Chapter 1: The World of Human Resources Management PDF

Rido/Shutterstock.com Chapter The World of Human Resources Management...

Rido/Shutterstock.com Chapter The World of Human Resources Management 1 Learning Outcomes After studying this chapter, you should be able to LO 1 Explain how human resources managers and other managers LO 4 Explain the dual goals human resources managers have in have rewarding careers through the strategic management terms of increasing productivity and controlling costs. of people. LO 5 Discuss how firms can leverage employee differences to LO 2 Explain how good human resources practices can help a firm their strategic advantage and how educational and cultural gain a sustainable competitive advantage and how COVID-19 changes in the workforce are affecting how human resources may impact this relationship. managers engage employees. LO 3 Describe how technology can improve how people perform LO 6 Provide examples of the roles and competencies of today’s their work and how they are managed. human resources professionals. 45459_ch01_hr_001-045.indd 1 04/02/22 2:56 PM  COVID-19 has changed the world in a dramatic manner. Almost everything has been seismically impacted, including how we manage people in organizations. As you will learn later in this chapter and throughout the text, among other human resource management (HRM) functions, the pandemic has affected how we recruit, select, train, appraise, and reward employees. While some of these changes may be temporary, others may become a part of the “new normal.” The pandemic, in many ways, has brought to the fore the crucial importance of people in organizations, from frontline employees to CEOs. We can describe how important people are to organizations in several ways. You hear such phrases as “our people are our most important assets” and “without our people, we would be nothing” all the time, but even more so in our contemporary COVID-19 world. The terms human resources, human capital, intellectual assets, and talent management imply that people drive the performance of their organizations (along with other resources, such as money, materials, and information). Successful organizations are particularly adept at bringing together different kinds of people to achieve a common purpose. This human resources management is the essence of human resources management (HRM). HRM involves a wide (HRM) variety of activities, including analyzing a company’s competitive environment The process of managing human talent to and designing jobs so that a firm’s strategy can be successfully implemented achieve an organization’s objectives to beat the competition fairly and ethically. This, in turn, requires identifying, recruiting, and selecting the right people for those jobs; training, motivating, and appraising these people; developing competitive compensation policies to attract and retain them; grooming them to lead the organization in the future, and the list goes on. Learning Outcome 1 Why Study Human Resources Explain how human resources managers and other managers have rewarding careers Management? through the strategic management of people. In your career, would you like to work with people to help solve organizational issues? attract top-notch people to come to work with you and your firm? determine the right people to hire so your team and company are a success? help and coach people so they become top performers? make pay and reward decisions that may influence peoples’ lives? establish the strategic direction your firm should take? If you answered yes to these questions, a job managing people might be a rewarding career for you and an excellent reason why you should study HRM. An article in Canadian Business lists “human resources manager” as one of the best jobs in Canada for 2019, with a median salary of $94,000 annually.1 Randstad, a multinational consulting firm, lists human resource management jobs as among the top 15 in Canada in 2021.2 You can pursue many jobs in the HRM field that offer diverse and rewarding opportunities. You may want to be an HR generalist to have a more wide-ranging set of responsibilities, such as those listed above. Otherwise, you can pursue a more specialized role. Specialized HR roles tend to be found in larger organiza- tions because they have more positions that require specific and technical skillsets. The more popular areas of specialization include workforce planning and employ- ment, HR development, total rewards, employee and labour relations, and risk management. Workforce planning and employment involves responsibilities such as full- cycle recruitment, promotions, and terminations. HR development covers training and development responsibilities. The total rewards specialization involves com- pensation planning, such as crafting job descriptions, conducting performance evaluations, completing job analyses, and reviewing compensation surveys. Total 2 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 2 04/02/22 2:56 PM  rewards also covers jobs that specialize in benefits, whether it be developing a ­benefits plan, communicating with vendors, administering benefits plans, and further benefits-related tasks. Employee and labour relations are different in unionized and nonunionized environments. In unionized environments, the responsibilities may include comprehending and deciphering union contracts, negotiating collective bargaining agreements, and dealing with employee griev- ances. In a nonunionized environment, employee relations can vary but may include fostering employee engagement, employment relations, and employee disputes. Finally, risk management involves creating and administering health and safety programs, ensuring health and safety compliance, and other health and safety-related matters. There are various other HRM roles, such as Human Resources Information Systems (HRIS) specialists, managing global HR, teaching, and many more that do not fit into these categories. As you can see, a variety of exciting opportunities exist in the field of HRM.3 Having a good understanding of HRM is important for managers and entre- preneurs of all types, not just human resources (HR) personnel. All managers are responsible for at least some of the activities that fall into the category of HRM. Managers play a key role in selecting, training, motivating, appraising, and pro- moting employees. What if you do a poor job of these activities? Believe it or not, many business- people with great business strategies, business plans, and products and services fail because they do not fully grasp the importance of HRM. Laments one entre- preneur: “My first year after investing in a small business that was failing, I tripled the amount of business that company did, and made a lot of money. But I didn’t pay my personnel enough or motivate them. They eventually abandoned me, and a larger competitor muscled me out of the marketplace. I now understand the important role personnel play in a business. They can make or break it.” In addition, great business plans, products, and services can easily be copied by your competitors. Great personnel cannot. Their knowledge and abilities are among the most distinctive and renewable resources upon which a company can draw. As Thomas J. Watson, the founder of IBM, said, “You can get capital and erect buildings, but it takes people to build a business.”4 Lastly, even if you never become a manager, understanding human resources management can help you understand your responsibilities and rights as an employee. For example, what if your employer asks for your passwords to Facebook or other social media sites? Do you need to provide the manager with that information? This text can help you answer questions such as these. Human Capital and HRM The idea that organizations “compete through people” highlights the fact that achieving success increasingly depends on an organization’s ability to manage talent, or human capital. The term human capital describes the economic human capital value of employees’ knowledge, skills, and capabilities. Although the value The knowledge, skills, and capabilities of of these assets might not show up directly on a company’s balance sheet, it individuals that have economic value to an nevertheless has a ­tremendous impact on an organization’s performance. The organization following quotations from notable and former chief executive officers (CEOs) illustrate this point: “If you look at our semiconductors and melt them down for silicon, that’s a tiny fraction of the costs. The rest is intellect and mistakes.” (Gordon Moore, Intel) “An organization’s ability to learn, and translate that learning into action ­rapidly, is the ultimate competitive business advantage.” ( Jack Welch, General Electric [GE]) “Human resources isn’t a thing we do. It’s the thing that runs our business.” (Steve Wynn, Wynn Las Vegas) Chapter 1: The World of Human Resources Management 3 45459_ch01_hr_001-045.indd 3 04/02/22 2:56 PM  “You gotta build a team that is so talented, they almost make you uncomfortable.” (Brian Chesky, AirBnB) “Successful companies of the twenty-first century will be those who do the best jobs of capturing, storing, and leveraging what their employees know.” (Lew Platt, Hewlett-Packard [HP])5 “For years human resources professionals have wanted a seat at the proverbial table. Now they have that seat in a major way.” ( Johnny C. Taylor Jr., CEO for the Society Human Resource Management)6 “We believe that one of the most important lessons and reminders for employers during COVID-19 is that employees are the most valuable assets for any business. Companies that treat their employees as such and invest in making their teams feel supported throughout the crisis will thrive in the long run.” (Andrei Pop, Human API)7 “We’re in a world now that’s all about people. We’re in a truly human moment where any connection that doesn’t absolutely lean into people will go nowhere.” (Bill McDermott, ServiceNow)8 Human capital is intangible and cannot be managed the way organizations manage jobs, products, and technologies. One reason why is because employees, not the organization, own their own human capital. If valued employees leave a company, they take their human capital with them and any investment the com- pany has made in training and developing these people is lost. However, HRM practices such as selection and training can develop replacements for these people, so the real strategic advantage for organizations is a high-quality HRM system. To build human capital in organizations, managers must continue to develop superior knowledge, skills, and experience within their workforces and retain and promote top performers.9 Beyond the need to invest in employee development, organizations must find ways to better use the knowledge of their workers. Too often employees have knowledge that goes unused. As Dave Ulrich, a professor of business at the University of Michigan, notes: “Learning capability is g times g—a business’s ability to generate new ideas multiplied by its adeptness at generalizing them throughout the company.”10 Although “competing through people” is a major theme of HRM, on a day-to-day basis, managers of all types must carry out the specific activities for a company to effectively do so. Figure 1.1 provides an overall framework of these activities. From Figure 1.1 Overall Framework for Human Resources Management COMPETITIVE EMPLOYEE HUMAN RESOURCES CHALLENGES CONCERNS AND ISSUES Changes in the Planning Job security marketplace Job design Healthcare and economy Recruitment Diversity issues Staffing Globalization Age, gender, and Training and Sustainability generational issues development Technology Retirement issues Appraisal Productivity and Communications Education levels cost challenges Compensation Employee rights and Leveraging employee Benefits differences privacy Labour relations International HR Work attitudes and employee engagement Work–life balance 4 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 4 04/02/22 2:56 PM  this figure, we can see that managers have to help blend many aspects of man- agement; at this point, we will simply classify them as either “competitive drivers” ­(challenges) or “employee concerns.” We will use Figure 1.1 as a basis for our discus- sion throughout this chapter. Check In Imagine a situation where you must explain the role and importance of good human resources management to a colleague. What would be some of your key points? Competitive Issues and Human Learning Outcome 2 Resources Management Explain how good human resources practices can help a firm gain a sustainable competitive advantage and how COVID-19 Professional organizations such as provincial HR associations, consulting organi- may impact this relationship. zations, and Human Resource Planning Society (HRSP) conduct ongoing studies of the most pressing competitive issues facing firms. By seeking the input of chief executives and HR managers, these organizations keep a finger on the pulse of major trends. The top trends or competitive issues/challenges they name today include those outlined in the sections that follow. Issue 1: Responding Strategically to Crisis, Changes, and Disruptions in the Local and ­Global Marketplace Given the pace of commerce, organizations can rarely stand still for long. In today’s highly competitive environments, in which competition is global and innovation is continuous, the ability to adapt has become the key to capturing opportunities and overcoming obstacles, as well as the very survival of organiza- tions. As one pundit put it, “No change means chance.” Successful companies, says Harvard Business School professor Rosabeth Moss Kanter, develop a culture that just keeps moving all the time.11 Consider what happened to every organization, to some extent, since COVID-19 shattered lives globally. Some will be closed, such as small businesses, maybe forever; others, such as home delivery services and pharmaceuticals, may be doing better because of the demand of their products. All these changes mean significant HR changes and challenges. COVID-19 and HRM COVID-19 has resulted in one of the most extreme organizational transforma- tions in the past century. Amidst the pandemic, HR professionals have played and continue to play a lead role in assisting organizations to brainstorm, evaluate, and significantly revise their organization’s people strategy while attempting to con- tinue to operate efficiently. However, the workplace issues caused by COVID-19 are unprecedented.12 As many as 61 percent of Canadian HR professionals have affirmed that their responsibilities have become significantly more complex.13 The main challenges reported by HR leaders during the pandemic include cre- ating business continuity plans (67 percent), administrating flexible work arrange- ments (64 percent), handling employee communication (56 percent), supporting employees with issues pertaining to workplace policies (53 percent), execution of preventive measures (43 percent), and revisiting preexisting welfare policies (25 percent).14 As we will discuss throughout the text, many HR responsibilities have either changed, increased in importance, or have been added since the COVID-19 Chapter 1: The World of Human Resources Management 5 45459_ch01_hr_001-045.indd 5 04/02/22 2:56 PM  outbreak began. Strategic planning has become even more crucial during the pandemic. Organizations are increasingly required to be agile and efficient in adapting their business plan for the future of work. HR is more frequently brought into management meetings to discuss how to best navigate this new landscape.15 HR has a role in establishing alignment and ensuring organization-wide com- munication about the precautions being taken, office updates, and organizational changes.16 In many organizations, HR spearheads the office re-entry planning to ensure safe and effective protocols with an assurance of office sanitation. There are many liability concerns surrounding office reopening plans, so this continues to be a crucial role for HR.17 HRM professionals have also been required to rewrite company policies and quickly adjust business plans. The employee handbook requires revisiting to account for new rules and practices that coincide with government mandates or in anticipation of future issues. Typically, a few policies are edited annually. Now, HR has quickly become responsible for adjusting policies frequently with the pandemic.18 In addition, HR’s role in compensation planning has become more crucial and challenging amidst COVID-19. Not only have salaries and bonuses been affected, but HR must also tackle a multitude of new compensation needs, including unemployment, work-sharing programs, commission-based positions, and other concerns.19 Organizations are also now embracing the importance of culture and HR’s role in enhancing connectedness and engagement. COVID-19 has highlighted the ardent need for a feeling of community and common objectives. HR must establish cohesion between employees and leaders as leaders learn how to manage, motivate, and engage remote employees amidst uncertainty.20 In sup- porting the organizational culture, HR also has an increasingly more crucial role in ­supporting employee mental health. Amidst the pandemic, there has been a significant rise in mental health issues, and HR may be involved in mass terminations, which will affect employees remaining in the organization. HR must maintain the morale of the remaining employees. They may also establish new employee assistance plans and programs and mindfulness, exercise, and ­financial training programs.21 Finally, there has been a shift in talent requirements due to COVID-19, and HR has had to amend its talent strategy. While some departments, positions, or skillsets within the organization may no longer be as relevant, others may be increasingly COVID-19 has placed new restrictions at work. Luis Alvarez/DigitalVision/Getty Images 6 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 6 04/02/22 2:56 PM  more critical and in demand. HR must rearrange the workforce, develop employees to possess newly required skills, and work on integrating gig-economy employees. Diversity and inclusion should also be considered, given that COVID-19 has inor- dinately impacted diverse groups. HR now plays an even more significant role in creating an equitable workplace to ensure equal access to opportunities.22 HR Managers and Business Strategies In decades past, HR departments were often focused on performing administrative tasks, dealing with unions, and complying with labour laws. But HR management is vastly different today. Astute executives know that HR professionals can help them improve, comply with the law, and aid the bottom line by streamlining employ- ment costs. HR professionals can improve the top line by redesigning work to foster innovation, forecasting labour trends, recruiting and motivating employees, and measuring their effectiveness. HR managers also help their firms with busi- ness strategies, mergers and acquisitions, and ways to enter new and global mar- kets. “If you look at the evolution going back to when we called HR ‘personnel,’ it’s come a long way as a function,” says Art Mazor, with Deloitte Consulting. New HR tools and technologies are allowing the HR functions to look outside the tactical, administrative reporting and data gathering to bring insights and to drive business strategy and results, Mazor says.23 HR managers need an intimate understanding of their firms’ competitive busi- ness operations and strategies, whatever they may be. During what has been called the “Great Recession,” which began in 2008, many companies pursued cost-cutting strategies, often in part by trimming workers’ benefits. Other companies took a dif- ferent strategy: they improved their benefit programs to attract top talent from other companies and expanded to be ready when the economy began growing again. Reengineering, downsizing, and outsourcing are also examples of the means organizations use to modify the way they operate to be more successful. Six Sigma Six Sigma is a set of principles and practices whose core ideas include understanding ­customer A set of principles and practices whose needs, doing things right the first time, and striving for continuous improvement core ideas include understanding customer (see Reality Check). needs, doing things right the first time, and striving for continuous improvement Reengineering has been described as “the fundamental rethinking and rad- ical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed.”24 Downsizing is the planned elimination of jobs reengineering and outsourcing simply means hiring someone outside the company to perform The fundamental rethinking and radical business processes that were previously done within the firm. redesign of business processes to achieve A common denominator of these strategies is that they require companies dramatic improvements in cost, quality, to engage in change management. Change management is a systematic way service, and speed of bringing about and managing both organizational changes and changes on the individual level. According to a survey by the research institute Roffey Park, downsizing two-thirds of firms believe that managing change is their biggest challenge. Planned elimination of jobs Although most employees understand that change is continuous—responsibilities, job assignments, and work processes change—people often resist it because it requires them to modify or abandon ways of working that have been successful outsourcing Contracting out work that was formerly done or at least familiar to them. Successful change rarely occurs naturally or easily. by employees To manage change executives and managers—including those in HR—must envision the future, communicate this vision to employees, set clear expectations for performance, and develop the capability to execute by reorganizing people and change management reallocating assets. Organizations that have been successful in engineering change Change management is a systematic way of bringing about and managing both link the change to the business strategy; organizational changes and changes on the show how the change creates quantifiable benefits; individual level engage key employees, customers, and their suppliers early when making a change; and make an investment in implementing and sustaining change.25 Chapter 1: The World of Human Resources Management 7 45459_ch01_hr_001-045.indd 7 04/02/22 2:56 PM  Many Canadian companies use ­business process reengineering to improve productivity at their plants. TRMK/Shutterstock.com reactive changes Some of the strategic changes companies pursue are reactive changes that Changes that occur after external forces result when external forces, such as the competition, a recession, a law change, or have already affected performance an ethical crisis (e.g., the backlash Volkswagen experienced in 2016 for cheating on its vehicles’ emissions tests), have already affected an organization’s perfor- proactive change mance. Other strategies are proactive change, initiated by managers to take Change initiated to take advantage of advantage of targeted opportunities, particularly in fast-changing industries in targeted opportunities which followers are not successful. Good HR managers know that they can be key players when it comes to driving the business strategies of their organizations to make changes. That is globalization why forward-looking CEOs such as Gregg Saretsky at WestJet, Howard Schultz at The trend to opening up foreign markets to Starbucks, and Jeff Immelt at GE make certain that their top HR executives report international trade and investment directly to them and help them address key issues. Companies are increasingly rotating non-HR managers into HR positions, and vice versa, to give them exposure to different areas of the organization. Rather than emphasizing the administrative aspects of HR, forward-thinking companies develop and promote their HR personnel and provide them with key business statistics and numbers they can use to measure the effectiveness of the workforce. We will dis- cuss more about competitive HR strategies and HR in Chapter 2. Meanwhile, keep in mind that HR’s role is not all about providing advice to CEOs and supervisors. In addition to serving as strategic partners to management, HR managers are also responsible for listening to and advocating on behalf of employees to make sure their interests are aligned with those of the firm, and that their rights are respected. A good deal of evidence suggests that this is one of the toughest parts of an HR manager’s job. We will discuss more about this aspect of the job later in the chapter. Competing, Recruiting, and Staffing Globally The strategies companies are pursing today increasingly involve one or more elements of globalization. The integration of world economies and markets has sent businesses abroad to look for opportunities and fend off foreign com- petitors domestically. Consumers around the world want to be able to buy “anything, anytime, anywhere,” and companies are making it possible for them to do so. Want to buy a Coke in Pakistan? No problem. Coca-Cola has an elabo- rate delivery system designed to transport its products to some of the most remote places on the planet. In fact, the company has long generated more of 8 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 8 04/02/22 2:56 PM  Reality Check Six Sigma Goodyear Canada underwent a major business transformation. Analyze the current situation and set clear goals, At the time, it had 19 Black Belts (full-time project leaders) and Improve the process through planned experimentation, and 7 Green Belts (part-time project leaders) working in offices, Control to validate and lock in the improvement, and then warehouses, and its 8 Canadian tire and rubber products sustaining it so that there is no backslide. manufacturing plants. Projects were projected to yield $10 million The model moves the organization to whatever goals in waste reduction, avoid capital equipment purchase, and are required by the customer. Six Sigma derives its name increase sales through elimination of production bottlenecks. from the Greek letter sigma, which is sometimes used to Goodyear’s tire manufacturing facility in Medicine Hat, denote variation from a standard, and the statistical concept Alberta, needed to produce more rubber from its Banbury rubber that if you measure the defects in a process, you can figure mixer to meet its daily quota and lessen its dependence on out how to get rid of them and get closer to perfection. A Six rubber produced by outside sources. In buying material, the fac- Sigma company cannot produce more than 3.4 defects per tory was paying freight charges to get the rubber to the factory. million opportunities. For a process with only one specifica- By optimizing the Banbury uptime and increasing the Banbury tion limit, this results in six process standard deviations output, the factory could reduce the amount of rubber it needed between the mean of the process and the customer’s to purchase. Using the tools of Six Sigma, the factory determined ­specification limit. that it could stagger shift rotations so that an operator was These “lean” principles can also be used to identify always available to keep the Banbury mixer running. The com- ­deficiencies in HR processes. The associate vice president of HR pany was also able to increase the batch weight sizes of some of at Canadian Tire and his team analyzed the recruitment process the compounds by 4 to 11 percent. In addition, staging batches from the initial request for a new hire to the time the new at the top of the conveyor and reducing the gate delay realized employee reported for work. They found delays, duplication, gains of two to three seconds per batch. Although 3 seconds and unnecessary steps. Applying lean methodology to recruit- does not sound like a great amount, over the course of a week, ment, the team was able to reduce the time to fill a position by it adds about 150 minutes of productivity. After six months, the 25 percent, eliminated one-half of the steps used, reduced cost factory increased its Banbury mixer output by more than five per hire by 34 percent, and reduced turnover rates. Other com- percent, generating savings of over $110,000. The Medicine Hat panies, such as WorkSafe BC and Maple Leaf Foods, also saw plant estimates that it can save $250,000 to $400,000 annually the advantage of using Six Sigma in the recruitment process, by implementing the new procedures. reasoning that a bad hire is like a product defect. According to Six Sigma research, as little as three percent Sun Life Financial also recognized the value of using of workplace activity is a measurable value to organizations. Six Sigma principles for process improvement. The company Gary Blake, Goodyear Canada Six Sigma champion and a has a Six Sigma initiative called the Brighter Way, a major Black Belt, says that Six Sigma is a problem-solving model that strategic investment that aims to increase productivity and applies rigorous statistical thinking to reduce defects, improve engagement through a company-wide endeavour. Carrie cycle time, and increase customer satisfaction. The method- Blair, CHRO of Sun Life, explained, “we’ve encouraged ology is being applied not only to traditional manufacturing people to bring forward the ideas for continuous improve- processes but also to transactional processes—supply chain, ment, and when we’ve harvested savings, we’ve turned purchasing, invoicing, sales, and marketing. A Six Sigma team around and reinvested them into new areas of the busi- follows five major steps known as DMAIC to clearly ness and new areas of growth.” In turn, recent engagement Define the scope of the project, surveys show exceptionally high engagement scores, which Measure customer requirements and process outputs, vastly exceeds other global financial firms. Sources: Interview with Gary Blake; V. Galt, “Canadian Tire Applied Its ‘Lean’ Ideals to Headquarters,” The Globe and Mail (February 23, 2012): B21; E. Kelly, “The Skinny on Six Sigma,” HR Professional (March/April 2010): 26–27; Jamie Henry, “Keeping Your Organization Organized,” HRD (June 23, 2014); Nicola Middlemiss, “Sun Life CHRO Reveals ‘Secret Sauce’,” HRD (June 20, 2017). Chapter 1: The World of Human Resources Management 9 45459_ch01_hr_001-045.indd 9 04/02/22 2:56 PM  its revenues abroad than it does in the United States. But globalization is not of interest only to large firms such as Coca-Cola. Although estimates vary widely, approximately 70 to 85 percent of the Canadian economy today is affected by international competition, including small companies. China could surpass the United States to become the largest economy in the world by 2041, and India could be the third largest. These countries can pro- duce goods and provide services at a fraction of the cost of Canadian workers. As the vice president and chief economist of the Conference Board of Canada stated, “There are billions of people in Asia who want to get to where we are, and they’re prepared to work longer and harder. So we have to work smarter.”26 The manufacturing industry in Canada illustrates a good example of the impact of globalization. For multiple generations, industrial plants were at the centre of the communities in which they resided. However, Canadian factory closures have become commonplace in tandem with a universal economic restructuring. Since 2001, Canada has lost 498,000 manufacturing jobs, of which Ontario was most affected. Although Ontario’s population has increased by 22 percent since 2001, the manufacturing labour force decreased by 28 percent overall. A main contributor to the decline is globalization. Brant County, in Ontario, remains largely focused on car manufacturing and has proclaimed that: “It is also becoming increasingly difficult to compete with lower-cost plants in parts of the U.S. and Mexico. Lower labour costs and new investments in automation in the newer plants contribute to this, as well as the relative value of the Canadian dollar against the U.S. currency.”27 Partnerships and mergers are two other ways companies both large and small are globalizing. Coca-Cola has tried to expand in China by partnering with that nation’s largest juice maker. As a result of globalization, the national identities of products are blurring, too. BMW has traditionally been a German brand, but now the automaker builds cars in the United States, China, and elsewhere. Likewise, you probably think of Budweiser as an American beer, but would it surprise you to know that the maker of Budweiser (Anheuser-Busch) is owned by a Belgian company called InBev? Amidst COVID-19, Anheuser-Busch InBev, like many other companies, was hit globally by heavily declining sales. Experts believe the company will rely on its Asia-Pacific segment to redeem itself. In the post-COVID-19 world, it is believed that there will be a rise in revenue of $5.2 billion in 2021. Of this revenue increase, $1 billion is expected to be attributed to the Asia-Pacific market.28 Numerous free-trade agreements forged among nations in the last half-century have helped quicken the pace of globalization. The first major trade agreement of the twentieth century was made in 1948, following World War II. Called the General Agreement on Tariffs and Trade (GATT), it established rules and guide- lines for global commerce among nations and groups of nations. Although the Great Recession temporarily caused a sharp drop in the amount of world trade, since GATT began world trade has exploded, increasing nearly 30 times the dollar volume of what it once was. This is three times faster than the world’s overall output has grown during the same period. GATT paved the way for the formation of many major trade agreements and institutions, including the European Union (EU) in 1986 and the North American Free Trade Agreement (NAFTA) in 1994, renegotiated in 2018 as the United States–Mexico–Canada (USMCA) Agreement, encompassing the United States, Canada, and Mexico. The World Trade Organization (WTO), headquartered in Lausanne, Switzerland, now has more than 153-member coun- tries, and new free-trade agreements seem to be forged annually. Free trade has, however, come under the microscope in many countries and has experienced some roll-back, as political leaders try to protect the busi- nesses and jobs in their countries. The United Kingdom voted to leave (“Brexit”) the European Union in 2016 (at the time of revising this book, the UK was still in consultations with the European Union on the terms of the exit). In the United States, the Donald Trump administration was critical of free-trade agree- ments, including NAFTA and a new trade agreement (USMCA) among the three 10 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 10 04/02/22 2:56 PM  North American countries came into effect in 2020. It is unclear (at the time of writing this textbook), whether the new US government would engage in fur- ther talks with Canada and Mexico on this agreement. Nonetheless, even the most vocal opponents of global trade are anxious to complete new free-trade deals with such countries as India to increase business opportunities for firms.29 Although they have come under fire from people and politicians around the world, new free-trade agreements continue to be forged. How Globalization Affects HRM For all the opportunities afforded by international business, when managers talk about “going global,” they have to balance a complicated set of issues related to different geographies, including different cultures, employment laws, and business practices. HR issues underlie each of these concerns. They include such things as dealing with employees today who, via the Internet, are better informed about global job opportunities and are willing to pursue them, even if it means working for competing companies. Gauging the knowledge and skill base of international workers and figuring out how best to hire and train them, sometimes with mate- rials that must be translated into a number of different languages, are also issues for firms. Relocating managers and other workers to direct the efforts of an inter- national workforce is a challenge as well. HR personnel are frequently respon- sible for implementing training programs and enhancing their firms’ managers’ understanding of other cultures and practices, as well as dealing with the culture shock these workers might experience and pay differentials that must be adjusted, depending on the country. The international arena for HRM has become so crucial and so involved that we have devoted an entire chapter (Chapter 15) to discussing its competitive, cultural, and practical implications. Issue 2: Setting and Achieving Corporate Social Responsibility and Sustainability Goals Globalization has led to an improvement in people’s living standards in the last half-century. As a result of free trade, Canadians are able to buy products made abroad more cheaply. Conversely, people in low-wage countries that make those goods and services are becoming wealthier and are beginning to buy North American-made products. Nonetheless, globalization stirs fierce debate—especially when it comes to jobs. Since the turn of the century, thousands of Canadian jobs, both white and blue collar, have been exported to low-wage nations all around the world. Some people worry that free trade is creating a “have/have not” world economy, in which the people in developing economies and the world’s environ- ment are being exploited by companies in richer, more developed countries. This has sparked anti-free-trade protests in many nations. Concerns such as these, coupled with corporate scandals over the years, including the use of sweatshop labour in third-world countries, risky lending tactics that fuelled a worldwide banking crisis, and a class action lawsuit alleging that Walmart discriminated against hundreds of thousands of female employees over the years, have led to a new focus on corporate social responsibility, corporate social responsibility or good citizenship. In a recent survey, Chronicle of Philanthropy found that The responsibility of the firm to act in 16 percent of companies were making more donations of products and services the best interests of the people and and that 54 percent of companies were encouraging more employees to volun- communities affected by its activities teer their time.30 Companies are learning (sometimes the hard way) that being socially responsible both domestically and abroad can not only help them avoid lawsuits but also improve their earnings. For example, researchers at the Boston College’s Center for Corporate Citizenship found that as a company’s reputation improved, so did the percentage increase in the number of people who would recommend that firm. Nearly two-thirds of the members of the 80 million-strong Chapter 1: The World of Human Resources Management 11 45459_ch01_hr_001-045.indd 11 04/02/22 2:56 PM  millennial generation (people born in the 1980s and 1990s) consider a company’s social reputation when deciding where to shop, and 90 percent say they would switch brands based on their perceptions of a company’s commitment to social responsibility.31 Moreover, prospective workers are saying that corporate respon- sibility is now more important to their job selection. sustainability Sustainability is closely related to corporate social responsibility. It refers Doing business in a way that does as little to a company’s ability to produce a good or service without damaging the envi- harm to the environment and depletes as ronment or depleting a resource. Achieving complete sustainability is nearly few natural resources as possible impossible, but companies are making strides to reduce their “carbon footprints.” Those that are not are finding themselves under pressure from consumers and collaborative software groups determined that they do. Consider what happened to HP. After HP broke Software that allows workers to interface a promise to eliminate toxic materials in its computers by 2009, Greenpeace and share information with one another activists painted the words “Hazardous Products” on the roof of the company’s electronically headquarters in Palo Alto, California. Meanwhile, a voice-mail message from Star Trek actor William Shatner was delivered to all of the phones in the building. “Please ask your leader [CEO Mark Hurd] to make computers that are toxin free like Apple has done,” Shatner said in the recording. The stunt and publicity it generated worked. HP got the message and later delivered on its promise.32 One of HR’s leadership roles is to spearhead the development and implemen- tation of corporate citizenship throughout their organizations, including good environmental management.33 Green Human Resource Management (GHRM) is a rapidly growing phenomenon and refers to the unification of environmental management and HRM. By adopting formal environmental HRM policies and sustainable business practices, GHRM plays an integral role in an organization’s sustainability strategies and contributes to its environmental objectives. These policies and practices can be incorporated into all facets of HRM, such as recruit- ment, training and development, performance management, employee relations, and compensation. Individuals are hired, trained, asked to participate in activi- ties, rated on their performance, and rewarded and compensated based on green initiatives. GHRM covers environmental concerns and supports the social and economic prosperity of both the organization and its employees. The benefits of GHRM are increased retention, increased job satisfaction and engagement, and increased ability to attract new talent.34 Check In Think of a firm that is facing dramatic challenges to survive the COVID-19 crisis. How do you think the firm’s personnel can help it adapt? What role will the company’s human resources staff play in helping with that goal? Learning Outcome 3 Issue 3: Advancing HRM with Technology Describe how technology can improve how Advancements in information technology have enabled organizations to take people perform their work and how they are advantage of the information explosion. Computer networks and “cloud com- managed. puting” (Internet computer services and data storage) have made it possible for nearly unlimited amounts of data to be stored, retrieved, and used in a wide variety of ways. Collaborative software that allows workers anywhere, any- time to interface and share information with one another electronically—wikis, document-sharing platforms such as Google Docs, online chat and instant mes- saging, Web and videoconferencing, and electronic calendar systems—have changed how and where people and companies do business. For example, Boeing Satellite Systems has a “lessons learned” site on its intranet where people from all areas of the company can store the knowledge they have and others can access it. Executives at Boeing estimate that the measure has reduced the cost of developing a satellite by as much as $25 million.35 The Internet and social media are also having an impact on HRM. Social media networking has become the new way to attract employees and check them out to see if they are acceptable candidates. Companies are hiring firms such as Social 12 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 12 04/02/22 2:56 PM  Intelligence, which combs through Facebook, LinkedIn, Twitter, Flickr, YouTube, and “thousands of other sources” to create reports about the “real you”—not the “you” you have presented in your résumé.36 (Care to change your Facebook page, anyone?) Social media has become a power tool for organizations, providing them with an array of positive options. Social media can be used for external purposes to attract the right employees and gather information about them, build the com- pany’s brand, and give a face to a company. Internally, key social media leaders by default become more engaged and connected to the organization’s culture, mission/vision, and overall goals. Organizations can also use social media to manage talents, address mobility issues, and allow for greater collaboration with employees and suppliers. This technology can also be used to build work teams that are diverse in nature given the flexibility that social media brings to the table.37 HR managers are also grappling with whether or not to develop blogging and social media policies and whether or not to establish rules about the amount of time employees can spend online or to install software that cuts them off after a certain amount of time. These are important considerations for HR managers because orga- nizations must be mindful to manage the risks associated with social media. Knowledge Workers, Virtual Learning, Automation, and Artificial Intelligence Advanced technology tends to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skill. In general, this transformation has been referred to as a shift from “touch labour” to knowledge knowledge workers workers, in which employee responsibilities expand to include a richer array of Workers whose responsibilities extend activities, such as planning, decision making, and problem solving.38 beyond the physical execution of work to The workplace of the knowledge worker amid the COVID-19 pandemic is include planning, decision making, and described in Highlights in HRM 1.1. Technology, transportation, communications, problem solving and utilities industries tend to spend the most on training. Knowledge-based training has become so important that Manpower, the largest employment agency in the United States, offers free information technology training through its online university. The site features thousands of hours of instruction in technology applica- tions, along with professional development, business skills, and telecommunications courses, seminars, and chat rooms with mentors. “Just-in-time” learning is delivered via the Internet to Manpower employees’ mobile phones, tablets, and computers. Virtual learning is increasing as well. Video conferencing platforms such as Zoom, Webex, Teams, and Hangouts have led to a workplace and HRM digital transformation. Before COVID-19, many suggested that these platforms were the way of the future and would change the employee experience. However, COVID-19 broke down barriers and expedited a process that would have otherwise taken many more years. Training can now be conducted virtually and more efficiently. Many software features can enhance the experience, including audience chat tools and polls, private chats, transcription capabilities, and the blackboard function. Further, if employees cannot attend in real-time, they can listen to the recorded session at a time that suits them.39 Research from senior executives worldwide has shown that web conferencing has increased employee cohesiveness and collabo- ration towards a common objective, increased agility, broken down organizational silos, improved time management, and increased innovation.40 Automation is affecting not only blue-collar and routine jobs, but others as well. News organizations are using web robots (“bots”) to gather information and write basic stories about corporate earnings and sports recaps. Many of the entries on Wikipedia aren’t written by people but by bots that comb the Web for information and compile the information you see on the site. Or consider the IBM robot, Jill Watson. In 2016, a university used Jill as an online teaching assis- tant in an experiment with an artificial intelligence class. Most students never figured out Jill wasn’t human—although some of them said they were suspicious she was because she seemed to answer their questions way too fast!41 Chapter 1: The World of Human Resources Management 13 45459_ch01_hr_001-045.indd 13 04/02/22 2:56 PM  Highlights in HRM 1.1 The Future of Work The world of work has been undergoing rapid change, and all suburban areas, so employees may choose to indications are that this trend will continue well into the future. work a few days a week in a shared space close Many changes have occurred at an expedited pace due to the to home. global COVID-19 pandemic. According to a variety of experts, The number of remote workers will almost double within the workplace of the post-pandemic world and beyond will look five years. like this: Meetings will likely be 38 percent completely remote, 33 percent completely in person, and 29 percent a Education will be lifelong; jobs won’t be. combination of remote and in-person attendees. Temporary, freelance work and other forms of nonstandard Virtual and augmented reality will become exceedingly employment will become increasingly popular as popular as fewer employees work in the same location. organizations employ fewer permanent workers. By 2030, technology and Artificial Intelligence (AI) will create The new normal will likely entail three days in the office more revenue for their organization than human employees and two days working from home. and occupy a larger portion of its annual operating costs. Companies will spend a significant amount on health, By 2035, AI will likely have the ability to make most hygiene, and safety and will hire more health and safety business decisions, which will reduce the requirement for roles to mitigate the potential of future pandemics. the conventional senior management team. Workplaces will use “hoteling,” in which employees The increase in remote work will attract diverse global will not have designated seats but will choose to sit talent and provide more prosperous job opportunities for where there is available space or based on a specific individuals in developing countries. task. There will be more focus on common spaces and collaboration. Human skills will become increasingly important in order to separate human ability from powerful algorithms and Offices will be more dispersed, and new work areas technological capabilities. will appear, thus saving people time and money compared to their original commute to a central For an interesting take on the “future of work” in Canada, business district. watch the video The Future of Work by Policy Horizons at Some organizations that currently have their offices this Government of Canada site (http://horizons.gc.ca/en in a central business district will have satellite offices in /2019/09/06/horizons-talks-the-future-of-work). Sources: Adapted from John Stackhouse, “There’s a Future for Jobs—We Are Just Not Ready for It,” The Globe and Mail (March 26, 2016), https://www.theglobeandmail.com/business/commentary/article-there-is-a-future-for-jobs-were-just-not-ready-for-it/, retrieved April 5, 2018; Theresa Agovino, “What Will the Workplace Look Like in 2025?” SHRM (December 12, 2020), https://www.shrm.org/hr-today/news/all-things-work/pages/the-workplace-in-2025.aspx; Dror Poleg, “The Future of Offices When Workers Have a Choice,” Chicago Tribune (January 9, 2021); Charles Towers-Clark, “Human Skills Will be Most Important in the Digital Future of Work,” Forbes (December 10, 2020); Jo Meunier, “Future of Work: Hybrid Meetings Will Bring Balance to the Workplace,” All Work (January, 8, 2021), https://allwork.space/2021/01/future-of-work-hybrid-meetings-will-bring-balance-to-the-workplace; “Life in 2025: What Will the Future Look Like?” Financial Times (December 15, 2020); Adam Ozimek, “Economist Report: Future Workforce,” retrieved January 9, 2021, https://www.upwork.com/press/releases /economist-report-future-workforce; Jim Wilson, “What Will Work Look Like in 2035?” Canadian HR Reporter, https://www.hrreporter.com/focus-areas /automation-ai/what-will-work-look-like-in-2035/334451. Automation plays a major part in the gig economy. AI contributes to the growing use of gig work as digital jobs become increasingly popular.42 Though AI is seemingly a productive tool for organizations that use AI to maximize profit margins, there may be negative implications for those who work gig jobs. For example, AI’s algorithmic systems have had effects on compensation. AI gathers information to determine how an organization can save money, which may result in decreases to workers’ wages and makes it hard for workers to predict their income or schedule. The platforms often make abrupt changes to increase an 14 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 14 04/02/22 2:56 PM  organization’s revenues. The AI Now 2019 Report claimed, “these platforms treat workers as subjects of constant experimentation, often in ways that destabilize their economic and even psychological security.”43 When organizations exceed- ingly place their trust on AI to make significant business decisions, they may depersonalize their management systems.44 On gig work platforms such as Uber and Lyft, algorithms are essential to allocate, monitor, and reward gig work. Now, workers blame algorithms on the unexplained eradication of jobs or decreasing income levels.45 Unsure of the reason for the decrease in jobs offered to them, to “win” more jobs, drivers often attempt to use strategies such as accepting jobs as quickly as possible and waiting in certain spots that seem to provide them more jobs. In turn, they lose the flexibility promised to them for pursuing such an opportunity. Labour scholar Jim Stanford stated, “the only thing truly new about gig employment is its use of digital and online techniques to assign work, discipline workers... and control the money. That’s more effective than the bulletin boards and classified ads of yesteryear—but it hardly negates the inherent power imbalance between an indi- vidual worker and the multibillion-dollar company they work for.” Influence of Technology on HRM Perhaps the most central use of technology in HRM is an organization’s human human resources information resources information system (HRIS). Because HR affects the entire workforce— system (HRIS) everyone who works for the company must be hired, trained, paid, and promoted, A computerized system that provides usually through HR—the impact of the HRIS has been dramatic. It has become a current and accurate data for purposes of potent weapon for lowering administrative costs, increasing productivity, speeding control and decision making up response times, improving decision making, and tracking a company’s talent. The most obvious impact has been operational—that is, automating rou- tine activities, alleviating administrative burdens, reducing costs, and improving productivity internal to the HR function itself. The most frequent uses include automating payroll processing, maintaining employee records, and administering benefits programs. “Self-service”—setting up systems, usually on an intranet— allows managers to access employee records themselves for administrative pur- poses and to access and change their own benefits and other personal information. The second way in which information technology is affecting HRM is rela- tional in nature—connecting people with one another and with the HR data they need. For example, companies are using software to recruit, screen, and pretest applicants online before hiring them, as well as to train, track, and pro- mote employees once they have been hired. As another example of HRIS capa- bilities, Humaans is a startup company that has created an HRIS system that supports human resources in onboarding, managing, and growing employees. “It is designed for speed, and features a beautiful people directory, document storage, time-off tracking, visual reporting, and connects existing systems through deep integrations,” explained Giovanni Luperti, one of the company’s founders.46 The third effect of the HRIS is transformational in nature—changing the way HR processes are designed and executed. Corning, Inc. uses HR software, among other things, to set the developmental goals of its employees once they have been hired and to gauge how well they are meeting them. Employees can look online to see their own goals and mark their progress as well as see everyone else’s goals in the command chain, from the CEO down to their immediate supervisors. This “cascading” of goals has helped Corning’s employees align their personal goals with the organization’s overall objectives to reach higher levels. “Like any large company, we tended to get ‘silo-ed’ and fragmented the more we grew,” said one vice president at a company using a system similar to Corning’s. “We needed a better way to pull our global team together and get people focused on what the priorities are for our business.”47 Chapter 1: The World of Human Resources Management 15 45459_ch01_hr_001-045.indd 15 04/02/22 2:56 PM  One of the newer HRIS applications is the use of big data. Traditionally, big data is described as the massive amounts of data that are too large for conven- tional database tools or statistical software to collect, save, manage, and examine. However, more recent research has extended the definition to entail not just large amounts of data, but also the “smartness” of the data, which essentially describes the degree to which longitudinal data can be used for detailed analyses to inter- pret and forecast behaviour and outcomes.48 Marketing departments have very successfully used big data to detect peoples’ buying patterns. By analyzing its cus- tomers’ buying habits, Target was able to predict which of them were pregnant, sometimes before they had even told their families. The company then sent the customers ads and coupons for baby products. Now companies are doing the same thing to analyze HR information, a pro- workforce (HR) analytics cess that’s referred to as workforce (HR) analytics. HR information such as The process of gathering and analyzing employment history, skills, education, demographics, hours worked, compensa- data to improve a firm’s human resources tion, performance, training, and disciplinary actions can be collected with “bigger management data” such as email content, social network communication, web searches, video surveillance, and GPS information from smartphones, and stored in one system. Though this data collection may raise privacy concerns, there is still much to be learned from this information to advance the HR field.49 Big data is useful for recruitment and selection. Big data can help pre-­ populate demographic questions and factual rather than self-reported experiences and activities such as professional memberships and associations. It could also conduct automated reference checks and use information from social network profiles to screen applications. Findings have concurred that personality assessments based on predictive analytics from social network profiles are similar to self-reports and help determine undergraduate students’ future work performance ratings. Recruitment and selection will benefit from big data in a variety of other ways in the near future. One area that will likely be pursued, and which LinkedIn is already working on rolling out, uses big data for targeted recruitment strate- gies and figuring out the organizations that may attract the applicant away from their current jobs. This information will help organizations secure candidates and determine how to retain those who could leave the organization. Further, an American national database, Occupational Information Network (O*NET), uses big data to collect information from job postings. ONET’s information could soon help determine the evolution of jobs and trends and the optimal individual char- acteristics to face the continually evolving workplace.50 HR can also use big data for a variety of other reasons. In terms of per- formance appraisal and management, organizations can track smartphones, computers, or tablets to assess real-time performance. It can also evaluate and predict how leadership behaviours and employee attitudes can ensure higher organizational performance51 and which leadership attributes will foster higher retention. Big data can also be useful for training and development. For example, it can determine which training designs and training content produce training outcomes depending on the individual. Predictive analytics and data mining can explore the context and personal attributes that will predict success in a training program. HR can use big data to assess organizational climate and culture. One method of doing so is by analyzing electronic interactions and social networks. As an example of such a system, researchers from MIT created a web application called Immersion, which studies emails to understand an individual’s social network. It reviews emails sent “to” and “from,” as well as those who are “cc’ed.” Rather than the email content, the program studies connections and communication lines. Thus, Immersion identifies both the links and the strength of relationships. This finding can also help support diversity and inclusion efforts. Big data will con- tinue to evolve and be evaluated to determine how it can add value for HR to be a better management decision tool.52 16 Part 1: Human Resources Management in Perspective 45459_ch01_hr_001-045.indd 16 04/02/22 2:56 PM  Using HR data, a firm can definitely answer questions like the following: Do employees with a degree perform better—or not—versus those without a degree? Exactly how much more do top performers need to be paid to stay with our firm? Which job applicants are likely to perform better? Which employees are most likely to quit? Traditionally, questions such as these have been answered based on anecdotal evidence or the “gut” feelings of HR professionals. But workforce analytics can provide more definitive answers. For example, companies such as Capital One, IBM, Oracle, and SAS are using data mining for candidate selection and retention. By using data analytics, the companies can find relationships between factors, including previous work experience, companies in which candidates have worked, and the schools they attended. The companies also use this data to forecast which employees have the greatest likelihood of leaving the company. From these find- ings, the company can select such candidates for retention initiatives.53 Gathering and analyzing HR data may sound like a daunting task, but HR software providers are including data analysis tools in their programs that make it easier to gather and visualize HR data in a meaningful way. What sort of system should HR professionals choose among the many options available to them? Prepackaged, or “canned,” HR Web-based solutions are as commonly used as custom-designed systems. Generally, companies also have the choice of hosting the applications on their own servers or having software vendors such as IBM or PeopleSoft do it for them. Experts say the first step in choosing an HRIS is for HR personnel to evaluate the biggest “headaches” they experience, or the mo