Chapter 1 - Introduction to Human Resource Management

What is human resource (HR) management and why is it important?Organizations have been described in various ways. We will focus our early efforts on understanding an organization as groups of individuals with formally assigned roles. Note that such individuals generally work together to achieve the common goals of an organization.Understanding the five elements of what managers do (planning, organizing, staffing, leading, and controlling) will assist you in your career. For example, no matter what your job, planning involves establishing goals, rules and procedures and attempting to forecast the future.Planning will enhance your ability to manage people and functions. For our purposes, we will focus our efforts on basic staffing functions. These include:

Acquiring talented employees Training new hires and existing managers and employees Creating and administering effective performance appraisals Properly compensating employees, and, Attending to concerns about labor relations, health, safety, and fairness

The HR function is primarily concerned with the “staffing” component of the five management processes, namely, planning, organizing, staffing, leading, and controlling. The key elements of staffing include:

Job analysis Planning labor needs Recruiting Orienting and training new employees Compensation Incentives and benefits Performance appraisal Communicating Training and development, and Employee commitment

In addition, HR is responsible for compliance with federal, state and local laws, safety, and handling grievances and labor relations.

Human Resource (HR) Responsibilities of Line and Staff ManagersLine and staff managers focus their energies in different yet related and complementary ways. Let’s talk about the two types of managers and what each does for the firm.If you are a line manager, you will hold responsibilities to issue orders, provide directions and establish rules and procedures. For example, as a sales manager, you will be responsible for requiring adherence to your rules relative to sales quotas and goals.On the other hand, an HR manager is a staff manager and, like all staff managers, is responsible for influencing and advising others. Within the HR department you may be responsible for establishing goals and giving orders to those in your department thus serving as a line manager within HR. Your principal duty to the organization as a whole, however, is that of a staff function, much the same as a purchasing department. Staff departments may include finance, accounting, and logistics. Sales, production, and operations departments generally are considered line functions. If you are a line manager, your duties and responsibilities concern how well you can successfully orient and integrate new hires into your unit, maintain their health and safety, supervise and motivate them, and effectively manage department costs. Line managers require support to perform their jobs properly. If you are a line manager, you will have the help of the people in your HR department. HR professionals ensure adherence to company policies, provide training, advice on motivating your employees, and other support as needed.

HR exists to contribute to employee well-being, profits,and performance in many ways. Such contributions include: Avoiding costly personnel mistakes Managing compensation and benefits Recruiting, hiring, and retaining good employees Managing performance and providing effective training and development

HR is a staff function for the firm yet serves in a line capacity within the HR department. An HR manager’s duties also may include advising the CEO regarding strategies, helping managers with legal compliance, handling grievances, and functioning as an innovator.

Important Trends in Human Resource ManagementIn the continuing development of human resource management, there exist various trends that will help shape its practice and evolution in the coming years. Human Resource responsibilities have become broader and more strategic over time in response to a number of trends. The role of HR has evolved from primarily being responsible for hiring, firing, payroll, and benefits administration to one that is more strategic.Many trends are emerging and will continue to change the shape, size, and function of HR management. Some of these trends we will discuss shortly include:

Globalization Competition Deregulation Increased indebtedness Technological innovation More high-tech & service jobs

In addition, we will discuss other trends such as: More knowledge work Aging workforce Economic downturn De-leveraging Deregulation slowdown Slower economic growthGlobalization refers to the tendency of firms to extend their sales, ownership, and/or manufacturing to new markets abroad. Dell, for example, is planning to supply PCs to

China. China is expected to become the largest market for computers in the world. Companies such as Toyota, BMW, and Honda build and sell some of their vehicles here in the U.S. and even ship them to other countries from the U.S. The reasons for going global are many including: reaching new markets, selling more products or services, lower labor costs, forming partnerships, and becoming more competitive.

Due to the softening of U.S. banking regulations, many banks were able to offer stocks and other financial instruments in addition to traditional banking services. Such actions contributed to increased risks for the average banking customer. Questionable lending practices led to easy credit for developers and homebuyers alike. Perhaps you have experienced some of these practices or know of people who have. Like many Americans, credit practices have allowed, even encouraged, you and me to buy what we want when we want it. Such practices encourage spending in excess of what we may earn. The U.S. and other countries have imported more than they’ve created and exported. Such practices are referred to as the balance of payments. Rating firms such as Standard and Poor’s have threatened to and even lowered the ratings of some debtor nations. Such steps and other actions have contributed to economic volatility and changes in the way firms conduct business and employee people.

The impact and growth in the use of smart phones and tablet computers, such as the iPad, have opened doors to people and the workplace in a way that previously has never occurred. The speed of information exchange has contributed to the growth of social networking sites such as Facebook and LinkedIn. Facebook, for example, offers Facebookrecruiting which provides a rapid conduit between employers and job-seekers.

As you enter the workforce or continue in your jobs, you are more likely to enter commands into a computer than perform dangerous physical labor. The “brawn to brains” changes have been fueled by moving manufacturing jobs to low-wage countries. Just-in-time (JIT) manufacturing processes have connected the customer with the manufacturer and the distributor in real time resulting in more precise scheduling, production and delivery. Another trend, human capital, refers to the knowledge, education, training, skills, and expertise of a firm’s workers. Today’s (and tomorrow’s) best jobs will go to the individuals with the best reading, math, and communication skills. In other words, the best knowledge workers will be hired first.

Workforce and Demographic TrendsAlthough you are in college now – perhaps some or many of you work as well – throughout your careers you will need to understand the people around you. One

aspect of the changing nature of the workplace has to do with the age of the people with whom you work. Other factors include whether those around you come from other countries and the cultural qualities they represent. Conversely, if you are a nontraditional or older worker or come from abroad, understanding the nature of those around you will enable you to be more productive and make greater contributions.

According to the Bureau of Labor Statistics, during the twenty-year period between 1998 and 2018, the number of white, non-Hispanic workers will decrease in the United States. The black and Asian workforce will increase. In fact, those members of the workforce of Hispanic origin will increase more than 7% while the percentage of younger workers will decrease. Most telling, perhaps, is that workers over the age of 55 will almost double from 12.4% to 23.9%!

“Generation Y” workers (those born from 1977-2002, also called “Millenials”) have, according to one expert, “…been pampered, nurtured, and programmed with a slew of activities….” Consequently, this generation:

Is considered to be both high-performance and high-maintenance Wants fair and direct supervisors who are highly engaged in their professional development Seeks out creative challenges and view colleagues as vast resources from whom to gain knowledge Wants to make an important impact on Day 1 Wants small goals with tight deadlines so they can build up ownership of tasks, and Aims to work faster and better than other workersConsider to what extent you identify with any or all of these elements and what they might mean to those around you who are not of your generation.Keep in mind these

descriptions are in comparison to baby-boomers and Generation X workers who have different characteristics.According to one survey, 41% of employers are bringing retirees back into the workplace. Thirty-one percent of employers are offering employment options to attract

semi-retired workers. Many workers hold multiple jobs or work in “contingent” arrangements such as two people sharing one job. Technology enables employees to work from home. Technology also has helped create “co-working” sites where people may be working at a shared site for the same or

different companies or even independently. One controversial trend involves the granting of H1-B visas for skilled foreign workers when enough U.S. workers with the proper skills are not available in a given

location.

Have you experienced or do you know of family members or friends who have had experiences with such workers or workplaces? What do such experiences suggest to you with respect to the role of HR?An important measure of U.S. total economic output, the Gross National Product (GNP), boomed between 2001 and 2008. Home prices soared and unemployment was low. Economically speaking, somewhere between 2007 and 2008, however, everything fell off a cliff. Today, unemployment remains at a high and sustained 9.1% while home prices may have dropped 20% or more. Financial institutions held enormous amounts of worthless debt on their books while lending dried up. In effect, the economy tanked. While this situation will improve, global economic impacts have been felt and will continue to be felt for some time. The human resource management profession must continually evolve and change keeping pace with the changes in the global economy.

Evidence-basedHuman Resource ManagementEvidence-based human resource management involves the use of the best available evidence with respect to human resource practices. For example, tracking median

HR expense as a percentage of a company’s total operating costs may average less than 1%. The use of this and similar metrics will help control expenses and contribute to profits.

The New Human Resource ManagersTrends such as the ones just discussed will have an impact on employees and how they are managed. The New Human Resource Managers require the new

knowledge and skills and must demonstrate expected results for the future.If you had been working as an HR professional after World War II, your duties would have been significantly different than they are today. Early in the HR

profession, most work was transactional in nature and involved such things as payroll and benefits administration and hiring and firing. Today, however, the scope of responsibilities is vastly different. New responsibilities include finding new ways to get the job done. Getting the job done may include outsourcing routine functions including payroll and benefits or installing the company’s own internal social networking sites. In addition, the new HR managers take an integrated “talent management” approach to managing HR. Managing talent now includes managing ethics, employee engagement, adding value, having more and varied core competencies, and measuring HR performance and results. You may wish to consider what ethics are. Are ethical considerations different for different people? In what ways should HR be involved in managing ethics?

Chapter 3Human Resource Management Strategy and Analysis

Goal-Setting and the Planning Process• The hierarchy of goals• Strategic planning

Strategic planning is important because in a well-run organization the goals come from the top of the organization downward. The process forms a hierarchy of goals. These goals, in turn, should guide everyone in the organization in what they do.A strategic plan is the company’s plan for how it will match its internal strengths and weaknesses with external opportunities and threats. A successful strategic plan helps ensure a competitive advantage. In companies, it is traditional to view the goals from the top of the firm down to front-line employees as a chain or hierarchy of goals. A strategic plan is the company’s plan for how it will match its internal strengths and weaknesses with external opportunities and threats. This will allow the organization to maintain a competitive advantage.

The Seven Steps in the Strategic Planning Process The seven steps in the strategic planning process allow you to manage the process in a systematic manner. Let’s discuss them now.

1. Define the current business and mission• The logical place to start is bydefining one’s current business. What products do we sell and where? How do our products or services differ from our competitors?

2. Perform external and internal audits• The next stepis to ask, “Are we heading in the right direction?”

3. Formulate a new direction• The question now is, what should our new business be? Translate the mission into goals.• Next,translate the mission into strategic objectives.

4. Formulate strategies to achieve the strategic goal• Next, the manager chooses courses of action that will enable the companyto achieve its strategic goals.

5. Implement the strategy• Strategy execution means translatingthe strategies into action and trying them out.

6. Evaluate performance• Things don’t always turn out as planned. At this point, the strategies are tested against reality. If changes are needed, the entire process may be repeated from an

earlier step.

Types of Strategies• Corporate strategy: identifies the portfolio of businesses that comprise the company and the ways in which these businesses are related to each other.

o Concentration: offers one product or product line, usually in one market.o Diversification: expand by adding new product lines.o Vertical integration: expands by, perhaps, producing its own raw materials, or selling its products directly to consumers.o Consolidation: reduces its size.o Geographic: grows by entering new territorial markets.

• Competitive strategy: enable a company to differentiate its product or service from those of its competitors. Such differentiation allows a company to increase its market share.

o Cost leadership: becoming the low-cost leader in an industry.o Differentiation: seeks to be unique in its industry along dimensions that are widely valued by buyers.o Focus: carve out a market niche (like Porsche).

• Functional strategy: identify the basic course of action that each department will pursue in order to help the business attain its competitive goals. Human capital is one of the best competitive advantages because it is hard to duplicate a company’s personnel.

• Strategic fit: sums up the idea that each department’s functional strategy should fit and support the company’s competitive aims. The “fit” point of view states that all of the firm’s activities must be tailored to or fit its strategy.

Management Roles in Strategic Planning• Top Managers’ Role in Strategic Planning: because the consequences of a poor choice can be dire, few top managers delegate total responsibility for strategic • Departmental Managers’ Strategic Planning Roles

o Devise: helping devise the strategic plano Support: formulating supporting, functional/departmental strategieso Execution: executing the plans

Strategic Human Resource Management• Defining strategic human resource management

Management formulates a strategic plan and measurable strategic goals or aims. The plans imply certain workforce requirements required to achieve the firm’s strategic aims.

• Human resource strategies and policiesGiven these workforce requirements, HR management formulates strategies. These HR policies and practices (strategies) help produce the desired workforce skills, competencies, and behaviors.

Mergers and AcquisitionsMergers and acquisitions are among the most important strategic moves companies make. When mergers and acquisitions fail, it’s often not due to financial or technical issues but to personnel-related ones. Before finalizing a deal, it is usual for the acquirer (or merger partners) to perform “due diligence” reviews. Such reviews ensure they know what they’re getting into. For the human resource teams, due diligence includes reviewing things like:

• Due Diligence Stageo Organizational culture and structureo Compensation and benefitso Labor relationso Pending employee litigationo Human resource policies and procedureso Key employees

• Integration Stage o Choosing the top management teamo Ensuring top management leadershipo Communicating changes effectively to employeeso Retaining key talento Aligning cultures

The two stages are complimentary and demonstrate the advances made in the HR profession in helping to achieve business results.

Strategic Human Resource Management Tools• Strategy map: shows the “big picture” of how each department’s performance contributes to achieving the company’s overall strategic goals. Many employers

quantify and computerize the map’s activities. The HR Scorecard helps them to do so.• The HR scorecard: is not a scorecard. It refers to a process for assigning financial and nonfinancial goals or metrics to important human resource management–

related chain of activities. That chain is required in order to achieve the company’s strategic aims and for monitoring results.• Digital dashboards: presents the manager with desktop graphics and charts. It is a computerized picture of where the company stands on all those metrics from an

HR Scorecard perspective.

HR Metrics and Benchmarking• HR metrics

o Types of metrics• Benchmarking

Being able to measure what you are doing is an integral part of the HR strategy process. First, management translates its strategic plan into workforce requirements. Such requirements are tracked in terms of measurable worker competencies and behaviors (such as outstanding service). Given these workforce requirements, the human resource manager then formulates supportive HR strategies, policies, and practices such as new training programs.Finally, the HR manager picks measures by which to gauge whether his or her new policies and practices are producing the required employee competencies and behaviors.Benchmarking means comparing the practices of high-performing companies to your own, in order to understand what they do that makes them better.

Strategy and Strategy-Based Metrics• Workforce/talent analytics: analyze and track HR data to help improve performance and increase job satisfaction• Data mining: statistical analysis to find hidden or new relationships among different variables. An example is tracking when and who is more likely to buy a certain

product.• HR audits: a way for an organization to measure current policies and practices. They can then identify areas where improvements can be made based on company

goals. • Evidence-based HR: the use of data, facts, etc. to support HR proposals, decisions, practices, and conclusions. To do so requires managers to be more scientific in

making organizational decisions. The scientific approach requires objectivity, experimentation, quantification, explanation, prediction, and replication.• Why should a manager be scientific? For managers, the key point of being “scientific” is to make better decisions. Two things are particularity important. First, in

gathering evidence, managers need to be objective. Being scientific also requires experimentation. An experiment is a test the manager sets up in such a way as to ensure that he or she understands the reasons for the results obtained. The question to be answered is, what’s the evidence and what does it suggest?

High-performance Work Systems• High-performance human resource policies and practices

A high-performance work system (HPWS) is a set of HR policies and practices that together produce superior employee performance. These policies and practices illustrate the importance of HR metrics and how they help to assess HR performance. They also reveal what HR systems must do to be successful. Such success may include helping workers aspire to manage themselves. HR practices also highlight measureable differences between HR systems in high and low performing companies.

Chapter 4 - Job Analysis and the Talent Management Process

The Talent Management Process• What Is Talent Management?

We can define talent management as the goal-oriented and integrated process of planning, recruiting, developing, managing, and compensating employees.Effectively managing talent means that managers:

1. Understand that talent management tasks are parts of one unified process. 2. Ensure talent management decisions such as staffing, training, and pay are goal-directed.3. Consistently use the same “profile” of competencies, traits, knowledge, and experience for potential employees. 4. The approach requires that employers proactively manage recruitment, selection, development, and rewards.5. Realize an effective talent management process integrates all underlying talent management activities such as recruiting, developing, and compensating employees.

The Basics of Job Analysis• Work activities• Behaviors• Machines, tools, equipment, and work aids• Performance standards• Job context• Human requirements

Talent management begins with understanding what jobs need to be filled, and the human traits and competencies employees’ need. Job analysis is the procedure through which you determine the duties of the positions and the characteristics of the people to hire for them.

Uses of Job Analysis Information• Recruitment and selection: what duties the job entails and what human characteristics are required helps in hiring decisions.• EEO compliance: crucial for validating all major human resources practices, especially when it comes to legal compliance. You may recall from our earlier

discussion of federal laws that care must be exercised in all areas related to employees such as hiring under the Americans with Disabilities Act (ADA).• Performance appraisal: helps compare each employee’s actual performance with his or her duties and performance standards in performance appraisals.• Compensation: depends on the job’s required skill and education level, safety hazards, degree of responsibility, and other factors you assess through job analysis.• Training: lists the job’s specific duties and skills—and therefore the training—that the job requires.

Conducting a Job AnalysisStep 1: Decide how you’ll use the information.Step 2: Review relevant background information such as organization charts, process charts, and job descriptions.Step 3: Select representative positions. Step 4: Actually analyze the jobby collecting data on job activities, working conditions, and human traits and abilities needed to perform the job.Step 5: Verify the job analysis information with the worker performing the job and with his or her immediate supervisor.Step 6: Develop a job description and job specification.

Job Analysis Guidelines

• A joint effort: make the job analysis a joint effort by a human resources manager, the worker, and the worker’s supervisor.• Clarity of questions and process: make sure the questions and the process are both clear to the employees.• Different job analysis tools: do not rely just on a questionnaire, forinstance, but supplement your survey with a short follow-up interview.

Collecting Job Analysis Information• Interviews

o Typical questions• What is the job being performed?• What are the education, experience, skill, and certification and licensing requirements?• What are the job’s physical demands? The emotional and mental demands?

o Structured interviewsMany managers use a structured format to guide the interview to ensure consistency and be certain key elements are not overlooked.

o Pros and consIt’s a simple and quick way to collect information, including information that might not appear on a written form.Distortion of information is the main problem—whether due to outright falsification or honest misunderstanding.

o Interviewing guidelines• Quickly establish rapport.• Use a structured guide.• Ask the worker to list his or her duties in order of importance and frequency of occurrence.• Review the information with the worker’s immediate supervisor and with the interviewee.

•• Questionnaires: having employees fill out questionnaires to describe their job-related duties and responsibilities• Observation: useful when jobs consist mainly of observable physical activities—assembly-line worker and accounting clerk are examples. • Diary/logs: every activity engaged in, the employee records the activity (along with the time) in a log.• Quantitative techniques:

Qualitative methods like interviews and questionnaires are not always suitable. You may need to say that, in effect, “Job A is twice as challenging as Job B, and so is worth twice the pay.” Now, of course, you must be able to prove such a claim quantitatively. The position analysis questionnaire ( PAQ) is a very popular quantitative job analysis tool, consisting of a questionnaire containing 194 items. The 194 items (such as “written materials”) each represent a basic element that may play a role in the job. Experts at the U.S. Department of Labor (DOL) did much of the early work developing job analysis. The DOL method uses a set of standard basic activities called worker functions to describe what a worker must do with respect to data, people, and things.

• Internet-based: HR department can distribute standardized job analysis questionnaires to geographically disbursed employees. Such questionnaires may be sent via company intranets, and include instructions to complete the forms and return them by a particular date.

Writing Job Descriptions• Job identification

The Fair Labor Standards Act (FLSA) status section identifies the job as exempt or nonexempt with respect to being exempt or non-exempt from FLSA overtime rules. Exempt and non-exempt status also is used to help plan compensation strategies for a firm. The “Date” is the date the job description was actually approved.

• Job summaryShould summarize the essence of the job, and include only its major functions or activities.

• Relationships There may be a “relationships” statement that shows the jobholder’s relationships with others inside and outside the organization. Responsibilities and duties are the heart of the job description.

• Responsibilities and dutiesThis section should present a list of the job’s significant responsibilities and duties. This section may also define the limits of the jobholder’s authority.

• Performance standards & working conditionsA “standards of performance” section lists the standards the company expects the employee to achieve for each of the job description’s main duties and responsibilities. Working conditions include the location, tools, environment (hot, cold, etc.) and the like.

• Job specifications

Profiles in Talent Management• Competencies and competency-based job analysis

Competencies are observable and measurable behaviors of the person that make performance possible. Competency-based job analysis means describing the job in terms of measurable, observable, behavioral competencies. Such competencies are usually grouped into general competencies, leadership competencies, and technical competencies.

• How to write competencies-based job descriptionsDefining the job’s competencies and writing them up is similar in most respects to traditional job analysis. However, instead of compiling lists of job duties, you will ask, “In order to perform this job competently, the employee should be able to…”

Chapter 5 - Personnel Planning and Recruiting

The Five Steps1. Decide what positions to fill, through workforce/personnel planning and forecasting.2. Build a pool of candidates for these jobs, by recruiting internal or external candidates.3. Have candidates complete application forms and perhaps undergo initial screening interviews.4. Use selection tools like tests, background investigations, and physical exams to identify viable candidates.5. Decide who to make an offer to, by having the supervisor and perhaps others interview the candidates.

Workforce Planning and Forecasting• Strategy and workforce planning

Like all plans, personnel plans require some forecasts or estimates. In this case, the forecasts involve: personnel needs, the supply of inside candidates, and the likely supply of outside candidates. The basic workforce planning process is to forecast the employer’s demand for labor and supply of labor. Next, identify supply-demand gaps and develop action plans to fill the projected gaps.

• Forecasting personnel needs (labor demand)o Trend analysis: studying variations in the firm’s employment levels over the last few years.o Ratio analysis: based on the historical ratio between two variables. One example might include some causal factor (like sales volume) and the number of

employees required (such as number of salespeople).o The scatter plot: shows graphically how two variables—such as sales and your firm’s staffing levels—are related.o Markov analysis: involves creating a matrix that shows the probabilities that employees in chain of feeder positions for a key job. “Feeder” positions are

those to which a job incumbent may likely be promoted. For example a junior engineer is a feeder position for an engineer. An engineer is a feeder position for a senior engineer who might be promoted to engineering supervisor, and so forth.

• Manual systems and replacement chartsIt is used primarily for smaller employers. For example, a personnel inventory and development record form compiles qualifications information on each employee. It will show the present performance and promotability for each position’s potential replacement.

• Computerized skills inventoriesLarger firms obviously can’t track the qualifications of hundreds or thousands of employees manually. Larger employers therefore computerize this information. One software system is Survey Analytics’ Skills Inventory Software.

• PrivacyMuch of the data are personal (such as Social Security numbers and illnesses). Legislation gives employees legal rights regarding who has access to information about them. The legislation includes the Federal Privacy Act of 1974 (for federal workers), the New York Personal Privacy Act of 1985, HIPAA (regulates use of medical records), and the Americans with Disabilities Act. Employers should keep their manual records under lock and key. Computerized records have been known to be compromised by hackers so high levels of system encryption, hashing or other tight security measures are critical.

Forecasting the Supply of Outside Candidates• Talent management

A talent management philosophy requires paying continuous attention to workforce planning issues. Managers call this newer, continuous workforce planning approach predictive workforce monitoring.

• Action planning for labor supply and demandWorkforce planning should logically culminate in a workforce action plan. This lays out the employer’s projected workforce demand–supply gaps, as well as staffing plans for filling the necessary positions.

• The recruiting yield pyramidThe recruiting yield pyramid is based on experience and solid record-keeping. In our example, if a company needs 50 entry-level accountants, using the pyramid, it will need to generate approximately 1,200 leads to fill the new-hire requirement.

The Need for Effective Recruiting• Why recruiting is important

Effective recruiting allows a company to fill open positions while their competitors may have missed solid opportunities. If, for example, you fill open positions 50% faster than industry average, you are more likely to get better talent onboard more quickly.

• What makes recruiting a challenge?o First, some recruiting methods are superior to others.o Second, the success you have recruiting depends on non-recruitment issues and policies. o Third, employment law prescribes what you can and cannot do when recruiting.

• Organizing how you recruitFor many firms, it’s simply much easier to recruit centrally now that so much recruiting is on the Internet. Face-to-face interviewing is the usual culmination of the preliminary recruiting done through the internet. With respect to the role of the supervisor in recruiting, the HR manager charged with filling an open position is seldom very familiar with the job itself. Someone has to tell this person what the position really entails, and what key things to look or watch out for. Only the position’s supervisor can do this.

Internal Sources of Candidates• Using internal sources

Some advantages of internal recruiting include the following: • Current employees may be more committed• Morale may go up since other employees will know about your policy• Current employees may require less orientation and training than new hires.

The disadvantages, however, include: employees may become discontented if they apply for jobs and do not get them. There also is a potential for inbreeding – maintaining the status quo – to occur.

• Finding internal candidatesTo be effective, promotion from within requires using job analysis and posting, using personnel records, and maintaining current skill banks.

• RehiringOn the positive side, they are known quantities and are already familiar with the organization. But former employees may return with negative attitudes. Current employees may perceive that the way to get ahead is to leave and come back. This is often the case if the rehires return at higher levels or salaries.

• Succession planningo Identify key needso Develop inside candidateso Assess and choose

Outside Candidates• Internet recruiting

For most employers and for most jobs, Internet-based recruiting is by far the recruiting source of choice. Most employers find that the Internet is their best choice for recruitment efforts. Social networking also provides recruiting assistance, especially for mid-level and higher management positions. Advantages – The Web is cost efficient, generating more responses more quickly and providing exposure for a longer time at less cost. Disadvantages – Gathering applications online may exclude more mature applicants and certain minorities.There are also other web recruiting practices that include networking sites, texting, an organization’s personal recruiting website, and virtual job fairs. These can generate more responses more quickly and for less cost. However, they have their disadvantages, such as less diversity of applicants.One survey of 256 alumni from graduate business schools showed why manyfirms’ Web-based recruiting turned them off. The objections included:

• Lack of relevant information• Using mandatory formatting for resumes• Privacy issues• Poor graphics and difficulty in using the site• Slow feedback from employers

• Advertising – media Advertising – While the internet is used a great deal, there are still reasons for using print-based ads. The best medium (internet, newspaper, etc.) should be selected based on the positions for which you are recruiting. For example, if you are seeking a highly specialized researcher, then advertising in the appropriate professional journal is your best bet.

Writing the Ad• Attention• Interest• Desire• Action

Why does this ad attract attention? The phrase “next key player “certainly helps. Next, develop interest in the job. In our ad, asking if you want to make an impact probably creates interest. Create desire by spotlighting words such as travel or challenge. Finally, the ad should prompt action with a statement like “call today.” In the ad, writing a cover letter addressing the question, “Beyond the beans, what is the role of a plant controller?” is a challenging requirement for simply applying for the job.

Employment AgenciesThere are three main types of employment agencies: 1. public agencies operated byfederal, state, or local governments; 2. agencies associated with nonprofit organizations; and 3. privately owned agencies, charge fees for each applicant they place.

Temp Agencies and Alternative Staffing• Pros and cons• What supervisors should know about temporary employees’ concerns• Legal guidelines• Alternative staffing

The benefits of contingency staffing include increases in overall productivity, and time and expenses saved by not having to recruit, train, and document new employees. Some of the major concerns of temporary employees include being treated in a dehumanizing and discouraging way and worrying about the lack of insurance and pension benefits. Understanding the difference between contract workers and employees is very important. Let the temp agency assume as much responsibility for the temporary employee as possible. This helps to create a clear line between temps and employees at the worksite.Alternative staffing, such as temporary employees, refers to the use of nontraditional recruitment sources.

Other Sources of Candidates• Offshoring and outsourcing jobs

Hiring workers abroad is becoming more and more common. Offshoring has to do with taking advantage of the lower costs of doing business outside of the U.S. This includes the wages paid as well as the lower costs of raw materials, energy sources, and the like.

• Executive recruitersExecutive recruiters, also called headhunters, are special employment agencies hired by employers to seek out top-management talent for their clients. There are two types of executive recruiters: contingent and retained. Contingent headhunters are paid on a commission basis. Retained recruiters are paid for their ongoing services whether or not a candidate they present is hired. There is occasional overlap between the two, however.Recruiters can be useful and save time and other resources for the company. However, some recruiters may be more interested in persuading managers to hire a candidate than in finding the rightone.Guidelines – Make sure the recruiting firm is capable, meet the individual who will handle the assignment, and ask how much the firm charges. Never rely on the recruiter to do all the reference checking.

• On-demand recruiting servicesOn-demand recruiting services (ODRS) provide short-term specialized recruitingassistance to support specific projects without the expense of hiring traditional retained search firms. They are recruiters who are paid by the hour or project, instead of apercentage fee.

• College recruitingo On-campus recruiting goalso The on-site visito Internships

Recruiting• Referrals and walk-ins• Telecommuters• Military personnel• Recruiting source use and effectiveness

Employee referral campaigns are an important recruiting option. Here the employer posts announcements of openings and requests for referrals on its Web site, bulletin, and/or wallboards. It often offers prizes or cash awards for referrals that lead to hiring. Referrals tend to generate high-quality candidates. Posting a “Help Wanted” sign may attract walk-in candidates.Telecommuters work from home for a particular firm that may provide equipment and even furniture for the home office.Returning and discharged military personnel can provide a great source of trained recruits. Several military branches have programs to facilitate service men and women in finding jobs. Research reveals several guidelines employers can use to improve their recruiting efforts’ effectiveness. For example, referrals from current employees yield applicants who are less likely to leave and more likely to perform better.

Other Issues

• Recruiting source use and effectiveness• Measuring recruiting effectiveness

Small employers may spend tens of thousands of dollars per year in recruiting. One survey found that only about 44% of the 279 firms surveyed made formal attempts to evaluate their recruitment efforts.In terms of what to measure, one question is “How many applicants did we generate through each of our recruitment sources?”The problem is that generatingmore applicants are not always better. The employer needs qualified, hirable applicants, not just applicants. The applicant tracking system should help compare recruiting sources. However, about 30% of them lack the necessary tools to effectively pinpoint source of hire.

Recruiting a More Diverse Workforce• Single parents• Older workers• Recruiting minorities • Welfare-to-work• Disabled workers

Recruiting a diverse workforce isn’t just socially responsible. Given the rapid increase in minority, older worker, and women candidates, it is anecessity. Formulating an intelligent program for attracting single parents should begin with understanding the considerable problems they often encounter in balancing work and family life.With the entire population aging, many employers are encouraging retirement-age employees not to leave. They may also actively recruit employees who are at or beyond retirement age. Sometimes, there is no substitute for experience. Recruiting minorities requires employers to tailor their way of thinking and to design HR practices that make their firms attractive to minority workers. The key to a welfare-to-work program’s success seems to be the employer’s pre-training program. Here, participants get counseling and basic skills training over several weeks.Employers can do several things to tap into the huge potential workforce of disabled individuals. The Department of Labor’s Office of Disability Employment Policy offers several programs. All states have local agencies that provide placement services and other recruitment and training tools.

Chapter 6 - Employee Testing and Selection

Why Careful Selection is Important• Performance• Cost• Legal obligations• Person and job/organization fit

Careful selection is important for three main reasons: performance, costs, and legal obligations.First, your own performance always depends on your subordinates.Second, it is important because it’s costly to recruit and hire employees. As the opening story in this chapter indicated, Google’s hiring process was streamlined due to the amount of time taken for interviews. Time spent by employees equates to the costs of not being productive in their jobs. Third, it’s important because mismanaging hiring has legal consequences.Person-job fit refers to identifying the knowledge, skills, abilities (KSAs), and competencies that are centralto performing the job. Then we must match the KSAs to the prospective employee’s knowledge, skills, abilities, and competencies.

Basic Testing Concepts• Reliability• Validity

o Criterion validityo Content validityo Construct validity

A test is basically a sample of a person’s behavior. Using a test (or any selection tool) assumes the tool is both reliable and valid. A reliable test is one that yields consistent scores when a person takes two alternate forms of the test or takes the same test on two or more different occasions.Validity tells you whether the test is measuring what you think it’s supposed to be measuring. Now, let’s discuss three types of validity.Criterion validity involves demonstrating statistically there is a relationship between scores on a selection procedure and the job performance of a sample of workers. It means showing that workers who do well on the job also do well on the test.Content validity shows that the content of a selection procedure is representative of important aspects of performance on the job.Constructs represent an underlying human trait or characteristic such as honesty. Construct validity demonstrates that a selection procedure measures a construct and that the construct is important for successful job performance.

Evidence-Based HR: How to Validate a Test1. First, analyze the job and write job descriptions and job specifications. Your goal is to specify the human traits and skills (predictors) you believe are required for job

performance. 2. Next, decide how to test for the predictors and choose the tests. You usually will base this choice on experience, previous research, and “best guesses.” You likely will

choose several tests and combine them into test battery. 3. One option is to administer the tests to employees currently on the job. You then compare their test scores with their current performance; this is concurrent (at the same

time) validation. Its main advantage is that data on performance are readily available. Predictive validation is the second and more dependable way to validate a test. Here you administer the test to applicants before you hire them. Then hire these applicants using only existing selection techniques (such as interviews). You would not use the results of the new tests. After they have been on the job for some time, measure their performance and compare it to their earlier test scores.

4. Next, determine if there is a significant relationship between test scores (the predictor) and performance (the criterion). The usual way to do this is to use statistical testing.

5. Finally, before using the test, you may want to check it by “cross-validating”—in other words, by again performing steps 3 and 4 on a new sample of employees.

Evidence-Based HR: Test Validation Issues• Who scores the test?• Bias• Utility analysis• Validity generalization

In many cases, certain tests are scored and interpreted by outside professionals. The results are then provided to the manager for consideration of whom to hire or promote. There may be bias in how the test measures the trait it purports to measure. If test scores indicate that males perform better in verbal reasoning tasks than do females, when in fact they both perform equally well, the test is biased. Second, “If the test used in college admissions systematically over predicts the performance of males and under predicts the performance of females, [then] that test functions as a biased predictor.” Utility analysis simply answers the question, Does it pay to use a given test in a particular situation? In other words, if you use a specific test, will the quality of individuals selected be better than if you had not used the test?Validity generalization helps determine if a test is valid in one situation, will it be so in others. Or, will the test need to be re-validated? Especially for smaller employers, properly generalizing the validity of a test can be a business lifesaver.

Evidence-Based HR: Test Validation Other Issues

• Individual rights and test security• Privacy issues• Using tests at work• Computerized and online testing

Test takers have rights to privacy and feedback under the American Psychological Association’s (APA) standards. Test takers (your potential future employees) have the right to expect:• Confidentiality of results• An informed consent opportunity• Only people qualified to interpret the scores will have access to them• The test is fair for allIn terms of privacy, common sense suggests that managers should keep their knowledge of employees’ test results private. However, there are also privacy protections embedded in U.S. and common law. Testing is used to screen in good employees and also to screen out ones that will not be successful. A survey conducted by the American Management Association (AMA) indicated that 41% of companies test applicants for basic skills such as reading. Computerized online testing is rapidly replacing traditional paper-and-pencil tests. In some cases, tests may be accessed via smartphones. That is, some tests adapt to the previous answers provided by the test taker, creating a one-off “custom” test.

Types of Tests• Cognitive abilities

o Intelligence testso Specific cognitive abilities

• Motor & physical abilities• Measuring personality• Interest inventories• Achievement tests

Cognitive tests include testing general reasoning ability or intelligence. In addition, they include tests of specific mental abilities such as memory or inductive reasoning. Intelligence tests are tests of general intellectual abilities. They measure a range of abilities, including memory, vocabulary, verbal fluency, and numerical ability. There are also measures of specific cognitive abilities, such as deductive reasoning, verbal comprehension, memory, and numerical ability.You also might need to measure motor abilities, such as finger dexterity, manual dexterity, and (if hiring pilots) reaction time.Personality tests measure basic aspects of an applicant’s personality. You should be a bit cautious about personality tests, however. In some cases, the tests may be somewhat difficult to interpret. Legal challenges also may present difficulties. Finally, some doubt exists as to whether self-reporting on a personality test can predict performance correctly. Interest inventories compare one’s interests with those of people in various occupations. And, achievement tests measure what someone has learned.

What do personality tests measure?• The “Big Five”• Predicting performance• Caveats

Personality tests measure basic aspects of an applicant’s personality, such as introversion, stability, and motivation. Some of these tests are projective. The psychologist presents an ambiguous stimulus (like an inkblot or clouded picture) to the person. The person then reacts to it. Other personality tests are self-reported: applicants complete them themselves.Industrial psychologists often focus on the “Big Five” personality dimensions: extraversion, emotional stability/neuroticism, agreeableness, conscientiousness, and openness to experience. Personality traits can be predictive since they do often correlate with job performance. Other traits correlate with occupational success. For example, extraversion correlates with success in sales and management jobs. However, there are three caveats. First, projective tests are hard to interpret. An expert must analyze the test taker’s interpretations and make conclusions about his or her personality. Second, personality tests can trigger legal challenges. Third, some dispute that self-reported personality tests predict performance at all.Be aware of what you expect from a personality test and the caveats associated with it. Nonetheless, personality tests can be a valuable source of information.

Work samples and simulations• Basic procedure• Situational judgment tests• Management assessment centers• Situational testing

The basic procedure with work sampling is to select a sample of several tasks crucial to performing the job, and then test applicants on them.Situational judgment tests are personnel tests “…designed to assess an applicant’s judgment regarding a situation encountered in the workplace.”Situational judgment tests are effective and widely used.A management assessment center is a 2- to 3-day simulation in which 10 to 12 candidates perform realistic management tasks such as making presentations. The behaviors of the candidates are observed by experts who appraise each candidate’s leadership potential. Most experts view assessment centers as effective for selecting management candidates. However, they are quite costly in terms of money and time.Situational tests require examinees to respond to situations found on the job. Work sampling and some assessment center tasks fall into this category. Some of the testing may be video-based.

• Computerized multimedia assessment • Miniature job training and evaluation• Realistic job previews• Testing techniques for managers

Employers increasingly use computerized multimedia candidate assessment tools. We discussed some of these tools when we considered computerized tests and management assessment centers.Like work sampling, miniature job training and evaluation tests applicants with actual samples of the job. Miniature job training assumes that a candidate who demonstrates the ability to perform a sample of job tasks will be able to learn and perform the job itself. Sometimes, a dose of realism makes the best screening tool. Describing all aspects of the job, the nature of the working environment and even the company culture helps create a self-screening tool. In general, applicants who receive realistic job previews are more likely to turn down job offers if they do not like what they understand the job to be. Applicants who accept are then more likely to stay on the job. You may find that, even in large companies, when it comes to screening employees, you’re on your own. The human resource department may work with you to design and administer screening tests. However, HR may be able to do little more than the recruiting, prescreening, background checks, and arrange for drugand physical exams. If HR is not given proper resources, you have even more reason to understand and use the information we have been discussing.

Situational judgment tests are used to assess the ability of a job candidate to react appropriately given a specific situation he or she will encounter on the job. Management assessment centers are used to determine the abilities of individuals to perform complex tasks. Typically, such centers are used for management and

executive positions. While cost, time, and the use of professionally trained assessors are potential issues to consider, most experts agree they are worthwhile.

Situational testing and video-based testing will involve situations that are presented to a job candidate. Such situations are realistic and typically derive from on-the-job situations.

Computerized and web-based assessment allows speed and flexibility in the testing process. Miniature job training assumes a candidate can learn the job components and perform them quickly. Realistic job previews present the candidate with detailed and highly realistic information about the job and the environment. Realize, that as a manager, you may or may not have help from the HR department in selecting and assessing job candidates. Learning as much as possible about

testing procedures will help in hiring the best candidates. Ultimately, the best candidates are usually the most productive, thus contributing to your department’s performance.

Background Investigations• Why perform checks?• Effectiveness• Legal dangers

o Defamationo Privacy

• How to checkOne of the easiest ways to avoid hiring mistakes is to check the candidate’s background thoroughly. Doing so is cheap and (if done right) useful. There are two main reasons to check backgrounds—to verify the applicant’s information and to uncover damaging information.In terms of effectiveness, however, most managers don’t view references as very useful. This makes sense, given that few employers will talk freely about former employees for legal or ethical reasons. That is just the tip of the iceberg, however. Being sued for defamation is the real danger. First-line supervisors and managers, not just employers, are potentially at risk. As a rule, only authorized managers should provide information. Most employers at least try to verify an applicant’s position and salary with his or her current or former employer by phone. Others call the applicant’s current and previous supervisors for information.

• Applicants’ social postings• Pre-employment information services• The polygraph and honesty testing• Graphology

More employers are Googling applicants or checking social networking sites. Googling is probably safe enough, but checking social networking sites raises legal issues. Your best strategy to protect your company (and yourself) is to advise a job candidate that your policies require performing such checks. The applicant, of course, may refuse. In that case, you may not wish to pursue a particular candidate further. Information services use databases to access information about matters such as workers’ compensation and credit histories. Before requesting reports, the employer must disclose to the applicant or employee that a report will be requested. The employer must certify to the reporting agency that the employer will comply with the federal and state legal requirements. Under federal law, the employer also must provide copies of the report to the applicant or employee if requested. Some firms still use the polygraph (or lie detector) for honesty testing, although the law severely restricts its use. Federal agencies (such as the FBI) may use such devices for hiring decisions. Paper-and-pencil tests also can be used to check for honesty. Graphology is the use of handwriting analysis to determine the writer’s basic personality traits. Graphology thus has some resemblance to projective personality tests, althoughgraphology’s validity is highly suspect

• “Human lie detectors”• Physical exams• Substance abuse• Complying with immigration law• Improving productivity through HRIS

While perhaps no more valid than graphology, some employers are using so-called “human lie detectors.” These are experts who claim to be able to identify lying just by watching candidates. Once the employer extends the person a job offer, a medical exam is often the next step in the selection process. In addition, many employers conduct drug screenings. The most common practice is to test candidates just before they’re formally hired. Some companies advise the candidate that a job offer is contingent upon successful completion of a drug screening test. Drug testing, while ubiquitous, is neither as simple nor effective as it might first appear since no drug test is foolproof. Also, tests for drugs only show whether drug residues are present, not if they will impact the individual in the workplace. Drug testing raises legal issues, too. Several federal (and manystate) laws affect workplace drug testing.Employees hired in the United States must prove they are eligible to work in the United States. Employers should ask a person they’re about to hire whether he or she is a U.S. citizen or an alien lawfully authorized to work in the United States.Most employers also use their applicant tracking systems (ATS) or Human Resource Information Systems (HRIS) to improve productivity. In some cases, an ATS is used to “knock out” applicants who don’t meet minimum, nonnegotiable job requirements. Employers also use ATS to test and screen applicants online. This includes skills testing (in accounting, for instance), cognitive skills testing and even psychological testing.

Chapter 9 - Performance Management and Appraisal  Define performance management and discuss how it differs from performance appraisal.Performance management has to do with creating an organizational system that is fair, effective, and widely understood by all. The goal of the system is to support the strategic aims of the firm by establishing a valid and reliable process connecting the employees to it.Performance appraisal involves: (1) setting work standards, (2) assessing actual performance relative to those standards, and (3) providing feedback to the employee.

The Performance Appraisal Process• Why appraise performance?• Continuous feedback• Performance management

Appraising performance is important for several reasons. Many employers still base pay and promotions on employee appraisals. Appraisals play an integral role in the employer's performance management process. The appraisal lets the boss and subordinate develop a plan for correcting any deficiencies while reinforcing those things the employee does correctly. Appraisals are a useful career planning tool. Finally, appraisals play a role in identifying training and development needs.  Aligning the employee’s efforts with the job’s standards should be a continuous process. When you see a performance problem, the time to take action is immediately. Similarly, when someone does something well, the best reinforcement comes immediately, not six months later.Performance management includes continuously adjusting how an organization and its team members do things. Team members who need coaching and training receive it, and procedures that need changing are changed.

Employee’s Goals and Performance Standards• HR in practice: how to set effective goals

o Assign specific goalso Assign measurable goals

o Assign challenging but doable goalso Encourage participation

At the heart of performance management is the idea that employees’ efforts should be goal directed. Such a process involves clarifying expectations and quantifying them by setting measurable standards for each objective. Goals should be:1. specific2. measurable3. challenging but attainable4. relevant and timelyFinally, employees should always have the opportunity to have meaningful input into the goals they are to achieve.

Employee’s Goals and Performance Standards• Basing appraisal standards on required competencies• The role of job descriptions

Competencies are often arranged according to the basic technical, motor, intellectual, and other skills needed to be successful in a job. In addition, the minimum level of each skill needed should be specified. Ideally, what to appraise and how to appraise it will be obvious from the job description. For the criteria to appraise, the job description should list the job’s duties or tasks, including how critical each is to the job and how often it’s performed.

Who Should Do the Appraising?• Peer appraisals• Rating committees• Self-ratings• Appraisal by subordinates• 360-degree feedback

Who should do the appraising? The immediate supervisor is usually in the best position to observe and evaluate the subordinate’s performance. He or she also is typically responsible for that person’s performance.Peer appraisals are becoming more popular with firms using self-managing teams.Rating committees consist of multiple raters, typically the employee’s immediate supervisor and three or four other supervisors.Self-ratings tend to be higher than supervisor or peer ratings although input from the subordinate is always to be encouraged.Appraisal by subordinates is also known as upward feedback. In this instance, subordinates anonymously rate their supervisor’s performance.360-degree feedback has become more widely used. Ratings are collected from the employee’s supervisors, subordinates, peers, and occasionally, internal or external customers. The best advice is that firms should carefully assess costs, train those giving feedback thoroughly, and not rely solely on 360-degree feedback.

Techniques for Appraising Performance• Graphic rating scale method• What to rate?

The graphic rating scale method is the simplest and most popular performance appraisal technique. First, a scale is used to list a number of traits and a range of performance for each. Then the employee is rated by identifying the score that best describes his/her performance level for each trait. Managers must decide which job performance aspects to measure. Such aspects include generic dimensions, actual job duties, or behaviorally recognizable competencies.

Performance Appraisal Tools• Alternation ranking • Paired comparison • Forced distribution • Critical incident • Narrative forms• Behaviorally Anchored Rating Scales (BARS)

The Alternation Ranking Method ranks employees from best to worst on a specific trait, choosing highest, then lowest, until all are ranked.The Paired Comparison Method involves ranking employees by making a chart of all possible pairs of employees for each trait. The manager then indicates which one is the better employee of the pair. Forced Distribution Method – Predetermined percentages of employee ratings are placed in various performance categories, similar to grading on a curve.Critical Incident Method – A supervisor keeps a record of uncommonly good and/or undesirable examples of an employee’s work-related behavior. The supervisor then reviews the record with the employee at predetermined times.The Narrative Forms method involves rating the employee’s performance for each performance factor needed on the job. Written examples and an improvement plan is provided. The process then aids the employee in understanding where his/her performance was good or bad focusing on problem solving.Behaviorally Anchored Rating Scales (BARS) is amethod that combines the benefits of narratives, critical incidents, and quantified scales. It does so by anchoring a scale with specific behavioral examples of good or poor performance. The advantages of BARS include accuracy, clearer standards, feedback, independent dimensions, and consistency.

• Mixed standard scales• Management by objectives (MBO)• Computerized and web-based performance appraisal• Electronic performance monitoring (EPM)

Mixed Standard Scales are similar to BARS but generally list just three behavioral examples or standards for each of the three performance dimensions. Management by Objectives (MBO) – The manager sets specific measurable goals with each employee and then periodically discusses the employee’s progress toward them. The process consists of six steps: 1. set organizational goals2. set departmental goals3. discuss4. define expected results5. conduct performance reviews6. provide feedbackA computerized and web-based performance appraisal approach generally enables managers to keep notes on subordinates during the year. It allows employee ratings on a series of performance traits, and then generates text to support each part of the appraisal. Electronic Performance Monitoring use computer network technology to allow managers access to their employees’ computers and telephones.Note, however, the most effective appraisal forms often merge several approaches

Dealing with Appraisal Problems and Interviews• Potential appraisal problems

o Unclear standardso Halo effecto Central tendency

o Leniency or strictnesso Recency effectso Bias

If standards are unclear, ambiguous traits and degrees of merit can result in an unfair appraisal.The influence of a rater’s general impression on ratings of specific qualities is known as the halo effect.  Central tendency occurs when supervisors stick to the middle of the rating scales, thus rating everyone average.Leniency or strictness occurs if supervisors have a tendency to rate everyone either high or low. Recency effects involve letting what the employee has done recently blind the manager to the employee’s performance over the entire year. Bias is a tendency to allow individual differences such as age, race, and sex affect employee appraisal ratings.

For this learning objective, we have covered various problems to avoid while appraising performance. These include the halo effect, bias, the effect of recency, the impact of leniency or strictness, unclear standards, and the impact of central tendency.

Appraisals can be more effective by following these five guidelines:  1. know the problem2. use the right appraisal tool3. keep a diary4. get agreement on a plan5. be fairThe courts have found that inadequate appraisal systems tend to be at the root of illegal discriminatory actions. In addition to being done legally, appraisals should be handled ethically and honestly.

Managing the Appraisal Interview• Types of appraisal interviews• How to conduct the appraisal interview

o Objective datao Don’t get personalo Encouragemento Agreement

Supervisors face four types of appraisal interviews, each with its unique objectives:1) Satisfactory – Promotable This is the easiest interview, the objective is to make development plans.2) Satisfactory – Not Promotable This type of interview has the objective of maintaining performance when promotion is not possible.3) Unsatisfactory – Correctable This has the objective to plan correction via the development and successful implementation of an action plan.Prepare for the interview by assembling the data, preparing the employee, and choosing the time and place. Be direct and specific, using objective examples. Don’t get personal. Encourage the person to talk. Plan on reaching agreement.

• Handling a defensive subordinate• Criticizing a subordinate• The formal written warning• Realistic appraisals

Recognize that defensive behavior is normal. Never attack or belittle a person’s defenses; they are legitimate to him or her. Postpone action as appropriate and recognize your own limitations.When required, criticize in a private and constructive manner that lets the person maintain his/her dignity and sense of worth.Written warnings should identify the standards by which the employee is judged, make it clear that the employee was aware of the standard. Then specify any violation of the standard, and show that the employee had an opportunity to correct the behavior. You may place this in his or her permanent personnel file. If circumstances warrant, you may remove the warning after a specified amount of time, say 90 days or longer. Be realistic and honest when giving an appraisal. It is important that a manager be candid when a subordinate is underperforming. Focus on specifics and allow opportunities to improve.

Performance Management• Performance management vs. appraisals• Information technology • Talent management • Appraisal and active management• Segmenting employees

Three concepts distinguish performance management from performance appraisal: 1. performance management is continuous2. it is goal-directed3. it is continuously re-evaluating and modifying the way people accomplish their workUsing information technology to support performance management allows management to monitor and correct deficiencies in real time. The process involves:1. assigning financial and nonfinancial goals2. informing employees of their goals3. using an IT system to monitor and assess performance and4. taking corrective actionTalent management requires actively managing decisions affecting employees and making certain they have input and a clear understanding of expectations. The traditional practice of allocating pay raises, development opportunities, and other scarce resources across the board does not make for a competitive, successful firm. Today, employers must focus their attention and resources on their company’s mission-critical employees essential to the firm’s strategic needs.Segmenting employees is a way to emphasize successful management of high potential employees. It may include such activities as identifying top performers and assessing them for promotability, time-frame, and leadership potential. You also may limit the “high potential group in whom the company invests heavily to no more than 10% to 20% of managerial and professional staff.” One company appoints “career stewards” to meet regularly with “emerging leaders.” In all situations, the goal is to focus effort and extra resources by investing in a firm’s future leaders.

Performance Management Summary• Direction sharing• Goal alignment• Ongoing performance monitoring• Ongoing feedback• Coaching and developmental• Recognition and rewards

We can summarize performance management’s six basic elements as follows:1. Direction sharing means communicating the company’s goals throughout the company. Then translating these into doable departmental, team, and individual goals.

2. Goal alignment means having a method that enables managers and employees to see the link between the employees’ goals and those of their department and company.3. Ongoing performance monitoring usually includes using computerized systems that measure and then e-mail progress and exception reports. The reports are based on the person’s progress toward meeting his or her performance goals.4. Ongoing feedback includes both face-to-face and computerized feedback regarding progress toward goals.5. Coaching and developmental support should be an integral part of the feedback process.6. Recognition and rewards provide the consequences needed to keep the employee’s goal-directed performance on track.

Chapter 11 - Establishing Strategic Pay Plans

Basic Factors in Determining Pay Rates• Aligning total rewards with strategy• Equity and its impact on pay rates• Equity theory of motivation• Addressing equity issues

The basic thrust in pay plans today is to produce an aligned reward strategy to create compensation plans that guide employee behaviors in the desired, strategic direction. Distinguishing between high and low performers is a policy issue, as is seniority-based pay.External and internal equity are crucial in pay rates. There are four components of equity to consider.External equity refers to how pay compares with rates in other organizations. Internal equity refers to employees viewing their pay as equitable given other pay rates in the organization. Individual equity refers to the fairness of an individual’s pay as compared to what his/her coworkers are earning for the same or very similar jobs in the company. Finally, procedural equity refers to the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay.Other Factors

• Union influences on compensation decisions• Pay policies• Geography

Unions and labor relations laws influence pay plan design. The rulings of the National Labor Relations Act underscored the need for employers to involve union officials in developing the compensation package.To raise salaries, employers can give raises based on a variety of factors. Some factors include longevity and skills. Employers can install a more aggressive merit pay program. Also, they can authorize supervisors to recommend equity adjustments for selected employees who are highly valued or victims of pay compression. Pay compression occurs when valued employees are at the top of their salary grade and deserve a performance increase yet company policies do not permit exceeding the maximum of the pay grade. Accounting for geographic differences in cost of living isanother big pay policy issue. One way to deal with it is to pay a differential for ongoing costs in addition to a one-time allocation. Otherfirmssimply raise the employee’s basesalary.

Job Evaluation Methods• Compensable factors• Preparing for the job evaluation

There are several job evaluations we will discuss shortly. However, all methods have two considerations that must be addressed: compensable factors and preparation. Compensable factors are those that jobs have in common that can be used to establish how the jobs compare to one another. While intuition may work in some situations, it is better to have an established system that can be widely understood and is defensible in court. For example, the Equal Pay Act uses four compensable factors—skills, effort, responsibility, and working conditions. Job evaluation is a judgmental process demandingclose cooperation among supervisors, HR, employees, and union representatives. The main steps include identifying the need for the program, getting cooperation, then choosing an evaluation committee. The committee then performs the actual evaluation.

Job Evaluation Methods: Ranking1. Obtain job information2. Select and group jobs3. Select compensable factors4. Rank jobs5. Combine ratings

The simplest job evaluation method ranks each job relative to all other jobs, usually based on some overall factor like “job difficulty.” There are several steps in the job ranking method: obtain job information, select and group jobs, select compensable factors, rank jobs, and combine ratings.

Job Evaluation Methods• Job classification• Point method

o “Packaged” point plans• Computerized job evaluations

Job classification is a simple, widely used method in which raters categorize jobs into groups. For pay purposes, all the jobs in each group are of roughly the same value. The groups are called classes if they contain similar jobs or grades if they contain jobs that are similar in difficulty but otherwise different.The point method involves identifying several compensable factors for the jobs. The method also includes the degree to which each factor is present in each job. Let’s take an example.Assume there are five degrees of the compensable factor “responsibility” a job could contain. Further, assume you assign a different number of points to each degree of each compensable factor. Once the evaluation committee determines the degree to which each compensable factor (like “responsibility” and “effort”) is present in the job, the committee can calculate a total point value for the job. It does so by adding up the corresponding points for each factor. The result is a quantitative point rating for each job. However, using quantitative job evaluation methods such as the point method can be time-consuming. Computer-aided job evaluation streamlines the process. Most computerized systems have two main components: structured questionnaires and statistical models. These elements allow the computer program to price jobs by assigning points.

How to Create a Market-Competitive Pay Plan1. Choose benchmark jobs. These are representative of the entire range of jobs you need to evaluate. 2. The choice of compensable factors generally depends on history, precedent,and law. As noted, the Equal Pay Act of 1963 uses four compensable factors − skill, effort,

responsibility, and working conditions. Your choice also depends on strategic and practical considerations endemic to the organization. Carefully define each factor to ensure that the evaluation committee members apply the factors with consistency.

3. Assigning weights to compensable factors determines the relative amount of each compensable factor the job contains. Assume there is a total of 100 percentage points for each job that needs to be allocated among those compensable factors selected.

4. Convert percentages to points for each factor.5. Next, define each of several degrees for each factor so raters may judge the amount or degree of a factor that exists in a job. The number of degrees usually does not

exceed five or six, and the actual number depends mostly on judgment.

6. Determine the degrees and assign points for each job. The evaluation committee must be able to determine the number of points each job contains. To do this, the committee must be able to examine each job and determine what degree of each compensable factor that job has. The committee then needs to know how many points each degree of each compensable factor is worth. To do this, we must first assign points to each degree of each compensable factor.

• Review job descriptions and specifications• Evaluate the jobs

o What is a market competitive pay plan?o What are wage curves?

The heart of job evaluation involves determining the amount or degree to which the job contains the selected compensable factors such as skill, effort, responsibility, and working conditions. Those conducting the job evaluation will frequently do so by reviewing each job’s job description and job specification.The committee determines the degree to which each compensable factor is present in each job. You can then determine how many points for skill, effort, responsibility, and conditions each benchmark job should contain. Finally, you can then add up these degree points to get a total point value for each benchmark job.A market-competitive pay system is a pay system that aligns the organization’s pay with the relevant labor markets.Wage curves show the relationship between the value of the job and the average wage paid for the job.

• Draw current (internal) wage curve• Conduct market analysis: salary surveys

o Commercial, professional, and government• Using internet to do compensation surveys

Plotting each job’s points and wage rate produces a scatter plot resulting in a drawing of the internal wage curve. A wage curve can be drawn through these points to show how point values relate to current wage rates.Virtually all employers conduct at least an informal telephone, newspaper, or Internet salary survey to price benchmark jobs and benefits. Often, HR professionals will exchange information informally to help analyze the market for pay plans. For commercial, professional, and government jobs employers use surveys published by consulting firms, professional associations, or government agencies. The Bureau of Labor Statistics (BLS) annually conducts and publishes area and industry wage surveys. This includes professional, administrative, technical, and clerical (PATC) surveys for the National Compensation Survey. Finally, a rapidly expanding array of Internet-based options makes it fairly easy for anyone to access published compensation survey information.

• Compensating executives and managers• What determines executive pay?

o Elements of executive payo Managerial job evaluation

• Compensating professional employees Basic compensation elements for top executives include: base pay, short-term incentives, long-term incentives, and executive benefits and perks. In some instances within the last decade, CEOs have been granted personal loans and then had the loans forgiven by a very generous board of directors. Shareholder activism has tightened restrictions on what companies pay top executives. Executive compensation emphasizes performance incentives more than do other employees’ pay plans. Organizational results (such as increasing shareholder value by x%) are likely to reflect executives’ contributions more directly. Executives typically have the broadest responsibilities for company performance and are judged accordingly. For professional employees, most employers use a market-pricing approach instead of job evaluation. This occurs because it’s not easy to identify factors and degrees of factors which meaningfully differentiate among the values of professional work. In addition, professionals tend to be loyal to their profession and may take their talents to your competitors if they feel unfairly compensated.

The difference between competency-based and traditional pay plans.How employers pay employees has been evolving. In this final section, we’ll look at five important contemporary compensation topics, competency-based pay, broadbanding,talent management, comparable worth, and executive pay.Competency-based pay means the company pays for the employee’s range, depth, and types of skills and knowledge, rather than for the job title he or she holds. There are three reasons why you should consider using competency-based pay. First, in a high performance work system, you want employees to be enthusiastic about learning and moving into other jobs. Second, you can enhance your strategic plans by paying for skills that are critical to those plans. Finally, measurable skills, knowledge, and competencies are at the heart of performance management processes.

In practice competency-based pay consists of four main components. These are a: 1) system that defines skills and processes; 2) training system; 3) competency testing system; and 4) work design that allows employees to move among jobs.Some note that competency-based pay “ignores the cost implications of paying [employees] for knowledge, skills and behaviors even if they are not used.”There may also be simplealternatives. For example, overlapping rate ranges allow workers to move from grade tograde, within limits

Chapter 12 - Pay for Performance and Financial Incentives

Money and Motivation• Strategy • Performance • Incentive Pay

Frederick Taylor was an American mechanical engineer who sought to improve industrial efficiencies. He made three major contributions in the late 1800s. First he defined a fair’s day work using standards of output. Second, he is known as the father of the scientific management approach. This approach emphasized improvement of work methods. Finally, he recognized the use of financial incentives for those whose output exceeded standards.Today, business is characterized by consideration of compensation, shareholder value, and turbulence. The three factors have produced a renaissance for financial incentive/pay-for-performance plans.

Apply five motivation theories in formulating an incentive plan.Motivation and Incentives

• Maslow’s Hierarchy of NeedsThe law of individual differences means that people differ in personality, abilities, values, and needs. Individuals, therefore, react to different incentives in different ways.

Several theorists have contributed information relevant to designing incentive plans. Let’s discuss each of them.

The Hierarchy of Needs and Abraham Maslow – This hierarchy includes five types of needs: physiological, security, social (love and belongingness), self-esteem, and self-actualization. According to Maslow, people are motivated to satisfy lower-order needs first and then work their way up the hierarchy in sequence,

• Herzberg’s Two-Factory Theory• Deci and demotivators Motivators and Frederick Herzberg – Hygiene-motivator theory divides needs into two factors. Hygiene factors include such things as working conditions, salary, and

incentives. Motivators include those factors that make the job more intrinsically motivating, like challenge, feedback, and recognition. He further claimed that the absence of hygiene factors would not foster a motivated individual. However, once hygiene factors had been attended to, the presence of motivator factors would create a motivated employee. Edward Deci found that extrinsic rewards could, at times, actually detract from an employee who already possesses a great deal of intrinsic motivation.

• Expectancy Theory, Victor VroomExpectancy theory suggests that a person’s motivation to exert some level of effort is a function of three things. First is the person’s expectancy (in terms of probability)

that his or her effort will lead to performance. Second is theinstrumentality, or the individual's perceived connection (if any) between successful performance and actually obtaining the rewards. Third,valence, represents the perceived value the person attaches to the reward.

• Behavior modification• Incentive pay terminology• Employee incentives and the law

Behavior Modification/Reinforcement and B. F. Skinner – Psychologist B.F. Skinner proposed that to understand behavior, one must understand the consequences of that behavior. Behavior modification means changing behavior through rewards or punishments that are contingent upon performance. Traditionally, allincentive plans are pay-for-performance plans. Variable pay is usually an incentive plan that ties pay to some measure of the firm’s overall profitability. However, confusing as it may be, some experts have usedthe term “variable pay” to include incentive plans for individual employees.The employer must comply with the overtime provisions of the Fair Labor Standards Act (FLSA) when designing and administering its incentive plans. Certain bonuses are excludable from overtime pay calculations. However,many other types of incentive pay must be included.main incentives for individual employees.Several incentive plans are particularly suited for use with individual employees.

Individual Employee Incentive and Recognition Programs• Piecework plans

o Straight pieceworko Standard hour planso Pros and cons

• Merit pay as an incentiveo Differential pay increaseso Merit pay options

Piecework is the oldest and still most popular individual incentive plan. Piecework involves paying the worker aspecified amount for each piece or unit he/she produces. Straight piecework entails a strict proportionality between results and rewards regardless of output. With a standard hour plan, the worker gets a premium equal to the percent by which his/her performance exceeds the standard. The pluses for piecework are that piecework plans are understandable, appear equitable, and can be powerful incentives, since rewards are proportionate to performance. On the other hand, workers may resist even justified attempts to raise production standards. This may occur in part because a cultural norm has been established between the employees performing the same work. Occasionally, employees may well downplay quality, or resist switching from job to job (since doing so could reduce productivity). Attempts to introduce new technology or processes may trigger resistance, for much the same reason.Merit pay or a merit raise is any salary increase the firm awards to an employee based on his/her individual performance. Merit plan effectiveness depends on truly differentiating among employees.Two adaptations of merit pay plans are popular. One awards merit raises in a lump sum once a year and does not make the raise part of the employee’s salary. The other adaptation ties merit awards to both individual and organizational performance.

• Incentives for professional employees• Nonfinancial and recognition-based awards

o Incentives managers can use• Online and IT-supported awards• Job design

Professional employees are those whose work involves the application of learned knowledge to the solution of the employer’s problems, such as lawyers, doctors, economists, and engineers.Recognition programs usually refer to formal programs such as employee-of-the-month programs. Social recognition programs are more informal manager-employee exchanges, including praise and approval. First, the best option for motivating employees is also the simplest—make sure the employee has a doable goal with which he or she agrees. Second, simply recognizing an employee’s contribution is a powerful motivation tool. Third, the manger can use casual social recognition as positivereinforcement on a day-to-day basis.There are many reasons to use Internet sites and IT to manage awards programs. The sites can offer a much broader range of products than most employers could catalog and offer by themselves. And perhaps most importantly, the whole process is expedited, so it’s much easier to bestow and deliver the awards.Research has shown that job design, job responsibility, and feedback from a job are primary drivers of employee engagement.For this learning objective, we have discussed the two types of piecework plans and their pros and cons. In addition, we noted that merit pay requires truly differentiating between employees, which is difficult for some managers due either to a lack of effective recordkeeping or reluctance to distinguish between employees. Professionals require different non-financial incentives such as time off for participation in professional organizations. Computer-based management of incentive and recognition programs offer several advantages compared to traditional approaches, including more timely distribution of rewards and tracking. Finally, job design, responsibility and feedback are important to many employees at all levels.

Incentives for Salespeople• Salary plan• Commission plan• Combination plan• Maximizing sales force results• How effective are your incentives?

Fixed salaries are offered by some firms. Straight salary makes it simple to switch territories or to reassign salespeople, and it can foster loyalty. A disadvantage is that it can constrict sales and de-motivate potentially high-performing salespeople.Salespeople are paid for results, and only for results. Thus, commission plans tend to attract high-performing salespeople who see that effort clearly leads to rewards. But it may cause them to neglect non-selling duties like servicing small accounts, cultivating dedicated customers, and pushing hard-to-sell items.Most companies pay salespeople a combination of salary and commissions, usually with a sizable salary component. Combination plans give salespeople a floor to their earnings and still provide an incentive for superior performance. Setting effective quotas is an art. In today’s fast-changing business scene, sales quotas must become more flexible than they have been in the past. There is a tendency to set commission rates informally, without considering how much each sale must contribute to coveringexpenses.To maximize performance, the sales manager typically needs evidence. Answering the following questions will provide such information.- Do the sales team members understand the compensation plans? - Do they know how we measure and reward performance?

- Are quotas set fairly? - Is there a positive correlation between performance and commission earnings? - Are commissions more than covering total salespersons expenses? - Does our commission plan maximize sales of our most profitable products? main incentives for managers and executives.

• Strategy and the executive’s long-term and total rewards package• Short-term incentives, annual bonus

o Eligibilityo Fund sizeo Individual performanceo Formula

Few HR practices have as profound or obvious an impact on strategic success as the company’s long-term incentives. In creating the compensation package, you should: 1) consider the strategic context; 2) shape each component of the package,then group them; 3) create a plan that gives the package a special character;4) check for legal compliance and tax effectiveness; and 5) install a review and evaluation process for major business changes.The Sarbanes-Oxley Act affects how employers formulate their executive incentive programs. It also injects a higher level of responsibility into executives’ and board members’ decisions. For short-term incentives, the annual bonus is aimed at motivating the short-term performance of managers and executives. Eligibility usually includes both top and lower-level managers.Fund size refers to the total amount of bonus money the firm makes available. A target bonus and maximum amount is set for each eligible position, and the actual award reflects the person’s performance. Finally, a formula may be used to base the bonus on specific measures critical to the company.

• Strategic long-term incentiveso Stock optionso Stock option problemso Other stock planso Ethics and incentives

• Other executive incentivesStrategic long-term incentives are used to inject a long-term perspective into executives’ decisions. Stock options account for over half of executives’ compensation. A stock option is the right to purchase a specific number of shares of company stock at a specific price during a specific period of time. Stock options can reward managers who experience a less than stellar performance. They also can encourage executives to take riskier ventures to increase profits. Other stock plans include stock appreciation rights, a performance achievement plan and a restricted stock plan. Stock appreciation rights permit the recipient to exercise the stock option (by buying the stock) or to take any appreciation in the stock price. A performance achievement plan awards shares of stock for the achievement of predetermined financial targets. In a restricted stock plan, shares are usually awarded without cost to the executive, but selling the stock is restricted for a specified time period.Simplistic, financial-performance-oriented incentives, in the absence of strong ethical standards may breed unethical behavior. The solution is to foster a forward-looking ethical culture. Companies provide various other incentives to persuade executives to remain with the firm, such as golden parachutes and low- or no-interest loans.

The Five Building Blocks of Effective Incentive Plans• Common sense• Linkages• Effort Rewards• Standards• Contract• Measurement

Once again, here are the five areas to address to ensure you are creating an effective incentive plan. 1. Ask: Does it make sense to use incentives?2. Link the incentive with your strategy.3. Make sure the program is motivational.4. Set complete standards.5. Be scientific.

Chapter 15 - Labor Relations and Collective Bargaining

The Labor Movement• Why do workers organize?

o The bottom lineWhy do workers organize? The urge to unionize often seems to boil down to the belief on the part of workers that it is only through unity that they can get their fair share

of the pie. It is sometimes the result of workers trying to protect themselves from management’s whims. The bottom line is that unions have two sets of aims − one for union security and one for improved wages, hours, working conditions, and benefits for their members. The five types of union security are closed shop, union shop, agency shop, preferential shop, and maintenance of membership arrangement. The typical labor agreement also gives the union a role in other HR activities, including recruiting, selecting, compensating, promoting, training, and discharging employees.

• What do unions want?• Union security• Improved wages, hours, and benefits

• The AFL-CIO and the SEIUUnion membership has declined in the past few decades. However, unions are trying to organize women and minorities, temporary and contingent workers, and those in

jobs not traditionally unionized. With increasing aggressiveness, unions are targeting multinational companies to unionize workers around the world.The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) is a voluntary federation of about 100 national and international labor unions in

the United States. The three layers of structure in the AFL-CIO are the local union (a single chapter in a national union), the national union, and the national federation. Changes have occurred recently. Four big unions have withdrawn from the AFL-CIO and have established the Change to Win Coalition. The Service Employees International Union (SEIU) is one of coalition member.  They are the fastest growing federation with more than 2 million members.  The Collective Bargaining ProcessBargaining that is not in Good Faith

Let’s discuss what collective bargaining is all about and the nature of good-faith bargaining. To bargain collectively is a mutual obligation to meetat reasonable times and confer in good faith with respect to wages, hours, terms and conditions of employment, the negotiation of an agreement, and other related matters.Good faith bargaining means that both parties communicate and negotiate, that they match proposalswith counterproposals, and that both make every reasonable effort to arrive at anagreement. A violation of the requirement for good faith bargaining may include the following: surface bargaining, inadequate concessions, and inadequate proposals and demands.Both union and management send a negotiating team to the bargaining table. It is vital that the team understand the impact, particularly the financial impact, of the things they either propose or accept in negotiations.Labor law sets out categories of items that are subject to bargaining: mandatory, voluntary, and illegal items.

To bargain effectively and in good faith, here are a few hints.• Set clear objectives • Understand on what grounds the objectives are established• Do not hurry• Find out why the other party says and does what it says and does• Be a good listener

• Impasses, mediation, and strikeso Third-party involvemento Sources of third-party assistanceo Strikeso Strike guidelines for employerso Other “weapons”

• The contract agreement In collective bargaining, an impasse occurs when the parties are not able to move furthertoward settlement. An impasse usually occurs because one party is demanding

morethan the other will offer. Three types of third-party interventions are used to overcome an impasse: mediation, fact-finding, and arbitration. Sources of third-party assistance come from various public and professional agencies.

Strikes are a withdrawal of labor. The types of strikes are economic, unfair labor practice, wildcat, and sympathy. An economic strike results from a failure to agree on the terms of a contract. An unfair labor practice strikes to protest illegal conduct by the employer. A wildcat strike is an unauthorized strike occurring during the term of a contract.A sympathy strike occurs when one union strikes in support of the strikeof another union.Strike guidelines can help employers manage the overall process. Guidelines include securing the facility, establish alternative methods of obtaining supplies, record all facts and many more.ther “weapons” include a waging a corporate campaign and a lockout. A corporate campaign is an organized effort by the union that exerts pressure on the corporation. A lockout is a refusal by the employer to provide opportunities to work.The contract agreement includes eleven elements such asmanagement rights, union security and automatic payroll dues deduction, grievance procedures, and arbitration.

Dealing with Disputes and GrievancesDeveloping a Grievance ProcedureHammering out a labor agreement is not the last step in collective bargaining. No laborcontract can cover all contingencies and answer all questions. The grievance procedure provides an orderly system whereby both employer andunion determine whether some action violated the contract.Employees may use just about any factor involving wages, hours, or conditions of employment as the basis of a grievance.The grievance procedure is specified in most collective bargaining contracts. It specifies the various steps in the procedure, time limits, and specificrules.   Examples of guidelines for handling grievances include investigating and handling each and every one of the grievances filed, talk with the employee and require the union to identify specific contractual provisions allegedly violated. Don’t discuss the case with the union steward alone – the grievant should be there. Don’t make arrangements with individual employees. Don’t hold back the remedy if the company is wrong and don’t admit the binding effect of a past practice.