Human Resource Management - Gary Dessler - 15th Edition (PDF)

PART ONE Introduction 1 Introduction to Human Resource Management Kwanbenz/Shutterstock LEARNING OBJECTIVES 1-1 Explain what human resource management is Company’s and how it relates to the management process....

PART ONE Introduction 1 Introduction to Human Resource Management Kwanbenz/Shutterstock LEARNING OBJECTIVES 1-1 Explain what human resource management is Company’s and how it relates to the management process. Strategic Goals 1-2 Briefly discuss and illustrate each of the im- portant trends influencing human resource management. Employee Competencies 1-3 Briefly describe “distributed HR” and other im- portant aspects of human management today. and Behaviors Required for Company to Achieve These Strategic Goals 1-4 List at least four important human resource manager competencies. 1-5 Outline the plan of this book. tegic and Lega Stra nvironment l E R e P l a ce cru ment Relatio e itme ns e Employ or many people today Elance (www.elance.com) F nt and HR Policies and Practices symbolizes much of what’s new in human resource Required to Produce Employee Competencies management. Millions of freelancers from graphic de- and Behaviors De rai signers to translators, accountants, and lawyers reg- ve T ion l t nin opme ister on the site. Employers then use Elance to find, sa g a nt pen nd Com screen, hire, and pay the talent they need, in more than 180 countries.1 WHERE ARE WE NOW … The purpose of this chapter is to explain what human resource management is, and why it’s important to all managers. We’ll see that human resource management activities such as hiring, training, appraising, compensating, and developing employees are part of every man- ager’s job. And we’ll see that human resource management is also a separate function, usu- ally with its own human resource or “HR” man- ager. The main topics we’ll cover here include what is human resource management, the trends shaping human resource management, human resource management today, the new human resource manager, and the plan of this book. The framework above (which introduces each chapter) makes this point: That the firm’s HR policies and practices should produce the employee skills and behaviors the company 2 needs to achieve its strategic aims.  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 3 What is Human Resource Management? To understand what human resource management is, it’s useful to start with what LEARNING OBJECTIVE 1-1 managers do. Elance is an organization. An organization consists of people (in Explain what human resource management is and how it this case, people like Elance’s own in-house sales managers and Web designers) with relates to the management formally assigned roles who work together to achieve the organization’s goals. A process. manager is someone who is responsible for accomplishing the organization’s goals, and who does so by managing the efforts of the organization’s people. Most writers agree that managing involves performing five basic functions: organization planning, organizing, staffing, leading, and controlling. In total, these functions A group consisting of people represent the management process. Some of the specific activities involved in each with formally assigned roles who work together to achieve the function include: organization’s goals. Planning. Establishing goals and standards; developing rules and procedures; manager developing plans and forecasts Someone who is responsible for Organizing. Giving each subordinate a specific task; establishing departments; accomplishing the organization’s delegating authority to subordinates; establishing channels of authority and goals, and who does so by manag- communication; coordinating the work of subordinates ing the efforts of the organization’s Staffing. Determining what type of people should be hired; recruiting prospec- people. tive employees; selecting employees; setting performance standards; compen- sating employees; evaluating performance; counseling employees; training and developing employees managing Leading. Getting others to get the job done; maintaining morale; motivating To perform five basic functions: planning, organizing, staffing, subordinates leading, and controlling. Controlling. Setting standards such as sales quotas, quality standards, or produc- tion levels; checking to see how actual performance compares with these stan- management process dards; taking corrective action as needed The five basic functions of planning, In this book, we will focus on one of these functions—the staffing, personnel man- organizing, staffing, leading, and agement, or human resource management function. Human resource management controlling. (HRM) is the process of acquiring, training, appraising, and compensating employ- ees, and of attending to their labor relations, health and safety, and fairness human resource management concerns. The topics we’ll discuss should therefore provide you with the concepts (HRM) and techniques every manager needs to perform the “people” or personnel aspects of The process of acquiring, training, appraising, and compensating management. These include: employees, and of attending to their Conducting job analyses (determining the nature of each employee’s job). labor relations, health and safety, Planning labor needs and recruiting job candidates. and fairness concerns. Selecting job candidates. Orienting and training new employees. Managing wages and salaries (compensating employees). Providing incentives and benefits. Appraising performance. Communicating (interviewing, counseling, disciplining). Training employees, and developing managers. Building employee relations and engagement. And what a manager should know about: Equal opportunity and affirmative action. Employee health and safety. Handling grievances and labor relations. Why Is Human Resource Management Important to All Managers? The concepts and techniques in this book are important to all managers for several reasons. 4 Part 1 introduCtion Avoid PeRsonnel MistAkes First, having a command of this knowledge will help you avoid the personnel mistakes you don’t want to make while managing. For example, you don’t want To have your employees not doing their best. To hire the wrong person for the job. To experience high turnover. To have your company in court due to your discriminatory actions. To have your company cited for unsafe practices. To let a lack of training undermine your department’s effectiveness. To commit any unfair labor practices. Carefully studying this book can help you avoid mistakes like these. iMPRoving PRofits And PeRfoRMAnce More important, it can help ensure that you get results—through people.2 Remember that you could do everything else right as a manager—lay brilliant plans, draw clear organization charts, set up modern assembly lines, and use sophisticated accounting controls—but still fail, for instance, by hiring the wrong people or by not motivating subordinates. On the other hand, many managers—from generals to presidents to supervisors—have been successful even without adequate plans, organizations, or controls. They were successful because they had the knack for hiring the right people for the right jobs and then motivating, appraising, and developing them. Remember as you read this book that getting results is the bottom line of managing and that, as a manager, you will have to get these results through people. This fact hasn’t changed from the dawn of management. As one company president summed it up: For many years it has been said that capital is the bottleneck for a developing industry. I don’t think this any longer holds true. I think it’s the workforce and the company’s inability to recruit and maintain a good workforce that does constitute the bottleneck for production. I don’t know of any major project backed by good ideas, vigor, and enthusiasm that has been stopped by a short- age of cash. I do know of industries whose growth has been partly stopped or hampered because they can’t maintain an efficient and enthusiastic labor force, and I think this will hold true even more in the future.3 Because of global competition, technological advances, and economic turmoil, that statement has never been truer than it is today. Human resource manage- ment methods like those in this book can help any line manager/supervisor (or HR manager) boost his or her team’s and company’s levels of engagement, profits and performance. Here are two examples we’ll meet in this book: At one Ball Corp. packaging plant, managers trained supervisors to set and communicate daily performance goals. Management tracked daily goal attain- ment with team scorecards. Employees received special training to improve their skills. Within 12 months production was up 84 million cans, customer complaints dropped by 50%, and the plant’s return on investment rose by $3,090,000. A call center averaged 18.6 vacancies per year (about a 60% turnover rate). The researchers estimated the cost of a call-center operator leaving at about $21,500. They estimated total annual cost of agent turnover for the call center at $400,853. Cutting that rate in half would save this firm about $200,000 per year. You MAY sPend soMe tiMe As An HR MAnAgeR Here is another reason to study this book: you might spend time as a human resource manager. For example, about a third of large U.S. businesses surveyed appointed non-HR managers to be their top human resource executives. Thus, Pearson Corporation (which publishes this book) promoted the head of one of its publishing divisions to chief human resource  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 5 executive at its corporate headquarters. Why? Some think these people may be better equipped to integrate the firm’s human resource activities (such as pay policies) with the company’s strategic needs (such as by tying executives’ incentives to corporate goals).4 Appointing non-HR people can also be good for the manager. For example, one CEO served a three-year stint as chief human resource officer on the way to becoming CEO. He said the experience he got was invaluable in learning how to develop leaders and in understanding the human side of transforming a company.5 However most top human resource executives do have prior human resource experience. About 80% of those in one survey worked their way up within HR. About 17% had the HR Certification Institute’s Senior Professional in Human Resources (SPHR) designation, and 13% were certified Professional in Human Resources (PHR). The Society for Human Resource Management (SHRM) offers a brochure describing alternative career paths within human resource management.6 Find it at www.shrm.org. HR foR sMAll Businesses And here is one other reason to study this book: you may well end up as your own human resource manager. More than half the people working in the United States work for small firms. Small businesses as a group also account for most of the 600,000 or so new businesses created every year. Statistically speaking, therefore, most people graduating from college in the next few years either will work for small businesses or will create new small businesses of their own.7 Small firms generally don’t have the critical mass required for a full-time human resource manager (let alone an HR department).8 The owner and his or her other managers (and perhaps assistant) handle tasks such as signing employees on. Gaining a command of the techniques in this book should help you to manage a small firm’s human resources more effectively. We’ll address human resource management for small businesses in later chapters. Line and Staff Aspects of Human Resource Management All managers have always been, in a sense, human resource managers, because they all get involved in recruiting, interviewing, selecting, and training their employees. Yet most firms also have a human resource department with its own top manager. How do the duties of this human resource manager and department relate to the human resource duties of sales and production and other managers? Answering this authority requires a short definition of line versus staff authority. Authority is the right to The right to make decisions, direct make decisions, to direct the work of others, and to give orders. Managers usually others’ work, and give orders. distinguish between line authority and staff authority. In organizations, line authority traditionally gives managers the right to issue line authority orders to other managers or employees. Line authority therefore creates a superior Traditionally gives managers the right to issue orders to other (order giver)–subordinate (order receiver) relationship. When the vice president of managers or employees. sales tells her sales director to “get the sales presentation ready by Tuesday,” she is exercising her line authority. Staff authority gives a manager the right to advise staff authority other managers or employees. It creates an advisory relationship. When the human Gives a manager the right to advise resource manager suggests that the plant manager use a particular selection test, he other managers or employees or she is exercising staff authority. On the organization chart, managers with line authority are line managers. line manager Those with staff (advisory) authority are staff managers. In popular usage, people A manager who is authorized to tend to associate line managers with managing departments (like sales or production) direct the work of subordinates and is responsible for accomplishing the that are crucial for the company’s survival. Staff managers generally run departments organization’s tasks. that are advisory or supportive, like purchasing and human resource management. Human resource managers are usually staff managers. They assist and advise line staff manager managers in areas like recruiting, hiring, and compensation. A manager who assists and advises line managers. Line Managers’ Human Resource Management Responsibilities However, line managers do have many human resource duties. This is because the direct handling of people has always been part of every line manager’s duties, from president down to first-line supervisors. One major company outlines its 6 Part 1 introduCtion line supervisors’ responsibilities for effective human resource management under these general headings: 1. Placing the right person in the right job 2. Starting new employees in the organization (orientation) 3. Training employees for jobs that are new to them 4. Improving the job performance of each person 5. Gaining creative cooperation and developing smooth working relationships 6. Interpreting the company’s policies and procedures 7. Controlling labor costs 8. Developing the abilities of each person 9. Creating and maintaining departmental morale 10. Protecting employees’ health and physical conditions And we’ll see in this chapter that, if anything, digital tools like LinkedIn hiring and cloud computing are actually expanding many line managers’ HR responsibilities. The Human Resource Department In small organizations, line managers may carry out all these personnel duties unas- sisted. But as the organization grows, line managers usually need the assistance, spe- cialized knowledge, and advice of a separate human resource staff. In larger firms, the human resource department provides such specialized assistance. Figure 1-1 shows human resource management jobs in one organization. Typical positions figuRe 1-1 Human Resource department organization chart showing typical HR Job titles Source: “Human Resource Development Organization Chart Showing Typical HR Job Titles,” www.co.pinellas.fl.us/persnl/pdf/ orgchart.pdf. Courtesy of Pinellas County Human Resources. Reprinted with permission.  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 7 include compensation and benefits manager, employment and recruiting supervisor, training specialist, and employee relations executive. Examples of job duties include: Recruiters: Maintain contacts within the community and perhaps travel exten- sively to search for qualified job applicants. Equal employment opportunity (EEO) representatives or affirmative action coordinators: Investigate and resolve EEO grievances, examine organizational practices for potential violations, and compile and submit EEO reports. Job analysts: Collect and examine detailed information about job duties to pre- pare job descriptions. Compensation managers: Develop compensation plans and handle the em- ployee benefits program. Training specialists: Plan, organize, and direct training activities. Labor relations specialists: Advise management on all aspects of union– management relations. new APPRoAcHes to oRgAnizing HR However, what HR departments do and how they do it are changing. Because of this, many employers are taking a new look at how they organize their human resource functions.9 For example, one survey found that 44% of the large firms surveyed planned to change how they organize and deliver HR services.10 Most plan to use technology to institute more “shared services” (or “transactional”) arrangements.11 These establish centralized HR units whose employees are shared by all the companies’ departments to assist the departments’ line managers in human resource matters. These shared services HR teams generally offer their services through intranets or centralized call centers; they aim to provide managers and employees with specialized support in day-to-day HR activities (such as discipline problems). You may also find specialized corporate HR teams within a company. These assist top management in top-level issues such as developing the personnel aspects of the company’s long-term strategic plan. Embedded HR teams have HR generalists (also known as “relationship managers” or “HR business partners”) assigned to functional departments like sales and production. They provide the selection and other assistance the departments need. Centers of expertise are basically specialized HR consulting firms within the company. For example, one center might provide specialized advice in areas such as organizational change to all the company’s various units. The Trends Shaping Human Resource Management Working cooperatively with line managers, human resource managers have long LEARNING OBJECTIVE 1-2 helped employers hire and fire employees, administer benefits, and conduct apprais- Briefly discuss and illustrate als. However, trends are occurring in the environment of human resource manage- each of the important trends influencing human resource ment that are changing how employers get their human resource management management. tasks done. These trends include workforce trends, trends in how people work, technological trends, and globalization and economic trends. Workforce Demographics and Diversity Trends The composition of the workforce will continue to change over the next few years; specifically, it will continue to become more diverse with more women, minority group members, and older workers in the workforce.12 Table 1-1 offers a bird’s-eye view. Between 1992 and 2022, the percent of the workforce that the U.S. Department of Labor classifies as “white” will drop from 85% to 77.7%. At the same time, the per- cent of the workforce that it classifies as “Asian” will rise from 4% to 6.2%, and those of Hispanic origin will rise from 8.9% to 19.1%. The percentages of younger workers will fall, while those over 55 years of age will leap from 11.8% of the workforce in 1992 to 25.6% in 2022.13 Many employers call “the aging workforce” a big problem. The problem is that there aren’t enough younger workers to replace the projected 8 Part 1 introduCtion Table 1-1 demographic groups as a Percent of the workforce, 1992–2022 Age, Race, and 1992 2002 2012 2022 Ethnicity Age: 16–24 16.9% 15.4% 13.7% 11.3% 25–54 71.4 70.2 65.3 63.1 55+ 11.8 14.3 20.9 25.6 White 85.0 82.8 79.8 77.7 Black 11.1 11.4 11.9 12.4 Asian 4.0 4.6 5.3 6.2 Hispanic origin 8.9 12.4 15.7 19.1 Source: Based on U.S. Bureau of Labor Statistics Economic News Release December 19, 2013. www.bls.gov/news.release/ecopro.t01.htm, accessed May 12, 2015. number of baby boom–era older workers (born roughly 1946–1964) retiring.14 Many employers are bringing retirees back (or just trying to keep them from leaving). With overall projected workforce shortfalls (not enough younger workers to replace retirees), many employers are hiring foreign workers for U.S. jobs. The H-1B visa program lets U.S. employers recruit skilled foreign professionals to work in the United States when they can’t find qualified American workers. U.S. employers bring in about 181,000 foreign workers per year under these programs, although such pro- grams face opposition.15 Other firms are shifting to nontraditional workers. Nontraditional workers are those who hold multiple jobs, or who are “temporary” or part-time workers, or those working in alternative arrangements (such as a mother–daughter team shar- ing one clerical job). Others serve as “independent contractors” for specific projects. Almost 10% of American workers—13 million people—fit this nontraditional workforce category. Some employers find millennials or “generation Y” employees (those born roughly between 1982 and 2004) a challenge to deal with, and this isn’t just an American phenomenon. For example, the New York Times recently reported that because China’s one-child rule led many parents to pamper their children, China’s senior army officers are having problems getting millennial-aged volunteers and con- scripts to shape up.16 On the other hand, millennials also bring a vast array of skills. They’ve grown up with social media and are expert at collaborating online. And, having grown up with Apple and Google, they’re comfortable with innovation. Trends in How People Work At the same time, work has shifted from manufacturing jobs to service jobs in North America and Western Europe. Today over two-thirds of the U.S. workforce is employed in producing and delivering services, not products. By 2020, service-providing indus- tries are expected to account for 131 million out of 150 million (87%) of wage and salary jobs overall. So in the next few years, almost all the new jobs added in the United States will be in services, not in goods-producing industries.17 on-deMAnd woRkeRs Anyone who has registered on Uber already knows something about on-demand workers.18 At last count, Uber was signing up almost 40,000 new independent contractor drivers per month, a rate that was doubling every few months. Today, in more and more companies like Uber, Elance, and Airbnb, employees aren’t employees at all, but are freelancers and independent contractors who work when they can on what they want to work on, when the company needs them.19 So, for example, Airbnb can run in essence a vast lodging company with only a fraction of the “regular” employees one like Hilton Worldwide would need (because the lodg- ings are owned and managed by the homeowners themselves). Other sites tapping  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 9 on-demand workers include Amazon’s Mechanical Turk, Elance-oDesk, TaskRabbit, and Handybook (which lets users tap Handy’s thousands of freelance cleaners and furniture assemblers when they need jobs done).20 The head of Elance-oDesk, which places millions of short-term professionals via its site, says those on its site are viewed as “mobile, independent bundles of skills.”21 The fact that employers increasingly rely on such Uber-like “extended work- forces” has implications for HR. For example, companies that rely on freelancers, con- sultants, and other such nontraditional employees will need to create personnel poli- cies on matters like compensation for these “nonemployees,” and become more expert as talent brokers in matching specific workers with specific tasks that need to be done. On-demand models like Elance’s and Uber’s have detractors. Some people who work for on-demand services say the sometimes menial jobs can make them feel some- what disrespected. One critic says such work is unpredictable and insecure. An article in the New York Times said this: “The larger worry about on-demand jobs is not about benefits, but about a lack of agency—a future in which computers, rather than humans, determine what you do, when and for how much.”22 Some Uber drivers recently sued to become regular (rather than freelance independent contractor) employees. HuMAn cAPitAl One big consequence of such demographic and workforce trends is employers’ growing emphasis on their workers’ knowledge, education, training, skills, and expertise—in other words on their “human capital.” Service jobs like consultant and lawyer always emphasized education and knowl- edge. And today’s proliferation of IT-related businesses like Google and Facebook of course demands high levels of human capital. The big change is that even “traditional” manufacturing jobs like assembler are increasingly high-tech. Similarly bank tellers, retail clerks, bill collectors, mortgage processors, and package deliverers today need a level of technological sophistication they wouldn’t have needed a few years ago. So in our increasingly knowledge-based economy, “… the acquisition and development of superior human capital appears essential to firms’ profitability and success.”23 For managers, the challenge here is that they have to manage such workers dif- ferently. For example, empowering workers to make more decisions presumes you’ve selected, trained, and rewarded them to make more decisions themselves. Employers therefore need new human resource management practices to select, train, and engage these employees.24 The accompanying HR as a Profit Center illustrates how one employer took advantage of its human capital. IMPROVING PERFORMANCE: HR as a Profit Center Boosting Customer Service A bank installed special software that made it easier for its customer service representatives to handle customers’ inquiries. However, the bank did not otherwise change the service reps’ jobs in any way. Here, the new software system did help the service reps handle more calls. But otherwise, this bank saw no big performance gains.25 A second bank installed the same software. But, seeking to capitalize on how the new software freed up customer reps’ time, this bank also had its human resource team upgrade the customer service repre- sentatives’ jobs. This bank taught them how to sell more of the bank’s services, gave them more authority to make decisions, and raised their wages. Here, the new computer system dramatically improved product sales and profitability, thanks to the newly trained and empowered customer service reps. Value-added human resource practices like these improve employee performance and company profitability.26 Based on “Human Resources Wharton,” www.knowledge.wharton.upe.edu; Anthea Zacharatos et al., “High- Performance Work Systems and Occupational Safety,” Journal of Applied Psychology, 90, no. 1, 2005, pp. 77–93. See also Jennifer Schramm, “Effective HR Practices Drive Profit,” HR Magazine, November 2012, p. 88. If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete this discussion. talk About it 1: Discuss three more specific examples of what you believe this second bank’s HR department could have done to improve the reps’ performance. 10 Part 1 introduCtion Globalization Trends Globalization refers to companies extending their sales, ownership, and/or manu- facturing to new markets abroad. Thus Toyota builds Camrys in Kentucky, while Apple assembles iPhones in China. Free trade areas—agreements that reduce tariffs and barriers among trading partners—further encourage international trade. The North American Free Trade Agreement (NAFTA) and the European Union (EU) are examples. Globalization has boomed for the past 50 or so years. For example, the total sum of U.S. imports and exports rose from $47 billion in 1960, to $562 billion in 1980, to about $5.1 trillion recently.27 Evolving economic and political philosophies drove this boom. Governments dropped cross-border taxes or tariffs, formed economic free trade areas, and took other steps to encourage the free flow of trade among countries. The fundamental economic rationale was that by doing so, all countries would gain, and indeed, economies around the world did grow quickly until recently. At the same time, globalization vastly increased international competition. More globalization meant more competition, and more competition meant more pressure to be “world class”—to lower costs, to make employees more productive, and to do things better and less expensively. As multinational companies jockey for position, many transfer operations abroad, not just to seek cheaper labor but to tap into new markets. For example, Toyota has thousands of sales employees based in America, while GE has over 10,000 employees in France. The search for greater efficiencies prompts some employers to offshore (export jobs to lower-cost locations abroad, as when Dell offshored some call-center jobs to India). Some employers offshore even highly skilled jobs such as lawyer.28 Managing the “people” aspects of globalization is a big task for any com- pany that expands abroad—and for its HR managers.29 Economic Trends Although globalization supported a growing global economy, the past 10 or so years were difficult economically. As you can see in Figure 1-2, gross national prod- uct (GNP)—a measure of the United States of America’s total output—boomed between 2001 and 2007. During this period, home prices (see Figure 1-3) leaped as much as 20% per year. Unemployment remained docile at about 4.7%.30 Then, around 2007–2008, all these measures fell off a cliff. GNP fell. Home prices dropped by 10% or more (depending on city). Unemployment nationwide soon rose to more than 10%. Why did all this happen? It’s complicated. Many governments stripped away rules and regulations. For example, in America and Europe, the rules that pre- vented commercial banks from expanding into new businesses such as investment figuRe 1-2 gross national 900 Product, 1940–2010 800 (Change from year ago, billions of dollars) Source: Based on “Gross 700 National Product (GNP)” by FRED Economic Data/St. Louis 600 Fed., from Federal Reserve Bank 500 of St. Louis. 400 300 200 100 0 –100 1940 1950 1960 1970 1980 1990 2000 2010 Shaded areas indicate US recessions. 2009 research.stlouisfed.org  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 11 figuRe 1-3 case-shiller 200 Home Price indexes June 175 1988–June 2013 Source: Based on Case-Shiller 150 Home Price Indexes June 1988– 125 June 2013, S&P Dow Jones Indices LLC. Accessed Septem- 100 ber 30, 2013. 75 50 25 1990 1995 2000 2005 2010 banking were relaxed. Giant, multinational “financial supermarkets” such as Citibank emerged. With fewer regulations, more businesses and consumers were soon deeply in debt. Homebuyers bought homes with little money down. Banks freely lent money to developers to build more homes. For almost 20 years, U.S. consumers spent more than they earned. The United States became a debtor nation. Its balance of pay- ments (exports minus imports) went from a healthy positive $3.5 billion in 1960, to a huge minus (imports exceeded exports) $497 billion deficit more recently.31 The only way the country could keep buying more from abroad than it sold was by borrowing money. So, much of the boom was built on debt. Around 2007, all those years of accumulating debt ran their course. Banks and other financial institutions found themselves owning trillions of dollars of worthless loans. Governments stepped in to try to prevent their collapse. Lending dried up. Many businesses and consumers stopped buying. The economy tanked. Economic trends are pointing up today, and hopefully they will continue to do so. For example, the unemployment rate had fallen from a high of more than 10% a few years ago to around 5% in 2015, and economic activity was also picking up. However, that doesn’t necessarily mean clear sailing for the economy. For one thing, the “Great Recession” of 2007–2009 certainly grabbed everyone’s attention. After seeing the economy tank the way it did, many companies became hesitant to spend a lot expanding factories and equipment. The financial meltdown and writ- ing off excessive debt left banks reluctant to make new loans, so prospective small business owners find it hard to start new businesses. With their mortgages (often still) underwater, their credit card and tuition loan debts still hanging over them, and many still without good jobs, consumers are understandably wary about pulling out all the stops when it comes to spending.32 The Federal Reserve Board, which sup- ported economic expansion after the Great Recession, began reducing support in 2014 (because the economy was looking better, and because of the huge debts it had run up supporting the recovery). At the same time, productivity increases are slow- ing, which may further retard economic growth.33 And after what the world went through in 2007–2009, it’s doubtful that the deregulation, leveraging, and globaliza- tion that drove economic growth for the previous 50 years will continue unabated. lABoR foRce tRends Complicating all this is the fact that the labor force in America is growing more slowly than expected (which is not good, because if employers can’t get enough workers, they can’t expand). To be precise, the Bureau of Labor Statistics projects the labor force to grow at 0.5% per year 2012 to 2022, compared with an annual growth rate of 0.7% during the 2002–2012 decade.34 Why the slower labor force growth? Mostly because with baby boomers aging, the “labor force participation rate” is declining—in other words, the percent of the population that wants to work is declining. Add it all up, and the bottom line looks to be slower economic growth ahead. The Bureau of Labor Statistics projects that gross domestic product (GDP) will increase by 2.6% annually from 2012 to 2022, slower than the 3% 12 Part 1 introduCtion or higher that more or less prevailed from the mid-1990s through the mid-2000s.35 One study of 35 large global companies’ senior human resource officers said “talent management”—the acquisition, development and retention of talent to fill the companies’ employment needs—ranked as their top concern.36 tHe unBAlAnced lABoR foRce There is other economic news. Although the unemployment rate is dropping, it’s doing so in part because fewer people are looking for jobs (remember the shrinking labor participation rate). Furthermore, demand for workers is unbalanced; for example, an “average” unemployment rate of, say, 5% masks the fact that the unemployment rate for, say, recent college graduates was much higher, while that of software engineers was much lower.37 In fact, almost half of employed U.S. college graduates are in jobs that generally require less than a four- year college education.38 Why did this happen? In brief, because most of the jobs that the economy added in the past few years don’t require college educations, and the Bureau of Labor Statistics says that will probably continue. Occupations that do not typically require postsecondary education employed nearly two-thirds of workers a few years ago.39 And, “two-thirds of the 30 occupations with the largest projected employment increases from 2012 to 2022 typically do not require postsecondary education for entry.”40 The result is an unbalanced labor force: in some occupations (such as high-tech) unemployment rates are low, while in others unemployment rates are still very high; recruiters in many companies can’t find candidates, while in others there’s a wealth of candidates41; and many people working today are in jobs “below” their expertise (which may or may not help to explain why about 70% of employees report being psychologically disengaged at work). In any case, slow growth and labor unbalances mean more pressure on employers (and their human resource managers and line managers) to get the best efforts from their employees. Technology Trends However, it may be technology that most characterizes the trends shaping human resource management today.42 For example, the consulting firm Accenture estimates that social media connections via tools like LinkedIn will soon produce as many as 80% of new recruits—often letting line managers bypass the human resource manage- ment unit.43 Five main types of digital technologies are driving this transfer of functional- ity from HR professionals to automation. Employers increasingly use social media tools such as Twitter, Facebook, and LinkedIn (rather than, say, as many employ- ment agencies) to recruit new employees. Employers use new mobile applications, for instance, to monitor employee location and to provide digital photos at the facility clock-in location to identify workers. The feedback, fun, and objectives inherent in gaming support many new training applications, and websites such as Knack, Gild, and True Office enable employers to inject gaming features into training, perfor- mance appraisal, and recruiting. Cloud computing and more intuitive user interfaces enable employers to monitor and report on things like a team’s goal attainment and to provide real-time evaluative feedback. Finally, data analytics basically means using statistical techniques, algorithms, and problem-solving to identify relation- ships among data for the purpose of solving particular problems (such as what are the ideal candidate’s traits, or how can I tell in advance which of my best employees is likely to quit?). When applied to human resource management, data analytics is called talent analytics. As one example, talent analytics is revolutionizing how employers look for job candidates. For example, one employer reportedly operated for many years on the assumption that what mattered was the school the candidate attended, the grades they had, and their references. A retrospective talent analytics study showed that these traits didn’t matter at all. What mattered were things like: their résumés were grammatically correct, they didn’t quit school until obtaining some degree, they were successful in prior jobs, and they were able to succeed with vague instructions.44  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 13 Technological change is also affecting the nature of jobs.45 When someone thinks of “tech jobs,” jobs at Apple and Google come to mind, but technology affects all sorts of jobs. At Alcoa’s Davenport Works plant in Iowa, a computer at each work station helps each employee control his or her machines or communicate data. One former college student became a team leader in a plant with automated machines. He and his team type commands into computerized machines that create precision parts.46 As another example, about 17 million people now use information technol- ogy to work from remote locations at least once per month. “Co-working sites” offer freelance workers office space and access to Wi-Fi and office equipment.47 Today’s New Human Resource Management A Brief History of Personnel/Human Resource Management LEARNING OBJECTIVE 1-3 Briefly describe “distributed HR” “Personnel management” is not new.48 Ancient armies and organized efforts always and other important aspects of required attracting, selecting, training, and motivating workers. But personnel tasks human management today. like these were mostly just part of every manager’s job, something that lasted in most countries until the late 1800s. At that time, labor problems began arising in many of the post–industrial revolution’s new factories. Soon employers were setting up “welfare offices” and “welfare secretaries” to manage activities like factory wash- rooms, and “safety bureaus” to oversee plant safety. By 1900, employers set up the first “hiring offices,” training programs, and factory schools. Personnel management had begun. In these early firms, personnel managers took over hiring and firing from super- visors, ran the payroll departments, and administered benefits plans. As expertise in testing emerged, personnel departments played a greater role in employee selection and training.49 New union laws in the 1930s added “Helping the employer deal with unions” to personnel’s tasks. New equal employment laws in the 1960s made employ- ers more reliant on personnel management to avoid discrimination claims.50 By the 1970s globalization made gaining a competitive edge through engaged employees— and therefore personnel management—increasingly important. Today economic and demographic trends (recall the diminishing workforce participation rate and aging population, for instance) make finding, hiring, and motivating employees more challenging, while more high tech and service jobs means employers must excel at managing employees’ knowledge, skills, and expertise (human capital) through aptly renamed human resource management departments. Furthermore, as we’ve seen, technological trends including mobile and social media are changing how employers recruit, select, train, appraise, and motivate employees.51 In a sense, a new human resource management is emerging. We’ll look at this next. Distributed HR and the New Human Resource Management Perhaps most importantly, more and more human resource management tasks are now being redistributed from a central HR department to the company’s employees and line managers, thanks to digital technologies like mobile phones and social media.52 For example, employees at Washington-based LivingSocial use a digital tool called Rypple to comment on each other’s work. LivingSocial then uses these com- ments as an input to its formal employee appraisals. Similarly, hiring managers in some companies bypass human resource management to find candidates directly via LinkedIn. At Google, when someone applies for a job, his or her information goes into a system that matches the recruit with current Google employees based on inter- ests and experiences. In a process Google calls “crowdsourcing,” Google employees then get a big say in who Google hires. Some experts say that if current trends continue, many aspects of HR and talent management will become “fully embedded in how work gets done throughout an organization [distributed], thereby becoming an everyday part of doing business.”53 So, somewhat ironically, we seem to be shifting in some respects back toward the time before the first personnel departments when line managers did more of the  14 Part 1 introduCtion personnel tasks. As an example, Hilton Worldwide is placing more HR activities in the hands of employees, while redirecting the savings thus attained to building up the more strategic aspects of what its human resource managers do.54 In the following chapters, we’ll use Trends Shaping HR features like the accompanying one to present more examples. Trends shaping hr: DIGITAL AND SOCIAL MEDIA Digital and social media tools and the new human resource management. Digital and social media tools are changing how people look for jobs, and how com- panies recruit, retain, pay, and train employees. In doing so, they’ve transformed the practice of human resource management, and created, in a sense, a new human resource management. Here are some examples. Career sites now make the inner workings of employers more transparent than they’ve ever been.55 Sites such as Glassdoor, CareerBliss, CareerLeak, and JobBite let their members share insights into hundreds of thousands of employers, includ- ing specific company-by-company commentaries, salary reports, and CEO approval ratings. According to one report, 48% of job seekers surveyed said they’ve used Glassdoor during their job search, including checking before apply- ing for employment at a company.56 Among other things, such trans- parency prompted sensible human resource (and other) managers to redouble their efforts to ensure that their internal processes (such as promotion decisions, pay allocations, and performance appraisals) are fair, and that their recruitment processes are civil—for instance, by responding to rejected job candidates and providing them with some closure. Recruitment is one of the most familiar ways that digital and social media revolutionized human resource management. For exam- ple, as we’ll see in Chapter 5, managers use LinkedIn to find passive employment candidates (those not actively looking for jobs), and to check out active candidates. Another site, Gild, lets managers find skilled software engineers by searching the Web for open source code, and then evaluating the code’s programmers in part by scanning tech- nology forums to assess the programmers’ reputations. Talent analytics algorithms help managers improve employee retention. They do this, for example by identifying the factors (such Photosindia.com/getty images as experience, career advancement, performance reviews, compensa- tion, and even a surge in activity on social media sites) that flag high- potential employees who are more likely to leave. To improve training, talent analytics tools synthesize information from learning management systems (such as training courses taken) and customer management systems (such as each salesperson’s sales performance) to identify which training courses have the biggest impact, and why. Like many employers, Rather than just matching mentors and protégés informally, new, eHarmony- Hilton Worldwide is type tools let managers match them also based on personality. “distributing HR”—placing And with about 70% of all openings now available online, new analytical tools more HR activities in the scrutinize online job ads and identify hiring trends by industry and occupation, and hands of employees. real-time competitive pay and benefits information. A Quick Summary We can summarize important trends to this point as follows: One big consequence of globalized competition, economic and demographic trends, and the shift to high-tech and service jobs is the growing emphasis by employers on getting the best from their “human capital,” in other words, from their workers’ knowledge, education, training, skills, and expertise.  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 15 figuRe 1-4 what trends Trends: Mean for Human Resource Economic Management global workforce technological Distributed Employers HR focus on “Human Capital” HR focus on Line managers HR more responsible employee manager for HR tasks performance, more time to engagement, focus on and HR strategy This requires, among other things, using human resource methods to improve employee performance and engagement. Thanks to digital devices and social media, employers are shifting (distributing) more HR tasks from central human resource departments to employees and line managers. This gives many line managers more human resource management responsibilities. And this means that many human resource managers can refocus their efforts from day-to-day activities like interviewing candidates to broader efforts, such as formulating strategies for boosting employee performance and engagement. Figure 1-4 illustrates this. We’ll look next at human resource management’s roles in strategy, performance, and employee engagement next. HR and Strategy strategic human resource management First, today’s human resource managers are focusing more on longer term, strategic Formulating and executing human “big picture” issues. We’ll see in Chapter 3 (Strategy) that strategic human resource resource policies and practices that management means formulating and executing human resource policies and prac- produce the employee competencies tices that produce the employee competencies and behaviors the company needs and behaviors the company needs to to achieve its strategic aims. We illustrate this throughout this book with Strategic achieve its strategic aims. Context features such as the accompanying one. IMPROVING PERFORMANCE: The Strategic Context Building L.L.Bean Strategic human resource management means formulating and executing human resource policies and practices that produce the employee competencies and behaviors the company needs to achieve its stra- tegic aims. L.L.Bean illustrates how companies do this. The heart of L.L.Bean’s strategy has always been offer- ing great outdoor equipment with outstanding service and expert advice. As its company history said, “L.L.Bean, Inc., quickly established itself as a trusted source for reliable outdoor equipment and expert advice. The small company grew. Customers spread the word of L.L.Bean’s quality and service.”57 16 Part 1 introduCtion To provide such service, L.L.Bean needs special people as employees, ones whose love of the outdoors helps them deal knowledgably and supportively with the company’s customers. To paraphrase its Website, L.L.Bean is looking for a special type of employee, one (like its customers) who loves the outdoors, and the company therefore treats its employees just as well as it famously treat its customers.58 L.L.Bean’s HR policies and practices attract and develop just such employees. For one thing, the com- pany knows just who to recruit for. It wants sociable, friendly, experienced, outdoors-oriented applicants and employees.59 To attract and cultivate these sorts of employee competencies and behaviors, the com- pany uses multiple interviews to screen out applicants who might not fit in. And L.L.Bean offers an out- doors-oriented work environment and competitive pay and benefits. It was a Fortune “100 Best Companies to Work For” employer in 2015. To help encourage great employee service, L.L.Bean also provides a supportive environment. For ex- ample, when its Web sales recently for the first time exceeded phone sales, L.L.Bean closed four local call centers, but arranged for the 220 employees to work from their homes. And instead of sending jobs abroad, the company keeps its jobs close to the town where Leon Leonwood Bean started his company almost 100 years ago.60 L.L.Bean’s managers built the firm’s strategy and success around courteous, expert service. They know that having the right employees is the key to its success, and that it takes the right blend of human resource practices to attract and nurture such employees. Source: Based on “Our Story”, L.L.Bean, pp. 1-19, from www.llbean.com/customerService/aboutLLBean/images/ 110408_About-LLB.pdf; www.llbean.com/; Michael Arndt, “L.L.Bean Follows Its Shoppers to the Web,” Busi- ness Week, March 1, 2010. http://www.llbean.com/llb/shop/515428. If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete these discussion questions. talk About it 2: What would you say are (1) L.L.Bean’s strategic aims, (2) its required employee behaviors and skills to achieve these aims, and (3) HR policies and practices it needs to produce these necessary employee behaviors and skills? As in the Strategic Context feature, today’s employers want their HR managers to put in place practices that will produce the employee behaviors that help the com- pany achieve its strategic aims. We use a model opening each chapter to illustrate this idea, but in brief the model follows this three-step sequence: Set the firm’s strategic aims → Pinpoint the employee behaviors and skills we need to achieve these strategic aims → Decide what HR policies and practices will enable us to produce these neces- sary employee behaviors and skills. HR and Performance Employers also expect their human resource manager/“people experts” to spearhead employee performance-improvement efforts. Here they can apply three levers. The first is the HR department lever. The HR manager ensures that the human resource management function is delivering services efficiently. For example, this might include outsourcing certain activities such as benefits management, and using tech- nology to deliver its services more cost-effectively. The second is the employee costs lever. For example, the human resource manager takes a prominent role in advising top management about the company’s staffing levels, and in setting and controlling the firm’s compensation, incentives, and benefits policies. The third is the strategic results lever. Here the HR manager puts in place the pol- icies and practices that produce the employee competencies and skills the company needs to achieve its strategic goals. That’s what was done at L.L.Bean, for instance. HR And PeRfoRMAnce MeAsuReMent Improving performance requires measuring what you are doing. For example, when IBM’s former chief HR officer needed $100 million to reorganize its HR operations several years ago, he told top management, “I’m going to deliver talent to you that’s skilled and on time and ready to be deployed. I will be able to measure the skills, tell you what skills we have, what [skills] we don’t have [and] then show you how to fill the gaps or enhance our training.”61 Human resource managers use performance measures (or “metrics”) to validate claims like these. For example, median HR expenses as a percentage of companies’ total operating costs average just under 1%.62 We’ll address this in Chapter 3.  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 17 HR And evidence-BAsed MAnAgeMent Basing decisions on such evidence is the heart of evidence-based human resource management. This is the use of data, facts, analytics, scientific rigor, critical evaluation, and critically evaluated research/case studies to support human resource management proposals, decisions, practices, and conclusions.63 Put simply, evidence-based human resource management means using the best-available evidence in making decisions about the human resource management practices you are focusing on.64 The evidence may come from actual measurements (such as, how did the trainees like this program?). It may come from existing data (such as, what happened to company profits after we installed this training program?). Or, it may come from published research studies (such as, what does the research literature conclude about the best way to ensure that trainees remember what they learn?). Sometimes, companies translate their findings into what management gurus call high-performance work systems, “sets of human resource management practices that together produce superior employee performance.”65 For example, at GE’s assembly plant in Durham, North Carolina, highly trained self-directed teams produce high- precision aircraft parts. We’ll also discuss how they do this in Chapter 3. HR And Adding vAlue The bottom line is that today’s employers want their human resource managers to add value by boosting profits and performance. Professors Dave Ulrich and Wayne Brockbank describe this as the “HR Value Proposition.”66 They say human resource programs (such as benefits plans) are just a means to an end. The HR manager’s ultimate aim must be to add value. Adding value means helping the firm and its employees improve in a measurable way as a result of the human resource manager’s actions. We’ll see in this book how human resource practices do this. For example, we’ll use, in each chapter, HR as a Profit Center features like the one on page 9 to illustrate this. HR and Performance and Sustainability In a world where sea levels are rising, glaciers are crumbling, and people increas- ingly view financial inequity as offensive, more and more people say that businesses can’t just measure “performance” in terms of maximizing profits. They argue that companies’ efforts should be “sustainable,” by which they mean judged not just on profits, but on their environmental and social performance as well.67 As one example, PepsiCo has a goal to deliver “Performance with Purpose”—in other words, to deliver financial performance while also achieving human sustainability, environ- mental sustainability, and talent sustainability. PepsiCo wants to achieve business and financial success while leaving a positive imprint on society (click www.pepsico. com, then click What We Believe, and then Performance with Purpose). In one sur- vey, about 80% of large surveyed companies report their sustainability performance.68 We’ll see that sustainability trends have important consequences for human resource management. HR and Employee Engagement employment engagement Employee engagement refers to being psychologically involved in, connected to, The extent to which an organiza- and committed to getting one’s jobs done. Engaged employees “experience a high tion’s employees are psychologi- level of connectivity with their work tasks,” and therefore work hard to accomplish cally involved in, connected to, and their task-related goals.69 committed to getting their jobs Employee engagement is important because it drives performance. For example done. (as we will discuss in Chapter 3), based on one Gallup survey, business units with the highest levels of employee engagement have an 83% chance of performing above the company median; those with the lowest employee engagement have only a 17% chance.70 A survey by consultants Watson Wyatt Worldwide concluded that companies with highly engaged employees have 26% higher revenue per employee.71 The problem for employers is that, depending on the study, only about 21–30% of today’s employees nationally are engaged.72 In one survey, about 30% were engaged, 50% were not engaged, and 20% were actively disengaged (anti-management).73 18 Part 1 introduCtion We will see in this book that managers improve employee engagement by taking concrete steps to do so. For example, a few years ago, Kia Motors (UK) turned its performance around, in part by boosting employee engagement.74 As we will discuss more fully in Chapter 3, it did this with new HR programs. These included new lead- ership development programs, new employee recognition programs, improved internal communications programs, a new employee development program, and by modifying its compensation and other policies. We use special Employee Engagement Guide for Managers sections in most chapters to show how managers use human resource activities such as recruiting and selection to improve employee engagement. The New Human Resource Manager It’s more complicated being a human resource manager today.75 Tasks like formu- LEARNING OBJECTIVE 1-4 lating strategic plans and making data-based decisions require new competencies List at least four important and skills. HR managers can’t just be good at traditional personnel tasks like hiring human resource manager competencies. and training. Instead, they must “speak the CFO’s language” by defending human resource plans in measurable terms (such as return on investment).76 To create strategic plans, the human resource manager must understand strategic planning, marketing, production, and finance.77 As companies merge and expand abroad, they must be able to formulate and implement large-scale organizational changes, drive employee engagement, and redesign organizational structures and work processes. None of this is easy. When asked, “Why do you want to be an HR manager?” many people basically say, “Because I’m a people person.” Being sociable is certainly important, but it takes much more. What does it take to be a human resource manager today? Recently, the Society for Human Resource Management (SHRM) introduced a new “competency model” (called the SHRM Body of Competency and Knowledge™); it itemizes the competencies, skills, and knowledge and expertise human resource managers need. Here are the behaviors or competencies (with definitions) SHRM says today’s HR manager should be able to exhibit: Leadership & Navigation The ability to direct and contribute to initiatives and processes within the organization. Ethical Practice The ability to integrate core values, integrity, and accountabil- ity throughout all organizational and business practices. Business Acumen The ability to understand and apply information with which to contribute to the Organization’s strategic plan. Relationship Management The ability to manage interactions to provide ser- vice and to support the organization. Consultation The ability to provide guidance to organizational stakeholders. Critical Evaluation The ability to interpret information with which to make business decisions and recommendations. Global & Cultural Effectiveness The ability to value and consider the perspec- tives and backgrounds of all parties. Communication The ability to effectively exchange information with stakeholders. SHRM also says human resource managers must have command of the basic knowl- edge in the functional areas of HR, such as employee relations. The basic knowledge of principles, practices, and functions they need here should cover: Functional Area #1: Talent Acquisition & Retention Functional Area #2: Employee Engagement Functional Area #3: Learning & Development Functional Area #4: Total Rewards Functional Area #5: Structure of the HR Function Functional Area #6: Organizational Effectiveness & Development Functional Area #7: Workforce Management  ChaPtEr 1 introduCtion to huMan rEsourCE ManagEMEnt 19 HR managers can’t just be good at traditional personnel tasks like hiring and training, but must “speak the CFo’s language” by defending human resource plans in measurable terms. Dmitriy Shironosov/Alamy Functional Area #8: Employee Relations Functional Area #9: Technology & Data Functional Area #10: HR in the Global Context Functional Area #11: Diversity & Inclusion Functional Area #12: Risk Management Functional Area #13: Corporate Social Responsibility Functional Area #14: U.S. Employment Law & Regulations Functional Area #15: Business & HR Strategy HR and the Manager’s Skills The aim of this book is to help every manager develop the skills he or she needs to carry out the human resource management–related aspects of his or her job, such as recruiting, selecting, training, appraising, and incentivizing employees, and provid- ing them with a safe and fulfilling work environment.78 Special HR Tools for Line Managers and Small Businesses features provide small business owners/managers in particular with techniques to better manage their small businesses. Know Your Employment Law features highlight the practical information all managers need to make better HR-related decisions that work. Employee Engagement Guide for Managers features show how managers improve employee engagement. HR and Ethics Regrettably, news reports today are filled with stories of otherwise competent man- agers who have run amok. For example, prosecutors filed criminal charges against several Iowa meatpacking plant human resource managers who allegedly violated employment law by hiring children younger than 16.79 Behaviors like these risk torpedo- ethics ing even otherwise competent managers and employers. Ethics means the standards The principles of conduct governing someone uses to decide what his or her conduct should be. We will see that many seri- an individual or a group; specifically, ous workplace ethical issues—workplace safety and employee privacy, for instance— the standards you use to decide are human resource management related.80 what your conduct should be. HR Manager Certification Many human resource managers use certification to demonstrate their mastery of contemporary human resource management knowledge and competencies. Managers have, at this writing, at least two testing processes to achieve certification. 20 Part 1 introduCtion The oldest is administered by the HR Certification Institute (HRCI), an inde- pendent certifying organization for human resource professionals (see www.hrci.org). Through testing, HRCI awards several credentials, including Professional in Human Resources (PHR), and Senior Professional in Human Resources (SPHR). Managers can review HRCI’s Knowledge Base and take an online HRCI practice quiz by going