Chap13 Hum Resources Notes Markup

BURKS-Instructor Notes-INTRO2BUS-CHAP13-HUMAN RESOURCES LEARNING OBJECTIVES 1. Describe the five components of a human resource management system and the way they work together to help a company obtain a competitive advantage. 2. Appreciate the issues involved in the process of recruiting qualified people to join a company and the steps involved in the selection process. 3. Explain how training and development activities help to build the abilities, skills, and knowledge of a company’s employees. 4. Understand why the process of appraising employees’ performance is a major factor influencing the way they wish to contribute to achieving a company’s goals and objectives. 5. Explain why linking pay to performance in a fair and equitable manner is an important source of employee motivation and commitment to a company. 6. Appreciate the importance of good labor relations and the importance of collective bargaining in aligning the goals of employees and companies.

I. COMPONENTS OF THE HUMAN RESOURCE MANAGEMENT SYSTEM Human resources include all of the people a company employs to perform the thousands of jobs and tasks necessary to create valuable goods and services. Human resources management (HRM) is the set of activities designed to acquire high-quality human resources and then build employee skills and capabilities so they can perform their jobs efficiently and effectively. 1. The primary responsibility of the HRM function is to develop a company’s HRM system, made up of five components: recruitment and selection, training and development, performance appraisal and feedback, pay and benefits, and labor relations. 2. HRM is a secondary function, not directly involved in the value chain, but whose activities improve the performance of all of the other functions. 3. When a company’s HRM system builds competitive advantage, it can create more value for all of its stakeholders. 4. All components of the HRM system must work together to build competitive advantage by helping to align individual goals with those of the organization. 5. HRM systems in which some components are poorly designed, or where managers don’t implement it equitably, can lead to labor disputes, strikes, turnover, customer complaints, and other problems that drain a company’s resources, productivity, and good will. II. RECRUITMENT AND SELECTION Recruitment and selection include all of the activities involved in acquiring human resources. Recruitment involves developing and using a company-specific set of rules and SOPs to identify and attract the best pool of applicants. Selection is the creation of criteria for deciding which candidate is best for the company and specific jobs.

A. Human Resources Planning Human resources planning is the process of forecasting the type and number of employees a company will require in the future to meet the objectives of its business model. It begins by taking an “inventory” of the skills and abilities of the people currently working for the company and comparing it to the needs of the company in the future. Then HR managers can identify the types of skills and numbers of people they will need to recruit, or perhaps they will need to layoff some employees. 1. Workflow analysis identifies what kinds of jobs will be required to allow each value chain function to perform efficiently and effectively in the future. It tells managers how jobs should be changed to find better ways to manage a company’s activities. 2. Job analysis is the process of obtaining detailed information about the tasks and responsibilities involved in each job in a company. The purpose of job analysis is to redesign jobs to increase efficiency, motivation, or ease of performance. 3. Job analysis can be performed by asking managers and employees who hold or interact with that job about its tasks and responsibilities. 4. The Position Analysis Questionnaire (PAQ) is a written survey used for job analysis that asks current job holders about (a) the skills and abilities used on the job, (b) the range of job activities, and (c) the technology used to do the job. 5. A job description is based on the information from the job analysis about the tasks and responsibilities of the job and the best way to perform them. It is a list of the tasks, responsibilities, and duties that make up a specific job. 6. A job specification is the list of required skills, abilities, and knowledge needed to perform that particular job. B. EXTERNAL AND INTERNAL RECRUITING When they know employees are needed, HRM can recruit based on job descriptions and specifications. 1. Internal recruitment involves a policy of promotion from within the organization that provides motivation and a career path for current employees that helps retain them. 2. Internal recruitment uses recommendations, performance appraisals, advertises on the company Intranet, posts positions on Bulletin Boards and e-mails. 3. External recruitment brings new employees to the company, but can have a demotivating effect on current employees. Some companies use both internal and external recruiting to prevent this problem. 4. External recruiting is used to fill most entry level positions. Higher-level applicants may be reached through newspapers, employment websites, trade journals, and magazines. 5. External recruiting is expensive and time consuming and it is difficult to identify the “right” candidate.

C. The Selection Process Selection is the process that starts with a pool of applicants and funnels them down to the choice of a final candidate. Although the sequence of steps may not be the same, the goal is to select the best candidate for the job using the established criteria. Screening criteria should be based on the job description and specifications. 1. Screening applications and resumes starts eliminating applicants. At every stage in the selection process, it is vital that applicants not be disqualified for any non-job related reason because of legal and ethical concerns. The same criteria and questions should be used for each. 2. Laws such as the Civil Rights Act (1964 and 1991), the Americans with Disabilities Act (1991), and the Equal Employment Opportunity (EEO) laws and regulations govern the way decisions are made. Their goal is to prevent discrimination against people and groups because of age, gender, race, religion, and national origin. 3. Applicant testing often uses standardized tests to determine an applicant’s skill levels and job knowledge, physical ability, intelligence, personality, or health. 4. The Interview Process is expensive and time consuming, so most companies try to limit the number of candidates they interview. 5. Structured or non-directive interviewing may be used, or a combination of the two forms, in more than one interview of an applicant. 6. Open-ended questions elicit he most information from an applicant. 7. All interview questions must be job-related and focus on the fit between the applicant, the job, and the company. Interviewers must be aware of questions that are illegal and avoid them. 8. Making the final selection is important to both candidate and company. The cost of recruiting and training employees is very high, and gets higher the for higher level positions. It is important to candidates to see that the process is fair and legal. III. TRAINING AND DEVELOPMENT The ability of people to continually learn new and improved skills and increase their job knowledge explains why a company’s human capital is often its greatest asset. Training and development is the process through which companies increase their employees work skills and knowledge to help them perform their jobs in ways that lead to superior performance. This component of HRM is very expensive, because it involves the cost of trainers as well as lost productivity on the employee’s regular assignment. A. Training Needs Analysis Scarce training dollars must be invested in activities that lead to measurable improvements in performance at the individual, group, and company levels. 1. Training needs analysis is used to identify the types of training and development that will provide the greatest improvements in performance. 2. A training gap occurs when a need for a specific form of skills training is identified as necessary to improve operating efficiency, product quality, customer service, learn new processes, or meet safety requirements.

B. Types and Methods of Training and Development Selection of a training method should be based on the need for employees to learn and retain skills and knowledge, as well as whether it is cost-effective. 1. On-the-job training teaches employees new skills while they are doing the job. 2. Supervisors and co-workers are used to train employees and they are able to implement what is learned right away, improving retention. 3. Other training methods include Internet based training, role playing, classroom instruction, simulations, games and case studies, and satellite programming. IV. PERFORMANCE APPRAISAL AND FEEDBACK Performance appraisal is the process through which managers review and evaluate how employees’ activities and accomplishments have contributed to functional and company goals. Performance feedback is the process through which managers communicate the results of this evaluation process to employees to persuade them to maintain or improve their level of performance. Performance appraisal and feedback, when conducted in a fair and equitable way, motivates employees in three ways: 1. Appraisals are used as a basis for decisions about distribution of rewards, such as salaries, bonuses, and promotions or layoffs and terminations. 2. Feedback gives employees information about their strengths and weaknesses. It gives managers information about which employees would benefit from additional training and development. 3. Employees’ performance can be evaluated in terms of how well their activities help achieve company goals. To build competitive advantage, it is essential for managers to tie performance measurement directly to the measures of efficiency, quality, innovation, and responsiveness to customers. A. Performance Appraisal Methods Performance appraisals may be based on the results or outcomes and employee achieves or it may be based on the behaviors that produced the outcomes. 1. Results-based appraisals are more cost effective because they measure the outcomes of the way an employee has done the job. 2. Behavior-based appraisals are often used for more complex jobs that have longer term outcomes. The evaluation is based on whether the employee has performed the behaviors that will lead to the desired outcome over time. 3. Management by Objectives, the goal setting and evaluation process discussed in Chapter 7, is a performance appraisal method that can be used for either results or behavior based processes. 4. Forced ranking methods, require managers to rank subordinates from top to bottom. It is especially important to assure that such a system is administered fairly and accurately. B. Who Appraises Performance? Most of the time, supervisors will perform employees’ performance appraisals, as they are in the best position to know the work and observe the behaviors and results over time.

1. Other sources of performance feedback and appraisal information can include selfevaluation, other managers, subordinates, customers, or co-workers. 2. 360 Degree performance appraisal collects information from many of the sources listed to get a more objective evaluation and remove personal bias from the process.

C. Giving Performance Feedback Although everybody enjoys getting positive feedback, few people want to hear negative feedback. It is very important to be able to clearly explain to employees which specific job behaviors or results led to each type of feedback, so they know how to improve. 1. Formal appraisals are conducted regularly to provide employees with feedback that becomes part of their company employment record. 2. Informal appraisals take place as employees and managers meet to discuss ongoing work issues, such as current projects or problems and provide the opportunity for advice, help, and mentoring. 3. Giving feedback to employees requires balanced feedback based on specific behaviors or results and constructive suggestions.

V. PAY AND BENEFITS Employee compensation includes pay and benefits. Pay is a monetary reward associated with a particular job in a company. Benefits are paid for employees and may include healthcare, life insurance, sick pay, vacation time, and pension plans. Companies are also required to pay employee taxes such as worker’s compensation, social security, and unemployment insurance. A. Pay Structures 1. A pay structure determines the relative compensation received by employees performing different types of jobs or jobs at different levels in the hierarchy, from top to bottom. It is based on the effect that job has on the achievement of company goals. 2. The pay level a company chooses refers to the average salary a company pays its employees compared to other companies in its industry. Those who pay above average expect to get employees with better qualifications who will work hard to improve the company’s competitive advantage. Others pay below average because their business model requires low costs. 3. Companies survey and benchmark themselves against other companies in their industries when setting their pay levels because there may be a shortage or an excess of certain types of skills available in the labor market.

B. Types of Incentive Pay Incentive pay links the size of the rewards received by individuals and groups to their success in achieving specific work outcomes and behaviors. 1. Individual incentive plans include piecework plans, commission systems, merit pay, and bonus pay. 2. Group and company wide reward systems include profit sharing plans, stock ownership plans, and organization bonus systems to provide incentives for groups and individuals to achieve company wide goals. This encourages cooperation among the different groups and functions to work cooperatively. VI. LABOR RELATIONS Labor relations is the process that establishes rules and practices between a company and its employees that specify how human resources should be used and rewarded. Many national laws have been passed to govern labor relations. 1. When labor and management develop good practices and working relationships, both employees and the companies they work for benefit. Unfortunately, employees and their companies may have difficulty agreeing on working conditions, and the level of pay and benefits. 2. A company, because it controls large amounts of capital, has great power in the labor market to determine its pay structure and pay level. 3. Individuals have no power to affect a company’s HRM practices, unless they join together to form an organization to give them more leverage or bargaining power known as a union. 4. Trade unions are organizations that represent the interests of workers who perform similar types of jobs in a particular company or industry, such as the steelworkers or auto workers union. 5. The goals of most unions include getting a higher share of the profits for workers and improving their working conditions on such issues as safety and a healthy environment. 6. The different stakeholders in an organization have competing interests.

A. Union-Management Relations Industrial conflict is the clash that occurs when workers, and the unions that represent them, trying to secure a greater share of the profits a company creates blocks the efforts of managers to use those profits to benefit other stakeholders. 1. Tools used by labor to bring pressure against management include working-to-rule and strikes. 2. Management may use a lock-out to exert pressure on labor by closing operations. 3. Companies may also hire different, non-union workers known as “scabs” or get managers to do the work of striking employees. 4. All stakeholders suffer a loss when this kind of conflict occurs. B. Collective Bargaining: Resolving the Conflict Collective bargaining is the process by which union representatives and managers negotiate a binding labor agreement over work-related issues such as pay, benefits, work rules, safety, job security, and the way grievances will be handled.

1. When an agreement is reached and approved by the union membership and management, it becomes a contract. 2. Collective bargaining is a complex process. 3. Integrative bargaining seeks a “win-win solution” that allows both parties to benefit. 4. Attitudinal structuring is used by negotiators to influence each other and the process. 5. Mediation involves the use of a neutral party to suggest a solution after reading the facts of the situation and hearing the views of both sides. 6. Arbitration is similar to mediation, but the arbitrator is authorized to impose a binding solution that both parties must accept. 7. Grievance procedures establish the system of rules and procedures that will be used to resolve disputes between a company and its employees that arise over the terms of a contract. REVIEW OF LEARNING OBJECTIVES 1. Describe the five components of a human resource management system and the way they work together to help a company obtain a competitive advantage. A company’s HRM system has five components: recruitment and selection, training and development, performance appraisal and feedback, pay and benefits, and labor relations. Each of the five work together to determine whether employees will work together in an efficient way to create high quality, innovative products. 2. Appreciate the issues involved in the process of recruiting qualified people to join a company and the steps involved in the selection process. Recruitment involves the activities a company engages in to identify and attract a pool of qualified applicants. It may include internal and external methods. Selection is the process through which a company decides which applicants will be the best match for the job and the company by comparing applicant information, testing, and interviews. These processes have legal requirements for fairness and equity. 3. Explain how training and development activities help to build the abilities, skills, and knowledge of a company’s employees. Training needs analysis is used to identify the kinds of employee training that will most directly affect performance and profitability. Companies then build employee skills and knowledge to increase efficiency, quality, innovation, and customer responsiveness.

4. Understand why the process of appraising employees’ performance is a major factor influencing the way they wish to contribute to achieving a company’s goals and objectives. Performance appraisal is the means by which employees learn how to improve their performance. If performed equitably, it will motivate them. Appraisals are used as a basis for decisions about distribution of rewards, such as salaries, bonuses, and promotions or layoffs and terminations. Feedback gives employees information about their strengths and weaknesses. It gives managers information about which employees

would benefit from additional training and development. Employees’ performance can be evaluated in terms of how well their activities help achieve company goals. To build competitive advantage, it is essential for managers to tie performance measurement directly to the measures of efficiency, quality, innovation, and responsiveness to customers. 5. Explain why linking pay to performance in a fair and equitable manner is an important source of employee motivation and commitment to a company. When pay and rewards are equitable, those who work hard to achieve company goals are rewarded better than those who do not. Workers will be motivated to work harder to achieve the rewards, achieving the company’s goals. When it is not handled equitably, employees are de-motivated and will work less hard or leave the company, creating turnover costs. 6. Appreciate the importance of good labor relations and the importance of collective bargaining in aligning the goals of employees and companies. When labor relations are good, all stakeholders should benefit. Employees have jobs and equitable pay and benefits. The company has a workforce that is not disruptive to productivity and motivated to help the company be profitable.