Chapter 12Managing Human Resources

The Strategic Role of HRM: The Strategic Approach to HRM

HR must drive organizational performance; it’s the competitive edge• Matching process

• Integrate strategy

• HR builds (organizational) culture

The right people: To become more competitive on a global basis

For improving quality, innovation, and customer service

To retain during mergers and acquisitions

To apply new information technology for e-business2

12.1 Strategic HRM

Building Human Capital to Drive Performance

• Strategic decisions are related to human decisions• More companies rely on information, creativity, and knowledge

• To build Human capital, HRM develops strategies for 1. Recruiting: Finding the best talent,

2. T & D: Enhancing their skills and knowledge with training programs and opportunities for personal and professional development, and

3. Providing compensation and benefits that support the sharing of knowledge and appropriately reward people for their contributions to the organization.

Human Capital is the economic value of the combined knowledge, experience, skills, and capabilities of employees

Valuing a Human Capital per employee – A Firm Value Approach• $ Human Capital per employee

= Firm Value ÷ # of Employees

• Firm Value = [Stock Price per share] x [# of Common Stocks]

• Example: Suppose Laker Corporation is a public company traded on NYSE. Its stock price today is $100. The number of outstanding stocks is 1,000,000. Laker Corp. employs 1,000 people. Using a firm value approach, value the company’s human capital per employee.

• Solution:• Firm Value = $100 x 1,000,000 shares = 100 M• $ Human Capital per employee = 100 M ÷ 1000 = 100 K

Cantrell, et al. (2006): The Role and Value of Human Capital Investments [Exhibit 12.2 ]

The Impact of Federal Legislation on HRM [Exhibit 12.3]

• HR managers must stay on top of legal and regulatory environment; Many laws exist to ensure equal opportunity and stop discrimination

• Discrimination – the hiring or promotion of applicants based on criteria that are not job related

• Affirmative action – requires employers to take positive steps to guarantee equal employment opportunities for people of protected groups

• Sexual harassment is a growing concern that is a violation of the Civil Rights Act

12.3 Major Federal Laws Related to HRM

12.3 Major Federal Laws Related to HRM

12.3 Major Federal Laws Related to HRM

The Changing Nature of Careers: OLD Social Contract

In the old social contract,

the employee contributed ability, education, loyalty, and commitment in return for

the company providing wages and benefits, work, advancement, and training.

The Changing Nature of Careers:New Social Contract

Employees:

Downsizing, outsourcing, rightsizing, and restructuring have left little stability

Subsidized benefits are decreasing

Employees are expected to be self-motivated

Employers:

Organizations must be creative with training and development

New performance appraisal processes are required

12.4 The Changing Social Contract

Innovations in HRM:(1) Becoming an Employer of Choice

Organizations that are highly attractive to potential employees because of HR practices that focus on:

Tangible benefits such as pay and profit sharing: Starbucks – Benefits to P/T employees

Intangibles (e.g., work/life balance, a trust-based work climate, a healthy corporate culture) and that embraces a long-term view to solving immediate problems

Innovations in HRM (continued):(2) Using Contingent Workers

Contingent workers (temporary/part-time employees) are not permanent, maintain flexibility, and keep costs low

The temporary staffing industry doubled between 2002 and 2007 and is projected to grow into a $200 billion industry by 2010.

People in these temporary jobs do everything from data entry to becoming the interim CEO.

Innovations in HRM (continued): (3) Promoting Work-Life Balance

Critical retention strategy

Helping workers lead a balanced life

Part-time work and telecommuting

Flexible scheduling

Gen Y/Millennials demand more work-life balance

On-site gym, Childcare, Eldercare, etc.

1. Planning, predicting the need for new employees based on the types of vacancies that exist

2. Communicate with potential applicants 3. Select those with the best potential4. Welcome the new employee to the organization

Finding the Right People: Attracting an Effective Workforce – 4 Steps

Finding Right People (continued):Matching Model [Exhibit 12.5]

Human Resource Planning

• What new technologies are emerging?• What is the volume of the business likely to be in

the next 5 to 10 years?• What is the turnover rate?

• What types of engineers will we need?• How many administrative personnel will we need to

support additional engineers?• Can we use temporary, part-time, or virtual

workers?

Recruiting (talent acquisition)

• Internal Recruiting: less costly, generates higher employee commitment, and offers career advancement

• Assessing Organizational Needs:– Job Analysis: a systematic process of gathering and interpreting

information about the essential duties, tasks, responsibilities, and context of a job

– Job Description: clear & concise summary of tasks, duties, responsibilities– Job Specification: knowledge, skills, education, physical abilities, etc.

• Realistic Job Previews (RJP) – provide pertinent information; positive and negative about the job & organization

• Legal Considerations – recruiting practices must be legal• Innovations in Recruiting:

– eRecruiting; Twitter, LinkedIn, and other social media– Getting referrals from current employees (cash rewards, etc.)

12.6 Sara Lee’s Required Skills for Finance Executives

12.7 PAIRE’s Recruitment and Hiring Policy

Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 22

Application Form• Avoid irrelevant questions • Avoid questions w/ adverse

impactInterview; cannot violate

EEO guidelines• Structured interviews• Biographical interviews• Behavioral interviews• Situational interviews• Panel interviews

Selecting

Employment Tests• Cognitive ability tests• Physical ability tests• Personality tests• Brainteasers

Assessment Center• Work sample tests

Online Checks

• Employers assess applicants for a “fit”• HR professionals us a combination of devices:

• DQ: Discuss what makes LinkedIn so special that US Cellular pays $60,000 annual fee to LinkedIn.

• DQ: Discuss what benefits you can get when you join LinkedIn.

• DQ: Explain how you can build your own professional networks even if you were not born with a silver spoon.

Linkedln (p. 336)

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P. 339 “Manager’s Shoptalk”1.Communication Skills2.Performance3.Attitude4.Appearance5.Honesty

5 Etiquette at Job Interview

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12.8 Employment Applications and Interviews: What Can You Ask?

12.9 Interview Brain Teasers

12.9 Interview Brain Teasers (continued)

Managing Talent

• Training and Development– On-the-Job Training– Corporate Universities– Promotion from Within– Mentoring and Coaching

• Development involves teaching broader skills

12.10 Methods and Goals of Training

Managing Talent (continued):Performance Appraisal

• Performance Appraisal:– Observing and assessing employee performance, – Recording the assessment, and – Providing feedback to the employee.

• Give feedback and praise• Reward high performers with merit pay, recognition,

and other rewards – must be on-ongoing process• HRM professionals concentrate on:– Accurate assessment of performance– Training managers to the use the performance appraisal

interview effectively

Performance Appraisal (continued)

• Assessing Performance Accurately – system should evaluate relevant performance

• 360-degree Feedback – uses multiple raters, including self-rating to appraise employees– Jack Welch’s negative opinion of this approach

• Performance review ranking - managers evaluate direct reports relative to one another and categorizes each on a scale; This system pit employees against each other

Managing Talent (continued):Performance Evaluation Errors [Ex. 12.11]

• Stereotyping – placing an employee into a class or category based on a few characteristics

• Halo Effect - giving an employee the same rating on all dimensions of the job even if performance is good on some dimensions and not good on others.

• Behaviorally Anchored Rating Scales (BARS) – rating technique that relates an employee’s performance to specific job-related incidents – P. 346

12.11 Example of a Behaviorally Anchored Rating Scale (BARS)

IBM – Volunteer project

• P. 343• Learn to accomplish things collaboratively• TEAMWORK, Teamplayer

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Compensation

• Compensation – all monetary payments and all goods or commodities used to reward employees

• Wage and Salary Systems– Merit pay system vs. Seniority

– Job-based pay: – Fails to reward the learning behavior (development)

– Emphasis on hierarchy, centralized decision making & control

– Skill-based pay (= Competency-based pay)– Encourages employees to develop their skills and

competencies, thus more valuable to the firm & more employable themselves

Compensation (continued)

• Compensation Equity – fairness and equity

• Pay for Performance (Incentive Pay) – raise productivity, cut labor costs in competitive environment

• DQ: Discuss weakness of job-based pay.

• DQ: A top research institution like Bell Lab, often pays higher salary to a new employee, a fresh Ph.D. at low rank than a senior employee. What kind of salary system does Bell Lab implement?

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• Social security, unemployment compensation, and workers’ compensation are required by law

• Benefits = 40% of labor costs in the U.S.

• Cafeteria-plan benefits packages allow employees to select benefits for themselves

• Healthcare Costs: HRM Innovation is needed to reduce the skyrocketing healthcare costs: Capitated Payment [McDonnel-Douglas to Barnes Hospital]

• DQ: Explain why Starbucks Company became an employer of choice, in particular, for contingent workers.

Benefits

• Reducing the company’s workforce to the “right” size; also called downsizing

• Make company stronger and more competitive

• HR Department must effectively and humanely manage the process

• Many organizations use communication and provide assistance to address emotional needs

Rightsizing the Organization

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• Employees leave voluntarily, retire, are rightsized, and are fired for poor performance

• Poor performing employees can be disruptive and cause problems for morale

• Exit interviews can be used to learn about dissatisfaction

• E-Bay Case - p. 350

Termination

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The Changing Workplace

Demographic changes have transformed society

Good organizations take steps to attract and maintain workers

Diversity is no longer just the right thing to do

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Globalization

• Organizations must compete on a global basis

• Success is determined by global HR strategies

• International human-resource management addresses the added complexity of managing diverse people globally

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Discussion Questions

• What is SHRM? What services/resources does SHRM provide to its members?

• Suppose Laker Corporation is a public company traded on NYSE. Its stock price today is $100. The number of outstanding stocks is 1,000,000. Laker Corp. employs 1,000 people. Using a firm value approach, value the company’s human capital per employee.

• Republicans has attempted to repeal Obama Care. What law is Obama Care related to?

• Discuss why the business community, in particular, owners of small business, hates Patient Protection and Affordable Care Act (2010).

• Explain what benefits “social contract” should provide for America, from the political economics perspectives.

• From the macro-economic perspectives, what does social contract offer to poor people?

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Discussion Questions (continued)

• Explain why Starbucks Company became an employer of choice, in particular, for contingent workers.

• Discuss what makes LinkedIn so special that US Cellular pays $60,000 annual fee to LinkedIn.

• Discuss what benefits you can get when you join LinkedIn.

• Explain how you can build your own professional networks even if you are not a child from the old money.

• Provide examples of inappropriate/illegal interview questions on (1) national origin (2) race (3) disabilities (4) age (5) religion (6) criminal record (7) marital/family status (8) education & experience (9) citizenship (10) sexual orientation.

• Elaborate five proper etiquette at a job interview.

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Discussion Questions (continued)

• Articulate your answer to the following questions:

– How would you weigh a jet plane without using scales?

– Why are manhole covers round?

– How many golf balls can fit inside a standard school bus?

– How much should you charge to wash all the windows in Seattle?

– You’re shrunk and trapped in a blender that will turn on in 60 seconds. What do you do?

• Discuss what outcomes IBM gained from a training and development project such as voluntary service in a foreign country.

• Explain the halo effect in performance evaluation.

• Explain how the BARS overcomes performance evaluation errors.

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Discussion Questions (continued)

• Discuss weakness of job-based pay.

• A top research institution like Bell Lab, often pays higher salary to a new employee, a fresh Ph.D. at low rank than a senior employee. What kind of salary system does Bell Lab implement?

• Discuss how the HR management department manage effectively and humanely manage the rightsizing process for remaining employees.

• Explain why people who left Microsoft voluntarily or involuntarily are not bitter about their former employer, from the HR management perspectives.

• How did e-Bay learn about high turn-over of mid-level executives? What caused the high turn-over.

• Explain why Jack Welch does not support the 360-degree evaluation approach.

• Explain how capitation (capitated payment) system works.

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Discussion Questions

• Explain the strategic role of human resource management.• Describe federal legislation and societal trends that influence human resource

management.• Explain what the changing social contract between organizations and

employees means for workers and human resource managers.• Show how organizations determine their future staffing needs through human

resource planning.• Describe the tools managers use to recruit and select employees.• Describe how organizations develop an effective workforce through training

and performance appraisal.• Explain how organizations maintain a workforce through the administration of

wages and salaries, benefits, and terminations.