Chapter 12
Managing Human Resources
The Strategic Role of HRM:
The Strategic Approach to HRM
HR must drive organizational performance; it’s the
competitive edge
•
Matching process
•
Integrate strategy
•
HR builds (organizational) culture
The right people:
 To become more competitive on a global basis
 For improving quality, innovation, and customer service
 To retain during mergers and acquisitions
 To apply new information technology for e-business
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12.1 Strategic HRM
Building Human Capital to Drive
Performance
• Strategic decisions are related to human decisions
• More companies rely on information, creativity, and knowledge
Human Capital is the economic value of the combined
knowledge, experience, skills, and capabilities of employees
• To build Human capital, HRM develops strategies for
1. Recruiting: Finding the best talent,
2. T & D: Enhancing their skills and knowledge with training programs
and opportunities for personal and professional development, and
3. Providing compensation and benefits that support the sharing of
knowledge and appropriately reward people for their contributions to the
organization.
Valuing a Human Capital per employee
– A Firm Value Approach
• $ Human Capital per employee
= Firm Value ÷ # of Employees
• Firm Value = [Stock Price per share] x [# of Common Stocks]
• Example:
Suppose Laker Corporation is a public company traded on
NYSE. Its stock price today is $100. The number of
outstanding stocks is 1,000,000. Laker Corp. employs 1,000
people. Using a firm value approach, value the company’s
human capital per employee.
• Solution:
• Firm Value = $100 x 1,000,000 shares = 100 M
• $ Human Capital per employee = 100 M ÷ 1000 = 100 K
Cantrell, et al. (2006): The Role and Value of Human
Capital Investments [Exhibit 12.2 ]
The Impact of Federal Legislation
on HRM [Exhibit 12.3]
• HR managers must stay on top of legal and
regulatory environment; Many laws exist to ensure
equal opportunity and stop discrimination
• Discrimination – the hiring or promotion of
applicants based on criteria that are not job related
• Affirmative action – requires employers to take
positive steps to guarantee equal employment
opportunities for people of protected groups
• Sexual harassment is a growing concern that is a
violation of the Civil Rights Act
12.3 Major Federal Laws Related to HRM
12.3 Major Federal Laws Related to HRM
12.3 Major Federal Laws Related to HRM
The Changing Nature of Careers:
OLD Social Contract
In the old social contract,
 the employee contributed ability, education,
loyalty, and commitment in return for
 the company providing wages and benefits, work,
advancement, and training.
The Changing Nature of Careers:
New Social Contract
 Employees:
 Downsizing, outsourcing, rightsizing, and restructuring
have left little stability
 Subsidized benefits are decreasing
 Employees are expected to be self-motivated
 Employers:
 Organizations must be creative with training and
development
 New performance appraisal processes are required
12.4 The Changing Social Contract
Innovations in HRM:
(1) Becoming an Employer of Choice
Organizations that are highly attractive to
potential employees because of HR practices that
focus on:
Tangible benefits such as pay and profit sharing:
 Starbucks – Benefits to P/T employees
Intangibles (e.g., work/life balance, a trustbased work climate, a healthy corporate culture)
and that embraces a long-term view to solving
immediate problems
Innovations in HRM (continued):
(2) Using Contingent Workers
Contingent workers (temporary/part-time
employees) are not permanent, maintain
flexibility, and keep costs low
The temporary staffing industry doubled
between 2002 and 2007 and is projected to grow
into a $200 billion industry by 2010.
People in these temporary jobs do everything
from data entry to becoming the interim CEO.
Innovations in HRM (continued):
(3) Promoting Work-Life Balance
 Critical retention strategy
 Helping workers lead a balanced life
 Part-time work and telecommuting
 Flexible scheduling
 Gen Y/Millennials demand more work-life
balance
 On-site gym, Childcare, Eldercare, etc.
Finding the Right People:
Attracting an Effective Workforce – 4 Steps
1. Planning, predicting the need for new employees
based on the types of vacancies that exist
2. Communicate with potential applicants
3. Select those with the best potential
4. Welcome the new employee to the organization
Finding Right People (continued):
Matching Model [Exhibit 12.5]
Human Resource Planning
• What new technologies are emerging?
• What is the volume of the business likely to be in
the next 5 to 10 years?
• What is the turnover rate?
• What types of engineers will we need?
• How many administrative personnel will we need to
support additional engineers?
• Can we use temporary, part-time, or virtual
workers?
Recruiting (talent acquisition)
• Internal Recruiting: less costly, generates higher employee commitment, and
offers career advancement
• Assessing Organizational Needs:
– Job Analysis: a systematic process of gathering and interpreting
information about the essential duties, tasks, responsibilities, and context
of a job
– Job Description: clear & concise summary of tasks, duties, responsibilities
– Job Specification: knowledge, skills, education, physical abilities, etc.
• Realistic Job Previews (RJP) – provide pertinent information; positive
and negative about the job & organization
• Legal Considerations – recruiting practices must be legal
• Innovations in Recruiting:
– eRecruiting; Twitter, LinkedIn, and other social media
– Getting referrals from current employees (cash rewards, etc.)
12.6
Sara Lee’s Required Skills for Finance Executives
12.7 PAIRE’s Recruitment and
Hiring Policy
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.
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Selecting
• Employers assess applicants for a “fit”
• HR professionals us a combination of devices:
Application Form
• Avoid irrelevant questions
• Avoid questions w/ adverse
impact
Interview; cannot violate
EEO guidelines
•
•
•
•
•
Structured interviews
Biographical interviews
Behavioral interviews
Situational interviews
Panel interviews
Employment Tests
•
•
•
•
Cognitive ability tests
Physical ability tests
Personality tests
Brainteasers
Assessment Center
• Work sample tests
Online Checks
Linkedln (p. 336)
• DQ: Discuss what makes LinkedIn so special that US Cellular
pays $60,000 annual fee to LinkedIn.
• DQ: Discuss what benefits you can get when you join LinkedIn.
• DQ: Explain how you can build your own professional
networks even if you were not born with a silver spoon.
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5 Etiquette at Job Interview
P. 339 “Manager’s Shoptalk”
1. Communication Skills
2. Performance
3. Attitude
4. Appearance
5. Honesty
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12.8 Employment Applications and Interviews:
What Can You Ask?
12.9 Interview Brain Teasers
12.9 Interview Brain Teasers (continued)
Managing Talent
• Training and Development
– On-the-Job Training
– Corporate Universities
– Promotion from Within
– Mentoring and Coaching
• Development involves teaching broader skills
12.10 Methods and Goals of Training
Managing Talent (continued):
Performance Appraisal
• Performance Appraisal:
– Observing and assessing employee performance,
– Recording the assessment, and
– Providing feedback to the employee.
• Give feedback and praise
• Reward high performers with merit pay, recognition,
and other rewards – must be on-ongoing process
• HRM professionals concentrate on:
– Accurate assessment of performance
– Training managers to the use the performance appraisal
interview effectively
Performance Appraisal (continued)
• Assessing Performance Accurately – system should
evaluate relevant performance
• 360-degree Feedback – uses multiple raters,
including self-rating to appraise employees
– Jack Welch’s negative opinion of this approach
• Performance review ranking - managers evaluate
direct reports relative to one another and categorizes
each on a scale; This system pit employees against
each other
Managing Talent (continued):
Performance Evaluation Errors [Ex. 12.11]
• Stereotyping – placing an employee into a class
or category based on a few characteristics
• Halo Effect - giving an employee the same rating
on all dimensions of the job even if performance is
good on some dimensions and not good on others.
• Behaviorally Anchored Rating Scales (BARS)
– rating technique that relates an employee’s
performance to specific job-related incidents
– P. 346
12.11 Example of a Behaviorally Anchored Rating Scale (BARS)
IBM – Volunteer project
• P. 343
• Learn to accomplish things collaboratively
• TEAMWORK, Teamplayer
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Compensation
• Compensation – all monetary payments and all goods or
commodities used to reward employees
• Wage and Salary Systems
– Merit pay system vs. Seniority
– Job-based pay:
– Fails to reward the learning behavior (development)
– Emphasis on hierarchy, centralized decision making & control
– Skill-based pay (= Competency-based pay)
– Encourages employees to develop their skills and
competencies, thus more valuable to the firm & more
employable themselves
Compensation (continued)
• Compensation Equity – fairness and equity
• Pay for Performance (Incentive Pay) – raise
productivity, cut labor costs in competitive environment
• DQ: Discuss weakness of job-based pay.
• DQ: A top research institution like Bell Lab, often
pays higher salary to a new employee, a fresh Ph.D.
at low rank than a senior employee. What kind of
salary system does Bell Lab implement?
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Benefits
• Social security, unemployment compensation, and workers’
compensation are required by law
• Benefits = 40% of labor costs in the U.S.
• Cafeteria-plan benefits packages allow employees to select
benefits for themselves
• Healthcare Costs: HRM Innovation is needed to reduce the
skyrocketing healthcare costs: Capitated Payment [McDonnelDouglas to Barnes Hospital]
• DQ: Explain why Starbucks Company became an employer of choice,
in particular, for contingent workers.
Rightsizing the Organization
• Reducing the company’s workforce to the “right”
size; also called downsizing
• Make company stronger and more competitive
• HR Department must effectively and humanely
manage the process
• Many organizations use communication and
provide assistance to address emotional needs
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Termination
• Employees leave voluntarily, retire, are
rightsized, and are fired for poor performance
• Poor performing employees can be disruptive
and cause problems for morale
• Exit interviews can be used to learn about
dissatisfaction
• E-Bay Case - p. 350
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The Changing Workplace
 Demographic changes have transformed society
 Good organizations take steps to attract and
maintain workers
 Diversity is no longer just the right thing to do
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Globalization
• Organizations must compete on a global basis
• Success is determined by global HR strategies
• International human-resource management
addresses the added complexity of managing
diverse people globally
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Discussion Questions
• What is SHRM? What services/resources does SHRM provide to its members?
• Suppose Laker Corporation is a public company traded on NYSE. Its stock price
today is $100. The number of outstanding stocks is 1,000,000. Laker Corp.
employs 1,000 people. Using a firm value approach, value the company’s
human capital per employee.
• Republicans has attempted to repeal Obama Care. What law is Obama Care
related to?
• Discuss why the business community, in particular, owners of small business,
hates Patient Protection and Affordable Care Act (2010).
• Explain what benefits “social contract” should provide for America, from the
political economics perspectives.
• From the macro-economic perspectives, what does social contract offer to
poor people?
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Discussion Questions (continued)
• Explain why Starbucks Company became an employer of choice, in particular,
for contingent workers.
• Discuss what makes LinkedIn so special that US Cellular pays $60,000 annual
fee to LinkedIn.
• Discuss what benefits you can get when you join LinkedIn.
• Explain how you can build your own professional networks even if you are
not a child from the old money.
• Provide examples of inappropriate/illegal interview questions on (1) national
origin (2) race (3) disabilities (4) age (5) religion (6) criminal record (7)
marital/family status (8) education & experience (9) citizenship (10) sexual
orientation.
• Elaborate five proper etiquette at a job interview.
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Discussion Questions (continued)
• Articulate your answer to the following questions:
– How would you weigh a jet plane without using scales?
– Why are manhole covers round?
– How many golf balls can fit inside a standard school bus?
– How much should you charge to wash all the windows in Seattle?
– You’re shrunk and trapped in a blender that will turn on in 60 seconds. What do
you do?
• Discuss what outcomes IBM gained from a training and development project
such as voluntary service in a foreign country.
• Explain the halo effect in performance evaluation.
• Explain how the BARS overcomes performance evaluation errors.
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Discussion Questions (continued)
• Discuss weakness of job-based pay.
• A top research institution like Bell Lab, often pays higher salary to a new
employee, a fresh Ph.D. at low rank than a senior employee. What kind of
salary system does Bell Lab implement?
• Discuss how the HR management department manage effectively and
humanely manage the rightsizing process for remaining employees.
• Explain why people who left Microsoft voluntarily or involuntarily are not
bitter about their former employer, from the HR management perspectives.
• How did e-Bay learn about high turn-over of mid-level executives? What
caused the high turn-over.
• Explain why Jack Welch does not support the 360-degree evaluation approach.
• Explain how capitation (capitated payment) system works.
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Discussion Questions
• Explain the strategic role of human resource management.
• Describe federal legislation and societal trends that influence human resource
management.
• Explain what the changing social contract between organizations and
employees means for workers and human resource managers.
• Show how organizations determine their future staffing needs through human
resource planning.
• Describe the tools managers use to recruit and select employees.
• Describe how organizations develop an effective workforce through training
and performance appraisal.
• Explain how organizations maintain a workforce through the administration of
wages and salaries, benefits, and terminations.