Chapter 8 Managing Human Resources in Organizations PDF

CHAPTER 8 Managing Human Resources in Organizations Sergii Ts...

CHAPTER 8 Managing Human Resources in Organizations Sergii Tsololo/Photos.com Learning Outcomes After studying this chapter, you should be able to: 1 Describe the environmental context of human resource management, including its strategic importance and its relationship with legal and social factors. 2 Discuss how organizations attract human resources, including human resource planning, recruiting, and selecting. 3 Describe how organizations develop human resources, including training and development, performance appraisal, and performance feedback. 4 Discuss how organizations maintain human resources, including the determination of compensation and benefits and career planning. 5 Discuss the nature of diversity, including its meaning, associated trends, impact, and management. 6 Describe labor relations, including how employees form unions and the mechanics of collective bargaining. 7 Describe the issues associated with managing knowledge and contingent and temporary workers. Management in Action No Company for Old-Fashioned Management “Anything that requires knowledge and service gives us a reason to be.” —Danny Wegman, CEO of Wegmans Food Markets If you’re looking for the best Parmesan cheese for your chicken parmigiana recipe, you might try Wegmans, especially if you happen to live in the vicinity of Pittsford, New York. Cheese department manager Carol Kent will be happy to recommend the best brand because her job calls for knowing cheese, as well as managing some 20 subordinates. Kent is a knowledgeable employee, and knowledgeable employees, says Wegmans CEO Danny Wegman, are “something our competitors don’t have and our customers couldn’t get anywhere else.” Wegmans Food Markets, a family-owned East Coast chain with nearly 80 outlets in six states, prides itself on its commitment to customers, and it shows: It ranks at the top of the latest Consumer Reports survey of the best national and regional grocery stores. But commitment to customers is only half of Wegmans’s overall strategy, which calls for reaching its customers 223 www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 224 Part 3: Organizing The Washington Post/Getty Images Wegmans has achieved success by building a long-term mutually beneficial relationship with its employees. This Wegmans fish department manager is explaining cooking options for wild-caught swordfish to a customer. through its employees. “How do we differentiate ourselves?” asks Wegman, who then proceeds to answer his own question: “If we can sell products that require knowledge in terms of how you use them, that’s our strategy. Anything that requires knowledge and service gives us a reason to be.” That’s the logic behind one of Carol Kent’s recent assignments—one which she understandably regards as a perk: Wegmans sent her to Italy to conduct a personal study of Italian cheese. “We sat with the families” that make the cheeses, she recalls, and “broke bread with them. It helped me understand that we’re not just selling a piece of cheese. We’re selling a tradition, a quality.” Kent and the employees in her department also enjoy the best benefits package in the industry, including fully paid health insurance. And that includes part-timers, who make up about two-thirds of the company’s workforce of more than 37,000. In part, the strategy of extending benefits to this large segment of the labor force is intended to make sure that stores have enough good workers for crucial peak periods, but there’s no denying that the costs of employee-friendly policies can mount up. At 15 to 17 percent of sales, for example, Wegmans’ labor costs are well above the 12 percent figure for most supermarkets. But according to one company HR executive, holding down labor costs isn’t necessarily a strategic priority: “We would have stopped offering free health insurance [to part-timers] a long time ago,” she admits, “if we tried to justify the costs.” Besides, employee turnover at Wegmans is about 6 percent—a mere fraction of an industry average that hovers around 19 percent (and can www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Chapter 8: Managing Human Resources in Organizations 2 2 5 approach 100 percent for part-timers). And this is an industry in which total turnover costs have been known to outstrip total annual profits by 40 percent. Wegmans employees tend to be knowledgeable because about 20 percent of them have been with the company for at least ten years, and many have logged at least a quarter century. Says one 19-year-old college student who works at an upstate New York Wegmans while pursuing a career as a high school history teacher, “I love this place. If teaching doesn’t work out, I would so totally work at Wegmans.” Edward McLaughlin, who directs the Food Industry Management Program at Cornell University, understands this sort of attitude: “When you’re a 16-year-old kid, the last thing you want to do is wear a geeky shirt and work for a supermarket,” but at Wegmans, he explains, “it’s a badge of honor. You’re not a geeky cashier. You’re part of the social fabric.” In 2012, Wegmans placed fifth in Fortune magazine’s annual list of “100 Best Companies to Work For”—good for 14 consecutive years on the list and seven straight top-seven finishes. “It says that we’re doing something right,” says a company spokesperson, “and that there’s no better way to take care of our customers than to be a great place for our employees to work.” In addition to its health-care package, Wegmans has been cited for such perks as fitness center discounts, compressed workweeks, telecommuting, and domestic-partner benefits (which extend to same-sex partners). Finally, under the company’s Employee Scholarship Program, full-time workers can receive up to $2,200 a year for four years and part-timers up to $1,500. Since its inception in 1984, the program has handed out over $76 million in scholarships to more than 23,500 employees. Like most Wegman policies, this one combines employee outreach with long-term corporate strategy: “This program has made a real difference in the lives of many young people,” says President Colleen Wegman, who adds that it’s also “one of the reasons we’ve been able to attract the best and the brightest to work at Wegmans.” Granted, Wegmans, which has remained in family hands since its founding in 1915, has an advantage in being as generous with its resources as its family of top executives wants to be: It doesn’t have to do everything with quarterly profits in mind, and the firm likes to point out that taking care of its employees is a long-standing priority. Profit sharing and fully funded medical coverage were introduced in 1950 by Robert Wegman, son and nephew of brothers Walter and John, who opened the firm’s original flagship store in Rochester, New York, in 1930. Why did Robert Wegman make such generous gestures to his employees way back then? “Because,” he says simply, “I was no different from them.”1 This chapter is about how organizations manage the people that comprise them. That’s why our opening story is about a company that’s reaped big dividends from a strategy that integrates customer satisfaction with employee satisfaction. The set of processes by which Wegmans and other companies manage their people is called “human resource management,” or HRM. We start by describing the environmental context of HRM. We then discuss how organizations attract human resources. Next, we describe how organi- zations seek to further develop the capacities of their human resources. We also examine www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 226 Part 3: Organizing how high-quality human resources are maintained by organizations. We conclude by discussing workforce diversity, labor relations, and new challenges in the changing workplace. THE ENVIRONMENTAL CONTEXT OF HRM human resource Human Resource Management (HRM) is the set of organizational activities directed at management (HRM) attracting, developing, and maintaining an effective workforce.2 HRM takes place within The set of a complex and ever-changing environmental context. Three particularly vital compo- organizational nents of this context are HRM’s strategic importance and the legal and social environ- activities directed at ments of HRM. attracting, developing, and The Strategic Importance of HRM maintaining an effective workforce Human resources are critical for effective organizational functioning. HRM (or “person- nel,” as it is sometimes called) was once relegated to second-class status in many organi- zations, but its importance has grown dramatically in the last two decades. Its new importance stems from increased legal complexities, the recognition that human resources are a valuable means for improving productivity, and the awareness today of the costs associated with poor HRM.3 For example, Microsoft recently announced that it was eliminating 5,000 jobs in business areas that are expected to shrink. At the same time, though, the firm began developing strategies for hiring high-talent people for jobs related to Internet search, an important growth area for the company.4 This careful and systematic approach of reducing human resources in areas where they are no longer needed and adding new human resources to key growth areas reflects a strategic approach to HRM. Indeed, managers now realize that the effectiveness of their HR function has a substantial impact on the bottom-line performance of the firm. Poor human resource planning can result in spurts of hiring followed by layoffs—costly in terms of unemployment compensation payments, training expenses, and morale. Haphazard compensation systems do not attract, keep, or motivate good employees, and outmoded recruitment practices can expose the firm to expensive and embarrassing discrimination lawsuits. Consequently, the chief human resource executive of most large businesses is a vice president directly accountable to the CEO, and many firms are developing strategic HR plans and integrating those plans with other strategic planning activities.5 Even organizations with as few as 200 employees usually have a human resource manager and a human resource department charged with overseeing these activities. Responsibility for HR activities, however, is shared between the HR department and line managers. The HR department may recruit and initially screen candidates, but the final selection is usually made by managers in the department where the new employee will work. Similarly, although the HR department may establish performance appraisal policies and procedures, the actual evaluation and coaching of employees are done by their immediate superiors. human capital Reflects the The growing awareness of the strategic significance of HRM has even led to new organization’s terminology to reflect a firm’s commitment to people. Human capital reflects the orga- investment in nization’s investment in attracting, retaining, and motivating an effective workforce. attracting, retaining, Hence, just as the phrase financial capital is an indicator of a firm’s financial resources and motivating an and reserves, so, too, does human capital serve as a tangible indicator of the value of the effective workforce people who comprise an organization.6 www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Chapter 8: Managing Human Resources in Organizations 2 2 7 The Legal Environment of HRM A number of laws regulate various aspects of employee–employer relations, especially in the areas of equal employment opportunity, compensation and benefits, labor relations, and occupational safety and health. Several major ones are summarized in Table 8.1. As much as any area of management, The Legal Environment HRM is subject to Table 8.1 of Human Resource Management wide-ranging laws and court decisions. Equal Employment Opportunity These laws and Title VII of the Civil Rights Act of 1964 (as amended by the Equal Employment decisions affect the Opportunity Act of 1972): Forbids discrimination in all areas of the employment human resource relationship function in many areas. For example, Age Discrimination in Employment Act: Outlaws discrimination against people AT&T was once older than 40 years. fined several million Various executive orders, especially Executive Order 11246 in 1965: dollars for violating Requires employers with government contracts to engage in affirmative action Title VII of the Civil Rights Act of 1964. Pregnancy Discrimination Act: Specifically outlaws discrimination on the basis of pregnancy Vietnam Era Veterans Readjustment Assistance Act: Extends affirmative action mandate to military veterans who served during the Vietnam War Americans with Disabilities Act: Specifically outlaws discrimination against disabled persons Civil Rights Act of 1991: Makes it easier for employees to sue an organization for discrimination but limits punitive damage awards if they win Compensation and Benefits Fair Labor Standards Act: Establishes minimum wage and mandated overtime pay for work in excess of 40 hours per week Equal Pay Act of 1963: Requires that men and women be paid the same amount for doing the same job Employee Retirement Income Security Act of 1974 (ERISA): Regulates how organizations manage their pension funds Family and Medical Leave Act of 1993: Requires employers to provide up to 12 weeks of unpaid leave for family and medical emergencies Labor Relations National Labor Relations Act: Spells out procedures by which employees can establish labor unions and requires organizations to bargain collectively with legally formed unions; also known as the Wagner Act Labor Management Relations Act: Limits union power and specifies management rights during union-organizing campaign; also known as the Taft–Hartley Act © Cengage Learning Health and Safety Occupational Safety and Health Act of 1970 (OSHA): Mandates the provision of safe working conditions www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 228 Part 3: Organizing Title VII of the Civil Equal Employment Opportunity Title VII of the Civil Rights Act of 1964 This Rights Act of 1964 law forbids discrimination in all areas of the employment relationship. The intent of Forbids discrimin- Title VII of the Civil Rights Act of 1964 is to ensure that employment decisions are ation on the basis of made on the basis of an individual’s qualifications rather than on the basis of personal sex, race, color, biases. The law has reduced direct forms of discrimination (such as refusing to promote religion, or national African Americans into management, failing to hire men as flight attendants, or refusing origin in all areas of to hire women as construction workers) as well as indirect forms of discrimination (such the employment as using employment tests that whites pass at a higher rate than African Americans). relationship Employment requirements such as test scores and other qualifications are legally defined as having an adverse impact on minorities and women when such individuals adverse impact meet or pass the requirement at a rate less than 80 percent of the rate of majority When minority group members. Criteria that have an adverse impact on protected groups can be used group members meet or pass a only when there is solid evidence that they effectively identify individuals who are better selection standard at able than others to do the job. The Equal Employment Opportunity Commission is a rate less than 80 charged with enforcing Title VII as well as several other employment-related laws. percent of the pass The Age Discrimination in Employment Act, passed in 1967, amended in 1978, and rate of majority amended again in 1986, is an attempt to prevent organizations from discriminating group members against older workers. In its current form, it outlaws discrimination against people older than 40 years. Both the Age Discrimination in Employment Act and Title VII Equal Employment require passive nondiscrimination, or equal employment opportunity. Employers are Opportunity not required to seek out and hire minorities, but they must treat all who apply fairly. Commission As much as any area of management, HRM is subject to wide-ranging laws and court Charged with decisions. These laws and decisions affect the human resource function in many areas. enforcing Title VII of For example, AT&T was once fined several million dollars for violating Title VII of the the Civil Rights Act of Civil Rights Act of 1964. 1964 Several executive orders, however, require that employers holding government con- tracts engage in affirmative action—intentionally seeking and hiring employees from Age Discrimination groups that are underrepresented in the organization. These organizations must have a in Employment Act written affirmative action plan that spells out employment goals for underutilized groups Outlaws and how those goals will be met. These employers are also required to act affirmatively discrimination in hiring Vietnam-era veterans (as a result of the Vietnam Era Veterans Readjustment against people older Assistance Act) and qualified disabled individuals. Finally, the Pregnancy Discrimination than 40 years; passed in 1967, amended in Act forbids discrimination against women who are pregnant. 1978 and 1986 In 1990, Congress passed the Americans with Disabilities Act, which forbids dis- crimination on the basis of disabilities and requires employers to provide reasonable affirmative action accommodations for disabled employees. More recently, the Civil Rights Act of 1991 Intentionally seeking amended the original Civil Rights Act as well as other related laws by both making it and hiring qualified easier to bring discrimination lawsuits (which partially explains the aforementioned or qualifiable backlog of cases) and limiting the amount of punitive damages that can be awarded in employees from those lawsuits. racial, sexual, and ethnic groups that are Compensation and Benefits Certain laws also regulate compensation and benefits. underrepresented in The Fair Labor Standards Act, passed in 1938 and amended frequently since then, sets a the organization minimum wage and requires the payment of overtime rates for work in excess of 40 hours per week. Salaried professional, executive, and administrative employees are Americans with exempt from the minimum hourly wage and overtime provisions. The Equal Pay Act Disabilities Act of 1963 requires that men and women be paid the same amount for doing the same Forbids job. Attempts to circumvent the law by having different job titles and pay rates for men discrimination and women who perform the same work are also illegal. Basing an employee’s pay on against people with seniority or performance is legal, however, even if it means that a man and woman are disabilities paid different amounts for doing the same job. www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Chapter 8: Managing Human Resources in Organizations 2 2 9 Civil Rights Act of 1991 Amends the original Civil Rights Act, making it easier to bring discrimination lawsuits while also limiting punitive damages Fair Labor Standards Act Sets a minimum wage and requires overtime pay for work in excess of 40 hours per week; passed in 1938 and Marc F. Henning/Alamy amended frequently since then Equal Pay Act of 1963 Requires that men Walmart has been criticized in recent years for its low wages, weak health-care benefits, lack of and women be paid full-time jobs, and other human resource practices. These Walmart employees are protesting some the same amount for of these practices outside the retailer’s home office in Bentonville, Arkansas. doing the same job Employee Retirement Income The provision of benefits is also regulated in some ways by state and federal laws. Security Act of 1974 Certain benefits are mandatory—for example, worker’s compensation insurance for (ERISA) employees who are injured on the job. Employers who provide a pension plan for their A law that sets employees are regulated by the Employee Retirement Income Security Act of 1974 standards for (ERISA). The purpose of this act is to help ensure the financial security of pension pension plan funds by regulating how they can be invested. The Family and Medical Leave Act of 1993 management and requires employers to provide up to 12 weeks of unpaid leave for family and medical provides federal emergencies. insurance if pension In the last few years, some large employers, most notably Walmart, have come under funds go bankrupt fire because they do not provide health care for all their employees. In response to this, Family and Medical the state of Maryland passed a law, informally called the Walmart Bill, that requires Leave Act of 1993 employers with more than 10,000 workers to spend at least 8 percent of their payrolls Requires employers on health care or else pay a comparable amount into a general fund for uninsured workers. to provide up to 12 Walmart appealed this ruling and the case is still pending; meanwhile, several other states weeks of unpaid are considering the passage of similar laws.7 leave for family and medical emergencies Labor Relations Union activities and management’s behavior toward unions constitute another National Labor Relations Act heavily regulated area. The National Labor Relations Act (also known as the Wagner Act), passed in 1935, sets up a procedure for employees to vote on whether Passed in 1935 to set up procedures for to have a union. If they vote for a union, management is required to bargain collec- employees to vote tively with the union. The National Labor Relations Board (NLRB) was established on whether to have a by the Wagner Act to enforce its provisions. Following a series of severe strikes in union; also known as 1946, the Labor-Management Relations Act (also known as the Taft–Hartley Act) the Wagner Act was passed in 1947 to limit union power. The law increases management’s rights during www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 230 Part 3: Organizing National Labor an organizing campaign. The Taft–Hartley Act also contains the National Emergency Strike Relations Board provision, which allows the president of the United States to prevent or end a strike that (NLRB) endangers national security. Taken together, these laws balance union and management Established by the power. Employees can be represented by a legally created and managed union, but the busi- Wagner Act to ness can make non-employee-related business decisions without interference. enforce its provisions Health and Safety The Occupational Safety and Health Act of 1970 (OSHA) directly mandates the provision of safe working conditions. It requires that employers Labor-Management (1) provide a place of employment that is free from hazards that may cause death or Relations Act serious physical harm, and (2) obey the safety and health standards established by the Passed in 1947 to U.S. Department of Labor. Safety standards are intended to prevent accidents, whereas limit union power; occupational health standards are concerned with preventing occupational disease. For also known as the example, standards limit the concentration of cotton dust in the air because this contami- Taft–Hartley Act nant has been associated with lung disease in textile workers. The standards are enforced by OSHA inspections, which are conducted when an employee files a complaint of unsafe Occupational Safety conditions or when a serious accident occurs. Spot inspections of plants in especially and Health Act of hazardous industries such as mining and chemicals are also made. Employers who fail to 1970 (OSHA) meet OSHA standards may be fined. Directly mandates Investigators have been looking into claims that chemical agents in the butter the provision of safe flavoring used in microwave popcorn are harmful to workers where such products working conditions are made. At least 30 workers at one plant in Jasper, Missouri, contracted a rare lung disease, and some doctors believe that it resulted from conditions on their job site. Although federal health officials point out that there is no danger to those cooking or eating microwave popcorn, research is ongoing into potential hazards to those who work in the industry.8 Emerging Legal Issues Several other areas of legal concern have emerged during the past few years. One is sexual harassment. Although sexual harassment is forbidden under Title VII, it has received additional attention in the courts recently, as more and more victims have decided to publicly confront the problem. Another emerging HRM issue is alcohol and drug abuse. Both alcoholism and drug dependence are major problems today. Recent court rulings have tended to define alcoholics and drug addicts as disabled, protecting them under the same laws that protect other disabled people. Finally, AIDS has emerged as an important legal issue as well. AIDS victims, too, are most often protected under various laws protecting the disabled. ATTRACTING HUMAN RESOURCES With an understanding of the environmental context of HRM as a foundation, we are now ready to address its first substantive concern—attracting qualified people who are interested in employment with the organization. Human Resource Planning job analysis The starting point in attracting qualified human resources is planning. HR planning, in A systematized turn, involves job analysis and forecasting the demand and supply of labor. procedure for collecting and Job Analysis Job analysis is a systematic analysis of jobs within an organization. A recording job analysis is made up of two parts. The job description lists the duties of a job, the information about job’s working conditions, and the tools, materials, and equipment used to perform it. jobs within an The job specification lists the skills, abilities, and other credentials needed to do the job. organization Job analysis information is used in many human resource activities. For instance, www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Chapter 8: Managing Human Resources in Organizations 231 knowing about job content and job requirements is necessary to develop appropriate selection methods and job-relevant performance appraisal systems and to set equitable compensation rates. Forecasting Human Resource Demand and Supply After managers fully under- stand the jobs to be performed within the organization, they can start planning for the organization’s future human resource needs. Figure 8.1 summarizes the steps most often followed. The manager starts by assessing trends in past human resource usage, future organizational plans, and general economic trends. A good sales forecast is often the foundation, especially for smaller organizations. Historical ratios can then be used to predict demand for employees such as operating employees and sales representatives. Of course, large organizations use much more complicated models to predict their future human resource needs. Several years ago, Walmart went through an exhaustive planning process that projected that the firm would need to hire 1 million people. Of this pro- jected total, 800,000 were to be new positions created as the firm grows, and the other 200,000 were to replace current workers who were expected to leave for various reasons.9 As time has passed, of course, Walmart adjusted these figures both up and down. But as things turned out, by the end of the forecast period, Walmart did indeed employ about 800,000 more people than when the plan was first completed. Assess trends in External labor markets Current employees Future organizational plans General economic trends Predict demand Forecast internal supply Forecast external supply Compare future demand and internal supply © Cengage Learning Plan for dealing with predicted shortfalls or overstaffing F I G U R E 8.1 Human Resource Planning Attracting human resources cannot be left to chance if an organization expects to function at peak efficiency. Human resource planning involves assessing trends, forecasting supply and demand of labor, and then developing appropriate strategies for addressing any differences. www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 232 Part 3: Organizing Forecasting the supply of labor is really two tasks: forecasting the internal supply (the number and type of employees who will be in the firm at some future date) and forecast- ing the external supply (the number and type of people who will be available for hiring in the labor market at large).10 The simplest approach merely adjusts present staffing levels for anticipated turnover and promotions. Again, though, large organizations use extremely sophisticated models to make these forecasts. At higher levels of the organiza- tion, managers plan for specific people and positions. The technique most commonly replacement chart used is the replacement chart, which lists each important managerial position, who Lists each important occupies it, how long he or she will probably stay in it before moving on, and who (by managerial position name) is now qualified or soon will be qualified to move into the position. This tech- in the organization, nique allows ample time to plan developmental experiences for persons identified as who occupies it, how potential successors to critical managerial jobs.11 In February 2012, Warren Buffett long he or she will announced that he has a successor in mind to replace him as CEO of Berkshire Hath- probably remain in away and stated the eventual transfer of power would be seamless.12 the position, and To facilitate both planning and identifying persons for current transfer or promotion, who is or will be a qualified some organizations also have an employee information system, or skills inventory, replacement which is usually computerized and contains information on each employee’s education, skills, work experience, and career aspirations. Such a system can quickly locate all the employees in the organization who are qualified to fill a position requiring, for instance, employee a degree in chemical engineering, three years of experience in an oil refinery, and fluency information system in Spanish. Enterprise resource planning (ERP) systems, as described in Chapter 7, (skills inventory) generally include capabilities for measuring and managing the internal supply of labor Contains information in ways that best fit the needs of the organization. on each employee’s education, skills, Forecasting the external supply of labor is a different problem altogether. How does a experience, and manager, for example, predict how many electrical engineers will be seeking work in career aspirations; Georgia three years from now? To get an idea of the future availability of labor, planners usually must rely on information from outside sources such as state employment commissions, computerized government reports, and figures supplied by colleges on the number of students in major fields. Matching Human Resource Supply and Demand After comparing future demand and internal supply, managers can make plans to manage predicted shortfalls or overstaffing. If a shortfall is predicted, new employees can be hired, present employees can be retrained and transferred into the understaffed area, individuals approaching retirement can be convinced to stay on, or labor-saving or productivity-enhancing systems can be installed. If the organization needs to hire, the external labor supply forecast helps managers plan how to recruit, based on whether the type of person needed is readily available or scarce in the labor market. As we noted earlier in this chapter, the trend in temporary workers also helps managers in staffing by affording them extra flexibility. If overstaffing recruiting is expected to be a problem, the main options are transferring the extra employees, not The process of replacing individuals who quit, encouraging early retirement, and laying people off. attracting individuals to apply for jobs that are open Recruiting Human Resources Once an organization has an idea of its future human resource needs, the next phase is usually recruiting new employees.13 Recruiting is the process of attracting qualified internal recruiting Considering current persons to apply for jobs that are open. Where do recruits come from? Some recruits employees as are found internally; others come from outside the organization. applicants for higher- Internal recruiting means considering present employees as candidates for openings. level jobs in the Promotion from within can help build morale and keep high-quality employees from organization leaving the firm. In unionized firms, the procedures for notifying employees of internal www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Chapter 8: Managing Human Resources in Organizations 2 3 3 job change opportunities are usually spelled out in the union contract. For higher-level positions, a skills inventory system may be used to identify internal candidates, or man- agers may be asked to recommend individuals who should be considered. Most busi- nesses today routinely post job openings on their internal communication network, or intranet. One disadvantage of internal recruiting is its ripple effect. When an employee moves to a different job, someone else must be found to take his or her old job. In one external recruiting organization, 454 job movements were necessary as a result of filling 195 initial Getting people from openings. outside the External recruiting involves attracting persons outside the organization to apply for organization to apply jobs. External recruiting methods include advertising, campus interviews, employment for jobs agencies or executive search firms, union hiring halls, referrals by present employees, and hiring “walk-ins” or “gate-hires” (people who show up without being solicited). realistic job preview Increasingly, firms are using the Internet to post job openings and to solicit applicants. (RJP) Of course, a manager must select the most appropriate methods, using the state employ- Provides the ment service to find maintenance workers but not a nuclear physicist, for example. Pri- applicant with a real vate employment agencies can be a good source of clerical and technical employees, and picture of what it executive search firms specialize in locating top-management talent. In general, “help would be like to wanted” ads in newspapers and in online job posting sites are often used because they perform the job that the organization is reach a wide audience and thus allow a large number of people to find out about and trying to fill apply for job openings. One generally successful method for facilitating a good person–job fit is the so-called realistic job preview (RJP), which involves providing the applicant with a real picture of validation what it would be like to perform the job that the organization is trying to fill.14 For Determining the extent to which a example, it would not make sense for a firm to tell an applicant that the job is exciting selection device is and challenging when in fact it is routine and straightforward; yet some managers do really predictive of this to hire the best people. The likely outcome will be a dissatisfied employee who will future job quickly be looking for a better job. If the company is more realistic about a job, though, performance the person hired will be more likely to remain in the job for a longer period of time. Selecting Human Resources Once the recruiting process has attracted a pool of applicants, the next step is to select whom to hire. The intent of the selection process is to gather from applicants information that will predict their job success and then to hire the candidates likely to be most successful.15 Of course, the organi- © Michal Kowalski/Shutterstock.com zation can gather information only about factors that are predictive of future performance. The process of determining the predictive value of information is called validation. Application Blanks The first step Realistic job previews play a big role in helping people better understand the in selection is usually asking the candi- nature of potential job opportunities. This senior manager, for example, is date to fill out an application blank. explaining the details of a potential new work assignment to one of his Application blanks are an efficient subordinates. By building familiarity and awareness in advance, businesses can reduce turnover and dissatisfaction later. method of gathering information about the applicant’s previous work history, www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 234 Part 3: Organizing educational background, and other job-related demographic data. They should not contain questions about areas not related to the job, such as gender, religion, or national origin. Application blank data are generally used informally to decide whether a candidate merits further evaluation, and interviewers use application blanks to familiarize themselves with candidates before interviewing them. Unfortunately, in recent years, there has been a trend toward job applicants’ either falsifying or inflating their credentials to stand a better chance of getting a job. Indeed, one recent survey of 2.6 million job applications found that an astounding 44 percent of them contained some false information.16 Tests Tests of ability, skill, aptitude, or knowledge that is relevant to the particular job are usually the best predictors of job success, although tests of general intelligence or personality are occasionally useful. In addition to being validated, tests should be admin- istered and scored consistently. All candidates should be given the same directions, should be allowed the same amount of time, and should experience the same testing environment (temperature, lighting, and distractions).17 Interviews Although a popular selection device, interviews are sometimes poor pre- dictors of job success. For example, biases inherent in the way that people perceive and judge others at a first meeting affect subsequent evaluations by the interviewer. Interview validity can be improved by training interviewers to be aware of potential biases and by increasing the structure of the interview. In a structured interview, questions are written in advance, and all interviewers follow the same question list with each candidate they interview. This procedure introduces consistency into the interview procedure and allows the organization to validate the content of the questions to be asked.18 Assessment Centers Assessment centers are a popular method used to select man- agers and are particularly good for selecting current employees for promotion. The assessment center is a content-valid simulation of major parts of the managerial job. A typical center lasts two to three days, with groups of 6 to 12 persons participating in a variety of managerial exercises. Centers may also include interviews, public speaking, and standardized ability tests. Candidates are assessed by several trained observers, usually managers several levels above the job for which the candidates are being considered. Assessment centers are quite valid if properly designed and are fair to members of minority groups and women.19 For some firms, the assessment center is a permanent facility created for these activities. For other firms, the assessment activities are per- formed in a multipurpose location such as a conference room. AT&T pioneered the assessment center concept. For years, the firm has used assessment centers to make vir- tually all of its selection decisions for management positions. Other Techniques Organizations also use other selection techniques depending on the circumstances. Polygraph tests, once popular, are declining in popularity. On the other hand, more and more organizations are requiring that applicants in whom they are interested take physical exams. Organizations are also increasingly using drug tests, espe- cially in situations in which drug-related performance problems could create serious safety hazards. For example, applicants for jobs in a nuclear power plant would likely be tested for drug use. Some organizations today even run credit checks on prospective employees. DEVELOPING HUMAN RESOURCES Regardless of how effective a selection system is, however, most employees need addi- tional training if they are to grow and develop in their jobs. Evaluating their performance and providing feedback are also necessary. www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Chapter 8: Managing Human Resources in Organizations 2 3 5 Training and Development training In HRM, training usually refers to teaching operational or technical employees how to do Teaching operational the job for which they were hired. Development refers to teaching managers and profes- or technical sionals the skills needed for both present and future jobs. Most organizations provide reg- employees how to ular training and development programs for managers and employees. For example, IBM do the job for which spends more than $700 million annually on programs and has a vice president in charge they were hired of employee education. U.S. businesses spend more than $125 billion annually on training and development programs away from the workplace. And this figure does not include development wages and benefits paid to employees while they are participating in such programs.20 Teaching managers and professionals Assessing Training Needs The first step in developing a training plan is to determine the skills needed for what needs exist. For example, if employees do not know how to operate the machinery both present and necessary to do their job, a training program on how to operate the machinery is clearly future jobs needed. On the other hand, when a group of office workers is performing poorly, training may not be the answer. The problem could be motivation, aging equipment, poor supervi- sion, inefficient work design, or a deficiency of skills and knowledge. Only the last could be remedied by training. As training programs are being developed, the manager should set specific and measurable goals specifying what participants are to learn. The manager should also plan to evaluate the training program after employees complete it. Common Training Methods Many different training and development methods are available. Selection of methods depends on many considerations, but perhaps the most important is training content. When the training content is factual material (such as company rules or explanations for how to fill out forms), assigned reading, programmed learning, and lecture methods work well. When the content is interpersonal relations or group decision making, however, firms must use a method that allows interpersonal contact, such as role-playing or case discussion groups. When employees must learn a physical skill, methods allowing practice and the actual use of tools and materials are needed, as in on-the-job training or vestibule training. (Vestibule training enables participants to focus on safety, learning, and feedback rather than on productivity.) Web-based and other electronic-media–based training are becoming very popular. Such methods allow a mix of training content, are relatively easy to update and revise, let participants use a variable schedule, and lower travel costs.21 On the other hand, they are limited in their capacity to simulate real activities and facilitate face-to-face interaction. Xerox, Massachusetts Mutual Life Insurance, and Ford have all reported tremendous success with these methods. In addition, most training programs actually rely on a mix of methods. Boeing, for example, sends managers to an intensive two-week training seminar involving tests, simulations, role-playing exercises, and DVD flight simulation exercises.22 Finally, some larger businesses have started creating their own self-contained training facility, often called a corporate university. McDonald’s was among the first to start this practice with its so-called Hamburger University in Illinois. All management trainees of the firm attend training programs there to learn exactly how long to grill a burger, how to maintain good customer service, and so on. The cult hamburger chain In-N-Out Burger also has a similar training venue called In-N-Out University. Other firms using this approach include Shell Oil and General Electric.23 Evaluation of Training Training and development programs should always be evaluated. Typical evaluation approaches include measuring one or more relevant criteria (such as attitudes or performance) before and after the training, and determining whether the criteria changed. Evaluation measures collected at the end of training are easy to get, but actual performance measures collected when the trainee is on the job are more important. Trainees may say that they enjoyed the training and learned a lot, but the true test is whether their job performance improves after their training. www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 236 Part 3: Organizing AT YOUR SERVICE Darden Invests in Employee Development as Bahama Breeze, Olive Garden, LongHorn Steak- house, and Capital Grill. All told, the firm has about 180,000 employees and 1,900 restaurants (all com- pany owned, not franchised). Darden was recently named the second-best company to work for in America (behind FedEx) by Fortune magazine, the only restaurant business that’s ever made this list. The firm’s annual employee turnover is about 20 percent lower than its industry average, and many Darden top managers started at the bottom and worked themselves up the corporate ladder. Indeed, that is one major reason that Darden’s employees enjoy working there so much. Take Mike Stroud, for example. Stroud started as a busboy at a Red Lobster (once a part of Darden) in Georgia in 1973. Today he is a senior vice president overseeing 215 locations. Likewise, Lisa Hoggs joined the company waiting tables at a LongHorn Steakhouse. Now she is a managing partner, running a $3 million location in Atlanta. About 42 percent of its employees are minorities, and 39 percent of its managers are women. What’s Darden’s secret? For one thing it tries to impress upon its employees that working for Darden can be a career not just a job. The firm invests ZUMA Press, Inc./Alamy heavily in talent development and offers extensive career planning to all employees. The company also offers its employees an array of other meaningful benefits as well. For example, its supports a credit union that provides low-interest loans to employees, Darden Restaurants owns such popular brands as strong health-care packages, and substantial training Olive Garden, LongHorn Steakhouse, and Capital Grill. and development opportunities. Darden has a reputation for being one of the best places Darden recently announced plans to open 500 to work in America, in part because of its aggressive new restaurants in the next five years and hire employee development and promote-from-within policies. almost 50,000 new employees. Given its track Clarence Otis, the firm’s CEO, believes that investing in record in hiring, nurturing, and promoting employees, Darden employees helps keep the business strong and there seems to be little question that it will succeed. profitable. And who knows—one day soon Bahama Breeze and Olive Garden may be as common as McDonalds and Starbucks. Some businesses see wages and salaries as an expense. But others see employees as vital References: “Serving Up the American Dream,” Fortune, resources that can give them a real competitive May 20, 2013, p. 34; Hoover’s Handbook of American advantage. Darden Restaurants falls clearly in the Business 2013 (Austin: Mergent, Inc.), pp. 243–244; “Darden second set. Darden operates such popular eateries to Sell Red Lobster,” New York Times, May 16, 2014, p. B1. www.MyEbookNiche.eCrater.com Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Chapter 8: Managing Human Resources in Organizations 2 3 7 Performance Appraisal Once employees are trained and settled into their jobs, one of management’s next performance concerns is performance appraisal. Performance appraisal is a formal assessment of appraisal how well employees are doing their jobs. Employees’ performance should be evaluated A formal assessment regularly for many reasons. One reason is that performance appraisal may be neces- of how well an sary for validating selection devices or assessing the impact of training programs. A employee is doing second reason is administrative—to aid in making decisions about pay raises, promo- his or her job tions, and training. Still another reason is to provide feedback to employees to help them improve their present performance and plan future careers.24 Because perfor- mance evaluations often help determine wages and promotions, they must be fair and nondiscriminatory. Common Appraisal Methods Two basic categories of appraisal methods commonly used in organizations are objective methods and judgmental methods. Objective measures of performance include actual output (that is, number of units produced), scrap rate, dollar volume of sales, and number of claims processed. This may be contam- inated by “opportunity bias” if some persons have a better chance to perform than others. For example, a sales representative selling snowblowers in Michigan has a greater opportunity than a colleague selling the same in Arkansas. Fortunately, adjusting raw performance figures for the effect of opportunity bias and thereby arriving at figures that accurately represent each individual’s performance are often possible. Another type of objective measure, the special performance test, is a method in which each employee is assessed under standardized conditions. This kind of appraisal also eliminates opportunity bias. For example, Verizon Southwest has a series of prere