Human Resource Management by Gary Dessler 15th ed PDF

3 Human Resource Management Strategy and Analysis Tang dewei/imaginechina/AP Images LEARNING OBJECTIVES 3-1 Explain with examples each of the seven steps Company’s in the strategic management process....

3 Human Resource Management Strategy and Analysis Tang dewei/imaginechina/AP Images LEARNING OBJECTIVES 3-1 Explain with examples each of the seven steps Company’s in the strategic management process. Strategic Goals 3-2 List with examples the main types of strategies. 3-3 Define strategic human resource management and give an example of strategic human resource management in practice. Employee Competencies and Behaviors Required for Company to Achieve These Strategic Goals 3-4 Give at least five examples of HR metrics. 3-5 Give five examples of what employers can do to have high-performance systems. tegic and Lega Stra nvironment l E 3-6 Describe how you would execute a program to R e P l a ce cru ment Relatio e improve employee engagement. itme ns e Employ nt and HR Policies and Practices Required to Produce Employee Competencies and Behaviors De rai hen the Ritz-Carlton Company took over W ve T ion l t nin opme managing the Portman Hotel in Shanghai, pen sa g a nt nd Com China, the hotel already had a good reputation among business travelers. However, many luxury hotels were opening there. To stay competitive, the Portman’s WHERE ARE WE NOW … new managers decided to reposition the hotel with The next part of this book, Part 2, turns to a new strategy, one that emphasized outstanding the nuts and bolts of human resource man- customer service. But they knew that improving the agement, including activities like analyzing jobs and recruiting and selecting employees. service would require new employee behaviors, and Ideally, activities like these should produce therefore new selection, training, and pay policies and the employee behaviors and competencies practices. We will see what they did. the firm needs to achieve its strategic goals. Therefore, the main purpose of the present chapter is to explain how managers formulate human resource strategies for their compa- nies. We’ll address the strategic management process, types of strategies, strategic hu- man resource management, HR metrics and benchmarking, high-performance work sys- tems, and employee engagement. We’ll turn in the following chapter to how to analyze jobs and recruit employees. 67 68 Part 1 introduCtion The Strategic Management Process Employers can’t intelligently design their human resource policies and practices with- LeARning ObjecTive 3-1 out understanding the role these policies and practices are to play in achieving their Explain with examples each of companies’ strategic goals. In this chapter, we look at how managers design strategic the seven steps in the strategic management process. and human resource plans, and how they evaluate the results of their plans. We start with an overview of the basic management planning process. The Management Planning Process The basic management planning process consists of five steps: setting objectives, making basic planning forecasts, reviewing alternative courses of action, evaluating which options are best, and then choosing and implementing your plan. A plan shows the course of action for getting from where you are to the goal. Planning is always “goal-directed” (such as, “double sales revenue to $16 million in fiscal year 2017”). In companies, it is traditional to view the goals from the top of the firm down to front-line employees as a chain or hierarchy of goals. Figure 3-1 illustrates this. At the top, the president sets long-term or “strategic” goals (such as “double sales revenue to $16 million in fiscal year 2017”). His or her vice presidents then set goals for their units that flow from, and make sense in terms of accomplishing, the president’s goal (see Figure 3-1). Then their own subordinates set goals, and so on down the chain.1 WLE Policies and procedures provide day-to-day guidance employees need to do their KNO DG jobs in a manner that is consistent with the company’s plans and goals. Policies set E BASE broad guidelines delineating how employees should act. For example, “It is the policy of this company to comply with all laws, regulations, and principles of ethical con- duct.” Procedures spell out what to do if a specific situation arises. For example, Any employee who believes this policy has been violated must report this belief to the employee’s immediate supervisor. If that is not practical, the employee should file a written report with the Director of Human Resources. There is to be no retaliation in any form.2 Employers write their own policies and procedures, or adapt ones from existing sources (or both). For example, most employers have employee manuals listing the company’s human resource policies and procedures. A Google search would produce many vendors of such policies and procedures.3 They offer prepackaged HR policies manuals covering appraisal, compensation, equal employment compliance, and other policies and procedures. President “Double sales revenue to $16 million in fiscal year 2017” Vice President of Vice President of Vice President of Sales Production Human Resources “Double sales in “Add one new “Add, train 6 East, West, and production line at salespeople” South regions” plant” Sales Manager, Sales Manager, Sales Manager, Recruiting Training Manager South Region East Region West Region Manager “Train 6 new “Hire 4 new “Triple sales to “Move 6 Nevada “Identify and attract salespeople and salespeople, add 18 government salespeople to 20 good sales retrain all others within customers” agencies” California market” candidates” 4 months” Figure 3-1 Sample Hierarchy of goals Diagram for a Company  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 69 What Is Strategic Planning? WLE As noted, the company’s hierarchy or chain of goals flows from top management’s KNO DG overall strategic plan for the company. A strategic plan is the company’s overall plan E BASE for how it will match its internal strengths and weaknesses with its external opportu- nities and threats in order to maintain a competitive position. The strategic planner strategic plan asks, “Where are we now as a business, and where do we want to be?” He or she then The company’s plan for how it will formulates a strategic plan to help guide the company to the desired destination.4 match its internal strengths and When Yahoo! tries to figure out whether to sell its search business to concentrate weaknesses with external opportuni- on offering more content, or when Apple branches out into selling watches, they are ties and threats in order to maintain engaged in strategic planning. a competitive advantage. Strategic plans are similar to but not the same as business models. Those investing in a business will ask top management, “What’s your business model?” A business model “is a company’s method for making money in the current business environment.” It pinpoints whom the company serves, what products or services it provides, what differentiates it, its competitive advantage, how it provides its product or service, and, most importantly, how it makes money.5 For example, Google doesn’t make money by requiring people to pay for searches; it makes money by offering targeted paid advertisements based on what you’re searching for. strategy A strategy is a course of action. Both PepsiCo and Coca-Cola face the same A course of action the company can basic problem—people are drinking fewer sugared drinks. However, they each chose pursue to achieve its strategic aims. different strategies to deal with this. PepsiCo diversified by selling more food items like chips. Coca-Cola concentrated on sweet beverages, and on boosting advertising to (hopefully) boost Coke sales. strategic management Finally, strategic management is the process of identifying and executing the The process of identifying and organization’s strategic plan by matching the company’s capabilities (strengths and executing the organization’s weaknesses) with the demands of its environment (its competitors, customers, and strategic plan by matching the suppliers, for instance). company’s capabilities with the demands of its environment. The Strategic Management Process Figure 3-2 summarizes the strategic management process. Its seven steps include (1) ask, “What business are we in now?” (2) evaluate the firm’s internal and exter- nal strengths, weaknesses, opportunities, and threats, (3) formulate a new business direction, (4) decide on strategic goals, and (5) choose specific strategies or courses of action. Steps (6) and (7) are to implement and then evaluate the strategic plan. The strategic management process begins (step 1) by asking, “What business are we in?” Here the manager defines the company’s current business. Specifically, “What products do we sell, where do we sell them, and how do our products or services differ from our competitors’?” For example, the Coca-Cola Company sells mostly sweetened beverages such as Coke and Sprite, while PepsiCo sells drinks but also foods such as Quaker Oats and Frito chips. Step 1: Step 2: Step 3: Step 4: Step 5: Step 6: Step 7: Define the Perform Formulate a Translate Formulate Implement Evaluate current external new the strategies to the performance business and direction mission achieve the strategies internal into strategic strategic audits goals goals Strategic Strategic Strategic Planning Execution Evaluation Figure 3-2 The Strategic Management Process 70 Part 1 introduCtion WLE The second step is to ask, “Are we in the right business given our strengths and KNO DG weaknesses and the challenges that we face?” To answer this, managers “audit” or study E BASE both the firm’s environment and the firm’s internal strengths and weaknesses. The environmental scan worksheet in Figure 3-3 is a guide for compiling information about the company’s environment. As you can see, this includes the economic, competitive, and political trends that may affect the company. The SWOT chart in Figure 3-4 is widely used. Managers use it to compile and organize the company strengths, weak- nesses, opportunities, and threats. This audit may also include analyzing the so-called PEST factors. These include Political factors such as government regulations and employment laws; Economic factors including unemployment and economic growth; Social factors such as changing demographics and health consciousness trends; and Technological factors such as use of social media and digitalization and of self-driving vehicles. In any case, the manager’s aim is to create a strategic plan that makes sense in terms of the company’s strengths, weaknesses, opportunities, and threats. Figure 3-3 Worksheet for environmental Scanning Economic Trends (such as recession, inflation, employment, monetary policies) Competitive and Market Trends (such as market/customer trends, entry/exit of competitors, new products from competitors) Political Trends (such as legislation and regulation/deregulation) Technological Trends (such as introduction of new production/distribution technologies, rate of product obsolescence, trends in availability of supplies and raw materials) Social Trends (such as demographic trends, mobility, education, evolving values) Geographic Trends (such as opening/closing of new markets, factors affecting current plant/office facilities location decisions)  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 71 Figure 3-4 SWOT Matrix, with generic examples 2QVGPVKCN5VTGPIVJU 2QVGPVKCN1RRQTVWPKVKGU r /CTMGVNGCFGTUJKR r 0GYQXGTUGCUOCTMGVU r 5VTQPITGUGCTEJCPFFGXGNQROGPV r (CKNKPIVTCFGDCTTKGTU r *KIJSWCNKV[RTQFWEVU r %QORGVKVQTUHCKNKPI r %QUVCFXCPVCIGU r &KXGTUKƂECVKQP r 2CVGPVU r 'EQPQO[TGDQWPFKPI 2QVGPVKCN9GCMPGUUGU 2QVGPVKCN6JTGCVU r.CTIGKPXGPVQTKGU r /CTMGVUCVWTCVKQP r 'ZEGUUECRCEKV[HQTOCTMGV r 6JTGCVQHVCMGQXGT r /CPCIGOGPVVWTPQXGT r.QYEQUVHQTGKIPEQORGVKVKQP r 9GCMOCTMGVKOCIG r 5NQYGTOCTMGVITQYVJ r.CEMQHOCPCIGOGPVFGRVJ r )TQYKPIIQXGTPOGPVTGIWNCVKQP Next, based on this analysis (in other words, on the environmental scan, SWOT, and PEST analyses), the task in step 3 will be to decide what should our new business be, in terms of what we sell, where we will sell it, and how our products or services differ from competitors’ products and services? Some managers express the essence vision statement of their new business with a vision statement. A vision statement is a general state- A general statement of the firm’s ment of the firm’s intended direction; it shows, in broad terms, “what we want to be- intended direction; it shows, in come.”6 PepsiCo’s vision is “Performance with Purpose.” CEO Indra Nooyi says her broad terms, “what we want to company’s executives choose which businesses to be in based on Performance with become.” Purpose’s focus on human sustainability, environmental sustainability, and talent sus- tainability.7 For example, that vision prompted PepsiCo to add the healthy Quaker Oats and Gatorade to its lineup of products. Whereas the vision statement describes in broad terms what the business should mission statement be, the company’s mission statement summarizes what the company’s main tasks Summarizes the answer to the are today. Several years ago, Ford adopted what was for several years a powerful question, “What business are we in?” Ford mission statement—making “Quality Job One.” In any case, the manager’s next step (step 4) is to translate the desired new direc- tion into strategic goals. At Ford, for example, what exactly did making “Quality Job One” mean for each department in terms of how they would boost quality? The answer was laid out in goals such as “no more than 1 initial defect per 10,000 cars.” Next, (step 5) the manager chooses strategies—courses of action—that will en- able the company to achieve its strategic goals. For example, how should Ford pur- sue its goal of no more than 1 initial defect per 10,000 cars? Perhaps open two new high-tech plants, and put in place new, rigorous employee selection, training, and performance-appraisal procedures. Step 6, strategy execution, means translating the strategies into action. This means actually hiring (or firing) people, building (or closing) plants, and adding (or eliminating) products and product lines. corporate-level strategy Finally, in step 7, the manager evaluates the results of his or her planning and Type of strategy that identifies the execution. Things don’t always turn out as planned. All managers should periodically portfolio of businesses that, in total, assess the progress of their strategic decisions. comprise the company and the ways in which these businesses relate to each other. Types of Strategies In practice, managers engage in three types or levels of strategic planning, corporate- LeARning ObjecTive 3-2 level strategic planning, business unit (or competitive) strategic planning, and func- List with examples the main tional (or departmental) strategic planning (see Figure 3-5, page 72). types of strategies. Corporate Strategy For any business, the corporate strategy answers the question, “What businesses will we be in?” Specifically, the corporate-level strategy identifies the portfolio of 72 Part 1 introduCtion Corporate-Level Strategy “What businesses are we in?” Business 1/ Business 2/ Business 3/ Competitive Strategy Competitive Strategy Competitive Strategy “How will we compete?” “How will we compete?” “How will we compete?” Business 1 Functional Business 1 Functional Business 1 Functional Strategy Strategy Strategy Sales Department Production Department HR Department “How do we support the “How do we support the "How do we support the business’s competitive business’s competitive business’s competitive strategy?” strategy?” strategy?” Figure 3-5 Type of Strategy at each Company Level businesses that, in total, comprise the company and how these businesses relate to each other. For example, with a concentration (single-business) corporate strategy, the company offers one product or product line, usually in one market. WD-40 Company is one example. With one spray lubricant its product scope is narrow. A diversification corporate strategy means the firm will expand by adding new product lines. PepsiCo is diversified. Thus, PepsiCo added Frito-Lay chips and Quaker Oats to its drinks businesses. Here product scope is wider. A vertical integration strategy means the firm expands by, perhaps, producing its own raw materials, or selling its products directly. Thus, Apple opened its own Apple stores. With a consolidation strategy, the company reduces its size. With geographic expansion, the company grows by entering new territorial markets, for instance, by taking the business abroad. Competitive Strategy On what basis will each of our businesses compete? Within a company like PepsiCo, each business unit (such as Pepsi and Frito-Lay) needs a business-level competitive competitive strategy strategy. A competitive strategy identifies how to build and strengthen the business A strategy that identifies how to unit’s long-term competitive position in the marketplace.8 It shows, for instance, how build and strengthen the business’s Pizza Hut will compete with Papa John’s, or how Walmart will compete with Target. long-term competitive position in Managers build their competitive strategies around their businesses’ competitive the marketplace. advantages. Competitive advantage means any factors that allow a company to differentiate its product or service from those of its competitors to increase market competitive advantage share. Coca-Cola has a “secret formula” that shows how to create its famous bever- Any factors that allow an age. However, competitive advantages needn’t be tangible. For example, here is how organization to differentiate its a former vice president of human resources at the Toyota Motor Manufacturing product or service from those of facility in Georgetown, Kentucky, described the importance of human capital as a its competitors to increase market competitive advantage: share. People are behind our success. Machines don’t have new ideas, solve problems, or grasp opportunities. Only people who are involved in thinking can make a differ- ence... Every auto plant in the United States has basically the same machinery. But how people are utilized and involved varies widely from one company to another. The workforce gives any company its true competitive edge.9 Managers typically adopt one or more of three standard competitive strategies— cost leadership, differentiation, or focus—to achieve competitive advantage. Cost  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 73 leadership means becoming the low-cost leader in an industry. Walmart is an exam- ple. With differentiation, the firm seeks to be unique in its industry along dimensions that are widely valued by buyers.10 Thus, Volvo stresses the safety of its cars, and Papa John’s stresses fresh ingredients. Focusers carve out a market niche (like Bugatti cars). They offer a product or service that their customers cannot get from generalist competitors (such as Toyota). Functional Strategy Each department should operate within the framework of its business’s competitive functional strategy strategy. Functional strategies identify what each department must do to help the A strategy that identifies the broad business accomplish its strategic goals. Thus, for, say, P&G to make its Oil of Olay activities that each department will products a top-tier brand, its product development, production, marketing, sales, pursue in order to help the business and human resource departments must engage in activities that are consistent with accomplish its competitive goals. this unit’s high-quality mission. Inferior products, cheap packaging, or sloppy sales- people would not do. Managers’ Roles in Strategic Planning Devising the company’s overall strategic plan is top management’s responsibility. However, few top executives formulate strategic plans without lower-level manag- ers’ input. No one knows more about the firm’s competitive pressures, product and industry trends, and employee capabilities than do the company’s department managers. For example, the human resource manager is in a good position to supply “com- petitive intelligence”—information on competitors. Details regarding competitors’ incentive plans, employee opinion surveys about customer complaints, and infor- mation about pending legislation such as labor laws are examples. Human resource managers should also be the masters of information about their own firms’ employ- ees’ strengths and weaknesses. In practice, devising the firm’s overall strategic plan involves frequent discussions among and between top and lower-level managers. The top managers then use this information to hammer out their strategic plan. WLE exaMPLe: iMPrOving MergerS anD aCquiSiTiOnS Mergers and acquisitions (M&A) KNO DG are among the most important strategic decisions companies make. When mergers E BASE and acquisitions fail, it’s often not due to financial issues but to personnel-related ones, such as employee resistance.11 Prudent top managers therefore tap their human resource managers’ input early in the merger process. Critical human resource M&A tasks include choosing top management, com- municating changes to employees, merging the firms’ cultures, and retaining key talent.12 Human resource consulting companies such as Towers Watson assist firms with merger-related human resource management services. For example, they iden- tify potential pension shortfalls, identify key talent and suitable retention strategies, help clients combine payroll systems, and help determine which employee is best for which role in the new organization.13 WLE Strategic Human Resource Management KNO DG E BASE The company’s top managers choose overall corporate strategies, and then choose competitive strategies for each of the company’s businesses. Then departmental man- agers within each of these businesses formulate functional strategies for their depart- LeARning ObjecTive 3-3 ments. Their aim should be to have functional strategies that will support the com- Define strategic human resource petitive strategy and the company-wide strategic aims. The marketing department management and give an example would have marketing strategies. The production department would have production of strategic human resource strategies. The human resource management (“HR”) department would have human management in practice. resource management strategies. 74 Part 1 introduCtion HR in Practice at the Hotel Paris Starting as a single hotel in a Paris suburb in 1990, the Hotel Paris is now a chain of nine hotels, with two in France, one each in London and Rome, and others in New York, Miami, Washington, Chicago, and Los Angeles. To see how managers use strategic human resource management to improve performance, see the Hotel Paris Case on pages 90–91 and answer the questions. What Is Strategic Human Resource Management? Every company’s human resource management policies and activities should make sense in terms of the firm’s strategic aims. For example, a high-end retailer like Neiman-Marcus will have different employee selection, training, and pay policies strategic human resource than will Walmart. Strategic human resource management means formulating and management executing human resource policies and practices that produce the employee compe- Formulating and executing human tencies and behaviors the company needs to achieve its strategic aims. The following resource policies and practices that Strategic Context feature illustrates. produce the employee competencies and behaviors the company needs to achieve its strategic aims. IMPROVING PERFORMANCE: The Strategic Context The Shanghai Ritz-Carlton Portman Hotel When the Ritz-Carlton Company took over managing the Portman Hotel in Shanghai, China, the new management reviewed the Portman’s strengths and weaknesses, and its fast-improving local competi- tors. They decided that to compete, they had to improve the hotel’s level of service. Achieving that in turn meant formulating new human resource management plans for hiring, training, and rewarding hotel employees. It meant putting in place a new human resource strategy for the Portman Hotel, one aimed at improving customer service. Their HR strategy involved taking these steps: Strategically, they set the goal of making the Shanghai Portman outstanding by offering superior customer service. To achieve this, Shanghai Portman employees would have to exhibit new skills and behaviors, for instance, in terms of how they treated and responded to guests. To produce these employee skills and behaviors, management formulated new human resource man- agement plans, policies, and procedures. For example, they introduced the Ritz-Carlton Company’s human resource system to the Portman: “Our selection [now] focuses on talent and personal values because these are things that can’t be taught … it’s about caring for and respecting others.”14 Management’s efforts paid off. Their new human resource plans and practices helped to produce the employee behaviors required to improve the Portman’s level of service, thus attracting new guests. Travel pub- lications were soon calling it the “best employer in Asia,” “overall best business hotel in Asia,” and “best busi- ness hotel in China.” Profits soared, in no small part due to effective strategic human resource management. If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete this discussion question. Talk about it 1: Asian culture is different from that in the United States. For example, team incentives tend to be more attractive to people in Asia than are individual incentives. How do you think these cultural differences would have affected how the hotel’s new management selected, trained, appraised, and compensated the Shanghai Portman’s employees? The basic idea of strategic human resource management is this: In formulat- ing human resource management policies and activities, the manager should aim to formulate policies that produce the employee skills and behaviors that the company needs to achieve its strategic goals. Figure 3-6 outlines this idea. First, the manager formulates strategic plans and goals. Next, he or she asks, “What employee skills and behaviors will we need to achieve these plans and goals?” And finally, he or she asks, “Specifically what recruitment, selection, training, and other HR policies and practices should we put in place so as to produce the required employee skills and behaviors?” Managers often refer to their specific HR policies and practices as human resource strategies.15 The accompanying HR as a Profit Center feature presents another strategic human resource management example.  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 75 IMPROVING PERFORMANCE: HR As a Profit Center The Zappos “WOW” Way When your strategy involves selling shoes and clothes online to people who can’t try them on, you need employees who are energized and enjoy what they’re doing—Zappos wants employees to deliver “WOW” through service.16 That’s why Zappos’ founders knew they needed special methods for hiring, developing, and retaining employees, and that’s just what they created. As their website says, “This ain’t your mama’s HR! Recruiting, benefits, and employee relations keep this cruise ship afloat with fun, inventive ways of getting employees motivated and educated about the Zappos Family of companies, their benefits, and the other fun stuff going on around here!”17 While they may not appeal to everyone, these “fun, inventive techniques” include interviewing job ap- plicants in what looks like the set of a talk show, asking employees to submit their own designs for Steve Madden shoes, and (during Zappos’ annual “Bald & Blue Day”) having some employees volunteer to shave their heads or dye their hair blue.18 And, by the way, if you’re not happy working at Zappos, the company will pay you to leave—it wants no one there who doesn’t truly want to be there. Again, that may not be for everyone, but it works for Zappos. It knows that selling online successfully requires energized employees who really enjoy what they’re doing. Management uses these special HR practices to cultivate the energized and fun environment that Zappos needs to execute its strategy, and judging from Zappos’ success they seem to be working. If your professor has assigned this, go to the Assignments section of mymanagementlab Company’s.com to complete this discussion question. Strategic Goals Talk about it 2: Why do you think Zappos’ top managers believe it is so impor- tant for employees to provide a “WOW” factor in their business? Watch It! How does a company actually go about developing a human resource strategy? Employee Competencies If your professor has assigned this, go to the Assignments section of and Behaviors Required mymanagmentlab.com to complete the video exercise titled Strategic for Company to Achieve Management (Joie de Vivre Hospitality). These Strategic Goals Sustainability and Strategic Human Resource Management Today’s emphasis on sustainability has important consequences for human resource management. Strategic human resource management tegic and Le Stra vironmen gal means having human resource policies and practices that produce the En t employee skills and behaviors that are necessary to achieve the com- Re Place pany’s strategic goals, and these include sustainability goals. cru ment Relatio ee For example, PepsiCo wants to deliver “Performance with Purpose.” itme ns Employ This means achieving financial performance while also achieving nt and HR Policies and Practices human sustainability, environmental sustainability, and talent sustain- Required to Produce ability.19 PepsiCo’s human resource managers can help the company Employee Competencies achieve these goals.20 For example, they can use its workforce planning and Behaviors processes to help determine how many and what sorts of environ- De ra mental sustainability (“green”) jobs the company will need to recruit ion v e T at s ini lopme for. They can work with top management to institute flexible work ng n o mpen and t arrangements that help sustain the environment by reducing commut- C ing. They can change its employee orientation process to include more emphasis on socializing new employees into PepsiCo’s sustainability goals. They can modify its performance appraisal systems to measure Figure 3-6 The Hr Strategy Model which managers and employees are successful in reaching their indi- Note: This figure opens each chapter of this vidual sustainability goals. They can use incentive systems that motivate book and says this: The company’s HR policies and practices should produce the employee com- employees to achieve PepsiCo’s sustainability goals.21 The bottom line petencies and behaviors that the company needs is that HR policies and practices can support a firm’s sustainability to achieve its strategic goals. strategy and goals. 76 Part 1 introduCtion Strategic Human Resource Management Tools Managers use several tools to translate the company’s strategic goals into human resource management policies and practices. These tools include the strategy map, the HR scorecard, and the digital dashboard. strategy map STraTegy MaP The strategy map summarizes how each department’s performance A strategic planning tool that contributes to achieving the company’s overall strategic goals. It helps the manager shows the “big picture” of how and each employee visualize and understand the role his or her department plays in each department’s performance achieving the company’s strategic plan. Management gurus sometimes say that the contributes to achieving the map clarifies employees’ “line of sight.” It does this by visually linking their efforts with company’s overall strategic goals. the company’s ultimate goals.22 Figure 3-7 presents a strategy-map example for Southwest Airlines. The top- level target is to achieve its profitability, costs, and revenue goals. Then the strategy map shows the chain of activities that help Southwest Airlines achieve these goals. Like Walmart, Southwest has a low-cost-leader strategy. So, for example, to boost revenues and profitability Southwest must fly fewer planes (to keep costs down), maintain low prices, and maintain on-time flights. In turn (further down the strat- egy map), on-time flights and low prices require fast turnaround. This, in turn, requires motivated ground and flight crews. The resulting strategy map helps each department understand what it needs to do to support Southwest’s low-cost strategy.23 Figure 3-7 Strategy Map Strategic/Financial for Southwest airlines Goals/Results Profitability Source: Based on TeamCHRYSALIS.com, accessed July 2006; http:// mcknightkaney.com/Strategy_ Lower costs Increased revenues Maps_Primer.html; www. strategymap.com.au/home/ StrategyMapOverview.html. Customer-Based Results Required More customers to Produce Desired Strategic/Financial Results Low fares On-time flights Internal Business Processes Fly fewer planes Minimize meals and frills Required to Produce Desired Financial Results Minimize plane turnaround on ground Organizational and Employee Highly engaged flight Capabilities and ground crews Required to Support Business Processes Supportive, high-performance Required HR practices HR Policies and Practices Strategy in Brief Low cost leader, high-quality customer service, operational efficiency  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 77 For example, what steps must Southwest’s human resource team take to boost the motivation and dedication of its ground crews? THe Hr SCOreCarD Many employers quantify and computerize the strategy map’s Hr scorecard activities. The HR scorecard helps them to do so. The HR scorecard is not a A process for assigning financial scorecard. It refers to a process for assigning financial and nonfinancial goals or and nonfinancial goals or metrics to metrics to the human resource management–related strategy-map chain of activities the human resource management– required for achieving the company’s strategic aims.24 (Metrics for Southwest might related chain of activities required include airplane turnaround time, percent of on-time flights, and ground crew for achieving the company’s strategic productivity.) The idea is to take the strategy map and to quantify it. aims and for monitoring results. Managers use special scorecard software to facilitate this. The computerized scorecard process helps the manager quantify the relationships between (1) the HR activities (amount of testing, training, and so forth), (2) the resulting employee behaviors (customer service, for instance), and (3) the resulting firm-wide strategic outcomes and performance (such as customer satisfaction and profitability).25 The HR scorecard derives from the “balanced scorecard” planning approach, which aims to balance hard data such as financial measures with soft data such as customer satis- faction in assessing a company’s performance. DigiTaL DaSHbOarDS The saying “a picture is worth a thousand words” explains the digital dashboard purpose of the digital dashboard. A digital dashboard presents the manager with Presents the manager with desktop desktop graphs and charts, showing a computerized picture of how the company graphs and charts, and so a comput- is doing on all the metrics from the HR scorecard process. As in the accompanying erized picture of where the company illustration, a top Southwest Airlines manager’s dashboard might display real-time stands on all those metrics from the trends for various strategy-map activities, such as fast turnarounds and on-time HR scorecard process. flights. This enables the manager to take corrective action. For example, if ground crews are turning planes around slower today, financial results tomorrow may decline unless the manager takes action. Figure 3-8 summarizes the three strategic planning tools. A digital dashboard pres- ents the manager with desktop graphs and charts, Attracting and keeping On-time flights showing a computerized customers: 2008 passengers to date picture of how the com- 2.5 pany is doing on all the Passengers (in million) 2.0 metrics from the hr score- 1.5 card process. 1.0 0.5 0% 100% 0.0 Jan-2008 June-2014 Employee morale trends based on quarterly surveys Plane turnaround time June 30, 2014 Very Satisfied Satisfied 18 55 Very Dissatisfied 78 Part 1 introduCtion Strategy Map HR Scorecard Digital Dashboard Graphical tool that summarizes A process for assigning financial Presents the manager with the chain of activities that and nonfinancial goals or metrics to desktop graphs and charts, so contribute to a company’s success, the human resource management– he or she gets a picture of and so shows employees the “big related chain of activities required where the company has been picture” of how their performance for achieving the company’s strategic and where it’s going, in terms contributes to achieving the aims and for monitoring results. of each activity in the strategy company’s overall strategic goals. map. Figure 3-8 Three important Strategic Hr Tools WLE KNO DG HR Metrics, benchmarking, and Data Analytics E BASE We’ve seen that strategic human resource management means formulating HR poli- cies and practices that produce the employee competencies and behaviors the company needs to achieve its strategic goals. Being able to measure results is essential to this pro- LeARning ObjecTive 3-4 cess. For example, it would have been futile for the Ritz-Carlton Portman Shanghai’s Give at least five examples of managers to set “better customer service” as a goal if they couldn’t measure customer HR metrics. service.26 Relevant measures might include, for instance, hours of training per employee, productivity per employee, and (via customer surveys) customer satisfaction. human resource metrics Human resource managers use many such measures (or “human resource The quantitative gauge of a human metrics”). For example, there is (on average) one human resource employee per 100 resource management activity, such company employees for firms with 100–249 employees. The HR employee-to-employee as employee turnover, hours of ratio drops to about 0.79 for firms with 1,000–2,499 employees and to 0.72 for firms with training per employee, or qualified more than 7,500 employees.27 Figure 3-9 illustrates other human resource management applicants per position. metrics. They include employee tenure, cost per hire, and annual overall turnover rate.28 Improving Performance Through HRIS: Tracking Applicant Metrics for Improved Talent Management As an example of using metrics, many employers spend thousands of dollars (or more) recruiting employees without measuring which hiring source produces the best candidates. The sensible solution is to assess recruitment effectiveness using measures or metrics such as quality of new hires.29 Many employers do track and analyze such data with the help of computerized applicant tracking systems (ATS). ATS suppliers include Authoria, PeopleFilter, Wonderlic, eContinuum, and PeopleClick. Regardless of the vendor, analyzing recruitment effective- ness using ATS software involves two steps: First, decide how to measure the performance of new hires. For example, with Authoria’s system, hiring managers input their evaluations of each new hire at the end of the employee’s first 90 days, using a 1-to-5 scale.30 Next, the applicant tracking system enables the employer to track the recruitment sources that correlate with superior hires. It may show, for instance, that new em- ployees hired through employee referrals stay longer and work better than those from newspaper ads do. For example, installing an Authoria ATS enabled the Thomson Reuters Company to identify the recruitment sources, candidate traits, and hiring practices that work best in each geographic area where the company does business.31 This enabled Thomson to reduce metrics like recruiting costs, by shifting recruitment dollars from less effective to more effective sources. Benchmarking Just measuring how one is doing (for instance, in terms of employee productivity) is rarely enough for deciding what (if anything) to change. Instead, most managers want to know “How are we doing?” in relation to something. For example, are our accident rates rising or falling? Similarly, the manager may want to benchmark the  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 79 1TICPK\CVKQPCN&CVC 'ORNQ[OGPV&CVC r 4GXGPWG r 0WODGTQH2QUKVKQPU(KNNGF r 4GXGPWGRGT(6' r 6KOGVQ(KNN r 0GV+PEQOG$GHQTG6CZGU r %QUV2GT*KTG r 0GV+PEQOG$GHQTG6CZGURGT(6' r 'ORNQ[GG6GPWTG r 2QUKVKQPU+PENWFGF9KVJKPVJG1TICPK\CVKQPoU5WEEGUUKQP2NCP r #PPWCN1XGTCNN6WTPQXGT4CVG r #PPWCN8QNWPVCT[6WTPQXGT4CVG *4&GRCTVOGPV&CVC r #PPWCN+PXQNWPVCT[6WTPQXGT4CVG r 6QVCN*45VCHH 'ZRGEVCVKQPUHQT4GXGPWGCPF1TICPK\CVKQPCN*KTKPI r *4VQ'ORNQ[GG4CVKQ r 2GTEGPVCIGQH*45VCHHKP5WRGTXKUQT[4QNGU r 2GTEGPVCIGQH1TICPK\CVKQPU'ZRGEVKPI%JCPIGUKP4GXGPWGKP r 2GTEGPVCIGQH*45VCHHKP2TQHGUUKQPCN6GEJPKECN4QNGU %QORCTGFVQ r 2GTEGPVCIGQH*45VCHHKP#FOKPKUVTCVKXG5WRRQTV4QNGU r 2GTEGPVCIGQH1TICPK\CVKQPU'ZRGEVKPI%JCPIGUKP*KTKPIKP r 4GRQTVKPI5VTWEVWTGHQTVJG*GCFQH*4 %QORCTGFVQ r 6[RGUQH*42QUKVKQPU1TICPK\CVKQPU'ZRGEVVQ*KTGKP /GVTKEUHQT/QTG2TQƂVCDNG1TICPK\CVKQPU *4'ZRGPUG&CVC r 6QVCN*45VCHH r *4'ZRGPUGU r *4VQ'ORNQ[GG4CVKQ r *4'ZRGPUGVQ1RGTCVKPI'ZRGPUG4CVKQ r *4'ZRGPUGU r *4'ZRGPUGVQ(6'4CVKQ r *4'ZRGPUGVQ1RGTCVKPI'ZRGPUG4CVKQ r *4'ZRGPUGVQ(6'4CVKQ %QORGPUCVKQP&CVC r #PPWCN5CNCT[+PETGCUG r #PPWCN5CNCT[+PETGCUG r 6CTIGV$QPWUHQT0QP'ZGEWVKXGU r 5CNCTKGUCUC2GTEGPVCIGQH1RGTCVKPI'ZRGPUG r 6CTIGV$QPWUHQT'ZGEWVKXGU r 6CTIGV$QPWUHQT0QP'ZGEWVKXGU r /CZKOWO4GKODWTUGOGPV#NNQYGFHQT6WKVKQP'FWECVKQP r 6CTIGV$QPWUHQT'ZGEWVKXGU 'ZRGPUGURGT[GCT r 2GTEGPVCIGQH'ORNQ[GGU2CTVKEKRCVKPIKP6WKVKQP'FWECVKQP 6WKVKQP'FWECVKQP&CVC 4GKODWTUGOGPV2TQITCOU r /CZKOWO4GKODWTUGOGPV#NNQYGFHQT6WKVKQP'FWECVKQP r 6KOGVQ(KNN 'ZRGPUGURGT;GCT r %QUV2GT*KTG r 2GTEGPVCIGQH'ORNQ[GGU2CTVKEKRCVKPIKP6WKVKQP'FWECVKQP r #PPWCN1XGTCNN6WTPQXGT4CVG 4GKODWTUGOGPV2TQITCOU Figure 3-9 Metrics for the SHrM® 2011–2012 Customized Human Capital benchmarking report Source: Reprinted with permission from the Society for Human Resource Management. All rights reserved. results—compare high-performing companies’ results to your own, to understand what makes them better.32 The Society for Human Resource Management’s (SHRM’s) benchmarking ser- vice enables employers to compare their own HR metrics with those of other compa- nies. The employer can request comparable (benchmark) figures not just by industry, but by employer size, company revenue, and geographic region. (See http://shrm.org/ research/benchmarks/.) Figure 3-10 illustrates one of the SHRM’s many sets of comparable benchmark mea- sures. It shows how much employers are spending for tuition reimbursement programs. Strategy and Strategy-Based Metrics Benchmarking provides one perspective on how your company’s human resource management system is performing.33 It shows how your human resource manage- ment system’s performance compares to the competition. However, it may not reveal strategy-based metrics the extent to which your firm’s HR practices are supporting its strategic goals. For Metrics that specifically focus example, if the strategy calls for doubling profits by improving customer service, to on measuring the activities that what extent are our new training practices helping to improve customer service? contribute to achieving a company’s Managers use strategy-based metrics to answer such questions. Strategy-based strategic aims. metrics measure the activities that contribute to achieving a company’s strategic aims.34 80 Part 1 introduCtion Figure 3-10 SHrM Customized Human 6WKVKQP'FWECVKQP&CVC Capital benchmarking VJ VJ report P 2GTEGPVKNG /GFKCP 2GTEGPVKNG #XGTCIG Source: “HR Expense Data,” from SHRM Customized Human /CZKOWOTGKODWTUGOGPV      Capital Benchmarking Report. CNNQYGFHQTVWKVKQP Reprinted with permission GFWECVKQPGZRGPUGURGT[GCT from the Society for Human 2GTEGPVCIGQHGORNQ[GGU      Resource Management. All RCTVKEKRCVKPIKPVWKVKQP rights reserved. www.shrm. GFWECVKQPTGKODWTUGOGPV org/Research/benchmarks/ RTQITCOU Documents/sample_humnba_ capital_report.pdf. Thus, for the Portman Shanghai, the strategic HR metrics might include 100% employee testing, 80% guest returns, incentive pay as a percent of total salaries, and sales up 50%. If changes in HR practices such as increased training have their intended effects, then strategic metrics like guest returns should also rise. WLE What Are HR Audits? KNO DG Human resource managers often collect data on matters like employee turnover and E BASE safety via human resource audits. One practitioner calls an HR audit “an analysis by which an organization measures where it currently stands and determines what it has to accomplish to improve its HR function.”35 The HR audit generally involves using a checklist to review the company’s human resource functions (recruiting, test- ing, training, and so on), as well as ensuring that the firm is adhering to regulations, laws, and company policies. The HR auditor may first review payroll data, focusing on what and when each employee was paid. He or she will then turn to whether the human resource records are in order (for instance, are medical records kept separate from résumés?). He or she will also review the employer’s handbooks and policies, for instance, checking for disability accommodation policies, social media policies, and family and medical leave policies.36 He or she may also want to benchmark the results to comparable companies’. Hr audit HR audits vary in scope. Typical areas audited include:37 An analysis by which an organiza- tion measures where it currently 1. Roles and headcount (including job descriptions, and employees categorized by stands and determines what it has exempt/nonexempt and full- or part-time) to accomplish to improve its HR 2. Compliance with federal, state, and local employment-related legislation functions. 3. Recruitment and selection (including use of selection tools, background checks, and so on) 4. Compensation (policies, incentives, survey procedures, and so on) 5. Employee relations (union agreements, performance management, disciplinary procedures, employee recognition) 6. Mandated benefits (Social Security, unemployment insurance, workers’ compen- sation, and so on) 7. Group benefits (insurance, time off, flexible benefits, and so on) 8. Payroll (such as legal compliance) 9. Documentation and record keeping. For example, do our files include résumés and applications, offer letters, job descriptions, performance evaluations, benefit enrollment forms, payroll change notices, and documentation related to person- nel actions such as employee handbook acknowledgments?38 10. Training and development (new employee orientation, development, technical and safety, career planning, and so on) 11. Employee communications (employee handbook, newsletter, recognition programs) 12. Termination and transition policies and practices  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 81 Trends shaping hr: DIGITAL AND SOCIAL MEDIA Data like monthly labor costs are interesting but relatively useless until converted to information. Information is data presented in a form that makes it useful for making decisions. For example knowing your cost per hire is interesting. However, presenting cost-per-hire data in a way that shows whether the cost is trending up or down provides information you can use to make decisions. Yet in one study, only 10% of respondents said they use such data to analyze their workplace practices’ effectiveness.39 But this is changing. Data analytics means using statistical and mathematical anal- ysis and algorithms to find relationships and make predictions. For example, when online bookstores use algorithms to predict which books you’re most likely to buy based on things like what books you’ve already bought and similarities between you and other groups, they are using data analytics.40 Data analytics relies on data min- ing. Data mining sifts through huge amounts of employee data to identify correla- tions that employers then use to improve their employee-selection and other practices. Data mining is “the set of activities used to find new, hidden, or unexpected patterns in data.”41 Big data is basically data analytics on steroids. The basic idea (of scientifically analyzing data to find relationships and make predictions) is the same. However, with “big data” the volume, velocity, and variety of data that are analyzed are much greater. In terms of volume, for example, Walmart now collects about 2.5 petabytes of data—2.5 million gigabytes—every hour from its customer transactions.42 Similarly, in terms of velocity, all these data are being created more or less instantaneously (as at Walmart); that means companies can use them to more quickly to adapt in real time (for instance, to who’s buying what products, and therefore how to adjust online pro- motions). Finally, big data capitalizes on the huge variety of data now available. For instance, data come not just from Walmart’s transactions but from customers’ mobile phones, GPS, and social networks too. TaLenT anaLyTiCS Data analytics tools like these enable employers (including Walmart) to analyze together employee data (like employee demographics, training, and performance ratings) from traditional sources such as employee records, as well as data from new sources (like company internal social media sites, GPS tracking, and e-mail activity).43 Employers then use talent analytics (data analytics applied to HR issues) to answer questions that in the past they couldn’t answer, or couldn’t answer as well. For example, human resource consultant Aon Hewitt has an “analytics engine” that analyzes its client’s employee and performance data. Computer dashboards then enable its clients to answer questions such as “Are there potential turnover trends we should further analyze to head off potential problems?” 44 “What factors drive our high- performing salespeople?” And, “what sorts of people are most likely to have accidents and submit claims?” Talent analytics can produce striking profitability results. For example, Best Buy used talent analytics to discover that a 0.1% increase in employee engagement led to a more than $100,000 rise in a Best Buy store annual operating income.45 Employers use talent analytics to answer several types of talent management questions. Human Capital Facts For example, “What are the key indicators of my organization’s over- all health?” JetBlue found that employee engagement correlated with financial performance. Analytical HR For example, “Which units, departments, or individuals need attention?” Lockheed Martin collects performance data in order to identify units needing improvement. Human Capital Investment Analysis For example, “Which actions have the greatest impact on my business?” By monitoring employee satisfaction levels, Cisco was able to improve its employee retention rate from 65% to 85%, saving the company nearly $50 million in recruitment, selection, and training costs. A Google talent analytics team analyzed data 82 Part 1 introduCtion on employee backgrounds, capabilities, and performance.46 It identified factors (such as an employee feeling underutilized) likely to lead to the employee leaving—and thus helped it reduce turnover. Microsoft identified correlations among the schools and companies its employees arrived from and the employees’ subsequent performance. This helped it improve its recruitment and selection practices.47 By gathering thousands of observations across 100 variables about managers, Google identified what traits its best managers shared, in- cluding: good coach; empowers and does not micromanage; expresses interest in and con- cern for team members’ success and personal well-being; productive and results-oriented; good communicator; helps with career development; has a clear vision and strategy for the team; and has key technical skills the team needs.48 ConAgra Foods uses talent analytics to discover relationships among employee demographics, training, and performance and their relationships with various performance indicators.49 If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete this discussion question. Talk about it 3: Could Best Buy or some of these other companies have made the same discoveries without using sophisticated computerized tools? How? Digital tools like talent analytics disrupt how HR departments do things. They require HR managers to be more scientific and analytical. And, they often shift “who does HR” (for instance, Aon Hewitt’s digital dashboard shows line managers when there’s a turnover problem) from the human resource department to other departments (such as finance), and sometimes to line managers like the heads of departments. Digital tools like these also show great promise. In one study, 82% of high- performing organizations gave human resource management leaders such analytical workforce data, compared with 33% of low-performing ones.50 Trends shaping hr: SCIENCE IN TALENT MANAGEMENT Data analytics permits making decisions based on a measurable and objective review of the situation. Managers have a name for this. Evidence-based human resource manage- ment means using data, facts, analytics, scientific rigor, critical evaluation, and critically evaluated research/case studies to support human resource management proposals, decisions, practices, and conclusions.51 You may sense that being evidence based is similar to being scientific, and if so, you are correct. A recent Harvard Business Review article even argues that manag- ers must become more scientific and “think like scientists” when making business decisions.52 But how can managers think like scientists? Objectivity, experimentation, and pre- diction are the heart of science. In gathering evidence, scientists (or managers) first need to be objective, or there’s no way to trust their conclusions. Recently, a medical school disciplined several professors. They had failed to reveal that they were on the payroll of the drug company that supplied the drugs, the results of which the doctors were studying. Who could trust their objectivity or conclusions? Being scientific also requires experimentation. An experiment is a test one sets up in such a way as to ensure that he or she understands the reasons for the results ob- tained. For example, in their Harvard Business Review article, “A Step-by-Step Guide to Smart Business Experiments,” the authors argue that if you want to judge a new incentive plan’s impact on corporate profits, don’t start by implementing the plan with all employees. Instead, implement it with an “experimental” group (which gets the incentive plan) and with a “control” group (a group that does not get the incen- tive plan). Doing so will help you gauge if any performance improvement stemmed from the incentive or from some other cause (such as a new company-wide training program).53 And, it will enable you to predict how changing the incentive plan will affect performance.  ChaPtEr 3 huMan rEsourCE ManagEMEnt stratEgy and analysis 83 For managers, the point of being “scientific” is to make better decisions by forc- ing you to gather the facts. “Is this sales incentive plan really boosting sales?” “We’ve spent $40,000 in the past 5 years on our tuition-refund plan; what (if anything) did we get out of it?” What’s the evidence? Successful HR managers need to be scientific today. As an example, the chemical company BASF Corp. used talent analytics to analyze data on the relationship among stress, health, and productivity in its 15,000 U.S. headquarters staff. Based on that analysis, the company instituted health programs that it calculated would more than pay for themselves in increased productivity by reducing stress.54 Throughout this book we will show examples of how managers use evidence to make better human resource management decisions. For example: Which recruitment source produces our best candidates? Does it pay to use this testing program? And, does our safety program really lead to fewer accidents? If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete this discussion question. Talk about it 4: If it is apparently so easy to do what BASF did to size up the potential benefits of health programs, why do more employers not do so? LeARning ObjecTive 3-5 High-Performance Work Systems Give five examples of what One reason to measure, benchmark, and scientifically analyze HR practices is to employers can do to have high- promote high-performance work practices. A high-performance work system performance systems. (HPWS) is a set of human resource management policies and practices that together produce superior employee performance. high-performance work What exactly are these high-performance work practices? In one recent study, system (HPWS) A set of human resource man- researchers collected data from 359 firms before, during, and after the 2007–2009 agement policies and practices recession. They found that firms that used more effective staffing and training out- that promote organizational performed competitors before, during, and after the recession.55 effectiveness. Another study looked at 17 manufacturing plants, some of which adopted high-performance work system practices. The high-performance plants paid more (median wages of $16 per hour compared with $13 per hour for all plants), trained more, used more sophisticated recruitment and hiring practices (tests and validated interviews, for instance), and used more self-managing work teams.56 Those with the high-performance HR practices performed significantly better than did those with- out such practices. Service companies (such as hotels) particularly gain from such high-performance work systems and practices.57 Studies like these show that high-performance work systems’ policies and prac- tices do differ from less productive ones (Table 3-1). For example, high-performing companies recruit more job candidates, use more selection tests, and spend many more hours training employees. Table 3-1 illustrates three things: First, it shows examples of human resource metrics such as hours of training per employee, or qualified applicants per position. (In Table 3-1, the metric for “Number of qualified applicants per position” is 37 in the high-performing companies.) Managers use these to assess their companies’ performance and to compare one firm with another.58 Second, it illustrates what employers must do to have high-performance systems. For example, high-performing companies have more than four times the number of qualified applicants per job than do low performers. They also hire based on vali- dated selection tests, and extensively train employees. Third, Table 3-1 shows that high-performance work practices usually aspire to encourage employee involvement and self-management. In other words, an aim of the high-performance recruiting, screening, training, and other human resources prac- tices is to nurture an engaged, involved, informed, empowered, and self-motivated workforce.59 84 Part 1 introduCtion TaBLe 3-1 examples Selected from Several Studies of How recruitment, Selection, Training, appraisal, Pay, and Other Practices Differ in High-Performance and Low-Performance Companies lower-Performance Companies’ higher-Performance Companies’ hr Practice averages (e.g., hr Practice averages (e.g., company performance in terms of company performance in terms of sales/employee, innovation, and sales/employee, innovation, and employee retention)* employee retention)* Recruitment: Average number of qualified 8 37 applicants per position Selection: Average percentage of employees hired 4% 30% based on a validated selection test Training: Average number of hours of training for 35 hours 117 hours new employees Appraisal: Average percentage of employees 41% 95% receiving a regular performance appraisal Pay Practices: Average percentage of the workforce 28% 84% eligible for incentive pay Use of Teams: Average percentage of the workforce 11% 42% routinely working in all teams: semiautonomous, cross-functional, or project teams Self-Directed Teams: Percent of companies with 9% 70% semiautonomous or autonomous work teams Operational Information Sharing: Employees 62% 82% receive relevant operating performance information Financial Information Sharing: Employees receive 43% 66% relevant financial performance information *Findings rounded. Based on “Comparison of HR Practices in High-Performance and Low-Performance Companies,” by B. E. Becker, et al., from The HR Scorecard: Linking People, Strategy and Performance (Boston: Harvard Business School Press, 2001); Barry Macy, Gerard Farias, Jean-Francois Rosa, and Curt Moore, “Built to Change: High-Performance Work Systems and Self-Directed Work Teams—A longitudinal Field Study,” Research in Organizational Change and Development, 16, pp. 339–418, 2007; James Gathrie, Wenchuan Liu, Patrick Flood, and Sarah MacCurtain, “High Performance Work Systems, Workforce Productivity, and Innovation: A Comparison of MNCs and Indig- enous Firms,” The Learning, Innovation and Knowledge (LINK) Research Centre Working Paper Series, WP 04-08, 2008. employee engagement guide for Managers: employee engagement and Performance Employee engagement refers to being psychologically involved in, connected to, and LeARning ObjecTive 3-6 committed to getting one’s jobs done. Engaged employees “experience a high level of Describe how you would connectivity with their work tasks,” and work hard to accomplish their task-related execut