department supervisor evaluates the candidates, sometimes in consultation with a higher-level manager, the human resources department, and staff. During the fifth stage, the employer checks the references of the top few candidates. The employer may also research the candidates’ education, previous employment, and motor vehicle records. A growing number of employers are also checking candidates’ credit histories. In the sixth stage, the supervisor selects the most suitable person for the job. Now the search is over-provided the candidate accepts the offer. Check References 5 Excellence in Business, 3e

Background Checks Educational Credentials Employment Verification Time Gaps Between Jobs Reference Checks To remove some of the mystery and reduce the chances of hiring people with the potential to damage the firm in some way, businesses now conduct a variety of background checks on job applicants, including verifying all educational credentials and previous jobs, accounting for any large time gaps between jobs, and checking references. Roughly 70 to 80 percent of U.S. employers now conduct criminal background checks, and a third conduct credit checks. Although some applicants and privacy advocates have expressed concerns about both invasion of privacy and the chance of errors in both criminal and credit histories. Arrest Records Credit Histories Excellence in Business, 3e

Hiring and the Law Equal Employment Opportunity Negligent Hiring Immigration Reform and Control Act Federal and state laws and regulations govern many aspects of the hiring process. In particular, employers must be careful to avoid discrimination in the wording of their application forms, in interviewing, and in testing. Employers must also respect the privacy of applicants. Asking questions about unrelated factors such as citizenship, marital status, age, and religion violates the Equal Employment Opportunity Commission’s regulations because such questions may lead to discrimination. In addition, employers are not allowed to ask questions about whether a person has children, whether a person owns or rents a home, what caused a physical disability, whether a person belongs to a union, whether a person has ever been arrested, or when a person attended school. The exception is when such information is related to a bona fide occupational qualification for the job. On the other hand, employers must also obtain sufficient information about employees to avoid becoming the target of a negligent-hiring lawsuit. Moreover, the Immigration Reform and Control Act (passed in 1986) forbids almost all U.S. companies from hiring illegal aliens. The act also prohibits discrimination in hiring on the basis of national origin or citizenship status. This creates a difficult situation for employers who must try to determine their applicants’ citizenship, so they can verify that the newly hired are legally eligible to work, without asking questions that violate the law. As you can imagine, striking the balance can be quite a challenge. Excellence in Business, 3e

Preemployment Testing
Job-Skills Psychological One much-debated aspect of the hiring process is testing —using not only the tests that prospective employers give job applicants but any devices that can evaluate employees when making job decisions. Tests are used to gauge abilities, intelligence, interests, and sometimes even physical condition and personality. Employers that receive high volumes of applications also use tests as screening devices to sort through the deluge of applications. Companies use three main procedures: job-skills testing, psychological testing, and drug testing. Job-skills tests are the most common type, designed to assess competency or specific abilities needed to perform a job. Psychological tests usually take the form of questionnaires. These tests can be used to assess overall intellectual ability, attitudes toward work, interests, managerial potential, or personality characteristics--including dependability, commitment, and motivation. To avoid the increased costs and reduced productivity associated with drug abuse in the workplace (estimated to cost industry some $100 billion a year), many employers require applicants to be tested for drug use. Companies with mandatory testing have found real advantages, including lower accident rates, fewer disability claims, and decreased violence and absenteeism. Nevertheless, some employers prefer not to incur the extra expense to administer drug tests; others consider such tests an invasion of privacy. Drugs and Alcohol Excellence in Business, 3e

Training and Development
Orientation Training Retraining To make sure that all new employees understand the company’s goals, policies, and procedures, most large organizations and many small ones have well-defined orientation programs. Training and other forms of employee development continue throughout the employee's career in most cases. Many HR departments maintain a skills inventory, which identifies both the current skill levels of all the employees and the skills the company needs in order to succeed. Depending on the industry, some of the most common subjects for ongoing training include problem solving, new products, sales, customer service, safety, sexual harassment, supervision, quality, strategic planning, communication, time management, and team building Excellence in Business, 3e

Appraising Employees Objectivity Periodic Performance Appraisals Improvement Fairness Standards Regular Written Evaluations Most human resources managers develop performance appraisal systems to objectively evaluate employees according to set criteria. The ultimate goal of performance appraisals is not to judge employees but rather to improve their performance. Thus, experts recommend that performance reviews be an ongoing discipline--not just a once-a-year event linked to employee raises. Most companies require regular written evaluations of each employee’s work. To ensure objectivity and consistency, firms generally use a standard company performance appraisal form. Specific measures of employee performance vary widely by job, company, and industry. Most jobs are evaluated in several areas, including tasks specific to the position, contribution to the company's overall success, and interaction with colleagues and customers. Many performance appraisal systems require the employee to be rated by several people (including more than one supervisor and perhaps several co-workers). One appraisal format that moves the review process from a one-dimensional perspective to a multidimensional format is the 360-degree review. This review is designed to provide employees with a broader range of feedback from colleagues above, below, and around the employee to provide observations of the person’s performance in several skill and behavioral categories. This means that employees rate the performance of their superiors as well as that of their peers. In addition to formal, periodic performance evaluations, many companies evaluate some workers' performance continuously, use electronic performance monitoring (EPM), sometimes called computer activity monitoring. For instance, customer service and telephone sales representatives are often evaluated by the number of calls they complete per hour and other variables. EPM efforts can generate controversy in the workplace, elevating employee stress levels and raising concerns about invasion of privacy. 360-Degree Reviews Electronic Performance Monitoring Excellence in Business, 3e

Workplace Compensation
Wages Salaries Benefits Pay Scale Bonuses Hourly Workers Corporate Executives Administering compensation, a combination of payments in the form of wages or salaries, incentive payments, employee benefits, and employer services, is another major responsibility of a company’s human resources department. Many blue-collar (production) and some white-collar (management and clerical) employees receive compensation in the form of wages, which are based on calculating the number of hours worked, the number of units produced, or a combination of both time and productivity. Employees whose output is not always directly related to the number of hours worked or the number of pieces produced are paid salaries. As with wages, salaries base compensation on time, but the unit of time is a week, two weeks, a month, or a year. Salaried employees such as managers normally receive no pay for the extra hours they sometimes put in; overtime is simply part of their obligation. Compensation has become a hot topic in recent years, at both ends of the pay scale. At the low end, for instance, many businesses, employees, and unions are wrestling with the downward pressure on wages and benefits exerted by Wal-Mart's enormous presence in the economy. Wal-Mart's compensation policies affect thousands of employees who've never worked there. At the upper end of the pay scale, executive compensation, and the pay of CEOs in particular, has generated its own brand of controversy. CEOs typically receive complex compensation packages that include a base salary plus a wide range of benefits and bonuses, including golden handshakes when they join a company and golden parachutes when they leave. It is important to note that comparing compensation packages is difficult because they are so complex, and some include potential income that executives haven't actually received yet, but critics still find the numbers staggering. Excellence in Business, 3e

Fair Labor Standards Act
Guidelines for Administering Salaries and Wages On-the-Job Responsibilities Overall Level of Pay Exempt Employees Nonexempt Overtime Pay Most employees receive the bulk of their compensation in the form of salary, if they receive a fixed amount per year, or wages, if they are paid by the unit of time (hourly, daily, or weekly) or by the unit of output (often called “getting paid by the piece” or “piecework”). The Fair Labor Standards Act, introduced in 1938 and amended many times since then, sets specific guidelines that employers must follow when administering salaries and wages, including setting a minimum wage and paying overtime for time worked beyond 40 hours a week. However, most professional and managerial employees are considered exempt from these regulations, meaning, for instance, their employers don’t have to pay them for overtime. The distinction between exempt employees and nonexempt employees is based on job responsibilities and pay level. In general, salaried employees are exempt, although there are many exceptions. Excellence in Business, 3e

Hot Compensation Issues
Lower End of Pay Scale Upper End of Pay Scale Downward Pressure on Wages on Benefits Compensation Gap Between CEO and Employees Disparity Between Results and Compensation Compensation has become a hot topic in recent years, at both ends of the pay scale. At the low end, for instance, many businesses, employees, and unions are wrestling with the downward pressure on wages and benefits exerted by Wal-Mart’s enormous presence in the economy. . In addition to offering lower wages than many traditional grocery and retail stores, Wal-Mart squeezes every possible penny out of operating costs and is quick to import goods from China and other lower-cost countries when U.S. suppliers can’t meet its cost demands. As a result, many companies now feel forced to lower their own costs in order to compete. Not all of Wal-Mart’s competitors are following the “race to the bottom,” as some people call it. For example, Wegmans and Costco are two retail chains that are succeeding with a markedly different approach to compensation. Wegmans, which offers most employees free health care coverage and higher wages than Wal-Mart, follows the belief that “If we take care of our employees, they will take care of our customers,” in the words of vice president Karen Shadders. Costco, which competes with Wal-Mart’s Sam’s Club chain of superstores, also offers higher wages and better benefits—and yet still generates better financial results than Sam’s Club. At the upper end of the pay scale, executive compensation, and the pay of CEOs in particular, has generated its own brand of controversy. CEOs typically receive complex compensation packages that include a base salary plus a wide range of benefits and bonuses, including golden handshakes when they join a company and golden parachutes when they leave. Part of the controversy stems from the widening compensation gap between CEOs and their employees; with the average compensation of CEOs at large companies now in the $15 million range, it’s not uncommon for CEOs to earn several hundred times more than their lowest-paid employees. A second aspect of the controversy can be the disparity between results and compensation. Even though CEOs are supposed to be evaluated by such factors as stock price appreciation, some continue to earn large salaries even as their companies’ stocks decline. Excellence in Business, 3e

Incentive Programs Bonuses Commissions To encourage employees to be more productive, innovative, and committed to their work, many companies provide managers and employees with incentives, cash payments linked to specific individual, group, and company wide goals; overall productivity; and company success. In other words, achievements, not just activities, are made the basis for payment. The success of these programs often depends on how closely incentives are linked to actions within the employee’s control: Bonuses. For both salaried and wage-earning employees, one type of incentive compensation is the bonus, a payment in addition to the regular wage or salary. Employees may be rewarded for staying with a company and encouraged to work harder through profit sharing, a system in which employees receive a portion of the company’s profits. Similar to profit sharing, gain sharing ties rewards to profits (or cost savings) achieved by meeting specific goals such as quality and productivity improvement. Profit Sharing Excellence in Business, 3e

Incentive Programs Gain Sharing Pay for Performance Gain sharing. Similar to profit sharing, gain sharing ties rewards to profits (or cost savings) achieved by meeting specific goals such as quality and productivity improvement. Pay for performance. A variation of gain sharing, pay for performance requires employees to accept a lower base pay but rewards them with bonuses, commissions, or stock options if they reach production targets or other goals. Another approach to compensation being explored by companies is knowledge-based pay, also known as competency-based pay or skill-based pay, which is tied to employees’ knowledge and abilities rather than to their job per se. Knowledge-Based Pay Excellence in Business, 3e

Benefits and Services Insurance Retirement Plans Stock Options Family Benefits Companies also regularly provide employee benefits—elements of compensation other than wages, salaries, and incentives. These benefits may be offered as either a preset package—that is, the employee gets whatever insurance, paid holidays, pension plan, and other benefits the company sets up—or as flexible plans, sometimes known as cafeteria plans. The benefits most commonly provided by employers are insurance, retirement benefits and employee stock-ownership plans, stock options, and family benefits. Excellence in Business, 3e

Insurance Benefits Life and Health Dental and Vision Disability Long-Term Care Employers can offer a range of insurance to their employees, including life, health, dental, vision plans, disability, and long-term- care insurance. However, perhaps no other issue illustrates the challenging economics of business today than health insurance. With insurance premiums and other costs rising faster than employers can raise their own prices, many companies are searching for ways to reduce the financial impact. Excellence in Business, 3e

Insurance Challenges Flat Wages Level Prices Rising Premiums Perhaps no other issue illustrates the challenging economics of business today than health insurance. With insurance premiums and other costs rising faster than employers can raise their own prices, many companies are searching for ways to reduce the financial impact. They’re taking a variety of steps, including forcing employees to pick up more of the cost (a practice often known as cost shifting), capping or reducing coverage for retired employees, auditing employees’ health claims more carefully, inquiring into employees’ health and habits more closely, dropping spouses from insurance plans, or even firing employees who are so sick or disabled that they are no longer able to work. At the same time, however, workers’ earnings aren’t increasing fast enough to cover these new expenses. Excellence in Business, 3e

Creative Approaches to Skyrocketing Health-Care Costs
High-Deductible Insurance In-House Clinics Employer-Driven Quality Improvements Health Savings Accounts Health Insurance Buying Groups Insurance for the Uninsured Sliding Scale Plans Wellness Programs In the true spirit of entrepreneurship, however, U.S. companies aren’t just giving up in the face of rising costs. The slide above shows a sample of many creative ways employers, insurers, and public officials are trying to offer adequate coverage at manageable costs. High-Deductible Insurance. One of the simplest changes is switching to high-deductible insurance, in which the employee must pay more of his or her medical expenses directly before insurance kicks in. This not only lowers insurance premiums, but advocates say it forces employees to use health care services more carefully. Health Savings Accounts. Higher deductibles are a feature of the new Health Savings Accounts (HSAs) introduced in HSAs let employees sock away parts of their salaries tax-free and use the money to pay for medical care or spend it on other things if they stay healthy. In-House Clinics. A few companies have saved by opening their own private clinics on site, giving them more control over costs and removing the insurance layer from the health care model. However, this option is attractive only to companies with large, geographically concentrated workforces. Health Insurance Buying Groups. Smaller employers can band together to increase their purchasing power. After joining the employers’ group Presidion, the Tampa, Florida, restaurant chain Ragin’ Ribs cut its health care costs by 25 percent. Similar organizations also exist to help independent contractors save on insurance. Employer-Driven Quality Improvements. An even more comprehensive cooperative effort is the Leapfrog Group, a nonprofit coalition representing a variety of employers and health care plans; Leapfrog offers incentives to hospitals and health care providers to reduce preventable medical errors improve the quality of care and in doing so also cut costs dramatically. Insurance for the Uninsured. A coalition of large employers recently formed the Affordable Health Care Solution, a giant purchasing cooperative that lowers the cost of insurance for independent contractors, part-timers, and other who can’t afford insurance. Sliding Scale Plans. With a sliding-scale program, employers charge for health insurance based on salary, making insurance more affordable for lower-wage workers. Wellness Programs. Many employers have discovered that a great way to cut health care costs is to keep employees healthier in the first place; wellness programs can include everything from dietary advice to exercise facilities to smoking-cessation classes. Excellence in Business, 3e

Employee Pension Plans
Retirement Benefits Employee Pension Plans Defined Benefit Plans Retirement age Average salary Years of service Defined Contribution Plans Employer contributions Employee contributions Accumulated earnings In addition to Social Security from the federal government, many employers offer retirement plans, which are designed to provide continuing income after the employee retires. Company-sponsored retired plans can be categorized as either defined benefit plans, in which the company specifies how much it will pay employees upon retirement, or defined contribution plans, in which companies specify how much they will put into the retirement fund (by matching employee contributions, for instance), without guaranteeing any specific payouts during retirement. Although both types are technically pension plans, when most people speak of pension plans, they are referring to traditional defined benefit plans, in which employers promise to pay their employees a benefit upon retirement based on the employee’s retirement age, final average salary, and years of service. In the past, most U.S. employers that offered retirement plans offered these defined-benefit plans, but today fewer than 50 percent still do. Moreover, many of these plans are now in serious financial trouble. Defined contribution plans are similar to savings plans that provide a future benefit based on annual employer contributions, voluntary employee matching contributions, and accumulated investment earnings. Employers can choose from several different types of defined contribution plans, the most common of which is known as a 401(k) plan. Unfortunately, stock market declines, reductions in company contributions, and accounting scandals have reduced the attractiveness of 401(k) plans in the eyes of many employees, particularly in the all-too-common situation where employees invested most of their 401(k) fund in their own employer's stock. Some eight million U.S. employees are now enrolled in another type of defined-benefit plan known as an employee stock-ownership plan (ESOP), in which a company places a certain amount of its stock in trust for some or all of its employees, with each employee entitled to a certain share. These plans allow employees to later purchase the shares at a fixed price. Excellence in Business, 3e

Stock Option Plans Employer Benefits Employee Benefits Cost Effective Profit Potential A related method for tying employee compensation to company performance is the stock option plan. Stock options grant employees the right to purchase a set number of shares of the employer’s stock at a specific price, called the grant or exercise price, during a certain time period. Stock options can be a win-win situation for employers and employees. From the employer’s perspective, stock options cost little, provide long-term incentives for good people to stay with the company, and encourage employees to work harder because they have a vested interest in the company doing well. From the employee’s perspective, stock options can generate a handsome profit if the stock’s market price exceeds the grant price. But stock options lose their appeal when the stock does not perform as expected. Options are particularly common in executive compensation packages, where they offer an incentive for effective corporate management. Long-Term Incentives Vested Interest Excellence in Business, 3e

Family-Friendly Benefits
Elder-Care Unpaid Leave Daycare The Family Medical and Leave Act (FMLA), signed into law in 1993, requires employers with 50 or more workers to provide up to 12 weeks of unpaid leave per year for childbirth, adoption, or the care of oneself, a child, a spouse, or a parent with serious illness. Day care is another important family benefit, especially for two-career couples. Today, only 10 percent of companies provide day-care facilities on the premises, but 86 percent of companies surveyed by Hewitt & Associates offer some form of child-care assistance. A related family issue is care for aging parents. An estimated 50 percent of employers offer some form of elder-care assistance, ranging from referral services that help find care providers to dependent-care allowances. Excellence in Business, 3e

Other Employee Benefits
Vacations, holidays, and sick leave Professional development Financial or legal counseling Wellness programs Employee Assistance Programs Corporate perks Although sometimes overlooked, paid holidays, sick pay, premium pay for working overtime or unusual hours, and paid vacations are important benefits. Among the many other benefits that companies sometimes offer are sabbaticals, tuition loans and reimbursements, professional development opportunities, personal computers, financial counseling and legal services, assistance with buying a home, paid expenses for spouses who travel with employees, employee assistance programs, nap time, and wellness programs. According to the U.S. Labor Department, 48 percent of all employers with more than 100 workers now offer employee assistance programs (EAPs). EAPs offer private and confidential counseling to employees who need help with issues related to drugs, alcohol, finances, stress, family, and other personal problems. Benefits such as company cars, paid country club memberships, free parking, and expanded casual dress days are often referred to as perks (short for perquisite). In a tight job market companies offer perks to attract the best managers. Excellence in Business, 3e

Overseeing Changes in Employment Status
Promotion Reassignment Termination Retirement Of course, providing competitive compensation and good employee benefits is no guarantee that employees will stay with the company. Employees leave companies for a variety of reasons. Some may decide to retire. Others may resign voluntarily to pursue a better opportunity. Still others may make a change because they are promoted, reassigned, or terminated. Whatever the reason, when a vacancy occurs, companies must go to the trouble and expense of finding a replacement, whether from inside or outside the company. Overseeing changes in the employment status is another responsibility of the human resources department. Excellence in Business, 3e

Promoting from Within Advantages Disadvantages Maximizes Workforce Individual Competence Many companies prefer to look within the organization to fill job vacancies. In part, this “promote from within” policy allows a company to benefit from the training and experience of its own workforce. This policy also rewards employees who have worked hard and demonstrated the ability to handle more challenging tasks. In addition, morale is usually better when a company promotes from within because employees see that they can advance. However, a potential pitfall of internal promotion is that a person may be given a job beyond his or her competence. A common practice is for someone who is good at one kind of job to be made a manager. If the promotion is a mistake, the company not only loses its sales leader but also risks losing the employee altogether. People who can’t perform well in a new job generally become demoralized and lose confidence in the abilities they do have. At the very least, support and training are needed to help promoted employees perform well. Rewards Employees Potential Turnover Boosts Morale Training Costs Excellence in Business, 3e

Terminating Employees
Performance Related Not Performance Related At-Will Employment Wrongful Discharge Rank and Yank Business Downturns Effects on Employees Outplacement Efforts A company invests time, effort, and money in each new employee it recruits and trains. This investment is lost when an employee is removed by termination—permanently laying off the employee because of cutbacks or firing the employee for poor performance or other reasons. Terminating employment by firing an employee is a complex subject with many legal ramifications, and the line between a layoff and a firing can be blurry. For instance, many employees would be surprised to learn that every state except Montana supports the concept of at-will employment, meaning that companies are free to fire nearly anyone they choose. Exceptions to this vary from state to state, but in general, employers cannot discriminate in firing. If the employee believes any of these principles have been violated, he or she can opt to file a wrongful discharge lawsuit against the employer. Sometimes a company has no alternative but to reduce the size of its workforce, leaving the human resources department to handle layoffs and their resulting effects on both the terminated and the remaining employees. In addition, many employers offer written assurances that they will terminate employees only for cause, which usually includes such actions as committing crimes or violating company policy. One of the newest and most controversial trends in employee termination is known as the rank and yank, in which a company ranks the performance of all its employees, then fires the bottom 5 or 10 percent in an effort to improve overall corporate performance. Layoffs are the termination of employees for economic or business reasons unrelated to employee performance. However, sometimes a company has no alternative but to reduce the size of its workforce, leaving the human resources department to handle layoffs and their resulting effects on both the terminated and the remaining employees. To help ease the pain of layoffs, many companies provide laid-off employees with job-hunting assistance. Outplacement aids such as résumé-writing courses, career counseling, office space, and secretarial help are offered to laid-off executives and blue-collar employees alike. Excellence in Business, 3e

Retiring Employees Hiring Mature Workers Balancing The Workforce For the business community, an aging population presents two challenges. The first is to give job opportunities to people who are willing and able to work but who happen to be past the traditional retirement age. Many older citizens are concerned about their ability to live comfortably on fixed retirement incomes. Others simply prefer to work. For several decades, many companies and industries had mandatory retirement policies that made it necessary for people to quit working as soon as they turned a certain age. As you read in Chapter 10, however, in 1967, the Age Discrimination in Employment Act outlawed discrimination against anyone between the ages of 40 and 65. The second challenge posed by an aging workforce is to find ways to encourage older employees to retire early if the company needs to balance its workforce. One method a company may use is to offer older employees financial incentives to resign, such as enhanced retirement benefits or onetime cash payments. Inducing employees to depart by offering them financial incentives is known as a worker buyout. This method can be a lot more expensive than firing or laying off employees, but it has several advantages: The morale of the remaining employees is preserved because they feel less threatened about their own security, younger employees see increased chances for promotion, and the risk of age-discrimination lawsuits is minimized. Excellence in Business, 3e

1. Why should companies treat human resources as one of the most vital strategic functions in the organization? 2. If you were hired to start the HR department in a young and fast-growing company, would you focus on recruiting or retention first? 3. List please three incentive programs

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