Strategic Human Resource Management and Leadership Theory and Practice PDF 2024

CAMPUS KÖLN CAMPUS MAINZ CAMPUS POTSDAM Strategic Human Resource Management and Leadership Prof. Dr. Ihar Sahakiants CBS International Business School 2024 LECTURER Prof. Dr. Ihar Sahakiants 1998 - 2005 – Ind...

CAMPUS KÖLN CAMPUS MAINZ CAMPUS POTSDAM Strategic Human Resource Management and Leadership Prof. Dr. Ihar Sahakiants CBS International Business School 2024 LECTURER Prof. Dr. Ihar Sahakiants 1998 - 2005 – Industry positions 2005 – 2007 – Postgraduate studies at the University of Trier 2008 – 2015 – Research associate, Assistant to the European Dean of Research at the ESCP Business School, Berlin Since 2013 - Lecturer at the ESCP Business School in Berlin Since 2015 – Professor of International Human Resource Management at the CBS International Business School 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 2 COURSES TOUGHT International Human Resource Training and Development Management Corporate Development and Human Resource Management Business Transformation Strategic Human Resource Management HR Research Techniques and Metrics and Leadership Agile Project Management Organizational Behaviour Digital leadership Reward Management 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 3  CURRENT (MAIN) RESEARCH AREAS International compensation: -Global rewards (including standardization vs. localization of pay systems) -Historical developments of compensation systems Corporate governance (CG): - International CG structures and executive pay - Social legitimacy and CG systems Socially responsible HR (SRHR) practices : -Historical development of SRHR practices -Institutional analysis of SRHRM - Analysis of non-financial reporting on SRHR Expatriate management: - Expatriate compensation - Digitization of expatriate management 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 4 SELF-STUDY SESSION This course is organized as a blended learning course: it includes face-to-face sessions and a self-study session. No general MS-Teams meeting will be scheduled for the self-study session. The task for the self-study session will be assigned approximately one week prior to it. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 5 COURSE MATERIAL I. Textbooks: Mello, J. Strategic Human Resource Management (latest edition). Mason, OH: Cengage. Wärnich, S., Carrell, M. R., Elbert, N. F., & Hatfield, R. D. Human resource management in South Africa (latest edition). Andover: Cengage Learning. Boselie, P.: Strategic Human Resource Management, McGraw Hill (latest edition). Darwish, T.K.: Strategic HRM and performance. Theory and Practice. Cambridge Scholar Publishing (latest edition). Noe, R. A.: Employee Training and Development, McGraw Hill (latest edition). Truss, C., Mankin, D., & Kelliher, C.: Strategic Human Resource Management. Oxford University Press (latest edition). II. Readings / Cases Readings will be provided in electronic form at least one day prior to each session. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 6 COURSE SCHEDULE Date Topic September 10, 2024 Introduction to the course / Strategic HRM and Leadership Theory and Practice Current Trends and Strategic Responses to Complex and Uncertain Environments/ Flexibilization September 17, 2024 of Work September 24, 2024 Strategic HRM and Digitalization October 1, 2024 Strategic Staffing October 8, 2024 Strategic Training and Development Management October 22, 2024 Strategic HRM and Sustainability / Employee Well-Being October 29, 2024 Transformational leadership and Strategic HRM November 5, 2024 SELF-STUDY - Strategic Human Resource Management in Multinational Corporations November 12, 2024 Presentations of self-study assignments / Strategic Performance Management I November 19, 2024 Strategic Performance Management II November 26, 2024 Strategic Rewards November 26, 2024 Exam preparation 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 7 COURSE EVALUATION Final written exam + up to 5 additional points for active participation, high self-study assignment quality and contribution to discussions / class activities (100 points is the highest grade though). Detailed information on the exam will be provided during the last session. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 8 Strategic Human Resource Management and Leadership Theory and Practice Prof. Dr. Ihar Sahakiants CBS International Business School 2024 LEADERSHIP DEFINITION Leadership is the ability to influence a group toward the achievement of a vision or set of goals. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 10 STRATEGIC HRM (SHRM) DEFINITION “The pattern of planned human resources deployments and activities intended to enable an organization to achieve its goals.“ (Wright & McMahan, 1992, p. 298) 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 11 HUMAN CAPITAL THEORY Source: Swanson and Holton, 2001, p. 110. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 12 THEORETICAL FRAMEWORKS FOR ANALYZING SHRM Institutional/Political Firm Strategy Forces Resource Dependence, Resource Institutional Based View HRM Practices of the Firm Behavioral Approach Agency/Transaction Costs Firm-Level Outcomes HR Capital Pool HR Behaviors (Performance, Satisfaction, (Skills, Abilities) Absenteeism, etc.) Source: Wright & McMahan, 1992, p. 298 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 13 SUSTAINED COMPETITIVE ADVANTAGE VRIO FRAMEWORK (RESOURCE-BASED VIEW) Is a resource... Difficult to Supported by Competitive Performance Valuable? Rare? Implications Imitate? Organization? No --- --- Competitive Below Normal Disadvantage Yes No --- Competitive Parity Normal Yes Yes No Temporary Above Normal Competitive Advantage Yes Yes Yes Sustained Above Normal Competitive Advantage Source: Adopted from Barney 1997, p. 163. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 14 RESOURCE-BASED VIEW AND HRM „The ultimate goal of any HR executive is to create value through the human Value resource function“ (p. 32) „An HR executive must examine how to develop and exploit rare Rareness characteristics of the firm’s human resources“ (p. 34) „The HR executive must attempt to develop and nurture characteristics of Imitability the firm’s human resources that cannot easily be imitated by competitors“ (p. 34) „Organization requires having in place the systems and practices that allow Organization human resource characteristics to bear the fruit of their potential advantages“ (p. 35) 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Barney & Wright 1997, pp. 32–35. 15 STRATEGIC ALIGNMENT VS HORIZONTAL FIT Vertical fit involves the alignment of Directs HR towards the primary HRM practices and the strategic initiatives of the organization management process of the firm Horizontal fit implies a congruence Is instrumental for efficiently among the various HRM practices allocating those resources 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 16 SITUATIONAL LEADERSHIP THEORY (SLT) Situational leadership theory (SLT) is a contingency theory that focuses on the followers. Successful leadership is achieved by selecting the right leadership style, which is contingent on the level of the followers’ readiness. Readiness refers to the extent to which people have the ability and willingness to accomplish a specific task 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 17 CHOICE OF LEADERS BEHAVIOURS FOLLOWERS‘ READINESS Able followers Unable followers The leader doesn’t need to The leader needs to display high do much task orientation to compensate for Willing followers’ lack of ability and high followers relationship orientation to get them to “buy into” the leader’s desires The leader needs to use a The leader needs to give clear Unwilling supportive and participative and specific directions followers style 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 18 DISCUSSION COMPANIES SAY NO TO HAVING AN HR DEPARTMENT 1. Why would some companies decide to abolish HR departments? 2. Please provide examples when specialized knowledge in the field of HR or a specialized HR function is necessary to maintain effective business operations. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 19 FACTORS INFLUENCING THE STANDING OF HRM SPECIALISTS IN ORGANIZATIONS Strengthening factors Weakening factors Political/visionary skills possessed by HR Inept HR practitioners practitioners HR function performing only a servicing role Perceived competence of HR staff Lack of top management support Top management support HR managers not involved in strategy process Involvement in strategy-making Training undertaken by line units Ongoing need for staff development and training Stable organization with little demand for change Large-scale reorganization Expansion of business requiring emphasis on HR Static business conditions practices (e.g. recruitment and training) Role of people less important than that of technical Business critically reliant on people as opposed to considerations technology (e.g. services) Source: Wärnich et al., 2015, p. 22. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 20 THE DIFFERENCES BETWEEN STRATEGIC HRM AND TRADITIONAL HRM Dimensions Strategic HRM Traditional HRM Planning and Participates in formulating overall Is involved in operational planning strategy organizational strategic plan and aligning HR only formulation functions with company strategy Authority Has high status and authority for top HR Has medium status and authority officer (e.g. vice president for HR) Scope Is concerned with all managers and employees Is concerned primarily with hourly, operational and clerical employees Decision-making Is involved in making strategic decisions Makes operational decisions only Integration Is fully integrated with other organizational Has moderate to small integration functions (e.g. marketing, finance, production) with other organizational functions Coordination Coordinates all HRM activities Does not coordinate all HR functions Source: Wärnich et al., 2015, p. 10. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 21 Current Trends and Strategic Responses in Complex and Uncertain Environments / Flexibilization of Work Prof. Dr. Ihar Sahakiants CBS International Business School 2024 IMPORTANCE OF HR ACTIVITIES IN 2030 TREND STUDY (HGS/PWC/DGFP) …percentage of respondents stating that the related function is important or very important for people management Source: Bruch, Lohman and Neu, 2023, p. 9. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 23 MAJOR DRIVERS OF CHANGE FOR HR PROFESSION Source: CIPD, 2023b, p. 7. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 24 DELOITTE HUMAN CAPITAL TRENDS THE WORKPLACE ECOSYSTEM Source: Deloitte, 2023, p. 46. Source: Deloitte, 2023, p. 48. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 25 DISCUSSION: GROWTH IN THE ‘GIG ECONOMY’ FUELS WORK FORCE ANXIETIES Discuss the advantages and disadvantages of gig work from the standpoint of companies and gig workers. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 26  DELOITTE HUMAN CAPITAL TRENDS EMPLOYEE WELL-BEING I Employee well-being as the most important trend in 2020 …still there is a perception gap between executives and rank-and-file employees Source: Delotte, 2020, p. 16 Source: Delotte, 2021, p. 15 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 27 DELOITTE HUMAN CAPITAL TRENDS EMPLOYEE WELL-BEING II (Link to job design) Source: Delotte, 2021, p. 14 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 28  HR-RELATED REPORTING European Union as the main driver, e.g.: Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 on disclosure of non- financial and diversity information In Germany: CSR Directive Implementation Act (CSR-Richtlinien-Umsetzungsgesetz, CSR-RUG), 2017: ▪ Reporting (e.g., by using Global Reporting Initiative [GRI] standards) on: − Environmental matters − Social and employee-related matters − Respect of human rights − Anti-corruption and bribery matters Amended by Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022: Corporate Sustainability Reporting Directive (CSRD) 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 29 WOMEN IN MANAGERIAL POSITIONS Share on the boards of the largest listed companies, 10/2022 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Publications Office of the European Union, 2023, p. 45 30  HYBRID WORKING Impact on an organisation’s productivity and efficiency (%) – UK data Source: CIPD, 2023a, p. 8 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 31  FLEXIBLE FIRM The concept of the flexible firm was proposed in the 1980s as a strategic response to “economic recession, uncertainty about market growth, technological change in both products and production methods, and reductions in working time” (Atkinson, 1985, p. 3). Segmenting the firm - in core (full-time) employees who enjoy job security, career development, high wages and allow for functional flexibility through multi-skilling - and periphery as a source of numerical flexibility The concept has been increasingly criticized ever since its introduction, although the related flexible work arrangements offer not only strategic flexibility to the firm but may contribute to the satisfaction of employees in many ways. Source: Atkinson, 1985, Peetz, 2019, Procter et al., 1994. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 32 FLEXIBLE WORK TYPES Numerical flexibility: allows for labor to be utilized at times when needed and disposed of when not needed (e.g., temporary staff, part-time employment, ‘gig’ workers, etc.) Functional flexibility: allows for staff to be deployed across different activities according to demand levels and might involve multi-skilling and multitasking Temporal flexibility: involves the time at which labor is employed Spatial flexibility: associated with the location of work and enables employees to deploy labor in different locations Source: Kelliher, 2017. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 33 VIRTUAL ORGANIZATION Virtual organization is an organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects. Source: Robbins & Coulter, 2018, p. 398. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 34 OUTSOURCING THE HR FUNCTION I Involves contracting out some of organization’s noncore work activities to outside specialists Can do work more effectively Often for less than cost of doing work in-house Areas frequently outsourced: Payroll Benefits Technological support An overwhelming majority of organizations outsource at least one HR function Source: Mello, 2015. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 35 OUTSOURCING THE HR FUNCTION II Can free up HR staff to focus on more strategic issues Considerations: Cost savings Whether contractor can deliver Compliance with laws Impacts on employees whose jobs might be lost Impacts on morale of remaining employees Source: Mello, 2015. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 36  TEMPORARY STAFFING AGENCIES USA VS GERMANY Temporary staffing agency employees in Germany, (in January 1980 – December 2022) Temporary staffing agency employees in the USA, in mln (in January 2013 – January 2023)* Source: Bundesagentur für Arbeit, 2023, p. 7. Source: BLS, 2023 * Seasonally adjusted 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 37 Strategic HRM and Digitalization Prof. Dr. Ihar Sahakiants CBS International Business School 2024 HUMAN RESOURCE INFORMATION SYSTEM (HRIS) Human resource information system (HRIS) is a system used to acquire, store, manipulate, analyse, retrieve and distribute information regarding an organisation’s human resources. Source: Wärnich et al., 2015, p. 46. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 39 HUMAN RESOURCE INFORMATION SYSTEM (HRIS) THE BENEFITS Improves quality of information Reduces administrative burden Improves the speed and accessibility of information Improves flexibility of information Increasing competitiveness Produces a greater number and variety of accurate, real-time HR related reports Improves the services to employees and employee satisfaction Produces HR metrics Reengineering HR processes and functions Shifts the focus of HR from processing of transactions to strategic HRM Source: Wärnich et al., 2015; p. 49. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 40 TYPES OF HRIS Decision support systems – supporting management with a variety of decisions including answering „what-if“ questions and looking at the current skills available in the organization. Management information systems – these provide important information and data that can be used in HR metrics and to produce specific reports Transaction processing systems – these automate routine transactions such as payroll and clock systems whilst reducing the cost of these transactions Enterprise resource systems – where all the functions in the organization are integrated, a number of off-the-shelf products are available here such as SAP, Oracle, Orange, SAGE VIP Payroll & HR, to name only a few. Source: Wärnich et al., 2015, p. 55. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 41 APPLICATIONS OF THE HRIS MODULES Applicant- Basic tracking Position employee module control module module HR Wage, metrics/ benefits & salary analytics & administration reports module Human Performance management module HRIS Resource Planning module Onboarding/ modules Talent orientation management module module Time & Training & attendance development module module Labour Skills relations inventory module module 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Wärnich et al., 2018. 42 HRIS IMPLEMENTATION OPTIONS ADVANTAGES An integrated solution A ‚best of breed‘ (BoB) solution (working with a single vendor to develop one platform that (considering multiple vendors and picking the best incorporates multiple HR functions) application for each functional area of HR) Feature a common interface “look and feel” across Can develop a “best fit” solution for each applications, making learning and transitions for functional area. users easier. Provide quicker implementation, because the Use integrated data and technological infrastructure, reducing system is simpler and affects fewer employees. the need to manage multiple Do not lock into a single vendor for all needs. technological architectures. Allow vendors to be more responsive to user Provide greater ease of integrating data from multiple HR needs. functions. Make it possible to purchase only the functionality Reduce the complexity of vendor management, because there needed. is only one vendor. Can be less expensive per application to implement than BoB. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Johnson and Gueutal., 2011, pp. 2-3 43 EMPLOYEE SELF-SERVICE (ESS) Employee self-service (ESS) is an approach in which employees access and maintain their personal HR data. According to a worldwide survey by Sierra-Cedar, 81% of companies used ESS in 2019. Source: Johnson and Gueutal., 2011, p. 5, Sierra-Cedar, 2019. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 44 THE EVOLUTION OF HR TECHNOLOGY Source: Deloitte, 2017, p. 21. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 45 TECHNOLOGY IN HR EXAMPLES I HR dashboards: Visual displays of various HR metrics that are available at the click of a button/icon Recruitment and selection: Video-based recruitment, the use of social media in recruitment and online recruitment and selection via the Web, virtual job fairs, AI-based selection Training and development: Training from remote locations using the Web/HRIS, social media, online collaboration technology, mobile learning, MOOCs Performance management: Metrics can be used, performance can be tracked and personal development plans monitored by HRIS. Source: Based on Wärnich et al., 2015, p. 68. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 46 TECHNOLOGY IN HR EXAMPLES II Succession planning: HRIS can assist in tracking progress and identifying suitable candidates Orientation/onboarding: Provision of materials with access from anywhere with a tracking system, mobile onboarding applications Bring your own device to work (BYOD): Where employees bring their own devices (tablets, smart phones, laptops etc.) and use them to connect to the organization‘s network to perform their duties. Clear policies should be in place to manage such usage. Gamification: implementing digital game elements in HR practices. Source: Based on Wärnich et al., 2015, p. 68. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 47 SOCIAL MEDIA Social media take many forms: Networking Shared Sites Microblogs Wikis Blogs Media (Facebook, (Twitter) (Wikipedia) (YouTube) LinkedIn) 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 48 CLOUD COMPUTING Cloud computing, often referred to as simply “the cloud,” is the delivery of on-demand computing resources — everything from applications to data centers — over the internet [usually] on a pay-for-use basis. Source: IBM, 2018. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 49 ARTIFICIAL INTELLIGENCE (AI) AI as a system’s ability to interpret external data correctly, to learn from such data, and to use those learnings to achieve specific goals and tasks through flexible adaptation. Source: Kaplan and Haenlein, 2019, p. 17. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 50 STAGES OF ARTIFICIAL INTELLIGENCE (AI) Source: Kaplan and Haenlein, 2019, p. 16. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 51 DANGERS RELATED TO CHATBOTS / GENERATIVE PRE-TRAINED TRANSFORMERS 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 52 Strategic Staffing Prof. Dr. Ihar Sahakiants CBS International Business School 2024 HR RECRUITMENT AND SELECTION DEFINITIONS Human resource recruitment is any practice or activity carried out by the organization with the primary purpose of identifying and attracting potential employees. Personnel selection is the process by which companies decide who will or will not be allowed into organizations. Source: Noe et al., 2010, p. 233 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 54 THE RECRUITMENT PROCESS I AND THE CORPORATE STRATEGY Source: Wärnich et al., 2015, p. 184. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 55 THE RECRUITMENT PROCESS II AND THE CORPORATE STRATEGY Source: Wärnich et al., 2015, p. 184. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 56 EXTERNAL PRESSURES ON RECRUITMENT External environment Impact on recruitment Skill needs and supply of candidates Economy Composition of the applicant pool Labor market Recruitment strategy and practice Social change Equity and fairness of processes Legislation Degree of selectivity possible Monitoring and targeting applications Source: Hurrelll and Scholarios., 2017, p. 85. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 57 USES OF MOBILE DEVICES BY APPLICANTS TO APPLY FOR A JOB (GERMANY) Source: Weitzel et al., 2019d, p. 13. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 58 USE OF SOCIAL MEDIA CHANNELS IN RECRUITING (GERMANY) Source: Weitzel et al., 2019a, p. 19. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 59 RECRUITMENT TRENDS: VIRTUAL REALITY (VR) Virtual tours provided by potential employers 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 60 RECRUITMENT TRENDS: VIDEO CVs Enhancing job applications with video CVs 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 61 ARTIFICIAL INTELLIGENCE (AI) IN RECRUITMENT AND SELECTION 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 62 E-RECRUITMENT MAIN OBJECTIVES / ADVANTAGES Improve recruiting efficiency and reduce costs Increase quality and quantity of applicants Establish, communicate and expand brand identity Increase the objectiveness of, and standardize, recruiting practices Increase applicant convenience 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Johnson and Gueutal., 2011, p. 8 63 E-RECRUITMENT POTENTIAL PITFALLS Increase in application quantity, but not application quality Loss of personal relationships with applicants Diversity issues and risk of adverse impact 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Johnson and Gueutal., 2011, pp. 10-11 64 E-SELECTION BUSINESS DRIVERS Reducing the time and resources required to manage the selection process Increasing flexibility in selection test administration Improving the utility of selection tests Enhancing an organization’s ability to provide adaptive testing of applicants 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Johnson and Gueutal., 2011, p. 11 65 E-SELECTION POTENTIAL PITFALLS Security of content Cheating Privacy and security of responses Legality of screening and selection tests 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Johnson and Gueutal., 2011, p. 13 66 REGULATORY FRAMEWORK IN EUROPE THE AI ACT (REGULATION (EU) 2024/1689 Source: EY Switzerland, 2024. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 67 BIAS IN AI-SUPPORTED RECRUITMENT & SELECTION Amazon’s sexist recruitment & selection Unilever’s bias-free AI application program vs. Sex, race or skin color are not used as selection criteria 10% increase in hires of non-white applicants 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 68 AVOIDING BIAS IN AI-SUPPORTED RECRUITMENT & SELECTION 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 69 Strategic Training and Development Management Prof. Dr. Ihar Sahakiants CBS International Business School 2024 STRATEGIC TRAINING AND DEVELOPMENT (T&D) Strategic training and development: A more holistic and forward-looking approach to T&D that should help individuals anticipate which knowledge and skills will be required to achieve the organization’s strategic objectives. Source: Wärnich et al., 2018, p. 358. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 71 THE LEARNING ORGANIZATION A learning organization is a company that has: an enhanced capacity to learn, adapt, and change carefully scrutinized and aligned training and development processes with company goals training and development as a part of a system designed to create human capital 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Noe, 2017 72 STRATEGIC TRAINING AND DEVELOPMENT PROCESS 26.11.2024 | PROF. DR. IHAR SAHAKIANTS Source: Noe, 2017, p. 69 73 ADULT LEARNING THEORY 1. Adults are self-directed 2. Adults have acquired a large amount of knowledge and experience that can be tapped as a resource for learning. 3. Adults show a greater readiness to learn tasks that are relevant to the roles they have assumed in life. 4. Adults are motivated to learn in order to solve problems or address needs, and they expect to immediately apply what they learn to these problems and needs. Source: DeSimone and Werner, 2010, p. 87. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 74 SOCIAL LEARNING THEORY Individuals learn by observing models of behavior, emulating behavior, and receiving reinforcement and rewards Learning results from directly experiencing the consequences of using a skill, observing others, and seeing the consequences of their behavior 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 75 MOBILE TECHNOLOGY & LEARNING Watch the video on mobile learning at Vodafone (see the link below) and answer the following questions: https://www.youtube.com/watch?v=MPnENqchVDk 1. What are the advantages of the mobile technology-based application at Vodafone? 2. How could adult learning and social learning theories be used to explain the effectiveness of this tool? 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 76 CORPORATE UNIVERSITY MODEL ORGANIZING THE T&D DEPARTMENT Source: Noe, 2017 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 77 AI-BASED SOLUTIONS The use of AI-based solutions represents one of the major trends in the field of T&D, including: - AI-based animated pedagogical agents - Educational robotics - Chatbots / virtual assistant technology 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 78 VIRTUAL AND AUGMENTED REALITY TRAINING An increasingly popular training tool Mostly related to simulations (minimize the negative features of traditional simulations) Provide training in a wide range of areas / professions 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 79 GAMIFICATION Gamification of training is a process in which training content and methods are modified using game elements. Source: Landers et al., 2019, p. 286. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 80 LEARNING MANAGEMENT SYSTEMS LMSs are technology platforms that automate the administration, development, and delivery of all a company’s training programs LMSs centralize the management of learning activities, track regulatory compliance, measure training usage, assess employee performance, and determine training needs 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 81 Strategic HRM and Sustainability Prof. Dr. Ihar Sahakiants CBS International Business School 2024  SUSTAINABLE HRM The most common definition of sustainable development was provided by the World Commission on Environment and Development (WCED) in 1987: “Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” In 1994 John Elkington coined the term triple bottom line (TBL). “The TBL is an accounting framework that incorporates three dimensions of performance: social, environmental and financial… The TBL dimensions are also commonly called the three Ps: people, planet and profits” (Slaper & Hall, 2011, p. 4). Sustainable HRM is related to the adoption of HRM strategies and practices that enable the achievement of financial, social and ecological goals, with an impact inside and outside of the organization and over a long-term time horizon while controlling for unintended side effects and negative feedback. Source: Ehnert et al., 2016, p. 90.. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 83  DIVERSITY MANAGEMENT Diversity management refers to the voluntary organizational actions that are designed to create greater inclusion of employees from various backgrounds into the formal and informal organizational structures through deliberate policies and programs. Source: Mor Barak, 2016, p. 218. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 84 ANTIDISCRIMINATION LEGISLATION IN GERMANY The General Act on Equal Treatment (German abbreviation: AGG) has been in force since 18 August 2006. It incorporates four Anti-Discrimination Directives of the EU into German law. The purpose of this Act is to prevent or to stop discrimination on the grounds of race or ethnic origin, gender, religion or belief, disability, age or sexual orientation. (Section 1 of this Act) 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 85 DIVERSITY AND INCLUSION TRAINING: VR TECHNOLOGY 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 86 THE GLASS CEILING A major issue facing companies is placing women and minorities in upper-level management positions The glass ceiling refers to a barrier to advancement that adversely affects women and minorities 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 87 Gender pay gap EU (2020) Source: European Commission, 2022. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 88 WOMEN IN MANAGEMENT POSITIONS (THE CASE OF GERMANY): IS THERE A GLASS CEILING? Proportion of female graduates from higher education establishments in 2020 – 51.7% Proportion of female STEM-graduates in 2019 – 37% Proportion of women in management positions in 2019 – 29.4% Pay gap between men and women in 2020 – 18% Source: Federal Statistical Office, 2021. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 89 DISCUSSION: QUOTA FOR WOMEN ON BOARDS Please read the following overview on the second management positions act in Germany and answer the questions below: https://www.loc.gov/item/global-legal-monitor/2021-09-12/germany-second-law-establishing-gender-quotas- to-increase-number-of-women-in-company-leadership-positions-enters-into-force/ 1. Discuss the advantages and possible disadvantages of quotas for women on boards of large corporations. 2. Which HR-related measures could be – in your opinion – be effective in increasing the proportion of women in management positions? 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 90 EXAMPLE: ADVANCEMENT OF WOMEN Mentoring Programm Source: Volkswagen AG, 2014, sl. 2, 5. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 91 PART-TIME MANAGEMENT TANDEMS Also known as a “two-in-a-box“ leadership model implemented as a career management tool 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 92 SPECIAL TOPIC: CORPORATE VOLUNTEERING 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 93 CORPORATE VOLUNTEERING: HR-RELATED BENEFITS Evidence of benefits related to: - Recruiting new employees - Enhancing the commitment and engagement of employees - Reducing employee turnover - Being a cost-effective means of developing certain core competencies Source: Lough & Turner, 2017, p. 2. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 94 Employee Well-Being Prof. Dr. Ihar Sahakiants CBS International Business School 2024 WELL-BEING Well-being is a “state of happiness and contentment, with low levels of distress, overall good physical and mental health and outlook, or good quality of life”. Source: APA, 2021. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 96 HEALTH ▪ Oxford English Dictionary: “the state of being free from illness or injury” ▪ WHO (1948): “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity”. ▪ Bircher (2005, p. 336):“dynamic state of wellbeing characterized by a physical, social and mental potential, which satisfies the demands of life commensurate with age, culture and personal responsibility”. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 97 WELL-BEING AT WORK Physical well-being ▪Decline in traditional focus on hazards associated with manufacturing and agricultural work ▪Shift to service economy -‘Sick building syndrome’ (Baldry et al. 1997) - Ergonomics - Impact of ICT on workplace health and safety Psychological well-being ▪Increasing prevalence of mental health conditions - Stress, anxiety, depression and burn-out Social well-being ▪Growing incidence of violence and verbal abuse at work ▪Work-life balance concerns 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 98 WORKING CONDITIONS AND WELL-BEING Health problems, by occupation, EU28 (%) 2017 “Poor working conditions result in a total of 300 000 work-related deaths and economic losses of 4% of the gross domestic product of the European Region every year” (WHO, 2018). Source: Eurofound, 2019. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 99 PSYCHOLOGICAL WELL-BEING Work stressor ▪Environmental situations or events capable of producing a state of psychological stress in an individual Work stress ▪An individual’s internal response to stressors, characterised by arousal and some level of discomfort Psychological strain ▪Response produced in the individual to aversive and potentially harmful reactions to long-term exposure to stress, including anxiety, depression and cardiovascular disease. Source: CIPD, 2018, O’Driscoll et al., 2009. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 100 PSYCHOLOGICAL WELL-BEING THE MOST COMMON CAUSES OF ABSENSE (UK) 2018 2020 The most common causes of absence (% of respondents) The most common causes of absence (% of respondents who include their top 3 causes) Source: CIPD, 2018, 2020 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 101 PSYCHOLOGICAL WELL-BEING WORK-RELATED STRESS (UK) Has stress-related absence increased or The most common causes of stress at work (in top three causes, % of decreased in your organization over the past respondents) year? (% of respondents) Source: CIPD, 2020 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 102 PSYCHOLOGICAL WELL-BEING GROWING IMPORTANCE OF STRESS-REDUCTION ACTIVITIES (UK) Proportion of organisations that are taking steps to identify and reduce stress at work? (% of respondents) Source: CIPD, 2020 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 103 EMPLOYEE WELL-BEING AND TECHNOLOGY The positive effects of advances in technology on employee The negative effects of advances in technology on employee well-being in organisations (% of respondents) well-being in organisations (% of respondents) Source: CIPD, 2020 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 104 JOB DEMANDS VS. JOB RESOURCES Examples of job demands Examples of job resources Short deadlines Mentoring or coaching opportunities High volumes of work Training and development opportunities Complex or boring projects Regular constructive feedback Emotionally draining tasks or roles Autonomy Unclear goals or role ambiguity Organizational rules, benefits, or Dangerous tasks processes that support and strengthen Unfriendly working hours employees Bureaucratic rules and procedures 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 105 THE JOB DEMANDS-RESOURCES (JD-R) MODEL (BAKKER AND DEMEROUTI) Source: Bakker and Demerouti, 2007, p. 313. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 106  TYPES OF STRESS INTERVENTIONS (CLARKE AND COOPER) Primary Organisation focus: intervention E.g., Job design, staff selection, management style, focus on team- s building Secondary Focus on organisation-individual interface: intervention E.g., Stress management training, cognitive coping strategies, time s management Tertiary Individual focus: intervention E.g., relaxation techniques, healthy lifestyle, mediation, employee s assistance programmes (EAPs) Source: Clarke and Cooper, 2000, p. 184. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 107 DISCUSSION: SUICIDES AT FRANCE TELECOM 1. How the case of suicides at France Telecom can be explained from the standpoint on the job demands-job resources model? 2. Which types of stress interventions (according to Clarke and Cooper, 2000) could have been implemented in response to the problem of suicides? Please give specific examples. 3. Which of the stress interventions would have been most effective? Why? Video: https://www.youtube.com/watch?v=ClnZHLeHHUg 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 108 Transformational Leadership and Strategic HRM Prof. Dr. Ihar Sahakiants CBS International Business School 2024 TRANSACTIONAL AND TRANSFORMATIONAL LEADERS Source: Robbins & Judge, 2015, p. 378. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 110 FULL RANGE OF LEADERSHIP MODEL Source: Robbins & Judge, 2015, p. 379. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 111 TRANSFORMATIONAL LEADERSHIP (TL) EFFECT ON JOB ATTITUDES Evidence of positive effects of TL on major job attitudes: Job Satisfaction A positive feeling about the job resulting from an evaluation of its characteristics. Job Involvement Degree of psychological identification with the job where perceived performance is important to self-worth. Employee Engagement - The degree of involvement with, satisfaction with, and enthusiasm for the job. - Engaged employees are passionate about their work and company. Organizational Commitment - Identifying with a particular organization and its goals and wishing to maintain membership in the organization. - Theoretical models propose that employees who are committed will be less likely to engage in work withdrawal even if they are dissatisfied, because they have a sense of organizational loyalty. Source: Ehnrooth et al., 2021; Robbins & Judge, 2015. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 112 TRANSFORMATIONAL LEADERSHIP OUTCOMES FOLLOWER PERFORMANCE Source: Bakker et al., 2023, p. 704. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 113 TRANSFORMATIONAL LEADERSHIP OUTCOMES PERFORMANCE INFORMATION USE Source: Moynihan et al., 2011, p. 148. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 114  TRANSFORMATIONAL LEADERSHIP (TL) LINK TO THE JD-R MODEL Evidence that transformational leadership reduces cognitive, emotional, and physical job demands Source: Tummers and Bakker, 2021, p. 8. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 115  PURPOSES OF PERFORMANCE MANAGEMENT DISCUSSION Strategic purpose Administrative purpose Developmental purpose Linking employee activities with the Use of performance management Development of employees with respect to job organization‘s goals. information (in particular, effectiveness. performance appraisals) in Definition of the results, behaviors, administrative decisions: Identification of employee’s weaknesses and the and employee characteristics that are causes of deficiencies (skill deficiencies, necessary to carry out the strategies. salary administration (pay raises) motivational problems, obstacles holding the Developing measurement and promotions employee back) feedback systems that will maximize retention-termination Design and implementation of developmental the extent to which employees exhibit layoffs programs to address underperformance the characteristics, engage in the recognition of individual Identification and development of high performing behaviors, and produce the results. performance employees. 1. Which of the above purposes can be particularly effective when enhanced by transformational leadership? 2. The achievement of which performance management purposes would rather correspond to the transactional leadership philosophy? Source: Noe et al., 2010, pp. 355-359. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 116 Strategic Performance Management Prof. Dr. Ihar Sahakiants CBS International Business School 2024 PERFORMANCE MANAGEMENT AND APPRAISAL Performance management is the continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning their performance with the organization’s goals. Source: Dessler, 2015, p. 293 Performance appraisal: The process of evaluating how well employees perform their jobs when compared to a set of standards, and then communicating that information to employees. Source: Wärnich et al., 2018, p. 305. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 118 THE PERFORMANCE MANAGEMENT PROCESS Source: Werner, 2022, p. 322 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 119 RATERS Supervisors as raters Have prior experience in rating employees Have idea about expected level of performance Peers as raters Work more closely with the ratee Have an undistorted perspective of typical performance Self as rater Generally more lenient and possibly more unreliable Enables realistic assessment Customer as rater Result of recognizing the importance of customers Subordinate as rater - Allows seniors to: Know how they are viewed by their subordinates See their strengths and their weaknesses as a leader and modify their behavior 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 120 BALANCED SCORECARD APPROACH TO PERFORMANCE MEASUREMENT Determines what contributes value in an organization Success depends on satisfied: Customers Employees Measures four dimensions Customer satisfaction Employee learning and growth Internal business processes Financial measures 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 121 BALANCED SCORECARD CUSTOMER SATISFACTION MEASURES Customer satisfaction Customer complaints Returned products as a percentage of sales Percentage of repeat customers from previous period 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 122 BALANCED SCORECARD INTERNAL BUSINESS PROCESS MEASURES Length of time taken to introduce new products Time taken to answer customer calls (e.g., answered within 30 seconds) Response time for customer inquiries Percent of on-time deliveries against all deliveries Time to resolve customer raised problems, issues and complaints Number of defect free units as a percent of all units Delivery cycle times Time to fill customer orders Wait times for customer problem resolution Throughput time Manufacturing cycle efficiency Percent of customer complaints settled the first time a contact is made 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 123 BALANCED SCORECARD EMPLOYEE LEARNING AND GROWTH Employee satisfaction measures Voluntary employee turnover Hours of training per employee Suggestions per employee Percentage of new hires based on employee referrals Percentage of employees rating work environment as good to very good 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 124 BALANCED SCORECARD FINANCIAL Return on equity Revenue (growth) Net profit Cash flow generated Etc. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 125 PERFORMANCE APPRAISAL ELEMENTS Elements Traditional Approaches High Involvement Purpose Organizational, legal Developmental Fragmented Integrated Appraiser Supervisor, managers Appraisee, co-workers and others Role of Appraisee Passive recipient Active participant Measurement Subjective, Objective and subjective Concerned with validity Timing Periodic, fixed, Dynamic, timely, employee- or administratively driven work-driven Source: Cummings et al., 2020, p. 373. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 126 THE PERFORMANCE MANAGEMENT REVOLUTION DISCUSSION 1. What are the major reasons for abandoning the traditional appraisal systems? 2. What are the major disadvantages of the forced (distribution) rankings? 3. What are the challenges associated with abandoning traditional appraisals? 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 127 STRATEGIC COMPENSATION Prof. Dr. Ihar Sahakiants CBS International Business School 2024 STRATEGIC PERSPECTIVE COMPENSATION A strategic perspective focuses on those compensation choices that help the organization gain and sustain competitive advantage. Source: Milkovich et al., 2014, p. 691.. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 129 TOTAL COMPENSATION APPROACH KEY ELEMENTS - Base Salary / Wage Base Cash Short-term variable - Incentive plans (Short-Term) pay - Bonuses/Spot Awards Long-term variable - Stock/Equity pay - Incentive Plans (Long-Term) - Retirement and Savings Plans - Paid Time Off Benefits - Legally Required Benefits - Health Care Plans - Company Cars - Club Memberships Perquisites - Financial and Legal Counselling Source: Festing, Engle, Dowling, & Sahakiants, 2012, p. 141. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 130 STRATEGIC CHOICES Source: Milkovich et al., 2014, p. 42.. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 131 INCENTIVE AND SORTING EFFECTS OF PAY ON EMPLOYERS‘ BEHAVIORS Pay affects motivational intensity, direction, and persistence Incentive effect: Degree to which pay influences individual and aggregate motivation Sorting effect: Effect that pay can have on the composition of the workforce How an organization pays, can result in sorting effects 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 132 STRATEGIC COMPENSATION CHOICES AND STRATEGIES Strategic compensation choices Objectives Internal alignment External competitiveness Employee contributions Management Stated strategies - Written compensation strategies Unstated strategies - Inferred from the pay decisions 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 133 THE PAY MODEL POLICIES TECHNIQUES OBJECTIVES INTERNAL Work Evaluation/ INTERNAL EFFICIENCY Descriptions Performance ALIGNMENT Analysis Certification STRUCTURE Quality Customer and COMPETITIVE- Market Policy PAY Stockholder Surveys NESS Definitions Lines STRUCTURE Cost FAIRNESS CONTRIBU- Seniority Merit PAY FOR Incentives TIONS Based Guidelines PERFORMANCE COMPLIANCE MANAGEMENT Cost Communication Change EVALUATION ETHICS Source: Milkovich, Newman, & Gerhart, 2011, p. 16. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 134 TAILORING THE COMPENSATION SYSTEM TO THE STRATEGY: EXAMPLES Source: Milkovich et al., 2014, p. 43. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 135 SPECIAL TOPIC EXECUTIVE COMPENSATION Main issues: - Appropriateness (e.g., the issue of excessive executive pay) - Alignment with the corporate strategy - Establishing a pay-performance link - Transparency - Legal requirements 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 136 EXECUTIVE COMPENSATION A NEVER-ENDING CONTROVERSY? 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 137 PERSPECTIVES OF COMPENSATION (INCENTIVES) VIEWS BY DIFFERENT STAKEHOLDERS Society’s Stockholders’ Views Views Employees’ Managers’ Views Views 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 138 EXECUTIVE COMPENSATION TRENDS (USA) Compensation component 1970s 1980s 1990s 2000s Base salary 60% 40% 33% 19% Benefits * 15 * * Perks * 5 * * Short-term bonus 25 20 27 17 Long-term incentives 15 20 40 66 Source: Milkovich, Newman, & Gerhart, 2011, p. 481. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 139 US-AMERICAN EXECUTIVE COMPENSATION CEO-TO-WORKER COMPENSATION RATIO, 1965–2022 Source: Economic Policy Institute (2023, p. 9). 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 140 GERMAN CEOs IN 2023 BEST PAID CEO OF A COMPANY LISTED IN DAX Oliver Blume (Volkswagen): 9.711 million euros Source: Volkswagen (2024, p. 67). 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 141 GERMAN CEOs IN 2023 OLIVER BLUME Source: Volkswagen (2024, p. 67). 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 142 US-AMERICAN CEOs IN 2023 TOP 10 BY TOTAL COMPENSATION GRANTED Source: CNBC (2024). 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 143 US-AMERICAN CEOs IN 2023 EXECUTIVE COMPENSATION AT TPG Source: tpg (2024). 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 144 MAKING EXECUTIVE PAY SUSTAINABLE Aligning CEO compensation with prevailing social norms and the interests of other stakeholder groups 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 145 MAKING EXECUTIVE PAY SUSTAINABLE FEASIBLE SOLUTIONS ▪ Emphasis on legal pressure / compliance ▪ Use of sustainability-related performance metrics ▪ Increased attention to performance evaluation ▪ Punishing bad performance ▪ Long-term orientation ▪ Increased shareholder activism ▪ … 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 146 BOARD MEMBERS’ COMPENSATION IN GERMANY (LISTED COMPANIES) ARUG II REGULATIONS ARUG II: Gesetz zur Umsetzung der zweiten Aktionärsrechterichtlinie [the German Act Implementing the Second Shareholder Rights Directive] of December 12, 2019 Stipulates a number of requirements with respect to: - Determination of compensation - Reporting on compensation - Approval of the compensation by the annual general meeting of the shareholders Source: Heuking Kühn Lüer Wojtek, 2021 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 147 DETERMINATION OF BOARD MEMBERS’ COMPENSATION ACCORDING TO ARUG II Content requirements for the compensation system: - Orientation on sustainable and long-term development of the company; consideration of social and ecological aspects when designing incentives - Determination of the maximum remuneration (consisting of fixed, variable pay, perquisites and benefits). This amount can be reduced by the annual general meeting - Setting up fixed and variable components of compensation, their relative share - Stipulation of financial and non-financial performance criteria for variable pay Source: Heuking Kühn Lüer Wojtek, 2021 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 148 VOLKSWAGEN REFERENCE TO ARUG II Source: Volkswagen, 2024, p. 61. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 149 Volkswagen CLAWBACK Source: Volkswagen, 2024, p. 65. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 150 VOLKSWAGEN SUSTAINABLE PERFORMANCE-BASED PAY Source: Volkswagen, 2024, p. 72. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 151 Summing up and exam preparation Prof. Dr. Ihar Sahakiants CBS International Business School 2024 BASIC FACTS Duration: one hour (60 minutes) Maximum number of points: 100 points Structure: Four to 10 questions. Questions often consist of several subquestions. Both lecture slides, self-study assignments, videos that were discussed during the classes, and readings are relevant for the exam. Please follow the recommendations of the examination office to get prepared for the online exam (with respect to software setup, hardware etc.) 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 153  RECOMMENDATIONS Plan your time carefully: e.g., to answer a 10-point question, you are not expected to take more than 6 minutes. Use appropriate wording: If you are asked just to list different options, advantages, disadvantages, aspects of a concept etc., you are expected to write several bullet points with one or several words for each. The questions might start with: “Name, state, give an example…”. Although incomplete sentences are appropriate in your answers, your point should be clear (e.g., when you are asked to give an example). If you are asked to describe, evaluate or explain, more extensive descriptions / explanations are expected. Don’t submit your exam much earlier than the deadline: Additional relevant information added to your answers might bring you further evaluation points. 26.11.2024 | PROF. DR. IHAR SAHAKIANTS 154 CAMPUS KÖLN CAMPUS MAINZ CAMPUS POTSDAM STRATEGIC HUMAN RESOURCE MANAGEMENT AND LEADERSHIP 2024 Prof. Dr. Ihar Sahakiants Tel. +49 (0) 221 931809-535 E-Mail: [email protected]