Performance Diagnosis
Instructions:
At the end of chapter 8, read all the scenarios in HRM Experience Performance Diagnosis.
In no more than 1 paragraph per employee scenario, describe what the potential causes of poor performance for each of the following employees might be and solutions that could enhance the person’s performance.
Submission Instructions:
Managing
Human Resources
18th Edition
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
SCOTT A. SNELL SHAD S. MORRIS
Professor of Business Administration, Associate Professor of Management,
University of Virginia Brigham Young University
89624_fm_hr_i-xxxii.indd 1 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Managing Human Resources,
Eighteenth Edition
Scott Snell and Shad Morris
Senior Vice President: Erin Joyner
Product Director: Bryan Gambrel
Content Developer: Jamie Mack
Product Assistant: Rhett Ransom
Marketing Manager: Emily McLellan
Digital Content Specialists: Jennifer Chinn/
David O’Connor
Digital Production Services Manager:
Derek Drifmeyer
Project Management and Compostion:
SPi Global
Sr. Art Director: Michelle Kunkler
Text Designer: Red Hangar Design, LLC
Cover Designer: Red Hangar
Design, LLC
Cover Image: i3alda/Shutterstock.com
Intellectual Property
Analyst: Diane Garrity
Intellectual Property Project Manager:
Nick Barrows
For product information and technology assistance, contact us at
Cengage Customer & Sales Support, 1-800-354-9706
For permission to use material from this text or product, submit all
requests online at www.cengage.com/permissions
Further permissions questions can be emailed to
permissionrequest@cengage.com
© 2019, 2016 Cengage Learning, Inc.
Unless otherwise noted, all content is © Cengage
ALL RIGHTS RESERVED. No part of this work covered by the copyright
herein may be reproduced or distributed in any form or by any means,
except as permitted by U.S. copyright law, without the prior written per-
mission of the copyright owner.
Library of Congress Control Number: 2017945321
ISBN: 978-1-337-38962-4
Cengage
20 Channel Center Street
Boston, MA 02210
USA
Cengage is a leading provider of customized learning solutions with
employees residing in nearly 40 different countries and sales in more
than 125 countries around the world. Find your local representative at
www.cengage.com.
Cengage products are represented in Canada by
Nelson Education, Ltd.
To learn more about Cengage platforms and services, visit
www.cengage.com
To register or access your online learning solution or purchase materi-
als for your course, visit www.cengagebrain.com
Printed in the United States of America
Print Number: 01 Print Year: 2017
89624_fm_hr_i-xxxii.indd 2 11/30/17 4:06 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
iii
Brief Contents
Part 1 Human Resources Management in Perspective
1 The Rewards and Challenges of Human Resources Management 1
2 Strategy and Human Resources Planning 38
Part 2 Meeting Human Resources Requirements
3 Equal Employment Opportunity and Human Resources Management 84
4 Job Analysis and Job Design 121
Part 3 Developing Effectiveness in Human Resources
5 Expanding the Talent Pool: Recruitment and Careers 152
6 Employee Selection 205
7 Training and Development 241
8 Performance Management 279
Part 4 Implementing Compensation and Security
9 Managing Compensation 318
10 Pay-for-Performance: Incentive Rewards 356
11 Employee Benefits 385
12 Promoting Safety and Health 416
Part 5 Enhancing Employee-Management Relations
13 Employees Rights and Discipline 448
14 The Dynamics of Labor Relations 481
Part 6 Expanding Human Resources Management Horizons
15 International Human Resources Management 515
16 Implementing HR Strategy: High-Performance Work Systems 556
Integrative Cases 585
Glossary 611
Name Index 622
Organization Index 624
Subject Index 627
89624_fm_hr_i-xxxii.indd 3 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
iv
Part 1 Human Resources Management in Perspective
Chapter 1 The Rewards and Challenges of
Human Resources Management 1
1.1 Why Should You Study Human Resources Management? Will It Pay Off? 2
1.1a Human Capital and Organizational Culture 3
1.2 Strategic and Global Challenges 5
1.2a Responding Strategically to Changes and Disruptions in the Marketplace 5
1.2b Competing, Recruiting, and Staffing Globally 7
1.2c Setting and Achieving Corporate Social Responsibility and Sustainability Goals 9
1.3 Technology Challenges 10
Highlights in HRM 1: Factors to Consider When Evaluating a
Human Resources Information System 14
1.4 Productivity and Cost Challenges 15
1.4a Maximizing Productivity 15
1.4b Managing the Size of the Workforce 15
1.4c Managing Pay and Benefits 16
1.5 Employee Challenges 18
1.5a Responding to the Demographic and Diversity Challenges
of the Workforce 18
1.5b Educational Shifts Affecting the Workforce 23
1.5c Adapting to Cultural and Societal Changes
Affecting the Workforce 24
1.6 The Role HR Managers Play and Their Partnership with Other Managers 27
1.6a Responsibilities of Human Resource Managers 28
1.6b Competencies Human Resource Managers Require 29
Highlights in HRM 2: SHRM Code of Ethical and Professional Standards
in Human Resource Management 30
Summary 32
Key Terms 33
Discussion Questions 33
Case Study 1: New HR Strategy Makes Lloyd’s a “Best Company” 34
Case Study 2: Shell’s Top Recruiter Takes His Cues from Marketing 34
Notes and References 36
Contents
89624_fm_hr_i-xxxii.indd 4 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
vContents
Chapter 2 Strategy and Human Resources Planning 38
2.1 Strategic Planning and Human Resources Planning 39
2.1a Strategic Planning and HR Planning:
Linking the Processes 40
2.2 Step One: Mission, Vision, and Values 42
2.2a Developing a Mission Statement 42
2.2b HR’s Role in Establishing and Reinforcing a Firm’s Mission,
Vision, and Values 43
2.3 Step Two: External Analysis 43
2.3a The Business Environment 44
2.3b The Competitive Environment 45
2.3c HR’s External Analysis 48
Highlights in HRM 1: HRM Metrics 50
2.4 Step Three: Internal Analysis 50
2.4a Core Capabilities 51
2.4b Sustaining a Competitive Advantage
Through People 52
2.4c Types of Talent and Their Composition
in the Workforce 52
2.4d Corporate Culture 54
2.4e Forecasting 56
Highlights in HRM 2: HR Planning and Strategy Questions
to Ask Business Managers 58
2.4f Assessing a Firm’s Human Capital Readiness:
Gap Analysis 61
Highlights in HRM 3: Succession-Planning Checklist 62
2.5 Step Four: Formulating a Strategy 64
2.5a Corporate Strategy 64
2.5b Business Strategy 66
2.5c HR Strategy 67
2.6 Step Five: Executing a Firm’s Strategy 67
2.6a HR’s Role in Strategy Execution 69
2.7 Step Six: Evaluation 70
2.7a Evaluating a Firm’s Strategic Alignment 70
Summary 73
Key Terms 74
Discussion Questions 74
HRM Experience: Customizing HR for Different Types
of Human Capital 75
Case Study 1: How a Strategy Change Led to Nike’s Formation 75
Case Study 2: Domino’s Tries to Get Its Strategic Recipe Right 76
Notes and References 78
89624_fm_hr_i-xxxii.indd 5 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
vi Contents
Appendix: Calculating Employee Turnover
and Absenteeism 80
A.1 Employee Turnover Rates 80
A.1a Computing the Turnover Rate 80
A.1b Determining the Costs of Turnover 81
A.2 Employee Absenteeism Rates 81
A.2a Computing Absenteeism Rates 81
Highlights in HRM 4: Costs Associated with the Turnover of One Computer Programmer 82
A.2b Comparing Absenteeism Data 82
A.2c Costs of Absenteeism 83
A.2d Absenteeism and HR Planning 83
Part 2 Meeting Human Resources Requirements
Chapter 3 Equal Employment Opportunity
and Human Resources Management 84
3.1 Historical Perspective of EEO Legislation 86
3.1a Changing National Values 86
3.1b Early Legal Developments 87
3.2 Government Regulation of Equal Employment Opportunity 88
Highlights in HRM 1: Test Your Knowledge of Equal Employment Opportunity Law 89
3.2a Major Federal Laws 89
3.2b Other Federal Laws and Executive Orders 97
3.2c Fair Employment Practice Laws 98
3.3 Other Equal Employment Opportunity Issues 98
3.3a Sexual Harassment 98
Highlights in HRM 2: Questions Used to Audit Sexual Harassment
in the Workplace 100
3.3b Sexual Orientation 100
3.3c Immigration Reform and Control 102
3.3d Emerging Employment Discrimination Issues 102
3.4 Uniform Guidelines on Employee Selection Procedures 104
3.5 Enforcing Equal Employment Opportunity Legislation 106
3.5a Record-Keeping and Posting Requirements 106
3.5b Processing Discrimination Charges 106
Highlights in HRM 3: EEOC Poster Supplement for 2016 107
3.5c Preventing Discrimination Charges 109
3.6 Affirmative Action and Diversity Management 109
3.6a Court Decisions 110
Highlights in HRM 4: Basic Steps in Developing an Effective
Affirmative Action Program 111
3.6b Beyond Affirmative Action: Leveraging Diversity 112
89624_fm_hr_i-xxxii.indd 6 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
viiContents
Highlights in HRM 5: Embracing Diversity and Leveraging
Employee Differences 113
Summary 113
Key Terms 114
Discussion Questions 114
Case Study 1: Going to the Dogs 115
HRM Experience: Sexual Harassment: A Frank Discussion 116
Case Study 2: Misplaced Affections: Discharge for
Sexual Harassment 116
Notes and References 118
Appendix: Determining Adverse Impact 120
A.1 The Four-Fifths Rule 120
Chapter 4 Job Analysis and Job Design 121
4.1 What Is a Job Analysis and How Does It Affect
Human Resources Management? 123
4.1a Major Parts of the Job Analysis 125
4.2 Sources of Job Analysis Information 126
4.2a Controlling the Accuracy of the Job Data Collected 126
4.2b Other Sources of Job Analysis Information 126
Highlights in HRM 1: Job Analysis Interview Questions 127
4.2c Parts of a Job Description 130
Highlights in HRM 2: An Example of a Job Description 132
4.2d Writing Clear and Specific Job Descriptions 133
4.3 Job Design 133
4.3a Ergonomics 134
4.3b Enrichment 135
Highlights in HRM 3: Empowered Employees
Achieve Results 138
4.4 Employee Teams and Flexible Work Schedules 139
4.4a Employee Teams 139
4.4b Flexible Work Schedules 143
Summary 146
Key Terms 146
HRM Experience: Establishing Ground Rules
for a Team’s Success 147
Discussion Questions 147
Case Study 1: The Zappos Experiment 148
Case Study 2: Are Firms Moving Away from Telecommuting? 149
Notes and References 150
89624_fm_hr_i-xxxii.indd 7 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
viii Contents
Part 3 Developing Effectiveness in Human Resources
Chapter 5 Expanding the Talent Pool: Recruitment and Careers 152
5.1 Business Strategies and Their Link to Strategic Recruiting 153
5.1a Elements of a Recruiting Strategy 153
Highlights in HRM 1: Marriott’s Recruitment Principles: Living Up to the Employment
Brand 156
5.2 External and Internal Recruiting Methods 159
5.2a External Recruiting Methods 159
Highlights in HRM 2: Making Employee Referral Programs Work 164
Highlights in HRM 3: Making Your Internship Program a Success 166
5.2b Internal Recruiting Methods 168
Highlights in HRM 4: Is a Worker an Independent Contractor—or Not? 169
5.3 Improving the Effectiveness of Recruiting 171
5.3a Using Realistic Job Previews 171
5.3b Surveys and Employee Profiles 172
5.3c Recruiting Metrics 172
5.3d Retention: How Do We Keep Our Talent? 175
5.4 Career Management: Developing Talent over Time 176
5.4a The Goal: Matching the Needs of the Organization to the Needs of Employees 176
5.4b Identifying Career Opportunities and Requirements 178
Highlights in HRM Box 5: Career Path of Jeff Bezos, Founder of Amazon.com 180
5.4c Career Development Initiatives 183
Highlights in HRM 6: Myths about Mentors 184
Highlights in HRM 7: Establishing a Relationship with a Mentor 185
5.5 Developing a Diverse Talent Pool 186
5.5a Women 187
5.5b Minorities 189
5.5c People Who Are Disabled 189
Highlights in HRM 8: Tips for Enhancing a Firm’s Diversity 190
5.5d Veterans 191
5.5e Older Employees 191
Summary 192
Key Terms 193
Discussion Questions 193
HRM Experience: Career Management 194
Case Study 1: A Lifecycle Approach to Talent 194
Case Study 2: Homegrown Talent: Mary Barra Rises to GM’s Top Post 195
Notes and References 196
Appendix: Personal Career Development 199
A.1 Developing Personal Skills and Competencies 199
A.2 Choosing a Career 199
89624_fm_hr_i-xxxii.indd 8 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
ixContents
A.3 Self-Evaluation 199
Highlights in HRM 9: “Must Have” Career Competencies 200
A.3a Interest Inventories 200
A.3b Informational Interviews, Job Shadowing, and Internships 201
A.4 Choosing an Employer 202
A.5 Consider the Boundaryless Career 202
A.6 Keeping Your Career in Perspective 202
Highlights in HRM 10: Questions to Ask Yourself Before
You Accept a Job 203
A.6a Developing Off-the-Job Interests 203
A.6b Balancing Marital and/or Family Life 203
A.6c Planning for Retirement 204
Key Terms 204
Notes and References 204
Chapter 6: Employee Selection 205
6.1 Overview of the Selection Process 206
6.1a Begin with a Job Analysis 207
6.1b Steps in the Selection Process 207
6.1c Obtaining Reliable and Valid Information 207
6.2 Initial Screening 208
6.2a Initial Screening Methods 208
Highlights in HRM 1: What to Include—and Not to Include—on a Job Application
Form 212
6.3 Employment Interviews 212
6.3a Types of Interviews 213
6.3b Methods for Administering Interviews 214
Highlights in HRM 2: Sample Situational Interview Question 215
Highlights in HRM 3: Hiring Managers Reveal Mistakes Candidates Make during Job
Interviews 216
6.3c Diversity Management: Could Your Questions Get You into
Legal Trouble? 217
6.4 Post-Interview Screening 217
6.4a Reference Checks 217
Highlights in HRM 4: Appropriate and Inappropriate Interview Questions 218
6.4b Background Checks 218
Highlights in HRM 5: Sample Reference-Checking Questions 219
6.5 Preemployment Tests 220
6.5a Types of Tests 221
6.5b Determining the Validity of Tests 227
6.6 Reaching a Selection Decision 229
6.6a Summarizing Information about Applicants 229
6.6b Decision-Making Strategy 231
6.6c Final Decision 233
89624_fm_hr_i-xxxii.indd 9 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
x Contents
Summary 234
Key Terms 235
Discussion Questions 235
HRM Experience: Designing Selection Criteria and Methods 236
Case Study 1: Job Candidate Assessment Tests Go Virtual 236
Case Study 2: Pros and Cons of Cleaning Up the “Resu-mess” 237
Notes and References 238
Chapter 7 Training and Development 241
7.1 The Scope of Training 242
7.1a A Strategic Approach to Training 243
7.2 Phase 1: Conducting the Needs Assessment 244
7.2a Organization Analysis 245
7.2b Task Analysis 246
7.2c Person Analysis 247
7.3 Phase 2: Designing the Training Program 247
7.3a Developing Instructional Objectives 247
Highlights in HRM 1: A Competency Assessment for a Managerial Position 248
7.3b Assessing the Readiness and Motivation of Trainees 248
7.3c Incorporating the Principles of Learning 249
7.3d Characteristics of Instructors 252
7.4 Phase 3: Implementing the Training Program—Training Delivery Methods 253
7.5 Additional Training and Development Programs 262
7.5a Orientation and Onboarding 262
Highlights in HRM 2: Checklist for Orienting New Employees 263
7.5b Basic Skills Training 264
7.5c Team Training 264
7.5d Cross-Training 266
7.5e Ethics Training 267
7.5f Diversity and Inclusion Training 267
7.6 Phase 4: Evaluating the Training Program 268
7.6a Criterion 1: Reactions 269
7.6b Criterion 2: Learning 269
7.6c Criterion 3: Behavior 269
7.6d Criterion 4: Results, or Return on Investment (ROI) 270
Highlights in HRM 3: Benchmarking HR Training 271
Summary 271
Key Terms 272
Discussion Questions 272
HRM Experience: Training and Learning Principles 273
Case Study 1: Whirlpool Mixes Up Its Managerial Training: Closed-Looped Method Brings
Learning Full Circle 273
89624_fm_hr_i-xxxii.indd 10 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xiContents
Case Study 2: Loews Hotels: Training for Four-Diamond Service and More 274
Notes and References 275
Chapter 8 Performance Management 279
8.1 Performance Management Systems 280
8.1a The Purposes of Performance Management 280
8.1b Why Performance Management Systems Sometimes Fail 282
8.2 Developing an Effective Performance Management System 284
8.2a What Are the Performance Standards? 284
8.2b Do Your Performance Reviews Comply with the Law? 287
8.2c Sources of Performance Review Information 288
8.2d Putting It All Together: 360-Degree Evaluations 290
8.2e Training Appraisers 291
8.3 Performance Review Methods 295
Highlights in HRM 1: Supervisor’s Checklist for a Formal Performance Review Meeting 296
8.3a Trait Methods 296
Highlights in HRM 2: A Graphic Rating Scale with Comments 297
Highlights in HRM 3: Example of a Mixed-Standard Scale 298
8.3b Behavioral Methods 298
8.3c Results Methods 299
Highlights in HRM 4: BARS and BOS Examples 300
Highlights in HRM 5: A Balanced Scorecard that Translates to a Personal Scorecard 302
8.3d Which Performance Review Method Should You Use? 302
8.4 Performance Review Meetings and Feedback Sessions 303
8.4a Types of Performance Review Meetings and Feedback Sessions 304
8.4b Conducting the Performance Review Meeting
or Feedback Session 304
8.4c Improving Performance 307
Summary 309
Key Terms 310
Discussion Questions 310
HRM Experience: Performance Diagnosis 311
Case Study 1: Adobe Ditches Formal Performance Reviews—And Wants to Help Other
Companies Do So Too 311
Case Study 2: “Project Oxygen” Resuscitates Google’s Poor-Performing Bosses 313
Notes and References 314
Part 4 Implementing Compensation and Security
Chapter 9 Managing Compensation 318
9.1 What Is Compensation? 319
9.2 Strategic Compensation 320
89624_fm_hr_i-xxxii.indd 11 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xii Contents
9.2a Linking Compensation to Organizational Objectives 321
9.2b The Pay-for-Performance Standard 323
9.2c The Bases for Compensation 326
9.3 Compensation Design—The Pay Mix 326
9.3a Internal Factors 327
Highlights in HRM 1: Comparison of Compensation Strategies 330
9.3b External Factors 330
9.4 Job Evaluation Systems 333
9.4a Job Ranking System 333
9.4b Job Classification System 333
9.4c Point System 334
9.4d Work Valuation 335
9.4e Job Evaluation for Management Positions 335
9.5 Compensation Implementation—Pay Tools 336
9.5a Wage and Salary Surveys 336
Highlights in HRM 2: Bureau of Labor Statistics National Compensation Survey 337
9.5b The Wage Curve 340
9.5c Pay Grades 340
9.5d Rate Ranges 341
9.5e Competence-Based Pay 343
9.6 Government Regulation of Compensation 344
Highlights in HRM 3: Minimum Wage Laws in the States 345
Highlights in HRM 4: Worldwide Minimum Wages 346
Highlights in HRM 5: The Federal Wage Poster 347
9.7 Compensation Assessment 348
Summary 350
Key Terms 350
HRM Experience: Why This Salary? 351
Discussion Questions 351
Case Study 1: Pay Decisions at Performance Sports 352
Case Study 2: An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay 352
Notes and References 353
Chapter 10 Pay-for-Performance: Incentive Rewards 356
10.1 Strategic Reasons for Incentive Plans 357
10.1a Incentive Plans as Links to Organizational Objectives 358
10.1b Requirements for a Successful Incentive Plan 359
10.2 Setting Performance Measures 360
Highlights in HRM 1: Setting Performance Measures—The Keys 361
10.3 Administering Incentive Plans 361
10.4 Individual Incentive Plans 362
10.4a Piecework 362
89624_fm_hr_i-xxxii.indd 12 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xiiiContents
10.4b Standard Hour Plan 363
10.4c Bonuses 363
10.4d Merit Pay 364
10.4e Incentive Awards and Recognition 365
Highlights in HRM 2: Lessons Learned: Designing Effective Team Incentives 367
10.4f Sales Incentives 368
10.5 Group Incentive Plans 369
10.5a Team Compensation 370
10.5b Gainsharing Incentive Plans 370
10.6 Enterprise Incentive Plans 372
10.6a Profit Sharing Plans 372
10.6b Stock Options 373
10.6c Employee Stock Ownership Plans 373
Highlights in HRM 3: How Stock Option Plans Work 374
10.7 Incentives for Professional Employees 375
10.8 Incentives for Executives 376
10.8a The Executive Pay Package 376
10.8b Executive Compensation: Ethics and Accountability 378
10.8c Executive Compensation Reform 379
Summary 379
Key Terms 380
Discussion Questions 380
HRM Experience: Awarding Salary Increases 381
Case Study 1: United States Auto Industry Back on Top … of CEO Pay 381
Case Study 2: Team-Based Incentives: Not Your Usual Office 382
Notes and References 383
Chapter 11 Employee Benefits 385
11.1 Elements of a Successful Benefits Program 386
11.1a Selecting Benefits 387
11.1b Administering Benefits 388
11.1c Communicating Employee Benefits 388
11.2 Employee Benefits Required by Law 394
11.2a Social Security Insurance 394
Highlights in HRM 1: A Personalized Statement of Benefits Costs 395
Highlights in HRM 2: Who Is Eligible to Collect Disability Payments under the
Social Security Act? 397
11.2b Unemployment Insurance 397
11.2c Workers’ Compensation Insurance 398
11.2d COBRA Insurance 398
11.2e Benefits Provided by the Patient Protection
and Affordable Care Act 399
89624_fm_hr_i-xxxii.indd 13 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xiv Contents
11.2f Benefits Provided under the Family
and Medical Leave Act 399
Highlights in HRM 3: Your Rights under the Family and Medical Leave Act 401
11.3 Work-Life Discretionary Benefits 402
11.3a Child and Elder Care 402
11.3b Payment for Time Not Worked 403
11.3c Life Insurance 405
11.3d Long-Term Care Insurance 406
11.3e Other Benefits and Services 406
11.3f Pension Plans 407
11.3g Domestic Partner Benefits 410
Summary 410
Key Terms 411
Discussion Questions 411
HRM Experience: Understanding Employer Benefit Programs 412
Case Study 1: Adobe’s Family-Friendly Benefits: An Unexpected Backlash 412
Case Study 2: Evaluate the Work-Life Climate in Your Company 413
Notes and References 414
Chapter 12 Promoting Safety and Health 416
12.1 Safety and Health: It’s the Law 417
12.1a OSHA’s Coverage 417
12.1b OSHA Standards 417
12.1c Enforcing OSHA Standards 420
12.1d OSHA Consultation Assistance 422
12.1e Responsibilities and Rights under OSHA 422
Highlights in HRM 1: What Are My Responsibilities under the OSH Act? 424
12.2 Promoting a Safe Work Environment 425
12.2a Creating a Culture of Safety 425
12.2b Enforcing Safety Rules 426
12.2c Investigating and Recording Accidents 426
Highlights in HRM 2: Test Your Safety Smarts 427
12.2d Safety Hazards and Issues 427
Highlights in HRM 3: Emergency Readiness Checklist 432
12.3 Creating a Healthy Work Environment 433
12.3a Ergonomics 433
12.3b Health Hazards and Issues 433
Highlights in HRM 4: Job Safety and Health Protection Poster 434
12.3c Building Better Physical and Emotional
Health among Employees 438
Summary 442
Key Terms 443
89624_fm_hr_i-xxxii.indd 14 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xvContents
Discussion Questions 443
Case Study 1: Rambo Goes Violent 444
Case Study 2: Too Much Fatigue and Stress? You Decide 444
Notes and References 445
Part 5 Enhancing Employee-Management Relations
Chapter 13 Employees Rights and Discipline 448
13.1 Employee Rights and Privacy 449
13.1a Employee Rights versus Employer Responsibilities 449
13.1b Negligent Hiring 450
13.1c Job Protection Rights 450
Highlights in HRM 1: Examples of Employment-at-Will Statements 456
13.1d Privacy Rights 457
13.1e Digital Surveillance 459
13.2 Disciplinary Policies and Procedures 466
13.2a The Result of Inaction 466
13.2b Setting Organizational Rules 467
13.2c Investigating a Disciplinary Problem 467
13.2d Approaches to Disciplinary Action 469
13.2e Discharging Employees 470
13.2f Alternative Dispute Resolution Procedures 472
13.3 Managerial Ethics in Employee Relations 475
Summary 475
Key Terms 476
Discussion Questions 476
Case Study 1: Discharged for Off-Duty Behavior 476
Case Study 2: You Can’t Fire Me! Check Your Policy 477
Notes and References 478
Chapter 14 The Dynamics of Labor Relations 481
14.1 The Labor Relations Process 482
14.1a Why Employees Unionize 484
14.1b Challenges of Unions to Management 486
14.1c Union Avoidance Practices 486
14.1d Organizing Campaigns 487
Highlights in HRM 1: Test Your Labor Relations Know-How 490
Highlights in HRM 2: What Happened to the American Labor Union? 491
14.1e Employer Tactics Opposing Unionization 492
Highlights in HRM 3: United Food and Commercial Workers International Union
Authorization Card 493
89624_fm_hr_i-xxxii.indd 15 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xvi Contents
14.1f How Employees Become Unionized 493
14.1g NLRB Representation Election 493
Highlights in HRM 4: Employer “Don’ts” during Union
Organizing Campaigns 494
Highlights in HRM 5: NLRB Election Poster 496
14.2 The Bargaining Process 497
14.2a Preparing for Negotiations 497
14.2b Gathering Bargaining Data 498
14.2c Developing Bargaining Strategies and Tactics 498
14.2d Negotiating the Labor Agreement 499
14.2e Good-Faith Bargaining 499
14.2f Interest-Based Bargaining 499
14.2g Management and Union Power in Collective Bargaining 500
14.2h Resolving Bargaining Deadlocks 502
14.3 The Labor Agreement 502
14.3a The Issue of Management Rights 502
Highlights in HRM 6: Items in a Labor Agreement 503
14.3b Union Security Agreements 504
14.4 Administration of the Labor Agreement 504
14.4a Negotiated Grievance Procedures 504
14.4b Grievance Arbitration 504
14.5 Contemporary Challenges to Labor Organizations 506
14.5a Decrease in Union Membership 506
14.5b Globalization and Technological Change 507
Summary 508
Key Terms 509
Discussion Questions 509
HRM Experience: Learn about Unions 510
Case Study 1: The New Union Battles: Public Unions vs.
Rich World Governments 510
Case Study 2: The Arbitration Case of Jesse Stansky 511
Notes and References 513
Part 6 Expanding Human Resources Management Horizons
Chapter 15 International Human Resources Management 515
15.1 Analyzing Your International Environment 516
15.1a Political Factors 517
15.1b Economic Factors 517
15.1c Sociocultural Factors 518
15.1d Technological Factors 519
15.1e Analyzing Your International Operations 520
89624_fm_hr_i-xxxii.indd 16 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xviiContents
15.2 Managing Your International Operations 522
15.2a Recruiting Internationally 524
15.2b Selecting Employees Internationally 527
Highlights in HRM 1: Skills of Expatriate Managers 529
15.2c Training and Development 530
15.2d Content of Training Programs 531
Highlights in HRM 2: Nonverbal Communications in Different Cultures 533
Highlights in HRM 3: Repatriation Checklist 537
15.3 Compensation 538
15.3a Compensation of Host-Country Employees 538
15.3b Compensation of Host-Country Managers 540
15.3c Compensation of Expatriate Managers 541
15.3d Performance Appraisal 542
15.4 Analyzing the International Labor Environment 545
15.4a Collective Bargaining in Other Countries 546
15.4b International Labor Organizations 547
15.4c Labor Participation in Management 548
Summary 548
Key Terms 549
Discussion Questions 549
HRM Experience: An American (Expatriate) in Paris 550
Case Study 1: How about a 900 Percent Raise? 550
Case Study 2: A “Turnaround” Repatriate Plan: U.S. Company Moves Indian
Workers Back Home 551
Notes and References 552
Chapter 16 Implementing HR Strategy: High-Performance Work
Systems 556
16.1 Fundamental Principles 558
16.1a Egalitarianism and Engagement 559
16.1b Shared Information and Trust 560
16.1c Knowledge Development 561
16.1d Performance-Reward Linkage 561
16.2 Designing High-Performance Work Systems 562
16.2a Work-Flow Design and Teamwork 562
16.2b Complementary Human Resources Policies and Practices 563
16.2c Supportive Information Technologies 566
16.3 Strategic Alignment 567
16.3a Ensuring Horizontal Fit 567
16.3b Establishing Vertical Fit 568
16.3c Assessing Strategic Alignment: The HR Scorecard 568
16.4 Implementing the System 568
89624_fm_hr_i-xxxii.indd 17 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xviii Contents
Highlights in HRM 1A: Diagnosing Horizontal Fit 569
16.4a Building a Business Case for Change and Engaging Stakeholders 569
Highlights in HRM 1B: Testing the Alignment of the HR System with HR Deliverables 570
Highlights in HRM 1C: Testing the Alignment of HR Deliverables 570
16.4b Establishing a Communications Plan 572
16.4c Evaluating and Sustaining the Success of the System 573
16.5 Outcomes of High-Performance Work Systems 575
16.5a Employee Outcomes and Quality of Work Life 575
16.5b Organizational Outcomes and Competitive Advantage 575
Summary 577
Key Terms 577
Discussion Questions 577
HRM Experience: Assessing the Strategic Fit of High-Performance Work Systems 578
Case Study 1: How Implementing an HPWS Fortified the Snack-Food Maker Snyder’s-Lance 579
Case Study 2: Whole Foods Market Faces Whole New Challenge 580
Notes and References 581
Integrative Cases 585
Glossary 611
Name Index 622
Organization Index 624
Subject Index 627
89624_fm_hr_i-xxxii.indd 18 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xix
The 18th edition of Managing Human Resources will place your students at the fore-
front of understanding how organizations can gain a sustainable competitive advantage
through people. Today’s HR managers play an active role in the strategic planning and
decision making within their organizations. Those managers who are good at it have a
major impact on the success of their firms and elevate human resources in terms of its
importance in the C-suites of their organizations. But human resources management
is not limited to the HR staff. The best organizations recognize that managing people
is the job of every manager, working in partnership with HR.
Each edition of the book highlights the changes human resources management
is undergoing but reveals that the goal of utilizing an organization’s talent in the best
way possible never changes. Consequently, the purpose of this book is always twofold:
(1) to equip students with the tools and practices of HR management and give them
an appreciation for the changes they can make by understanding how best to manage
people, and (2) to present the most current challenges and opportunities graduating
students will face when it comes to today’s human resources management environment.
These challenges exist both for those who will become HR managers and those who
will go on to become other types of managers.
Toward that end, the first chapter of the book lays out in broad terms the key
challenges in HRM today. It includes a discussion of the HR strategies pursued by
firms and the importance of retaining and motivating employees in the process. Other
aspects broached include the strategies companies are using to continue to try to control
health care costs; how social media is affecting hiring, human resources management,
and employees’ privacy rights; and how good human resources practices can help a
firm achieve its corporate social responsibility and sustainability goals and make it an
employer of choice. The chapter also discusses the important partnership with line
managers and the competencies required of HR management. The textbook contin-
ues with the introduction, explanation, and discussion of the individual practices and
policies that make up HRM. We recognize the manager’s changing role and emphasize
current issues and real-world problems and the policies and practices of HRM used to
meet them.
Strategy and talent have become such central concerns of HR today that we con-
tinue to emphasize the topic in this edition of the book in Chapter 2. Chapter 5 focuses
on expanding and managing the talent pool in organizations. Employee diversity and
inclusion, and how firms can leverage all types of differences among their workers to
their strategic advantage, are examined.
Organizations in today’s competitive world are discovering that it is how the
individual HR topics are combined that makes all the difference. Managers typically
Preface
89624_fm_hr_i-xxxii.indd 19 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xx Preface
don’t focus on HR issues such as staffing, training, and compensation in isolation
from one another. Each of these HR practices should be combined into an overall
system—one that furthers a firm’s strategy by enhancing employee involvement and
productivity. Managing Human Resources ends with a final chapter that focuses on
how high-performance work systems (HPWSs) are used to implement these strate-
gies. We outline the strategic processes used to implement HPWSs, including work-
flow design, HR practices, management processes, and supporting technologies as
well as the outcomes of an HPWS that benefit both the employee and the organiza-
tion as a whole.
Streamlined Coverage
Today’s students are extremely busy. They want to know what they need to learn and
be able to learn it as quickly as possible. Instructors also want to be able to cover all
of the material they want to teach during a semester. To help both groups, we made
a special effort to streamline our coverage in this edition. We did so without sacrific-
ing key material but by shortening the copy to make it readable and deleting extra-
neous information reviewers have indicated may be “TMI” (too much information)
for their students. Students and instructors will find that the copy is briefer, clearer,
and more engaging.
New Cutting-Edge Content
As with other editions, a great deal of new information is provided in this revision to
accurately reflect HRM in today’s business world and help the reader understand today’s
HRM issues more effectively. Examples include the concerns of Millennial and Generation
Z employees, and how Big Data, HR analytics, mobile technology, and social media are
profoundly affecting the field, and the effects artificial intelligence and automation are
having. Ever-changing international HR concerns are covered, including the work-visa
challenges facing U.S. firms, immigration, human rights issues, global rights issues such as
data protection, and intellectual property rights. The International Labor Organization’s
“Agenda 2030 for Sustainable Development,” which places decent work for all at the heart
of the ILO’s current initiatives, resulted in numerous updates. Of course, the 18th edition
also includes a complete update of all laws, administrative rulings and guidelines, and
court decisions governing HRM. We also show a recent shift in the interest of Millennials
who are seeing collective action through unions as much more aligned with their interests
than previous generations.
Lastly, in addition to the changes we have already mentioned, to help instructors
incorporate the new material discussed into their courses, the following is a list of
chapter-by-chapter additions:
Chapter 1
• Updated discussion on international trade, Brexit, and the H-1B visa debate.
• The loss of middle-class jobs in the United States and new technology affecting
HR, such as robotics and automation.
• New coverage on the employee experience.
• New coverage on Generation Z.
• Updated information on workforce demographic trends and the progress of
women and minorities in the workplace.
89624_fm_hr_i-xxxii.indd 20 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxiPreface
Chapter 2
• Updated information on U.S. labor supply statistics.
• New section on a firm’s primary and secondary stakeholders.
• New section and figure on the 4As model (Alignment, Agility, Architecture, and
Ability).
• New case study on how a strategy change led to the formation of Nike.
Chapter 3
• New legal interpretations on what reasonable accommodation means for employ-
ees with disabilities.
• Updated information on how Title VII is being interpreted to prohibit discrimi-
nation based on gender identity or sexual orientation.
• A list of specific examples of unlawful discrimination against LGBTQ
communities.
• New research showing how states that enact the federal Employment
Non- Discrimination Act (ENDA) achieve higher levels of innovation than
states that do not enact the act.
• We expand upon the term “disparate treatment.”
• New material on how students in universities react to affirmative action.
Chapter 4
• New coverage of workflow analysis prior to job analysis.
• New discussion on how a firm’s strategy affects its workflows and job design.
• New discussion of how companies are using fitness trackers, standing desks, and
other devices to improve the ergonomics in their workplaces.
• New discussion on workplace democracy, and the work-life balance Millennials
and the members of Generation Z are demanding.
• New case study on how Zappos eliminated all managerial positions and moved to
a self-management model.
Chapter 5
• New section on retaining talent.
• New coverage on the use of games to attract applicants.
• New information on writing job postings to attract more candidates and the use
of technology to detect biased job postings.
• New information on the virtual-assistant type technology some companies are
beginning to use to automate the process of posting jobs, searching for candidates
online, scheduling interviews with them, and notifying them of where they stand
in the job hiring process.
• New case study on Scripps Health’s lifecycle approach to training and retaining
talent.
Chapter 6
• Updated information on the practice of using the Internet to prescreen candi-
dates and the legal hazards of doing so.
• Updated information on the “ban the box” movement.
89624_fm_hr_i-xxxii.indd 21 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxii Preface
• New coverage on the use of technology and other best practices to eliminate bias
when screening résumés and ranking candidates based on their interviews.
• New information on the use of Big Data and gamification in preemployment
testing.
Chapter 7
• Updated coverage on how MOOCs are affecting corporate training.
• New coverage on experiential learning and the gamification of employee training.
• Updated information on social media’s role in training.
Chapter 8
• New coverage reflecting the growing role of coaching rather than formal perfor-
mance appraisals in organizations.
• New coverage of SMART goals.
• New coverage on how some firms are using technology to detect biased perfor-
mance appraisals and get a better picture of how well employees are performing.
• New case study on why Adobe ended formal appraisals and what the company
replaced them with.
Chapter 9
• How some companies like Zappos are moving from a traditional management
structure to a system where work is organized around roles rather than titles and
teams report to teams rather than supervisors.
• The movement by tech companies to using objectives and key results (OKR)
systems to tie compensation to objectives.
• The push for health care professionals to be evaluated based on quality of care
instead of a production model where it is more about quantity of care.
• New research that shows how competition and recessions can reduce employee
wages.
• New coverage of locations, such as Glassdoor, to collect salary and other related
data.
• A list of the highest paying jobs for 2017 in the United States.
• An updated discussion of minimum age required for employment.
• Salary rates for the fastest growing jobs in the United States.
Chapter 10
• Discussion of the new presidential administration’s support for policies that
reward government employees for merit, not just tenure.
• New discussion of how companies are gamifying incentives and rewards to
improve performance.
• Updated research on how to design rewards to provide (1) autonomy, (2) oppor-
tunity, and (3) purpose.
• New research on public sentiment toward CEO pay.
Chapter 11
• Updated information on the current status of the Patient Protection and Afford-
able Care Act (PPACA).
89624_fm_hr_i-xxxii.indd 22 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxiiiPreface
• New discussion of workers’ lack of awareness of the employer costs of their
benefits.
• Updated information on employee leave programs as they relate to the Family
Medical Leave Act.
• Expanded discussion on how companies can better meet the needs of Millennials
by providing work-life benefits.
Chapter 12
• Updated research on the financial benefits of health and safety programs.
• Updated information on U.S. employee injury and safety statistics today.
• Updated information on how to enforce safety rules.
• Updated information on workplace violence and antibullying legislation.
Chapter 13
• Updated information on employee privacy rights at their place of employment.
• New figures on employer versus employee rights.
• New information on how employees are protected for blowing the whistle.
• New discussions and statistics of social media and how it is used and abused by
employees.
Chapter 14
• A clearer introduction to the chapter that includes current sentiments in the
United States toward unions.
• Discussion of how the last presidential election impacted unions and their tradi-
tional allegiance to the Democratic Party and U.S. sentiment toward international
trade.
• New research showing how Millennials relate to collective action—where they
agree and disagree with unions.
• Some evidence that more professionals are seeing unionization as a viable way to
stabilize employment. A look at recent union movements that aren’t just limited
to companies but more related to social movements (e.g., Fight for 15 and
Occupy Wall Street).
• Reorganized material to help with chapter flow.
Chapter 15
• Updated discussions on sentiments about globalization and free trade.
• Discussion surrounding the new gig economy where many workers are finding
work globally online as independent contractors.
• Updated discussions of how companies like Microsoft are creating globally
dispersed teams that must work virtually.
• Updated immigration and foreign worker discussions as they relate to H-1B visas.
Chapter 16
• New discussion on why higher compensation is generally required when imple-
menting an HPWS.
• Updated case study on Whole Foods’ HPWS and the challenges the company
faces sustaining it and regaining a competitive advantage.
89624_fm_hr_i-xxxii.indd 23 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxiv Preface
Features of the Book
Designed to facilitate understanding and retention of the material presented, each
chapter contains the following pedagogical features:
• Learning Outcomes listed at the beginning of each chapter provide the basis for
the Integrated Learning System. Each outcome is also listed in the margin of the
chapter in which it appears, along with a thought-provoking question designed to
get students thinking about how the related content applies to them personally.
The outcomes are revisited in the chapter summary and discussion questions and
in all of the book’s ancillaries.
• Small Business Application Boxes. The boxes are designed to help entrepre-
neurs, small business owners, and managers think about how to organize, imple-
ment, and leverage talent and to draw attention to resources designed especially
for them to do so. We feel the coverage is very important because many students
today are very interested in entrepreneurship and will go on to found their
own businesses. Moreover, small businesses provide most of America’s jobs to
workers.
• Highlights in HRM. This popular boxed feature provides real-world examples
of how organizations perform HR functions. The highlights are introduced in
the text discussion and include topics such as small businesses and international
issues.
• Key Terms appear in boldface and are defined in margin notes next to the text
discussion. The Key Terms are also listed at the end of the chapter and appear in
the glossary at the end of the book.
• Figures. An abundance of graphic materials and flowcharts provides a visual,
dynamic presentation of concepts and HR activities. All figures are systematically
referenced in the text discussion.
• Summary. A paragraph or two for each Learning Outcome provides a brief and
focused review of the chapter.
• Discussion Questions following the chapter summary offer an opportu-
nity to focus on each of the Learning Outcomes in the chapter and stimulate
critical thinking. Many of these questions allow for group analysis and class
discussion.
• HRM Experience. An experiential activity designed to simulate HR activities is
included in each chapter.
• End-of-Chapter Cases. Two case studies per chapter present current HRM issues
in real-life settings that allow for student consideration and critical analysis.
• Extended Cases. Eleven extended cases are provided at the end of the main text.
These cases use material covered in more than one chapter and provide capstone
opportunities.
MindTap
Managing Human Resources, 18th edition, includes a brand new MindTap learning
experience, powered by a rich array of online resources designed to deliver an all-in-one
solution for learning and retaining the course topics. The following items are included
in the MindTap learning path:
• An engagement activity designed to stimulate student interest and launch your
classroom discussion.
89624_fm_hr_i-xxxii.indd 24 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxvPreface
• A media-rich e-version of the text enhanced with interactive versions of several
figures in the text as additional video content for extra concept coverage and
engagement.
• A comprehensive auto-graded homework assignment designed to guide stu-
dents from basic comprehension to real-world application of concepts. Robust
feedback is provided within each question to help reinforce understanding as stu-
dents navigate through the new concepts of each chapter.
• Assignable version of Integrated Case assignments found at the end of the book.
The assignments utilize the power of digital to engage students and grade open-
ended question submissions easier with MindTap.
• Brand new video “You Make the Decision” exercises designed to enable students
to think like HR managers and teach students to apply concepts taught within the
classroom to real-world scenarios.
• Quiz assignment that delivers a myriad of question types to measure overall com-
prehension of chapter learning objectives.
• New Study App that helps students quiz themselves and prepare for upcoming
exams. Practice questions are based on learning objectives within the course,
and correlated to the test bank to provide students with a robust bank to utilize
in their test preparation. Student have the flexibility to decide what chapters to
study, and how many questions they will answer making on-the-go studying
easier, quicker, and exactly what they need.
Instructor Materials
The following instructor support materials are available to adopters online at www.
cengagebrain.com.
• Instructor’s Resource Guide. The Instructor’s Resource Guide contains a chapter
synopsis and learning objectives; a very detailed lecture outline; answers to the
end-of-chapter discussion questions, notes for decision activities, and end-of-
chapter case studies; solutions to the extended cases in the textbook; and “Flip
Tips” activities to provide ideas for the flipped classroom.
• Test Bank. Cengage Learning Testing powered by Cognero is a flexible, online sys-
tem that allows you to:
• Author, edit, and manage test bank content from multiple Cengage Learning
solutions.
• Create multiple test versions in an instant.
• Deliver tests from your LMS, your classroom, or wherever you want.
Each test bank chapter provides more than 100 questions, all tagged by learning
objective, AACSB standards, and Bloom’s taxonomy. There are true/false, multiple-
choice, and essay items for each chapter.
• PowerPoint™ Presentation Slides. These presentation slides will add color
and interest to lectures. Lecture slides also include engagement items such
as video links and discussion questions to enhance the classroom learning
experience.
89624_fm_hr_i-xxxii.indd 25 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxvi Preface
Acknowledgments
Because preparation of manuscript for a project as large as Managing Human Resources
is a continuing process, we would like to acknowledge the work of those colleagues
who provided thoughtful feedback, and invaluable content expertise for this and the
previous editions of the text. Our appreciation and thanks go to:
Ryan Hall, Chatfield College
Loren Kuzuhara, University of Wisconsin
Kim Fox-Marchetti, Lone Star College
Dale King, Lenoir-Rhyne University
Carol Decker, Tennessee Wesleyan University
Christie Hovey, Lincoln Land Community College
Tony Hunnicutt, College of the Ouachitas
Debra Moody, Virginia Commonwealth University
Dave Quirk, Northwest Christian University
Greg Berezewski, Robert Morris University of Illinois
Avan Jassawalla, SUNY Geneseo School of Business
Jeffrey Moser, Valley City State University
Jonathan Biggane, Fresno State University
Niesha Geoffroy, Golden Gate University
Julia Levashina, Kent State University
Jaime Simmons, Marlboro College Graduate School
Zhaoquong Qin, Langston University
Justin Wareham, Oklahoma City University
Kiristen Jefferson, Southern New Hampshire University
LaSondra Banks, Triton Community College
Misty Resendez, Ivy Tech
Neeley Shaw, Waynesburg University
Rimjhim Banerjee-Batist, Schenectady County Community College
Rhoda Sautner, University of Mary
Robin Sawyer, University of Maryland
Sandra Obilade, Bresica University
Shirley Rijkse, Central Carolina Community College
Weichu Xu, East Stroudsburg University
Steve Ash, University of Akron
Michael Bedell, California State University, Bakersfield
Brad Bell, Cornell University
Katherine Clyde, Pitt Community College
Mary Connerley, Virginia Tech University
Susie Cox, McNeese State University
Paula S. Daly, James Madison University
Sharon Davis, Central Texas College
Douglas Dierking, University of Texas, Austin
Suzanne Dyer-Gear, Carroll Community College
Joe J. Eassa, Jr., Palm Beach Atlantic University
Summer Zwanziger Elsinger, Upper Iowa University
Robert E. Ettl, SUNY Stony Brook
Diane Fagan, Webster University
Angela L. Farrar, University of Nevada, Las Vegas
89624_fm_hr_i-xxxii.indd 26 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxviiPreface
Lou Firenze, Northwood University
Olene L. Fuller, San Jacinto College
Judith Gordon, Boston College
Rita G. Greer, Spalding University
Mike Griffith, Cascade College
Daniel Grundmann, Indiana University
Adrian Guardia, Texas A&M University, San Antonio
Xuguang Guo, University of Wisconsin, Whitewater
Sally Hackman, Central Methodist College
Kevin Hale, Lonestar College
Mike Hashek, Gateway Technical College
Rich Havranek, SUNY Institute of Technology
Kim Hester, Arkansas State University
Stephen Hiatt, Catawba College
Alyce Hochhalter, St. Mary Woods College
Madison Holloway, Metropolitan State College of Denver
David J. Hudson, Spalding University
Karen Jacobs, LeTourneau University
Avan Jassawalla, SUNY at Geneseo
Michelle Jetzer, Madison College
Nancy M. Johnson, Madison Area Technical College
Jeffrey Johnston, Alpena Community College
Pravin Kamdar, Cardinal Stritch University
Cheryl L. Kane, University of North Carolina, Charlotte
Jordan J. Kaplan, Long Island University
Steve Karau, Southern Illinois University at Carbondale
Joseph Kavanaugh, Sam Houston State University
John Kelley, Villanova University
Dennis Lee Kovach, Community College of Allegheny County
Kenneth Kovach, University of Maryland
Trudy Kroeger, Wisconsin Indianhead Technical College
Chalmer E. Labig, Jr., Oklahoma State University
Alecia N. Lawrence, Williamsburg Technical College
Scott W. Lester, University of Wisconsin, Eau Claire
J. Jonathan Lewis, Texas Southern University
Corinne Livesay, Bryan College
Beverly Loach, Central Piedmont Community College
L. M. Lockhart, Penn State Greater Allegheny
Gloria Lopez, New Mexico Highlands University
Barbara Luck, Jackson Community College
Larry Maes, Davenport University
Jennifer Malfitano, Delaware County Community College
Michael Matukonis, SUNY Oneonta
Doug McCabe, Georgetown University
Lee McCain, Seminole Community College
Marjorie L. McInerney, Marshall University
Veronica Meyers, San Diego State University
Robert T. Mooney, Texas State University
Julia Morrison, Bloomfield College
89624_fm_hr_i-xxxii.indd 27 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxviii Preface
Jim Nichols, Crown College
Harold Nolan, Georgian Court University
Sue Norton, University of Wisconsin Parkside
David Nye, Kennedy-Western University
Paul Olsen, Saint Michael’s College
Donald Otto, Lindenwood University
Charles Parsons, Georgia Institute of Technology
Dane Partridge, University of Southern Indiana
Bryan J. Pesta, Cleveland State University
Theodore Peters, Hartwick College
David Pitts, Delaware Technical and Community College
Amy Pogue, Valencia College
Alex Pomnichowski, Ferris State University
Victor Prosper, University of the Incarnate Word
Michael Raphael, Central Connecticut State University
Charles Rarick, Barry University
Eladio D. Reid, University of Houston Downtown
June Roux, Salem Community College
Robert Rustic, University of Findlay
Laura L. Sankovich, Capella University
Machelle Schroeder, University of Wisconsin–Platteville
Kelli Schutte, Calvin College
Mike Sciarini, Michigan State University
Tom Sedwick, Indiana University of Pennsylvania
Jim Sethi, University of Montana Western
Patricia Setlik, William Rainey Harper College
William L. Smith, Emporia State University
Norman Solomon, Fairfield University
Emeric Solymossy, Western Illinois University
Carol Spector, University of North Florida
Howard Stanger, Canisius College
Scott L. Stevens, Detroit College of Business
Michael Sturman, Cornell University
Nanette Swarthout, Fontbonne College
Michael T. Korns, Indiana University of Pennsylvania
Karen Ann Tarnoff, East Tennessee State University
Thomas Taveggia, University of Arizona
Donna Testa, Herkimer County Community College
Alan Tillquist, West Virginia State College
Sue Toombs, Weatherford College
Richard Trotter, University of Baltimore
William Turnley, Kansas State University
Catherine L. Tyler, Oakland University
Melissa Waite, The College at Brockport, SUNY
Harvell Walker, Texas Tech University
Barbara Warschawski, Schenectady County Community College
Steve Werner, University of Houston
Liesl Wesson, Texas A&M University
JoAnn Wiggins, Walla Walla University
89624_fm_hr_i-xxxii.indd 28 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxixPreface
Jim Wilkinson, Stark State College
L. A. Witt, University of New Orleans
Evelyn Zent, University of Washington, Tacoma
Ryan Zimmerman, Texas A&M University
In the manuscript for this edition, we have drawn not only on the current litera-
ture but also on the current practices of organizations that furnished information and
illustrations relating to their HR programs. We are indebted to the leaders in the field
who have developed the available heritage of information and practices of HRM and
who have influenced us through their writings and personal associations. We have also
been aided by students in our classes; by research assistants like Natalie Stoker, Kenne-
rley Roper, and Ashley Fife; by former students; by the participants in the management
development programs with whom we have been associated; by HR managers; and by
our colleagues. In particular, we would like to express our appreciation to Amy Ray
for her helpful insights, research, and editorial support for this edition of the text. She
is a wonderful partner. We appreciate the efforts of everyone at Cengage who helped
develop and produce this text and its supplements. They include: Bryan Gambrel,
Product Director; Jamie Mack, Content Developer; Stephanie Hall, Learning Design
Author; Carol Moore, Digital Content Designer; Michelle Kunkler, Sr. Art Director;
and Rhett Ransom, Product Assistant.
We are also so grateful to our wives—Marybeth Snell and Mindi Morris—who
have contributed in so many ways to this book. They are always sources of invaluable
guidance and assistance. Furthermore, by their continued enthusiasm and support,
they have made the process a more pleasant and rewarding experience. We are most
grateful to them for their many contributions to this publication, to our lives, and to
our families.
Lastly, we would like to say farewell and thank you to long-time coauthor, George
Bohlander, who has been a valued partner for decades and the intellectual backbone
of the franchise. With his departure from the author team, George leaves an enduring
legacy. His experience and insight have given this book its voice for many editions,
and his guidance, counsel, and leadership have proved invaluable. His passion for the
field, his students, and the profession have been inspirational. He is a great mentor,
and friend. And a wonderfully decent man. Thank you, George.
Scott A. Snell
University of Virginia
Shad S. Morris
Brigham Young University
89624_fm_hr_i-xxxii.indd 29 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxx
Scott A. Snell
Scott Snell is the E. Thayer Bigelow Research Chair of business administration and
former senior associate dean for executive education at the University of Virginia’s
Darden Graduate School of Business. Scott teaches courses in leadership and strategic
management and works with management teams on aligning their human resource
investments to better execute their strategies. Scott is the author of four books and was
recently listed among the top one hundred most-cited authors in scholarly journals
of management. He currently serves on the board of HR People + Strategy (SHRM),
and previously has served on the boards of the Strategic Management Society’s Hu-
man Capital Group, the Society for Human Resource Management Foundation, the
Academy of Management’s Human Resource Division, the Academy of Management
Journal, and the Academy of Management Review.
Prior to joining the Darden faculty in 2007, Scott was professor and director of
executive education at Cornell University’s Center for Advanced Human Resource
Studies and a professor of management in the Smeal College of Business at Pennsylvania
State University. He received a BA from Miami University, as well as an MBA and PhD
in business from Michigan State University. Originally from Ohio, Scott now lives in
Charlottesville, Virginia.
Shad S. Morris
Shad Morris is the Georgia White Fellow and associate professor of management at the
Marriott School of Business at Brigham Young University. He teaches courses in the
areas of human resources management and international business. Prior to joining
the Marriott School in 2013, Shad was an assistant professor of management and
human resources at The Ohio State University and has held appointments at the Sloan
School of Management at MIT, Copenhagen Business School in Denmark, China
Europe International Business School (CEIBS) in China, and SKK Graduate School of
Business in South Korea.
Shad’s research focuses on strategic human resource management in a global
environment. His research has been published in a number of journals, such as the
Harvard Business Review, MIT Sloan Management Review, Academy of Management
Review, Journal of International Business Studies, Strategic Management Journal,
Journal of Management, and Human Resource Management. He has worked for the
World Bank, Management Systems International, and Alcoa. He has consulted with
numerous companies on their HR and knowledge practices. He is the recipient of the
About the Authors
89624_fm_hr_i-xxxii.indd 30 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
xxxiAbout the Authors
International HRM Scholarly Research Award from the Academy of Management and
is currently a faculty fellow at Cambridge University’s Centre for International Human
Resource Management. In addition, Shad currently serves on the board of the Interna-
tional Journal of Human Resources Management and is a founding editor of the Journal
of Microfinance. He received a BS in psychology and a masters in organizational
behavior from Brigham Young University, as well as a PhD in human resources man-
agement from Cornell University.
89624_fm_hr_i-xxxii.indd 31 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
89624_fm_hr_i-xxxii.indd 32 11/17/17 4:21 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
1
CHAPTER 1
The Rewards and Challenges
of Human Resources Management
Learning Outcomes
After studying this chapter, you should be able to
Explain how human resource managers and other
managers can have rewarding careers by helping
their firms gain a sustainable competitive advan-
tage through the strategic utilization of people.
Explain how good human resource practices
can help a firm’s globalization, corporate social
responsibility, and sustainability efforts.
Describe how technology can improve how people
perform and how they are managed.
LO 1
LO 2
LO 3
Explain the dual goals HR managers have in terms
of increasing productivity and controlling costs.
Discuss how firms can leverage employee
differences to their strategic advantage and how
educational and cultural changes in the workforce
are affecting how human resource managers
engage employees.
Provide examples of the roles and competencies
of today’s HR managers and their relationship with
other managers.
LO 4
LO 5
LO 6
Ra
w
pi
xe
l/
G
et
ty
Im
ag
es
89624_ch01_hr_001-037.indd 1 11/17/17 11:02 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
2 Part 1 Human Resources Management in Perspective
W
e use a lot of words to describe how important people are to organizations. The
terms human resources, human capital, intellectual assets, and talent manage-
ment imply that it’s people who drive the performance of their organizations
(along with other resources such as money, materials, and information). Successful orga-
nizations are particularly adept at bringing together different kinds of people to achieve
a common purpose. This is the essence of human resources management (HRM).
Human resources management involves a wide variety of activities, including analyz-
ing a company’s competitive environment and designing jobs and teams so a firm’s
strategy can be successfully implemented to beat the competition. This, in turn, requires
identifying, recruiting, and selecting the right people for those jobs and teams; train-
ing, motivating, and appraising these people; developing competitive compensation
policies to retain them; grooming them to lead the organization in the future—and
the list goes on.
1.1 Why Should You Study Human Resources
Management? Will It Pay Off?
Which of these activities would you like to engage in your career:
• Establishing the strategic direction your firm should take
• Attracting top-notch people to come to work for you and your firm
• Determining the right people to hire so your team and company are a success
• Helping and coaching people so they become top-notch performers
If you answered yes to these questions, a job managing people might be a reward-
ing career for you and an excellent reason why you should study human resources
management. Having a good understanding of human resources management is
important for managers and entrepreneurs of all types—not just human resources
(HR) personnel. All managers are responsible for at least some of the activities that
fall into the category of management. Managers play a key role in selecting employees,
training and motivating them, appraising them, promoting them, and so forth. It’s a
job that can be incredibly rewarding—like a gardener helping his or her crops to grow.
But what if you do a poor job of these activities? Believe it or not, many businesspeople
with great business strategies, business plans, and products and services fail because
they do not fully grasp the importance of human resources management. Laments one
entrepreneur:
My first year after investing in a small business that was failing, I tripled the
amount of business the company did and made a lot of money. But I didn’t pay
my personnel enough or motivate them. They eventually abandoned me, and
a larger competitor muscled me out of the marketplace. I now understand the
important role personnel play in a business. They can make or break it.
In addition, great business plans and products and services can easily be copied by
your competitors. Great personnel cannot. Their knowledge and abilities are among the
human resources
management (HRM)
The process of managing
human talent to achieve
an organization’s
objectives.
Think of a firm you
do business with that
is facing dramatic
changes in order to
survive. (Retailers such
as Target and Macy’s,
which are facing stiff
competition from
online retailers are an
example.) How do you
think the firm’s person-
nel can help it adapt?
What role will the com-
pany’s HR staff play in
helping with that goal?
LO 1
89624_ch01_hr_001-037.indd 2 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
3Chapter 1 The Rewards and Challenges of Human Resources Management
most distinctive and renewable resources upon which a company can draw. As Thomas
J. Watson, founder of IBM, said, “You can get capital and erect buildings, but it takes
people to build a business.”1
Lastly, even if you never become a manager, understanding human resources
management can help you understand your responsibilities and rights as an employee.
For example, what if your employer asks for your passwords to Facebook or other social
media sites? Do you need to provide the manager with that information? This textbook
can help you answer questions such as these.
1.1a Human Capital and Organizational Culture
The idea that organizations “compete through people” highlights the fact that achieving
success increasingly depends on an organization’s ability to manage its human capital.
The term human capital describes the employees’ knowledge, skills, abilities, and other
attributes (KSAOs) that have economic value to the firm. Although the value of these
assets might not show up directly on a company’s balance sheet, it nevertheless has
tremendous impact on an organization’s performance. The following quotations from
notable CEOs and former CEOs illustrate this point2:
• “The key for us, number one, has always been hiring very smart people.” (Bill Gates,
Microsoft)
• “Human resources isn’t a thing we do. It’s the thing that runs our business.” (Steve
Wynn, Wynn Las Vegas)
• “You gotta build a team that is so talented, they almost make you uncomfortable.”
(Brian Chesky, AirBnB)
human capital
The knowledge, skills,
and capabilities of
individuals that have
economic value to an
organization.
If an employer
requested your Face-
book login credentials,
what would you do?
Ra
w
pi
xe
l.c
om
/S
hu
tt
er
st
oc
k
89624_ch01_hr_001-037.indd 3 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
4 Part 1 Human Resources Management in Perspective
Companies that do “win” because of the talent they find, hire, and manage include:
• Publix, which empowers its employees to make decisions—decisions that are good
for an individual store, its customers, area growers, community, and the firm as a
whole.
• Nordstrom’s, which empowers its employees to go through near-heroics to satisfy
customers.
• The Martin Agency, a Virginia-based advertising agency whose talented and
creative personnel generate award-winning advertising campaigns like those for
insurer Geico and cable-TV network Nickelodeon.
However, unlike physical capital and resources, human capital is intangible and
cannot be managed the way organizations manage jobs, products, and technologies.
One reason why this is so is because employees, not the organization, own their own
human capital. If valued employees leave a company, they take their human capital
with them, and any investment the company has made in training and developing these
people is lost.
To build human capital in organizations, managers must continue to develop supe-
rior knowledge, skills, and experience within their workforces and retain and promote
top performers.3 Beyond the need to invest in employee development, organizations
have to find ways to better utilize the knowledge of their workers. Too often employees
have knowledge that goes unused. Human resource managers and programs are often
the conduit through which knowledge is developed and transferred among employees.
As Dave Ulrich, a noted expert in human resources, notes: “Learning capability is g
times g—a business’s ability to generate new ideas multiplied by its adeptness at general-
izing them throughout the company.”4
Why does knowledge go unshared and unused in organizations? Oftentimes it’s
because of a firm’s organizational culture. Organizational culture refers to the shared
values, beliefs, and assumptions people in an organization have. Organizational cul-
ture affects how people in an organization work and treat each other and customers. A
negative organizational culture stifles employees and leads to lower productivity and
morale. In contrast, a positive organizational culture helps employees not only acquire
knowledge and skills, but also helps foster curiosity among employees, allows them
to grow and thrive, and creates mission-driven teams that actually achieve success.
You probably understand organizational culture more than you realize. Are there
businesses you like to shop with because they perform better and you enjoy the atmo-
sphere and people? Are there other businesses that are similar but that you don’t like
to shop with? The difference is likely due to organizational culture. Marriott’s culture
is critical to its success. The hotel chain takes care of its employees. They, in turn, take
care of the customers, who come back time and again.
Although “competing through people” and “organizational culture” are major
themes of human resources management, on a day-to-day basis, managers of all types
have to carry out the specific activities for a company to effectively do so. Figure 1.1
provides an overall framework of these activities.
What do you think are the biggest human resource–related challenges you would
have to face as a manager or team leader? Professional organizations such as the Society
for Human Resource Management (SHRM) conduct ongoing studies of the most press-
ing competitive issues facing firms. The top trends, or challenges, firms name today
include those outlined in the sections that follow.
organizational culture
The shared values,
beliefs, and assumptions
people in an organiza-
tion have.
89624_ch01_hr_001-037.indd 4 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
5Chapter 1 The Rewards and Challenges of Human Resources Management
1.2 Strategic and Global Challenges
Organizations can rarely stand still for long. Being able to adapt has become the key
to capturing opportunities and overcoming obstacles both domestically and abroad.
In fact, it is often the key to the very survival of organizations. Many of the biggest 500
companies in the world 50 years ago (GE and GM included) are still in business. How-
ever, many others, such as Esmark Steel, are not. In fact, you may never have even heard
of Esmark Steel. As a corollary, think about the species that populate our planet today.
It’s not necessarily the biggest and the strongest species, such as the dinosaurs, that have
survived but those best able to adapt. This is true for not only species but individual
employees and companies as well.
1.2a Responding Strategically to Changes and Disruptions
in the Marketplace
Products and markets are evolving at a breakneck pace, disrupting what businesses pro-
duce, how they produce, and for whom. Changes in the stock market, world economic
conditions, labor markets, and technology are making “business as usual” a thing of the
past. So how do HR managers help their firms cope with ever-changing business condi-
tions? One way is by helping redesign their firms to achieve agility.
Agility is a firm’s ability make quick changes to gain a competitive advantage.
Achieving agility often involves eliminating managerial layers that can slow down deci-
sion making and make an organization less nimble. Instead, project teams that can gear
up fast, make their own decisions, and disband quickly are utilized to develop and get
new products out the door while they’re “hot.” Many tech companies operate this way,
and other firms are finding that the model can work for them.
agility
A firm’s ability make
quick changes to gain a
competitive advantage.
• Changes in the
marketplace
and economy
• Globalization
• Sustainability
• Technology
• Productivity and
cost challenges
• Leveraging employee
differences
• Planning
• Job design
• Recruitment
• Staffing
• Training and
development
• Appraisal
• Communications
• Compensation
• Benefits
• Labor relations
• International HR
• Job security
• Health care
• Diversity issues
• Age, gender, and
generational issues
• Retirement issues
• Education levels
• Employee rights and
privacy
• Work attitudes and
employee engagement
• Work-life balance
COMPETITIVE
CHALLENGES
HUMAN RESOURCES
EMPLOYEE
CONCERNS AND ISSUES
Overall Framework for Human Resources ManagementFigure 1.1
Does a company’s HRM
function need to be
an integral part of its
sustainability and cor-
porate social respon-
sibility efforts? Why or
why not?
LO 2
89624_ch01_hr_001-037.indd 5 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
6 Part 1 Human Resources Management in Perspective
The online shoe company Zappos has gone so far as to eliminate all of its managers.
Employees aren’t told how to work. Instead, they “self-manage” and belong to voluntary
employee teams. Employees are motivated to develop new skills and capabilities so
they can join multiple teams and work on new projects at a moment’s notice. Successful
companies, says Harvard Business School professor Rosabeth Moss Kanter, develop a
culture that just keeps moving all the time.5 It’s been said that “No change means no
chance.” The change applies to HR managers, too.
Human Resources Managers and Business Strategies
In decades past, HR departments were often focused on performing administrative
tasks, dealing with unions, and complying with labor laws. But HR management is
vastly different today. Astute executives know that human resource professionals can
help them improve, to comply with the law and help the bottom line by streamlining
employment costs. HR professionals can improve the top line by redesigning work to
foster innovation, by forecasting labor trends, by recruiting and motivating employees,
and by measuring their effectiveness. HR managers also help their firms with business
strategies, as well as mergers, acquisitions, and ways to enter new and global markets.
“If you look at the evolution going back to when we called HR ‘personnel,’ it’s come a
long way as a function,” says Art Mazor, with Deloitte Consulting. New HR tools and
technologies are allowing the HR function to look outside the tactical, administrative
reporting and data gathering to bring insights and to drive business strategy and results.6
Mazor says.6
Sometimes changing a firm’s strategy requires adjusting the labor force via downsiz-
ing, outsourcing, and offshoring. Downsizing is the planned elimination of jobs, and
outsourcing simply means hiring someone outside the company to perform business
processes that were previously done within the firm. Offshoring, also referred to as
“global sourcing,” involves shifting work to locations abroad.
A common denominator of all these strategies is that they require companies to
engage in bringing about and managing both organizational changes and changes
on the individual level. Although most employees understand that change is
continuous—responsibilities, job assignments, and work processes change—people
often resist it because it requires them to modify or abandon ways of working that
have been successful or at least familiar to them. Successful change rarely occurs
naturally or easily.
Some of the strategic changes companies pursue are reactive changes that result
when external forces, such as the competition, a recession, a law change, or an ethi-
cal crisis (such as the backlash Volkswagen experienced in 2016 for cheating on its
vehicles’ emissions tests) have already affected an organization’s performance. Other
strategic changes are proactive changes, initiated by managers to take advantage of tar-
geted opportunities, particularly in fast-changing industries in which followers are not
successful.
Good HR managers know that they can be key players when it comes to driving
the business strategies of their organizations to make changes. That is why forward-
looking CEOs, including those of Southwest Airlines, Starbucks, and GE, make certain
their top HR executives report directly to them and help them address key issues.
A rapidly growing number of companies, including Ford, Intel, United Technolo-
gies, and the gamemaker Electronic Arts, are assigning HR representatives to their core
business teams to make certain they are knowledgeable about core business issues. In
downsizing
The planned elimination
of jobs.
outsourcing
Contracting outside the
organization to have
work done that formerly
was done by internal
employees.
offshoring
The business practice
of sending jobs to other
countries.
89624_ch01_hr_001-037.indd 6 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
7Chapter 1 The Rewards and Challenges of Human Resources Management
addition, companies are increasingly rotating non-HR managers into HR positions and
vice versa to give them exposure to different areas of the organization. Rather than
emphasizing the administrative aspects of HR, these companies develop and promote
their HR personnel and provide them with key business statistics and numbers they can
use to measure the effectiveness of the workforce.
We will discuss more about competitive HR strategies and HR in Chapter 2. Mean-
while, keep in mind that HR’s role is not all about providing advice to CEOs and super-
visors. In addition to serving as a strategic partner to management, HR managers are
also responsible for listening to and advocating on behalf of employees to make sure
their interests are aligned with those of the firm and vice versa. A good deal of evidence
suggests that this is one of the toughest parts of an HR manager’s job. We will discuss
more about this aspect of the job later in the chapter.
1.2b Competing, Recruiting, and Staffing Globally
Have you ever thought about working abroad or learning a second (or third) language?
Doing so could give you a big advantage in today’s workplace. Why? Because the strate-
gies companies are pursing today increasingly involve one or more elements of global-
ization. The integration of world economies and markets has sent businesses abroad
to look for opportunities, fend off foreign competitors domestically, and find the right
kind of employees to help them do so. Consumers around the world today want to be
able to buy “anything, anytime, anywhere,” and companies are making it possible for
them to do so. Want to buy a Coke in Pakistan? No problem. Coca-Cola has an elaborate
delivery system designed to transport its products to some of the remotest places on
the planet. In fact, the company has long generated more of its revenues abroad than it
does in the United States
Some changes are
reactive, such as those
experienced by Volk-
swagen when it was
revealed the company
had cheated on its
vehicles’ emission tests.
sh
au
nl
/G
et
ty
Im
ag
es
89624_ch01_hr_001-037.indd 7 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
8 Part 1 Human Resources Management in Perspective
Importing and exporting goods and services is the easiest way to “go global.” India
has the world’s second-largest population (1.2 billion people) and a growing middle
class, so firms are increasingly trying to expand their exports to that country.7 Apple is
one of those companies. Although the iPhone dominates the U.S. market, only 5 percent
of smartphones in India are iPhones. Partnerships, mergers, and takeovers are other
ways companies are preparing for globalization.
Many American and foreign firms have partnered with Chinese firms to expand
in China, which is the world’s most populous country, with 1.3 billion people. In turn,
Chinese and other foreign companies are merging with American firms, sometimes in
industries you wouldn’t expect. For example, in 2016, the Chinese firm Dalian Wanda
Group bought U.S. film company Legendary, which produced The Dark Knight, Jurassic
World, and Straight Outta Compton.8
As a result of globalization, the national identities of products are blurring, too.
BMW is a German brand, but the automaker builds cars in the United States, China,
and elsewhere. Likewise, you probably think of Budweiser as an American beer, but its
maker (Anheuser-Busch) is owned by a Belgian company called InBev. Like many other
companies, Anheuser-Busch InBev has been purchasing or partnering with factories
and brands in other countries such China and Mexico to expand its sales.9 After buying
Legendary, Dalian Wanda Group produced The Great Wall starring Matt Damon, which
was released in both China and the United States.
Numerous free-trade agreements forged between nations in the last half century
have helped quicken the pace of globalization. The first major trade agreement of the
twentieth century was made in 1948, following World War II. Called the General Agree-
ment on Tariffs and Trade (GATT), it established rules and guidelines for global com-
merce between nations and groups of nations. Since GATT began, the growth in world
trade has far outpaced the growth in the world’s overall output. GATT paved the way
for the formation of many major trade agreements and institutions, including the Euro-
pean Union in 1986 and the North American Free Trade Agreement (NAFTA) in 1994,
encompassing the United States, Canada, and Mexico.
Although they have come under fire from people and politicians around the world,
new free-trade agreements continue to be forged. The United Kingdom left (“Brexited”)
the European Union in 2016. Nonetheless, even the country’s most vocal opponents of
global trade are anxious to complete a new free-trade deal with India to do more busi-
ness with that nation.10
How Globalization Affects HRM
Due to globalization, firms have to balance a complicated set of issues related to differ-
ent geographies, including different cultures, employment laws, and business practices,
and the safety of employees and facilities abroad. Human resource issues underlie each
of these concerns. They include such things as dealing with employees today who,
via the Internet and social media, are better informed about global job opportunities
and are willing to pursue them, even if it means working for competing companies or
foreign companies. Gauging the knowledge and skill base of workers worldwide and
figuring out how best to hire and train them (sometimes with materials that must be
translated into a number of different languages) is also an issue for firms. Relocating
managers and training foreign managers abroad to direct the efforts of an international
workforce is a challenge as well. In Chapter 15, we will explain how these challenges
are tackled.
89624_ch01_hr_001-037.indd 8 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
9Chapter 1 The Rewards and Challenges of Human Resources Management
1.2c Setting and Achieving Corporate Social Responsibility
and Sustainability Goals
Globalization has led to an improvement in people’s living standards in the last half
century. As a result of free trade, Americans are able to buy products made abroad
more cheaply. Conversely people in low-wage countries that make those goods and
services are becoming wealthier and are beginning to buy American-made products.
Nonetheless, globalization stirs fierce debate—especially when it comes to jobs. Since
the turn of the century, millions of U.S. jobs—both white collar and blue collar—have
been exported to low-wage nations all around the world. Other people worry that free
trade is creating a “have/have not” world economy, in which the people in developing
economies and the world’s environment are being exploited by companies in richer,
more developed countries. This has sparked anti-free-trade protests in many nations.
Concerns such as these, coupled with corporate scandals over the years, including
the use of sweatshop labor in third-world countries, have led to a new focus on corporate
social responsibility, or good corporate citizenship. Many firms and professional asso-
ciations also have ethics codes, or codes of conduct. The codes are written guidelines that
clarify right and wrong behaviors an organization endorses or prohibits. Highlights in
HRM 2 shows the codes of ethics adopted by the Society for Human Resources Manage-
ment. Other firms have gone so far as to appoint “chief ethics officers” to try to ensure
that ethical breaches by employees don’t adversely affect their companies. Chief ethics
officers and ethics are discussed in more detail in Chapters 7 and 13.
Companies are learning (sometimes the hard way) that being ethical and socially
responsible both domestically and abroad can not only help them avoid lawsuits but also
improve their earnings. For example, researchers at Boston College’s Center for Corpo-
rate Citizenship found that as a company’s reputation improved, so did the percentage
increase in the number of people who would recommend that firm. Nearly two-thirds of
corporate social
responsibility
The responsibility of
the firm to act in the
best interests of the
people and communities
affected by its activities.
After an unsafe fac-
tory collapsed, killing
hundreds of textiles
workers in Bangladesh
in 2013, approximately
70 retailers, mostly
European, signed an
agreement to inspect
factories they offshore
work to and finance
safety upgrades for
them.
M
U
N
IR
U
Z
ZA
M
A
N
/A
FP
/G
et
ty
Im
ag
es
89624_ch01_hr_001-037.indd 9 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
10 Part 1 Human Resources Management in Perspective
the members of the 80-million-strong millennial generation (people born in the 1980s
and 1990s) consider a company’s social reputation when deciding where to shop, and
9 of 10 say they would switch brands based on their perceptions of a company’s com-
mitment to social responsibility.11 Moreover, prospective workers are saying corporate
responsibility is now more important to their job selection. They want to work for
companies that are concerned not only with profits but also making the world a better
place for everyone, both rich and poor.
Sustainability is closely related to corporate social responsibility. Sustainability
refers to a company’s ability to produce goods or services without depleting the world’s
resources and doing the least amount of harm to the environment as possible. Achieving
complete sustainability is nearly impossible, but companies are making strides to reduce
their “carbon footprints.” Those that are not are finding themselves under pressure from
consumers and groups determined that they do.
Consider what happened to Hewlett-Packard (HP). After HP broke a promise
to eliminate toxic materials in its computers, Greenpeace activists painted the words
“Hazardous Products” on the roof of the company’s headquarters in Palo Alto, Cali-
fornia. Meanwhile, a voicemail message from Star Trek actor William Shatner was
delivered to all of the phones in the building. “Please ask your leader [HP’s CEO] to
make computers that are toxin free like Apple has done,” Shatner said in the recording.
The stunt and publicity it generated worked. HP got the message and later delivered
on its promise.12
One of HR’s leadership roles is to spearhead the development and implementation
of corporate citizenship throughout their organizations, especially the fair treatment of
workers.13
1.3 Technology Challenges
Advancements in information technology have enabled organizations to take advantage
of the information explosion. Computer networks and “cloud computing” (Internet
computer services and data storage) have made it possible for nearly unlimited amounts
of data to be stored, retrieved, and used in a wide variety of ways anywhere and at any
time. Software that allows workers to work with and share information with one another
electronically anywhere, any time—social media, wikis, document-sharing platforms
such as Google Docs, online chat and instant messaging, and web- and videoconferenc-
ing—have changed how and where people and companies do business. For example,
BNSF Railway uses the social media site Yammer to help employees collaborate on ideas
and provide each other with praise and feedback.
Social media networking has also become the way workers find jobs and employ-
ers recruit candidates and screen them today. Companies are hiring firms such as
Social Intelligence, which combs through Facebook, LinkedIn, Twitter, Instagram,
YouTube, and “thousands of other sources” to create reports about the “real you”—not
the “you” you have presented in your resume.14 (Care to change your Facebook page,
anyone?)
HR managers are often responsible for developing Internet and social media poli-
cies for employees, including how much time employees should be allowed to spend
online, the sites they should be allowed to visit, and whether or not an employee can use
his or her own electronic devices (mobile phones, tablets, etc.) for work purposes. Other
sustainability
Doing business in a way
that does as little harm
to the environment and
depletes as few natural
resources as possible.
In what ways can the
HR managers and
employees of small
firms facilitate their
competitiveness rela-
tive to firms with supe-
rior technology? Why
are employees still key?
LO 3
89624_ch01_hr_001-037.indd 10 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
11Chapter 1 The Rewards and Challenges of Human Resources Management
issues include what apps employees can use. Deutsche Bank doesn’t allow its employees
to use unapproved apps such as Google Talk and What’s App for business purposes on
either their work or personal phones.15
From Touch Labor to Knowledge Workers
Technology—and automation in particular—have reduced the number of jobs that
require routine tasks and little skill and have increased the number of jobs that require
considerable skill. In 1979, approximately 40 percent of Americans held routine-task-
type jobs. Today, only about 30 percent do as a result of automation and robotics.16 This
change has been referred to as a shift from “touch labor” to knowledge workers, in
which employee responsibilities expand to include a richer array of nonroutine activities
that involve analyzing information and problem-solving.17 Fewer good “middle class”
type jobs are available to U.S. workers today as a result, disrupting the labor market.
“One of our retail utility customers in the U.K. has about 300 robots doing 600 people’s
worth of work,” says Alistair, the CEO of Blue Prism, a company that helps automate
business functions. “Before you needed a building to house 600 people, but all that gets
crushed down to one cabinet in the corner of a data center.”18
But it’s not just routine jobs and blue-collar jobs that are affected by automation.
News organizations are using web robots (“bots”) to gather information and write basic
stories about corporate earnings and sports recaps. Many of the entries on Wikipedia
aren’t written by people but by bots that comb the Web for information and compile the
information you see on the site. Or consider the IBM robot Jill Watson. In 2016, Georgia
Institute of Technology used Jill as an online teaching assistant in an experiment with an
artificial intelligence class. Most students never figured out Jill wasn’t human—although
some of them said they were suspicious she was because she seemed to answer their ques-
tions way too fast.19
knowledge workers
Workers whose respon-
sibilities extend beyond
the physical execution
of work to include plan-
ning, decision-making,
and problem-solving.
Ordering kiosks like
this one in a New York
City store are likely to
replace some workers.
So
rb
is
/S
hu
tt
er
st
oc
k
89624_ch01_hr_001-037.indd 11 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
12 Part 1 Human Resources Management in Perspective
Clearly, no one is immune to the changes automation and technology bring. But
that doesn’t mean that all jobs are going away because of it. A recent study found that
about 50 percent of workers’ tasks today could be eliminated with current technology
and technology being developed. However, only 5 percent of jobs could be.20 More
likely, humans will work with the help of virtual assistants similar to Siri, Cortana, and
Amazon’s Echo device.
Knowledge-based training is critical to the business model of Manpower, the largest
employment agency in the United States. Manpower offers free information technol-
ogy training to its employees through its online university. The site features thousands
of hours of instruction in technology applications, along with professional develop-
ment, business skills, and telecommunications courses, seminars, and chat rooms with
mentors. “Just-in-time” learning is delivered via the Internet to Manpower’s employees’
mobile phones, tablets, and computers.
Firms and their employees are also utilizing massive open online courses (MOOCs)
created by colleges and educational firms. A MOOC is a noncredit, often free course
anyone can take online, and enrollment is unlimited. MOOCs can help employees get
training quickly as well as stretch a company’s training budget.
Virtual learning is taking place as well. IBM, Cisco, Kelly Services, and Manpower
are among the many companies that have built training facilities, offices, and meeting
rooms inside the online reality game Second Life. The spaces these companies build
online enable them to do certain things more easily and cheaply than they can in the
real world—for example, bringing people from several continents into one room for
training or new hires for orientation.21 Augmented reality devices such as Google Glass
and “wearables” such as the Apple Watch are helping employees get information when
and where they need it, too. At AGCO, a manufacturer of agricultural equipment, fac-
tory workers wear augmented reality glasses, which display diagrams and instructions
to help them conduct quality checks.22
Technology’s Effect on HRM
Perhaps the most central use of technology in HRM is an organization’s
human resources information system (HRIS). HR affects the entire workforce—
everyone who works for the company must be hired, trained, paid, and promoted,
usually through HR. Human resources information systems are used for everything
from automating payroll processing to administering benefits programs. The systems
allow managers to access employee records for administrative purposes and employees
to access and change their own benefits and other personal information on either an
intranet or a secure website.
Firms use human resources information systems to recruit, screen, and pretest
applicants online before hiring them as well as to train, track, and promote employees
once they have been hired. The drugmaker Merck’s HRIS captures information from job
recruiting sites and social network sites like LinkedIn, scans applicants’ resumes, and
makes the information immediately accessible to managers so they can search system-
atically for the people whose skills they want. Managers can search online for internal
and external talent by running searches of candidates who have been categorized by skill
set.23 The HRIS system of the consumer-products maker Procter and Gamble (P&G)
makes good internal candidates visible to managers instead of the managers having to
scour the company to find them. The system contains information about its 100,000-plus
human resources
information system
(HRIS)
A computerized system
that provides current and
accurate HR-related data
for the purposes of con-
trol and decision-making.
89624_ch01_hr_001-037.indd 12 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
13Chapter 1 The Rewards and Challenges of Human Resources Management
employees worldwide for promotion purposes at the country, business category, and
regional levels.
Corning Inc. uses HR software, among other things, to set the developmental goals
of its employees once they have been hired and to gauge how well they are meeting them.
Employees can look online to see their own goals and mark their progress as well as see
everyone else’s goals in the command chain, from the CEO down to their immediate
supervisors. This “cascading” of goals has helped Corning’s employees align their per-
sonal goals with the organization’s overall objectives, to reach higher levels. “Like any
large company, we tended to get ‘silo-ed’ and fragmented the more we grew,” said one
vice president at a company using a system similar to Corning’s. “We needed a better
way to pull our global team together and get people focused on what the priorities are
for our business.”24
One of the newer HRIS applications is the use of big data. Big data is a buzzword
that describes the massive amounts data available online and offline today that can be
“crunched” to make decisions. Marketing departments have very successfully used big
data to detect people’s buying patterns. By analyzing its customers’ buying habits, Target
was able to predict which of them were pregnant, sometimes before they had even told
their families. The company then sent the customers ads and coupons for baby products.
Now companies are doing the same thing to analyze HR information, a process
that’s referred to as workforce (HR) analytics. Using HR data, such as employee
demographic information, performance ratings, pay, employee surveys, academic
history, years of service, and so on, a firm can definitely answer questions like the
following:
• Do employees with degrees from Ivy League schools perform better—or not?
• Exactly how much more do top performers need to be paid to stay with our firm?
• Which job applicants are likely to perform better?
• Which employees are most likely to quit?
Traditionally, questions such as these have been answered based on anecdotal evi-
dence or the “gut” feelings of HR professionals. But workforce analytics can provide more
definitive answers. For example, a major customer service provider analyzed more than
7,000 of its employees and found that “relevant job experience” in the customer service
area had no impact on how well they performed and stayed with the company. As a result,
the company altered its hiring criteria.25 Gathering and analyzing HR data may sound
like a daunting task, but HR software providers are including data analysis tools in their
programs that make it easier to gather and visualize HR data in a meaningful way.
So what sort of HRIS should HR professionals choose among the many options
available to them? One of the first steps in choosing a HRIS is for HR personnel to eval-
uate the biggest “headaches” they experience, or the most time-consuming tasks, and
then choose the applications that can have the strongest impact on the firm’s financial
measures—that is, the ones that get the “biggest bang for the buck.” Off-the-shelf HR
Web-based solutions are as commonly used as custom-designed systems. Free open-
source HRIS software is also available on the Web. OrangeHRM is an example. Open-
source software can be a good solution for startup and small businesses looking for a
low-cost HRIS solution. Highlights in HRM 1 shows the other factors that need to be
evaluated.
workforce (HR)
analytics
The process of gathering
and analyzing data to
improve a firm’s human
resources management.
89624_ch01_hr_001-037.indd 13 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Factors to Consider When Evaluating a Human Resources Information System
�� Fit of the application to the firm’s employee base. If many
of the firm’s employees work on a factory floor, is the
system appropriate, or does HR need to install kiosks
in employee areas? Will employees be able to access
the HRIS offsite on the Internet or on their mobile
phones? How will the information be secured? Will
employees need to be assigned passwords?
�� Ability to upgrade or customize the application. What
sorts of costs will be involved to upgrade the applica-
tion in the coming years?
�� Compatibility with current systems. Does the HRIS link
into existing, or planned, information systems easily
and inexpensively?
�� User friendliness. Does the application provide addi-
tional features such as links to learning resources or
help for managers or employees who might need it?
�� Collaboration. Does the system connect employees
and allow them to collaborate on solutions to prob-
lems and projects?
�� Workforce analytics. Does the system make it easy to
gather HR data and visualize its implications?
�� Survey capabilities. Does the system have an
app that allows employees to be surveyed
electronically?
�� Recruiting and applicant tracking. Does the system
make it easy to find, recruit, and track applicants
and a company’s current employees for hiring
purposes?
�� Scheduling. Does the system have scheduling ability to
ensure employees are in the right places, working the
right times, and on the right projects?
�� Availability of technical support. Should the HRIS sys-
tem be supported internally, or should the vendor
host it? Will it be cloud based?
�� Time required to implement and train staff members to
use the HRIS, including HR and payroll personnel, man-
agers, and employees. Who is responsible for training
employees, and how will it be done?
�� Initial costs and annual maintenance costs. Is a “suite”
of apps needed or just a few key apps? Experts advise
HR managers to price each application separately and
then ask vendors for a “bundled” price.26
Highlights in HRM1
HRweb (shown here) is
an example of one of
the many HRIS systems
available for firms to
manage
HR-related tasks.
H
RW
eb
.c
om
89624_ch01_hr_001-037.indd 14 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
15Chapter 1 The Rewards and Challenges of Human Resources Management
Ultimately, however, an HRIS should provide HR personnel with analytical
information—statistics, metrics, and so forth—that helps them analyze, refine, and
better implement a firm’s strategic direction. This can include forecasting personnel
needs (especially for firms planning to expand, contract, or merge), planning for career
and employee promotions, and evaluating the impact of the firm’s policies—both those
related to HR functions and other functions.
1.4 Productivity and Cost Challenges
Labor costs are often the largest expenditures companies make, particularly in service-
and knowledge-intensive firms. How can companies actually spend more money on
employees and still drive overall costs lower? The answer: via higher employee pro-
ductivity. Employee productivity is the result of a combination of employees’ abilities,
motivation, and work environment, and the technology they use to work.
1.4a Maximizing Productivity
Productivity can be defined as “the output gained from a fixed amount of inputs.”
Organizations can increase their productivity either by reducing their inputs (the cost
approach) or by increasing the amount that employees produce by adding more human
and/or physical capital to the process. Companies such as Southwest Airlines, Nucor,
and the manufacturing and technology firm Danaher achieve low costs in their indus-
tries not because they scrimp on employees but because they are the most productive.
United States is still by far the world’s most productive nation in terms of the total
value of all goods and services it produces, even when it comes to manufacturing.
China ranks second. Apparel and textile manufacturing are far smaller industries in
the United States than what they once were, but they have been replaced by industries
that rely more on technological precision and brainpower than on low-skilled labor—
industries for aircraft, sophisticated machinery, medical devices, and so on.27 How-
ever, the growth in output per worker is now climbing fast in countries such as China
that in the past have lacked the amount of technology available to U.S. workers. When
the investment in faster computers and more efficient machine tools levels off, this
limits how much assistance technology can offer employees in terms of their
productivity. Any additional productivity will have to come from the enhanced abil-
ity of employees, their motivation, and their work environment, which makes the job
of the HR manager in the coming years all the more crucial.28
1.4b Managing the Size of the Workforce
Part of managing productivity is matching the size of the workforce to the demand
requirements of a firm given technology, the firm’s strategic direction, and global
competition. Sometimes this task entails hiring additional personnel to expand a
firm’s capacity. At other times, offshoring is used to increase capacity. Offshoring
can help a firm deliver products more quickly if people across the globe are working
around the clock on them. For example, to keep up with demand as well as lower costs,
some U.S. clinics and hospitals have offshored the task of reading X-rays to radiolo-
gists in other countries such as India. X-rays taken in the day are read at night abroad
and delivered the next day to the hospitals and clinics.29 Offshoring is also used when
As a manager, do you
think it would be pos-
sible to maintain the
morale of your firm’s
employees in the face
of shrinking budgets
and benefits? How
might you do so?
LO 4
89624_ch01_hr_001-037.indd 15 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
16 Part 1 Human Resources Management in Perspective
companies want to expand to other countries and capture market share there. Apple
is trying to do this by opening an iPhone manufacturing facility in India.
Outsourcing can help a firm manage the size of its workforce, reduce costs, and focus
on the activities it does best. For example, companies hire advertising firms to handle
their promotions, software firms to develop data-processing systems for them, and law
firms to handle their legal issues rather than do them in-house. Maintenance, security,
catering, and payroll (and in small companies, sometimes entire HR departments) are
outsourced to increase the organization’s flexibility and manage the size of the workforce.
Despite the advantages offshoring and outsourcing offer, a growing number of
firms are moving jobs back to their domestic markets or in-house. Delta Air Lines
is among the firms that returned its call-center operations to the United States after
customers complained about the service they received from personnel in foreign coun-
tries. Other companies are nearshoring, which is the practice of bringing jobs closer
to domestic countries, and homeshoring, which is the practice of outsourcing work to
domestic workers who work out of their homes.
Downsizing is, of course, another way to manage the size of the workforce as is
furloughing. Furloughing is the practice of requiring employees to take time off for
either no pay or reduced pay. More diligent workforce planning may be a better solution
than either downsizing or furloughing, says John Sullivan, an HR expert and consultant.
Business revenues seldom fall off overnight. Sullivan says the best managers develop a
process that pinpoints skills the company no longer needs, low-impact jobs, and poor
performers in advance of a crisis. Instead, part-time or contract employees can be hired
and their hours of service adjusted as needed.30
1.4c Managing Pay and Benefits
Most firms closely monitor employee pay and benefit programs. Skyrocketing health care
costs are perhaps the biggest concerns companies are facing when it comes to compensation
and benefits. Companies are taking many different approaches to try to keep health care
costs in check, including charging employees higher premiums for covering their spouses
if they are able to obtain insurance through their own employers. Yet another approach
is giving employees a set amount of money they can use to purchase health insurance on
their own. Walgreen’s and Darden Restaurants, which operates the Olive Garden and Red
Lobster chains, have taken this approach. A more proactive approach is to offer employees
incentives to get healthy—for example, by quitting smoking, losing weight, or exercising.31
Another way firms are managing benefits is by using employee leasing. When
employee leasing is used, a firm signs an agreement with a professional employer orga-
nization (PEO). The PEO—typically a larger company—takes over the management of
the smaller company’s HR tasks and becomes a coemployer to its employees. The PEO
performs all the HR duties of an employer—hiring, payroll, and performance appraisal.
Because PEOs can coemploy a large number of people working at many different compa-
nies, they can provide employees with benefits that small companies cannot afford, such
as 401(k) and health care plans, workers’ compensation, and even adoption assistance.
Another strategy to manage pay and benefits is to hire freelancers, part-time
employees, independent contractors, and consultants, who work in what’s being called
the “gig economy.” In the gig economy, people earn income from various nonperma-
nent “gigs,” or jobs, and work independently, rather than full time for a single employer.
An Uber driver is an example of a person participating in the gig economy. The gig
economy isn’t new, but it’s definitely a growing trend.
nearshoring
Occurs when a firm
relocates jobs abroad
to nations closer to its
domestic market.
homeshoring
The practice of outsourc-
ing work to domestic
workers who work out of
their homes.
furloughing
A situation in which an
organization asks or
requires employees to
take time off for either no
pay or reduced pay.
employee leasing
The process of eliminat-
ing the jobs of employ-
ees who are then hired
by a leasing company
(which handles all HR-
related activities) and
contracting with that
company to lease back
the employees.
89624_ch01_hr_001-037.indd 16 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
17Chapter 1 The Rewards and Challenges of Human Resources Management
Some companies, such as Google, are able to hire talented employees by offering them
great pay and fantastic benefits. However, most companies, especially small ones or ones
that are struggling, find it hard to compete with bigger firms like Google with deluxe ben-
efit packages. What can small companies do to attract employees yet contain costs? Many
companies are finding that providing work flexibility is a good way to improve the produc-
tivity and motivation of valuable employees, especially when giving them larger benefit
packages is not an option. For example, when gasoline prices shot up to over $4/gallon
during the last recession, most small companies weren’t able to increase their employees’
pay because they were facing higher transportation costs themselves for the goods and
services they had to buy. But some companies began letting employees telecommute (work
from home) or, like the state of Utah did, work 10 hours per day, 4 days a week.
As experienced and highly respected HR professionals,
Delise West and Tonya Rochette could have easily fur-
thered their careers by pursuing positions in large corpo-
rations or academia. Instead, they chose to forge a new
path for themselves by founding Human Resource Part-
ners, a small human-resources consulting firm located in
Dover, New Hampshire. Friends and family thought they
were both a little crazy to enter the “risky” world of owning
a small business, but since joining forces 12 years ago, they
have been very successful at serving other small, entrepre-
neurial businesses just like theirs.
West and Rochette both recognized early on that
small businesses need to address HR issues just as much
as larger businesses, yet small-business owners usually do
not have the time or expertise to devote to these issues
themselves and often do not have the financial resources
to hire a full-time, knowledgeable HR manager. This pair
of entrepreneurs saw that reality as an opportunity to pro-
vide a full spectrum of HR services to companies in need.
“There are so many companies who don’t have the
right HR infrastructure in place,” said West, whose firm
works mostly with companies under 70 employees.
“Oftentimes, an owner of a growing business will come
to me and simply say, ‘I can’t do it anymore because it has
become too time consuming.’ Some of the companies
that have turned to West and Rochette for help with HR
functions and strategy include a major car dealership, a
regional construction company, and a local nursery.
Work with a new client typically begins with an
evaluation of the firm’s level of HR compliance and
best practices, such as job description documentation,
payroll systems, and legal interviewing practices. From
Small Business Application
there, Human Resource Partners develops strategies
for the client to implement in the areas of recruiting,
screening, interviewing, and hiring new staff; evaluat-
ing and recognizing current employee performance; and
improving employee relations and developing supervi-
sory skills.
By giving small firms the tools, services, and train-
ing they need, West and Rochette allow their clients to
focus on their core business. Said West, Human Resource
Partners lets small firms “realize the return on their invest-
ments in their greatest assets: their people.”
Outsourcing a firm’s HR isn’t a new strategy for firms,
big or small. Many companies have outsourced their pay
and benefits functions for years. What is new is the growth
in HR outsourcing. Currently, it’s a $42.6 billion industry. By
2020, that number is expected to grow to $53.9 billion, a
25 percent increase.
The growth of HR outsourcing has been good
news for West and Rochette. Human Resource Partners
expanded quickly and now serves larger, midsize busi-
nesses as well. To help meet demand in Dover and other
New Hampshire cities the two entrepreneurs also brought
on additional HR professionals as partners. Because the
outsourcing model gives small and midsize businesses
senior-level HR expertise, West says she believes HRP will
continue to grow.
Sources: Mark Feffer, “Meet the People Behind Your Outsourcing,”
HR News (July 1, 2016), https://www.shrm.org; Kim Murdoch, “Cel-
ebrating 10 Years: Concord- and Dover-based HRP Marks Milestone,”
ConcordPatch (May 24, 2013), http://concord-nh.patch.com; Michael
McCord, “Outsourcing Frees Owners from Time Consuming Tasks,” Sea-
Coastonline.com (January 10, 2011), http://www.seacoastonline.com;
company website: h-rpartners.com.
A Small Business Built on Helping Small Businesses
89624_ch01_hr_001-037.indd 17 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
18 Part 1 Human Resources Management in Perspective
1.5 Employee Challenges
Do you think a company has a moral obligation to take care of its workforce? What kind
of company would you like to work for? These are questions you are probably asking
yourself as you prepare for your career. Clearly, in addition to the strategic challenges
that companies face, they also must attend to some very important employee concerns.
Those challenges span a wide range of important concerns such as job security, health
care, diversity, and employee rights.
1.5a Responding to the Demographic and Diversity
Challenges of the Workforce
To forecast trends to support the strategies of their organizations, HR managers
frequently analyze the capabilities of different demographic groups and how well
each is represented in both fast-growing and slow-growing occupations. Women,
for example, are fairly well represented in fast-growing occupations such as health
services but are also represented in some slow-growth occupations such as admin-
istrative jobs and computer and financial records processing jobs. Blacks and His-
panics have been heavily concentrated in several of the slow-growth and declining
occupations. The U.S. labor force also grew more slowly in the last decade than it did
in the previous one, a trend that is projected to continue. The labor force participa-
tion rate—that is, the number people employed or actively looking for work—is also
declining in the United States. Figure 1.2 shows the U.S. labor force participation
rate. The rate peaked in 2000 at about 67 percent; however, during the last recession,
many people dropped out of the job market. The rate then fell before leveling off at
about 62.7 percent.
But even with the economic recovery, the labor participation rate is predicted to
fall because of declining birth rates and the aging U.S. population. By 2050, the U.S.
Bureau of Labor Statistics (BLS) predicts the labor force participation rate will be
about 60.2 percent. To accommodate shifts such as these, find qualified talent, and
broaden their customer bases, businesses know it is absolutely vital to increase their
Think about some of
the teams you have
been a member of.
Which of them per-
formed better—those
that were diverse or
those that were not?
What challenges and
opportunities did the
more diverse teams
present? How do you
think they translate
to human resources
management?
LO 5
68
58
59
60
61
62
63
64
65
66
67
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
P
e
rc
e
n
t
U.S. Labor Force Participation Rates over TimeFigure 1.2
Source: U.S. Bureau of Labor Statistics
89624_ch01_hr_001-037.indd 18 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
19Chapter 1 The Rewards and Challenges of Human Resources Management
efforts to recruit and train a more diverse workforce. And with a more diverse work-
force comes more diverse expectations on the part of employees for their employers
to meet.
Ethnic and Racial Diversity in the Workforce
Minorities in the United States are increasing relative to the total population. U.S. work-
ers are becoming more diverse as well. Much of the growth of the minority workforce
has been due to not only the arrival of immigrants but also high birth rates among some
minority groups, such as Hispanics. By 2024, Hispanics are projected to make up nearly
one-fifth of the labor force. By 2050, they are projected to make up about one-third of
the labor force, as Figure 1.3 shows.32
Firms have been criticized for hiring immigrant workers—both legal and illegal—
because people believe they prevent U.S. citizens from getting jobs. In addition, following
the attack on the World Trade Center in 2001, the number of work visas issued to foreign-
ers by the U.S. government was cut. Many American employers say this a problem because
they lack the highly qualified workers they need for key positions. To bring in the talent
it needs from abroad, Microsoft opened a facility in Canada, across from its Redmond,
Washington, headquarters. However, critics of work visas, of which there are many, claim
there isn’t a shortage of qualified workers and that employers use the program to hire
foreign workers they can pay less. The United States has been able to attract the best and
brightest of the world’s talent, which fueled the country’s success. For example, in 2016,
all American Nobel Laureates were immigrants. But as you will learn in Chapter 15, that
is changing.33
It is not just the most highly educated who are in demand either. Some busi-
nesses, including those in the agricultural business, face labor shortages that would
be even more severe without less-skilled immigrants willing to work for low pay and
few or no benefits. The jobs these people do are often labor intensive and must be
2010 Projected 2050
Hispanic
15%
Non-Hispanic
85%
Non-Hispanic
70%
Hispanic
30%
Source: U.S. Bureau of Labor Statistics
Labor Force Participation Rates of Workers of Hispanic Origin versus
Non-Hispanic Origin
Figure 1.3
89624_ch01_hr_001-037.indd 19 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
20 Part 1 Human Resources Management in Perspective
done in bad weather or in agricultural facilities in less-than-pleasant conditions, and
involve work that many Americans don’t want to do. Nonetheless, there is a concern
that immigrants (both legal and illegal) are taking away jobs from Americans. Illegal
immigrants make up about 5 percent of the labor force. They are concentrated in
certain jobs, such as farming (26%), cleaning and maintenance (17%), and construc-
tion (14%).34
In recent years, the federal government and state and local governments have tried
to make it harder for firms to hire illegal immigrants and passed laws making it more
difficult for them to live, work, and drive in the United States. After Georgia and Ala-
bama did so, crops rotted in the fields in those states because of a lack of workers to
harvest them. Those states subsequently relaxed their rules. Later in the book we will
discuss in more detail what companies are doing in response to minority and immigra-
tion challenges and opportunities.35
Age Distribution of the Workforce
The newest generation entering the workplace is Generation Z. The members of Gen-
eration Z were born in the mid-1990s and early 2000s. It’s been estimated that by 2020,
they will make up 20 percent of the workforce. These workers have never known life
without smartphones and social media and they expect to be trained and managed with
digital tools. They are also more comfortable with racial, cultural, and sexual diversity
than other generations and want to change the world for the better. A large number of
members of this generation say they want to start their own businesses. Others, having
grown up during the last recession, want to go straight to work rather than incurring
the cost of college.
The millennial generation (Generation Y) is having a big impact on the labor
market right now. The group is also 75 to 80 million people strong, making it the larg-
est generation ever. Millennials are generally regarded as having good technological
knowhow and initiative, especially when it comes to starting their own businesses.
(Facebook founder Mark Zuckerberg is a notable example.) Like Generation Z, they
are also interested in meaningful work that will improve the world around them
and want a good work-life balance. Neither generation wants to be pigeonholed into
jobs. They want to try new jobs and new tasks, and they are quite willing to job hop
to do so.
People in Generation X were born between 1964 and 1979. Many members of
Generation X watched their babyboomer parents get downsized at some point in their
lives. Now that they are raising children themselves, Generation Xers value job secu-
rity. However, they are less likely to think of themselves as being wed to one employer
as their parents were. The members of Generation X are also independent. They like
challenging work rather than repetitive work and dislike supervisors who look over
their shoulders.
A relatively large number of people were born after World War II (between 1946 and
1964). These people are members of the babyboom generation. A significant proportion
of babyboomers have hit retirement age. Not all babyboomers are retiring, though. Due
to advances in medicine, people are staying healthier as they age, and many are remain-
ing in the labor force longer. Other factors—including an increase in the official retire-
ment age in the United States from 65 to 67—are also keeping babyboomers working.
89624_ch01_hr_001-037.indd 20 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
21Chapter 1 The Rewards and Challenges of Human Resources Management
So are economic factors: Many babyboomers have not saved enough to retire, or their
401(k) retirement accounts have not grown as well as expected. Older workers tend to
be dependable and remain on the job longer than younger workers, who operate more
like free agents. Because their kids are grown up, older workers are also often willing to
work flexible hours.
So, what will the workforce look like in years to come in terms of ages? Figure 1.4
shows older Americans—those hitting the 55-and-over age bracket—are the fastest
growing segment of the workforce and will be for decades as the U.S. workforce con-
tinues to age. By contrast, the average annual growth rate of 16- to 24-year-olds in the
labor force is projected to decline. Managers can find themselves challenged in terms of
getting the four generations to work well together. Babyboomers sometimes categorize
younger workers as having a poorer work ethic. Some younger workers have the per-
ception that older workers are set in their ways and are technologically challenged. The
situation can also create supervisory issues. How will a 55-year-old react to being man-
aged by someone in their 20s or 30s? To help companies overcome these obstacles, HR
departments and experts are developing programs to help the generations understand
one another better so they can capitalize on one another’s strengths rather than preying
on one another’s weaknesses.
Keep in mind that the three generations of workers we have described here are gen-
eralizations. Individual employees are vastly different from one another and motivated
by different factors, even if they belong to the same generation. It is up to managers to
figure out what drives each person so as to best utilize his or her talents and to meet the
person’s employment demands and career aspirations.
16%
23%
26%
22%
13%
14%
22%
22%
23%
19%
12%
22%
22%
20%
24%
2000 2010 Projected 2050
16 to 24 years
25 to 34 years
45 to 54 years
55 years and older
35 to 44 years
Source: U.S. Bureau of Labor Statistics
Labor Force Participation Rates of Workers in the Labor Force by
Their Ages
Figure 1.4
89624_ch01_hr_001-037.indd 21 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
22 Part 1 Human Resources Management in Perspective
Gender Distribution of the Workforce
Following World War II, less than one-third of women were in the workforce. Currently,
women constitute a little under half of the U.S. workforce. About 60 percent of women
age 16 and older are in the labor force, and approximately 70 percent of mothers with
school-age children are employed in some capacity. As Figure 1.5 shows, the number
of women joining the U.S. labor force has tapered off some in recent years as it has for
men and is expected to continue to do so.36
The educational attainment of women is also increasing relative to men. Today,
three of every five college graduates are women. Women’s wages have increased, too.
In 1979, on average, women made 62 percent of what men made. Although the gap has
not closed, it has narrowed. Women who are employed full time today make about 83
percent of what men employed full time make.37
However, some studies have found that younger women in urban areas make more
than their male counterparts. One market research firm analyzing census data found
that in 47 of the 50 biggest U.S. metropolitan areas, the median full-time salaries of
young women were 8 percent higher than for men in their peer group.38 Top executive
positions are still dominated by men, though.
Employers wanting to attract the talent that women have to offer are taking mea-
sures to ensure they are treated equally in the workplace in terms of their advancement
opportunities and compensation. In addition, more companies are accommodating
working parents by offering them parental leave, part-time employment, flexible work
schedules, job sharing, telecommuting, child and elder care assistance, and adoption
assistance.
As we have suggested, harnessing a company’s talent means being aware of char-
acteristics common to employees while also managing these employees as individuals.
It means not just tolerating or accommodating all sorts of differences but support-
ing, nurturing, and utilizing these differences to the organization’s advantage—in other
words, strategically leveraging them rather than simply managing them so that people
100
86.4
59.2
52.7
64.6
Men
Total
Women
60
40
20
0
19601950 1970 1980 1990 2000 2020
80
100
60
40
20
0
80
2030 20402010 2050
P
e
rc
e
n
t
P
e
rc
e
n
t
33.9
58.5
Labor Force Participation Rates by GenderFigure 1.5
Source: U.S. Bureau of Labor Statistics
89624_ch01_hr_001-037.indd 22 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
23Chapter 1 The Rewards and Challenges of Human Resources Management
are treated equitably and “everyone gets along.”39 HR managers have to ask themselves
the following questions: What is it about the experiences, mindsets, and talents of dif-
ferent groups of people that can be utilized in a strategic way? After all, despite our
similarities, all of us are different in one way or another, aside from the obvious dif-
ferences we have outlined in this section. These differences, too, can be the source of
organizational strength. Later in the book, we will discuss more about the steps firms
can take to leverage employee differences.
1.5b Educational Shifts Affecting the Workforce
Over the years, the educational attainment of the U.S. labor force has risen dramatically.40
Figure 1.6 shows that a college education results in higher wages and lower unemploy-
ment rates. Despite the fact the educational attainment of the labor force has risen in
general, American students’ math and science test scores lag behind those of students
in China, Japan, Singapore, Finland, and several other nations. The U.S. Department of
Education has found that less than half of all high school seniors can handle mathematics
problems involving fractions, decimals, percentages, elementary geometry, and simple
algebra. American adults are struggling, too. In survey of adults in 24 developed coun-
tries, Americans scored below the average on literacy, math, and computer skills tests.41
What does this mean for the United States? What will HR managers do? The best ones
will find strategies to help their firms compete, despite these challenges.
Source: U.S. Department of Labor.
Doctoral degree
Professional degree
Master’s degree
Bachelor’s degree
Associate’s degree
Some college, no degree
High school diploma
Less than a high school diploma
All workers: $860 All workers: 4.3%
Median usual weekly earning Unemployment rate
$1,623
$1,730
$1,341
$1,137
$798
$738
$678
$493
$1,623 1.7%
1.5%
2.4%
2.8%
3.8%
5.0%
5.4%
8.0%
$1,730
$1,341
$1,137
$798
$738
$678
$493
Earnings and Unemployment Rates of Full-Time U.S. Workers by EducationFigure 1.6
89624_ch01_hr_001-037.indd 23 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
24 Part 1 Human Resources Management in Perspective
1.5c Adapting to Cultural and Societal Changes Affecting
the Workforce
The attitudes, beliefs, values, and customs of people in a society are an integral part
of their culture. Naturally, their culture and society affect their behavior on the job and
the environment within the organization, influencing their reactions to work assign-
ments, leadership styles, and reward systems. Cultural and societal changes are ongo-
ing. HR policies and procedures therefore must be adjusted to cope with these changes.
Changing Employee Rights
Laws affecting employee rights are continually changing. In this book we will dis-
cuss the major laws affecting companies today. Among them are laws granting
employees the right to equal employment opportunities (Chapter 3); union rep-
resentation if they desire it (Chapter 14); a safe and healthful work environment
(Chapter 12); unemployment and health care benefits as required by law and the
regulation of pension plans by the government (Chapter 11); equal pay for equal
work (Chapter 9); and so on. An expanded discussion of the specific areas in which
rights and responsibilities are of concern to employers and employees will be pre-
sented in Chapter 13.
Privacy Concerns of Employees
HR managers and their staff members, as well as line managers in positions of respon-
sibility, generally recognize the importance of discretion in handling all types of infor-
mation about employees. Since the passage of the federal Privacy Act of 1974, increased
attention to privacy has been evident, heightened by the increase in identity theft in recent
years. While the act applies almost exclusively to records maintained by federal agencies,
it has drawn attention to the importance of privacy and has led to the passage of addi-
tional privacy legislation, including the Health Insurance Portability and Accountability
Act of 1996 (HIPAA) and the associated privacy rule issued by the U.S. Department of
Health and Human Services, which protects the use and disclosure of personal medical
information.
In addition to implementing privacy policies, most companies try to limit the use
of social security numbers on employment forms. Companies also restrict access to
employee files, conduct background checks on employees who have access to others’
files, and contract with outside firms specializing in identity theft to prevent the abuse
of employee information. Globalization has added another twist to privacy compliance.
For example, EU countries prohibit the transfer of personal data to countries with inad-
equate data protection laws.42
The Electronic Communications Privacy Act of 1986 protects people’s electronic
communications such as their email. However, employers have a right to monitor their
employees’ emails, phone calls, texts, and Internet use while on the job. Camera surveil-
lance in the workplace is also an issue, as is the use of the global positioning system
(GPS). The nonprofit organization Workplace Fairness reports that employers are using
GPS in company cars to track where workers are, how fast they are driving, and the
length of their breaks by monitoring how long their vehicles have not moved. Employers
are also using applications installed on workers’ smartphones and employee ID cards to
see where they are, if they have arrived at jobsites on time, and dispatch the closest ones
to jobs.43 In addition, employers are scrutinizing information employees post on the Web
and social media. Some employers have gone so far as to demand job applicants give
them their passwords to social media sites.
89624_ch01_hr_001-037.indd 24 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
25Chapter 1 The Rewards and Challenges of Human Resources Management
Is it legal to do these things? In many cases, yes. In most U.S. states it’s legal for
employers to require their employees to give passwords to social networking sites, and
ask job applicants what they earned at their previous jobs, despite efforts by some leg-
islators to prohibit the practice. And in most states, it’s legal to monitor your employees
without telling them.
But although legislators have not addressed all privacy situations, some of them
are being decided in court. Firms that have disciplined or fired employees for making
disparaging remarks about their organizations on the Internet have found themselves
sued by the employees and labor organizations claiming the workers’ rights to com-
municate and congregate freely were violated. Intrusive practices can also seriously
erode employee morale and a firm’s ability to attract top talent. In Chapter 13, we will
discuss employer-implemented privacy programs and guidelines along with the privacy
employees can expect while on the job.
Changing Attitudes Toward Work and How They Relate to Employee
Engagement
Employees today are less likely to define their personal success only in terms of financial
gains. Many employees, especially younger ones, believe satisfaction in life is more likely
to result from balancing their work challenges and rewards with those in their personal
lives. Though most people still enjoy work and want to excel at it, they tend to be focused
on finding interesting work and are more inclined to pursue multiple careers. In fact, in
a survey of more than 3,000 workers, 86 percent said work fulfillment and work-life bal-
ance were their top priorities. Only 35 percent of workers said being successful at work
and moving up the ladder were their top priorities. Remaining with a single employer
is no longer a top priority either. People also appear to be seeking ways of living that are
less complicated but more meaningful.
Tracking software and mobile apps are becoming more popular for employers to remotely track
employees actions on their cell phones or computer to monitor their whereabouts and activities while
on the job.
ch
om
bo
sa
n/
Sh
ut
te
rs
to
ck
89624_ch01_hr_001-037.indd 25 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
26 Part 1 Human Resources Management in Perspective
These new lifestyles cannot help having an impact on the way employees must
be motivated, managed, and engaged. Employee engagement can be defined as the
extent to which employees are enthused about their work and committed to it. Employee
engagement is not easy to achieve. Many studies show that far fewer employees are
engaged with their jobs than their firms would like.
Consequently, firms are rethinking what employee engagement means and how it
can be achieved. A growing number of them are thinking about the “employee experi-
ence” like they do the “customer experience.” For example, how can a firm excite its
employees about their jobs and gain their loyalty like Apple does its iPhone customers?
In other words, firms are using some of the insights of consumer marketing and apply-
ing them to HR.
To improve the employee experience, firms such as Whole Foods are allow-
ing their workers to vote on firmwide initiatives and rate their company’s HR prac-
tices—just like people rate restaurants, hotels, and movies on Yelp.44 Improving the
employee experience also includes allowing employees to test-drive new roles and
jobs, just like customers test-drive different products. One HR manager predicts
there will come a time when, after completing projects, workers will get computer
messages that say something like: If you enjoyed this type of work, you might also enjoy
X type of work—just like you get alternate product selections when you’re shopping
on the Web.
Balancing Work and Family
Even though new Census Bureau figures show couples postponing marriage and parent-
hood, balancing work and family continues to be a major concern for firms and their
employees. Employees are already working more hours than they have at any time since
1973, and increasingly employees are tethered to their companies around the clock via
communication technologies. Complicating the task is the fact that today’s families are
also more diverse. They can consist of two-wage-earner families, single-parent families,
families headed by same-sex couples, and families in which multiple generations of
adults are living under one roof.
Competitive organizations are finding it advantageous to provide employees with
more family-friendly options. Those options include telecommuting, flexible work
hours, day care, elder care, part-time work, job sharing, parental leave, adoption assis-
tance, spousal involvement in career planning, and assistance with family problems.
Most Fortune 500 companies, including Walmart and Exxon-Mobile, now provide
same-sex-partner health-insurance benefits.45
Companies with programs such as these calculate that accommodating their
employees’ individual needs and circumstances is a powerful way to attract and
retain top-caliber people. Aetna Life and Casualty, for example, cut its turnover by
50 percent after it began offering 6-month parental leaves, coupled with an option for
part-time work when employees return to the job. Bank of America encourages all its
employees to visit their children’s schools or volunteer at any school—on company
time.46
Family-friendly companies have to balance the benefits they provide to families versus
their single employees, though. The majority of employees have no children under 18.
A Conference Board survey of companies with family-friendly programs found that
employee engagement
The extent to which
employees are enthused
about their work and
committed to it.
89624_ch01_hr_001-037.indd 26 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
27Chapter 1 The Rewards and Challenges of Human Resources Management
companies acknowledge that childless employees sometimes harbor resentment against
employees with children who are able to take advantage of these programs when they
cannot.47
1.6 The Role HR Managers Play and Their
Partnership with Other Managers
So far in this chapter, we have outlined a number of challenges firms face. HR
managers can play a key role in terms of helping their firms meet these challenges.
For example, utilizing business statistics and surveys, HR managers can measure
the engagement and effectiveness of their firms’ workforces. How do employees
think, learn, work, solve problems, manage their time, and deal with other peo-
ple? By first seeing differences such as these, exploring them, and then discovering
how they can provide value to the organization, HR managers can leverage those
differences.
Similarly, by staying abreast of workforce trends and developments and gathering
and analyzing data, HR managers can help theirs firms choose the best strategies when it
comes to competing globally, selecting human resource systems that are ideal for a firm
and its workers, maximizing productivity, managing benefits, and so on. For example,
rather than cutting its health care benefits, HR personnel at Cerner Corp., a midsize
Kansas City–based technology company, looked at statistics and other data to find out
which diseases its workers were most likely to suffer from and adjusted its employee
health-and-wellness programs accordingly. The company has been able to lower its health
care costs as a result.
HR managers also serve as valuable partners to other managers, including
line managers. Line managers are non-HR managers who are responsible for oversee-
ing the work of other employees. Successful organizations combine the experience of line
managers with the expertise of HR managers to develop and utilize the talents of employees
to their greatest potential. HR programs in particular tend to more successful if they are
“owned” by line managers and HR. When employees see HR as the sole owner of a pro-
gram, they sometimes interpret it as an administrative or back-office rather than a strategic
initiative.
Just as there are different types of line managers who specialize in different func-
tions—operations, accounting, marketing, and so forth—there are different types of
HR managers who specialize in different functions. Some of these workers specialize in
employee training and development, recruitment, or compensation. Other HR employees
specialize in studying the effects of industry and occupational trends, or concentrate on
labor relations and prepare information for managers to use during negotiations with
labor unions. By contrast, an HR generalist might handle all aspects of human resources
work depending on his or her employer’s needs. Figure 1.7 shows salary information for
some of the HR positions we have discussed. The median pay for HR managers in 2015
was $104,440.
The Bureau of Labor Statistics has forecasted that the number of HR managers
needed is expected to grow by 9 percent between 2014 and 2024, which is faster than the
line managers
Non-HR managers who
are responsible for over-
seeing the work of other
employees.
Explain the dual role
HR managers play in
terms of serving both
management and staff.
Have you ever found
yourself in a similar
situation at work or
school? Were you able
to keep both groups
happy? How were the
challenges you faced
similar to those faced
by HR managers?
LO 6
89624_ch01_hr_001-037.indd 27 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
28 Part 1 Human Resources Management in Perspective
average for all occupations. Nonetheless, we understand that most readers of this book
will be line managers and supervisors rather than HR specialists. The text is, therefore,
oriented to helping people lead and manage people more effectively, whether they become
team leaders, first-line supervisors, HR managers, or chief executive officers.
1.6a Responsibilities of Human Resource Managers
The major activities for which HR managers are typically responsible include:
1. Strategic advice and counsel. HR managers often serve as in-house consultants
to supervisors, managers, and executives. Given their knowledge of internal
employment information and productivity metrics as well as their awareness
of external trends such as economic and unemployment data and new legal and
regulatory issues, HR managers are an invaluable resource for making deci-
sions. In some companies, generally larger ones, chief compliance or ethics
officers help employees wade through gray areas when it comes to right and
wrong and ensure personnel comply with the laws and regulations that affect
their industries. The firm’s top HR manager is in a good position for this job.
HR managers are also being relied on more heavily to advise compensation
committees, which are more closely scrutinizing executives’ pay than they have
in years past.
2. Service. HR managers perform a host of service activities such as recruiting, select-
ing, testing, and planning/conducting training programs. Technical expertise in
these areas is essential for HR managers as they design and implement talent-man-
agement programs.
3. Policy formulation and implementation. HR managers generally propose and draft
new policies or policy revisions to cover recurring problems or to prevent antici-
pated problems. Ordinarily, the policies are proposed to the senior executives of
the organization, who actually issue them. HR managers also monitor the firm’s
managers and employees to ensure they follow established HR policies, procedures,
and practices. Perhaps more important, they are a resource to whom managers can
turn for policy interpretation.
4. Employee advocacy. One of the enduring roles of HR managers is to serve as an
employee advocate—listening to employees’ concerns and representing their needs
to managers—to make certain that the interests of employees and the interests of
the organization are aligned with one another.
Source: U.S. Bureau of Labor Statistics.
Position Annual Wage
Training and development specialists $ 58,210
Labor relations specialists $ 58,820
Compensation, benefits, and job analysis specialists $ 60,850
Training and development managers $ 102,640
Compensation and benefits managers $ 111,430
Positions in HR and Their Median Annual WagesFigure 1.7
89624_ch01_hr_001-037.indd 28 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
29Chapter 1 The Rewards and Challenges of Human Resources Management
1.6b Competencies Human Resource Managers Require
As top executives expect HR managers to assume a broader role in overall organi-
zational strategy, many of these managers will need to acquire a complementary set
of competencies. These competencies are summarized here and shown graphically in
Figure 1.8.
• Business mastery. As we have explained, HR professionals need to know the busi-
nesses of their organizations and their strategies thoroughly. This requires an under-
standing of an organization’s customers and economic and financial capabilities to
help a firm shape and achieve its strategic direction and adjust it as needed. Human
resource managers who have good problem-solving skills and are also innovative
and creative are a strategic asset to their firms.
• HR mastery. HR professionals are the organization’s behavioral science experts.
They should develop expert knowledge in the areas of staffing, development,
appraisals, rewards, team building, performance measurement, and communica-
tion. Good interpersonal skills are essential.
• Personal credibility. Like other management professionals, HR professionals must
establish personal credibility in the eyes of people internal and external to the firm.
Credibility and trust are earned by developing good relationships with people both
internal and external to the firm, demonstrating the values of the firm, standing up
for one’s own beliefs, and dealing with all parties equitably. Highlights in HRM 2
outlines the code of ethical and professional standards HR personnel should follow,
according to the Society for Human Resource Management.
Source: Adapted from Arthur Yeung, Wayne Brockbank, and Dave Ulrich, “Lower Cost, Higher Value: Human
Resource Function in Transformation,” reprinted with permission from Human Resource Planning, vol. 17, no. 3
(1994). Copyright 1994 by The Human Resource Planning Society, 317 Madison Avenue, Suite 1509, New York, NY
10017, (212) 490 6387.
Business
Mastery
HR Mastery
Personal Credibility
Human Resource Competency ModelFigure 1.8
89624_ch01_hr_001-037.indd 29 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
SHRM Code of Ethical and Professional Standards in Human Resource Management
Highlights in HRM2
CODE PROVISIONS
Professional Responsibility
Core Principle
As HR professionals, we are responsible for adding value
to the organizations we serve and contributing to the
ethical success of those organizations. We accept pro-
fessional responsibility for our individual decisions
and actions. We are also advocates for the profession by
engaging in activities that enhance its credibility and
value.
Intent
�� To build respect, credibility and strategic importance
for the HR profession within our organizations, the
business community, and the communities in which
we work.
�� To assist the organizations we serve in achieving their
objectives and goals.
�� To inform and educate current and future practitio-
ners, the organizations we serve, and the general
public about principles and practices that help the
profession.
�� To positively influence workplace and recruitment
practices.
�� To encourage professional decision-making and
responsibility.
�� To encourage social responsibility.
Guidelines
1. Adhere to the highest standards of ethical and
professional behavior.
2. Measure the effectiveness of HR in contributing to
or achieving organizational goals.
3. Comply with the law.
4. Work consistent with the values of the profession.
5. Strive to achieve the highest levels of service, perfor-
mance and social responsibility.
6. Advocate for the appropriate use and appreciation of
human beings as employees.
7. Advocate openly and within the established forums
for debate in order to influence decision-making and
results.
Professional Development
Core Principle
As professionals we must strive to meet the highest standards
of competence and commit to strengthen our competencies
on a continuous basis.
Intent
�� To expand our knowledge of human resource man-
agement to further our understanding of how our
organizations function.
�� To advance our understanding of how organizations
work (“the business of the business”).
Guidelines
1. Pursue formal academic opportunities.
2. Commit to continuous learning, skills development and
application of new knowledge related to both human
resource management and the organizations we serve.
3. Contribute to the body of knowledge, the evolution of
the profession and the growth of individuals through
teaching, research and dissemination of knowledge.
4. Pursue certification where available, or comparable
measures of competencies and knowledge.
Ethical Leadership
Core Principle
HR professionals are expected to exhibit individual leader-
ship as a role model for maintaining the highest standards
of ethical conduct.
Intent
�� To set the standard and be an example for others.
�� To earn individual respect and increase our credibility
with those we serve.
Guidelines
1. Be ethical; act ethically in every professional interaction.
2. Question pending individual and group actions when
necessary to ensure that decisions are ethical and are
implemented in an ethical manner.
3. Seek expert guidance if ever in doubt about the ethi-
cal propriety of a situation.
89624_ch01_hr_001-037.indd 30 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
31
Professional Standards in Human Resource Management or
with one’s responsibilities and duties as a member of the
human resource profession and/or as an employee of any
organization.
Guidelines
1. Adhere to and advocate the use of published
policies on conflicts of interest within your
organization.
2. Refrain from using your position for personal, material
or financial gain or the appearance of such.
3. Refrain from giving or seeking preferential treatment
in the human resources processes.
4. Prioritize your obligations to identify conflicts of inter-
est or the appearance thereof; when conflicts arise,
disclose them to relevant stakeholders.
Use of Information
Core Principle
HR professionals consider and protect the rights of indi-
viduals, especially in the acquisition and dissemination of
information while ensuring truthful communications and
facilitating informed decision-making.
Intent
To build trust among all organization constituents by maxi-
mizing the open exchange of information, while eliminating
anxieties about inappropriate and/or inaccurate acquisition
and sharing of information
Guidelines
1. Acquire and disseminate information through ethical
and responsible means.
2. Ensure only appropriate information is used in deci-
sions affecting the employment relationship.
3. Investigate the accuracy and source of information
before allowing it to be used in employment related
decisions.
4. Maintain current and accurate HR information.
5. Safeguard restricted or confidential information.
6. Take appropriate steps to ensure the accuracy and
completeness of all communicated information about
HR policies and practices.
7. Take appropriate steps to ensure the accuracy and
completeness of all communicated information used
in HR-related training.
4. Through teaching and mentoring, champion the
development of others as ethical leaders in the profes-
sion and in organizations.
Fairness and Justice
Core Principle
As human resource professionals, we are ethically respon-
sible for promoting and fostering fairness and justice for all
employees and their organizations.
Intent
�� To create and sustain an environment that encourages
all individuals and the organization to reach their full-
est potential in a positive and productive manner.
Guidelines
1. Respect the uniqueness and intrinsic worth of every
individual.
2. Treat people with dignity, respect and compassion to
foster a trusting work environment free of harassment,
intimidation, and unlawful discrimination.
3. Ensure that everyone has the opportunity to develop
their skills and new competencies.
4. Assure an environment of inclusiveness and a commit-
ment to diversity in the organizations we serve.
5. Develop, administer and advocate policies and proce-
dures that foster fair, consistent and equitable treat-
ment for all.
6. Regardless of personal interests, support decisions
made by our organizations that are both ethical and
legal.
7. Act in a responsible manner and practice sound man-
agement in the country(ies) in which the organiza-
tions we serve operate.
Conflicts of Interest
Core Principle
As HR professionals, we must maintain a high level of trust
with our stakeholders. We must protect the interests of our
stakeholders as well as our professional integrity and should
not engage in activities that create actual, apparent, or
potential conflicts of interest.
Intent
To avoid activities that are in conflict or may appear to be in
conflict with any of the provisions of this Code of Ethical and
89624_ch01_hr_001-037.indd 31 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
32 Part 1 Human Resources Management in Perspective
Understanding human resource manage-
ment practices and issues can help you better com-
pete in the marketplace—as an employee, manager,
or HR manager. Employees and managers who have
a good understanding of their firm’s business can
help it achieve its strategies—whatever they may be—
through the effective utilization of people and their
talents.
An organization’s success increasingly depends on
the knowledge, skills, and abilities of its employees. To
“compete through people,” organizations have to do a
good job of fostering and managing human capital:
the knowledge, skills, and capabilities that have value
to organizations. Managers must develop strategies
for identifying, recruiting, and hiring the best talent
available; developing these employees in ways that are
firm specific; helping them to generate new ideas and
generalize them throughout the company; encourag-
ing information sharing; and rewarding collaboration
and teamwork among employees.
Globalization has become pervasive in the
marketplace. It influences the number and kinds
of jobs that are available and requires that organi-
zations balance a complicated set of issues related
to managing people working under different busi-
ness conditions in different geographies, cultures,
and legal environments. HR strategies and func-
tions have to be adjusted to take into account these
differences.
The fast pace of globalization along with corpo-
rate scandals over the years have led to a new focus
on corporate social responsibility (good citizenship)
and sustainability (a company’s ability to produce a
good or service without damaging the environment
or depleting a resource). Companies are finding out
that having a good reputation for pursuing these
efforts can enhance their revenues and improve the
caliber of talent they are able to attract. One of HR’s
leadership roles is to spearhead the development and
implementation of corporate citizenship throughout
their organizations, especially the fair treatment of
workers.
Technology has tended to reduce the number of
jobs that require little skill and to increase the number
of jobs that require considerable skill, a shift we refer
LO 1
LO 2
LO 3
Summary
to as moving from touch labor to knowledge work.
This displaces some employees and requires that oth-
ers be retrained. In addition, information technology
has influenced HRM through human resources infor-
mation systems (HRIS) that streamline HR processes,
make information more readily available to managers
and employees, and enable HR departments to focus
on the firm’s strategies. The Internet and social media
are also affecting how employees are hired, work, and
are managed.
Productivity can be defined as “the output
gained from a fixed amount of inputs.” Organiza-
tions can increase their productivity either by reduc-
ing their inputs (the cost approach) or by increasing
the amount that employees produce by adding
more human and/or physical capital to the process.
Companies such as Southwest Airlines, Nucor, and
the manufacturing and technology firm Danaher
achieve low costs in their industries not because they
scrimp on employees but because they are the most
productive.
To maximize productivity and contain costs,
organizations have to manage the size of their work-
force. Some of the techniques used to do so are off-
shoring, outsourcing, downsizing, furloughing, using
part-time employees, and leasing them from profes-
sional employment agencies. HR’s role is to not only
implement these programs but consider the pros and
cons of programs such as these and how they might
affect a company’s ability to compete, especially if they
lead to the loss of talented staff members.
The workforce is becoming increasingly
diverse, and organizations are having to do more
to address employee concerns and to maximize the
benefit of different kinds of employees. HR manag-
ers have to keep abreast of the educational abilities of
the talent available to their organization. Employee
rights, privacy concerns, attitudes toward work, and
efforts to balance work and family are becoming
more important to workers as the cultural dynam-
ics in the labor force shift. Companies are finding
that accommodating employees’ individual needs as
a result of these shifts is a powerful way to attract
and retain top-caliber people and improve employee
engagement.
LO 4
LO 5
89624_ch01_hr_001-037.indd 32 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
33Chapter 1 The Rewards and Challenges of Human Resources Management
HR managers play a number of important
roles when it comes to meeting the challenges their
firms face; they are called for strategic planning,
advice and ethics counsel, various service activi-
ties, policy formulation and implementation, and
employee advocacy. To perform these roles effec-
tively, HR managers must have a deep understanding
of their firm’s operational, financial, and personnel
capabilities and work with line managers and execu-
tive managers above and below them. HR managers
LO 6 who do and are creative and innovative can help
shape a firm’s strategies so as to respond successfully
to changes in the marketplace. Ultimately, manag-
ing people is rarely the exclusive responsibility of the
HR function. Every manager’s job involves managing
people. Consequently, successful companies com-
bine the expertise of HR specialists with the expe-
rience of line managers and executives to develop
and use the talents of employees to their greatest
potential.
agility
corporate social responsibility
downsizing
employee engagement
employee leasing
furloughing
homeshoring
human capital
human resources information
system (HRIS)
human resources management
(HRM)
knowledge workers
line managers
nearshoring
offshoring
organizational culture
outsourcing
sustainability
workforce (HR) analytics
Key Terms
Are people always an organization’s most valu-
able asset? Why or why not? Suppose your boss
asked you to summarize the major people-
related concerns related to opening an office
in India. What issues would be on your list?
Name a company you hope to work for some-
day. What is its track record in terms of cor-
porate social responsibility and sustainability?
Are these factors important to you? Why or
why not?
Will technology eliminate the need for human
resource managers?
LO 1
LO 2
LO 3
Do cost-containment pressures work against
the effective management of people? Why or
why not?
What are the pros and cons of having a more
diverse workforce? Is the United States in a
better position to compete globally because of
its diverse population?
In your opinion, what is the most important
role HR managers play?
LO 4
LO 5
LO 6
Discussion Questions
89624_ch01_hr_001-037.indd 33 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
34 Part 1 Human Resources Management in Perspective
CASE STUDY New HR Strategy Makes Lloyd’s a “Best Company”1
After more than 300 years in business, a few years ago,
the global insurer Lloyd’s of London finally set out to
establish its first true HR strategy, starting with the hiring
of HR Director Suzy Black. “I was brought in to trans-
form the HR function from one modeled on an old-style
personnel office to a function that is more cutting edge,
business focused, and value adding,” says Black.
Black’s first order of business was to evaluate the
current state of affairs, particularly how the corpora-
tion’s senior managers perceived the HR role. With
this information in hand, Black and her team began
to develop an overarching strategic agenda as well as
specific tactics, addressing everything from recruit-
ment to performance management to basic policies
to rewards and compensation.
Changing longtime employees’ perception of HR
took a bit of convincing, but employees quickly began
to recognize the value of Black’s actions. Gradually, they
could see how the HR strategies were effectively creating
conditions in which they could develop in their careers,
be successful, and find meaning and value in their work.
Today, Lloyd’s employees list the company’s challeng-
ing work environment, healthy incentive programs, and
meaningful community outreach programs among the
key reasons they enjoy working for the insurance giant.
Black’s efforts also enhanced Lloyd’s position as a
desirable place to work. The average tenure of employ-
ees at the company is, incredibly, 21 years. The insurer
has been named one of the “Top 100 Best Companies
to Work For” (in the United Kingdom) by the Sunday
Times and hailed as one of the United Kingdom’s Top
40 Business Brands by an independent researcher.
Each year, new graduates scramble to get hired by
Lloyd’s. These new hires rotate through three to four
different assignments within Lloyd’s so they get a per-
spective of the company and the insurance market as
well as a better idea of the departments in which they
would like to ultimately work. Lloyd’s also offers a
graduate program in insurance, apprenticeships, and
internships.
Work-life balance at the company is good. Although
sometimes extra hours have to be worked, that’s not the
norm. Working mothers can choose to work part or full
time. In addition, the company offers employees time
to do charity and nonwork-related activities to further
their personal growth, says Black. “Employees are very
sophisticated people, and they have more drivers than
just wanting to earn money,” she notes.
Ironically, Black’s position was the first HR posi-
tion she had ever held, having risen through the ranks
in other arenas in business. But her experience has
given her a clear definition of the ideal characteris-
tics of the HR professionals. “They must understand
change and transformation, excel at operations, and
balance tactical and strategic thinking and acting,”
she says. “They will have to be able to manage and
navigate organizational complexity and ambiguities
and not be afraid to say no occasionally in order to
establish appropriate boundaries with the business.”
Questions
1. What skills does Black think employees need, to
work successfully in the area of HR?
2. What are some of the outcomes of the company’s
new HR strategy?
3. What do you think might be some of the challenges
of establishing HR policies for a global company?
4. What types of situations do you think might
require an HR manager to say “no”?
Sources: “Lloyd’s of London Says India Reinsurance Branch to Open
by April,” Reuters (January 18, 2017), http://uk.reuters.com; “Careers,”
Lloyds.com (January 17, 2017), http://www.lloyds.com; “Lloyd’s: A Top
Place to Work,” Lloyds.com (March 16, 2011), http://www.lloyds.com;
Helen William, “City Slicker,” Personnel Today (August 11, 2009): 10–11;
Digby Morgan Human Resourcefulness Newsletter (February 2010),
http://www.digbymorgannewsletter.com/story04_HR_02_10.htm;
company website: www.lloyds.com.
CASE STUDY Shell’s Top Recruiter Takes His Cues from Marketing2
When Navjot Singh joined the global oil-and-gas
company Shell, the company was facing an extraor-
dinary challenge: The rate at which Shell’s engineers
were retiring meant the global firm needed to more
than triple the number of new recruits it hired, which
was about 2,500, to nearly 8,000. Yet at the time, Shell
89624_ch01_hr_001-037.indd 34 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
35Chapter 1 The Rewards and Challenges of Human Resources Management
was not considered an employer of choice. The com-
pany needed to project a new image—fast. Says Singh,
“In the same way marketers know they need to adver-
tise to be a market leader, HR had to know how to
create an employer brand. Marketing is the only way
to ensure customers buy products. It was also the only
way to ensure Shell got the best people coming to us
first.”
“Wait! Why would Shell’s HR guy be talking about
marketing?” you might be wondering. As both an HR
and marketing expert, Singh saw a powerful synergy
between the two. “I’m 50 percent a marketer—the
rest is HR, communications, and recruitment,” says
Singh. Singh initially started out as VP of customer
relationship management, but quickly joined the HR
team when he recognized Shell’s emerging need for
new talent and the immense potential for him to
use classic marketing techniques to help the com-
pany achieve its objectives. His vision, skill sets, and
experience were a perfect match for the company’s
situation.
So in Singh’s mind, addressing the company’s
need for new talent meant building a brand as an
employer, which in turn meant creating a cohesive
message. But Shell’s global recruiting approach was
anything but cohesive. “At the time we had 1,200
recruitment systems, 35 recruitment companies, and
400 executive search companies working for us,” he
recalls. “I attended a careers event at Cambridge Uni-
versity where there were three Shell stands beside
each other—one from the UK, one from Malaysia,
and another from Nigeria. This was a fragmented
approach and tough for candidates to understand.”
Shell needed to create a unified outreach program if
it was going to meet its need for numbers while ful-
filling its desire for a global talent pool. The company
recruits from among 90 different nationalities each
year because it recognizes the benefits of cultural
diversity.
“It’s not enough to tell candidates why they
should join Shell. We needed to demonstrate such
reasons through the interviewing process and the
whole candidate experience,” explains Singh. “A
motivating candidate experience—from the moment
someone hears about Shell to the moment they have
joined us—requires a coordinated approach across
all the recruitment disciplines: marketing, opera-
tions, recruiters and line managers all need to work
together.” It also necessitated personnel take less of a
more Shell-concentric perspective to one that focused
on candidates.
Singh and his team set about applying various
marketing techniques to the recruitment process,
which have since resulted in an 80 percent cut in
recruitment costs and a 20 percent reduction in the
time to hire new staff. To attract talented gradu-
ates, Shell annually sponsors a popular compe-
tition that challenges student teams around the
world to solve various food, water, and alternative
energy problems. About a thousand teams compete
annually.
The efforts have paid off. Shell has won more than
75 awards for its unique HR strategy. Better yet, in a
recent global survey of 8,400 people in the oil-and-
gas sector, Shell received the most mentions from
respondents who were asked to name the employers
they would most like to work for.
Despite Shell’s recruiting success, Singh believes the
war for talent will be ongoing: “In the future, companies
will have to apply for skilled people to work for them
rather than candidates applying to work at an organi-
zation. HR must still realize the strategic value it can
bring.”
Questions
1. What functions of HRM are similar to marketing
functions? How can thinking about “marketing”
a company’s jobs improve the strategic focus of
human resources personnel?
2. If you were planning to use marketing strate-
gies to “brand” a company as an employer of
choice, what are some of the factors you would
consider?
3. Do you agree with Singh’s statement that in the
future, companies will have to apply for skilled
people to work for them rather than candidates
applying to work at an organization? Why or why
not?
Sources: Jon Mainwaring, “Shell Q&A: What Makes an Ideal Employer
in Oil, Gas?” Rigzone (November 16, 2016), http://www.rigzone.com;
Jon Mainwaring, “Shell Takes First Place in Rigzone’s Inaugural Ideal
Employer Survey,” Rigzone (November 16, 2016), http://www.rigzone.
com; Don Wood, “Lateral Thinking,” Human Resources (January 2010):
12–13; Christopher Van Mossevelde, “Views from the Top,” Employer
Branding Today (April 16, 2009), http://www.employerbrandingtoday
.com; Peter Crush, “Shell UK Combines HR and Marketing to Sell the
Brand,” HR Magazine (August 25, 2009), http://www.hrmagazine.co.uk;
Navjot Singh and Ana Maria Santos, “How Shell Recruited More for Less,”
Marketing Society (July 9, 2012), https://www.marketingsociety.co.uk.
89624_ch01_hr_001-037.indd 35 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
36 Part 1 Human Resources Management in Perspective
1. T. J. Watson, Jr. A Business and Its Beliefs: The Ideas That
Helped Build IBM (New York: McGraw-Hill, 1963).
2. Donald C. Busi, “Assignment Reviews (ARs): Moving toward
Measuring Your Most Valuable Asset,” Supervision 66, no. 1
(January 2005): 3–7.
3. David Lepak and Scott Snell, “Managing the Human
Resource Architecture for Knowledge-Based Competi-
tion,” in S. Jackson, M. Hitt, and A. DeNisi (eds.), Managing
Knowledge for Sustained Competitive Advantage: Designing
Strategies for Effective Human Resource Management, SIOP
Scientific Frontiers Series (San Francisco: John Wiley &
Sons, 2003), 127–54; David Lepak and Scott Snell, “Exam-
ining the Human Resource Architecture: The Relationship
among Human Capital, Employment, and Human Resource
Configurations,” Journal of Management 28, no. 4 (2002):
517–43; Steve Bates, “Study Links HR Practices with the
Bottom Line,” HRMagazine 46, no. 12 (December 2001): 14;
Ann Pomeroy, “Cooking Up Innovation: When It Comes
to Helping Employees Create New Products and Services,
HR’s Efforts Are a Key Ingredient,” HRMagazine 49, no. 11
(November 2004): 46–54.
4. Dave Ulrich, Steve Kerr, and Ron Ashkenas, The GE Work-
Out: How to Implement GE’s Revolutionary Method for Busting
Bureaucracy & Attacking Organizational Problems (New York:
McGraw-Hill Professional Publishing, 2002).
5. John P. Kotter, “Ten Observations,” Executive Excellence 16,
no. 8 (1999): 15–16.
6. Jared Lindzon, “Welcome to a New Era of Human Resources,”
Fast Company (May 20, 2015), https://www.fastcompany.com.
7. “Best Countries,” U.S. News & World Report (2016), http://
worldnews.com.
8. Ellen Sheng, “The Five Biggest Chinese Investments in the U.S.
in 2016,” Forbes (December 21, 2016), http://www.forbes.com.
9. Candice Choi and Bruce Schreiner, “Beam Being Acquired by
Japan’s Suntory,” Associated Press (January 13, 2014), http://
ap.org; “Beermaker Eyes Chinese Factories,” Fort Worth Star-
Telegram (December 28, 2010): 3C; Susan Meisinger, “Going
Global: A Smart Move for HR Professionals,” HRMagazine 49,
no. 3 (March 2004): 6; “AB InBev Completes ModeloGrupo
Deal,” St. Louis Post-Dispatch (June 4, 2013), http://www.stl-
today.com.
10. “U.K. Expresses Keenness to Have Free Trade Agreement
with India,” The Tribune (January 18, 2017), http://www.
tribuneindia.com.
11. Laura McKnight, “For Companies, Doing Good Is Good
Business,” Kansas City Star (December 26, 2010), http://www.
kansascity.com.
12. Jeff Tanner and Mary Anne Raymond, Principles of Marketing
(Nyack, NY: FlatWorld Knowledge, 2010), Chapter 10.
Notes and References
13. Nancy R. Lockwood, “Corporate Social Responsibility: HR’s
Leadership Role,” HRMagazine 49, no. 2 (December 2004):
S1–11.
14. Carol Carter, Keys to Business Communication (Upper Saddle
River, NJ: Pearson, 2012), 414.
15. “Text Messaging Curtailed at Bank,” Wall Street Journal
(January 14–15, 2017): B3.
16. Lauren Webber, “‘Routine Jobs’ Are Disappearing,” Wall Street
Journal (January 3, 2017), http://www.wsj.com.
17. “China Engineers Next Great Leap with Wave of ‘Knowledge
Workers,’ ” Milwaukee Journal Sentinel (December 31, 2003),
http://www.jsonline.com; “Edward Yourdon’s New Book
Helps ‘Knowledge Workers’ Put Emotion Aside to Look at the
Facts of the New Economic Reality,” PR Newswire (October 4,
2004); Marshall Goldsmith, “Supervisors of the Smart,” BRW
30, no. 20 (May 22, 2008): 57–57.
18. Christopher Mims, “Technology’s Long-Term Toll on the
Middle Class,” Wall Street Journal (January 23, 2017): B1–B4.
19. Melissa Korn, “Imagine Discovering Your Teaching Assistant
Is a Robot,” Wall Street Journal (May 6, 2016), http://wsj.com.
20. Steve Lohr, “Robots Will Take Jobs, but Not as Fast as Some
Fear, New Report Say,” New York Times (January 12, 2017),
https://www.nytimes.com.
21. Ben Worthen, “Measuring the ROI of Training,” CIO 14,
no. 9 (February 15, 2001): 128–36; Hashi Syedain, “Out of
this World,” People Management 14, no. 8 (April 17, 2008):
20–24.
22. Sarah Castellanos, “Augmented Reality in the Workplace,”
Wall Street Journal (December 13, 2016): B4.
23. Scott A. Snell, Donna Stueber, and David P. Lepak, “Virtual HR
Departments: Getting Out of the Middle,” in R. L. Heneman
and D. B. Greenberger (eds.), Human Resource Management in
Virtual Organizations (Columbus, OH: Information Age Pub-
lishing, 2002): 81–99; Samuel Greengard, “How to Fulfill Tech-
nology’s Promise,” Workforce, HR Software Insights (February
1999): S10–18.
24. Drew Robb, “Building a Better Workforce: Performance
Management Software Can Help You Identify and Develop
High-Performing Workers,” HRMagazine 49, no. 10 (October
2004): 86–92.
25. Josh Bersin, “The Datification of Human Resources,” Forbes
(July 19, 2013), http://www.forbes.com.
26. Robb, “Building a Better Workforce,” 86–92; “How to Imple-
ment an Effective Process for a New HR Management Sys-
tem,” HRFocus (January 2005): 3–4; “New Study Finds HRIS
Key to Reducing Costs,” Payroll Managers Report 7, no. 5
(May 2007): 13.
27. Bruce Stokes, “Is There a Future for ‘Made in America,’ ” The
Atlantic (December 9, 2010), http://www.theatlantic.com.
89624_ch01_hr_001-037.indd 36 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
37Chapter 1 The Rewards and Challenges of Human Resources Management
28. Patrick Barta and Andrew Caffrey, “Productivity Leap Shows
Potential of U.S. Economy—Rise at 8.6 Percent Pace, Positive
for Profits, Doesn’t Bode Very Well for Employment,” The
Wall Street Journal (May 8, 2002): A1; Jon E. Hilsenrath, “The
Economy: Big U.S. Service Sectors Boosted Late 1990s Surge
in Productivity,” The Wall Street Journal (April 22, 2002): A2;
Karen Lowry Miller, “Economy: Out of Steam—A Dip in U.S.
Productivity Provokes Anxious Questions,” Newsweek Inter-
national (February 21, 2005): 34; Milan Yager, “Outsource to
Gain Human Resources Expertise,” Hotel & Motel Manage-
ment 223, no. 7 (April 21, 2008): 14.
29. Pete Engardio, Michael Arndt, and Dean Foust, “The Future
of Outsourcing,” BusinessWeek (January 30, 2006): 50–58.
30. John Sullivan, “Employee Furloughs Can Be a Bad Alternative
to Layoffs,” ere.net (February 9, 2009), http://www.ere.net/.
31. Mike Stobbe, “Dieting Like It’s Your Job: Does Paying for
Healthy Habits Work?” USA Today (June 1, 2010), http://
www.usatoday.com; Tom Murphy, “To Cut Health Costs,
Firms Target Spousal Benefits,” Fort Worth Star-Telegram
(September 16, 2013): 1D.
32. Mitra Toossi, “Labor Force Projections to 2024: The Labor
Force Is Growing, But Slowly,” Monthly Labor Review
(December 2015): 3–16.
33. Ibid.
34. Jeffrey S. Passel and D’Vera Cohn, “Share of Unauthorized
Immigrant Workers in Production Construction Jobs Falls,
since 2007,” Pew Research Center (March 26, 2015), www.
pewhispanic.org.
35. Irwin Speizer, “Diversity on the Menu: Rachelle Hood, Denny’s
Chief Diversity Officer, Has Boosted the Company’s Image. But
That Hasn’t Sold More Breakfasts,” Workforce Management 83,
no. 12 (November 1, 2004): 41; Patrick Purcell, “Older Work-
ers: Employment and Retirement Trends,” Journal of Pension
Planning & Compliance 34, no. 1 (Spring 2008): 32–48.
36. U.S. Bureau of Labor Statistics, “Occupational Employment,”
Occupational Outlook Quarterly Online (Winter 2013–2014),
http://www.bls.gov.
37. Ibid.
38. U.S. Bureau of Labor Statistics, “Women in the Labor Force:
A Databook,” BLS Reports (December 2015), http://www.bls.
gov.
39. Kathleen Iverson, “Managing for Effective Workforce Diver-
sity,” Cornell Hotel and Restaurant Administration Quar-
terly 41, no. 2 (April 2000): 31–38; Gail Johnson, “Time to
Broaden Diversity Training,” Training 41, no. 9 (September
2004): 16.
40. The U.S. Department of Labor’s Bureau of Labor Statis-
tics keeps up-to-date projections and percentages on
educational requirements for different kinds of jobs. Inter-
ested readers can access this information at http://www.
bls.gov; Louis Uchitelle, “College Degree Still Pays, but
It’s Leveling Off,” The New York Times (January 13, 2005):
C1.
41. Lyndsey Layton, “U. S. Adults Lag Most Countries in Literacy
and Computer Skills,” Washington Post (October 8, 2013),
http://washingtonpost.com.
42. “Avoiding Identity Theft,” Aftermarket Business 114, no. 12
(December 2004): 10.
43. “Your Rights: Surveillance at Work,” Workplace Fairness
(December 2010), http://www.workplacefairness.org.
44. Jeanne Meister, “The Employee Experience Is the Future
of Work,” Forbes (January 5, 2017), http://www.forbes.com;
Rachel Emma Silverman, “Workplace Democracy Catches
On, Wall Street Journal (March 28, 2016): B5.
45. Ashley Surdin, “Benefits for Same-Sex Couples Expanding,”
Washington Post (November 27, 2009), http://www.washing-
tonpost.com.
46. Todd Raphael, “The Drive to Down-shifting,” Workforce 80,
no. 10 (October 2001): 23; Jim Olsztynski, “Flexible Work
Schedules May Make More Sense: One in Six Americans
Qualifies as a Caregiver Who May Benefit from Flextime,”
National Driller 26, no. 2 (February 2005): 16–19; Karen
Springen, “Cutting Back Your Hours,” Newsweek, 151, no. 19
(May 12, 2008): 60.
47. Leah Carlson, “Flextime Elevated to National Issue,” Employee
Benefit News (September 15, 2004): 1–16.
89624_ch01_hr_001-037.indd 37 11/17/17 11:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
38
CHAPTER 2
Strategy and Human
Resources Planning
Learning Outcomes
After studying this chapter, you should be able to
Explain how human resources planning and a firm’s
mission, vision, and values are integrally linked to its
strategy.
Understand how an organization’s external environ-
ment influences its strategic planning.
Understand why it is important for an organization
to do an internal resource analysis.
LO 1
LO 2
LO 3
Explain the linkages between competitive strategies
and HR.
Understand what is required for a firm to success-
fully execute a strategy and assess its effectiveness.
Describe how firms evaluate their strategies and HR
execution.
LO 4
LO 5
LO 6
Ro
be
rt
D
al
y/
G
et
ty
Im
ag
es
89624_ch02_hr_038-083.indd 38 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
39Chapter 2 Strategy and Human Resources Planning
O
ne of the clichés about the annual reports of companies is that they often claim
that “people are our most important asset.” Do you believe this is true? Historically
managers often have not acted as though they themselves really believed it. Too
often the focus has been on minimizing the number of a firm’s employees rather than
strategically utilizing their talents.
But for many firms, this is changing. Surveys show that 92 percent of chief financial
officers now believe human capital affects an organization’s customer service, 82 percent
believe it affects profitability, and 72 percent believe it affects innovation.1 And in a sur-
vey by the consulting firm Deloitte, nearly 80 percent of corporate executives said the
importance of HRM in their firms has grown substantially over the years, and two-thirds
said that HR expenditures are now viewed as a strategic investment rather than simply
a cost to be minimized.
Forward-thinking companies are also demanding their human resource groups push
past short-term projections and provide detailed forecasts for needs and the associated
costs over a 2- to 3-year horizon. Even small companies are realizing that their employ-
ees are the key to ensuring their ability to compete and survive. As Apple’s legendary
founder Steve Jobs put it: “Hiring the best is your most important task. ”
2.1 Strategic Planning and Human Resources
Planning
As we explained in Chapter 1, “competing through people” is the theme for this book.
But the idea remains only a premise for action until put it into practice. To deliver on
this promise, we need to understand some of the systems and processes in organizations
that link human resources management with strategic management. A few definitions
may be helpful upfront.
First of all, strategic planning involves a set of procedures for making decisions
about the organization’s long-term goals and strategies. In this chapter, we discuss stra-
tegic plans as having a strong external orientation that covers major portions of the
organization. The plans especially focus on how the organization will position itself
relative to its competitors, to ensure its long-term survival, create value, and grow.
Human resources planning (HRP), by comparison, is the process of anticipating and
providing for the movement of people into, within, and out of an organization. Overall,
its purpose is to help managers deploy their human resources as effectively as pos-
sible, where and when they are needed, to accomplish the organization’s goals. Strategic
human resources management combines strategic planning and HR planning. It can
be thought of as the pattern of human resource deployments and activities that enable
an organization to achieve its strategic goals.
HR planning is an essential activity of organizations. Consider CNA Financial
Corp., a Chicago-based insurance company. CNA Financial discovered via HR planning
that it would run short of underwriters—a key skill pool in the company—in just 2 years’
time if their turnover rates continued at their current pace. The global strategies firms
strategic planning
Procedures for making
decisions about the
organization’s long-term
goals and strategies.
human resources
planning (HRP)
The process of anticipat-
ing and providing for
the movement of people
into, within, and out of
an organization.
strategic human
resources management
The pattern of human
resources deployments
and activities that enable
an organization to
achieve its strategic goals.
Why is HR planning
integral to a firm’s
strategic planning?
As an HR professional,
what do you think you
could do to tie the two
functions together?
What role might the
firm’s mission, vision,
and values play?
LO 1
89624_ch02_hr_038-083.indd 39 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
40 Part 1 Human Resources Management in Perspective
increasingly pursue include mergers, joint ventures, offshoring, automating, relocating
plants, and planning product innovations, thus making HR planning more critical and
more complex for managers.
According to Walt Cleaver, an HR strategist and president of the Cleaver Con-
sulting Group, increased global competitiveness in many industries has led to the
commoditization of products based on price, which is making talent the “great dif-
ferentiator” among firms. As we explained in Chapter 1, it is relatively easy for a
competitor to copy your product and make it more cheaply. But duplicating the tal-
ents of your employees is much more difficult.2 Globalization and shifts in the com-
position of the labor force that are occurring also require that HR managers become
more involved in planning because these changes affect the full range of a company’s
HR practices (such as employee recruitment, selection, training, compensation, and
motivation).
2-1a Strategic Planning and HR Planning: Linking
the Processes
Good HR managers “marry” human resources planning to the strategic planning
for their organizations as a whole. Human resources planning relates to strategic
planning in several ways, but at a fundamental level, we can focus on two issues:
strategy formulation and strategy execution. Human resources planning provides
inputs into the strategic formulation process in terms of what is possible, that is,
whether a firm has the types and numbers of people available to pursue a given
strategy. For example, when Barnes & Noble executives contemplated the move
into web-based commerce to compete with Amazon.com, one of the issues they had
to address was whether they had the talent needed to succeed in that arena. Barnes
& Nobles had to go through the same exercise again prior to launching its Nook
reader.
In addition to strategy formulation, HRP is important in terms of strategy execu-
tion. In other words, once the firm has devised its strategy, the company’s executives
must make resource allocation decisions to implement that strategy, including decisions
related to the firm’s structure, processes, and human capital.3 3M’s managers have the
two aspects down to a science. Not only does the company engage in elaborate work-
force planning, it has figured out how to utilize its employees to expand into markets
worldwide. Once primarily a domestic company, today most of its products are sold
abroad. The company is able to project the demand for any workforce category, in any
business, in any part of the world.4
Figure 2.1, which will serve as a map for this chapter’s discussion, shows how com-
panies align their HRP and strategic planning in this way: A firm’s business strategy,
along with its overall purpose, goals, and values, establishes the context for its HR strat-
egy and the number and types of people, the skills they must have, and the like. In other
words, the firm’s HR strategy follows the business strategy and helps to execute it: If
the firm’s strategy is based on efficiency, its HR strategy will focus on practices that
encourage employees to look for better, faster, and more efficient ways for the company
to do business. If the firm’s strategy is based on innovation, its HR strategy will involve
encouraging and incentivizing employees to be creative and innovative. For example,
at GE, employees receive monetary incentives for developing and patenting products
for the company.
89624_ch02_hr_038-083.indd 40 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
41Chapter 2 Strategy and Human Resources Planning
Although the firm’s business strategy affects its HR strategy, it is not a one-way
street. The type of people an organization has, and the culture and climate of the com-
pany, in turn will constrain what the firm is able to achieve strategically. So, HR plan-
ning and strategic planning are integral to one another: Strategic planning decisions
affect—and are affected by—HR concerns. As James Walker, a noted HRP expert, puts
it, “Today, virtually all business issues have people implications; all human resource
issues have business implications.”
Researchers Douglas Conger and Jeff Ready have studied businesses that lacked the
talent to get their strategies off the ground. To underscore how important talent is to
firms, they point to an instance in which a London real estate developer had to pass on a
project worth more than $0.5 billion of reconstruction work because it hadn’t groomed
anyone capable of leading the project. Talent problems are all too common in firms.
S
W
O
T
A
n
a
ly
si
s
STRATEGIC PLANNING HR PLANNING
• Identify purpose and scope of
organization
• Clarify its long-term direction
• Establish its enduring beliefs
and principles
• Assess its opportunities and threats
(OT)
• Conduct environmental scanning
(legal, etc.)
• Analyze the industry and
competitors
• Analyze firm’s strengths and
weaknesses (SW)
• Analyze firm’s core competencies
• Analyze firm’s resources: people,
process, and systems
• Develop corporate strategy
• Develop business strategy
• Design structure, systems, and so on
• Allocate resources
• Functional strategy: ensure
alignment
• Evaluate benchmarking efforts
• Ensure alignment is achieved
• Encourage workforce agility and
flexibility
• Capture underlying business
philosophy
• Establish cultural foundation
• Guide ethical codes of conduct
• Gauge demographic trends
• Gauge the external supply of labor
• Benchmark competitors’ HR metrics
• Analyze workforce’s culture,
competencies, and composition
• Forecast the demand for employees
• Forecast the supply of employees
• Establish productivity and efficiency
goals
• Establish quality, service, speed, and
innovation goals for workforce
• Reconcile supply and demand via
hiring, downsizing, layoffs, etc.
• Ensure vertical and horizontal fit
• Use staffing, training, rewards, and so
on to motivate employees to achieve
the strategy
• Maintain human capital metrics
• Utilize balanced scorecard
External
Analysis
Internal
Analysis
Strategy
Formulation
Strategy
Execution
Mission, Vision
and Values
Evaluation
Linking Strategic Planning and Human ResourcesFigure 2.1
89624_ch02_hr_038-083.indd 41 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
42 Part 1 Human Resources Management in Perspective
2.2 Step One: Mission, Vision, and Values
When you entered college, you probably thought a lot about what you should do with
your life. Believe it or not, firms go through the same sort of search process when they
develop their strategic plans. The first step in strategic planning is establishing a mission,
vision, and values for the organization. The mission is the basic purpose of the organiza-
tion, as well as its scope of operations. It is a statement of the organization’s reason for
existing and the shared purpose of the people in the organization. The mission often
is described in terms of the customers the firm serves. Depending on the scope of the
organization, the mission may be broad or narrow. For example, the mission of Google
is “to organize the world’s information and make it universally accessible and useful.”5
The strategic vision of the organization moves beyond the mission statement to provide
a perspective on where the company is headed and what the organization can become in
the future. Although the terms mission and vision often are used interchangeably, the vision
statement ideally clarifies the long-term direction of the company and its strategic intent.
The organization’s core values are the strong enduring beliefs and principles that
guide a firm’s decisions and are the foundation of its corporate culture.6 The following
are the core values for the organic grocer Whole Foods:
• We sell the highest quality natural and organic products available.
• We satisfy, delight, and nourish our customers.
• We support team member happiness and excellence.
• We create wealth through profits and growth.
• We serve and support our local and global communities.
• We practice and advance environmental stewardship.
• We create ongoing win-win partnerships with our suppliers.
• We promote the health of our stakeholders through healthy eating education.
Core values such as these indicate how a company intends to act toward its custom-
ers, employees, and the public in general.
2-2a Developing a Mission Statement
How as a manager or business owner would you begin to craft the business’s mission
statement? One way to begin would be to ask yourself the following questions and write
down your answers to them:
• What is my organization’s reason for being? What need do we fulfill that isn’t already
being met by another firm or could be better met?
• For whom will the firm fulfill the need? Who are our customers?
• Where is our market and our customers? Where will operate? Locally, geographi-
cally, or globally?
• What core values do the people in my organization share as part of our mission?
• How do these values differentiate us from other companies?
Once an organization or entrepreneur has the answer to these questions, they can
begin to draft a mission statement that synthesizes the information. For example, Uber’s
mission, or vision statement, is to “make transportation as reliable as running water,
everywhere, for everyone.”
mission
The basic purpose of the
organization as well as its
scope of operations.
strategic vision
A statement about where
athe company is going
and what it can become
in the future.
core values
The strong and enduring
beliefs and principles
that guide a firm’s deci-
sions and are the foun-
dation of its corporate
culture.
89624_ch02_hr_038-083.indd 42 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
43Chapter 2 Strategy and Human Resources Planning
2-2b HR’s Role in Establishing and Reinforcing a Firm’s
Mission, Vision, and Values
HR managers play a key role when it comes to formulating, vetting, and fine-tuning a
firm’s mission, vision, and values. Does the mission statement accurately reflect employ-
ees’ beliefs or only upper management’s? Does it accurately reflect the public’s percep-
tion of the organization? If not, how should it be changed? A firm’s mission statement
keeps everyone on the “same page” and heading in the same direction. Hence, it needs
to be accurate.
HR managers help embody the firm’s mission, vision, and values within the orga-
nization by doing the following:
• Communicating them frequently, both informally and formally, via verbal and
written communications such as employee meetings, emails, newsletters, bul-
letins boards, the firm’s website, annual report, and employee orientations.
Nordstrom’s asks its employees to describe to new hires work incidents that
demonstrate how they put the retailer’s mission, vision, values into action. Doing
so is more powerful and motivating than merely stating them or putting them
into print.
• Recruiting and hiring employees whose values are consistent with the organization.
This can also help organizations attract Generation Z and millennial workers, who
place a high priority on finding employment meaningful to them and aligned with
their goals and values in life.
• Translating the mission, vision, and values into job descriptions and specific behav-
iors and recognizing and rewarding employees based on them.
Like organizations themselves, firms have to be prepared to change their mission
statements as conditions change over time. Monitoring those changes requires a firm
to continually scan the environment for threats and opportunities, which we discuss
next.
2-3 Step Two: External Analysis
Before you decided on your major, you probably looked at information about possible
careers—whether there were many opportunities in those careers—or not. Were certain
fields becoming more demanding than others or more profitable than others? Firms do
something similar. On an ongoing basis, they analyze external opportunities and threats.
A comparison of one’s strengths, weaknesses, opportunities, and threats is referred to as
a SWOT analysis. A SWOT analysis summarizes the major facts and forecasts derived
from external and internal analyses. We’ll discuss how to do a SWOT analysis later in the
chapter. Environmental scanning is the systematic monitoring of major external forces
influencing the organization, including forces in the business environment—which is
sometimes called the remote environment—and the competitive environment, which
we will discuss.7
Changes in the external environment directly impact the way organizations are
run and people are managed. Some of these changes represent opportunities, and
some of them represent real threats to the organization. By continuously scanning the
environment for changes, managers can anticipate their impact and make adjustments
early.
SWOT analysis
A comparison of one’s
strengths, weaknesses,
opportunities, and
threats for strategy
formulation purposes.
environmental
scanning
Systematic monitoring
of the major external
forces influencing the
organization.
What external factors
in the environment
do you think firms are
most likely to overlook
when formulating their
business strategies?
How can an HR man-
ager help its executive
team get a fuller pic-
ture of the competitive
environment in which a
company operates?
LO 2
89624_ch02_hr_038-083.indd 43 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
44 Part 1 Human Resources Management in Perspective
2-3a The Business Environment
A firm’s business environment consists of all of the external factors in the general
environment—factors a firm cannot directly control but that can affect its strategy. The
business environment includes forces that generally affect most, if not all, firms—forces
over which they have virtually no control. Economic changes, technological changes,
demographic changes, and legal and regulatory changes are examples. By and large, a
firm can only adapt to these changes rather than influence them. In the next sections, we
will look at these factors and how HR personnel can help their companies understand
the business environment.
Economic Changes
All firms must react to local, regional, and global economic conditions. During eco-
nomic booms, firms are more likely to expand. During recessions they generally con-
tract. But this isn’t true for all businesses. It depends upon their strategies. Dollar stores,
such as Family Dollar and Dollar Tree, usually see their sales and stock prices rise during
recessions as consumers cut back on their spending at regular retail stores. During the
last recession, Family Dollar and Dollar Tree opened thousands of new stores and hired
thousands of employees. Meanwhile, many other retailers scaled back their operations.8
Ecological Changes
Closely related to the economy are ecological conditions. To deal with climate change,
farmers around the globe have had to adopt environmentally conscious techniques to
combat erosion and depleted aquifers. No-till farming is one such technique: With this
method, farmers don’t ever till up the soil. Doing so depletes it of moisture and nutrients.
Instead, growers just plant over any old plants from the year before.9
The catastrophic tsunami that struck Japan in 2011 is another example of an eco-
logical change that affected thousands of different types of businesses and supply chains
worldwide. One Japanese semiconductor manufacturer recovered more quickly than
its peers from the tsunami, thanks to a strategy it had developed in the aftermath of an
earlier earthquake: The company had created flexible manufacturing capabilities that
allowed it to shift production to unaffected facilities in other parts of Japan and Asia.10
Technological Changes
Like economic and ecological changes, technological changes such as automation have
a broad effect on businesses—changes that they have had to adapt to strategically.
Many technology experts expect that in the future, 3D printers and other technological
advances will dramatically change what products get made, how they get made, and by
whom. The Internet, of course, has affected businesses in nearly every industry and in
nearly every country. Think about travel agents. For decades they used to be the key
resource people used to search for flights, hotels, rental cars, and the like. However, with
the advent of online reservation systems, travel agents have had to adapt their approach.
Today, they are more likely to compete based on the service they provide and the exper-
tise they have about particular locations. Likewise, newspapers have had to adjust from
print to digital subscribers and adjust their sales and revenues strategies to match the
new medium or go out of business.
Demographic and Social Changes
Chapter 1 discussed demographic and labor market trends, including the age,
composition, and literacy of the labor market, and immigration. From a strategic
standpoint, changes in the labor supply can limit the strategies available to firms.
business environment
Factors in the external
environment that a
firm cannot directly
control but that can
affect its strategy and
performance.
89624_ch02_hr_038-083.indd 44 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
45Chapter 2 Strategy and Human Resources Planning
High-growth companies in particular may find it difficult to find the talent they
need to expand their businesses. Unemployment rates vary by sector, but the short-
age of talent in high-skill jobs continues to create strategic challenges for firms. The
U.S. Department of Labor indicates that 11 of the 15 fastest growing occupations
between now and 2024 will require some level of postsecondary education. These
labor force trends illustrate the importance of monitoring demographic changes
as a part of environmental scanning. It is a core responsibility of human resource
managers.
Likewise, societal attitudes are constantly changing the business landscape for firms
in all industries. We talked about social changes in Chapter 1 such as people’s chang-
ing priorities toward work, the need for child care, elder care, adequate wages and job
security, educational priorities, and environmental and sustainability concerns. How do
these changes affect a firm’s strategies, and HR strategies in particular?
Consider Walmart. For decades, selling products at low prices has been Walmart’s
main focus. But now the retailer and others are facing increasing social pressure to
provide better pay for employees as are many fast-food companies. Offering low prices
yet higher employee pay will be a strategic challenge for them.
Legal and Regulatory Changes
Finally, government and legislative issues, including laws and administrative rulings,
have a broad effect on the business environment. Any one change can require firms
and entire industries to dramatically adjust their strategic directions. For example, the
U.S. government put a ban on slaughtering of horses in 2006. U.S. horse slaughter-
houses were forced to exit this line of business or move their plants abroad, such as to
Mexico—not an inexpensive proposition. And it’s not just U.S. laws and regulations
that are a part of the business environment, but the laws of other countries as well that
affect businesses. Until recent years, Apple and other 4G smartphone makers were
unable to sell devices in the lucrative Chinese market, because the Chinese government
hadn’t granted the country’s major telecommunications companies licenses to build
4G networks there.11
2-3b The Competitive Environment
The competitive environment is narrower than the business environment, and firms
have a greater ability to affect it. As Figure 2.2 shows, the competitive environment
consists of a firm’s specific industry, including the industry’s customers, rival firms,
new entrants, substitutes, and suppliers. Firms analyze their competitive environment
to adapt to or influence the nature of competition. A general rule of thumb about this
analysis is: The more power each of these forces has, the less profitable (and therefore
attractive) the industry will be. Let us look at each of the five forces.
Customers
A firm’s strategy should focus on creating value for customers, who often want differ-
ent things. For example, in the hotel industry, business travelers may want convenient
locations with meeting facilities. Vacationers may want resort locations with swimming
pools, golf courses, and luxury spas. Other travelers may just want an inexpensive room
next to the highway. The point is that increasingly “one size does not fit all,” so orga-
nizations need to know how they are going to provide value to customers. That is the
foundation for strategy, and it influences the kinds of skills and behaviors needed from
employees.
competitive
environment
Consists of a firm’s spe-
cific industry, including
the industry’s custom-
ers, rival firms, new
entrants, substitutes,
and suppliers.
89624_ch02_hr_038-083.indd 45 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
46 Part 1 Human Resources Management in Perspective
Rival Firms
Perhaps the most obvious element of industry analysis is examining the nature of com-
petition. Who is the competition? Often the answer is clear to everyone, but sometimes
it is not. For many years, Toys “R” Us viewed its main competitors to be other toy stores
such as FAO Schwarz. However, other retailers such as Target and Walmart soon moved
into this space very successfully. This had a direct effect on human resources planning
for Toys “R” Us. While in the past, Toys “R” Us had been successful with a volume-based
approach, bigger retailers like Walmart were even better at that game. As a consequence,
Toys “R” Us had to modify its strategy to compete more on customer service and the
expertise of its employees.
New Entrants
New companies can sometimes enter an industry and compete well against established
firms, and sometimes they cannot. To protect their positions, companies often try to
establish entry barriers to keep new firms out of their industries. However, when new
firms do enter an industry it is often because they have a different—and perhaps better—
way to provide value to customers. When Virgin America entered the airlines market,
the company’s goal was not just to sell cheap tickets. It promised to make “flying good
again” by offering, among other perks, in-flight live concerts, free Wi-Fi, USB plugs at
every seat, mood lighting, and top-notch customer service.12 New entrants such as this
can change the “rules of the game” in an industry.
Substitutes
At times, the biggest opportunity or threat in an industry does not come from direct
competition but from buyers substituting other products. For example, people are
increasingly disconnecting their cable-TV service and instead using streaming services
such as Netflix and Hulu. That implies that firms may need to adjust their employee
skill bases to support different technologies, or they may need to think about how they
will compete in different ways.
RIVAL
FIRMS
SUPPLIERS
NEW ENTRANTS
SUBSTITUTES
CUSTOMERS
The Five Forces FrameworkFigure 2.2
89624_ch02_hr_038-083.indd 46 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
47Chapter 2 Strategy and Human Resources Planning
Suppliers
Organizations rarely create everything on their own but instead have suppliers that
provide them with key inputs. These inputs can include raw materials for production,
money (from banks and stockholders), information, and people. This last factor—peo-
ple, or labor as it is historically called—has direct implications for strategic planning
and human resources planning.
Stakeholders
Stakeholders are key people and groups that have an interest in a firm’s activities and
can either affect them or be affected by them. A firm’s primary stakeholders include its
investors, employees, customers, suppliers, and creditors. Primary stakeholders have
a direct stake in the firm and its success. A firm’s secondary stakeholders have less of a
stake but can nonetheless affect or be affected by the company. Secondary stakeholders
include the community in which the firm operates, the government, business groups,
and the media.
Firms have to analyze and balance the interests of their various stakeholders. For
example, laying off employees will often result in lower costs for a firm, at least in the
short term. But if the cuts are too severe and affect a firm’s service, for instance, cus-
tomers are likely to suffer as will investors and creditors. The community could suffer
as well.
One way a firm attempts to balance the interests of their shareholders is by deter-
mining how a strategic action is likely to impact each group. For which group is the
action critical? For which group is the action less critical? As Figure 2.3 shows, the firm
may want to involve or at least consult primary shareholders in major strategic actions.
In contrast, secondary stakeholders can be monitored and informed. So, for example, if
a firm is considering developing a new product, its suppliers, creditors, and employees
should definitely be involved and consulted about the move. Secondary stakeholders,
such as the community and the media, can merely be informed about the new strategy
when appropriate and their responses monitored.
stakeholders
Key people and groups
that have an interest in a
firm’s activities and that
can either affect them or
be affected by them.
Consult
Inform
InterestLow
L
o
w
H
ig
h
High
Pr
im
ar
y
Se
co
nd
ar
y
In
fl
u
e
n
c
e
Monitor
Involve
Primary Stakeholders versus Secondary StakeholdersFigure 2.3
89624_ch02_hr_038-083.indd 47 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
48 Part 1 Human Resources Management in Perspective
2-3c HR’s External Analysis
Because strategic management is ultimately aimed at creating a competitive advantage,
many firms also evaluate their performance against other firms. Benchmarking is the
process of looking at your practices and performance in a given area and then compar-
ing them with those of other companies. To accomplish this, a benchmarking team
collects metrics on its own company’s performance and those of other firms to uncover
any gaps. The gaps help determine the causes of performance differences the team can
use to map out a set of best practices.
The target company for benchmarking does not need to be a competitor. For exam-
ple, when Xerox wanted to learn about excellent customer service, it benchmarked
L.L. Bean. By working with noncompeting companies, Xerox was able to get access to
information a competitor would not divulge.
Sources of information about the changes in a firm’s external environment, par-
ticularly the external supply of labor, are invaluable for both operational and strategic
reasons. HRP has to focus on both. At an operational level, labor-supply changes directly
affect hiring plans in the area where the organization is located or plans to locate. To be
closer to younger, educated workers, who will lead them into the digital future, as well as
high-earning consumers, companies that moved to the suburbs decades ago are relocat-
ing to the cities or opening satellite offices there. In Detroit, Microsoft, Quicken Loans,
and dozens of tech companies have relocated suburban facilities to the downtown area.13
Similarly, with a “maturing” workforce, HRP must consider the implications for
recruitment and replacement policies. Other “barometers” of the labor market include
migration in and out of the area and the mobility of the population, the firm’s demand
for specific skills, unemployment rates, educational level of the workforce, government
labor regulations, and so on.
The analysis of the external labor market is aided by published documents. In the
United States, unemployment rates, labor force projection figures, and population char-
acteristics are reported by the U.S. Department of Labor.14 The Monthly Labor Review and
Occupational Outlook Handbook, both published by the Bureau of Labor Statistics (BLS),
contain information on jobholder characteristics and predicted changes in the workforce.
In addition, local chambers of commerce and individual state development and planning
agencies can assist both large organizations and new business ventures by providing them
with a labor market analysis of their areas. Offshore consulting firms such as IBM Global
benchmarking
The process of looking
at your practices and
performance in a given
area and then comparing
them with those of other
companies.
Amazon.com has
tested technology to
deliver small packages
to people’s houses via
drones. How might
drone delivery change
Amazon’s competitive
environment? What
changes in customers,
new entrants, substi-
tutes, and suppliers
might result? How
would it affect the
firm’s HR practices?
A
m
az
on
/U
PI
/N
ew
sc
om
89624_ch02_hr_038-083.indd 48 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
49Chapter 2 Strategy and Human Resources Planning
Services and Accenture can be a good source for information about labor trends in other
countries. 3M’s HR team regularly consults with outside recruiters to learn about the
talent supplies in various countries in which it does or wants to do business.
Part of conducting an external labor analysis includes gauging the talent in your
own industry—in other words, looking at the competitive environment for labor. What
schools are the top candidates being recruited from? What firms are attracting the most
candidates and why? What firms end up hiring the best candidates and why? Astute HR
managers who track their firms’ hiring and recruiting metrics relative to the competition
are an invaluable source of external labor “intelligence” such as this. Attending industry
conventions and talking to your company’s suppliers about business and employment
trends are other good ways of gathering competitive intelligence. So are interviews with
job candidates. Simply asking candidates who turned down job offers why they did so can
yield a great deal of information. We will talk more about this aspect of HR in Chapter 5.
The HR benchmarks, or metrics, a firm collects fall into two basic categories: human
capital metrics and HR metrics. Human capital metrics assess aspects of the workforce,
whereas HR metrics assess the performance of the HR function itself. For its clients, the
management consulting company PwC publishes monthly and annual human capital
benchmarking information, which includes metrics from almost 900 companies.
Highlights in HRM 1 shows some of the basic HR metrics companies use. Most
larger companies use software to track their HR metrics over time. Figure 2.4 shows an
example of an HR “dashboard,” which is software that tracks and graphically displays HR
statistics so they can be viewed by managers at a glance (like you can your dashboard
readings when driving a car).
An Example of an HR Dashboard Figure 2.4
89624_ch02_hr_038-083.indd 49 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
As we have explained, today’s HR managers can significantly enhance their worth to
their organizations if they go a step further by gathering informal information, or “intelli-
gence,” about the strategic and HRM practices of their competitors. This can be done by legal
means, such as by reading industry blogs, checking competitors’ press releases and Facebook
pages, and signing up for their newsfeeds, messages they put out on Twitter, LinkedIn, and
Google email alerts that are triggered when competing firms’ names appear in the news.
Gathering competitive intelligence and benchmarking alone will not give a firm a
competitive advantage, though. According to author and HR consultant Mark Huselid, a
competitive advantage is based on the unique combination of a company’s human capi-
tal, strategy, and core capabilities—which differ from firm to firm. This means that HR
managers cannot simply rely on the benchmarks and strategies of other firms. Instead,
they must develop their own. If they can successfully do so and implement them, they
can achieve a sustained competitive advantage.15
2.4 Step Three: Internal Analysis
When you decided on your major, you not only had to look at careers that were in
demand, you had to take a hard look at yourself and what you’re good at relative to other
people. For example, software engineers make a lot of money and are in great demand.
But do you have what it takes to become one? Similarly, organizations also analyze their
own strengths and weaknesses.
HRM Metrics
Different companies rely on different HRM metrics, depend-
ing upon their strategic objectives. The following are some
of the metrics mostly commonly used:
General
Total payroll and benefits costs
Payroll and benefits costs per employee
Revenue earned per employee
Average salary per employee
Total employee hours worked
Hours worked per employee
Employees per department
Average employee tenure
Average employee age
Employee absenteeism rate
Training and Development
Total training costs
Training costs per employee
Average training hours provided to existing employees
Average training hours provided to new hires
Hiring and Turnover
Total separation costs (severance, etc.)
Separation costs per employee
Average time to fill (a position)
Quality of fill
Cost per fill
Percentage of positions filled internally
Percentage of new hires retained for 90 days
Employee turnover rate
Voluntary turnover rate
Involuntary turnover rate
HR Department Metrics
Number of employees per HR professional
Total HR expenses
HR expenses per employee
Percentage of HR expenses spent on outsourced
functions
Highlights in HRM1
Recall from Chapter 1
the discussion about
autoparts makers having
to look for new markets
when car sales plum-
meted in the last reces-
sion. How do you think
the autoparts makers
assessed their ability to
enter new markets? Do
you think they looked
first at new markets
and then the capabili-
ties of their employees
and suppliers—or vice
versa?
LO 3
50
89624_ch02_hr_038-083.indd 50 11/17/17 9:53 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
51Chapter 2 Strategy and Human Resources Planning
2.4a Core Capabilities
A growing number of experts now argue that the key to a firm’s success is based on
establishing a set of core capabilities—abilities that distinguish an organization from
its competitors and create value to customers. You can think of value creation as a
cost–benefit scenario: value benefits costs5 2 . For example, what is driving, or would
drive, a customer’s willingness to buy from your firm versus another? What benefits do,
or would, customers get from your firm relative to the costs they incur? In what areas
does your organization excel as far as potential customers are concerned? Most firms
recognize that there is a small set of three to six core capabilities that are most critical to
differentiating them from competitors. Core capabilities can consist of a combination of
three resources: (1) processes, (2) systems (technologies), and (3) people.
Processes are “recipes” or standard routines for how work will be done and results
will be accomplished. For example, when Intermountain Healthcare (IHC), a hospital and
clinic chain in Utah, analyzed the firm’s capabilities, it found that less than 10 percent of
its processes accounted for over 90 percent of the cost, time, and quality of a health care.
Consequently, ICH chose to focus on these processes to enhance its core capabilities.
Top-notch systems are also part of the core capabilities equation. They include
information systems, databases, proprietary technologies, and the like. Great systems
and technologies are a core capability of Amazon.com—one that has resulted in a sig-
nificant competitive advantage for the firm. UPS’s Orion system is another example of
a great system. The Orion system takes into account all of the packages a UPS driver
has to deliver and determines out the fastest route for doing so.
Last, but certainly not least, people are a key resource that underlies a firm’s core capa-
bilities. Particularly in knowledge-based industries such as the software and information
services industries, success depends on “people-embodied knowhow.” Knowhow includes
the knowledge, skills, and abilities of employees most critical for executing the firm’s plan
to create the most value for customers and whose skills are difficult to replicate or replace.
core capabilities
Integrated knowledge
sets within an organiza-
tion that distinguish it
from its competitors
and deliver value to
customers.
value creation
What a firm adds to a
product or service by
virtue of making it; the
amount of benefits pro-
vided by the product or
service once the costs of
making it are subtracted.
FedEx’s workers sup-
port their employer’s
core capabilities. That
helps FedEx stand out
from its competitors
and deliver added
value to its customers.
Bl
oo
m
be
rg
/G
et
ty
Im
ag
es
89624_ch02_hr_038-083.indd 51 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
52 Part 1 Human Resources Management in Perspective
As a result, a number of companies that previously relied on standard plans for recruit-
ing and managing their employees are designing more tailored plans to address the indi-
vidual needs of employees so they will be in a better position to help execute their firms’
strategies. Microsoft enables certain types of employees to design their own career paths.
For example, the company offers software engineers both a management-focused and
technical specialist career track and allows them to move back and forth between the two.
2.4b Sustaining a Competitive Advantage Through People
Organizations can achieve a sustained competitive advantage if they have resources—
particularly people—that meet the following criteria16:
1. The resources must be valuable. People are a source of competitive advantage when
they improve the efficiency or effectiveness of the company. Value is increased
when employees find ways to decrease costs, provide something unique to cus-
tomers, or some combination of the two. To improve the bottom line, REI and
Southwest Airlines are among the companies that empower and motivate their
workers to spark their creativity.
2. The resources must be rare. People are a source of competitive advantage when their
knowledge, skills, and abilities are not equally available to competitors. Companies
such as Facebook, Four Seasons Hotels, and Virgin America therefore invest a great
deal to hire and train the best and the brightest employees to gain an advantage over
their competitors.
3. The resources must be difficult to imitate. People are a source of competitive advan-
tage when the capabilities and contributions of a firm’s employees cannot be copied
by others. Disney and Starbucks are each known for creating unique cultures that
get the most from employees (through teamwork) and are difficult to imitate.
4. The resources must be organized. People are a source of competitive advantage
when their talents can be combined and deployed to work on new assignments at
a moment’s notice. As you learned in Chapter 1, companies such as IBM, GE, and
Procter & Gamble closely “track” employees and their talents. As a result, these
firms are able to quickly reassign talent to different areas of their companies and
the world as needed.
These four criteria highlight the importance of people and show the closeness of
HRM to strategic management.
2.4c Types of Talent and Their Composition
in the Workforce
A related element of internal analysis for organizations that compete on capabilities is
determining the types of talent needed and their composition of a firm’s current workforce.
As we have indicated, managers need to determine whether people are available internally
to execute an organization’s strategy. Managers have to make tough decisions about whom
to employ internally, whom to contract externally, and how to manage different types of
employees with different skills who contribute in different ways to the organization.
Figure 2.5 shows that different skill groups in any given organization can be classi-
fied according to the degree to which they create strategic value and are unique to the
89624_ch02_hr_038-083.indd 52 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
53Chapter 2 Strategy and Human Resources Planning
organization. This figure shows the departments for an Australian biotechnology firm
and the quadrants those groups fall into. As a general rule, managers often consider con-
tracting externally (or outsourcing) skill areas that are not central to the firm’s core com-
petence. HRP plays an important role in helping managers weigh the costs and benefits
of using one approach to employment versus another. Evidence from research suggests
that employment relationships and HR practices for different employees vary according
to which segment they occupy in this matrix.
Strategic Knowledge Workers
This group of employees tends to have unique skills directly linked to the company’s
strategy and are difficult to replace (such as research and development scientists in a
pharmaceuticals company or computer scientists in a software development company).
Sales
Finance
Customer
Service
Quality
Control
Distribution
Manu-
facturing
R&D
Partners
Legal
StrategicStrategic
CoreCore
ComplementaryComplementary
SupportSupport
L
o
w
H
ig
h
U
N
IQ
U
E
N
E
S
S
O
F
S
K
IL
L
S
Low HighCUSTOMER VALUE
Manage-
ment
Mapping Human CapitalFigure 2.5
89624_ch02_hr_038-083.indd 53 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
54 Part 1 Human Resources Management in Perspective
These employees typically are engaged in knowledge work that involves considerable
autonomy. Companies tend to make long-term commitments to these employees,
investing in their continuous training and development, and perhaps giving them an
equity stake in the organization.
Core Employees
This group of employees has skills that are quite valuable to a company but not par-
ticularly unique or difficult to replace (such as salespeople in a department store or
truckdrivers for a courier service). These workers tend to be employed in traditional
types of jobs. Because their skills are transferable, it is quite possible that they could
leave to go to another firm. As a consequence, managers frequently invest less to train
and develop these employees and focus more on paying them for their short-term per-
formance achievements.
Supporting Workers
This group of workers typically has skills that are less central to creating customer
value and generally available in the labor market (such as clerical workers, customer
service representatives, and manufacturing, operations, and distribution employees).
Individuals in these jobs are often hired from external agencies on a contract basis
to support the strategic knowledge workers and core employees. The scope of their
duties tends to be limited, and their employment relationships tend to be transac-
tion based and focused on rules and procedures. Less investment is made in their
development.
Complementary (External) Partners
Complementary partners are external people and firms with skills that are unique and
specialized but not directly related to a company’s core strategy. Attorneys on retainer,
consultants hired on a contract basis, and external companies that work with the firm,
such as research and development firms, for example, are complementary partners.
Although a company perhaps cannot justify their internal employment given their indi-
rect link to the firm’s strategy, these individuals have skills that are specialized and not
readily available to all firms. As a consequence, companies tend to establish longer-term
alliances and partnerships with them and nurture an ongoing relationship focused on
mutual learning. Considerable investment is made in the exchange of information and
knowledge with these people.17
2.4d Corporate Culture
Think about our initial discussion of mission, vision, and values back at Step One.
Because managers increasingly understand that their employees are critical to their
success, they often conduct cultural audits to examine their values, attitudes, beliefs,
and expectations. Can they make a difference in a firm’s strategy? Yes. Cultural audits
can help firms decide upon the strategic investments and maneuvers that their cultures
lend themselves to. The audits can also be used to determine if the cultures of two
companies will complement one another should the firms merge. As we will discuss
later, many a merger has failed due to corporate “culture clashes” between companies
that tried to join forces.
cultural audits
Audits of the culture and
quality of work life in an
organization.
89624_ch02_hr_038-083.indd 54 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
55Chapter 2 Strategy and Human Resources Planning
Conducting a Cultural Audit
To conduct a cultural audit, employees can be surveyed about how they feel about issues
such as the following: How is business conducted within your organization? How do
people communicate with one another? How are conflicts and crises resolved?
The cultural audit conducted by SAS, a business-analytics corporation that often
ranks No. 1 on Fortune magazine’s “Best Companies to Work For” list, includes detailed
questions about the company’s pay and benefit programs and a series of open-ended ques-
tions about the company’s hiring practices, internal communications, training and recog-
nition programs, health care and other benefits, and diversity efforts.18 Cultural audits can
also be used to determine whether there are different groups, or subcultures, within the
organization that have distinctly different views about the nature of the work and how it
should be done. To prevent legal and ethical breaches, some firms conduct cultural audits
that ask employees questions about the degree of fear associated with meeting their firms’
revenue goals and incentive plans that could encourage unethical or illegal behavior.19
Perhaps the most widely used cultural audit questionnaire is the Organizational
Culture Assessment Instrument (OCAI), developed by Kim Cameron and Robert
Quinn. The questionnaire helps identify four distinct types of corporate cultures, which
are shown in Figure 2.6.
• The “clan” culture in which employees are closely knit and exhibit great concern
for one another and their customers, and loyalty and cohesion are highly valued.
Starbucks’s culture can be categorized as a clan culture. Many small and midsize
businesses fall into this category, too. Their HR strategies are more informal and
focused on creating a family-type feel that binds employees emotionally to the
organization.20
• The “adhocracy” culture, which is a culture characterized by risk-taking, innova-
tion, and a spirit of entrepreneurship. Google clearly fits into this category.
• The “market” culture, which encourages competitive, result-oriented behaviors.
Investment banks that closely focus on achieving their financial numbers are an
example of firms with market cultures. The investment bank Goldman Sachs falls
into this category.
• The “hierarchical” culture, which is characterized by formal structures and proce-
dures and in which efficiency and stability are greatly valued. Utility-type compa-
nies and well-established companies such as railroads fall into this category.
Some cultures lend themselves more readily to certain strategies than others; however,
almost all firms have elements of each of the four cultures. For example, W.L. Gore & Asso-
ciates, which makes Gore-Tex fabric and other cutting-edge products such as space suits
and surgical products, is highly entrepreneurial like an adhocracy is. However, the company,
which was launched by entrepreneur Bill Gore and his wife, Vivien Gore, in their basement
in the 1950s, remains privately owned and exhibits elements of the “clan” culture as well.
According to author James Clawson, leaders who target employees’ values, attitudes,
beliefs, and expectations are more effective than those who simply focus on workers’
behaviors or thought processes. This makes sense. Recall from Chapter 1 the story
about the entrepreneur who tripled his sales but, because he took his staff for granted,
was then muscled out of the market by a competitor. If a firm lacks a clear idea of how
employees view the organization, no matter how great the organization’s plans are, those
plans might never be successfully executed and sustained.
89624_ch02_hr_038-083.indd 55 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
56 Part 1 Human Resources Management in Perspective
Clan
• Family-feel oriented
Adhocracy
• Risk-taking and innovation
oriented
Hierarchy
• Formal structures and
procedures oriented
Market
• Competitive and
results-oriented
Four Basic Types of Organizational CultureFigure 2.6
2.4e Forecasting
An internal analysis of an organization can reveal a great deal about where it stands today.
However, things change. In an important sense, strategic planning is about managing
that change. Managers must continually forecast both the needs and the capabilities of
the firm for the future to do an effective job at strategic planning. As Figure 2.7 shows,
managers focus on (at least) three key elements: (1) forecasting the demand for labor,
(2) forecasting the supply of labor, and (3) balancing supply and demand considerations.
Consider for a moment the high costs of not forecasting—or forecasting poorly.
If job vacancies are left unfilled, the resulting loss in efficiency can be very costly, par-
ticularly when you consider the amount of time it takes to hire and train replacement
employees. As pointless as it may sound, it’s not uncommon for employees to be laid off
in one department while applicants are hired for similar jobs in another department.
Poor forecasting that leads to unnecessary layoffs also makes it difficult for employees
to accurately assess their own career prospects and development. When this happens, a
firm’s more competent and ambitious workers will be inclined to seek other employment
where they feel they will have better career opportunities.21
On the plus side, accurate forecasting provides the kind of information managers
need to make sound decisions. It can help them ensure that they have the right number
and right kinds of people in the right places at the right times, doing things that provide
value to both the organization and the employees.
Forecasting a Firm’s Demand for Employees
As we have indicated, a variety of factors, including a firm’s competitive strategy, tech-
nology, structure, and productivity, will affect its demand for labor. External factors such
as business cycles—economic and seasonal trends—can also play a role. For example,
89624_ch02_hr_038-083.indd 56 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
57Chapter 2 Strategy and Human Resources Planning
retailers such as BestBuy, Bath & Body Works, and Target rely heavily on temporary
employees between November and January, during the holiday season. There are two
approaches to HR forecasting—quantitative and qualitative—which we discuss next.
Quantitative Approaches. Quantitative forecasting approaches involve the use of sta-
tistical or mathematical techniques. One commonly used method is a trend analysis,
which plots a historical trend of a business factor, such as sales, in relation to the number
of employees. The trend and its strength up or down will affect how many employees
should be hired. Other, more sophisticated statistical planning methods include model-
ing or multiple predictive techniques.
Whereas a trend analysis relies on a single factor (such as sales) to predict
employment needs, more advanced methods combine several factors, such as inter-
est rates, gross domestic product, the disposable income of consumers, and sales, to
predict employment levels. Factors such as a firm’s strategy and “what if ” scenarios
can also be incorporated in the analysis. For example, if the firm wants to increase
its sales by 10 percent, how many additional salespeople should it hire? Forecasting
methods such as these are often used by larger companies with the help of analysts
and statisticians. However, advances in data collection technology and software have
made it easier and affordable for smaller businesses to use more sophisticated fore-
casting techniques.
trend analysis
A quantitative approach
to forecasting labor
demand based on a fac-
tor such as sales.
FORECASTING DEMAND
FORECASTING SUPPLY
BALANCING
SUPPLY AND DEMAND
Surplus
• Reduce employees’
work hours
• Implement a hiring
freeze
• Lay off or furlough
employees
• Offer employees early
retirement
Shortage
• Utilize overtime
• Add full-time workers
• Add part-time workers
• Employ contract
workers
• Recall employees
• Outsource work
• Reduce employee
turnover
Considerations
• Product/service demand
• Economics
• Technology
• Financial resources
• Absenteeism/turnover
• Organizational growth
• Management philosophy
Techniques
• Trend analysis
• Managerial
estimates
• Delphi technique
Techniques
• Staffing tables
• Markov analysis
• Skills inventories
• Management
inventories
• Replacement charts
• Succession planning
External Considerations
• Demographic changes
• Education of workforce
• Labor mobility
• Government policies
• Unemployment rate
Model of HR ForecastingFigure 2.7
89624_ch02_hr_038-083.indd 57 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Qualitative Approaches. Forecasting is frequently more of an art than a science, pro-
viding inexact approximations rather than absolute results. The ever-changing envi-
ronment in which an organization operates contributes to this situation. For example,
estimating changes in the demand for a firm’s products or services is a basic forecasting
concern, as is anticipating economic changes.
A firm’s internal changes are critical, too. A community hospital anticipating inter-
nal changes in its technology or how the facility is organized or managed must consider
these factors when it forecasts its staffing needs. Also, the forecasted staffing needs must
be in line with the organization’s financial resources.
In contrast to quantitative approaches, qualitative approaches to forecasting are
less statistical. Management forecasts are the opinions (judgments) of supervisors,
department managers, experts, or others knowledgeable about the organization’s future
employment needs. For example, at Souplantation and Sweet Tomatoes, a national soup,
salad, and bakery chain, each restaurant manager is responsible for his or her store’s
employment forecasts. Another qualitative forecasting method, the Delphi technique,
attempts to decrease the subjectivity of forecasts by soliciting and summarizing the judg-
ments of a preselected group of individuals. HR personnel can do this by developing a
list of questions to ask the managers in their companies. Highlights in HRM 2 contains
some good questions to ask.
Ideally, forecasting should include the use of both quantitative and qualitative
approaches. Numbers without context—including the context supplied by skilled HR
professionals who understand the business and can analyze and interpret the data—
are less useful. “The most important software is the one running between your ears,”
explains one HR director about the qualitative forecasting.22
Forecasting the Supply of Employees
Just as an organization must forecast its future requirements for employees, it must
also determine whether sufficient numbers and types of employees are available to
staff the openings it anticipates having. As with demand forecasts, the process involves
both tracking current employee levels and making future projections about those
levels.
management forecasts
The opinions (judg-
ments) of supervisors,
department manag-
ers, experts, or others
knowledgeable about
the organization’s future
employment needs.
HR Planning and Strategy Questions to Ask Business Managers
�� What are your current pressing business issues?
�� What are our competitors’ organizational strengths?
How do we compare?
�� What core capabilities do we need to win in our markets?
�� What are the required knowledge, skills, and abilities
we need to execute the winning strategy?
�� What are the barriers to achieving the strategy?
�� What types of skills and positions will be required or
no longer required?
�� Which skills should we have internally versus contract
with outside providers?
�� What actions need to be taken to align our resources
with our strategy priorities?
�� What recognition and rewards are needed to attract,
motivate, and retain the employees we need?
Sources: Adapted from Agilent Technologies for The Conference Board
and the Society for Human Resource Management.
Highlights in HRM2
58
89624_ch02_hr_038-083.indd 58 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
59Chapter 2 Strategy and Human Resources Planning
Staffing Tables and Markov Analyses. An internal supply analysis can begin with staff-
ing tables. A staffing table shows a firm’s jobs, along with the numbers of employees cur-
rently occupying those jobs (and perhaps future employment requirements derived from
demand forecasts). Another technique, called a Markov analysis, shows the percentage
and actual number of employees who remain in each of a firm’s jobs from year to year and
the proportions of those promoted, demoted, transferred, or who have quit. As Figure 2.8
shows, a Markov analysis can be used to track the pattern of employee movements through
various jobs and to develop a transition matrix for forecasting labor supply.
Forecasting the supply of human resources available to a firm requires managers to
have a good understanding of employee turnover and absenteeism. We have included
formulas for computing turnover and absenteeism rates in an appendix to this chapter.
Also included in the appendix is a formula for calculating a metric called quality of fill.
It was developed because managers understand that simply having “bodies” in place
is not enough. The quality-of-fill metric attempts to measure how well new hires are
performing so the company will have enough top performers to propel it toward its
strategic objectives. We will show you how it is calculated in Chapter 5 when we discuss
recruiting metrics.
Skill Inventories and Management Inventories. Staffing tables, a Markov analysis,
turnover rates, and the like tend to focus on the number of employees in particular
jobs. Other techniques are more oriented toward the types of employees and their skills,
knowledge, and experiences. Skill inventories can also be prepared either manually or
using a human resources information system that lists each employee’s education, past
work experience, vocational interests, specific abilities and skills, compensation history,
and job tenure. The inventories allow an organization to quickly match forthcoming
job openings with employee backgrounds. When data are gathered on managers, these
inventories are called management inventories.
staffing table
A table that shows
a firm’s jobs, along
with the numbers of
employees currently
occupying those jobs
and future (monthly
or yearly) employment
requirements.
Markov analysis
A method for tracking
the pattern of employee
movements through
various jobs in a firm.
quality of fill
A metric designed to
measure how well new
hires that fill positions
are performing on
the job.
skill inventories
Files of personnel
education, experience,
interests, skills, and so
on that allow managers
to quickly match job
openings with employee
backgrounds.
90%
11% 83%
11% 66% 8%
72% 2%
74%
10%
6%
15%
16%
20%6%
10%
Forecasted Supply 15 41 92 301 1072 351
Store Managers
(n = 12)
Assistant Store
Managers (n = 36)
Section
Managers (n = 96)
Department
Managers (n = 288)
Sales Associates
(n = 1440)
11
4 30
11 63 8
207 6
1066
1
2
14
46
28886
29
Store
Managers
Asst. Store
Managers
Section
Managers
Dept.
Managers
Sales
Associates Exit2018
Transition percentage Actual number of employees
2019
Hypothetical Markov Analysis for a Retail CompanyFigure 2.8
89624_ch02_hr_038-083.indd 59 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
60 Part 1 Human Resources Management in Perspective
Replacement Charts and Succession Planning. Skill and management inventories
(talent inventories) can be used to develop employee replacement charts, which list
current jobholders and identify possible replacements should openings occur. Figure 2.9
shows an example of how an organization might develop a replacement chart for the
managers in one of its divisions. The chart provides information on the current perfor-
mance and promotability of possible replacements.
A replacement chart can be used side by side with other pieces of information for
succession planning—the process of identifying, developing, and tracking talented indi-
viduals so that they can eventually assume top-level positions. The strategy and consulting
firm Accenture has developed an application listing its employees, where they are based,
and their individual areas of expertise. The application helps managers with deployment
decisions. It also makes it easier for Accenture’s employees who do not necessarily know
each other or work together to collaborate with one another. Succession planning and
replacement charts are often developed in conjunction with talent reviews: strategic
meetings to determine if a company has the human resources it needs to compete in the
future.
replacement charts
Listings of current job-
holders and people who
are potential replace-
ments if an opening
occurs.
succession planning
The process of identify-
ing, developing, and
tracking key individuals
for executive positions.
talent reviews
strategic meetings to
determine if a company
has the human resources
it needs to compete in
the future.
ACCOUNTING
DIVISION MANAGER
W. Shepard C/2
TECHNICAL
ADVISOR
N. Lyman B/3
NORTHWEST
REGION
MANAGER
L. Green A/2
A. Tupper C/4
CENTRAL REGION
MANAGER
J. Gomez A/1
EASTERN REGION
MANAGER
O. Morris B/3
KEY
Names provided are
replacement candidates
A. Promotable now
B. Needing development
C. Not fitted to position
1. Superior performance
2. Above-average
performance
3. Acceptable
performance
4. Poor performance
ASSISTANT TO
MANAGER
L. Martinez B/1
ASSISTANT
MANAGER
R. Gorton A/2
T. Brown B/3
MANAGER
J. Green A/2
DIVISION HR
MANAGER
C. Broderick A/1
PLANNING DIVISION
MANAGER
B. Verkozen A/1
T. Turner B/1
NORTH CENTRAL
REGION MANAGER
D. Lim B/2
An Executive Replacement ChartFigure 2.9
89624_ch02_hr_038-083.indd 60 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
61Chapter 2 Strategy and Human Resources Planning
A certain mystique exists about family businesses being car-
ried on for generations, But although 80 to 90 percent of
U.S. businesses are family owned, less than a third of these
companies continue to exist into the second generation,
and just 10 percent survive into the third, according to one
study. One reason this occurs is because only about one-
quarter of family businesses have succession plans. It may
take the death of a colleague or a sudden illness for business
owners to realize that, like a will, they need a succession plan
to keep a business going, continue to provide for their fami-
lies, and keep their workers out of the unemployment line.
Business owners are sometimes reluctant to put suc-
cession plans in place for fear of relinquishing control, or
they don’t feel their successor is ready to take over the
business. In some cases there is no clear successor. Some-
times the next generation just is not enthusiastic about
joining the family business.
Even with a business owner willing to relinquish the
reins and a well-chosen successor waiting in the wings, an
Small Business Application
actual transition plan is still needed. “[Any transition] needs
to be carried out without causing any alarm to the other
stakeholders—that is, financiers who may be worried that
such a change may increase firm-specific risk,” says Dr.
Ashraf Mahate, an economist and expert on international
trade and finance. “Suppliers may be concerned about pro-
viding future credit facilities or even doing business with
the company. Customers may be fearful of long-term rela-
tionships with the company. Therefore, it is in everyone’s
interest to have an orderly change to the new structure.”
Sources: Michael Cohn, “Most Family Businesses Lack Succession
Plans,” Accounting Today (January 14, 2017), http://www.accounting-
today.com; “Next in Line: The Advantages of Succession Planning,”
Forbes (July 30, 2013), http://www.forbes.com; “Canada’s Banks Eye
Succession Plans for Boomers,” Reuters (December 20, 2012), http://
www.reuters.com; Manoj Nair, “Succession Planning Is the Key,” gulf-
news.com (January 19, 2011), http://gulfnews.com; Ernesto J. Poza,
Family Business (Boston: South-Western/Cengage Learning, 2010),
85–89; Don Schwerzler, “Family Succession Plan First,” http://www
.family-business-experts.com/family-succession-plan.html.
Lack of Succession Planning Threatens Family Businesses
Human resource managers frequently lament that they have trouble keeping man-
agers, including CEOs, focused on succession planning. It’s possible that because CEOs
are increasingly being recruited from the outside, they are less concerned with internal
succession planning than they are in “bringing in their own people.” And, of course,
because the workforce is becoming increasingly mobile, some managers wonder why
they should develop employees internally who may eventually leave the organization
when they can recruit qualified talent from the outside. Managers also get distracted by
putting out immediate fires, especially in tough times, explains Ranjay Gulati, a Harvard
Business School professor. Instead of planning for succession, they look externally for
“savior” types of employees to rescue their organization because they have been unable
to adapt to the competition.23
Not having a succession plan can imperil a small firm, as the small-business box
in this chapter illustrates. Highlights in HRM 3 shows a checklist for evaluating how
successful a firm’s succession planning is.
2.4f Assessing a Firm’s Human Capital Readiness:
Gap Analysis
Once a company has assessed both the supply and demand for employee skills, talent,
and knowhow, it can begin to understand its human capital readiness. Any difference
between the quantity and quality of employees required versus the quantity and quality
of employees available represents a gap that needs to be fixed.
Figure 2.10 shows how a pharmaceutical company approached its assessment of
human capital readiness. Similar to our discussion in the preceding sections, managers
human capital
readiness
The process of evaluating
the availability of critical
talent in a company and
comparing it to the firm’s
supply.
89624_ch02_hr_038-083.indd 61 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Succession-Planning Checklist
Highlights in HRM3
RATE THE SUCCESS OF YOUR SUCCESSION PLANNING
For each characteristic of a best-practice succession-planning and management program appearing in the left column
below, enter a number to the right to indicate how well you believe your organization manages that characteristic. Ask
other decision makers in your organization to complete this form individually. Then compile the scores and compare notes.
Total (add up the scores for items 1–10
and place in the box on the right)
Your organization has successfully…
Characteristics of a Best-Practice
Succession-Planning and Management
Program
Clarified the purpose and desired results of the
succession-planning and management program.
Created a means by which to document
competence and find organizational talent
quickly when needed.
Established a means by which to evaluate
the results of the succession planning and
management program.
Created and sustained rewards for
developing people.
Created a means to follow up and hold
people accountable.
Established a means by which to narrow
gaps through the use of individual
development plans (IDPs).
Created an ongoing means by which to
assess individual potential against future
competency models.
Determined what performance is needed in
the future by establishing future
competency models for all job categories.
Established a means to measure individual
performance that is aligned with the competencies
currently demonstrated by successful performers.
Determined what performance is required
now for all job categories in the organization
by establishing competency models.
Very Poor
(1)
Poor
(2)
Neither Poor
Nor Good (3)
Good
(4)
Very Good
(5)
How Would You Rate Your Organization’s Succession-
Planning and Management Program on the Characteristic?
1
2
3
4
5
6
7
8
9
10
50–40
Congratulations. The succession-planning and
management program in your organization conforms with
best practices.
29–20
Okay. While your organization could make improvements,
you appear to have some of the major pieces in place for
a succession-planning and management program.
39–30
Pretty good. Your organization is on the way toward
establishing a first-rate succession-planning and
management program.
9–0
Give yourself a failing grade. You need to take steps
immediately to improve the succession-planning and
management practices of your organization.
19–10
Not good at all. Your organization is probably filling
positions on an as-needed basis.
SCORES
Source: From William J. Rothwell, “Putting Success into Your Succession Planning,” The Journal of Business Strategy 23, no. 3 (May/June
2002): 32–37. Republished with permission—Thomson Media, One State Street, 26th Floor, New York, NY 10004.
89624_ch02_hr_038-083.indd 62 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
63Chapter 2 Strategy and Human Resources Planning
begin by identifying a company’s core capabilities and the key people and processes
critical to those capabilities. The company identified nine key job “families.” For each
of these critical job families, managers identified the critical knowledge, skills, and
behaviors necessary to build the core capabilities. They then determined the num-
ber of people required for these positions, as well as the number who are currently
qualified. As the lower portion of the figure shows, the company’s human capital (HC)
readiness ranged between 63 percent for bioscientists and 100 percent for chemical
and mechanical engineers. Once the assessment of a firm’s human capital readiness is
complete, managers have a much better foundation for establishing their strategy going
forward and the specific requirements for developing the talent needed to execute the
strategy.24
Disease Area
————–
Experimental
Design
Results
Interpretation
————–
Analytical
Thinking
Strategic
Thinking
Collaboration
Chemistry
————–
Molecular
Design
Protein
Synthesis
————–
Analytical
Thinking
Collaboration
Results-
Orientation
Toxicology
————-
Pharmacology
Molecular
Toxicology
————–
Problem-
Solving
Results-
Orientation
Collaboration
Disease Area
————-
Clinical Trial
Design
Results
Interpretation
————–
Communicate
Collaboration
Brand and
Market
Knowledge
Disease Areas
————–
Project
Management
————–
Leadership
Collaboration
Results
Orientation
Chemical &
Mechanical
Engineering
————-
Production
Design
Testing &
Analysis
Operations
Management
————–
Detail
Orientation
Formulation
————–
Analytical
Chemistry
Process
Chemistry
Scale Up
————–
Analytical
Thinking
OPERATIONSDEVELOPMENT COMM
P
R
O
C
E
S
S
E
S
P
E
O
P
L
E
DISCOVERY
V
A
L
U
E
Lead
Optimization
Predictive
Science
Personalized
Medicine
Bioscientists
Chemists
Toxicologists
SCM
Specialists
Clinician/
Physicians
Pre-Clinical
Clinical Trial
Design
Patient Insight
Manufacture
Packaging
Distribution
Branding
Sales/Mkt
Pharmacists
Chem/Mech
Engineers
Brand
Marketers
Brand Team
Leader
PharmaCo
325
C
O
M
P
E
T
E
N
C
IE
S
125 25 55 30 15 320
206 85 20 50 20 15 255
63% 68% 80% 91% 62% 100% 79%
Required
Quali�ed
HC
Readiness
Assessing a Firm’s Human CapitalFigure 2.10
89624_ch02_hr_038-083.indd 63 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
64 Part 1 Human Resources Management in Perspective
2.5 Step Four: Formulating a Strategy
Think once again about your education, your major, and career choices. After you
looked at possible careers, the opportunities they presented, and your ability and desire
to do them, you probably had to formulate a strategy for pursuing one of them by
choosing a college. When you graduate, you will have to formulate a strategy for suc-
cessfully landing a job in your field. Similarly, after managers have analyzed the internal
strengths and weaknesses of a firm, as well as external opportunities and threats, they
have the information they need to formulate corporate, business, and HR strategies for
the organization.
Strategy formulation builds on a SWOT analysis, discussed earlier in the chapter.
A SWOT analysis can help a company move from formulating a strategy, to devising a
plan, to capitalizing on opportunities, to counteracting on threats, to alleviating internal
weaknesses. Figure 2.11 is an example of a SWOT analysis done for the women’s cloth-
ing brand Liz Claiborne.
2.5a Corporate Strategy
A firm’s corporate strategy includes the markets in which it will compete, against whom,
and how. Some firms choose a concentration strategy that focuses on only a portion of
the industry. Visteon Corporation specializes in electronics, climate, and powertrain
technologies for the automotive industry. In contrast, Henry Ford at one time owned
everything from the ore mines needed to make steel for his cars, all the way down to the
showrooms in which they were sold.
Growth and Diversification
Emerging and growing companies execute their strategies differently than mature com-
panies or those in decline. As companies grow, they often formulate geographic, vol-
ume, and product-expansion strategies. HR planning is vital to these decisions because
Think about a firm you
enjoy doing business
with or one you don’t.
What competitive strat-
egy does it pursue? Do
you think its employees
have the right skills
given the strategy?
Do you detect any
mismatches?
LO 4
Strengths Weaknesses
• Brand Recognition
• Understanding Customer Needs
• New Product Lines
• Advertising Scheme
• Product Diversification Strategy
• Tailor to Changing Needs
• Preferences and Lifestyles
• Changing Consumer Needs
• Highly Competitive Market
• Long Lead Time Bringing New Styles to
Market
• Clothing Line Is Complete Success or Costly
Mistake
Opportunities Threats
• Overseas Markets
• Worldwide Advertising
• Entering the Large Size Consumer Market
• Designing Mix-and-Match Outfits
• Men’s Sportswear
• Key Competitors
• Strict Government Regulations
• Changing Shopping Patterns
• Quota Restrictions
An Example of a SWOT Analysis for Liz ClaiborneFigure 2.11
Source: “Liz Claiborne SWOT Analysis,” WikiSWOT, http://www.wikiswot.com.
89624_ch02_hr_038-083.indd 64 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
65Chapter 2 Strategy and Human Resources Planning
achieving growth requires three related elements: (1) increased employee productivity,
(2) a greater number of employees, and (3) employees developing or acquiring new
skills. Thus, a firm’s staffing, training, employee motivation efforts, and the like can
either enable the company to grow or limit its potential.
As companies diversify into new businesses, managers are faced with a “make or
buy” decision, just like Ford was. That is, should they develop the capabilities in-house
to produce their products or contract externally for them or at least parts of them? When
IBM entered the personal computer market in the early 1980s, it contracted with (then
startup companies) Intel and Microsoft to make the hardware and operating systems
for its PCs. The decision did not rest solely on human resource issues, but they were an
important part of the equation.
Eventually IBM got out of the PC business altogether by selling its PC product
lineup to the Chinese computer manufacturer Lenovo. Today IBM develops custom
technology services for businesses, which it believes will be more profitable in the
long run and a harder product for competitors to imitate. To help accomplish the
strategy, IBM bought up dozens of business-service-related companies and hired
their talent.
Some companies diversify far beyond their core businesses. At one time GE mostly
produced electrical and home-appliance products. Today its products include those
in the health, finance, truck and air transportation, oil and gas, and power and water
industries. To manage such a diverse portfolio, GE has invested heavily in developing
its talent and leadership abilities in contrast to its traditional focus on manufacturing,
much of which it has outsourced.
Mergers and Acquisitions
As we have explained, the world has seen a host of mergers and acquisitions in recent
years. They include such firms as AT&T and TimeWarner, Fiat and Chrysler, American
Airlines and U.S. Airways, and others. When companies merge, they can often stream-
line their costs by eliminating duplicate functions, such as duplicate accounting, finance,
and HR departments, for example.
However, many mergers end up being risky because they do not go well (mea-
sured by return on investment, shareholder value, and the like). Often the failure
is due to cultural inconsistencies, as well as conflicts among the managers of each
firm. The failure of the merger between the German firm Daimler-Benz (the manu-
facturer of Mercedes Benz vehicles) and Chrysler in 1998 is an example. Although
the German portion of the firm had superior technology, reportedly it was less than
eager to share its knowhow with its American counterparts. Problems like this one
point directly to the importance of effective HR planning prior to—and during—the
merger process.
Strategic Alliances and Joint Ventures
Sometimes firms do not acquire or merge with another firm but instead pursue coop-
erative strategies such as a strategic alliance or joint venture. Especially when firms
enter into international joint ventures, the issues of culture (both company culture and
national culture) become paramount. On the front end, HR plays a vital role in assess-
ing the compatibility of cultures and potential problems. As the alliance is formed, HR
helps select key executives and develops teamwork across the respective workforces. In
addition, HR is typically involved in the design of performance assessment and mutual
incentives for the alliance.
89624_ch02_hr_038-083.indd 65 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
66 Part 1 Human Resources Management in Perspective
2.5b Business Strategy
While we think about corporate strategy as domain selection, business strategy is viewed
in terms of domain navigation. It is more focused on how the company will compete
against rival firms to create value for customers. Companies can increase the value they
offer customers by decreasing the costs of their goods and services or by increasing
the benefits their products provide (or some combination of the two). Their business
strategies reflect these choices.
Low-Cost Strategy: Compete on Productivity and Efficiency
A low-cost strategy means keeping your costs low enough so that you can offer an
attractive price to customers relative to your competitors. Organizations such as Dell,
Walmart, and Spirit Airlines have been very successful competing based on a low-cost
strategy by focusing on efficiency, productivity, and minimizing waste. These types of
companies often are large and try to take advantage of economies of scale in the produc-
tion and distribution of goods and services so they can sell them at lower prices, which
leads to higher market shares, volumes, and (hopefully) profits. However, even a low-
cost leader must offer a product or service that customers find valuable. As one CEO put
it, “You can make a pizza so cheap that no one will buy it.”23 Ultimately organizations
need to use a cost strategy to increase value to customers rather than take it away.
A low-cost strategy is linked to HR planning in several ways. The first has to do with
productivity. A common misconception about low-cost strategies is that they inevitably
require cutting labor costs. On the contrary, there are several good examples of companies
that pay their employees “top dollar” but gain back cost advantages because of excellent
productivity. That is, they get a terrific “bang for the buck.” Either they produce more from
the workforce they have, or they can produce the same amount with a smaller workforce.
According to Peter Cappelli, who heads the Center for Human Resources at
the Wharton School at the University of Pennsylvania, the productivity of the best-
performing staffs can be 5 to 20 times higher than the productivity of the worst-
performing staffs, depending upon the industry. Both Costco and Sam’s Club have
low-cost, high-volume strategies. However, one study found that the pay and benefits
to Costco’s employees far outstripped those earned by Sam’s Club employees, but so do
Costco’s profits per employee. In addition, employee turnover and the costs associated
with it are much lower for Costco.26 Similarly, Billy Beane, the general manager of the
Oakland A’s, became famous for making the most of the A’s small payroll. Beane did so
by carefully choosing and developing players and using them more strategically than
other major league teams with bigger payroll budgets.
The second way that low-cost strategies are linked to HR pertains to outsourcing.
Companies consider contracting with complementary (external) partners that can
perform particular activities or services equally well (or better) at a lower cost. However,
organizations need to have a clear understanding of their core processes and skills. Too
often, a firm bases outsourcing decisions on costs alone. But this can lead to detrimental
effects if the skills base of the firm’s employees suffers and its core capabilities erode.
Differentiation Strategy: Compete on Unique Value Added
Another way to compete is by providing something unique and distinctive to customers,
such as a high-quality product, innovative features, speed to market, or superior ser-
vice. The Ritz-Carlton’s commitment to quality and luxury, FedEx’s focus on speed and
flexible delivery, Neiman Marcus’s commitment to high fashion and customer service,
89624_ch02_hr_038-083.indd 66 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
67Chapter 2 Strategy and Human Resources Planning
and Apple’s emphasis on innovation and product
development are all easily identifiable examples
of differentiation strategies.
Each of these strategies is rooted in human
resources management. Companies that focus on
service, for example, need to identify and support
ways to empower employees to serve customers
better. Relative to companies that emphasize low
cost and efficiencies, differentiating companies
will bend the rules a bit more and customize
products and services to let the customer “have
it their way.” In place of rigid rules, Starbucks
looks for prospective employees with the ability
to make good decisions on their own. Similarly,
Nordstrom’s employee handbook consists of just
a single 538 index card that reads: “Welcome to
Nordstrom. Rule #1. Use your good judgment in
all situations. There will be no additional rules.”
2.5c HR Strategy
A firm’s HR strategy must work in tandem with its corporate and business strategies. For
example, decisions have to be made about the composition of the workforce. Getting the
right number and kinds of people in right places at the right times doing things that ben-
efit them and the firm is no small task. Too often firms focus on their core employees,
such as knowledge workers, because they are in the best position to implement a firm’s
strategies. But core workers alone can’t make or break a company. Engineering may
develop a great product, but if the firm’s customer service representatives do a poor job
of helping customers with the good or service, its sales will suffer—as will the company.
Instead, the firm must focus on all of its talent, including support employees, con-
tractors, temporary employees, and complementary partners and how they mesh with
one another. Each group of workers differs in terms of the human capital they bring,
the expectations placed on them, the extent to which they are trained and developed,
and so on. Subcultures will also emerge from the various groups. The firm’s engineers
may have a whole different way of working and viewing the firm than, say, the com-
pany’s customer representatives. HR managers have to examine and analyze these
differences. They and line managers then have to formulate a plan that blends the
firm’s structure, culture, operations, technology, and “people management” practices
in ways that facilitate a firm’s competencies and drive its strategies forward.27
2.6 Step Five: Executing a Firm’s Strategy
As the old saying goes, “Well begun is half done”—but only half. Like any plan, formu-
lating the appropriate strategy is not enough. You can’t be successful by just planning
to go to college and formulating a strategy to get a career. You have to actually do it. As
you know, this is easier said than done.
Similarly, strategy alone does not differentiate high- from low-performing firms.
The true differentiator between winners and losers turns out to be, not what their
Billy Beane won
more games by using
statistics and other
analytics to manage
the Oakland A’s.
A
P
Im
ag
es
/J
us
tin
S
ul
liv
an
Why is it difficult to
translate a firm’s strat-
egy into HR deliverables
that actually get the job
done? What part of this
endeavor do you think
HR managers struggle
with the most?
LO 5
89624_ch02_hr_038-083.indd 67 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
68 Part 1 Human Resources Management in Perspective
strategies were, but how well the strategy was executed. Yet half of managers in one sur-
vey said there is a gap between their organization’s ability to develop a vision and strategy,
and then actually execute it. Former Honeywell CEO Larry Bossidy noted in his book
Execution that people believe they understand the concept—“it’s about getting things
done”—but when asked how they get things done, “the dialogue goes rapidly downhill.”
Figure 2.12 shows the “4As” required to successfully execute a strategy. They are
as follows:
• Alignment. Alignment occurs in an organization when it has a clear strategic intent,
its staff has shared performance expectations, and are accountable for the results.
We will talk about alignment more later in the chapter.
• Agility. Execution is not a “one and done event.” It’s also about competing tomorrow.
The key to execution increasingly depends on being agile, nimble, and proactive in
the face of change. As the great former hockey player Wayne Gretsky used to say, “I
don’t skate to where the puck is. I skate to where the puck is going to be.”
• Architecture. A firm’s architecture consists of its structures, processes, and systems.
Ideally, they should be simple and streamlined so as to propel the firm to success.
But too often a firm’s architecture can end up being complicated and entangle a
firm like a straightjacket.
• Ability. As we have explained, products and processes are easy to duplicate. Talent
is not. Strategy execution (and ultimately growth, and profitability) depend on a
firm’s talent capacity—a talented group of leaders, managers, and employees work-
ing together in an engaged and collaborative way.
As the figure shows, execution is the process of combining these four elements of human
capital and organizational capital.
ALIGNMENT
•
•
•
AGILITY
TYPE OF RESOURCE
Human Capital Organization Capital
ABILITY ARCHITECTURE
Clear strategic intent
Shared performance
expectations/culture
•
•
•
External connection
Strengthening the core
Organizational learning
•
•
•
Simplified structures
System and technology
utilization
Streamlined processes
•
•
•
Talent capacity
Leadership bench
Engagement and
collaboration
Accountability for results
The 4As Framework of Execution CapabilityFigure 2.12
89624_ch02_hr_038-083.indd 68 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
69Chapter 2 Strategy and Human Resources Planning
2.6a HR’s Role in Strategy Execution
In addition to formulating corporate- and business-level strategies, managers need to
“translate” strategic priorities into functional areas of the organization (such as market-
ing, manufacturing, human resources, and the like). Human resources management is
instrumental to almost every aspect of strategy execution, whether it pertains to the
organization’s structure, systems, style, skills, staff, or shared values.
Remaining Agile
Like the firm as a whole, HR has to focus on ensuring agility when the environment
changes. HR agility can be achieved in two primary ways: coordination agility and
resource agility.
Coordination agility is the ability to rapidly reallocate resources to new or changing
needs. Through HRP, managers can anticipate upcoming events, keep abreast of changes
in legal regulations, forecast economic trends, spot competitors’ moves, and the like.
With advance notice, managers can move people into and out of jobs, retrain them for
new skill requirements, and modify the kinds of incentives they use. The use of a contin-
gency workforce composed of part-timers, temporary employees, and complementary
partners also helps achieve coordination flexibility.28
Resource agility, on the other hand, results from having resources that can be used
in different ways and people who can perform different functions in different ways.
Cross-training employees, rotating them into different jobs, and using teams are all
efforts that focus on building a flexible workforce.
Reconciling Supply and Demand
Part of remaining agile includes reconciling the firm’s demand for its products with its
supply of employees. Demand considerations are based on forecasted trends in business
activity. Supply considerations involve determining where and how candidates with the
required qualifications can be found to fill a firm’s vacancies.
In an effort to meet their human resource demands, organizations have many staff-
ing options, including recruiting and hiring full-time employees as well as reducing their
turnover, having employees work overtime, recalling laid-off workers, using temporary
or contract employees, and outsourcing or offshoring some of their business processes.
Some of the ways firms say they are, or will, attract and retain babyboomers to avoid
future labor shortages include offering employees flexible scheduling, health care, and
long-term care benefits as they eventually retire.29
If its labor shortages are acute, a company may have to develop talent from the
ground up. For example, knowing that about 40 percent of its aging workforce would be
eligible for retirement in 5 years, Saudi Aramco, a Saudi-owned oil company, developed
a system of hiring top high-school graduates in the country, sponsoring their college
educations, and providing them with job training. The company employs 400 planners
to analyze its workforce needs for the next decade and beyond.30
When forecasts show a surplus of employees, organizations often restrict their
hiring, reduce their employees’ work hours or furlough them, and consider layoffs.
Across-the-board pay cuts are sometimes utilized in lieu of or in addition to layoffs.
Some organizations try to reduce their workforces by relying on attrition, which is a
gradual reduction of employees that occurs due to employee resignations, retirements,
and deaths. Programs in which employees are offered “sweetened” retirement benefits
to leave a firm earlier than planned are common in large companies.
89624_ch02_hr_038-083.indd 69 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
70 Part 1 Human Resources Management in Perspective
As we have discussed, organizations have to be constantly prepared to exit and
enter new lines of business, restructure, outsource, offshore, and sometimes downsize
either because they have too many employees or employees with the wrong skill sets.
Decisions about employee layoffs are usually based on seniority and/or performance.
In some organizations, especially in Japanese firms, seniority is more likely to be the
primary consideration. In other organizations, factors such as an employee’s ability and
productivity take precedence over seniority. In the case of unionized organizations, the
criteria for determining who will be laid off are typically set forth in union agreements
and based on seniority. Unions recognize seniority because they feel that their members
deserve certain rights proportionate to the years they have invested in their jobs.
Employers often recognize the seniority of employees who are not unionized,
though. But one disadvantage of doing so is that the less-competent employees can end
up receiving the same rewards and security as the more-competent employees. Also,
the practice of using seniority as the basis for deciding which workers to lay off can
inadvertently have a disparate impact on women and minority workers, who often have
less seniority than other groups of workers.
When firms are downsizing, HR managers must ensure no laws are violated in the
process, of which there are many. They range from laws designed to protect minorities
and older employees from being unfairly targeted to laws requiring companies of a cer-
tain size laying off a certain number of employees to give them warning between 60 days
to 6 months. Firms must also comply with government provisions, giving some workers
who have been laid off and their families the right to temporary health care coverage at
group rates. We will talk more about these laws in Chapter 13.
2.7 Step Six: Evaluation
You probably know someone who graduated, went to work in a particular field, assessed
their success (or lack of it) in that field, and then decided to do something else for a
living. The same sort of reevaluation and assessment is an important function for busi-
nesses as well. At one level, it might seem that assessing a firm’s effectiveness is the final
step in the planning process. But it is also the first step. Planning is cyclical, of course,
and while we have somewhat conveniently placed evaluation at the end of this chapter,
the information it provides actually provides firms with inputs they need for the next
cycle in the planning process.
To evaluate their performance, firms need to establish a set of “desired” objectives
as well as the metrics they will use to monitor how well their organizations delivered
against those objectives. The objectives can include achieving a certain level of produc-
tivity, revenue, profit, market share, market penetration, customer satisfaction, and so
forth. For example, after Barnes and Noble saw lackluster sales for its Nook e-reader,
the company reevaluated its strategy and began contemplating selling its Nook division
for partnering with another company to produce it. Today it develops the tablets in
conjunction with Samsung.
2.7a Evaluating a Firm’s Strategic Alignment
This involves all aspects of the business, but in particular there needs to be a clear align-
ment between HR and the requirements of an organization’s strategy. HR policies and
practices need to achieve two types of fit: vertical and horizontal.31
As an HR manager,
how would you know
whether or not your
firm’s overall strategy
and HR strategy were
being successfully
implemented?
LO 6
89624_ch02_hr_038-083.indd 70 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
71Chapter 2 Strategy and Human Resources Planning
Vertical Fit/Alignment
Vertical fit (or vertical alignment) focuses on the connection between the business’s
objectives and the major initiatives undertaken by HR. On the one hand, as we noted
earlier, if a company’s strategy focuses on achieving low cost, its HR policies and prac-
tices need to encourage employees to work more efficiently and be more productive.
On the other hand, if the organization competes through innovation and new product
development, then its HR policies and practices would be more aligned with the notion
of fostering creativity and flexibility.
When ensuring alignment, firms have to ask themselves whether or not their capa-
bilities, including those of its employees, are aligned with its value proposition. Most
observers would agree that Tom Monahan, founder of Domino’s, was able to change the
pizza industry not because he created a better product but because he was able to offer
a different value proposition—delivery in 30 minutes or the pizza was free—and then
created the capability to “deliver” against that promise. Case Study 2 discusses Domino’s
alignment in more detail.
Horizontal Fit/Alignment
In addition to vertical alignment, or fit, managers need to ensure that their HR practices
are all aligned with one another internally to establish a configuration that is mutually
reinforcing. The entire range of the firm’s HR practices—from its job design to staff-
ing, training, performance appraisal, and compensation—need to focus on the same
objectives. Too often, one HR practice will emphasize one objective, whereas another
HR practice will emphasize another. Charles Schwab & Co. faced this situation. The
company has a reputation in the financial services industry for developing a culture of
teamwork that has been important to its strategy. However, when it changed its com-
pensation strategy to provide more rewards to its high-performing brokers, the firm
sent mixed signals to its employees. Which is more important: teamwork or individual
high flyers?32
Figure 2.13 shows an example of how organizations can assess the horizontal fit
of their HR practices. There are essentially three steps. First, managers need to iden-
tify the key workforce objectives they hope to achieve. The objectives might include
loyalty, customer service, productivity, and creativity. Second, managers would iden-
tify each of the HR practices used to elicit or reinforce those workforce objectives
(job design, staffing, training, appraisal, compensation, and so on). Third, managers
would evaluate each HR practice on a scale of –5 (not supportive) to 5 (supportive).
By tallying up the ratings across managers, organizations can get a very clear idea
of which HR practices are working together to achieve the workforce objectives and
which are not.
Keep in mind that horizontal fit is a necessary, but insufficient, cause of strategic
alignment. A company could have nearly perfect alignment among its HR practices,
and they still might not be aligned with the competitive strategy. For that reason, it is
important for managers to assess both vertical and horizontal fit.
Strategic Alignment and the Balanced Scorecard
One of the tools for mapping a firm’s strategy to ensure strategic alignment is the
balanced scorecard (BSC). Developed by Harvard professors Robert Kaplan and David
Norton, the BSC is a framework that helps managers translate their firms’ strategic goals
into operational objectives. The model has four related cells: (1) financial, (2) customer,
(3) processes, and (4) learning. The logic of the BSC is firmly rooted in human resources
balanced scorecard
(BSC)
A measurement frame-
work that helps manag-
ers translate strategic
goals into operational
objectives.
89624_ch02_hr_038-083.indd 71 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
72 Part 1 Human Resources Management in Perspective
management. People management and learning help organizations improve their
internal processes and provide excellent customer service. Internal processes—product
development, service, and the like—are critical for creating customer satisfaction and
loyalty, and they are also important for ensuring productivity to contain costs for bet-
ter financial performance. Customer value creation, in turn, drives up revenues, which
enhances profitability.
Figure 2.14 shows how this might work at Starbucks. In each cell, Starbucks would
identify the key metrics that help translate strategic goals to operational imperatives.
For example, under customer metrics, Starbucks might look at percentage of repeat
customers, number of new customers, growth rate, and so forth. Under people met-
rics, managers might measure the numbers of suggestions provided by employees, par-
ticipation in the Starbucks stock sharing program, employee turnover, training hours
spent, and the like. Each of these cells links vertically. People management issues such
as rewards, training, and suggestions can be linked to efficient processes (brewing the
perfect cup, delivering top-notch customer service, etc.). These processes then lead to
better customer loyalty and growth. Growth and customer loyalty in turn lead to higher
profitability and market value.
Assessing Horizontal FitFigure 2.13
89624_ch02_hr_038-083.indd 72 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
73Chapter 2 Strategy and Human Resources Planning
••Average tenure
••Voluntary turnover
••Engagement
survey
Objectives Measures
••Number of
customers
••New stores
••Repeat customers
••Same store sales
••Customer feedback
••First time right
••Order ful�llment
Initiatives
••Customer
engagement
••Automation
••40 hrs. training
••Employee
awards
••Store develop
••New products
••Customer
loyalty program
••New partners
Targets
••Market value
••Revenue
••General and
administrative
costs as % of Sales
••20 mill/week
••1500/yr
••15% 2/wk
••13% growth
••90+
satisfaction
••99+%
accurate
••<3 minutes
••Mgr >3 yrs
••Barista 80%
••85% rating
••Pro�tability
••Grow revenues
••Improve cost
structure
••New customers
••More value to
current (now)
customers
••Friendly service
••Accurate orders
••Fast ful�llment
••Store manager
stability
••Barista
engagement
Strategic Theme:
“The Third Place”
Long Term
Shareholder Value
Financial
People
Customer
Internal
Attract & Retain
Customers
Grow
Revenues
Premium
Coffee
••20%
Compound
annual
growth rate
(CAGR)
••Intl. growth
••U.S. growth
Engage
Cust.
Fill
Orders
Baristas
Asset
Utilization
Store
Manager
Building the Metrics ModelFigure 2.14
Strategic human resources management
(SHRM) integrates strategic planning and HR planning.
It can be thought of as the pattern of human resource
deployments and activities that enable an organization
to achieve its strategic goals. The firm’s mission, vision,
and values provide a perspective on where the company
is headed and what the organization can become in the
future. Ideally, they clarify the long-term direction of
the company and its strategic intent.
Analyzing the firm’s external environment is
central to strategic planning. Benchmarking is the pro-
cess of looking at your practices and performance and
then comparing them to those of your competitors.
Environmental scanning is the systematic monitor-
ing of major external forces influencing the organi-
zation, including forces in the business environment
and the competitive environment. Changes in the
external environment have a direct impact on the way
LO 1
LO 2
Summary
organizations are run and people are managed. Some
of these changes represent opportunities, and some of
them represent real threats to the organization.
Conducting an internal analysis to gauge the
firm’s strengths and weaknesses involves looking at
a firm’s core capabilities, its talent and composition in the
firm, and the firm’s corporate culture. An internal analy-
sis enables strategic decision makers to assess the organi-
zation’s workforce—its skills, cultural beliefs, and values.
An organization’s success increasingly depends on
the knowledge, skills, and abilities of employees, partic-
ularly as they help establish a set of core capabilities that
distinguish an organization from its competitors. When
employees’ talents are valuable, rare, difficult to imitate,
and organized, a firm can achieve a sustained competi-
tive advantage through its people. HRP is a systematic
process that involves forecasting the demand for labor,
performing supply analysis, and balancing supply and
LO 3
89624_ch02_hr_038-083.indd 73 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
74 Part 1 Human Resources Management in Perspective
demand considerations. Quantitative and qualitative
methods help a firm identify the number and type of
people needed to meet the organization’s goals.
After managers have analyzed the internal
strengths and weaknesses of the firm, as well as exter-
nal opportunities and threats, they have the informa-
tion they need to formulate corporate, business, and
HR strategies for the organization. A firm’s corporate
strategy includes the markets in which it will compete,
against whom, and how. The firm’s business strategy
is viewed in terms of domain navigation. It is more
focused on how the company will compete against
rival firms to create value for customers. A firm’s HR
strategies and practices should be aligned with its cor-
porate and business strategies.
Formulating an HR strategy is only half of the
HR battle. The strategy must also be executed. Human
resources management is instrumental to almost
every aspect of strategy execution, whether it pertains
to the organization’s structure, systems, style, skills,
staff, or shared values. Like the firm as a whole, HR
LO 4
LO 5
has to focus on ensuring agility when the environment
changes. Employment forecasts must also be recon-
ciled against the internal and the external supplies
of labor the firm faces. This can include having cur-
rent employees work overtime; hiring full-time, part-
time, or contract employees; downsizing employees;
furloughing them; and outsourcing or offshoring. If
there is a labor shortage, the firm might have to refor-
mulate its long-term and short-term strategic plans or
find ways to develop employees “from the ground up.”
To evaluate their performance, firms need
to establish a set of “desired” objectives as well as
the metrics they will use to monitor how well their
organizations delivered against those objectives. The
objectives can include achieving certain levels of pro-
ductivity, revenue, profit, market share, market pen-
etration, customer satisfaction, and so forth. Issues of
measurement, alignment, fit, and agility are central to
the evaluation process. Firms use strategy mapping,
the balanced scorecard (BSC) tool, and various HR-
related metrics for these purposes.
LO 6
balanced scorecard (BSC)
benchmarking
business environment
competitive environment
core capabilities
core values
cultural audits
environmental scanning
human capital readiness
human resources planning (HRP)
management forecasts
Markov analysis
mission
quality of fill
replacement charts
skill inventories
staffing tables
stakeholders
strategic human resources
management
strategic planning
strategic vision
succession planning
SWOT analysis
talent reviews
trend analysis
value creation
Key Terms
Identify the three key elements of the human
resources planning model and discuss the rela-
tionships among them.
What external forces influence a firm’s
strategy?
What criteria must be met if firms are to achieve a
competitive advantage through their employees?
LO 1
LO 2
LO 3
Explain the difference between a firm’s cor-
porate strategy and business strategy. Why do
firms need to look at both aspects?
Why is it often difficult for a firm to match its
strategy to HR deliverables?
What steps does the firm need to take to exe-
cute its strategy and measure the results?
LO 4
LO 5
LO 6
Discussion Questions
89624_ch02_hr_038-083.indd 74 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Customizing HR for Different Types of Human Capital
wants to give her all the room she needs to grow and stay
committed to the firm.
Calvin Duff is a salesperson on the retail side of the firm. He
has daily contact with customers and is responsible for mak-
ing sales and communicating with service personnel. Make
no mistake: To many customers, Calvin and his coworkers are
the “face” of the company. Always on the lookout for a bet-
ter position, Calvin has thought about working for PeachTree
Computing, Applied Software Solution’s main competitor.
Other salespeople have found that they can leave Applied
Software Solutions and get “up to speed” easily at other firms.
Their skills are very transferable, and the transition is not diffi-
cult. Bill Ding and other managers at the company recognize
this fact, so they try to keep salespeople loyal and productive,
recognizing that many of them do eventually leave.
Chandra Singh is a part-time administrative assistant for
Applied Software Solutions. She handles routine typing and
filing work for the company, particularly in peak periods in
the summer and around the holidays. She usually works for a
few weeks at a time and then takes time off. The executives at
the company have considered either outsourcing her job to
an agency or automating it through a new computer system.
But for now things are steady.
Part of strategic planning is mapping an organization’s
human capital. When we look at the strategic value of a
person’s skills as well as their uniqueness, we soon discover
that organizations are comprised of different kinds of work-
ers who have very different kinds of skills. Some are core
knowledge workers; some are more traditional job-based
employees; some are contract workers; and some are exter-
nal partners. It is unlikely a firm would manage all of these
employees the same way. There are differences in HR prac-
tices for different groups. That is not bad, but it makes the job
of HR managers more difficult.
Assignment
The following are descriptions of three different employees.
How would you characterize each worker? What role does
each play when it comes to the organization’s strategy?
Sobadia Bascomb is a highly talented computer program-
mer for Applied Software Solutions. She is among an elite set
of engineers in the computer industry doing leading-edge
work on advanced computer modeling. The firm’s CEO, Bill
Ding, believes the future of the company rests on the innova-
tive work that Sobadia and her team are doing. He worries
that someone might lure her away to work for them, so he
CASE STUDY How a Strategy Change Led to Nike’s Formation1
Nike, the world’s most famous athletic company, didn’t
start out by making Air Jordans. In fact, it didn’t make
shoes at all. It distributed them.
Nike actually began as company called Blue
Ribbon. It was founded in 1964 by Phil Knight, a
runner from Oregon, along with his former college
track coach, Bill Bowerman. At the time, the run-
ning shoe market was dominated by the German
firms Adidas and Puma. However, Knight and
Bowerman had become intrigued by new lighter,
lower-cost running shoes made in Japan. Bowerman
had always tinkered with shoe designs to try to
make his runners faster. Meanwhile, Knight had
just earned an MBA from Stanford University and
was looking for a way to combine what he loved—
sports—with work. So, the two men each chipped in
$500, and began importing and selling Tiger-brand
shoes (now Asics) made by the Japanese company
Onitsuka.
Blue Ribbon’s start wasn’t glamorous. Bowerman
and Knight began by selling the shoes out of their cars
at local track meets. But runners liked the new lighter
shoes, and the company started earning a profit. Even-
tually the business did well enough it was able to hire
some employees, most of whom were passionate run-
ners like the owners.
75
89624_ch02_hr_038-083.indd 75 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
76 Part 1 Human Resources Management in Perspective
For about a decade Blue Ribbon’s strategy worked
well. Business grew, and the company even opened its
own store in Santa Monica, California. But by 1971,
the firm was facing a crisis. Bowerman wanted Onit-
suka to make a lighter shoe he had designed. Onitsuka
wasn’t interested. Moreover, Knight believed Onitsuka
was looking for other distributors to cut Blue Ribbon
out of the business.
What did Knight and Bowerman do? They
designed their own shoe called “the Nike” and began
selling it. Executives at Onitsuka were enraged by the
move. They immediately stopped selling shoes to Blue
Robbin and sued it to boot.
At that point, it looked like it might be the end of
the road for Blue Ribbon. There wasn’t much of a mar-
ket for the Nike shoes yet. The company was still young
and in debt, and a lawsuit would be expensive to fight.
Knight gave Blue Ribbon’s employees the bad
news. But instead of throwing in the towel, he laid
out a new vision and mission for the firm: “This is
the moment we’ve been waiting for,” Knight recounts
telling them in his bestselling book, Shoe Dog. “No
more selling someone else’s brand. No more working
for someone else. Onitsuka has been holding us down
for years. Their late deliveries, their mixed-up orders,
their refusal to hear and implement our design ideas—
who among us isn’t sick of dealing with all that? . . . If
we’re going to succeed, or fail, we should do so on our
own terms, with our own ideas—our own brand.”
After the initial shock wore off, relief swept across
Blue Ribbon’s employees. Not only were they undaunted
by the new mission, they were energized and excited
about it. Their future lay in their own hands, and they
would find a way to achieve it. Immediately they began
formulating new strategies and plans.
Knight thinks the culture and agility of the com-
pany were major reasons why Nike became the suc-
cess it is today. Most, if not all, of its employees were
scrappy competitive types. “Each of us was willing
to do whatever was necessary to win,” he says. “And
if ‘whatever was necessary’ fell outside our area of
expertise, no problem. Not that any of us thought we
wouldn’t fail. In fact we had every expectation that we
would. But when we did fail, we had faith we’d do it
fast, learn from it, and be better for it . . . Taking a
chance on people—you could argue that’s what it’s all
been about.”
Questions
1. Who is ultimately responsible for formulating
a firm’s strategy—its managers, employees, or
both?
2. What strategy execution problems do you think
Knight and Bowerman might have faced in their
effort to make Nike successful?
Sources: Frank Kalman, “Nike, Phil Knight and The Power of Shared
Purpose,” Talent Economy (January 26, 2017), http://wwwtalentecon-
omy.com; Andy Gould, “Three Lessons for Entrepreneurs from Nike
‘Shoe Dog’ Phil Knight,” Motley Fool (January 17, 2017), http://fool.
com; Lara O’Reilly, “Eleven Things Hardly Anyone Knows about Nike,”
Business Insider (November 4, 2014), http://www.businessinsider.
com.
CASE STUDY Domino’s Tries to Get Its Strategic Recipe Right2
Believe it or not, years ago it was normal for people
to have wait an hour or more to get their pizzas deliv-
ered. But those were the years B.D.—before Domino’s.
Started by Tom Monahan and his brother in Ypsilanti,
Michigan, in the 1960s, Domino’s created a value
proposition people were hungering for: pizza deliv-
ered in 30 minutes or less. Better yet, if a Domino’s
pizza wasn’t delivered in 30 minutes, it was free. That
was unheard of in the pizza business.
Monahan changed the pizza industry not because
Domino’s created a better product but because it was
able to offer a different value proposition than anyone
else was offering and align its people, processes, and
systems to deliver against that promise. Domino’s
used assembly line–based systems and standardized
processes to improve efficiency and reduce pizza
preparation times. For example, it was the first to use
conveyor-belt oven technology to ensure uniform
temperatures and reduce baking times. Domino’s also
translated its strategy into HR deliverables by empha-
sizing and encouraging fast pizza-making and deliv-
ery. Annually the company holds a “World’s Fastest
Pizza Maker” competition in which its pizza makers
compete for cash and other prizes.
89624_ch02_hr_038-083.indd 76 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
77Chapter 2 Strategy and Human Resources Planning
As important as what Domino’s did is what it
did not do. Strategy is about making choices. Domi-
no’s did not focus on great pizza—it focused on fast
pizza. It did not customize every order but prepared
them all in advance. It didn’t hire premiere pizza
chefs who tossed pizza dough into the air to make
lighter crusts. It didn’t use the wood-fired stoves to
give the pizza an old-world taste. And it didn’t offer
in-store dining.
Each of the ingredients in Monahan’s formula was
aligned around its value proposition of fast delivery—
a strategy that worked well for Domino’s for decades.
This strategy and a franchise model helped the com-
pany grow by leaps and bounds. Today there are over
13,000 Domino’s pizza stores, which are located in
80-plus countries around the world. India is currently
the company’s hottest market.
Over time, however, Domino’s competitive envi-
ronment changed. Other companies began delivering
pizzas in about 30 minutes, and consumers began
wanting more than fast pizza: They wanted good
pizza. The problem was that Domino’s wasn’t deliver-
ing on that score. In taste tests, customers complained
Domino’s pizzas tasted like cardboard. At one point,
the firms’ customer-satisfaction scores in terms of
its food and service were lower than any other pizza
chain. Perhaps not surprisingly, the firm’s stock price
reflected as much.
To turn things around, the company had to
rethink its value proposition. That included revamp-
ing its food. The company developed a new recipe for
its pizza crusts; began using fresher, gourmet types of
ingredients; and began offering new products, such as
artisan pizzas, pasta, and desserts. It also remodeled
stores and added in-store dining. But Domino’s had to
revamp its HR strategies and policies, too. One prob-
lem was employee turnover. Domino’s turnover rate
was 158 percent annually. In other words, for every
employee hired during a year another 1.5 employees
quit.
Domino’s CEO at the time, David Brandon, wasn’t
convinced that higher pay for hourly-wage employees
was the solution though. “If we could have increased
everybody’s pay 20 percent could we have moved the
needle a little bit to buy some loyalty? Maybe, but
that’s not a long term solution.” Moreover, because
most of Domino’s stores are individually owned rather
than corporate owned, it is the individual owners of
the stores who have to decide for themselves whether
to increase hourly wages.
Instead, the company focused on the quality of
store managers—choosing better ones, finding ways
to retain good ones, and coaching them to train and
motivate employees by being respectful and polite.
It’s store managers who cause employees to stick
around—or not, said Rob Cecere, a regional man-
ager for Domino’s. Employees can go to McDonald’s
or Pizza Hut and make as much as they make at
Domino’s. “You’ve got to make sure they are happy
to come to work for you,” Cecere explained. Domi-
no’s also worked harder to promote a culture of “fun”
via its World’s Fastest Pizza competition and other
initiatives.
Domino’s chief strength still lies in its systems
and technology though. The biggest department at
the firm’s headquarters in Ann Arbor, Michigan,
is its technology department. The department has
built novel applications over the years, such as an
online ordering system that allows customers to
“build” their pizzas online and track their prepara-
tion, cooking, and delivery times. Customers can
also use a mobile app for ordering, an emoji to text
a standard order, or simply tell “Dom,” Domino’s
chatbot, what they want. In Australia and New Zea-
land, the company is experimenting with robot and
drone delivery.
Has Domino’s new recipe worked? By most
accounts, yes. Turnover dropped by more than 100
percent following the initiative, and customer satisfac-
tion scores jumped up, too. In 2016, Domino’s sales
growth was the best among the 25 largest restaurant
chains in the United States. Its stock price has rocketed
upward as well.
Still, strategy changes and their implementation
are continually evolving challenges for firms, and
Domino’s is no exception. “We need to understand
what’s going on and create competitive advantage by
being ahead of the curve,” says the company’s current
CEO J. Patrick Doyle. For one, the company still faces
issues with its HR piece of the puzzle and ensuring its
strategy is aligned all the way down the food chain.
Recently a group of franchise owners in New York
agreed to pay $1.5 million to settle cases for mini-
mum-wage and overtime violations.
Doyle says the firm has to start paying higher
wages. Minimum-wage laws are rising in some states,
89624_ch02_hr_038-083.indd 77 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
78 Part 1 Human Resources Management in Perspective
and employers like Walmart and Target are raising
their minimum wages. “The reality is the labor market
is tightening up, and we’ve got to respond to that. It’s
getting harder to hire people,” says Doyle. “We’ve got
to do what the market demands to get the right people
for our business,” he says.
Will paying hourly-wage employees a little more
buy Domino’s a little more loyalty and prevent nega-
tive publicity for the company? And if so, would the
costs have been worth the benefits? And who should
incur these costs since most of the stores are privately
owned? These questions are food for thought, ones
that Domino’s will have to resolve.
After all, even with the best technologies and
systems, pizzas don’t cook and deliver themselves.
People do.
Questions
1. Explain how Domino’s strategy differed from its
competitors.
2. Has the firm been able to achieve a long-term
strategic fit between its strategy and HR practices
in your opinion? Why or why not?
Sources: Dave Buss, “What Matters to Domino’s: Five Questions
with CEO J. Patrick Doyle,” Brandchannel (January 23, 2017), http://
brandchannel.com; Kevin McCoy, “N.Y. Sues Domino’s Pizza for
Alleged Wage Theft,” USA Today (May 24, 2016), http://www.usatoday.
com; “Domino’s Pizza Will Have to Raise Wages to Stay Competitive,”
Reuters (April 6, 2015), http://www.reuters.com; William James, David
Kretzman, “Why Domino’s Digital Component Is Important,” Motley
Fool (December 10, 2013), http://motleyfool.com; Erin White, “To Keep
Employees, Dominos Decides It’s Not All about Pay,” The Wall Street
Journal (February 17, 2005), http://online.wsj.com.
1. Chistopher Rees, Hasanah Johari, “ ‘Senior Managers’ Per-
ceptions of the HRM Function during Times of ‘Strategic
Organizational Change,’ ” Journal of Organizational Change
Management 23, no 2. (2010): 517.
2. Scott A. Snell, Mark Shadur, and Patrick M. Wright, “Human
Resources Strategy: The Era of Our Ways,” in M. A. Hitt, R.
E. Freeman, and J. S. Harrison (eds.), Handbook of Strategic
Management (Oxford, UK: Blackwell, 2002), 627–49; Patrick
M. Wright, Benjamin Dunford, and Scott A. Snell, “Human
Resources and the Resource-Based View of the Firm,” Journal
of Management 27, no. 6 (2002): 701–21; “What’s Affecting
HR Operations? Globalization, Sustainability, and Talent,” HR
Focus 84, no. 8 (August 2007): 8; Doris Sims, “Do You Know
Where Your Talent Is?” Training 45, no. 1 (January 2008):
46–46.
3. “The Importance of HR,” HRFocus 73, no. 3 (March 1996):
14; David Brown, “HR’s Role in Business Strategy: Still a
Lot of Work to Be Done,” Canadian HR Reporter 14, no. 19
(November 5, 2001):1–20; “How Should the HR Dept. of 2004
Be Structured?” Human Resource Department Management
Report, no. 3 (November 2003): 1.
4. Patrick Kiger, “Serious Progress in Strategic Workforce Plan-
ning,” Workforce Management (July 1, 2010), http://work-
force.com.
5. Bala Iyer, “Deconstructing Google,” Computerworld 42, no.
15 (April 7, 2008): 32–33.
6. “Core Values and the Companies that Do Them Well,
Grapper,” Grasslands: The Entrepreneurial Blog (April 4,
2010), http://grasshopper.com.
7. Jay J. Jamrog and Miles H. Overholt, “Building a Strategic HR
Function: Continuing the Evolution,” Human Resource Planning
27, no. 1 (March 2004): 51; Gary L. Nielson, Karla L. Martin,
and Elizabeth Powers, “The Secrets to Successful Strategy Exe-
cution,” Harvard Business Review 86, no. 6 (June 2008):60–70.
8. Ann Zimmerman, “Dime a Dozen: Dollar Stores Pinched
by Rapid Expansion,” WSJ Online (February 4, 2013), http://
www.wsjonline.com.
9. Hiroko Tabuchi, “In America’s Heartland, Discussing Climate
Change without Saying ‘Climate Change,’ ” New York Times
(January 28, 2017), https://www.nytimes.com.
10. Kelly Marchese, Siva Paramasivam, Michael Held, and Deloitte
Consulting,“Bouncing Back: Supply Chain Risk Management
Lessons from Post-Tsunami Japan,”Industry Week (March 9,
2012), http://www.industryweek.com.
11. Paul Carsten,“Apple China Mobile Launch Could Spark
Costly Subsidy War,” Reuters (January 17, 2014), http:www
.reuters.com.
12. Jan Alexander,“Virgin America’s Guide to Not Screwing Up
Customer Service,” BNET (February 22, 2010), http://bnet.com.
13. John Gallagher,“Microsoft’s Move Boosts Detroit’s Credibility
as Tech Hub,” Detroit Free Press (February 3, 2017), http://
www.freep.com.
14. For example, see U.S. Department of Labor, Bureau of Labor
Statistics, Geographic Profiles of Employment and Unemploy-
ment. The data and information are accessible via the Office
of Employment Projections home page at http://www.bls.gov/
emp.
15. Ray Brillinger, “Best Practices: Human Resources Bench-
marking,” Canadian HR Reporter 14, no. 12 (June 18, 2001):
12; Chris Mahoney, “Benchmarking Your Way to Smarter
Decisions,” Workforce 79, no. 10 (October 2000): 100–103;
Brian E. Becker and Mark A. Huselid, “Strategic Human
Notes and References
89624_ch02_hr_038-083.indd 78 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
79Chapter 2 Strategy and Human Resources Planning
Resources Management: Where Do We Go from Here?” Jour-
nal of Management 32, no. 6 (January 2006): 898–925.
16. For more information on methods to identify a firm’s core
capabilities, see Khalid Hafeez, YanBing Zhang, and Naila
Malak, “Core Competence for Sustainable Competitive
Advantage: A Structured Methodology for Identifying Core
Competence,” IEEE Transactions on Engineering Management
49, no. 1 (February 2002): 28–35; J. B. Quinn, “The Intelligent
Enterprise: A New Paradigm,” Academy of Management Execu-
tive 6, no. 4 (2002): 48–63; Jane Wollman Rusoff, “Outsourced
Solutions: Brokerage Firms Looking to Focus on Their Core
Competencies Find the Most Value in a Resource-Rich Clear-
ing Partner,” Research 27, no. 11 (November 2004): 37–40.
17. Snell, Shadur, and Wright, “Human Resources Strategy,”
627–49; Wright, Dunford, and Snell, “Human Resources and
the Resource-Based View of the Firm,” 701–21; David Col-
lis and Cynthia Montgomery, “Competing on Resources,”
Harvard Business Review 86, no. 7/8 (July–August 2008):
140–150; Susan Cantrell, “The Work Force of One,” Wall
Street Journal 249, no. 140 (June 16, 2007): R10.
18. “ ‘SAS Again Ranks No. 1 on FORTUNE Best Companies
to Work For’ List in America,” SAS.com (January 20, 2011),
http://www.sas.com.
19. Joseph F. Castellan and Susan S. Lightle, “Using Cultural
Audits to Assess Tone at the Top,” CPA Journal 75, no. 2 (Feb-
ruary 2005): 6–11.
20. Patrick M. Wright, “Human Resource Strategy: Adapting to
the Age of Globalization,” SHRM Foundation.
21. Stephenie Overman, “Gearing Up for Tomorrow’s Work-
force,” HRFocus 76, no. 2 (February 1999): 1, 15; Kathryn
Tyler, “Evaluate Your Next Move,” HRMagazine 46, no. 11
(November 2001): 66-71; Bill Leonard, “Turnover at the Top,”
HRMagazine 46, no. 5 (May 2001): 46–52.
22. Carolyn Hirschman, “Putting Forecasting in Focus,”
HRMagazine 52, no. 3 (March 2007): 44–49.
23. Leslie Kwoh, “Are Firms Neglecting Succession Planning?”
Wall Street Journal (September 5, 2012), http://www.wsj.
com.
24. Robert Kaplan and David Norton, Strategy Maps: Converting
Intangible Assets into Tangible Objectives (Boston: Harvard
Business School Press, 2006), Chapter.
25. John Huey, “Outlaw Flyboy CEOs,” Fortune 142, no. 11
(November 13, 2000): 237–50; “Visions of the Future,”
HumanResources (January 2008): special section, 22.
26. Patrick Wright, “Human Resource Strategy: Adapting to the
Age of Human Resources Management,” SHRM Foundation
(2008), http://www.shrm.org/foundation.
27. Scott A. Snell, Mark A. Shadur, and Patrick M. Wright,
“Human Resources Strategy: The Era of Our Ways,” Center
for Advanced Human Resource Studies (November 1, 2000):
working paper, 23–29.
28. R. Sanchez, “Strategic Flexibility in Product Competition,”
Strategic Management Journal 16 (1995): 135–59; Wright and
Snell, “Toward a Unifying Framework,” 756–72.
29. “Poll Shows Concern about Aging Workforce,” Credit Union
Management 32, no. 6 (January 2011): 36.
30. Patrick Kiger, “Serious Progress in Strategic Workforce Plan-
ning,” Workforce Management (July 1, 2010), http://work-
force.com.
31. Brian Becker, Mark Huselid, and Dave Ulrich, The HR Score-
card: Linking People, Strategy, and Performance (Cambridge,
MA: Harvard Business School Press, 2001); see also Shari
Caudron, “How HR Drives Profits,” Workforce 80, no. 12
(December 2001): 26–31.
32. “A Singular Sensation for Schwab Brokers,” Businessweek
(January 24, 2002), http://www.businessweek.com.
89624_ch02_hr_038-083.indd 79 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
80
Appendix
Calculating Employee Turnover and Absenteeism
Throughout this chapter, we have emphasized that HRP depends on having an accurate
picture of both the supply of and the demand for employees. Two factors, employee
turnover and absenteeism, have a direct impact on HR planning strategy and recruit-
ment processes. In this appendix, we provide a detailed discussion of turnover and
absenteeism, methods for measuring them, and suggestions for managing their impact.
A.1 Employee Turnover Rates
Employee turnover refers simply to the movement of employees out of an organization. It
is often cited as one of the factors behind the failure of U.S. employee productivity rates
to keep pace with those of foreign competitors. It is also one of the chief determinants of
labor supply. Even if everything else about an organization stays the same, as employees
turn over, its supply of labor goes down. This involves both direct and indirect costs to
the organization.
A.1a Computing the Turnover Rate
The U.S. Department of Labor suggests the following formula for computing turnover
rates:
Number of separations during the month
Total number of employees at midmonth
100×
So, if there were 25 separations during a month and the total number of employees at
midmonth was 500, the turnover rate would be:
25
500
100 5 percent3 5
Turnover rates are computed on a regular basis to compare specific units such as
departments, divisions, and work groups. In many cases, comparisons are made with
data provided by other organizations. The Bureau of Labor Statistics’ Job Openings and
Labor Turnover Survey is a very good source of comparative turnover data.1
Another method of computing the turnover rate is one that reflects only the avoid-
able separations (S). This rate is computed by subtracting unavoidable separations
89624_ch02_hr_038-083.indd 80 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
81Chapter 2 Strategy and Human Resources Planning
(US)—for example, due to pregnancy, return to school, or death—from all separations.
The formula for this method is as follows:
100 (turnover rate)
−
3 5
S US
M
T
where M represents the total number of employees at midmonth. For example, if there
were 25 separations during a month, 5 of which were US, and the total number of
employees at midmonth (M) was 500, the turnover rate would be:
25 5
500
100 4 percent
−
3 5
A.1b Determining the Costs of Turnoverr
Replacing an employee is time consuming and expensive. Costs can generally be broken
down into three categories: separation costs for the departing employee, replacement
costs, and training costs for the new employee. These costs are conservatively estimated
at two to three times the monthly salary of the departing employee, and they do not
include indirect costs such as low productivity prior to quitting and lower morale and
overtime for other employees because of the vacated job. Consequently, reducing turn-
over could result in significant savings to an organization. Highlights in HRM 4 details
one organization’s costs associated with the turnover of a single computer programmer.
Note that the major expense is the cost involved in training a replacement.
A.2 Employee Absenteeism Rates
How frequently employees are absent from their work—the absenteeism rate—is also
directly related to HR planning and recruitment. When employees miss work, the orga-
nization incurs direct costs of lost wages and decreased productivity. It is not uncom-
mon for organizations to hire extra workers just to make up for the number of absences
totaled across all employees. In addition to these direct costs, indirect costs may under-
lie excessive absenteeism. A certain amount of absenteeism is, of course, unavoidable.
There will always be some who must be absent from work because of sickness, accidents,
serious family problems, or other legitimate reasons. However, chronic absenteeism may
signal deeper problems in the work environment.
A.2a Computing Absenteeism Rates
Managers should determine the extent of the absenteeism problem, if any, by maintain-
ing individual and departmental attendance records and by computing absenteeism
rates. Although there is no universally accepted definition of “absence” or a standard
formula for computing absenteeism rates, the method most frequently used is that rec-
ommended by the U.S. Department of Labor.
2
3
Number of worker days lost through job absence during period
Average number of employees 3 number of workdays
100
89624_ch02_hr_038-083.indd 81 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
If 300 worker-days are lost through job absence during a month having 25 sched-
uled working days at an organization that employs 500 workers, the absenteeism rate
for that month is:
300
300 25
100 2.4 percent
3
3 5
The U.S. Department of Labor defines job absence as the failure of employees to
report to work when their schedules require it, whether or not such failure to report
is excused. Scheduled vacations, holidays, and prearranged leaves of absence are not
counted as job absence.
A.2b Comparing Absenteeism Data
The Bureau of Labor Statistics of the U.S. Department of Labor receives data on job
absences from the Current Population Survey of Households conducted by the Bureau
of the Census, and analyses of these data are published periodically. These analyses help
identify problem areas—industries, occupations, or groups of workers with the highest
incidence of absence or with rapidly increasing rates of absence. Comparison with other
organizations may be made by referring to Bureau of Labor Statistics data reported in
the Monthly Labor Review.
Costs Associated with the Turnover of One Computer Programmer
Turnover costs Separation costs Replacement costs
Training costs
5 1
1
Separation Costs
1. Exit interview cost for salary and benefits of both
interviewer and departing employee during the exit
interview $30 $30 $60
5
5 1 5
2. Administrative and record keeping action $30 Sepa-
ration costs 5 $60 $30 $90
2 5
5 1 5
Replacement Costs
1. Advertising for job opening $2, 5005
2. Preemployment administrative functions and record-
keeping action $1005
3. Selection interview $2505
4. Employment tests $405
5. Meeting to discuss candidates(salary and benefits of
managers while participating in meetings) $250
Replacement costs $2, 500 $100 $250 $40
$250 $3,140
5
5 1 1 1 1
5
Training Costs
1. Booklets, manuals, and reports $505
2. =Education $240 / day for new employee’s salary and
benefits 10 days of workshops, seminars, or courses
$2, 400
3
5
3. 5
3
5
+
One-to-one coaching ($240 / day per new employee
$240 / day per staff coach or job expert) 20 days
of one-to-one coaching $9, 600
4. Salary and benefits of new employee until he or she
gets “up to par” $240 / day for salary and benefits
20 days $4, 800
5 3
5
Training costs $50 $2, 400 $9, 600 $4, 800 $16, 8501 1 1 5
Total turnover costs $90 $3,140 $16, 850 $20, 0805 1 1 5
Sources: Adapted from the book Turning Your Human Resources
Department into a Profit Center by Michael Mercer, PhD (Barrington,
IL: Castlegate Publishers, Inc.). Copyright 2002 Michael Mercer. Repro-
duced with permission from Michael Mercer, PhD, http://www.DrMer-
cer.com.
Highlights in HRM4
82
89624_ch02_hr_038-083.indd 82 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
83Chapter 2 Strategy and Human Resources Planning
A.2c Costs of Absenteeism
The cost of each person hour lost to absenteeism is based on the hourly weighted average
salary, costs of employee benefits, supervisory costs, and incidental costs. For example,
XYZ Company, with 1,200 employees, has 78,000 person hours lost to absenteeism; the
total absence cost is $560,886. When this figure is divided by 1,200 employees, the cost
per employee is $467.41. (In this example, we are assuming the absent workers are paid.
If absent workers are not paid, their salary figures are omitted from the computation.)
A.2d Absenteeism and HR Planning
While an employer may find that the overall absenteeism rate and costs are within an
acceptable range, it is still advisable to study the statistics to determine whether there
are patterns in the data. Rarely does absenteeism spread itself evenly across an organiza-
tion. It is very likely that employees in one area (or occupational group) may have nearly
perfect attendance records, while others in a different area may be absent frequently.
By monitoring these differences, managers can assess where problems might exist and,
more important, begin planning ways to resolve or improve the underlying causes. For
example, incentives could be provided for perfect attendance. Alternatively, progres-
sive discipline procedures might be used with employees having a record of recurring
absenteeism.
By establishing a comprehensive absenteeism policy, Allen-Bradley (which is now a
part of Rockwell Automation) cut absenteeism 83.5 percent in a 25-month period. This
reduced the strain on labor costs and increased productivity.
89624_ch02_hr_038-083.indd 83 11/17/17 9:54 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
84
CHAPTER 3
Equal Employment Opportunity
and Human Resources Management
Learning Outcome
After studying this chapter, you should be able to
Describe the major equal employment opportunity
(EEO) laws related to age, gender, religion, weight,
and sexual orientation. Determine the employment
practices they prohibit and the reason behind
passage of EEO legislation. Describe what a bona
fide occupational qualification is.
Explain how the Uniform Guidelines on Employee
Selection Procedures were developed and how
firms use them to ensure they are abiding by the
law. Understand adverse impact and disparate
treatment.
LO 1
LO 2
Understand Equal Employment Opportunity
Commission (EEOC) record-keeping and posting
requirements and describe how discrimination
charges are processed by the EEOC.
Explain what affirmative action is and how
companies today are seeing the value of voluntarily
having diverse workforces.
LO 3
LO 4
Yu
ri_
A
rc
ur
s/
G
et
ty
Im
ag
es
89624_ch03_hr_084-120.indd 84 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
85Chapter 3 Equal Employment Opportunity and Human Resources Management
O
ne of the most important topics that must be discussed in any human resources
management textbook is equal employment opportunity (EEO). Equal employ-
ment opportunity, or the employment of individuals in a fair and nonbiased man-
ner, commands the attention of the media, courts, legislators, HR managers, and their
firms alike. In 2016, 91,503,412 private-sector workplace discrimination charges were
filed with the U.S. Equal Employment Opportunity Commission (EEOC), the federal
agency that enforces the nation’s fair employment laws.1 The number of filings have
gradually increased over the last 20 years, marking an increased importance for man-
agers to know and comply with numerous EEO laws as the workforce becomes more
diverse and multicultural.
When managers ignore or are unaware of fair employment laws, they and their
firms run the risk of costly and time-consuming litigation, negative public attention,
potentially lower sales, lower employee morale, and even damage to their own indi-
vidual careers.2 Because even unintentional discrimination can be illegal, supervisors
need to be aware of their personal biases and how they can affect their dealings
with their subordinates.3 Employment discrimination is not only a legal issue, but
also an emotional one. It concerns all individuals, regardless of their sex, race, reli-
gion, age, national origin, color, sexual orientation, physical condition, and position
in an organization. Fortunately, it is a problem that can be minimized with good HR
practices.
This chapter will help you better understand how to minimize employment dis-
crimination and will also discuss the diversity efforts companies are actively pursuing
equal employment
opportunity (EEO)
The treatment of indi-
viduals in all aspects of
employment— hiring,
promotion, training,
etc.—in a fair and
nonbiased manner.
Equal Employment
Opportunity Commis-
sion (EEOC)
The EEOC’s work con-
sists of formulating EEO
policy and approving
all litigation involved
in maintaining equal
employment opportu-
nity. The EEOC’s guide-
lines are not federal
law but administrative
rules and regulations
published in the Federal
Register.
The American Mus-
tache Institute (AMI)
has been working to
alleviate facial hair
discrimination in the
United States.
G
-s
to
ck
st
ud
io
/S
hu
tt
er
st
oc
k.
co
m
89624_ch03_hr_084-120.indd 85 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
86 Part 2 Meeting Human Resources Requirements
as a way to gain a strategic edge. HR professionals agree that when all functions of
HRM comply with the law, the organization becomes a fairer place to work and a more
effective competitor.
3.1 Historical Perspective of EEO Legislation
Equal employment opportunity as a national priority has emerged slowly in the United
States. Three factors seem to have influenced the growth of EEO legislation: (1) chang-
ing attitudes toward employment discrimination; (2) published reports highlighting the
economic problems and injustices experienced by minority workers; and (3) a growing
body of disparate discrimination laws and regulations at different levels of government
that legislators feel should be standardized. (See Figure 3.1). Although the United States
has progressed substantially in improving business practices and public attitudes about
discrimination, problems still persist.
3.1a Changing National Values
The United States was founded on the principles of individual merit, hard work, and
equality. In spite of these values, employment discrimination has a long history in the
United States. Organizations that claim to offer fair treatment to employees have inten-
tionally or unintentionally engaged in discriminatory practices. As a result, laws have
been passed to ensure equality and reward individual merit and hard work.
1. Changing attitudes
towards employment
discrimination
2. Published reports
on economic injustices
experienced by
minority workers
Growth
of EEO
legislation3. A growing
body of disparate
discrimination laws and
regulations that legislators
feel should be standardized
Three Factors Come Together to Influence EEO LegislationFigure 3.1
Have you ever felt
discriminated against
in the workplace? How
about in school, by a
teacher? How did it
make you feel?
LO 1
89624_ch03_hr_084-120.indd 86 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
87Chapter 3 Equal Employment Opportunity and Human Resources Management
Nonetheless, discrimination still persists. The Employment Non-Discrimination
Act, or “ENDA,” proposed by the U.S. Congress extends federal employment discrimi-
nation protection currently provided on race, religion, gender, national origin, age, and
disability to include sexual orientation and gender identity.
3.1b Early Legal Developments
Litigation concerning discriminatory practices has been prevalent since the nine-
teenth century. In 1866, Congress passed the Civil Rights Act, which extended to
all people the right to enjoy full and equal benefits of all laws, regardless of race. In
1933, Congress enacted the Unemployment Relief Act, which prohibited employment
discrimination on account of race, color, or creed (religious beliefs). Then in 1941,
President Franklin D. Roosevelt issued Executive Order 8802, which was to ensure
that every American citizen, “regardless of race, creed, color, or national origin,”
would be guaranteed equal employment opportunities for workers employed by
firms awarded World War II defense contracts. Over the next 20 years a variety
of other legislative efforts were promoted to resolve inequities in employment
practices.
Unfortunately, these early efforts did little to correct employment discrimina-
tion. First, nondiscrimination laws gave no enforcement powers to agencies. Laws
did not specify what discriminatory practices or methods needed correction and
employers were not required to comply with Equal Employment Opportunity
legislation.
Owners and managers of growing small businesses should
consider conducting routine HR compliance assessments,
either annually or perhaps each time the company reaches
another significant increase in employees, for example,
from less than 5 to closer to 15 employees.
There are other occasions when a small firm should
check its compliance as well. Eric A. Marks, a partner in
charge of the Human Resources Consulting Practice at the
New York accounting firm Marks Paneth & Shron, explains:
Significant changes to the business, such as merg-
ers; the retirement of senior managers; newly
hired or promoted supervisors or managers who
may lack HR experience; creation or revision of
an employee handbook; changes in employee
morale, turnover, attendance, or disciplinary prob-
lems; taking on government contracts where com-
pliance requirements are often stricter; and major
changes in state or federal regulations—any of
Small Business Application
these are danger signs. They signal that the busi-
ness has a fresh need to address compliance and
make sure its house is in order.
In short, an HR compliance assessment reviews how
well an employer is following employment, benefits, and
safety laws. Fortunately, small-business owners do not
have to remain in the danger zone. There are numerous HR
consulting firms that not only can conduct a compliance
assessment, but can also assist the owner with rectifying
any noncompliant systems and procedures and train the
company’s managers and supervisors to maintain them.
There are even HR compliance self-assessment forms
available online. Help is only a mouse-click away.
Source: “New Risks to Small Businesses” Marketwire (February 28,
2011), http://www2.marketwire.com; “HR Compliance Assessment
Overview,” http://www.the-arnold-group.com/hr-assessment.cfm; “HR
Challenges: Compliance,” http://www.strategic-workplace-solutions
.com/services/compliance.
The Perils of Noncompliance
89624_ch03_hr_084-120.indd 87 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
88 Part 2 Meeting Human Resources Requirements
3.2 Government Regulation of Equal
Employment Opportunity
Despite their shortcomings, the laws and executive orders discussed in the previous sec-
tion laid the groundwork for a significant number of laws that have since been passed
barring employment discrimination.
Part of the reason why it is so critical for managers and supervisors to understand
and apply EEO laws is that employees act as agents of their employers. If a manager or
supervisor violates the law, both she and her organization can face legal consequences.
The organization cannot claim that it is not legally responsible for what the manager
or supervisor did.
Figure 3.2 shows the various prohibited HR activities related to hiring, promoting,
compensating employees, and so forth covered by EEO laws. If you think you already
know what constitutes a legal or illegal employment practice, you might be surprised.
Highlights in HRM 1 will test your current understanding of how equal employment
opportunity laws are applied in the workplace.
Prohibited Discriminatory Employment PracticesFigure 3.2
It is illegal to discriminate in any aspect of employment, including:
• hiring and firing;
• compensation, assignment, or classification of employees;
• transfer, promotion, layoff, or recall;
• job advertisements;
• recruitment;
• testing;
• use of company facilities;
• training and apprenticeship programs;
• fringe benefits;
• pay, retirement plans, and disability leave; or
• other terms and conditions of employment.
Discriminatory practices under these laws also include:
• harassment on the basis of race, color, religion, sex, national origin, disability, genetic information, or age;
• retaliation against an individual for filing a charge of discrimination, participating in an investigation, or opposing
discriminatory practices;
• employment decisions based on stereotypes or assumptions about the abilities, traits, or performance of individuals
of a certain sex, race, age, religion, or ethnic group, or individuals with disabilities, or based on myths or assumptions
about an individual’s genetic information; and
• denying employment opportunities to a person because of marriage to, or association with, an individual of a
particular race, religion, national origin, or an individual with a disability. Title VII also prohibits discrimination because
of participation in schools or places of worship associated with a particular racial, ethnic, or religious group.
89624_ch03_hr_084-120.indd 88 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Test Your Knowledge of Equal Employment Opportunity Law
The following questions have been used as “icebreakers” by
employers and consultants when training supervisors and
managers in EEO legislation. What is your knowledge of EEO
laws? Answers are found at the end of this chapter.
1. Two male employees tell a sexually explicit joke. The
joke is overheard by a female employee who com-
plains to her supervisor that this is sexual harassment.
Is her complaint legitimate?
_______________Yes _______________No
2. To be covered by Title VII of the Civil Rights Act, an
employer must be engaged in interstate commerce
and employ 25 or more employees.
_______________True _______________False
3. People addicted to illegal drugs are classified as dis-
abled under the Americans with Disabilities Act of
1990.
_______________Yes _______________No
4. The Equal Pay Act of 1963 allows employers to pay dif-
ferent wages to men and women who are performing
substantially similar work. What are the three defenses
for paying a different wage?
1. __________________________________________
2. __________________________________________
3. __________________________________________
5. A person applies for a job as a janitor at your company.
During his interview with you, the person mentions
that since birth he has sometimes experienced short
periods of memory loss. Must you consider this indi-
vidual a disabled person under the Americans with
Disabilities Act of 1990?
_______________Yes _______________No
6. On Friday afternoon, you tell Nancy Penley, a com-
puter analyst, that she must work overtime the next
day. She refuses, saying that Saturday is her regular
religious holiday and she can’t work. Do you have the
legal right to order her to work on Saturday?
_______________Yes _______________No
7. You have just told an applicant that she will not
receive the job for which she applied. She claims
that you denied her employment because of her age
(she’s 52). You claim she is not protected under the
age discrimination law. Is your reasoning correct?
_______________Yes _______________No
8. As an employer, you can select those applicants who
are the most qualified in terms of education and
experience.
_______________Yes _______________No
9. As a manager, you have the legal right to mandate
dates for pregnancy leaves.
_______________True _______________False
10. State and local fair employment practice laws cover
smaller employers not covered by federal legislation.
_______________True _______________False
Highlights in HRM1
3.2a Major Federal Laws
Major federal EEO laws have been enacted to prevent discrimination against groups of
workers most often affected by unfair employment practices. These groups are referred
to as protected classes.4 (See Figure 3.3).
Defined broadly, the classes include employees of a particular race, color, religion,
national origin, sex, age, and those with physical or mental disabilities. Figure 3.4 lists
the major and separate federal laws and their provisions governing equal employment
opportunity.
Equal Pay Act of 1963
The Equal Pay Act makes it illegal to discriminate against people in terms of the pay,
employee benefits, and pension they earn based on their gender when they do equal
work.5 Jobs are considered “equal” when they require substantially the same skill, effort,
and responsibility under similar working conditions and in the same establishment.
However, a company does not violate the Equal Pay Act when the differences in the
protected classes
Individuals of a minor-
ity race, women, older
people, and those with
disabilities who are
covered by federal laws
on equal employment
opportunity.
89
89624_ch03_hr_084-120.indd 89 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
90 Part 2 Meeting Human Resources Requirements
wages it pays to men and women for equal work are based on seniority systems, merit
considerations, or the workers’ quantity or quality of production. Also, if a pay dispar-
ity between the sexes exists, employers cannot legally lower the wages of one gender to
comply with the law; rather, they must raise the wages of the gender being underpaid.
Civil Rights Act of 1964
The Civil Rights Act of 1964 is a landmark law that addresses discrimination in society.
Title VII of the act specifically bars employment discrimination in all HR activities,
including hiring, training, promotion, transfers, pay, employee benefits, and other con-
ditions of employment. Discrimination is prohibited on the basis of race, color, religion,
sex, or national origin. Title VII of the Civil Rights Act also created the EEOC to admin-
ister the law in order to promote equal employment opportunity.
In response to the growing number of immigrant workers and workplace cultural
and ethnic awareness, the EEOC has issued important guidelines on national origin
discrimination.6 A “national origin group” is defined as a group of people sharing a com-
mon language, culture, ancestry, and/or similar social characteristics. This definition
includes people born in the United States who are not racial or ethnic minorities. Also
prohibited under the act is discrimination based on pregnancy or a medical condition
related to it or childbirth. The Civil Rights Act of 1964 covers a broad range of organiza-
tions. The law includes under its jurisdiction the following:
1. All private employers in interstate commerce who employ 15 or more employees
for 20 or more weeks per year
2. State and local governments
3. Private and public employment agencies
Protected Classes:
Employees
of a particular Race Color
Religion National origin
Sex Age
Physical
disabilities
Mental
disabilities
Protected Classes of EmployeesFigure 3.3
89624_ch03_hr_084-120.indd 90 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
91Chapter 3 Equal Employment Opportunity and Human Resources Management
4. Joint labor-management committees that govern apprenticeship or training
programs
5. Labor unions having 15 or more members or employees
6. Public and private educational institutions
7. Foreign subsidiaries of U.S. organizations employing U.S. citizens
Certain employers are excluded from coverage of the Civil Rights Act. Broadly
defined, these are (1) U.S. government–owned corporations; (2) bona fide, tax-exempt
private clubs; (3) religious organizations employing people of a specific religion; and (4)
organizations hiring Native Americans on or near a reservation.
Bona Fide Occupational Qualification. Under Title VII of the Civil Rights Act,
employers are permitted limited exemptions from antidiscrimination regulations
if the employment preferences are based on a bona fide occupational qualification.
A bona fide occupational qualification (BFOQ) permits discrimination when employer
bona fide occupational
qualification (BFOQ)
Suitable defense against
a discrimination charge
only when age, religion,
sex, or national origin is
an actual qualification for
performing the job.
LAW PROVISIONS
Equal Pay Act of 1963 Requires all employers covered by the Fair Labor Standards Act and others to provide
equal pay for equal work, regardless of sex.
Title VII of Civil Rights Act of 1964
(amended in 1972, 1991, 1994,
and 2009)
Prohibits discrimination in employment on the basis of race, color, religion, sex, or
national origin; created the EEOC to enforce the provisions of Title VII.
Age Discrimination in Employ-
ment Act of 1967 (amended in
1986 and 1990)
Prohibits private and public employers from discriminating against people age 40 or
older in any area of employment because of age; exceptions are permitted when age
is a bona fide occupational qualification.
Equal Employment Opportunity
Act of 1972
Amended Title VII of Civil Rights Act of 1964; strengthens the EEOC’s enforcement
powers and extends coverage of Title VII to government employees, employees in
higher education, and other employers and employees.
Pregnancy Discrimination
Act of 1978
Broadens the definition of sex discrimination to include pregnancy, childbirth, or
related medical conditions; prohibits employers from discriminating against pregnant
women in employment benefits if they are capable of performing their job duties.
Americans with Disabilities
Act of 1990 (amended in 2008)
Prohibits discrimination in employment against people with physical or mental
disabilities or the chronically ill; enjoins employers to make reasonable accommodation
to the employment needs of the disabled; covers employers with 15 or more employees.
Civil Rights Act of 1991 Provides for compensatory and punitive damages and jury trials in cases involving
intentional discrimination; requires employers to demonstrate that job practices are
job-related and consistent with business necessity; extends coverage to U.S. citizens
working for U.S. companies overseas.
Uniformed Services Employment
and Reemployment Rights Act
of 1994 (amended in 1998, 2004,
and 2008)
Protects the employment rights of individuals who enter the military for short
periods of service.
Don’t Ask, Don’t Tell Repeal Act
of 2010
Bars discrimination against military personnel based on their sexual orientations.
Major Laws Affecting Equal Employment OpportunityFigure 3.4
89624_ch03_hr_084-120.indd 91 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
92 Part 2 Meeting Human Resources Requirements
hiring preferences are a reasonable necessity for the normal operation of the business.
Courts have ruled that a business necessity is a practice that is necessary for the safe
and efficient operation of the organization.
However, a BFOQ is a suitable defense against a discrimination charge only when
age, religion, sex, or national origin is an actual qualification for performing the job.
(See Figures 3.5). For example, an older person could legitimately be excluded from
consideration for employment as a model for teenage designer jeans. It is also reasonable
to expect the Chicago Bears of the National Football League to hire male locker-room
attendants or for Abercrombie and Fitch Clothing Store to employ females as models
for women’s fashions. Religion is a BFOQ in organizations that require employees to
share a particular religious doctrine. National origin can also be a BFOQ if it is an
actual qualification for a job. For example, to ensure the “authenticity” of the dining
experience, an Asian restaurant could use the business-necessity defense to support its
preference for hiring Asian American servers. The BFOQ exception does not, however,
apply to discrimination based on race or color.
Religious Preference. Title VII of the Civil Rights Act prohibits employment dis-
crimination based on a person’s religion. Title VII does not require employers to grant
complete religious freedom in employment situations, however. Employers need only
make a reasonable accommodation for a current employee’s or job applicant’s religious
observance or practice without incurring undue hardship in the conduct of the busi-
ness. Managers or supervisors may have to accommodate an employee’s religion in the
specific areas of (1) holidays and observances (scheduling), (2) personal appearance
(wearing beards, veils, or turbans), and (3) religious conduct on the job (missionary
work among other employees).
What constitutes “reasonable accommodation” can be difficult to define. For
example, in the 2012 case, Porter v. City of Chicago, the city of Chicago had tried to
resolve scheduling conflicts with Latice Porter by offering an evening shift to appease
her request for time off on Sundays for religious reasons. However, she wasn’t inter-
ested in this option and didn’t return to work. She was later fired for not fulfilling work
responsibilities. She sued the city based on discrimination against her religion. The
business necessity
A work-related practice
that is necessary to the
safe and efficient opera-
tion of an organization.
BFOQ
Bona fide Occupational qualification
Must be an actual Qualification for performing
the job.
Age Religion Sex
National
origin
BFOQ Bona Fide Occupational QualificationFigure 3.5
89624_ch03_hr_084-120.indd 92 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
93Chapter 3 Equal Employment Opportunity and Human Resources Management
City of Chicago won the case.7 Reasonable accommodation doesn’t mean an employer
must accommodate at all costs, rather it is meant as a possible benefit to the employee.
Employer–employee cooperation and flexibility are often the key when it comes to
employment accommodations, including those for religious reasons. The EEOC’s posi-
tion is not that firms need to quash religious expression in the workplace but to make a
reasonable effort to accommodate people with different belief systems.
Amendments to the Civil Rights Act of 1964
Equal Employment Opportunity Act of 1972. The Equal Employment Opportunity
Act of 1972 amended the Civil Rights Act of 1964. Two important changes were made:
(1) The act’s coverage was broadened to include state and local governments and public
and private educational institutions, and (2) the law strengthened the enforcement pow-
ers of the EEOC by allowing the agency itself to sue employers in court.
Civil Rights Act of 1991. The Civil Rights Act of 1991 was enacted to allow employ-
ees who can prove they were intentionally discriminated against to seek compensatory
monetary damages. Compensatory damages include money for emotional pain, suffer-
ing, mental anguish, and so forth.
The Civil Rights Act of 1991 also states that employees who are sent abroad to work
for U.S.-based companies are protected by U.S. antidiscrimination legislation governing
age and disability and Title VII of the Civil Rights Act of 1964.
Glass Ceiling Act of 1991. The Glass Ceiling Act of 1991 was passed jointly with the
Civil Rights Act of 1991. The “glass ceiling” represents an invisible barrier that prohibits
protected class members from reaching top organizational positions. The act created
the Glass Ceiling Commission to study and report on the status of and obstacles faced
by minorities as they strive for top-level management jobs.
Title VII of the Civil
Rights Act requires
employers to make
reasonable accommo-
dations for an employ-
ee’s religious practices
and observances.
Zu
rij
et
a/
Sh
ut
te
rs
to
ck
.c
om
89624_ch03_hr_084-120.indd 93 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
94 Part 2 Meeting Human Resources Requirements
Lilly Ledbetter Fair Pay Act (2009). The Lilly Ledbetter Fair Pay Act states that the
180-day statute of limitations for filing an equal-pay lawsuit with EEOC resets with
each new discriminatory paycheck an employee receives—not the date the employee
received his or her first discriminatory paycheck as the U.S. Supreme Court had ruled.
What this means is that employees can claim discrimination after years of getting
unfair pay and demand to be compensated for the lost wages. Organizations therefore
need to diligently and regularly examine their pay systems carefully to be sure they are
equitable.
Age Discrimination in Employment Act of 1967
The Age Discrimination in Employment Act (ADEA) prohibits specific employers from
discriminating against employees and applicants age 40 or older in any employment
area. Employers affected are those with 20 or more employees; unions with 25 or more
members; employment agencies; and federal, state, and local governments. Managers
or supervisors discriminate against older employees if they:
• Exclude older workers from important work activities.
• Make negative changes in the performance evaluations of older employees.
• Deny older employees job-related education, career development, or promotional
opportunities.
• Select younger job applicants over older, better-qualified candidates.
• Pressure older employees into taking early retirement or terminate them.
• Reduce the job duties and responsibilities of older employees.8
Exceptions to the law are permitted when age is a bona fide occupational
qualification.
Amendments to the ADEA
The Older Workers Benefit Protection Act of 1990 specifically prohibits employ-
ers from denying benefits to older employees except in limited circumstances. The
law also allows employers to ask older employees to waive their legal rights under
the ADEA in exchange for compensation such as severance packages or court set-
tlements. As a result of the act, many firms that have downsized have been able
to legally offer older employees early-retirement severance packages. However, to
be valid, an ADEA waiver must be in writing, clear, and understandable, and the
recipients need to be given a certain amount of time to consider the offer in the
waiver.
Pregnancy Discrimination Act of 1978
The Pregnancy Discrimination Act amended the Civil Rights Act of 1964 by stating
that pregnancy is a disability and that pregnant employees in covered organizations
must be treated on an equal basis with employees having other medical conditions.
Specifically, the Pregnancy Discrimination Act affects employee benefit programs
including (1) hospitalization and major medical insurance, (2) temporary disability
and salary continuation plans, and (3) sick leave policies.9 The law also prohibits dis-
crimination in the hiring, promotion, transfer, or termination of women because of
pregnancy.
89624_ch03_hr_084-120.indd 94 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
95Chapter 3 Equal Employment Opportunity and Human Resources Management
Americans with Disabilities Act of 1990
Congress in 1990 passed the Americans with Disabilities Act (ADA), which prohibits
employers from discriminating against individuals with physical and mental disabilities
and the chronically ill.10 Disability discrimination charges from employees have doubled
from 2005 to 2016, from 14,893 to 28,073.
The law defines a disability as “(a) a physical or mental impairment that sub-
stantially limits one or more of the major activities; (b) a record of such impairment;
or (c) being regarded as having such an impairment.” Note that the law also protects
people “regarded” as having a disability—for example, individuals with disfiguring
burns.
Not every mental or physical impairment is considered a disability under the law.
For example, significant personality disorders are covered under the EEOC’s “Enforce-
ment Guidance on the Americans with Disabilities Act and Psychiatric Disabilities.”11
Covered personality disorders include schizophrenia, bipolar disorders, major affective
disorders, personality disorders, and anxiety disorders. These impairments are char-
acterized by aberrant behavior, self-defeating behavior, manipulation of others, and
troublesome manners of behavior. However, mental impairments described as “adjust-
ment disorders” or attributed to stress have generally not been subject to ADA cover-
age. Therefore, employees who claim to be “stressed” over marital problems, financial
hardships, demands of the work environment, job duties, or harsh and unreasonable
treatment from a supervisor would not be classified as disabled.
The act requires employers to make a reasonable accommodation for disabled peo-
ple who are otherwise qualified to work, unless doing so would cause undue hardship
to the employer.12 “Undue hardship” refers to unusual work modifications or exces-
sive expenses that might be incurred by an employer in providing an accommodation.
Reasonable accommodation “includes making facilities accessible and usable to dis-
abled persons, restructuring jobs, permitting part-time or modified work schedules,
reassigning to a vacant position, changing equipment, and/or expense.” An example
of a reasonable accommodation case is that of Minnihan v. Mediacom Communica-
tions (2015). Minnihan had a seizure disorder that barred him from driving—an essen-
tial part of his job. Mediacom offered as many accommodations as possible, such as
a nondriving job in another facility, contact infor-
mation of an employee who could give Minnihan
a ride to work, and information on public trans-
portation. However, Minnihan didn’t accept any
of these suggestions and requested that Mediacom
hire another employee to perform the driving por-
tion of his job—but Mediacom rejected this idea.
Mediacom was found to have provided reasonable
accommodation.
Furthermore, employers cannot use selection
procedures that screen out or tend to screen out dis-
abled people unless the selection procedure “is shown
to be job-related for the position in question and is
consistent with business necessity” and acceptable
job performance cannot be achieved through reason-
able accommodation. Information and forms related
to the health of employees must be kept confidential
and separate from their regular personnel files.
reasonable
accommodation
An attempt by employers
to adjust, without undue
hardship, the working
conditions or schedules
of employees with dis-
abilities or religious
preferences.
The ADA prohibits
employers from dis-
criminating against
individuals regarded
as having physical or
mental disabilities.
ES
B
Pr
of
es
si
on
al
/S
hu
tt
er
st
oc
k
89624_ch03_hr_084-120.indd 95 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
96 Part 2 Meeting Human Resources Requirements
Hiring disabled individuals is not only a legal mandate, it is also good business.
Employers subject to the ADA and those who value the varied skills and abilities of
the disabled approach the law as a proactive business requirement. Hiring the disabled
emphasizes what these individuals can do rather than what they cannot do. Two of the
most comprehensive studies conducted on the ADA show that the law has had a positive
effect on both business outcomes and disabled employees. Conducted by the National
Council on Disability (NCD), the studies reported positive gains regarding the ADA’s
four major goals: equal opportunity, full participation, independent living, and eco-
nomic self-sufficiency for people with disabilities.13 Figure 3.6 identifies specific ways
to make the workplace more accessible to the disabled.
Amendments to the ADA
The Americans with Disabilities Act Amendments Act was enacted in 2008 in
response to court rulings that had weakened the ADA. The ADAAA broadened the
definition of what constitutes a disability. The new act makes it less likely a person will
be denied protection because his or her condition does not seem severe enough or
because it is improved by drugs, prosthetic devices, and so forth.
After the passage of the law, the EEOC filed a number of suits against companies
including one that alleged that a longtime cashier with severe arthritis was denied a
reasonable accommodation—a stool. The woman had used the stool for 7 years, but a
new manager did not like the fact and had terminated her.14
Genetic Information Nondiscrimination Act of 2008
The Genetic Information Nondiscrimination Act (GINA) enacted in 2008 was passed to
alleviate people’s fears that their genetic information would be misused. Under Title II of
the act, employers are prohibited from requesting, requiring, or purchasing the genetic
information of workers or their family members. Employers that happen to possess
genetic information as a result of health insurance records must keep the information
confidential and separate from an employee’s personnel files.15
• Install easy-to-reach switches.
• Provide sloping sidewalks and entrances.
• Install wheelchair ramps.
• Reposition shelves for the easy reach of materials.
• Rearrange tables, chairs, vending machines, dispensers,
and other furniture and fixtures.
• Widen doors and hallways.
• Add raised markings on control buttons.
• Provide designated accessible parking spaces.
• Install hand controls or manipulation devices.
• Provide flashing alarm lights.
Americans with Disabilities Act Suggestions for an Accessible WorkplaceFigure 3.6
• Remove turnstiles and revolving doors or provide
alternative accessible paths.
• Install holding bars in toilet areas.
• Redesign toilet partitions to increase access space.
• Add paper cup dispensers at water fountains.
• Replace high-pile, low-density carpeting.
• Reposition telephones, water fountains, and other
needed equipment.
• Add raised toilet seats.
• Provide a full-length bathroom mirror.
89624_ch03_hr_084-120.indd 96 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
97Chapter 3 Equal Employment Opportunity and Human Resources Management
In 2016, this act was supported with the decision in the EEOC v. Joy Mining Machinery
case, where the employer was denied the ability to make post-offer medical examinations
in asking prospective employees if they had family medical history of tuberculosis, cancer,
epilepsy, and heart disease.16
Uniformed Services Employment and Reemployment
Rights Act of 1994 (USERRA)
The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)
covers all military personnel, including National Guard members, reservists, and active-
duty military personnel, who enlist either voluntarily or involuntarily during peace
or wartime. Under this act, people who enter the military for a total of five years can
return to their private-sector jobs without risk of loss of seniority or benefits.17 The act
protects against discrimination on the basis of military obligation in the areas of hiring,
job retention, and advancement. The law does not require employers to pay the workers’
wages while they are enlisted.
Amendments to the USERRA
In 2004, the USERRA was amended by the Veterans Benefits Improvement Act requir-
ing employers to provide a notice of rights, benefits, and obligations of both employees
and employers under USERRA.18 For their part, service members must provide their
employers advance notice of their military obligations in order to be protected by the
reemployment rights statute.
3.2b Other Federal Laws and Executive Orders
Executive orders are used to provide equal employment opportunity to individuals
employed by government contractors. Since many large employers—such as General
Dynamics, Intel, Dell Computer, and Motorola—and numerous small companies have
contracts with the federal government, managers are expected to know and comply
with the provisions of executive orders and other laws. The federal laws and executive
orders that apply to government agencies and government contractors are summarized
in Figure 3.7.
EEO Rules Applicable to Federal Contractors and AgenciesFigure 3.7
LAW PROVISIONS
Vocational Rehabilitation Act of 1973
(amended in 1974)
Prohibits federal contractors from discriminating against disabled individuals
in any program or activity receiving federal financial assistance; requires federal
contractors to develop affirmative action plans to hire and promote disabled
people.
Executive Order 11246 (1965), as
amended by Order 11375 (1966)
Prohibits employment discrimination based on race, color, religion, sex, or
national origin by government contractors with contracts exceeding $10,000;
requires contractors employing 50 or more workers to develop affirmative
action plans when government contracts exceed $50,000 per year.
Executive Order 11478 (1969) Obligates the federal government to ensure that all personnel actions affecting
applicants for employment be free from discrimination based on race, color,
religion, sex, or national origin.
89624_ch03_hr_084-120.indd 97 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
98 Part 2 Meeting Human Resources Requirements
Vocational Rehabilitation Act of 1973
The Vocational Rehabilitation Act was passed in 1973 and required private employers with
federal contracts over $2,500 to take action to hire individuals with a mental or physical dis-
ability. Recipients of federal financial assistance, such as public and private colleges and uni-
versities, are also covered. In applying the safeguards of this law, the term disabled individual
means “any person who (1) has a physical or mental impairment which substantially limits
one or more of such person’s major life activities, (2) has a record of such an impairment, or
(3) is regarded as having such an impairment.” Also, employment is not required when some
aspect of the employee’s disability prevents that person from carrying out essential parts of
the job, nor is it required if the disabled person is not otherwise qualified.
In cases when people with contagious diseases are “otherwise qualified” to do their
jobs, the law requires employers to make a reasonable accommodation to allow the disabled
to perform their jobs.19 Individuals with AIDS or HIV are also disabled within the mean-
ing of the Rehabilitation Act. However, the Rehabilitation Act does not require employers
to hire or retain a disabled person if he or she has a contagious disease that poses a direct
threat to the health or safety of others and the individual cannot be accommodated.
Executive Order 11246
Federal agencies and government contractors with contracts of $10,000 or more must
comply with the antidiscrimination provisions of Executive Order 11246. The order
prohibits discrimination based on race, color, religion, sex, or national origin in all
employment activities. Furthermore, it requires that government contractors or subcon-
tractors having 50 or more employees with contracts in excess of $50,000 develop affir-
mative action plans; such plans will be discussed later in the chapter.
Don’t Ask, Don’t Tell Repeal Act of 2010. On September 20, 2011, the Don’t Ask,
Don’t Tell Repeal Act was implemented to end the ban on gay, lesbian, or bisexual per-
sons openly serving in the U.S. military.
3.2c Fair Employment Practice Laws
In addition to federal laws and executive orders, almost all states and many local
governments have passed laws barring employment discrimination. Referred to as
fair employment practices (FEPs), these statutes are often more comprehensive than
the federal laws.
3.3 Other Equal Employment
Opportunity Issues
Federal laws, executive orders, court cases, and state and local statutes provide the broad
legal framework; and within these major laws, specific issues are of particular interest
to supervisors and managers.
3.3a Sexual Harassment
Sexual harassment refers to unwelcome sexual advances, requests for sexual favors,
and other verbal or physical harassment of a sexual nature. It can also include offen-
sive remarks, vulgar or obscene gestures, language or comments, related to one’s sex,
disabled individual
Any person who (1) has
a physical or mental
impairment that substan-
tially limits one or more
of the person’s major life
activities, (2) has a record
of such impairment, or
(3) is regarded as having
such an impairment.
fair employment
practices (FEPs)
State and local laws
governing equal
employment oppor-
tunity that are often
more comprehensive
than federal laws and
apply to small-business
employers.
sexual harassment
Unwelcome advances,
requests for sexual
favors, and other verbal
or physical conduct of
a sexual nature in the
working environment.
89624_ch03_hr_084-120.indd 98 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
99Chapter 3 Equal Employment Opportunity and Human Resources Management
an individuals body, or sexual activity. Both the victim and the harasser can be either
female or male, and harassment can occur between individuals of the same or opposite
sex. The harasser can be the victim’s supervisor, a supervisor in another area, a coworker,
or someone who is not an employee of the employer, such as a client or customer.20
The EEOC recognizes two forms of sexual harassment as being illegal under Title
VII. The first, quid pro quo harassment, occurs when “submission to or rejection of
sexual conduct is used as a basis for employment decisions.”21 This type of harassment
involves a tangible or economic consequence, such as a demotion or loss of pay. If a
supervisor promotes an employee only after the person agrees to an after-work date,
the conduct is clearly illegal.
The second type of harassment, hostile environment, can occur when unwel-
come sexual conduct “has the purpose or effect of unreasonably interfering
with job performance or creating an intimidating, hostile, or offensive working
environment.”22
Dirty jokes, vulgar slang, nude pictures, swearing, and personal ridicule and insult
create a hostile environment when an employee finds them offensive. Email, instant and
text messages, and posts on social networking sites have become convenient ways for
employees to sexually harass their coworkers electronically.
Via a questionnaire, it is possible to test the understanding of your employees about
what is and what is not sexual harassment. Highlights in HRM 2 shows some sample
questions firms can ask their employees to gauge their knowledge of the topic.
The EEOC considers an employer guilty of sexual harassment when the employer
knew or should have known about the unlawful conduct and failed to remedy it or to
take corrective action. Employers are also guilty of sexual harassment when they allow
nonemployees (customers or salespeople) to sexually harass employees.23 When charges
of sexual harassment have been proved, victims forced out of their jobs can be awarded
back pay, lost benefits, attorney’s fees, and interest charges, and they may be reinstated
in their jobs. Sexual harassment involving physical conduct can invite criminal charges,
and punitive damages can be assessed against both the employer and the individual
offender.24
Sexual harassment includes
any type of behavior,
comments, gestures, and
actions of a sexual nature
that create a hostile
work environment for an
employee.
Ph
ot
og
ra
ph
ee
.e
u/
Sh
ut
te
rs
to
ck
89624_ch03_hr_084-120.indd 99 11/17/17 2:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions Used to Audit Sexual Harassment in the Workplace
ACTIVITY
IS THIS SEXUAL
HARASSMENT?
AWARE OF THIS
BEHAVIOR IN THE
ORGANIZATION?
�� Employees post cartoons on bulletin boards containing sexually
related material. Yes No Uncertain Yes No
�� A male employee says to a female employee that she has beautiful
eyes and hair. Yes No Uncertain Yes No
�� A male manager habitually calls all female employees “sweetie” or
“darling.” Yes No Uncertain Yes No
�� A manager fails to promote a female (male) employee for not
granting sexual favors. Yes No Uncertain Yes No
�� Male employees use vulgar language and tell sexual jokes that are
overheard by, but not directed at, female employees. Yes No Uncertain Yes No
�� A male employee leans and peers over the back of a female
employee when she wears a low-cut dress. Yes No Uncertain Yes No
�� A supervisor gives a female (male) subordinate a nice gift on her
(his) birthday. Yes No Uncertain Yes No
�� Two male employees share a sexually explicit magazine while
observed by a female employee. Yes No Uncertain Yes No
�� Female office workers are “rated” by male employees as they pass
the men’s desks. Yes No Uncertain Yes No
�� Revealing female clothing is given as a gift at an office birthday
party. Yes No Uncertain Yes No
�� A sales representative from a supplier makes suggestive sexual
remarks to a receptionist. Yes No Uncertain Yes No
Highlights in HRM2
3.3b Sexual Orientation
Nearly half of U.S. states and some cities also have passed laws prohibiting sexual ori-
entation discrimination in workplaces.25 Although Title VII of the Civil Rights Act of
1964 lists “sex” as a protected class, currently no federal law bars discrimination based
on one’s sexual orientation. For lesbian, gay, bisexual, transgender, and queer (LGBTQ)
employees who do not work for the federal government, protection from discrimina-
tion largely comes from fair employment practice laws passed at state and local levels.
The laws vary regarding the protection afforded to the LGBTQ community and those
who are covered under the laws. For example, in some states, public—but not private—
sector employees are protected from discrimination based on their sexual orientation.
Therefore, it becomes important for managers and supervisors to know and follow
the legal rights of the LGBTQ community in their geographic area.26 Figure 3.8 shows
a list of states that have passed non-discrimination laws based on sexual orientation.
100
89624_ch03_hr_084-120.indd 100 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
101Chapter 3 Equal Employment Opportunity and Human Resources Management
Regardless of any state or local laws, however, the EEOC interprets and enforces
Title VII’s prohibition of sex discrimination as forbidding any employment discrimina-
tion based on gender identity or sexual orientation.
The commission has obtained approximately $6.4 million in monetary relief for indi-
viduals, as well as numerous employer policy changes, in voluntary resolutions of LGBTQ
discrimination charges under Title VII since data collection began in 2013. Some exam-
ples of LGBTQ-related claims that EEOC views as unlawful sex discrimination include:
• Failing to hire an applicant because she is a transgender woman.
• Firing an employee because he is planning or has made a gender transition.
• Denying an employee equal access to a common restroom corresponding to the
employee’s gender identity.
• Harassing an employee because of a gender transition, such as by intentionally and
persistently failing to use the name and gender pronoun that correspond to the gender
identity with which the employee identifies, and which the employee has communi-
cated to management and employees.
• Denying an employee a promotion because of sexual orientation.
• Discriminating in terms, conditions, or privileges of employment, such as providing a
lower salary to an employee because of sexual orientation, or denying spousal health
insurance benefits to a female employee because her legal spouse is a woman, while
providing spousal health insurance to a male employee whose legal spouse is a woman.
• Harassing an employee because of his or her sexual orientation, for example, by
derogatory terms, sexually oriented comments, or disparaging remarks for associat-
ing with a person of the same or opposite sex.
Not pictured:
District of Columbia.
Laws prohibit both
sexual orientation
and gender identity
States with laws prohibiting sexual orientation
and gender identity discrimination
Laws that prohibit both
Laws that prohibit only
sexual orientation
discrimination
No laws in place
Sexual orientation in
public employment
Sexual orientation and
gender identity solely in
public employment
Gender identity in
public employment
States with Laws Prohibiting Sexual Orientation and Gender Identity DiscriminationFigure 3.8
89624_ch03_hr_084-120.indd 101 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
102 Part 2 Meeting Human Resources Requirements
• Discriminating against or harassing an employee because of his or her sexual orien-
tation or gender identity, in combination with another unlawful reason, for example,
on the basis of transgender status and race, or sexual orientation and disability.27
Regardless of how companies may feel about sexual orientation discrimination,
studies have shown that prohibiting sexual orientation and gender discrimination can
increase company performance. For example, one study points out that patent-based
innovation increases by 8 percent in states after they adopt the federal Employment
Non-Discrimination Act (ENDA) to ban sexual orientation and gender identity
discrimination in the workplace.28
3.3c Immigration Reform and Control
Good employment is the magnet that attracts many people to the United States. However,
illegal immigration is an issue of national concern at the federal, state, and local legislative
levels and among employers, unions, civil rights groups, and, of course, Donald Trump.29
Employers must comply with the requirements of the Immigration Reform and
Control Act (IRCA). The law has two employer mandates. First, all employers covered
by the law are prohibited from knowingly hiring or retaining unauthorized aliens on the
job.30 Second, employers with four or more employees are prohibited from discriminat-
ing in hiring or termination decisions on the basis of national origin or citizenship.31
Employers must comply with the law by verifying and maintaining records on the
legal rights of applicants to work in the United States. The Handbook for Employers,
published by the U.S. Department of Justice, lists five actions that employers must take
to comply with the law:
1. Have employees fill out their part of Form I-9.
2. Check documents establishing an employee’s identity and eligibility to work.
3. Complete the employer’s section of Form I-9.
4. Retain Form I-9 for at least three years.
5. Present Form I-9 for inspection to an Immigration and Naturalization Service
officer or to a Department of Labor officer upon request.32
Employers with sizable contracts with the federal government must also use its
E-Verification system. E-Verify is a system that provides an automated link to federal
databases to help employers determine the legal eligibility of workers and the validity of
their social security numbers. Employers that do not do business with the government
can also use E-Verify.
Employers found to have violated the discrimination provisions of the Immigration
Reform and Control Act will be ordered to cease the discriminatory practice. They may
also be directed to hire, with or without backpay, individuals harmed by the discrimina-
tion and to pay a fine of up to $1,000 for each person discriminated against. Charges of
discrimination based on national origin or citizenship are filed with the Office of Special
Counsel in the Department of Justice.
3.3d Emerging Employment Discrimination Issues
Weight Discrimination
Some studies show that weight discrimination, especially against women, is not only
increasing but has become almost as common as racial discrimination.33 No federal laws
prohibit weight discrimination, although the EEOC has said that morbid obesity is a
89624_ch03_hr_084-120.indd 102 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
103Chapter 3 Equal Employment Opportunity and Human Resources Management
protected disability under the ADA. At some point it is not out of the realm of possibility
that it could become a protected class.34
Attractiveness and Discrimination
There are no federal laws prohibiting discrimination in the workplace based on people’s
attractiveness, although it undoubtedly occurs. In a survey of hiring managers con-
ducted by Newsweek, 57 percent of them said that qualified but unattractive job candi-
dates would have a harder time landing a job.
Part of the problem of implementing a law making it legal to discriminate based on
a person’s appearance would be deciding who is unattractive enough to be protected by
the law. Moreover, in some instances, good looks can be a BFOQ. The modeling busi-
ness is one example.35
Caregivers and Discrimination
In 2007, the EEOC issued new enforcement guidelines to help prevent discrimination
against workers with caregiving responsibilities. There are no federal statutes that pro-
hibit discrimination based “solely” on a person being a caregiver. However, disparate
Employers using
E-Verify must display a
copy of this poster for
employees to see.
ht
tp
s:
//
w
w
w
.u
sc
is
.g
ov
/e
-v
er
ify
89624_ch03_hr_084-120.indd 103 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
104 Part 2 Meeting Human Resources Requirements
treatment arises when an employee with caregiving responsibilities is subjected to dis-
crimination based on a protected characteristic under equal opportunity laws (such as
sex, race, age).36 The EEOC has outlined numerous scenarios it says could constitute
discrimination against a caregiver. Denying women with young children an employment
opportunity available to men with young children is an example. So is refusing to hire
a worker who is a single parent of a child with a disability based on the assumption that
caregiving responsibilities will make the worker unreliable.
3.4 Uniform Guidelines on Employee
Selection Procedures
Employers are often uncertain about the appropriateness of specific selection proce-
dures, especially those related to testing and selection. To remedy this concern, the
EEOC, along with three other government agencies, adopted the current Uniform
Guidelines on Employee Selection Procedures.37 The Uniform Guidelines is a very
important procedural document for managers because it applies to employee selection
procedures in the areas of hiring, retention, promotion, transfer, demotion, dismissal,
and referral. It is designed to help employers, labor organizations, employment agen-
cies, and licensing and certification boards comply with the requirements of federal laws
prohibiting employment discrimination.
Validity
When using a test or other selection instrument to choose individuals for employment,
employers must be able to prove that the selection instrument bears a direct relationship
to success on the job. This proof is established through validation studies that show how
related the test is to the job.
Uniform Guidelines on
Employee Selection
Procedures
A procedural document
published in the Federal
Register to help employ-
ers comply with federal
regulations against
discriminatory actions.
The EEOC provides
guidelines to help
prevent discrimination
against caregivers.
g-
st
oc
ks
tu
di
o/
Sh
ut
te
rs
to
ck
Following so many
EEO laws might sound
daunting. Would it help
if you had some type of
guideline when hiring
a person to make sure
you do not break any of
these laws?
LO 2
89624_ch03_hr_084-120.indd 104 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
105Chapter 3 Equal Employment Opportunity and Human Resources Management
Adverse Impact and Disparate Treatment
For an applicant or employee to pursue a discrimination case successfully, the individual
must establish that the employer’s selection procedures resulted in an adverse impact on
a protected class. Adverse impact refers to the unintentional rejection for employment,
placement, or promotion of a significantly higher percentage of members of a protected
class when compared with members of non-protected classes.38 The Uniform Guidelines
does not require an employer to conduct validity studies of its selection procedures
when they have not resulted in adverse impact on a protected class. However, organiza-
tions that validate their selection procedures on a regular basis and use interviews, tests,
and other procedures in such a manner so as to avoid adverse impact, will generally be
in compliance and avoid costly litigation.
In EEO cases, it is important to distinguish between adverse impact and disparate
treatment discrimination. Adverse impact cases deal with unintentional discrimina-
tion; disparate treatment cases involve instances of purposeful discrimination. Allow-
ing men to apply for craft jobs, such as carpentry or electrical work, but denying this
opportunity to women would also show disparate treatment. To win a disparate treat-
ment case, the plaintiff must prove that the employer’s actions intended to discriminate,
which is often difficult.
There are two basic ways to show that adverse impact exists.
Adverse Rejection Rate, or Four-Fifths Rule. According to the Uniform Guidelines, a
selection program has an adverse impact when the selection rate for any racial, ethnic,
or sex class is less than four-fifths (or 80 percent) of the rate of the class with the high-
est selection rate. The EEOC has adopted the four-fifths rule as a rule of thumb to
determine adverse impact in enforcement proceedings. The four-fifths rule is not a
legal definition of discrimination; rather, it is a method by which the EEOC or any
other enforcement agency monitors serious discrepancies in hiring, promotion, or
other employment decisions. The appendix at the end of this chapter explains how
adverse impact is determined and gives a realistic example of how the four-fifths rule
is computed.
An alternative to the four-fifths rule, and one frequently used in discrimination law-
suits, is to conduct a standard deviation analysis of a firm’s applicant data. The Supreme
Court, in Hazelwood School District v. United States, set forth a standard deviation anal-
ysis that determines whether the difference between the expected selection rates for
protected groups and the actual selection rates could be attributed to chance. If chance
is eliminated for the lower selection rates of the protected class, it is assumed that the
employer’s selection technique has an adverse impact on the employment opportunities
of that group.
Restricted Policy. Any evidence that an employer has a selection procedure that
excludes members of a protected class, whether intentional or not, constitutes adverse
impact. For example, hiring individuals who must meet a minimum height or appear-
ance standard (at the expense of protected class members) is evidence of a restricted
policy.
The benchmark case in employment selection procedures is Griggs v. Duke Power
Company (1971). Willie Griggs, who was black, had applied for the position of coal
handler with the Duke Power Company. His request for the position was denied because
he was not a high school graduate, a requirement for the position. Griggs claimed the
job standard was discriminatory because it did not relate to job success and because the
standard had an adverse impact on a protected class. When employers use educational,
adverse impact
A concept that refers to
the rejection of a signifi-
cantly higher percentage
of a protected class for
employment, placement,
or promotion when
compared with the
successful, nonprotected
class.
disparate treatment
A situation in which
protected class members
receive unequal treat-
ment or are evaluated by
different standards.
four-fifths rule
A rule of thumb followed
by the EEOC in deter-
mining adverse impact
for use in enforcement
proceedings.
89624_ch03_hr_084-120.indd 105 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
106 Part 2 Meeting Human Resources Requirements
physical, or intelligence standards as a basis for hiring or promotion, these must be
absolutely necessary for job success.
Workforce Utilization Analysis
As you have learned, employers must be aware of the impact their selection procedures
have on protected class members. Part of this process involves analyzing the composi-
tion of their internal workforce when compared with their external labor market. The
EEOC refers to this comparison as workforce utilization analysis. This concept simply
compares an employer’s workforce by race and sex for specific job categories against
the surrounding labor market. The employer’s relevant labor market is that area from
which employees are drawn who have the skills needed to successfully perform the job.
For example, if Squarespace, the website maker, is hiring computer technicians from a
labor market composed of 10 percent black workers, 8 percent Hispanic workers, and
2 percent Native American workers, all of whom possess the qualifications for the job,
the employer’s internal workforce should reflect this racial composition. When this
occurs, the employer’s workforce is said to be at parity with the relevant labor market.
If the employer’s racial workforce composition is below external figures, then the pro-
tected class is said to be underutilized, and the employer should take steps to correct the
imbalance.
3.5 Enforcing Equal Employment
Opportunity Legislation
As the federal government’s leading civil rights agency, the EEOC is responsible for
ensuring that covered employers comply with equal employment opportunity legisla-
tion. The commission accomplishes this goal primarily by (1) issuing various employ-
ment guidelines and monitoring the employment practices of organizations and (2)
protecting employee rights through the investigation and prosecution of discrimination
charges.39
3.5a Record-Keeping and Posting Requirements
Organizations subject to Title VII are required by law to maintain specific employ-
ment records and reports. Those failing to comply with record-keeping and posting
requirements or willfully falsifying records can incur penalties, including fines and
imprisonment. See Highlights in HRM 3 for a recent example of one of the posters that
companies are required by law to display in prominent places such as the cafeteria, by
time clocks, or by the water cooler. It should be easier than finding Waldo in a Where’s
Waldo book. If not, then the EEOC could allow an employee to file a discrimination
charge late (past the 180-day filing deadline).
3.5b Processing Discrimination Charges
Figure 3.9 summarizes the process of filing a discrimination charge with the EEOC.40
(Note that the process is slightly different for federal employees and job applicants.)
Employees or job applicants who believe they have been discriminated against first file
a discrimination complaint, or charge form, with the EEOC. The charge must be filed
workforce utilization
analysis
A process of classifying
protected-class members
by number and by the
type of job they hold
within the organization.
charge form
A discrimination com-
plaint filed with the EEOC
by employees or job
applicants.
Based on all these
laws and regulations,
wouldn’t it be best for
the company to not let
employees know about
them?
LO 3
89624_ch03_hr_084-120.indd 106 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
EEOC Poster Supplement for 2016
Highlights in HRM3
89624_ch03_hr_084-120.indd 107 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
108 Part 2 Meeting Human Resources Requirements
within 180 days of the alleged unlawful practice occurring.41 The processing of a charge
includes notifying the employer that a charge of employment discrimination has been
filed. See Figure 3.9 to understand how to file a charge of employment discrimination.
Employers will receive a copy of the charge within 10 days of it being filed. Both parties,
the plaintiff (employee) and the defendant (organization), must be prepared to support
their beliefs or actions.
Retaliation
Managers and supervisors must not retaliate against individuals who invoke their legal
rights to file charges or to support other employees during EEOC proceedings.42 Retali-
ation can include any punitive action taken against employees who elect to exercise their
legal rights before any EEO agency.43 These actions can include terminating employ-
ees, giving them unjustified negative appraisals, subjecting them to more supervision,
demoting them, and reducing their salaries and work responsibilities, and transferring
to a less desirable job.44 Of course, employees are not excused from continuing to per-
form their jobs or follow their company’s legitimate workplace rules just because they
have filed a complaint with the EEOC or opposed discrimination.
EEOC
investigation
Charge filed
Suit filed by
individual
Employer
receives copy
of charge
Deferred to
state agency
Determination
to dismiss
charge
Settlement
Successful
Unsuccessful
suit filed by
EEOC
Failure to file
suit within
180 days
Individual may
sue within 90
days
Finding of
reasonable
cause
Conciliation
Federal District Court
Filing a Charge of Employment DiscriminationFigure 3.9
89624_ch03_hr_084-120.indd 108 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
109Chapter 3 Equal Employment Opportunity and Human Resources Management
3.5c Preventing Discrimination Charges
Both large and small employers understand that the foundation to preventing any form
of discrimination is having a comprehensive EEO policy. Employers that do not have
an EEO policy are legally vulnerable. Antidiscrimination policy statements must be
inclusive; they must cover all applicable laws and EEOC guidelines and contain practi-
cal illustrations of specific inappropriate behavior. For the policy to have value, it must
be widely disseminated to managers, supervisors, and all non-managerial employees.
A complete policy will include specific sanctions for those found guilty of discrimina-
tory behavior.45
Since managers and supervisors are key to preventing and correcting discrimi-
nation, they, in particular, must be trained to understand employee rights and
managerial obligations.46 A comprehensive training program will include (1) the
prohibitions covered in the various EEO statutes and executive orders, (2) guidance
on how to respond to complaints of discrimination, (3) procedures for investigat-
ing complaints (see Chapter 13), and (4) suggestions for remedying inappropriate
behavior. Perhaps the ultimate key to preventing employment discrimination is for
managers and supervisors to create an organizational climate in which the principles
of dignity, respect, and the acceptance of a diverse workforce are the norm and
therefore expected.
3.6 Affirmative Action and
Diversity Management
Equal employment opportunity legislation requires managers to provide the same
opportunities to all job applicants and employees regardless of race, color, religion,
sex, national origin, or age. Affirmative action goes beyond not discriminating
among employees. Affirmative action occurs when employers take proactive steps
to help reverse the impact of past discrimination against minorities. Employers
with voluntary affirmative action programs actively encourage employment diver-
sity, post job opportunities with minority agencies, remove unnecessary barriers to
employment, and offer comprehensive training and mentoring to protected class
members.
So what happens when affirmative action becomes controversial? Students at the
University of Texas at Austin in 2016 illustrated the controversy through an affirma-
tive action bake sale. Depending on your race or gender, you were charged a different
amount to buy a pastry. View this clip to see the controversy: https://www.youtube.com/
watch?v=dUR_MCdnUAo. Based on this clip, what is your own take on affirmative
action within college?
Employers establish affirmative action programs for several reasons. Affirmative
action programs are required by the OFCCP for employers with federal contracts greater
than $50,000. The OFCCP provides regulations and suggestions for establishing affir-
mative action plans. Specifically, employers must (1) provide an organizational profile
that graphically illustrates their workforce demographics (see workforce utilization
analysis previously discussed), (2) establish goals and timetables for employment of
underutilized protected classes, (3) develop actions and plans to reduce underutiliza-
tion, including initiating proactive recruitment and selection methods, and (4) monitor
progress of the entire affirmative action program.
affirmative action
A policy that goes
beyond equal employ-
ment opportunity by
requiring organizations
to comply with the law
and correct any past dis-
criminatory practices by
increasing the numbers
of minorities and women
in specific positions.
What effect, if any, do
you think ending affir-
mative action programs
in the United States
have on the diversity
and competitiveness of
U.S. businesses?
LO 4
89624_ch03_hr_084-120.indd 109 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
110 Part 2 Meeting Human Resources Requirements
Courts will sometimes mandate employers that have been found guilty of past dis-
crimination to establish affirmative action programs, particularly when the discrimi-
nation has been pervasive and a long-held organizational practice. A court-ordered
program, often implemented through a consent decree between the court and employer,
will require the setting of hiring and promotional goals along with stated timetables for
compliance. When the requirements of the consent decree are met, the employer is no
longer bound by the court order.
Sometimes employers voluntarily develop their own affirmative action programs to
ensure that protected class members receive fair treatment in all aspects of employment.
For example, some companies employ chief diversity officers. A chief diversity officer
(CDO) is a top executive responsible for the implementation of a firm’s diversity efforts.
For example, in 2016 Salesforce, Dropbox, Pinterest, and Twitter all hired a chief diver-
sity officer, following the footsteps of tech giants like Google, Microsoft, and Facebook.
Today, about one in five Fortune 1000 companies have a CDO. A number of studies have
demonstrated how a diverse workforce drives up a company’s revenue.47 In fact, one
study has shown that having a diverse set of leaders can improve a company’s likelihood
of improving market share by 45 percent. As HR professionals readily note, the success
of any voluntary affirmative action program or diversity effort largely depends on the
support given to it by senior managers and supervisors at all organization levels.48 The
EEOC recommends that organizations developing affirmative action programs follow
specific steps, as shown in Highlights in HRM 4.
One of the drawbacks of implementing an affirmative action program is that an
employer can be accused of reverse discrimination, or giving preference to members
of protected classes to the extent that unprotected individuals believe they are suffering
from discrimination. When these charges occur, organizations encounter a “catch-22”
as they are caught between attempting to correct past discriminatory practices and
handling present complaints from unprotected members alleging that HR policies are
unfair.
3.6a Court Decisions
In the 1970s, regarding two leading cases of reverse discrimination, University of
California Regents v. Bakke and United States Steelworkers of America v. Weber,49 the
Supreme Court ruled that applicants must be evaluated on an individual basis and race
can be one factor used in the evaluation process as long as other competitive factors are
considered. The Court stated that affirmative action programs were not illegal per se
as long as rigid quota systems were not specified for different protected classes. Also,
voluntary affirmative action programs are permissible where they attempt to eliminate
racial imbalances in traditionally segregated job categories.
The judicial support for affirmative action programs has eroded over the decades,
however. During the mid-1990s, federal courts increasingly restricted the use of race
and ethnicity in awarding scholarships, determining college admissions, making layoff
decisions, selecting employees, promoting employees, and awarding government con-
tracts. Then in 2009, the Supreme Court heard Ricci vs. DeStafano, a lawsuit brought
against the City of New Haven, Connecticut, by 19 city firefighters. The firefighters
alleged that the city discriminated against them by invalidating a test for a promotion
because no black firefighters had passed it with a score high enough to warrant promo-
tion. The firefighters, 17 of whom are white and 2 of whom are Hispanic, claimed they
were denied the promotions because of their race.
chief diversity
officer (CDO)
A top executive respon-
sible for implementing a
firm’s diversity efforts.
reverse discrimination
The act of giving prefer-
ence to members of
protected classes to the
extent that unprotected
individuals believe
they are suffering
discrimination.
89624_ch03_hr_084-120.indd 110 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Basic Steps in Developing an Effective Affirmative Action Program
Filing a Charge of Employment Discrimination
1. Issue a written equal employment opportunity policy
and an affirmative action commitment statement.
2. Publicize the policy and the organization’s affirmative
action commitment.
3. Appoint a top official within the organization to direct
and implement the program.
4. Survey minority and female employment by depart-
ment and job classification.
5. Develop goals and timetables to improve utilization of
minorities and women in each area in which underuti-
lization has been identified.
6. Develop and implement specific programs to achieve
goals.
7. Establish an internal audit and reporting system to
monitor and evaluate progress in each aspect of the
program.
8. Develop supportive in-house and community
programs.
Source: U.S. Equal Employment Opportunity Commission.
Highlights in HRM4
In a split decision, the Court ruled in the firefighters’ favor. The ruling didn’t ques-
tion the fire department’s efforts to ensure minorities were fairly promoted. However,
it said throwing out the test midstream (which, incidentally, had been designed by an
outside consulting firm to be nondiscriminatory) was unfair to those who had passed
it. In its ruling, the Court said: “once that process has been established and employers
have made clear their selection criteria, they may not then invalidate the test results, thus
upsetting an employee’s legitimate expectation not to be judged on the basis of race.”
The ruling underscores the importance of designing careful selection procedures
as well as following them once they are designed. It also shows how tricky it can be to
implement an affirmative action program.50
One of the ways
companies can foster
diversity within their
organizations is by
getting employees to
talk about their differ-
ences. For example, the
Mallon Group Training
and Management has
developed a series of
Know Me games that
enable participants
of different cultures,
races, sexual orienta-
tions, and so forth
to explore issues of
diversity together.
Ra
w
pi
xe
l.c
om
/S
hu
tt
er
st
oc
k
111
89624_ch03_hr_084-120.indd 111 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
112 Part 2 Meeting Human Resources Requirements
3.6b Beyond Affirmative Action: Leveraging Diversity
The future of affirmative action might not rest in judicial decisions or laws, but in
managers’ attitudes and voluntary actions to make the workplace fairer and more com-
petitive. Managers who embrace a diverse workforce know individual employee differ-
ences and the contributions made by people of varied abilities are one way to develop a
competitive advantage. For example, some studies have found that companies with more
progressive nondiscrimination policies outperform competing firms that lack them.51
As more companies expand around the globe either physically or on the Web, they are
recognizing that they need to employ diverse people with different talents to better
understand and compete in various markets abroad.
According to Martin Davidson, a professor and researcher at the Darden School
of Business at the University of Virginia, strategically leveraging employee’s differences
means seeing not only the more obvious differences between people, such as their ethnic
backgrounds, sexes, ages, religions, and so forth, but how they think, learn, work, and
interact with each other. How do they use their time? How do they solve problems? Why
do some people “think outside of the box,” whereas others do not? What is it about the
experiences, mindsets, and talents of different groups of people that can be utilized in
a strategic way?
The steps toward leveraging people’s differences involves seeing, understand-
ing, and valuing them, as shown in the model in Figure 3.10. Highlights in HRM 5
shows the actual activities individuals and organizations can take to facilitate each of
these steps. We will discuss more about diversity in Chapter 5 and throughout this
textbook.
Source: Martin N. Davidson, The End of Diversity as We Know It: Why Diversity Efforts Fail and How Leveraging
Difference Can Succeed (San Francisco: Berrett-Kohler Press, 2011).
See Difference
Value
Difference
Understand
Difference
Step 1
Step 2 Step 3
Leverage
Difference
Steps to Leveraging Employee DifferencesFigure 3.10
89624_ch03_hr_084-120.indd 112 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Embracing Diversity and Leveraging Employee Differences
Practices for Individuals
Seeing
�� Openly acknowledge that relevant differences are
common.
�� Address points of conflict. Observe while remaining silent.
Understanding
�� Seek sources of information that bring understanding
about the differences.
�� Acquire data through listening, asking questions, and
sharing your story.
�� Involve people who are different from you in your
network.
Valuing
�� Avoid being overly careful in dealing with differences.
�� Accept that there will be conflict and discomfort that
require perseverance.
�� Use data to develop a new perspective.
Practices for Organizations
Seeing
�� Openly address tension among members. Encourage
members to avoid secrecy.
Understanding
�� Seek sources of information that bring understanding
about the differences.
�� Gather data through surveys and other techniques.
Establish inclusive structures.
Valuing
�� Reward members for engaging in activities that
address and diminish differences.
�� Hold employees accountable for employing new
behaviors. Actively seek diversity when recruiting.
Source: Adapted from Martin N. Davidson, The End of Diversity as We Know
It: Why Diversity Efforts Fail and How Leveraging Difference Can Succeed.
(San Francisco: Berrett-Kohler Press, forthcoming, 2011).
Highlights in HRM5
Government reports show that the wages and
job opportunities of minorities typically lag behind
those for white males. EEOC was originally set up to
ensure fair employment practices regardless of race,
gender, or age. Being fair requires knowing the legal
aspects of the employment relationship, including the
laws and various executive orders mentioned in this
chapter. Other areas that have more recently become
a concern include discrimination based on disabilities,
sexual orientation, weight, appearance, or status as a
caregiver.
The Uniform Guidelines on Employee Selec-
tion Procedures is designed to help employers com-
ply with federal bans against employment practices
that discriminate on the basis of race, color, religion,
gender, or national origin. The Uniform Guidelines
LO 1
LO 2
Summary
provides employers with a framework for making
legally enforceable employment decisions. Employers
must be able to show that their selection procedures
are valid when it comes to predicting a person’s job
performance.
To ensure that organizations comply with
antidiscrimination legislation, the EEOC was estab-
lished to monitor employers’ actions. Employers
subject to federal laws must maintain certain records
and report certain employment statistics where man-
dated. Employees or applicants for employment who
believe they have been discriminated against may file
a discrimination complaint (a charge form) with the
EEOC. If an agreement is not reached, the EEOC may
elect to sue the employer in federal court. Figure 3.9
illustrates the steps in filing a discrimination charge.
LO 3
113
89624_ch03_hr_084-120.indd 113 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
114 Part 2 Meeting Human Resources Requirements
EEO legislation was prompted by significant
social events. List those events and describe
how they influenced the passage of various
EEO laws. Cite and describe the major federal
laws and court decisions that affect the employ-
ment process of both large and small organi-
zations. After receiving several complaints
of sexual harassment, the HR department
of a city library decided to establish a sexual
harassment policy. What should be included
in the policy? How should it be implemented?
What is the Uniform Guidelines on Employee
Selection Procedures? To whom do the guide-
lines apply? What do they cover? Joe Alverez
has filed a complaint with the EEO alleging
that his employer, Universal Mortgage Com-
pany, promotes more whites than Hispanics
into managerial positions. Explain the statisti-
cal methods used by the EEOC to investigate
this adverse impact claim.
LO 1
LO 2
Understand how the EEOC affects compa-
nies and what you must do as a manager to
appropriately respond to the administrative
rules and regulations published in the Federal
Register.
As a marketing manager, you have recently
turned down Nancy Conrad for a position as
sales supervisor. Nancy believes the denial was
due to her gender, and she has filed a sex dis-
crimination charge with the EEOC. Explain
the steps the EEOC will use to process the
charge; include Nancy’s options during the
process.
Affirmative action is both a legal and emo-
tional issue affecting employees and employers.
Develop as many arguments as you can both
supporting and opposing affirmative action as
an employer policy. If you were asked to imple-
ment such a program, what steps would you
follow?
LO 3
LO 4
Discussion Questions
Affirmative action goes beyond provid-
ing equal employment opportunities to employ-
ees. Firms with federal contracts and firms that
have been found guilty of past discrimination can
be required to utilize affirmative action programs.
This is accomplished by employing protected
classes for jobs in which they are underrepresented.
The employer’s goal is to have a balanced internal
LO 4 workforce representative of the employer’s relevant
labor market. The future of affirmative action might
not rest in judicial decisions or laws but in the efforts
of managers to voluntary embrace and foster diver-
sity. Differences of all sorts among people are ubiq-
uitous in the workforce. Managers need to leverage
these differences because they can be the source of
organizational strength.
adverse impact
affirmative action
bona fide occupational
qualification (BFOQ)
business necessity
charge form
chief diversity officer (CDO)
disabled individual
disparate treatment
equal employment opportunity
Equal Employment Opportunity
Commission (EEOC)
fair employment practices (FEPs)
four-fifths rule
protected classes
reasonable accommodation
reverse discrimination
sexual harassment
workforce utilization analysis
Uniform Guidelines on Employee
Selection Procedures
Key Terms
89624_ch03_hr_084-120.indd 114 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
115Chapter 3 Equal Employment Opportunity and Human Resources Management
CASE STUDY Going to the Dogs1
Let’s admit it: With very few exceptions, we all love
dogs. We love to be with our dogs, and our dogs love
to be with us. So it is only natural, then, to want to
keep our dogs with us as much as possible, even when
we go to work. Pet Sitters International thinks this is
such a good idea that they have instituted “Take Your
Dog to Work Day,” a once-a-year event designed to
raise awareness of the benefits of dog ownership and
to encourage pet adoption.
But maybe you would like something a bit more
regular, like having the option to bring Fido to work
every day? According to a survey by the American
Pet Products Manufacturers Association, it should
not be too hard to find an opportunity since nearly
one in five companies already allows pets in the work-
place. You can even find a list of employers that allow
canines at work on DogFriendly.com. Fans of the
dogs-at- the-office policy say it increases employee
morale and decreases stress.
Before we go too far with this idea, however, per-
haps we should take note of some arguments against
bringing dogs to work. First, some HR experts like
Ethan Winning have cautioned that dogs can be messy,
placing an unfair burden on employers to clean up
afterwards. Dogs can also be a distraction, and other
employees may be allergic or otherwise disturbed by
them. And what happens when two or more employ-
ees bring their dogs to work on the same day, and Fido
and Fifi don’t want to play nice?
Of course, some people actually need to bring
their dogs to work, which is why the Americans with
Disabilities Act permits the use of “service animals” to
assist those with disabilities. For example, seeing-eye
dogs are allowed to accompany blind individuals at
work. The EEOC guideline is reasonable since guide
dogs are necessary to blind individuals, and further-
more, guide dogs are trained not to be a nuisance.
It can be challenging, however, for employers to
know where to draw the line. Take the case of Eliza-
beth Booth, a quadriplegic hired by Case Services
Corporation as an accountant in the billing depart-
ment. Booth, who uses a wheelchair for mobility,
has trained her small, well-behaved dog to pick up
small items that Booth has dropped. Along with a
formal request to be allowed to bring her dog to
work to assist her, Booth submitted to her employer
a letter from her doctor stating that the dog would
also help relieve Booth’s stress. When Case Services’s
HR director denied the request, Booth immediately
filed a discrimination charge with the EEOC,
claiming the company did not provide a reason-
able accommodation to her disability or her health
needs.
When it comes to establishing a pet policy, as is
so often the case, balancing the employer’s needs and
responsibilities with the employees’ needs and wants
presents something of a dilemma.
Questions
1. What is your position on this issue? Provide two
or three reasons to support your argument.
2. If you were an HR manager of a company, what
pet policy would you set and how would you
implement it?
3. How would you decide the case of Elizabeth
Booth, and which laws would you base your deci-
sion on? Explain.
Sources: James J. McDonald, Jr., “Take Your Dog to Work Every
Day,” Employee Relations Law Journal 32, no. 3 (Winter 2006): 86;
“Has Your Organization Gone to the Dogs?” http://www.hrwebcafe
.com/2007/06/has_your_organization_gone_to.html; Ethan A. Win-
ning, “Pets at the Corporate Zoo,” http://www.ewin.com/arch/pets
.htm; “About Take Your Dog to Work Day,” http://www.takeyourdog
.com/About/; “Take Your Dog to Work Every Day,” http://www .dog-
friendly.com/server/general/workplace/.
89624_ch03_hr_084-120.indd 115 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Sexual Harassment: A Frank Discussion
behaviors might be viewed differently by female and
male employees. Give examples.
2. Many sexual harassment incidents go unreported.
Fully discuss why this can occur and what might be
done to reduce this problem.
3. The cornerstone to addressing sexual harassment is
achieving organizational awareness through training.
Develop a sexual harassment training program for a
company of 250 employees that covers, at a minimum,
the following: (1) who should attend the training ses-
sions, (2) the content outline for the training program
(the list of materials your team wants to teach), (3) spe-
cific examples to illustrate the training materials, and
(4) how to investigate sexual harassment complaints.
4. This chapter will assist you with this assignment. You
can obtain additional materials from EEOC offices and
from various HR magazines.
5. Be prepared to present your training outline to other
class members.
Over the past decade, the problem of sexual harassment has
captured the attention of all managers and employees. While
it is widely known that sexual harassment is both unethical
and illegal, the incidents of sexual harassment continue to
plague business. Unfortunately, when these cases arise, they
cause morale problems among employees, embarrassment
to the organization, and costly legal damages. Consequently,
all managers and supervisors play a central role in prevent-
ing sexual harassment complaints. It is important that man-
agers understand the definition of sexual harassment, who
is covered by sexual harassment guidelines, and how to pre-
vent its occurrence. This skill-building exercise will provide
you with knowledge in each of these areas.
Assignment
1. Working in teams of female and male members,
develop a list of behaviors that could be classified
as quid pro quo harassment or hostile environment.
Explore the possibility that some sexual harassing
CASE STUDY Misplaced Affections: Discharge for Sexual Harassment2
Peter Lewiston was terminated on July 15, 2017,
by the governing board of the Pine Circle Unified
School District (PCUSD) for violation of the dis-
trict’s sexual harassment policy. Prior to Lewiston’s
termination he was a senior maintenance employee
with an above-average work record who had worked
for the PCUSD for 11 years. He had been a widower
since 2012 and was described by his coworkers as
a friendly, outgoing, but lonely individual. Beverly
Gilbury was a fifth-grade teacher working in the
district’s Advanced Learning Program. She was 28
years old and married and had worked for PCUSD
for 6 years. At the time of the incidents, Lewiston
and Gilbury both worked at the Simpson Elementary
School, where their relationship was described as
“cooperative.” The following sequence of events was
reported separately by Lewiston and Gilbury during
the district’s investigation of this sexual harassment
case.
Gilbury reported that her relationship with
Lewiston began to change during the last month of
the 2016–2017 school year. She believed that Lewiston
was paying her more attention and that his behavior
was “out of the ordinary” and “sometimes weird.” He
began spending more time in her classroom talking
with the children and with her. At the time she did not
say anything to Lewiston because “I didn’t want to hurt
his feelings since he is a nice, lonely, older man.” How-
ever, on May 25, when Lewiston told Gilbury that he
was “very fond” of her and that she had “very beautiful
eyes,” she replied, “Remember, Peter, we’re just friends.”
For the remainder of the school year, there was little
contact between them; however, when they did see
each other, Lewiston seemed “overly friendly” to her.
116
89624_ch03_hr_084-120.indd 116 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
117Chapter 3 Equal Employment Opportunity and Human Resources Management
June 11, 2017. Gilbury obtained from the West-
ern Justice Court an injunction prohibiting sexual
harassment by Lewiston. Shortly thereafter Lewis-
ton appealed the injunction. A notice was mailed
to Gilbury giving the dates of the appeal hearing.
The notice stated in part, “If you fail to appear, the
injunction may be vacated and the petition dis-
missed.” Gilbury failed to appear at the hearing, and
the injunction was set aside. Additionally, on June 11
she had filed with the district’s EEOC officer a sexual
harassment complaint against Lewiston. After the
investigation, the district concluded that Lewiston’s
actions created an “extremely sexually hostile” envi-
ronment for Gilbury. The investigative report recom-
mended dismissal based upon the grievous conduct
of Lewiston and the initial injunction granted by the
Justice Court.
Questions
1. Evaluate the conduct of Peter Lewiston against
the EEOC’s definition of sexual harassment.
2. Should the intent or motive behind Lewiston’s
conduct be considered when deciding sexual
harassment activities? Explain.
3. If you were the district’s EEOC officer, what
would you conclude? What disciplinary action, if
any, would you take?
Sources: This case is adapted from an actual arbitration hearing con-
ducted by George Bohlander. The background information is factual.
All names and dates are fictitious.
June 7, 2017. On the first day of summer school,
Gilbury returned to school to find a dozen roses and a
card from Lewiston. The card read, “Please forgive me
for thinking you could like me. I played the big fool.
Yours always, P.L.” Later in the day Lewiston asked
Gilbury to lunch. She replied, “It’s been a long time
since anyone sent me roses, but I can’t go to lunch.
We need to remain just friends.” Gilbury told another
teacher that she was uncomfortable about receiving
the roses and card and that Lewiston would not leave
her alone. She expressed concern that Lewiston might
get “more romantic” with her.
June 8, 2017. Gilbury arrived at school to find
another card from Lewiston. Inside was a handwrit-
ten note that read, “I hope you can someday return my
affections for you. I need you so much.” Later in the day,
Lewiston again asked her to lunch, and she declined,
saying, “I’m a happily married woman.” At the close of
the school day, when Gilbury went to her car, Lewiston
suddenly appeared. He asked to explain himself but
Gilbury became agitated and shouted, “I have to leave
right now.” Lewiston reached inside the car, supposedly
to pat her shoulder, but touched her head instead. She
believed he meant to stroke her hair. He stated that he
was only trying to calm her down. She drove away, very
upset.
June 9, 2017. Gilbury received another card and
a lengthy letter from Lewiston, stating that he was
wrong in trying to develop a relationship with her and
he hoped they could still remain friends. He wished
her all happiness with her family and job.
Answers to Highlights in HRM 1
1. Yes
2. False
3. No
4. Merit, seniority, incentive pay plans
5. Yes
6. Yes, if no reasonable accommodation can be made
7. No
8. Yes, except if under a court order
9. False
10. True
89624_ch03_hr_084-120.indd 117 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
118 Part 2 Meeting Human Resources Requirements
1. U.S. Equal Employment Opportunity Commission, “Charge
Statistics: FY 1997 Through FY 2016,” USA.gov (March 7,
2017), https://www.eeoc.gov/eeoc/statistics/enforcement/
charges.cfm.
2. J. B. Becton, J. B. Gilstrap, and M. Forsyth, “Prevent-
ing and Correcting Workplace Harassment: Guide-
lines for Employers,” Business Horizons 60, no. 1 (2017):
101–111; Darla Mercado, “Morgan Stanley Settles
$46 Million Discrimination Suit,” Workforce.com
(October 16, 2007), http://www.workforce.com/articles/
morgan-stanley-settles-46-million-discrimination-suit.
3. Michael Orey, “White Men Can’t Help It,” Business Week (May
15, 2006): 54.
4. For a practical overview of EEO law, see David J. Walsh,
Employment Law for Human Resource Practice, 3rd ed.
(Mason, OH: South-Western, 2010).
5. Dennis Cauchon, “Gender Pay Gap Is Smallest on Record,”
USA Today (September 14, 2010), http://www.usatoday.com.
6. For information on national origin discrimination, go to
http://www.justice.gov/crt/publications/natorigin2.php.
7. Porter v. City of Chicago, No. 11-2006 (7th Cir. 2012 [March 7,
2017]), http://law.justia.com/cases/federal/appellate-courts/
ca7/11-2006/11-2006-2012-11-08.html.
8. Lynn D. Lieber, “As Average Age of Workforce Increases, Age
Discrimination Verdicts Rise,” Employment Relations Today
34, no. 1 (Spring 2007): 105.
9. Maria Greco Danaher, “Include Pregnancy Leave in Pension
Credit,” HR Magazine 52, no. 11 (November 2007): 98.
10. United States Department of Justice Civil Rights Division,
“The Americans with Disabilities Act of 1990 and Revised
ADA Regulations Implementing Title II and Title III,” ADA
.gov (Jan 2014), http://www.ada.gov/2010_regs.htm.
11. U.S. Equal Employment Opportunity Commission, “EEOC
Enforcement Guidance on the Americans with Disabilities
Act and Psychiatric Disabilities,” EEOC (1997; January 2014),
http://www.eeoc.gov/policy/docs/psych.html.
12. Jonathan R. Mook, “Accommodation Paradigm Shifts,” HR
Magazine 52, no. 1 (January 2007): 115; see also, James J.
McDonald, Jr., “Take Your Dog to Work Everyday,” Employee
Relations Law Journal 32, no. 3 (Winter 2006): 86.
13. Bill Leonard, “Studies: ADA Makes Business Better,” HR
Magazine 52, no. 10 (October 2007): 22.
14. “Broadening the Coverage of the ADA: The 2008 Amend-
ments to the Americans with Disabilities Act,” INSIGHT into
Diversity (November 2010): 32–35.
15. “Genetic Information Nondiscrimination Act: A Primer on
Title II,” Venulex Legal Summaries (Winter 2010): special
section, 1.
16. “Joy Mining Machinery Settles EEOC Genetic Information
Non-Discrimination Act Lawsuit,” US Equal Employment
Notes and References
Opportunity Commission, https://www.eeoc.gov/eeoc/news-
room/release/1-7-16.cfm.
17. Gary L. Tidwell, Daniel A. Rice, and Gary Kropkowski,
“Employer and Employee Obligations and Rights under the
Uniformed Services Employment and Reemployment Rights
Act,” Business Horizons 52, no. 3, (May 2009): 243–250, DOI:
10.1016/j.bushor.2009.01.003. Find additional information on
the law at the USERRA Advisor at the Department of Labor’s
website, http://www.dol.gov/elaws.
18. Veterans Benefits Improvement Act of 2004, Public Law
108–454 (December 20, 2004).
19. As currently defined, an “otherwise qualified” employee is one
who can perform the “essential functions” of the job under
consideration.
20. Oncale v. Sundowner Offshore Services, Inc. 72 PED 45, 175;
WL 88039 (U.S. 1l998), http://www.eeoc.gov/laws/types/
sexual_harassment.cfm.
21. Guidelines on Discrimination Because of Sex, 29 C.F.R. Sec.
1604.11(a) (1955).
22. Guidelines on Discrimination, Sec. 1605.11(a).
23. Jeffrey I.Chasen, “Discrimination and Harassment in the
Workplace: Five Essential Strategies for Smarter Risk Man-
agement,” Risk Institute. PERI (January 2014), http://www
.riskinstitute.org/.
24. Margaret Bryant, “Harassment Lawsuits and Lessons,” Security
Management 60, no. 4 (April 2006): 50.
25. Laura G. Barron, “Sexual Orientation Employment: Anti-
Discrimination Legislation and Hiring Discrimination and
Prejudice,” Academy of Management Annual Meeting Proceed-
ings (2009): 1.
26. “What You Should Know about EEOC and the Enforcement
Protections for LGBT Workers,” U.S. Equal Employment
Opportunity Commission (March 7, 2017), https://www
.eeoc.gov/eeoc/newsroom/wysk/enforcement_protections_
lgbt_workers.cfm. The EEOC has ruled that transgender and
transsexual individuals are not covered by Title VII of the Civil
Rights Act. According to the EEOC, gender only applies to
one’s sex at the time of birth and not to one’s sexual orientation.
See Jon D. Bible, “In a Class by Themselves: The Legal Status of
Employee Appearance Policies Under Title VII after Jespersen
v. Harrah’s Operating Co.,” Employee Relations Law Journal
32, no. 4 (Spring 2007): 3. See also, Stan Malos, “Appearance-
Based Sex Discrimination and Stereotyping in the Workplace:
Whose Conduct Should We Regulate?” Employee Responsibili-
ties and Rights Journal 19, no. 2 (June 2007): 95.
27. What You Should Know about EEOC and the Enforcement
“Protections for LGBT Workers,” U.S. Equal Employment
Opportunity Commission (March 7, 2017), https://www.eeoc.
gov/eeoc/newsroom/wysk/enforcement_protections_lgbt_
workers.cfm.
89624_ch03_hr_084-120.indd 118 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
119Chapter 3 Equal Employment Opportunity and Human Resources Management
40. Howard S. Lavin and Elizabeth E. DiMichele, “The Time
for Filing Charges of Discrimination: The Supreme Court’s
Decision and Its Aftermath,” Employee Relations Law Journal
33, no. 3 (Winter 2007): 113; see also, Reynolds Holding,
“Stumble on the Bench,” Time (June 18, 2007): 56.
41. The time period is 300 days in states in which the charge is
deferred to a state agency.
42. David Sherwyn, Zev Eigen, and Gregg Gilman, “Retaliation:
The Fastest Growing Discrimination Claim,” Cornell Hotel
and Restaurant Administration Quarterly 47, no. 4 (November
2006): 350.
43. Rebecca M. Archer and Stephen T. Lanctot, “Are Your Hands
Tied? A Practical Look at Employee Claims of Retaliation,”
Employee Relations Law Journal 33, no. 1 (Summer 2007): 53; see
also, Mary Price Birk, “Walking on Eggshells—Avoiding Retali-
ation Claims When the Employee Does Not Leave,” Employee
Relations Law Journal 32, no. 3 (Winter 2006): 10; and Martin
K. LaPointe, “The Supreme Court Sets the Standard for Title VII
Retaliation Claims: Burlington Northern and Santa Fe Railway
v. White,” Labor Law Journal 57, no. 4 (Winter 2006): 205.
44. Jathan Janove, “Retaliation Nation,” HR Magazine 51, no. 10
(October 2006): 62.
45. Heather J. Broadwater, “Preventing Workplace Sexual Harass-
ment,” Rural Telecommunications 25, no. 5 (September /Octo-
ber 2006): 34.
46. Michael W. Johnson, “Harassment and Discrimination Pre-
vention Training,” Labor Law Journal 55, no. 2 (Summer
2004): 119.
47. Alison DeNisco, “Does Your Company Need a Chief Diversity
Officer?” TechRepublic (September 28, 2016).
48. Voluntary Diversity Plans Can Lead to Risk,” HR Focus 84, no.
6 (June 2007): 2.
49. University of California Regents v. Bakke, 438 U.S. 265 (1978)
and United Steelworkers of America v. Weber, 443, U.S. 193
(1979).
50. Daniel A. Biddle and Richard E. Biddle, “Ricci v. Destefano:
New Opportunities for Employers to Correct Disparate
Impact,” Labor Law Journal 61, no. 3 (Fall 2010): 123–41.
51. Peng Wang and Joshua L. Schwarz, “Stock Price Reactions
to GLBT Nondiscrimination Policies,” Human Resource
Management 49, no. 2 (March–April 2010): 195.
28. Huasheng Gao and Wei Zhang, “Non-Discrimination Laws
Make U.S. States More Innovative,” Harvard Business Review
(August 17, 2016).
29. Ali Vitali, “President Trump Signs New Immigration Execu-
tive Order,” NBC News (March 6, 2017); Mark Schoeff, “DHS
Rule Rankles Employer Groups,” Workforce Management 86,
no. 14 (August 20, 2007): 1.
30. 8 U.S.C.A. § 1324a (a) (1), (2) (2005).
31. 8 U.S.C.A. § 1324B (1) (2005).
32. U.S. Department of Justice, Immigration and Naturalization
Service, Handbook for Employers: Instructions for Completing
Form I (Washington, D.C.: U.S. Government Printing Office,
2005).
33. Jacqueline Howard. “Weight Bias Is Bigger Problem than You
May Think, Experts Say,” CNN.com; Svetlana Shkolnikova,
“Weight Discrimination Could Be as Common as Racial Dis-
crimination,” USA Today (May 28, 2008), http://www.usatoday
.com.
34. Donna Ballman, “Is Weight Discrimination At Work Ille-
gal?” AOL Jobs (November 6, 2012), http://jobs.aol.com/
articles/2012/11/06/is-weight-discrimination-illegal/.
35. Enbar Toledano, “May the Best (Looking) Man Win: The
Unconscious Role of Attractiveness in Employment Deci-
sions,” Cornell (University) HR Review (February 14, 2013),
http://www.cornellhrreview.org.
36. Gerald E. Calvasina, Richard V. Calvasina, and Eugene J. Cal-
vasina, “Caregiver Responsibility Discrimination and EEOC
Guidelines,” Journal of Legal, Ethical & Regulatory Issues 13,
no. 2 (June 2010): 1–2.
37. The guidelines themselves and examples of their application
can be found at www.uniformguidelines.com.
38. Uniform Guidelines, Sec. 40. Adverse impact need not be con-
sidered for groups that constitute less than 2 percent of the
relevant labor force.
39. The primary website for the EEOC is http://www.eeoc.gov.
This website contains a wealth of information about the
EEOC, including the agency’s history and administration,
how discrimination charges are filed and processed, train-
ing and outreach programs, litigation statistics, and various
pamphlets and posters offered free of charge to interested
parties.
89624_ch03_hr_084-120.indd 119 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
120
Appendix
Determining Adverse Impact
A.1 The Four-Fifths Rule
Employers can determine adverse impact by using the method outlined in the interpre-
tive manual for the Uniform Guidelines on Employee Selection Procedures.
1. Calculate the rate of selection for each group (divide the number of people
selected from a group by the number of total applicants from that group).
2. Observe which group has the highest selection.
3. Calculate the impact ratios by comparing the selection rate for each group with that
of the highest group (divide the selection rate for a group by the selection rate for
the highest group).
4. Observe whether the selection rate for any group is substantially less (usually less
than four-fifths, or 80 percent) than the selection rate for the highest group. If it is,
adverse impact is indicated in most circumstances.
Example
Job Applicants Number Hired
Selection Rate
Percent Hired
Step A Whites 100 52 52 / 100 52%5
Blacks 50 14 14 / 50 28%5
Step B The group with the highest selection rate is whites, 52%.
Step C Divide the black selection rate (28%) by the white selection
rate (52%). The black rate is 53.8% of the white rate.
Step D Since 53.8% is less than four-fifths, or 80%, adverse impact
is indicated.
Source: Adoption of Questions and Answers to Clarify and Provide a Common Interpretation of the Uniform
Guidelines on Employee Selection Procedures, Federal Register 44, no. 43 (March 2, 1979): 11998.
89624_ch03_hr_084-120.indd 120 11/17/17 2:50 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
121
CHAPTER 4
Job Analysis and Job Design
Learning Outcomes
After studying this chapter, you should be able to
Explain what a job analysis is and how it is used in
conjunction with a firm’s HRM functions.
Explain how the information for a job analysis typi-
cally is collected and incorporated into various sec-
tions of a job’s description.
LO 1
LO 2
Provide examples illustrating the various factors
that must be taken into account when designing a
job, including what motivates employees.
Describe the different group techniques and types
of work schedules used to broaden a firm’s job func-
tions and maximize the contributions of employees.
LO 3
LO 4
Kz
en
on
/S
hu
tt
er
st
oc
k
89624_ch04_hr_121-151.indd 121 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
122 Part 2 Meeting Human Resources Requirements
O
rganizations exist because people can accomplish more together than they can
on their own. However, the actions of an organization need to be coordinated,
and each person within it needs to do those things he or she does best. This
coordination is typically achieved by creating individual jobs. A job can be defined as an
activity people do for which they get paid, particularly as part of the trade or occupation
they occupy. But how exactly should the work be divided, and which people should
do which tasks or jobs. These are questions businesspeople such as Henry Ford and
scientific management researchers such as Frederick Winslow Taylor sought to answer
at least a century ago, and ones managers still ask today.
The answers to the questions about what jobs an organization should have stem
from a firm’s strategy. What good or service does the firm intend to provide and
how much of it? What does the firm believe its competitive advantage is? Is the
company trying to capture market share based on a new product it has developed?
A lower-priced product? A higher-quality product? How and where will the prod-
uct will be produced, and distributed, and with what technology? What types of
people and skills will be needed to accomplish these tasks and how should they be
organized?
A workflow analysis can help a company answer these questions. A workflow analysis
helps a firm determine the best processes, types, and mix of jobs, and how they should
ideally be organized to execute the firm’s mission. For example, both Apple and Lenovo
make computers. However, Apple focuses on producing innovative products, whereas
Lenovo has traditionally focused on producing low-priced products. As a result, how
the companies are organized, their workflows, and numbers and types of jobs differ in
significant ways. To develop and improve their workflows, large organizations often hire
outside business analysts and operations management specialists who work in conjunc-
tion with the firm’s top managers and HR personnel to do so. The resulting workflow
analysis outlines the division of labor among employees, the degree to which they are
specialized, to whom they report to, and that person’s authority, or span of control over
his or her subordinates.
However, as the competitive environment changes, these elements have to change
as well. Formerly Lenovo had a typical hierarchical organizational structure. (Recall from
your introduction to business and management classes that tall organizational struc-
tures are characterized by many managerial levels with narrow spans of control and jobs
that are narrowly focused.) That structure worked well for the firm’s PC business, but to
remain competitive, the company needed to improve its innovation capabilities and
expand its product lineup to attract new types of customers.
So, a few years ago, Lenovo flattened its organization by dividing its PC-focused
division into four separate business units: PCs, mobiles devices, servers and storage, and
cloud computing systems. It also divided countries into emerging and mature markets
and developed different strategies and personnel for each. Today, not only is Lenovo
the biggest seller of PCs in the world, it also sells more mobile phones in China than any
other company, including Apple.
job
An activity people do
for which they get paid,
particularly as part of the
trade or occupation they
occupy.
89624_ch04_hr_121-151.indd 122 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
123Chapter 4 Job Analysis and Job Design
What will workflows and jobs look like in the near future? The biggest game
changer is likely to be automation. Virtually all companies must compete on price, at
least to some extent. And in the long run, automating repetitive tasks is cheaper than
hiring people to do them. Amazon.com has developed a grocery store that allows peo-
ple to walk in, load up their groceries, automatically pay for them, and leave without
going through a checkout stand. In Japan, conveyor belts deliver sushi to customers
almost as soon as they click on a menu to choose their selections. Computer chips in
the plates sense when entrées have been chosen and the customer’s bill gets tallied up
based on what they grab. U.S. restaurants are automating, too.
And it’s not just service jobs that are being replaced. In the oil and gas industry, thou-
sands of workers who drilled and monitored wells have been replaced by robots and
electronic equipment and sensors. “Pretty soon every rig will have just one worker and
one robot,” says Eustasio Velazquez, a 44-year-old oil field worker who recently lost his
job. Oil companies are hiring smaller numbers of high-tech workers, such as engineers,
data scientists, and mathematicians, who often work in mission-control-like centers.
Twenty-five-year old Andre Nel, a mechanical engineer with a computer science back-
ground, is one of them. In addition to designing systems and software for his petroleum
company, Nel can monitor the maintenance history and production trends of thousands
of wells with just the click of a mouse.1
4.1 What Is a Job Analysis and How Does It
Affect Human Resources Management?
Think about an organization you worked for or a job or position you have held. Did
you ever think about ways to make the organization’s workflow better? If so, you were
doing an informal work analysis. Likewise, did you analyze the tasks you were doing
and conclude they should be done by someone else or vice versa? If so, you were doing
an informal analysis of your job. A job analysis is the systematic process of collecting
information about all of the parameters of a job—its basic responsibilities, the behaviors,
skills, and the physical and mental requirements of the people who do it.
A job analysis should also outline the tools needed to do the job, the environment
and times at which it needs to be done, with whom it needs to be done, and the outcome
or performance level it should produce.2 Normally, a manager or an HR manager such as
a job analyst is responsible for collecting the information for a job analysis. These people
rely on the cooperation of employees and their supervisors to gather the information
needed for the analysis of jobs.
How does a job analysis help facilitate a firm’s human resources efforts? As
Figure 4.1 shows, the information in a job analysis is crucial to a number of HRM func-
tions, including the following:
• Strategic HR planning. A job analysis is used to examine a company’s organiza-
tional structure and strategically position it for the future. Does the firm have the
right numbers and types of jobs and skills needed to cover the scope of its activities
job analysis
The process of obtaining
information about a job
by determining its duties,
tasks, or activities.
Are there any HR func-
tions not affected
by the job analysis
process? If so, what are
they?
LO 1
89624_ch04_hr_121-151.indd 123 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
124 Part 2 Meeting Human Resources Requirements
now and in the future? In addition, are the jobs aligned with one another, or do their
purposes or duties conflict with one another? Are there tasks that need to be done
in the organization that are not clearly assigned to a particular job? Conducting a
job analysis helps ensure alignment.
• Workflow analysis and job design. The information generated by a job analy-
sis can be used to analyze a company’s work processes—that is, how work is
done. Would rearranging an organization’s workflow or jobs help a company
better compete? Can the nature of the jobs be redesigned to improve the firm’s
performance?
• Recruitment and selection. Some of the information provided in a job analysis is
contained in job advertisements. The information and qualifications provide a basis
for attracting qualified applicants and discourageing unqualified ones.
• Training and development. Any discrepancies between the abilities of jobholders
and a firm’s job descriptions provide clues about the training jobholders need to
succeed and advance into different jobs as well as the training the firm needs to
provide.
• Performance appraisal and compensation. A job analysis provides the criteria for
evaluating what constitutes a good performance versus a poor performance; the
firm can then take steps to improve the latter.
• Compensation management. Conducting a job analysis helps HR managers fig-
ure out the relative worth of positions so the compensation for them is fair and
equitable, and employees want to remain with the firm rather than search for
other jobs.
• Legal compliance. If the criteria used to hire and evaluate employees are not job
related, employers are more likely to find themselves being accused of discrimi-
nation. In decades past, before firms regularly analyzed jobs, non-job-related
criteria were prevalent: For example, laborers were often required to have high
Alignment of: Job Description (TDRs) Job Specification (KSAOs)
• HR Strategy and Planning Nature of structure and work to achieve
business results and goals
Supply and demand of labor, number
and kinds of people needed to fill open
positions
• Workflow Analysis and Job
Design
Sequencing or grouping of related jobs,
and the nature of interdependence
Enriching or expanding jobs to develop
and motivate employees further
• Recruitment and Selection Posting advertisements, etc. of jobs to fill
and the nature of responsibilities
Hiring criteria for evaluating candidates
who apply for open positions
• Performance Appraisal
Process
Setting goals, duties, and activities that
define the desired performance
Attributes and demonstrated qualities used
to assess performance and give feedback
• Compensation and Benefits Job evaluation of the job in terms of
responsibilities and working conditions
Job evaluation of the skills, effort required,
etc. that are rewarded
• Legal Compliance Equal employment requirements Fair treatment and valid employment
practices
Job Analysis: The Cornerstone of HRM FunctionsFigure 4.1
89624_ch04_hr_121-151.indd 124 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
125Chapter 4 Job Analysis and Job Design
school diplomas; plumbers, electricians, and machinists were sometimes required
to be male. As you learned in Chapter 3, these kinds of job specifications are
discriminatory.
4.1a Major Parts of the Job Analysis
Let’s look at the two major pieces of information that come out of a job analysis:
1. A job description, which is a written document that describes the overall pur-
pose of the job, and tasks, duties, and responsibilities, or what human resources
personnel refer to as TDRs, and the qualifications needed to do it. The following
is an excerpt of the purpose and TDRs for a firefighter’s position posted by the
city of Del Mar, California.
Purpose
Responds to emergency calls to protect life and property; participates in training,
drill and independent study activities; participates in the maintenance of fire depart-
ment apparatus, equipment and facilities; performs various staff support assign-
ments; and performs related work as assigned.
Tasks, Duties, and Responsibilities
• Responds to a wide variety of emergency alarms, such as structural and envi-
ronmental fires, traffic accidents, natural gas leaks, medical emergencies, and
hazardous material spills.
• Provides first-responder medical emergency response at the basic life support
level, including initial patient and situation assessment, cardiopulmonary resus-
citation and trauma emergency medical care; prepares patients and assists para-
medics in advanced life support emergency medical care.
2. Job specifications, or qualifications, which are a part of the written job descrip-
tion and outline the specific knowledge, skills, abilities, and other attributes (often
referred to as KSAOs) required of the person performing the job. Knowledge refers
to what you know. Your education is an example of knowledge. For example, some
cities require firefighters to be certified paramedics. Other cities don’t. Skills are
things you have learned to do. If you’re a firefighter, that experience could include
knowing how to make minor repairs to fire equipment. Abilities are your innate
aptitudes. You don’t have to be taught them or learn them on a job. Examples for
a firefighter would include the ability to lift firefighting equipment and stay calm
during an emergency. Other attributes refer to your personality, values, and so on.
Helpfulness and the predisposition toward teamwork are examples of “other attri-
butes” firefighters need.
Are you thinking you want to go into human resources management? If so, Highlights
in HRM 2 later in the chaper will give you an idea of what a job description for an entry-
level position in this field would look like. Note that a job description isn’t necessarily
the information you would see in a job posting, which is used for advertising. The job
description in Highlights in HRM 2 is an internal document used by the firm and HR
personnel for their planning and staffing needs. For example, note that the job analyst
who compiled the information and the date the job was analyzed are included at the top of
the document. We will take a closer look at the parts of the document later in the chapter.
job description
A statement of the tasks,
duties, and responsi-
bilities of a job to be
performed.
job specifications
A statement of the
specific knowledge, skills,
and abilities of a person
who is to perform a job
needs.
89624_ch04_hr_121-151.indd 125 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
126 Part 2 Meeting Human Resources Requirements
4.2 Sources of Job Analysis Information
You have learned that a job analysis is an important HR building block. What you are
probably wondering now is how a person does one. The first step is to collect informa-
tion needed to analyze jobs. The most common methods of collecting this information
are interviews, questionnaires, observation, and diaries.
• Interviews. A job analyst or supervisor interviews individual employees and their
managers about the parameters of the job. Highlights in HRM 1 shows the types
of questions asked as part of job analysis interviews. When a job is particularly
complex, firms sometimes interview a panel of subject matter experts (SMEs). SMEs
are job experts who actually do the job or train and supervise others to do the job.
• Questionnaires. The job analyst or supervisor circulates standard questionnaires
for jobholders to fill out individually. The forms contain questions similar to those
asked in an interview.
• Observation. The job analyst or supervisor learns about the job by observing and
recording the activities associated with it on a standardized form.
• Diaries. Jobholders are asked to keep diaries of their work activities for an entire
work cycle. The diaries are normally filled out at specific times of the work shift
(such as every half hour or hour) and maintained for a 2- to 4-week period.
Job analysis software and templates available on the Web have greatly facilitated
the job analysis process. They normally contain task statements that can apply to many
different jobs. Managers and employees select those statements that best describe the
job under review, indicating the importance of the task to the job.
Figure 4.2 shows the job analysis process. It includes how the information to be
analyzed is collected and feeds back into the HRM functions we discussed in Figure 4.1.
4.2a Controlling the Accuracy of the Job Data Collected
When interviewing employees or reviewing their questionnaires, a job analyst should look
for any responses that contradict other facts or impressions he or she has received about the
job. Sometimes employees exaggerate the difficulty of their positions to inflate their egos
and their paychecks.3 Inflating a job’s responsibilities can also occur unintentionally. For
example, people who have been in their jobs for a long time and are good at them sometimes
mistakenly believe that the skills needed for their jobs are higher than they really are. As one
job analyst noted, “When in doubt about the accuracy of employee responses, always dou-
ble-check the data with others.”4 In other words, collect information from a representative
sample of individuals doing the same job, not just one or two jobholders. Also, once a job
analysis is done, it should be checked for accuracy by the jobholders and their managers.5
4.2b Other Sources of Job Analysis Information
Do managers and job analysts have to start from scratch when it comes to designing
questionnaires to gather job information and analyzing it? No, not necessarily, even if a
position is a new one. Several different quantitative job analysis approaches already exist.
Each has its own advantages and disadvantages.6 Five of the more popular methods are
the functional job analysis, the position analysis system, the critical incident method, a
task inventory analysis, and a competency-based job analysis.
Answer the questions
in Highlights in HRM 1
based on the job you
currently hold or most
recently held. Then
organize the informa-
tion into the various
job sections of a job
description.
LO 2
89624_ch04_hr_121-151.indd 126 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Job Analysis Interview Questions
The following are examples of interview questions HR pro-
fessionals use to gather information for a job analysis.
1. Job’s purpose
�� What work do you essentially do? What is the job’s
overall purpose?
�� How do you see your work contributing to the
overall mission or purpose of the organization,
now and in the future?
2. Job’s duties
�� Describe your duties in terms of what they are, how
you do them, how often you perform them, and
how long they each take.
�� Does the job have to be done in the way you were
trained to do it, or do you see ways to improve it?
�� Are you performing duties not presently included
in your job description? Describe them.
�� Are the instructions you receive from your supervi-
sor clear and consistent with your job description?
3. Job criteria and results
�� Have work standards for the job been established
(errors allowed, time taken for a particular task,
etc.)? If so, what are they?
�� Describe the successful completion and/or end
results of the job.
4. Background and knowledge
�� What personal attributes are needed to be success-
ful in this position?
�� Describe the level, degree, and breadth of knowl-
edge required for this position.
�� Indicate the education, certification, and license
requirements for the job.
5. Training
�� Describe the orientation you received when you
first began this job and its effectiveness.
�� What sort of on-the-job training and training
period is needed for the position?
�� What tools, equipment, or other resources are
needed to train people for this position?
�� What assessment tests are needed to determine if
someone is competent in this position?
6. Abilities required
�� Do you use special software tools, equipment, or
machines? If so, list them.
�� What manual skills are needed to operate the
machines, tools, and equipment to do the job?
�� What reasoning or problem-solving ability must
you have?
�� Are any supervisory or managing abilities
required?
�� What physical abilities such as strength, coordina-
tion, or visual acuity must you have?
7. Working conditions
�� Describe your working conditions.
�� Describe the frequency and degree to which you
encounter working conditions such as these: con-
tact with hazardous materials, strenuous physical
labor, cramped quarters, moving objects, vibration,
and inadequate ventilation.
8. Authority
�� What is the job’s level of authority, and to whom
are you accountable?
�� What kinds of independent action are you allowed
to take?
9. Responsibilities
�� Are you responsible for any confidential material? If
so, describe how you handle it.
�� Are you responsible for any money or things
of monetary value? If so, describe how you
handle it.
10. Evaluation and compensation
�� In what ways and how often is your performance
evaluated and feedback provided?
�� What criteria do you think should be used in the
evaluation process?
�� Considering your level of productivity and the skill
level required to fulfill your responsibilities, do you
think you are compensated adequately?
�� Describe the criteria that should be used to
determine the compensation for the position:
responsibilities, skills, experience, knowledge, work
environment, safety hazards, and so forth.
Sources: Michael G. Aamodt, Industrial/Organizational Psychology: An
Applied Approach, 7th ed. (Mason, OH: Cengage Learning, 2012); David
Ngo, “Job Analysis Questions,” (March 3, 2011), http://www.humanre –
sources.hrvinet.com; “Job Analysis: Overview,” HR Guide to the Inter-
net, http://www.job-analysis.net/G000.htm; “Job Analysis: Asking
Questions,” Department for Business Innovation & Skills, http://www
.bis.gov.uk.
Highlights in HRM1
89624_ch04_hr_121-151.indd 127 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
128 Part 2 Meeting Human Resources Requirements
Functional Job Analysis System
Developed by the U.S. Training and Employment Service, the functional job analysis
(FJA) approach utilizes an inventory of the various types of work activities that can
constitute any job. Basic activities called worker functions are used to describe what
workers do with regard to “information, people, and things” as part of this system.
For example, when it comes to people, the basic functions of a job might include
coordinating and supervising them. Each job function is assigned a percentage in
terms of its importance to the job. For example, supervising might be 75 percent of
the job.
The U.S. Department of Labor has a comprehensive occupation-information web-
site called O*NET Online that contains thousands of free job descriptions that can help
match people’s interests and abilities with occupations as well as serve as a starting point
for analyzing a job. The jobs on the site are classified into broader functional areas,
from entry level to advanced, and across various specialties and contain comprehen-
sive information about the tasks, tools and technology, KSAOs, education, interests,
works styles, wages, and employment outlook associated with the jobs. Free job analysis
questionnaires can be downloaded from O*NET. Although they are generic, they can
be customized and used to collect occupational information from jobholders and their
managers.
functional job analysis
(FJA)
A job analysis approach
that utilizes an inventory
of the various types of
work activities that can
constitute any job.
Source: U.S. Bureau of Labor Statistics
METHODS OF
COLLECTING DATA
Interviews
Questionnaires
Observations
Diaries
HUMAN RESOURCES
FUNCTIONS
Recruitment
Selection
Training and development
Performance appraisal
Compensation management
JOB SPECIFICATION
Skill requirements
Physical demands
Knowledge requirements
Abilities needed
JOB DESCRIPTION
Tasks
Duties
Responsibilities
JOB DATA
Tasks
Performance
standards
Responsibilities
Knowledge required
Skills required
Experience needed
Job context
Duties
Equipment used
SOURCES OF DATA
Job analyst
Employee
Supervisor
The Job Analysis ProcessFigure 4.2
89624_ch04_hr_121-151.indd 128 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
129Chapter 4 Job Analysis and Job Design
The Position Analysis Questionnaire System
The position analysis questionnaire (PAQ), which identifies approximately 300 different
worker tasks, has been widely used for decades to collect and analyze job information.
The PAQ seeks to determine the degree to which the different tasks are involved in
doing a particular job. The results obtained with the PAQ are quantitative and can be
statistically analyzed. Although a PAQ tends to be accurate, it requires a person to have
a high level of reading ability.7 To obtain the best results, it should be administered to
employees by a job analyst rather than having the employees complete the questionnaire
alone. Also, the questionnaire isn’t free. Firms must pay for it.
The Critical Incident Method
The objective of the critical incident method is to identify both desirable and undesir-
able behaviors that resulted in either a very good outcome or a very bad outcome on
the job. For example, a job analyst might ask a company’s customer service employees
to describe incidents that led to either a good or bad outcome with a customer. The fol-
lowing are examples of questions that might be asked:
• What happened?
• How did the incident happen?
• Did the incident have a good or bad outcome?
• What led to the outcome?
• What actions were effective or ineffective?
• What would you do differently if the situation occurred again?
The information, which can be collected through interviews or surveys, helps pinpoint
important behaviors for a job analysis. Figure 4.3 illustrates the critical incident. The
incidents in the middle of the figure are associated with neutral outcomes. Most of the
outcomes will fall into this area. The incidents on the ends of the figure are good and
bad outcomes. Relatively fewer of the incidents will occur in these areas. Nonetheless,
examining them is important because they can reveal critical job behaviors.
position analysis
questionnaire (PAQ)
A questionnaire that
identifies approximately
300 different tasks to
determine the degree to
which each is involved in
doing a job.
critical incident method
A job analysis method
used to identify both
desirable and undesir-
able behaviors that
resulted in either a very
good outcome or a very
bad outome on the job.
Effectiveness of Behavior
F
re
q
u
e
n
c
y
o
f
B
e
h
a
vi
o
r
(%
)
Very Positive
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
–0.05
–4 –3 –2 –1 0 1 2 3 4
Very
Negative
The Critical Incident Method IllustratedFigure 4.3
89624_ch04_hr_121-151.indd 129 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
130 Part 2 Meeting Human Resources Requirements
Task Inventory Analysis
The task inventory analysis method was pioneered by the U.S. Air Force. Unlike the
PAQ, which uses a standardized form to analyze jobs in different organizations, a task
inventory questionnaire can be tailored for a specific organization. With the help of
employees and their managers, a list of tasks and their descriptions for different jobs
are developed and then rated based on how important they are. The goal is to produce
a comprehensive list of task statements applicable to all jobs. Task statements then are
listed on a task inventory survey form to be completed by the person analyzing the
job under review. A task statement might be: “Monitors current supplies to maintain
stock levels.” The job analysis would also note the importance of the task, frequency
of occurrence, and time spent on the task to the successful completion of the job.
Competency-Based Approach
The approaches to job analysis we have discussed so far focus on the tasks employees
do, but not what they are capable of doing. The following statement by two HR profes-
sionals highlights this concern: “Typically, job analysis looks at how a job is currently
done. But the ever-changing business market makes it difficult to keep a job analysis
up-to-date. Also, companies are asking employees to do more, so there is a question of
whether ‘jobs’ as we know them are obsolete.” The risk is that in a dynamic environ-
ment where job demands rapidly change, obsolete job analysis information will hinder
an organization’s ability to adapt to change.
When organizations operate in a fast-moving environment, managers often adopt a
competency-based approach to job analysis.8 This job analysis method relies on build-
ing job profiles that look at not only the responsibilities and activities of jobs a worker
does currently but the competencies or capabilities he or she needs to do them well and
to adapt to new job challenges. How the work is done (and therefore can be improved)
becomes more of the focus than just what work is done.9
The objective is to identify key competencies for the organization’s success. Compe-
tencies can be identified through focus groups, surveys, or interviews and might include
such things as interpersonal communication skills, decision-making ability, conflict
resolution skills, adaptability, or self-motivation. Figure 4.4 shows a form used to gather
information for a competency-based job analysis.
4.2c Parts of a Job Description
Most job descriptions contain at least three parts: (1) the job’s title and location; (2) a
job identification section, which contains administration information such a numerical
code for the job, to whom the jobholder reports, and wage information; and (3) a job
duties section. The other important outcome of the job analysis is the job specification,
or the description of KSAOs. If the job specification is not prepared as a separate docu-
ment, it is usually stated in the concluding section of the job description, as Highlights
in HRM 2 shows. Next, let’s look at these sections.
Job Title
Selecting a job’s title serves several purposes. First, the job title is psychologically impor-
tant because it provides status to the employee. For instance, “sanitation engineer” is a
more appealing title than “garbage collector.” Second, if possible, the title provides an
indication of what the duties of the job entail. Titles such as meat inspector, electronics
assembler, salesperson, and engineer obviously hint at the nature of the duties of these jobs.
task inventory analysis
An organization-specific
list of tasks and their
descriptions used as a
basis to identify compo-
nents of jobs.
89624_ch04_hr_121-151.indd 130 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
131Chapter 4 Job Analysis and Job Design
The job title also should indicate the level of the job in the organization. For example, the
title junior engineer implies that this job occupies a lower level than that of senior engineer.
Job Identification Section
The job identification section usually follows the job title. It includes such items as the
department and location of the job, the person to whom the jobholder reports, and the
date the job description was last revised. Sometimes it also contains a payroll or code
number, the number of employees performing the job, the number of employees in the
department where the job is located, and the code assigned to the job using the O*NET
system. A “Purpose” statement usually appears at the bottom of this section and distin-
guishes the job from other jobs in the organization—something the job title might fail
to do. Working conditions may also be listed.
Tasks, Duties, and Responsibilities Section
Statements covering job duties are typically arranged in order of their importance.
Sometimes the statements indicate the percentage of time devoted to each duty. The
Civil Rights Act of 1991, the American with Disabilities Act (ADA), and landmark
court rulings require employers to show that the job criteria they use to select employ-
ees for a particular position are valid and relate specifically to the duties for that job.
Moreover, the duties must be essential functions for success on the job. For example, if
the job requires the jobholder to categorize materials or memorize stock codes, these
requirements should be stated within the job description. Criteria that are vague or not
job related are increasingly and successfully challenged.
Part B: Skill Matrix in a Dejobbed Organization
Job Title: XYZ
8 8 8 8 8 8
7 7 7 7 7 7
6 6 6 6 6 6
5 5 5 5 5 5
4 4 4 4 4 4
3 3 3 3 3 3
2 2 2 2 2 2
1 1 1 1 1 1
Technical
Expertise
Communication
& Interpersonal
Ability
Business Acumen
& Decision
Making
Leadership &
Guidance
Planning &
Organizing
Initiative &
Problem Solving
➢ The numbers in the matrix describe each skill level. For example, for technical expertise (1) might read: basic knowledge
of handling machine, while (8) might read: conducts and supervises complex tasks requiring advanced knowledge of a
range of skills.
➢ The shaded boxes indicate the minimum level of skill required in each skill category for the position XYZ.
➢ The jobholder is required to move from the minimum level to higher levels. The appraisal and rewards are tied to this movement.
Form Used to Gather Information for a Competency-Based Job AnalysisFigure 4.4
Source: Feza Tabassum Azmi, “Job Descriptions to Job Fluidity: Treading the Dejobbing Path,” EBS Review, no. 23 (2007): 8. Reprinted by permission.
89624_ch04_hr_121-151.indd 131 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
An Example of a Job Description
Title: Employment Assistant
Job Identification
Division: Southern Division
Department: Human Resources
Job Analyst: Antonio Floros
Date Analyzed: 1/3/18
Wage Category: Exempt
Report to: HR Manager
Job Code: 1117
Date Verified: 1/17/18
Purpose
Performs professional human resources work in the areas
of employee recruitment and selection, testing, orienta-
tion, transfers, and maintenance of employee human
resources files. May handle special assignments and proj-
ects related to EEO/affirmative action, employee griev-
ances, training, or classification and compensation. Works
under general supervision. Incumbent exercises initia-
tive and independent judgment in the performance of
assigned tasks.
Working Conditions: This job is done in a professional
office environment with the use of equipment such as lap-
top computers, photocopiers, and smartphones. Working
hours are Monday through Friday, 8:30 a.m. to 5:00 p.m.
Evening, weekend work, and travel may be required
occasionally.
Tasks, Duties, and Responsibilities
1. Maintains a daily working relationship with division
managers on human resource matters, including
recruitment concerns, retention or release of proba-
tionary employees, and discipline or discharge of per-
manent employees. (25%)
2. Schedules and conducts personal interviews to deter-
mine applicants’ suitability for employment. Includes
reviewing applications and resumes. Supervises the
administration of the applicant testing program.
Responsible for developing or improving testing
instruments and procedures. (20%)
3. Presents orientation program to all new employees.
Reviews and develops all materials and procedures for
the orientation program. (15%)
4. Coordinates the division job posting and transfer pro-
gram. Establishes job posting procedures. Responsible
for reviewing transfer applications, arranging transfer
interviews, and determining effective transfer dates.
(10%)
5. Distributes new or revised human resource
policies and procedures to all employees and
managers through email, the company’s intranet,
meetings, memorandums, or personal contact.
(10%)
6. Prepares recruitment literature and job advertise-
ments. (10%)
7. Performs related duties as assigned by the human
resources manager. (10%)
Job Specifications
�� Four-year college or university degree with major
course work in human resources management,
business administration, or industrial psychology;
OR a combination of experience, education, and
training equivalent to a 4-year college degree in
human resources management.
�� Detailed knowledge of the principles of employee
selection and assignment of personnel.
�� Ability to express ideas clearly in both written and oral
communications.
�� Ability to independently plan and organize one’s own
activities.
�� Knowledge of HRIS applications desirable.
Physical Requirements: The employee is regularly required
to talk and hear. Occasionally the employee is required to
stand, walk, sit, and use hands and figures to control objects.
Occasional lifting or movement of office products and sup-
plies, up to 10 pounds is required.
Highlights in HRM2
89624_ch04_hr_121-151.indd 132 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
133Chapter 4 Job Analysis and Job Design
Job Specifications Section
Typically, a job specifications section covers two areas of qualifications: (1) the skills
required to perform the job and (2) the job’s physical demands. Skills relevant to a job
include the education, experience, and specialized training it requires, and the personal
traits or abilities and manual dexterities it requires. To comply with EEOC requirements,
the physical demands of a job should refer to how much walking, standing, reaching,
lifting, bending, or talking must be done on the job. Recall from Chapter 3 that an orga-
nization is legally required to make a reasonable accommodation for disabled individu-
als who would be able to do the functions if they were accommodated. The condition
of the physical work environment and the hazards an employee might encounter in the
position are also among the physical demands of a job.
The job specifications section should also include interpersonal skills if a compe-
tency-based job analysis approach is used. For example, behavioral competencies might
include the ability to make decisions based on incomplete information, handle multiple
tasks, and resolve conflicts.
4.2d Writing Clear and Specific Job Descriptions
Several problems are frequently associated with job descriptions, including the following:
1. If they are poorly written, using vague rather than specific terms, they provide
little guidance to the jobholder.
2. They are sometimes not updated as job duties or specifications change.
3. They may violate the law or union agreements and lead to employee greivances.
4. They can limit the scope of activities of the jobholder, reducing an organization’s
flexibility.
When writing a job description, keep the items on it direct and simply worded.
Unnecessary words or phrases should be eliminated. The term “occasionally” is used to
describe duties that are performed once in a while. The term “may” is used in connec-
tion with duties performed only by some workers on the job.
To help alleviate the problem of employees claiming that a task “is not my job,”
organizations often include language in their job descriptions stating that the jobholder
will perform “other duties” as needed. Notice that the job duties section in Highlights
in HRM 2 contains the following language: Performs related duties as assigned by the
human resources manager.
4.3 Job Design
Job design, which is an outgrowth of job analysis, focuses on reconfiguring jobs to
capture the talents of employees, improve their work satisfaction, and enhance an orga-
nization’s performance.10 Companies such as Harley-Davidson and Banner Health are
among the many firms that have revamped their jobs to eliminate unnecessary job tasks
and find better ways of doing work. As Figure 4.5 shows, four basic approaches can be
used to design jobs. Top-down approaches (industrial engineering and ergonomics)
focus on the tasks of a job and how they can be done better. Bottom-up approaches
(enrichment and empowerment) are more person focused. The idea behind these two
approaches is to design jobs so that the people doing them are more motivated to do
them well. Motivating people is especially important when you consider the fact that
job design
An outgrowth of job
analysis that improves
jobs through techno-
logical and human
considerations in order
to enhance organization
efficiency and employee
job satisfaction.
Can a firm’s managers
control the process of
job crafting? What chal-
lenges does it present
for them?
LO 3
89624_ch04_hr_121-151.indd 133 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
134 Part 2 Meeting Human Resources Requirements
people—not machines—are the most strategic asset companies have today. However, all
four approaches need to be considered when designing a single job.
Industrial engineering, a top-down job design approach, is the study of work to
determine which, if any, elements of work can be modified, combined, rearranged, or
eliminated to reduce the time needed to complete the work cycle. Time standards are
then established by recording the time required to complete each element in the work
cycle, using a stopwatch or work-sampling technique. Industrial engineering dramati-
cally changed how people worked around the beginning of the twentieth century and for
decades to come, and continues to do so today. For example, consider the jobs done by
pit crews in NASCAR races. It used to be that the members of NASCAR pit crews were
mechanics who worked at the races on weekends. Changing the tires on a vehicle took
about 30 seconds. Today, pit crews need to change the tires in under 12 seconds for teams
to win. The jobs are now done by former athletes who are stronger and faster, work out,
and watch tapes to speed up the 70-plus moves they need to make during a pit stop.11
4.3a Ergonomics
Ergonomics, a top-down approach in Figure 4.5, is the process of studying and design-
ing equipment and systems that are easy and efficient for employees to use so that
their physical well-being isn’t compromised and work gets done more efficiently in the
organization. In other words, in contrast to industrial engineering, which focuses on
time and efficiency, ergonomics focuses on the well-being of workers so as to improve
efficiency. Factors such as the climate employees work in, the temperatures of facili-
ties, noise and lighting conditions, and the length of schedules and fatigue factors are
examined. UPS developed an ergonomic simulator to help train its drivers to walk on
ice without injuring themselves.12 Even just sitting for long periods of time like office
industrial engineering
A field of study con-
cerned with analyz-
ing work methods
and establishing time
standards.
ergonomics
The process of studying
and designing easy-
to-use equipment and
systems so the physical
well-being of employees
isn’t compromised and
work gets done more
efficiently.
Ergonomics
Enrichment Empowerment
Industrial
Engineering
Focus on Task
Focus on Person
Top-Down Approaches
Bottom-Up Approaches
Top-Down versus Bottom-Up Job Design Approaches Figure 4.5
89624_ch04_hr_121-151.indd 134 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
135Chapter 4 Job Analysis and Job Design
workers do can be hazardous to one’s health. Doing so slows down a person’s metabo-
lism and can lead to diabetes and heart problems. Standing desks and treadmill desks
have been developed to help alleviate this problem.
Ergonomics efforts need not be that complicated though. They can be as simple as
rearranging the flow of work so workers need to take fewer steps or organizing items
so they are within easier reach of workers. Part of ergonomics involves looking at the
design of equipment and the physical abilities of the different operators who use it. That
could include lowering shelves so female workers are more easily able to reach items
or redesigning hand controls to make them easier for women use. Or it could include
encouraging employees to wear fitness trackers that electronically prompt them to move
around after sitting for long periods of time. Fitbit Inc. has contracted with more than a
thousand firms, including Target, IBM, and Gonzaga University, to outfit their employ-
ees with Fitbit trackers.13 Ergonomics will be discussed in more detail in Chapter 12.
4.3b Enrichment
Would you find it motivating if your supervisor timed to the minute each of the tasks
associated with your job and then asked you to meet those times? Probably not. Such
an approach would get mind-numbing. After a while, you would begin to feel like a
machine. In an effort to counter the motivational problems that occur when workers do
standardized, repetitive tasks, researchers began proposing theories they believed could
improve both the efficiency of organizations and the job satisfaction of employees.14
Any effort that makes work more rewarding or satisfying by adding more variety and
meaning to a job is called job enrichment. Job enrichment was pioneered by Frederick
Herzberg in the 1960s.15 Its goal is to enrich a job so that it is intrinsically motivating to
employees versus extrinsically motivating. Extrinsic motivators are external rewards such as
money and bonuses. But most employers want their employees to do more than just work for
a paycheck. When people are intrinsically motivated they take pride in their work and want
to do a good job because it’s interesting and they feel they are making a difference by doing it.
job enrichment
Enhancing a job by add-
ing more meaningful
tasks and duties to make
the work more rewarding
or satisfying.
Although not inexpen-
sive, standing desks
and treadmills can
improve a workplace’s
ergonomics.
iS
to
ck
.c
om
/J
ac
ob
A
m
m
en
to
rp
L
un
d
89624_ch04_hr_121-151.indd 135 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
136 Part 2 Meeting Human Resources Requirements
The job characteristics model is a more recent theory proposed by Richard Hack-
man and Greg Oldham.16 According to this model, the following three psychological
states of a jobholder result in improved work performance, internal motivation, and
lower absenteeism and turnover:
1. Experiencing the meaningfulness of the work performed
2. Experiencing responsibility for work outcomes
3. Knowing the results of the work performed.17
Hackman and Oldham believe that five core job dimensions produce the three psycho-
logical states. The five job characteristics are as follows as well as illustrated in Figure 4.6:
1. Skill variety. The degree to which a job includes a variety of activities, which
demand the use of a number of different skills and talents by the jobholder.
2. Task identity. The degree to which a jobholder is able to complete a whole and identi-
fiable piece of work—that is, do a job from beginning to end with a visible outcome.
job characteristics
model
A job design theory that
purports that three psy-
chological states (expe-
riencing meaningfulness
of the work performed,
responsibility for work
outcomes, and knowing
the results of the work
performed) result in a
jobholder’s improved
work performance,
internal motivation, and
lower absenteeism and
turnover.
Source: Richard Hackman and Greg R. Oldham, “Motivation through the Design of Work: Test of a Theory,” Organizational Behavior
and Human Performance 16, no. 2 (August 1976).
Skill variety
Task identity
Task significance
Autonomy
Feedback
Experienced
meaningfulness
of the work
High internal
work motivation
High quality work
performance
High satisfaction
with work
Low absenteeism
and turnover
Experienced
responsibility
for outcomes
of the work
Core Job
Dimensions
Critical
Psychological
States
Individual’s
Need for
Growth
Personal
and Work
Outcomes
Knowledge of
the actual results
of the work
activities
Job Characteristics ModelFigure 4.6
89624_ch04_hr_121-151.indd 136 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
137Chapter 4 Job Analysis and Job Design
3. Task significance. The degree to which the job has a substantial impact on the lives
or work of other people in one’s organization or elsewhere.
4. Autonomy. The degree to which the job provides a person the freedom and discre-
tion to schedule his or her work and determine how to do it.
5. Feedback. The degree to which a person is given direct and clear information about
the effectiveness of his or her job performance.
Other techniques to enrich jobs include job enlargement and job rotation. Job
enlargement is the process of adding a greater variety of tasks to a job. Maytag,
IBM, and AT&T are some of the firms that have used job enlargement to motivate
their employees.18 Job rotation is a process whereby employees rotate in and out of
different jobs.
Job enlargement and job rotation help prevent the boredom people experience
where they perform narrow, specialized jobs. Rotating people in and out of different
jobs can also help employees who do repetitive physical tasks avoid health problems
and on-the-job injuries. For instance, after a number of hours on his feet, a drugstore
cashier might move to the store’s photo department and process photos while sitting
down.
Empowerment
The techniques we have described are ones in which managers change the jobs of
employees. A less-structured method is to allow employees to initiate their own job
changes through the concept of empowerment. Employee empowerment encourages
workers to become innovators and managers of their own work, and it involves them
in their jobs in ways that give them more control and autonomous decision-making
capabilities.
AT&T and Dick’s Sporting Goods are companies that have decentralized their work
units and allowed decisions to be made by employees who are directly involved in the pro-
duction of the products or services being delivered.19 The objective is to develop jobs and
basic work units that are adaptable enough to thrive in a world of high-velocity change. The
cosmetics maker Avon empowered its minority managers to improve the sales and service
the company offers in inner-city markets. Grounded in the belief that minority manag-
ers better understand the culture of inner-city residents, Avon turned unprofitable mar-
kets into highly profitable ones. See Highlights in HRM 3 for more examples of employee
empowerment.
Employee empowerment succeeds when the culture of an organization is open and
receptive to change.20 Workers with innovative ideas need to be encouraged to explore
new paths and take reasonable risks at reasonable costs. An empowered environment is
created when curiosity is as highly regarded as technical expertise. Employees also must
have access to a wide range of information within their firms and be held accountable for
the results of their empowerment.
Employee empowerment won’t work without the support of an organization’s senior
managers though. They set the tone of the organization. If they are honest, confident,
trusting, receptive to new ideas, and respect employees as partners in the organization’s
success, it’s more likely the firm will be able to empower its employees.
Closely related to employee empowerment is workplace democracy. Workplace
democracy is the utilization of democratic principles such as voting and debate to give
employees more say on how an organization is run and the direction it will take. The
job enlargement
The process of adding a
greater variety of tasks
to a job.
job rotation
The process whereby
employees rotate in and
out of different jobs.
employee
empowerment
Giving employees the
power to initiate change,
thereby encouraging
them to take charge of
what they do.
89624_ch04_hr_121-151.indd 137 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
grocer Whole Foods allows its employees to vote on issues both large and small. W.L.
Gore & Associates, which makes Gore-Tex fabric, surgical, aerospace, and other products,
asked its employees to help choose its current CEO. But like empowerment initiatives,
with workplace democracy, managers have to be willing to give up some decision-making
authority.21
Another type of empowerment technique that occurs at the individual level is
job crafting. According to Amy Wrzesniewski at the Yale School of Management,
job crafting is a naturally occurring phenomenon whereby employees mold their tasks
to better fit their individual strengths, passions, and motives.22 Dorothy Galvez, an
administrative assistant at the W. P. Carey School of Business at Arizona State Uni-
versity is an example. Galvez found a way to make her job more meaningful by doing
a lot more than traditional administrative work. She expanded her role by planning
college activities and events, preparing special college reports, and serving as the dean’s
representative at college and business events.
job crafting
A naturally occurring
phenomenon whereby
employees mold their
tasks to fit their individ-
ual strengths, passions,
and motives better.
Empowered Employees Achieve Results
By empowering their employees, Home Depot, Walmart,
Cigna HealthCare, Costco, AutoZone, Disney, and Applebee’s
have reduced costs, successfully modified products, and cre-
ated new ones.
�� Kraft Foods employees at the company’s Sussex,
Wisconsin, food plant redesigned their work, which
increased the plant’s productivity, reduced its over-
head, and cut assembly times.
�� Employees at Ford Motor Company’s assembly plant in
Wayne, Michigan, saved $115,000 a year on protective
gloves used to handle sheet metal and glass. The
group figured out how to have the gloves washed so
they could be used more than once.
�� Home Depot’s Special Project Support Teams (SPST)
improved the company’s business and information
services. Employees with a wide range of backgrounds
and skills collaborated to address a variety of strategic
and tactical business needs.
�� The American Airlines “Rainbow Team” of employees
brought in $192 million in annual revenue by target-
ing the gay community.
Highlights in HRM3
To help spark innova-
tion at Microsoft, the
company created
“Microsoft Garage” by
renovating an older
building. The building
has whiteboards, 60
touchscreen monitors,
comfortable chairs, 3D
printers, laser cutters,
and other gadgets. The
goal is to encourage
employees as well as
people from the com-
munity to hang out
and to tinker at Micro-
soft on their own time
like they would their
own garages at home.
So
ur
ce
: h
tt
p:
//
w
w
w
.m
ic
ro
so
ft
.c
om
/e
n-
us
/n
ew
s/
st
or
ie
s/
ga
ra
ge
/i
nd
ex
.h
tm
l
138
89624_ch04_hr_121-151.indd 138 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
139Chapter 4 Job Analysis and Job Design
One study found that employees who are proactive like Galvez are more likely to
job craft.23 But whether their managers want them to or not, employees of all types
often reshape their jobs, Wrzesniewski says. And in many cases, job crafting results
in significantly more employee engagement, which we briefly discussed in Chapter 1.
Employee engagement is a situation in which workers are enthusiastic and immersed
in their work to the degree that it improves the performance of their companies.
4.4 Employee Teams and Flexible
Work Schedules
Do you enjoy working teams? If not, you might want to work on learning how to enjoy
the arrangement. Increasingly, teams are how work gets done in organizations. There’s
a sense among firms that the traditional ways of organizing are too rigid for today’s
dynamic marketplace and that they don’t meet employees’ needs. In addition, companies
are seeing advantages of tinkering with and redesigning work schedules to make them
more flexible, and adding flexibility to where employees can work.
4.4a Employee Teams
An employee team can be defined as a group of employees working together toward
a common purpose, in which members have complementary skills, members’ work is
mutually dependent, and the group has discretion over tasks performed. Organizations
of all types—Federal Express, Trek Bikes, Calvin Klein, and Lucasfilm, the producer of
the Star Wars and Indiana Jones films—are using employee teams to solve unique and
complex problems and improve the collaboration among workers and their morale.24
Even the U.S. Army has turned to teams. Early on in the Iraq war, the army’s hierar-
chical structure hindered its operations. General Stanley McChrystal’s solution was to
learn something from the insurgents the army was fighting: decentralize authority to
self-organizing teams.25
Part of the reason why employee teams exist is that employees, not managers, are
closest to the work that’s actually being done in an organization. Thus, they are often in
a better position to see how the work can be done better. Teamwork also can result in
synergy. Synergy occurs when the interaction and outcome of team members is greater
than the sum of their individual efforts.26 Synergy in teams does not automatically hap-
pen, though. Figure 4.7 lists the behaviors that can help a team develop synergy.
Teams can operate in a variety of structures, each with different strategic purposes or
functional activities. Figure 4.8 describes common team forms. They include cross-functional
teams, project teams, self-directed teams, task-force teams, process-improvement teams,
and virtual teams. Self-directed teams are often championed as being the highest form
of teams. Also called autonomous work groups, self-managed teams, or high-performance
teams, they consist of groups of employees who are accountable for an entire work pro-
cess or segment that delivers a product or service to an internal or external customer. For
example, in a manufacturing environment, a team might be responsible for a whole product
such as a computer screen or a clearly defined segment of the production process, such as
the building of an engine for a passenger car. Similarly, in a service environment, a team
is usually responsible for an entire group of products and services. Or a team might be
responsible for serving clients in one particular geographical area.
employee engagement
A situation in which
workers are enthusiastic
and immersed in their
work to the degree
that it improves the
performance of their
companies.
employee team
A group of employees
working together toward
a common purpose, in
which members have
complementary skills,
members’ work is mutu-
ally dependent, and the
group has discretion over
tasks performed.
Describe the types of
teams you have worked
in. Were some more
successful than others?
If so, why? How might
what you have learned
from being a team
member be applied in
an HR context?
LO 4
89624_ch04_hr_121-151.indd 139 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
140 Part 2 Meeting Human Resources Requirements
Typical team functions include setting work schedules, dealing directly with exter-
nal customers, training team members, setting performance targets, budgeting, inven-
tory management, and purchasing equipment or services. To operate efficiently, team
members generally acquire multiple skills so that they are able to perform a variety of
tasks as part of the team. Job rotation is also often used in work teams so members can
trade off doing different tasks as needed.
Closely associated with teams is dejobbing. Dejobbing refers to a process of struc-
turing organizations not around jobs but around projects that are constantly changing
and have different team members. In a dejobbed organization, a skills matrix like the
one shown in Figure 4.4 is likely to be used instead of a traditional job description that
defines specific work. Hackman and Oldham predict that this type of organizational
structure will be the norm in the future.27
dejobbing
Refers to a process of
structuring organiza-
tions not around jobs but
around projects that are
constantly changing.
Team synergy is heightened when team members engage in the following behaviors.
• Support. The team exhibits an atmosphere of inclusion. All team members speak up and feel free to offer constructive
comments.
• Listening and Clarification. Members honestly listen to others and seek clarification on discussion points. The team
members summarize discussions held.
• Disagreement. Disagreements are seen as natural and are expected. The members’ comments are nonjudgmental and
focus on factual issues rather than personality differences.
• Consensus. The team’s members reach agreements through consensus. Proposals that are acceptable to all team
members are adopted, even if they are not the first choice of some of the individual members. Common ground
among ideas is sought.
• Acceptance. The team members value one another as individuals. They recognize that each person brings a valuable
mix of skills and abilities to the team.
• Quality. Each team member is committed to excellence. There is emphasis on continuous improvement and attention
to detail.
Synergistic Team CharacteristicsFigure 4.7
Cross-Functional Team. A group staffed with a mix of employees from an organization’s marketing, production, engi-
neering departments, and so forth and is formed to accomplish a specific objective.
Project Team. A group formed specifically to design a new product or service. The members are assigned by their
managers on the basis of their ability to contribute to the team’s success. The group normally disbands after the task is
completed.
Self-Directed Team. Groups of highly trained individuals performing a set of interdependent job tasks within a natural
work unit. The team members rely on consensus-type decision-making to perform their work duties, solve problems, or
deal with internal or external customers.
Task Force Team. A group formed by management to immediately resolve a major problem.
Process-Improvement Team. A group made up of experienced people from different departments or functions. The
group is charged with improving quality, decreasing waste, or enhancing the productivity of processes that affect all
departments or functions. The members are normally appointed by management.
Virtual Team. A team that utilizes telecommunications technology to link team members who are geographically
dispersed—often worldwide across cultures and across time zones.
Forms of Employee TeamsFigure 4.8
89624_ch04_hr_121-151.indd 140 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
141Chapter 4 Job Analysis and Job Design
To be sure, it is hard to imagine a world without jobs. Nonetheless, dejobbed
organizations do exist. There are no bosses at W.L. Gore or traditional jobs per se. All
employees are hired as “associates” and assigned to “sponsors” in the functional groups
in which they work. The structure has helped create a culture of innovation within the
company that has repeatedly landed it on Fortune magazine’s annual list of the U.S. “100
Best Companies to Work For.” Zappos, the online shoe seller, is an extreme example of
dejobbing. A few years ago the company did away with all of its hierarchical structures.
There are no jobs, no bosses, or sponsors at the company. Case Study 1 at the end of the
chapter explains what Zappos did and how well it’s working.
Virtual Teams
Virtual teams utilize telecommunications technology to link team members who are
geographically dispersed—often worldwide across cultures and across time zones.
The technology virtual teams use includes wikis, document sharing platforms such as
Google Docs, online chat and instant messaging, web- and videoconferencing, and elec-
tronic calendar systems, to name a few. People and firms working virtually in hundreds
of countries worldwide helped design the U.S. Defense Department’s latest and greatest
fighter jet, the F-35. Microsoft used a virtual team of top scientists around the world to
improve the functionality of the Windows 10 Cortana product.28
Virtual teams do not have to work for just one organization, though. Many virtual
teams consist of members from different organizations. For example, to improve work-
flows in supply chains, it is not uncommon for manufacturers to have their employees
team up with the employees of their suppliers and the employees of the retailers who
buy the manufacturers’ products.
Although virtual teams have many benefits, they are not without their problems.29 They
include language and cultural barriers, unclear objectives, time conflicts due to diverse geo-
graphical locations, and members’ ability to work in a collaborative setting.30 NASA encoun-
tered an extreme problem of this type when it lost a $125 million space probe as a result of its
team members around the world using different units of measurement—the English system
versus the metric system.
Navi Radjou, an expert in network innovations, notes, “One problem with dis-
tributing work is that you lose the intimacy of talking things through at the local café.”
To help virtual teams “gel,” more companies are beginning to use online collaborative
meeting spaces that
allow the members of
a team to share pho-
tos of themselves, their
bios, links to the social
media sites they fre-
quent, and engage with
one another via private
chat. Go-To-Meeting
and iMeet are exam-
ples of online meet-
ing spaces designed to
create more intimacy
among team members.
At Nokia, team mem-
bers are encouraged to
virtual teams
Teams that utilize
telecommunications
technology to link team
members who are geo-
graphically dispersed—
often worldwide across
cultures and across time
zones.
Online services such as
Skype and iMeet allow
virtual workers to get
better acquainted
with one another and
have face-to-face con-
versations across any
distance.
ve
ct
or
fu
si
on
ar
t/
Sh
ut
te
rs
to
ck
89624_ch04_hr_121-151.indd 141 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
142 Part 2 Meeting Human Resources Requirements
network online and to share their pictures and personal biographies. Gathering the
members of a team together, especially when the team is first launched and at intervals,
can also help a team build trust among the members and “gel.”
Facilitating Teams
Regardless of the structure or purpose of the team, the following characteristics have
been identified with successful teams:
• A commitment to shared goals and objectives
• Motivated and energetic team members
Specialization and employees solely dedicated to well-
defined tasks may work well in large corporations, but
small businesses can’t really afford that luxury. In an entre-
preneurial business setting, employees typically wear mul-
tiple hats. They need to understand what their coworkers
do and how they do it so that the business can always
continue to function, regardless of the circumstances.
That’s why a team environment—where a small number
of employees are cross-trained to perform a variety of
roles—is an ideal strategy for the small-business owner.
In some ways, establishing a team environment
within a small business may be easier because it’s so
obvious how individuals are contributing to the whole—a
key component of success in team building. Adds human
resources and management development consultant
Susan M. Heathfield, “Fostering teamwork is creating a
work culture that values collaboration. In a teamwork
environment, people understand and believe that think-
ing, planning, decisions, and actions are better when
done cooperatively.” To nurture this kind of environment,
Heathfield recommends holding regular discussions
about collaboration and its purpose, recognizing and
rewarding teamwork both publicly and privately, and
finding ways to build some fun into team activities in
addition to doing the hard work.
Of course, a successful team starts with an effective
leader. Some teams have a single leader while others are
structured so that members take turns leading. Business
strategist Rick Johnson says that team managers need to
know how to communicate expectations clearly, how to
avoid micromanaging, and how to build confidence in
team members, which empowers them to perform well.
This means team leaders will need to learn how to act as
facilitators. “Coaching is a skill set that should be required
training for all managers to improve team management,”
adds Johnson.
Small Business Application
Craig Wagganer, a speaker and trainer who special-
izes in team building, has developed an easy-to-remember
method for effectively leading teams, which he calls the
CARE method. He suggests that team leaders:
• Consider each team member’s strengths, goals, and
relationship to the team. A good leader will not only
capitalize on what the team member has to offer,
the leader will help the member realize his or her
potential.
• Appreciate each team member’s gifts and contribu-
tions, and express that appreciation often.
• Respect differences among team members so that
conflicts can be resolved fairly and impersonally
and mistakes can be handled with grace, not blame.
• Encourage team members, individually and as a
group, in their efforts.
Wagganer goes on to describe the ripple effect of
a healthy team environment under expert leadership:
“When the heart of each team member is encouraged first
by the team leader, then the team will be poised to cheer
on each other. It starts at the top. And when a person feels
encouraged, their outlook changes and becomes one of
enthusiasm for the cause and excitement for the team
making a positive difference and being successful in its
endeavors.” That kind of optimism goes a long way in the
small business environment.
Sources: Stephane Kasriel “Three Team-Building Secrets of Suc-
cessful Small-Business Owners,” Entreprenuer (May 2, 2016), https://
www.entrepreneur.com; “Building a High-Performance Sales Team,”
Atlanta Journal-Constitution (January 30, 2014), http://ajc.com; Chuck
Stinnett, Evansville Courier Press (February 26, 2011), http://www.cou-
rierpress.com; Rick Johnson, “The Six Principles of Effective Team Man-
agement,” www.teambuildingtips.com; Susan M. Heathfield, “How to
Build a Teamwork Culture,” http://humanresources.about.com; Craig
Wagganer, “Team Building Starts with Team Member Building,” www
.leadershipinstitute.com.
Building Teams in the Small Business Environment
89624_ch04_hr_121-151.indd 142 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
143Chapter 4 Job Analysis and Job Design
• Open and honest communication
• Shared leadership
• Clear role assignments
• A climate of cooperation, collaboration, trust, and accountability
• The recognition of conflict and its positive resolution
Unfortunately, not all teams succeed or operate at their full potential. Richard Hackman
(who helped develop the job characteristics model discussed earlier in the chapter) once
said, “I have no question that when you have a team, the possibility exists that it will gener-
ate magic, producing something extraordinary … But don’t count on it.”31 Power struggles,
uncertainty about the roles members should play, a lack of resources, conflicts of inter-
est, and personality differences are common team problems. Another difficulty with work
teams is that they alter the traditional manager–employee relationship. Managers sometimes
feel threatened by the growing power of the team and the reduced power of management.
Organizations can help prevent some of the problems a team experiences. First the
firm should determine when and when not a team is needed. It’s not unusual for teams
to be assembled for tasks that could be better done by individuals working alone or
working separately and collaborating only occasionally with one another. To determine
whether a team is appropriate, researcher Jeffrey Polzer suggests firms do a process
analysis to evaluate the work by looking at its complexity and the interdependence of
the tasks that need to be done. Complex tasks include projects that are large, uncertain,
and for which there are no standard procedures for completing. Interdependent tasks
require people to rely closely on one another to execute. Teams are ideal for projects
that are both highly complex and require a high degree of interdependence.32
Once it’s been determined a team is a needed, a company can help it succeed by
designing the compensation so that the team’s members individually and jointly work
for its achievements and have the members undergo team training. Complete training
for the team would cover the importance of skills in (1) team leadership, (2) mission/
goal setting, (3) how to conduct meetings, (4) team decision-making, (5) conflict
resolution, (6) effective communication, and (7) diversity awareness.33 In addition,
research shows that teams are more effective when they initially establish “ground
rules” for how they should operate and their members should behave. HRM Experi-
ence, at the end of the chapter, presents an exercise to set team ground rules.
4.4b Flexible Work Schedules
Employers sometimes depart from the traditional workday or workweek to improve their
productivity and the morale of their employees by giving them more control over the hours
they work.34 Fifty-five percent of companies recently survey by the Society for Human
Resources offer their employees flexible working options.35 As we explained earlier in the
book, flexible work schedules can be used to attract and retain employees when a company
is facing tough times or is unable to offer the benefits or pay a competitor would. In one
survey, 42 percent of employers who were unable to provide raises to their employees said
they were willing to offer them flexible hours instead.36 The more common flexible work
schedules are the compressed workweek, flextime, job sharing, and telecommuting.
Flextime
Flextime, or flexible working hours, give employees the option of choosing daily starting
and quitting times, provided they work a certain number of hours per day or week. With
flextime, employees are given considerable latitude in scheduling their work. Often there
flextime
Flexible working hours
that give employees the
option of choosing daily
starting and quitting
times, provided that they
work a set number of
hours per day or week.
89624_ch04_hr_121-151.indd 143 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
144 Part 2 Meeting Human Resources Requirements
is a “core period” during the morning and afternoon when all employees are required
to be on the job.
Flextime provides both employees and employers with several advantages. By allow-
ing employees greater flexibility in work scheduling, employers can reduce some of the
traditional causes of tardiness and absenteeism.37 Employees can adjust their work to
accommodate their particular lifestyles and, in doing so, gain greater job satisfaction.
Employees can also schedule their working hours for the time of day when they are most
productive. In addition, variations in arrival and departure times can help reduce traffic
congestion at the peak commuting hours, so employees spend less time on the road.
Younger workers in particular want flexibility on the job. A lack of it was making
it difficult for PricewaterhouseCoopers, a Big-4 accounting firm, to retain millennials,
especially during the busy tax auditing season. So, the company implemented a pro-
gram that encourages employees to customize their schedules to avoid burnout. Kathie
Lingle, national director of work/life at KPMG, a competing Big-4 accounting firm, says
flextime is the number-one driver of retention for her firm.38
Besides being a good employee recruiting and retention tool, flextime allows orga-
nizations that want to improve their service to customers or clients to extend their
operating hours. CenturyLink, a telecommunications company, uses flextime to keep
its business offices open for customers who cannot get there during the day. Research
demonstrates that flextime can have a positive impact on the performance measures of
reliability, quality, and quantity of the employee’s work.
There are some disadvantages to flextime. First, it is not suited to some jobs, such
as those that require specific workstations to be staffed at all times. Second, it can create
problems for managers trying to supervise and schedule meetings with employees who
aren’t onsite when they are. To keep in closer touch with employees when they are work-
ing offsite, some firms utilize work-oriented social media tools such as Slack, Yammer,
and Workplace by Facebook.
Compressed Workweek
A compressed workweek is one in which the number of days in the workweek is short-
ened by lengthening the number of hours worked per day. So, for example, employees
might work 10 hours a day for 4 days a week. Or, they might work 80 hours over 9 days
and take 1 day off every other week.
Compressed workweeks have been shown to reduce absenteeism and make recruiting
and retaining employees easier.39 Many workers like the arrangement because it lengthens
their weekends and decreases the time and money they spend getting ready for work and
commuting back and forth to it. The major disadvantage of the compressed workweek
involves federal laws regarding overtime. The Fair Labor Standards Act has stringent rules
requiring the payment of overtime to nonsupervisory employees who work more than 40
hours a week. (See Chapter 9.) Another disadvantage of the compressed workweek is that
it can increase the stress employees experience because long workdays can be exhausting.
Job Sharing
An arrangement whereby two part-time employees do a job normally held by one full-time
employee is called job sharing. People who have families or want to work part time, and
older workers who want to phase into retirement by shortening their workweeks, often
find job sharing desirable.40 After her doctor warned that the stress of her 100-mile round-
trip daily commute could shorten her life, Mary Kaye Stuart decided to pursue a job-
sharing situation. “I had been wanting more balance in my life, and this was the answer,”
job sharing
An arrangement
whereby two part-time
employees do a job nor-
mally held by one full-
time employee.
89624_ch04_hr_121-151.indd 144 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
145Chapter 4 Job Analysis and Job Design
says Stuart, 63, an account executive in Austin, Texas.41 Job sharing can also reduce layoffs
in hard economic times. Companies with job sharing programs include Sprint, American
Express, and Kaiser Permanente, one of the nation’s largest health organizations.
Telecommuting
Globalization and technology are drastically changing how we do our jobs and the offices
we do them in. Telecommuting is the use of smartphones, tablets, personal computers,
and other communications technology to do work traditionally done in the workplace.42
Telecommuting, which is also referred to as working from home or remote working, is
increasing. It is fairly prevalent in states like California, where commute times are long.
A survey by the Hudson Group, a global consulting firm, found that most workers
believe that telecommuting at least some of the time is the ideal work situation. Telecommut-
ing may also reduce stress. According to a study conducted by the University of Wisconsin–
Milwaukee, employees who telecommute are more satisfied with their jobs because they
experience fewer interruptions and less office politics.43 However, telecommuters often end
up working a few more hours per week than people who don’t telecommute.44
How does telecommuting help firms? The better work-life balance employees expe-
rience can help firms attract and retain valuable employees who otherwise might quit.
Telecommuting can also dramatically lower a firm’s real estate costs by reducing the
amount of office space it needs and restructuring it. At a major publishing company in
Boston, employees telecommute on a regular basis. No one is assigned a cube or office.
Instead, open arrangement desks and other spaces allow employees to sit where they
want when they come to the office. Community areas with couches, small meeting
rooms, and a food court are places employees can congregate.
Not all employees have the self-discipline to work alone at home, however. In
addition, collaboration and communication within an organization can suffer because
employees are not interacting face to face with one another on a regular basis. For reasons
such as these, some companies require employees to work at least a couple of days of week
in the office.45 Other companies, including large ones such as Yahoo, IBM, and Best Buy,
have curtailed the practice altogether. Case Study 2 at the end of this chapter explains
why. Figure 4.9 presents suggestions for establishing a successful telecommuting program.
telecommuting
The use of personal
computers, networks,
and other communica-
tions technology to do
work in the home that is
traditionally done in the
workplace.
• Determine the Jobs Suitable for Telecommuting. Jobs that require face-to-face contact with customers or the use of spe-
cialized equipment, or require a physical presence, such as security guards aren’t candidates. Also, determine eligibility
criteria to assess who is or who is not eligible to telecommute based on their types of jobs or collective bargaining
agreements, for example.
• Establish formalized telecommuting guidelines. The guidelines could cover hours of availability, office reporting periods,
performance expectations, and weekly progress reports or email updates.
• Identify the equipment. The equipment needed for telecommuting should be specified. What equipment is the firm provid-
ing? What equipment is the teleworker providing? Who provides technical assistance in the event of equipment disruption?
• Keep telecommuters informed. Physical separation can make telecommuters feel isolated and invisible. Department and
staff updates, including telecommuters on project teams, requiring their attendance at meetings, and “chat room” dis-
cussions can keep telecommuters “in the loop.”
• Recognize when telecommuting is not working. State in telecommuting policies that the arrangement can be terminated
when it no longer serves the company’s needs or if the employee’s performance declines.
Keys for Successful TelecommutingFigure 4.9
Sources: Barbara Hemphill, “Telecommuting Productivity,” Occupational Health and Safety 73, no. 3 (March 2004): 16; U.S. Office of Personnel Man-
agement, “Guide to Telework in the Federal Government” (April 2011), I.D. No.: ES/WLW-04-11, http://www.telework.gov.
89624_ch04_hr_121-151.indd 145 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
146 Part 2 Meeting Human Resources Requirements
A job analysis is the systematic process of col-
lecting information about all of the parameters of a
job—its basic responsibilities, the behaviors, skills,
and the physical and mental requirements of the peo-
ple who do it. A job analysis should also outline the
tools needed to do the job, the environment and times
at which it needs to done, with whom it needs to be
done, and the outcome or performance level it should
produce. The information a job analysis collects serves
many HRM functions, including a firm’s workflow
and design of jobs, its legal compliance efforts, and
the recruitment, selection, training and development,
performance appraisal, and compensation of employ-
ees. To comply with the law, human resources deci-
sions must be based on criteria objectively collected
by analyzing the requirements of each job.
Job analysis information can be gathered in
several ways—via interviews, questionnaires, observa-
tions, and diaries. Other more quantitative approaches
include the U.S. Department of Labor’s job analysis
system, the Position Analysis Questionnaire system,
the critical incident method, a task inventory analysis,
and a competency-based analysis. The format of job
descriptions varies widely, often reflecting the needs
of the organization and the expertise of the writer. At a
minimum, job descriptions should contain a job title,
a job identification section, the purpose of the job, the
tasks, duties, and responsibilities of the job, and the
job’s specifications (KSAOs). Job descriptions should
be written in clear and specific terms with consider-
ation given to their legal implications.
LO 1
LO 2
Summary
Job design, which is an outgrowth of job analy-
sis, focuses on restructuring jobs in order to capture
the talents of employees, improve their work satisfac-
tion, and an organization’s performance. Top-down
job design techniques such as industrial engineering
and ergonomics focus more on tasks; bottom-down
techniques such as enrichment and empowerment
focus more on workers and how to motivate them to
do their jobs better. In the job characteristics model,
five job factors affect employees’ satisfaction: job skill
variety, task identity, task significance, autonomy, and
feedback. All factors should be built into jobs, since
each factor affects the psychological state of employees.
Increasingly, firms are using employee teams
to solve unique and complex problems, enhance the
collaboration among workers, improve their morale
and performance, and make the most of a firm’s scarce
resources. An employee team is a group of individuals
working together toward a common purpose, in which
members have complementary skills, members’ work is
mutually dependent, and the group has discretion over
the tasks it performs. The types of teams commonly
used are cross-functional teams, project teams, self-
directed teams, task-force teams, process-improvement
teams, and virtual teams. Employers sometimes depart
from the traditional workday or workweek to improve
their productivity and the morale of their employees
by giving them more control over the hours they work.
Compressed workweeks, flextime, job sharing, and
telecommuting allow employees to adjust their work
periods to accommodate their particular lifestyles.
LO 3
LO 4
critical incident method
dejobbing
employee empowerment
employee engagement
employee team
ergonomics
flextime
functional job analysis (FJA)
industrial engineering
job
job analysis
job characteristics model
job crafting
job description
job design
job enlargement
job enrichment
job rotation
job sharing
job specification
position analysis questionnaire (PAQ)
task inventory analysis
telecommuting
virtual teams
Key Terms
89624_ch04_hr_121-151.indd 146 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Establishing Ground Rules for a Team’s Success
6. Prepare thoroughly before meetings.
7. Make team members feel at ease during discussions.
8. Encourage members to ask questions when they do
not clearly understand tasks or procedures.
9. Outline the pros and cons of decisions faced by the
team.
10. Follow through on task assignments.
11. Help other members when they need assistance.
12. Treat all team members as equals.
13. Paraphrase or restate what someone else says in order
to check its meaning.
14. Openly voice opinions and share ideas.
15. Be flexible in arranging meeting schedules.
16. Compliment others for things they have said or
done.
17. Be willing to meet whenever it is necessary to discuss
a problem.
18. Bring conflicts to the attention of the team and deal
with them directly.
19. Express enthusiasm about what the team is doing.
20. Encourage budgeting of the team’s time.
21. At the end of a meeting, have members restate their
own responsibilities to check for agreement.
22. Be serious about the team’s work.
23. Arrive on time for regularly scheduled meetings.
24. Be willing to listen to other team members’ ideas.
25. Get the team’s approval on important matters before
proceeding.
Ground rules—or team norms—are agreed-on formal rules
that guide the behavior of a team’s members, including how
they want to be treated and agree to treat others. Ground
rules help teams maintain order, promote positive behavior,
and can be used to correct undesirable actions.
Assignment
1. Divide your class into teams.
2. Using the list below, have each team member silently
select 10 behaviors they believe are most critical for a
team’s success. The first list of 10 behaviors (each per-
son’s A list) should consist of those most important for
group conduct. The second list of 10 behaviors (each
person’s B list) should consist of those that are desirable.
3. Next, have the members of your team select a final
list of 10 behaviors from both lists. These will become
your team’s ground rules. The items can be modified
or combined to meet your team’s specific needs.
Behaviors List
While working in our team, individuals should:
1. Do their fair share of the work.
2. Check to ensure that everyone clearly understands
what is to be done.
3. Encourage planning, including short-range agendas
as well as long-range goals.
4. Encourage open and candid opinions about issues.
5. Listen willingly and carefully to other people’s ideas,
even if those people have a different viewpoint.
Assume you are the general manager of a service
department. How might formally written job
requirements help you manage your work unit?
Discuss the various ways in which a job analy-
sis can be completed. Compare and contrast
these methods, noting the pros or cons of each.
Why is employee motivation such an important
aspect of designing today’s jobs? The job char-
acteristics model has five components—skill
LO 1
LO 2
LO 3
variety, task identity, task significance, auton-
omy, and feedback. Provide an example of
how each component can be used to improve
an organization and the job of an employee.
(Suggestion: Consider your present or a recent
job to answer this question.)
Figure 4.8 shows the different forms of employee
teams. Provide an example of where each type of
team can be used. How do teams create synergy?
LO 4
Discussion Questions
147
89624_ch04_hr_121-151.indd 147 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
148 Part 2 Meeting Human Resources Requirements
CASE STUDY The Zappos Experiment1
There are many different ways in which firms can
organize themselves: There are flat organizations and
there are tall organizations. There are organizations
structured by products, divisions, and geography. But
one thing nearly all structures have in common is a
chain of command, or hierarchy.
Do companies have to set up that way? Tony
Hsieh doesn’t think so. Hsieh is the CEO of Zappos,
the online seller of shoes. Hsieh is a guy who thinks
outside of the box. When he started Zappos in 1999,
no one was selling shoes online. It seemed like a crazy
idea—you can’t try on shoes online to see if they fit.
But Zappos made the business work by offering good
product, free shipping and returns, and great cus-
tomer service.
Hsieh believes it’s not just the Zappos business
model that has led to its success. Employees and their
satisfaction are, too. To keep workers happy and pas-
sionate about their jobs, the company offers top-of-
the-line and unusual perks: Good pay, free health care,
and employees can bring their dogs to work if they
are well socialized. Quirky celebrations and parties
are the norm at the company, which routinely makes
Fortune’s “Best Places to Work” List.
Happy Zapponians and a booming business
weren’t enough for Hsieh though. He had noticed that
most companies on the Fortune 500 list in 1955 were
no longer on it today. In fact, many of them no longer
existed.
Hisieh figured it was because as firms grow, they
become slow and lose touch with their customers.
Executives at the top make the decisions, but they
don’t really understand what customers want, how
products can be improved, or have a lot ideas for
transforming the business. Lower-level employees—
the people closest to the work— often do, but their
suggestions rarely make it up the food chain. He didn’t
want that to happen at Zappos.
So what did Hsieh do? In 2014, he instituted a
new type of self-management system. There are no
managers at Zappos anymore. Everyone is an equal,
and no one can tell anyone else what to do.
Employees at Zappos don’t have job titles. They
have “roles” and their coworkers are their “partners.”
They work together in “circles” (or teams) of their
choosing. The members of a circle meet regularly to
talk about improvements and ideas. A “chit chat” is
held at the beginning of each meeting. Everyone is
required to speak, which ensures even the quietest
employee is heard. A software system then tracks
the circle’s goals and who agreed to do what and
when. “Really what we’re trying to do is turn each
employee into a mini entrepreneur who has the abil-
ity to sense ideas and do something about it,” says
John Bunch, who oversees the Zappos self-governing
system.
There are also no performance appraisals at Zap-
pos. If you’re doing a poor job, your coworkers will
let you know. Each employee gets 100 “people points”
to distribute to the members in their circles. If an
employee doesn’t get enough points, the person may
get booted from a circle—like contestants get voted
off of the island in Survivor. And if the person has no
circle to work in, he or she is out of job. Pay raises are
based on new skills a person develops, a system called
“badging.” For example, a person might earn a badge
for Java coding or merchandising.
If ditching the old corporate structure for something
new sounds simple, it turned out to be anything but that
for Zappos. First, there were all kinds of rules and meet-
ings required to set up the system: “Tactical” meetings
focused on the workflows, and “governance” meetings
focused on hashing out processes and eliminating road-
blocks. Second, employees had trouble understanding
the new system and weren’t sure what they were sup-
posed to be doing. Former managers felt diminished.
They no longer had any power or status, and they never
would. So much for having climbed the corporate lad-
der. Writer/editor Roger Hodge referred to the new Zap-
pos organizational structure as “a radical experiment …
to end the office workplace as we know it.”
Hsieh knew the transition wouldn’t be easy, so
he offered employees who didn’t like the new system
a buyout, which amounted to about 5 months’ pay.
Eighteen percent of the workforce, or 1,600 employ-
ees, took it. Another 15 percent or so quit later.
Morale fell, and Zappos dropped off of Fortune’s
“Best Companies to Work for List” for the first time
in its history.
Does Hshieh have any regrets about implement-
ing such a radical change at an already successful
company? No, although he admits he was surprised
89624_ch04_hr_121-151.indd 148 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
149Chapter 4 Job Analysis and Job Design
how hard it was for people to leave their bureaucratic
baggage behind. “In retrospect, I would have probably
ripped off the Band-Aid sooner,” he says.
Employees say Zappos is running more smoothly
now and that things improved after their coworkers
who didn’t like the system left. The company also
implemented a program to better screen and prepare
new employees to manage themselves. And reportedly
the firm’s profit margins are holding up.
Derek Noel, an employee with Zappos, says the
new system has let his ideas be heard and allowed him
to take on a more substantive role in the company.
“My worst day at Zappos is still better than my best
day anywhere else,” he says. “I can’t imagine going
back to traditional hierarchy anymore.”
CASE STUDY Are Firms Moving Away from Telecommuting?2
Telecommuting has been on the rise for years. Accord-
ing to the Bureau of Labor Statistics, about a quarter
of workers do all or some of their work at home. And
about 40 percent of people who hold management,
business, financial operations, and professional jobs
do. Sixty-eight percent of workers say that they expect
to work remotely in the future.
But not all firms are jumping on the telecommut-
ing bandwagon. In fact, some firms are jumping off it.
In 2013, Marissa Mayer, who at the time had just been
named Yahoo’s new CEO, ended telecommuting at the
struggling Internet-search company. Yahoo’s decision
surprised people because telecommuting is prevalent
in high-tech industries, particularly in Silicon Valley,
where Yahoo is located. How could the firm hope to
compete for employees in the area if it ended telecom-
muting? One tech news outlet called it “the worst deci-
sion Marissa Mayer has made in her tenure as Yahoo
CEO.”
Yahoo had been struggling. It’s likely that Mayer
thought some synergy was being lost by telecommut-
ing because it left fewer Yahoo employees communi-
cating face to face with one another. Mayer had also
learned that many of Yahoo’s telecommuters weren’t
logged onto Yahoo’s intranet when they were sup-
posed to be and that the company’s offices were nearly
empty on Fridays.
The memo Yahoo sent its employees announcing
telecommuting would be discontinued read: It is critical
that we are all present in our offices. Some of the best deci-
sions and insights come from hallway and cafeteria discus-
sions, meeting new people and impromptu team meetings.
Shortly after Yahoo ended telecommuting, Best
Buy and Hewlett-Packard did the same. More recently,
Honeywell and IBM ended the practice, citing the
same reasons as Yahoo: Being in the office fosters
teamwork and idea sharing. The move by IBM was
particularly surprising because the company was an
early champion of telecommuting. It published stud-
ies on the practice and persuaded its clients that its
benefits more than made up for the loss of in-person
interaction. The company also developed software to
facilitate communications with remote workers.
One thing notable about the companies was that
they were all facing tough competitive challenges
when they ended telecommuting. Some employees
suspected their employers were just trying to coerce
them to quit so they wouldn’t have to downsize them.
However, there may be a less sinister reason: The
CEOs who ended remote working may not think it’s
necessarily a bad practice, but that a firm’s HR and
other policies can’t be set in stone. In other words,
firms have to tailor their HR strategies and the design
of jobs to meet the conditions they are facing.
Discussion Questions
1. Is a self-managing organization a good idea?
Why or why not?
2. Could Zappos have done anything to make the
transition to the new system smoother? If so,
what?
Sources: Zack Guzman, “Zappos CEO Tony Hsieh on Getting Rid of
Managers: What I Wish I’d Done Differently,” CNBC (September 13,
2016), http://www.cnbc.com; Yuki Noguchi, “Zappos: A Workplace
Where No One and Everyone Is the Boss,” NPR (July 21, 2015), http://
npr.org; Jennifer Reingold, “How a Radical Shift Left Zappos Reeling,”
Fortune (March 4, 2017), http://fortune.com; Camille Sweeney and
Josh Gosfied, “No Managers Required: How Zappos Ditched the Old
Corporate Structure for Something New,” Fast Company (January 6,
2014), https://www.fastcompany.com.
89624_ch04_hr_121-151.indd 149 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
150 Part 2 Meeting Human Resources Requirements
Cassidy Solis, a workplace flexibility program
specialist with the Society for Human Resource Man-
agement, agrees. “It depends on the business’s cir-
cumstances,” Solis says. “And telecommuting is not
the only flex work arrangement that an employer can
offer.”
Solis notes that shortly after ending telecom-
muting, Yahoo began offering employees gener-
ous amounts of time off and more parental leave.
“The beauty of a flexible work arrangement is that
it matches both the employees’ and the employer’s
needs,” she says. And although the company won’t
comment on it, Yahoo has begun allowing employees
to work offsite again. Time and changing conditions
will tell whether Best Buy, Hewlett-Packard, IBM, and
Honeywell do the same.
Discussion Questions
1. How can a firm know when it’s a good idea to
implement telecommuting or not?
2. Can you think of any other pros and cons related to
telecommuting that aren’t mentioned in this case?
Sources: Erika Morphy and Noreen Seebacher, “IBM Reportedly Ends
Remote Working as Layoff Rumors Grow,” CMS Wire (February 15, 2017),
http://www.cmswire.com; Laura Shin, “Work from Home in 2017,”
Forbes (January 31, 2017), http://forbes.com; Dee DePass, “Honeywell
Ends Telecommuting Option,” Star Tribune (October 21, 2016), http://
startribune.com; James Surowiecki, “Face Time,” The New Yorker (March
18, 2103), http://www.newyorker.com; Chris Isidore and Paul Stein-
hauser, “Americans Say Telecommuting Works,” CNNMoney (March 14,
2013), http://money.cnn.com; “Best Buy Copies Yahoo, Reigns in Tele-
commuting,” USA Today (March 6, 2013), http://www.usatoday.com;
John Challenger, “Yahoo’s Telecommuting Ban Shows Mayer Is Work-
ing,” MarketWatch (March 4, 2013), http://www.marketwatch.com.
Notes and References
1. Anna M. Tinsely, “Jobs Are Left Behind as Texas Oil Fields
Turn to Automation,” Fort Worth Star-Telegram (February 21,
2017): 1A.
2. Rehman Safdar, Ajmal Waheed, and Khattak Hamid Rafiq,
“Impact of Job Analysis on Job Performance: Analysis of
a Hypothesized Model,” Journal of Diversity Management
5, no. 2 (Summer 2010): 17–36.
3. Fredenick P. Morgeson, Kelly Delaney-Klinger, Melinda S.
Mayfield, Philip Ferrara, and Michael A. Campion, “Self-
Presentation Processes in Job Analysis: A Field Experiment
Investigating Inflation in Abilities, Tasks, and Competencies,”
Journal of Applied Psychology 89, no. 4 (August 2004): 674.
4. Interview with job analyst Carol Tucker, Mesa, Arizona,
(May 10, 2006).
5. Angela R. Connell and Satris S. Culbertons, “Eye of the
Beholder: Does What Is Important About a Job Depend on
Who Is Asked?” Academy of Management Perspectives 24, no.
2 (May 2010): 83.
6. A detailed description of different job analysis techniques is
beyond the scope of this text. For those interested in more
comprehensive information or job analysis tools, see Michael
T. Bannick, Edward L. Levine, and Frederick P. Morgeson,
Job and Work Analysis: Methods, Research, and Applications
for Human Resource Management, 2nd ed. (Thousand Oaks,
CA: Sage, 2007).
7. V. S. Rama Rao, “Quantitative Job Analysis Techniques,” The Cite
Man Network (March 4, 2011), http://www.citeman.com.
8. Piers Steel and John Kammeyer-Mueller, “Using a Meta-
Analytic Perspective to Enhance Job Component Validation,”
Personnel Psychology 62, no. 3 (2009): 533.
9. Eric Klas, Alexandros Papalexandris, George Ioannou, and
Gregory Prastacos, “From Task-Based to Competency-
Based,” Personnel Review 39, no. 3 (2010): 325–346, DOI:
10.1108/0048348101103052.
10. Gensheng Liu, Rachna Shah, and Roger G. Schroeder, “Link-
ing Work Design to Mass Customization: A Socio-technical
Systems Perspective,” Decision Sciences 37, no. 4 (November
2006): 519; Nicolai J. Foss, Dana B. Minbaeva, Torben Ped-
ersen, and Mia Reinholt, “Encouraging Knowledge Shar-
ing among Employees: How Job Design Matters,” Human
Resource Management 48, no. 5 (2009): 871.
11. Jay Heizer and Barry Render, Operations Management, 11th
ed. (Upper Saddle River, NJ, Pearson: 2013), 396.
12. Ibid.
13. Christina Farr, “How Fitbit Became the Next Big Thing in
Corporate Wellness,” Fast Company (April 18, 2016), http://
fastcompany.com.
14. Pooja Garg and Renu Rastogi, “New Models of Job Design:
Motivating Employees’ Performance,” The Journal of Manage-
ment Development 25, no. 6 (2006): 572.
15. Narasimhaiah Gorla, Ravi Chinta, and Tam Wai Chu, “An
Enhanced Business Process Re-engineering Model for Sup-
ply Chain Management and a Case Study,” Journal of Infor-
mation Technology Case and Application Research 9, no. 2
(2007): 5.
16. For the original article on the job characteristics model,
see J. Richard Hackman and Greg R. Oldham, “Motivation
through the Design of Work: Test of a Theory,” Organiza-
tional Behavior and Human Performance 16, no. 2 (August
1976): 250–79.
89624_ch04_hr_121-151.indd 150 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
151Chapter 4 Job Analysis and Job Design
17. Jed DeVaro, Robert Li, and Dana Brookshire, “Analyzing the
Job Characteristics Model: New Support from a Cross-Sec-
tion of Establishments,” The International Journal of Human
Resource Management 18, no. 6 (June 2007): 986.
18. O. C. Ferrell, Geoffrey Hirt, and Linda Ferrell, Introduction to
Business (Burr Ridge, IL: McGraw-Hill, 2008), 309.
19. For Herzberg’s important article on job enrichment, see Fred-
erick Herzberg, “One More Time: How Do You Motivate
Employees?” Harvard Business Review 46, no. 2 (January–
February 1968): 53–62.
20. To come
21. Rachel Emma Silverman, “Workplace Democracy Catches
On,” Wall Street Journal (March 28, 2016): B5.
22. To come
23. Judith Plomp, Maria Tims, Svetlana Khapova, Paul Jansen,
and Arnold Baker, “Proactive Personality and Well-Being:
The Mediating Role of Job Crafting and Career Competen-
cies,” Academy of Management Proceedings (January 2016),
DOI: 10.5465/AMBPP.2016.11411abstract.
24. Feza Tabassum Azmi, “Job Descriptions to Job Fluid-
ity: Treading the Dejobbing Path,” EBS Review 2, no. 23
(2007): 8.
25. “Team Spirit,” The Economist (March 19, 2016), http://www.
economist.com.
26. Brian Hindo, “The Empire Strikes at Silos,” Business Week
(August 20, 2007): 63.
27. Leigh Thompson, “Improving the Creativity of Organiza-
tional Work Groups,” Academy of Management Executive 17,
no. 1 (February 2003): 96.
28. Matt Weinberger, “How the Forgetfulness of One of Micro-
soft’s Top Scientists Inspired a Killer New Feature for Win-
dows 10,” Business Insider (February 9, 2017), http://www
.businessinsider.com.
29. Laura A. Hambley, Thomas A. O’Neil, and Theresa J. B. Klien,
“Virtual Team Leadership: The Effects of Leadership Style
and Communication Medium on Team Interaction Styles
and Outcomes,” Organizational Behavior and Human Deci-
sion Processes 103, no. 1 (May 2007): 1.
30. Interview with Paulette Tichenor, Arizona State University,
Tempe, Arizona, (January 18, 2007).
31. “Team Spirit,” The Economist (March 19, 2016), http://www
.economist.com.
32. Jeffrey T. Holzer, Leading Teams (HBS 9-403-094) (Cam-
bridge, MA:Harvard Business School), 1–23.
33. Jay F. Nunamaker Jr., Bruce A. Reinig, and Robert O. Briggs,
“Principles for Effective Virtual Teamwork,” Communications
of the ACM 52, no. 4 (2009): 113; Stephen B. Knouse, “Build-
ing Task Cohesion to Bring Teams Together,” Quality Progress
40, no. 3 (March 2007): 49.
34. Michelle Conlin, “Smashing the Clock,” Businessweek
(December 11, 2006): 60.
35. Mark Fadden, “Workplace Trends,” Fort Worth Star-Telegram
(February 19, 2017): E1.
36. “Employers Willing to Negotiate Salary,” OfficePro 7, no. 1
(2011): 4.
37. Rita Zeidner, “Bending with the Times,” HR Magazine 53, no.
7 (July 2008): 10.
38. Mark Fadden, “Workplace Trends”, Fort Worth Star-Telegram
(February 19, 2017): E1.
39. Lori L. Wadsworth and Rex L. Facer, “Work–Family Balance
and Alternative Work Schedules,” Public Personnel Manage-
ment 45, no. 4 (December 2016): 42; Kathy Gurchiek, “Good
News for Moms Reconsidering Work,” HR Magazine 51, no. 7
(August 2006): 39.
40. “Have You Considered Job Sharing as a Retention Tool?” HR
Focus 83, no. 9 (September 2006): 10.
41. Vivian Wagner, “Take This Job and Share It,” AARP (January
27, 2017), www.aarp.org.
42. http://www.wikipedip.org/wiki/telecommuting.
43. Wendell Joice, “Implementing Telework: The Technology
Issue,” Public Manager 36, no. 2 (Summer 2007): 64.
44. Megan Scudellari, “The Downsides of Telecommuting,” Bos-
ton Globe (February 10, 2017), http://bostonglobe.com.
89624_ch04_hr_121-151.indd 151 11/17/17 10:55 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
152
CHAPTER 5
Expanding the Talent Pool:
Recruitment and Careers
Learning Outcomes
After studying this chapter, you should be able to
Describe how a firm’s strategy affects its recruiting
efforts, and outline the elements that are part of a
strategic recruiting strategy.
Describe the methods firms use to recruit externally
and internally.
List some of the ways firms can improve their
recruiting and the metrics they use to do so.
LO 1
LO 2
LO 3
Explain how career management programs
integrate the needs of individual employees and
their organizations.
Explain why diverse recruitment and career
development activities are important to companies.
LO 4
LO 5
H
er
o
Im
ag
es
/G
et
ty
Im
ag
es
89624_ch05_hr_152-204.indd 152 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
153Chapter 5 Expanding the Talent Pool: Recruitment and Careers
I
n this chapter, we will discuss the many strategies and techniques organizations use
both internally and externally to recruit the talent they need. The competition for top
talent requires firms not only to look for talented pools of employees but also to figure
out what they want, determine how to develop relationships with them, and establish
the firm as an employer of choice. In this chapter, we will also discuss the approaches
organizations take toward helping employees manage their careers. This is important
because, unlike physical assets, human assets (employees) can decide to leave the firm.
Finally, at the end of the chapter, we devote special attention to the recruitment and
career development of diverse employees.
5.1 Business Strategies and Their Link
to Strategic Recruiting
Suppose you’re an entrepreneur trying to capitalize on the next “big idea.” You have
developed a strategic vision for your firm, analyzed its workflows, and determined the
jobs you will need and how many of them. Now where do you begin to look for talent?
The decisions you make about talent—regardless of whether they pertain to recruit-
ing, transferring, promoting, developing, or deploying people—need to be considered
within the context of your business’s strategies and priorities. Consider the decision
to outsource and offshore work: Most American clothing makers have outsourced or
offshored work because labor costs are cheaper outside the United States. (Nearly all of
the clothing purchased in the United States today is imported. Just check your clothing
labels.) But that’s not the strategy Round House Workwear, based in Oklahoma, and
All American Clothing, based in Ohio, have pursued. These companies have managed
to carve out a niche by selling products with the “Made in America” label to appeal to
people who see it as a sign of prestige or national pride. The point of this story is that
recruiters always have to consider the firm’s strategy.
5.1a Elements of a Recruiting Strategy
Figure 5.1 shows the various elements a firm has to consider as part of its recruitment
strategy. The elements include the strength of the firm’s employment “brand,” the types
of positions the company is recruiting for, where it needs them, when it needs them,
and who is responsible for doing the recruiting and making the recruiting decision. We
will talk about each of these factors next.
Note that at any given time a firm might need to use multiple recruiting strate-
gies. Moreover, a strategy that works for one firm or one job might not work for
another firm (or job). For example, an engineering firm might place a premium on
finding highly qualified applicants, whereas an amusement park ramping up for a
new season might place a premium on hiring quickly. Recruiting strategies and their
effectiveness can change over time as well. As a result, firms need to continuously
examine their recruiting efforts and refine them. So, for example, if the engineering
firm landed a huge construction contract, being able to hire engineers quickly could
become a priority.
This section describes
some of the major fac-
tors that can affect a
firm’s recruiting. What
other factors might
play a role? Hint: Refer
to Chapter 1.
LO 1
89624_ch05_hr_152-204.indd 153 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
154 Part 3 Developing Effectiveness in Human Resources
Brand: How Do We Attract Talent?
Whomever and wherever a firm is recruiting, it wants to be the employer of choice to
attract and hire top candidates before its competitors do. Branding can help organiza-
tions do this. Branding refers to a company’s efforts to help existing and prospective
workers understand why it is a desirable place to work as opposed to its competitors.
A LinkedIn survey found that the hiring costs for firms with strong employer brands
are two times lower than the hiring costs of firms with weaker employer brand rankings.
Companies with strong employer brands also experienced less turnover.1
So how does a company “burnish” its employment brand? One way is to think of
applicants as consumers and focus on what they want in terms of jobs and careers as
opposed to what an organization has to “sell” them, says Diane Delich, with the Kansas
City, Missouri-based recruiting company Executive Pursuits. Delich advises companies
to listen to and reach out to applicants just like they do consumers. In fact, some firms
make their customers their employers. A high percentage of the people the Container
Store recruits are customers who like doing business with the storage-solution company.
“Basically we have mini human resources departments in each of our stores. We chal-
lenge each of our 4,000 employees to be recruiters and refer us to great people,” says the
Container Store’s Director of Recruiting Karyn Maynard.2
Another way is by reaching out to people via social networks. Firms are creating
pages on websites like LinkedIn, Facebook, and Google1 to promote their organiza-
tions and careers they have to offer. The sites allow recruiters to strike up conversa-
tions with potential applicants on those pages and give them a preview of what it is
like to work for their firms. Writing blogs and articles for industry publications is
another way.
branding
A company’s efforts
to help existing and
prospective workers
understand why it is a
desirable place to work.
BRAND
METHOD
What sources are best
for �nding talent?
Where do we need
talent?
What positions and
KSAOs are most
important?
Why does someone
want to work for us?
Who is responsible
for the decision?
Is our need immediate
or in the future?
DECISION FOCUS
LOCATIONTIMING
Elements of a Recruitment StrategyFigure 5.1
89624_ch05_hr_152-204.indd 154 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
155Chapter 5 Expanding the Talent Pool: Recruitment and Careers
Using the Internet and social networks is an inexpensive way to brand and
recruit. The strategy can be particularly effective for small companies that can’t afford
to pay for a lot of job advertising to promote their firms and attract candidates. Luke’s
Lobster, a chain that began as a small restaurant in New York City, uses all the social
media tools it can—Facebook, LinkedIn, YouTube, Twitter, Tumblr, Pinterest, and
Vimeo—to post photos and videos about the restaurant and its employees and make
announcements about specials, contests, and job openings. This has made it easy to
recruit great employees, each of whom are featured in colorful profiles on the com-
pany’s website. We will talk more about social networks as a recruiting tool later in
the chapter.
In the global arena, branding can be enormously helpful because locals are often
unfamiliar with foreign firms. In India, the firms people work for are very important to
applicants and their families. U.S. firms often set up “storefronts” in major Indian cities
to promote their employment brands. Candidates can walk in and chat with company
representatives about what these firms do and the kinds of opportunities they offer.
Online games are good branding and recruiting tool as well. Barclays Investment
Bank has a free online stock-trading game that uses real-time market data. More than
4,500 people, mostly college students, have played the game, and about 8 percent of
them have applied for jobs with the company.3 Philanthropic activities can help bur-
nish a company’s employer brand, too, especially among Generation Z and millennial
employees, who want more out of life than just a job and a paycheck. The accounting
firm Deloitte sponsors volunteer spring-break programs for undergraduate students,
who work alongside the firms’ employees to help communities in need. Highlights in
HRM 1 shows how Marriott lives up to its brand in order to recruit talent.
Focus: What Types of Positions Are Needed?
As you learned from Chapter 2, a major responsibility of human resources managers is
knowing what jobs a firm needs now and in the future as well as the KSAOs required for
those jobs. Given those needs, the condition of the labor market can have a big effect on
a firm’s recruiting plans. During periods of high unemployment, an organization might
be able to maintain an adequate supply of qualified candidates by accepting unsolicited
Luke’s Lobster uses
social networking to
promote its brand.
Lu
ke
’s
Lo
bs
te
r H
ol
di
ng
L
LC
89624_ch05_hr_152-204.indd 155 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Marriott’s Recruitment Principles: Living Up to the Employment Brand
1. Build the Employment Brand. Marriott attracts
employees the same way it attracts customers. Just as
consumers buy experiences, not just products, poten-
tial employees are looking for a great work experience
when they shop for jobs. As the company’s founder, J.
W. Marriott, put it: “For more than 70 years, we’ve lived
by a simple motto: If we take care of our associates,
they’ll take care of our guests.”
2. Get It Right the First Time. Marriott “hires friendly”
and “trains technical.” It is better to hire people with
“the spirit to serve” and train them to work than hire
people who know business and try to teach them to
enjoy serving guests. Marriott hires cooks who love to
cook and housekeepers who love to clean. They have
learned that this approach works both for delivering
excellent service and for retaining their employees.
3. Money Is a Big Thing, But… The top concern of Mar-
riott associates is total compensation. But intangible
factors taken together, such as work-life balance,
leadership quality, opportunity for advancement,
work environment, and training, far outweigh money
in their decisions to stay or leave. From flexible sched-
ules to tailored benefit packages and development
opportunities, Marriott has built systems to address
nonmonetary factors.
4. A Caring Workplace Is a Bottom-Line Issue. When
employees come to work, they feel safe, secure, and
welcome. Managers are accountable for associate satis-
faction ratings and for turnover rates. Every day, associ-
ates in each of Marriott’s full-service hotels participate
in a 15-minute meeting to review basic values such as
respect and encourage associates to raise their personal
concerns. They take the time to celebrate birthdays
and anniversaries. Practices such as these build loyalty
among associates and repeat business from customers.
5. Promote from Within. More than 50 percent of Mar-
riott’s current managers have been promoted from
within. All associates are given the opportunity to
advance as far as their abilities will carry them. Elevat-
ing employees who have continually served the com-
pany to positions of leadership helps Marriott pass on
the soul of its business—its corporate culture—from
one generation to the next.
Sources: J. W. Marriott, “Competitive Strength,” Executive Excellence 18,
no. 4 (April 2001): 3–4; J. W. Marriott, “Our Competitive Strength: Human
Capital,” Executive Speeches 15, no. 5 (April/May 2001): 18–21.
Highlights in HRM1
156
résumés and applications and from internal labor markets. Internal labor markets are
associated with “promotion within” policies, where workers are hired into entry-level
jobs and higher-level jobs are filled from within.4 By contrast, a tight labor market (one
with low unemployment) might force the employer to advertise heavily and/or seek
assistance from recruiting and employment agencies. Keep in mind that the actual labor
market a company faces depends upon the industry in which the firm operates and the
types of positions it is seeking to fill. In one industry, the supply of qualified individuals
might be plentiful for a particular position. In another industry, they may not be.
Location: Where Do We Need the Talent, and Where Will We Find It?
The two primary locations in which to find candidates are those internal to the firm
(internal candidates) and those external to the firm (external candidates), each of which
are recruited somewhat differently.
Internal versus External Recruiting Markets. Recruiting internally is generally eas-
ier, faster, and less expensive. However, not all positions can be filled internally. Jobs
that require specialized training and experience cannot always be easily filled from
within and may need to be filled from the outside. This is especially common in small
internal labor markets
Labor markets in which
workers are hired into
entry-level jobs and
higher-level jobs are
filled from within.
89624_ch05_hr_152-204.indd 156 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
157Chapter 5 Expanding the Talent Pool: Recruitment and Careers
organizations in which the existing talent pool is limited. Moreover, in rapidly changing
industries there may not be time for a company’s employees to develop completely new
skill sets. Consequently, hiring from the outside makes sense.
Applicants hired externally can also be a source of new ideas and creativity, and
may bring with them the latest knowledge acquired from their previous employers. It
is not uncommon for firms to attempt to gain secrets from their competitors by hiring
away their employees. Amazon.com was sued by Walmart, which accused the online
retailer of hiring away employees who had in-depth knowledge about Walmart’s sophis-
ticated inventory systems. Tesla Motors sued a former employee for allegedly stealing
its self-driving car technology and trying recruit dozens of the company’s engineers for
a startup firm.5
Some applicants bring more than knowledge to their new employers. They bring
revenue. Talented salespeople, doctors, accountants, lawyers, and hairdressers are exam-
ples. When these people leave their organizations, their clients often go with them.
Recruiting externally in this case makes sense. Reaching an employer’s diversity goals
is another factor that can lead a firm to recruit externally.
Regional Recruiting Markets. Have you ever noticed that competing firms are often
located in the same areas? Oil and gas companies are plentiful in the Houston area.
Film and television companies are clustered around Los Angeles. This is not a coinci-
dence. These “business clusters” occur because the resources these firms need—both
human and natural—are located in some areas and not others. Many manufacturers
have located to the South because lower-cost labor is plentiful there and unions are
less prevalent than they are in the North. Likewise, because nearby Stanford University
has one of the top computer science schools in the country, high-tech companies have
flocked to Silicon Valley in California.6
Global Recruiting Markets. To stay apace of their competitors and expand their opera-
tions around the world, companies not only look globally for goods and services, but
also for labor. Firms aren’t doing this just to save on labor costs. They are doing it to
attract the best talent wherever it may be. Firms in countries such as China and India
have heated up the competition for talent to staff the growing high-tech industries in
these nations. It is not just technical positions firms are trying to fill either. It is lower-
skilled positions, too. Resorts and vacation areas, and cruise lines are among the busi-
nesses that frequently have trouble finding employees to staff their operations and must
hire globally.
Recruiting abroad can be very complicated, however. In addition to having to deal
with a myriad of local, national, and international laws, as well as visas and work per-
mits, employers also have to take into account the different labor costs, preemployment
and compensation practices, and cultural differences associated with the countries in
which they are recruiting. In volatile areas of the world, security is a concern. Recruiting
globally is likely to become even more difficult as U.S. immigration laws tighten. To help
them navigate challenges such as these, many companies utilize firms such as Genpact
and Robert Half International, which specialize in global recruiting.
Timing: When Do We Need the Talent?
You have probably heard the saying “Timing is everything.” This is especially true
for recruiters. HR professionals shouldn’t just engage in recruiting when a position
comes open. Instead, they need to understand their firm’s business strategies, the
89624_ch05_hr_152-204.indd 157 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
158 Part 3 Developing Effectiveness in Human Resources
talent the company currently has by studying succession plans and what it will need
in the future, and then translate these into ongoing recruiting plans. Is the firm rap-
idly expanding? If so, how many positions will be needed and in what areas? How
many applicants will need to be recruited to result in a single hire? If a firm waits
too long to hire, its competitors may capitalize on emerging business opportunities
before it can.
In addition, HR managers have to consider which jobs have the biggest impact
on the firm’s financial results and prioritize filling them. It may be possible for a firm
to leave an administrative position unfilled for a few months by assigning some of the
job’s duties to other people. By contrast, leaving open a salesperson’s position in a sales
territory that generates a lot of revenue and is highly competitive could take a serious
toll on a company’s revenues.
Timing also comes into play in terms of the recruiting process. Some jobs, such
as the job of an administrative assistant, can be advertised and filled relatively quickly.
Other jobs, such as a search for a CEO, can take months. These factors have to be taken
into consideration when recruiting and moving applicants through the various hiring
stages.
Method: How Do We Find the Talent?
Firms use different methods to try to recruit different types of people for different jobs.
The methods also change over time as technology changes and the sources of candi-
dates change. Recruitment ads on the Internet and social media sites like LinkedIn have
replaced the bulk of print advertisements.
UPS needs to recruit more than 50,000 temporary workers to help deliver the mil-
lions of extra packages the company ships during the holiday season. Using mobile apps
the company reached a broader talent pool. City youths who used to have to go to a
library or school to search for UPS jobs and fill out forms once they were hired can now
do so on their mobile devices.
Decision: Who Does the Recruiting and Makes the
Final Hiring Decision?
The size of an organization often affects who performs the recruitment function. Most
large firms have full-time, in-house HR recruiters. In smaller organizations, the recruit-
ing might be done by an HR generalist. If the organization has no HR function, man-
agers and supervisors recruit their own employees. At companies such as Macy’s and
Williams-Sonoma, the members of work teams help select new employees for their
groups.
Organizations that want to focus on their core functions, including small businesses
that lack time or HR personnel, sometimes outsource their recruiting functions to out-
side firms. This practice is known as recruiting process outsourcing (RPO). Organiza-
tions also sometimes use RPO providers when they need to hire a lot of employees or
hire employees quickly. RPO providers can also be useful when a firm has had trouble
finding suitable candidates in the past or needs a different way to tap different talent
pools, perhaps to find more diverse candidates.
Regardless of who does the recruiting, they must have a good understanding
of the knowledge, skills, abilities, experiences, and other characteristics required
for the job and be personable, enthusiastic, and competent. Recruiters can often
enhance the perceived attractiveness of a job and an organization—or detract
from it. They are often a major reason why applicants select one organization over
another.
recruiting process
outsourcing (RPO)
The practice of outsourc-
ing an organization’s
recruiting function to an
outside firm.
89624_ch05_hr_152-204.indd 158 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
159Chapter 5 Expanding the Talent Pool: Recruitment and Careers
5.2 External and Internal Recruiting Methods
When you graduate, what sources do you expect to use to search for a job? Conversely,
what is the best source, or method, a firm should use to find talented people like you to
hire? In essence, these two questions are really different sides of the same coin. Employ-
ers are searching for the right employees and the right places to find them. Conversely,
people searching for work are looking for the best companies they can find and ways
to connect with them.
5.2a External Recruiting Methods
Figure 5.2 shows the major external recruitment methods. The “active” and “passive”
labels indicate that some methods take more effort on the part of the applicant and/or
the recruiting firm than others. The sources from which employers recruit externally will
vary with the type of position to be filled. A computer programmer, for example, is not
likely to be recruited from the same source as a machine operator. Trade schools can be
a good source of applicants for entry-level positions. Firms also keep detailed statistics by
job type on the sources from which their employees are hired. This helps human resource
managers make better decisions about the places to begin recruiting when different job
openings arise. We will talk more about recruiting statistics later in the chapter.
Advertisements
Advertising job openings on websites, social media, and in newspapers and trade jour-
nals is a common way to attract candidates. But help-wanted signs, billboards, and
even Craigslist are sometimes used. In countries in which literacy rates are low, radio
and television ads can be more effective. Amazon.com places ads on bus stop benches
Sometimes firms do
not post internal open-
ings for which anyone
may apply. Instead,
they select someone to
promote. Why might
a firm do this and
what drawbacks could
result?
LO 2
Job Fairs
Educational Inst.
Unions
Employment Agencies
Job Boards
Advertisements
Passive
P
a
ss
iv
e
A
c
ti
ve
A
P
P
L
IC
A
N
T
Active
COMPANY
Employee Referrals
Search Firms
Social Networking
Walk-Ins
Sources of External RecruitmentFigure 5.2
89624_ch05_hr_152-204.indd 159 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
160 Part 3 Developing Effectiveness in Human Resources
to alert prospective applicants to job openings at its distributions center. Job postings
that include videos describing the firm and the positions it offers are particularly effec-
tive. According to the job website CareerBuilder, ads such as these get viewed more
frequently and generate significantly more applicants.7
Advertising has the advantage of reaching a large audience of possible applicants.
However, some degree of selectivity can be achieved by choosing among the sources to
use. Professional and trade journals, blogs, the professional social networking groups
on LinkedIn, and the publications of unions and various fraternal or nonprofit organi-
zations will attract different types of candidates than help-wanted signs, for example.
Preparing recruiting advertisements not only is time consuming; it requires creativ-
ity in terms of developing their design and message content. Well-designed advertise-
ments highlight the major assets of the position while showing the responsiveness of the
organization to the job, career, and lifestyle needs of applicants. Among the informa-
tion typically included in advertisements is that the recruiting organization is an equal
opportunity employer. Advertisements also need to be written so as to attract diverse
candidates and avoid bias. For example, because it can discourage good candidates,
experts on HR diversity advise firms to delete from their job descriptions (and postings)
wording such as “degree from a top-tier school required.”
Also, there appears to be a correlation between the accuracy and completeness of
information provided in job advertisements and an organization’s recruitment success. The
more information disclosed, the better. However, even when a job opening is described
thoroughly in an advertisement, many unqualified applicants will still apply. Later in the
chapter we will talk about how firms go about screening the many applications they get.
Walk-Ins and Unsolicited Applications and Résumés
Walk-in jobseekers looking for jobs that pay hourly wages are common in smaller orga-
nizations. Employers also receive unsolicited applications and résumés. Walk-in appli-
cants and individuals who send unsolicited résumés to firms may or may not be good
Textio is a Web-based
product that checks job
posting for bias. You
paste in a post, and
the software suggests
how to rephrase it to
attract more diverse
candidates.
Ra
w
pi
xe
l.c
om
/S
hu
tt
er
st
oc
k
89624_ch05_hr_152-204.indd 160 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
161Chapter 5 Expanding the Talent Pool: Recruitment and Careers
prospects for employment. However, they are a source that should not be ignored. In
fact, it is often believed that individuals who contact employers on their own initiative
will be better employees than those recruited through advertisements.
Any person contacting an organization for a job should be treated with courtesy
and respect. SkipTheDishes, a chain that delivers restaurant food to people’s businesses
and homes, found this out the hard way: In 2017, a candidate who had interviewed with
the company politely emailed her interviewer to find out what the job’s hourly wage
and benefits were. She was essentially told her questions were inappropriate and her
second interview was cancelled as a result. People on Twitter expressed anger after the
candidate posted the exchange. The CEO publicly apologized and offered to resched-
ule the interview.8 The moral of this story is that hiring is no longer a one-way street:
Companies are realizing they need to improve the “candidate experience,” which is the
idea that to attract candidates (and customers), they need to make the recruiting process
a positive experience for people, whether they get hired or not. Not doing so directly
harms a company’s brand.
The Internet
Looking on the Internet is the most commonly used search tactic by jobseekers and
recruiters to connect with one another. Both companies and applicants find the approach
cheaper, faster, and potentially more effective. There are tens of thousands of indepen-
dent job boards on the Web. Widely used jobs boards include Monster, CareerBuilder,
Indeed, GlassDoor and Google for Jobs. Staffing experts say it is also a good idea to post
your firm’s jobs at free association and trade group sites, where your specific talent pool
is most likely to congregate.9
Specialty Internet recruiting sites such as Medzilla (for the pharmaceutical indus-
try), AMFMJobs (for radio personnel), and JobsInLogistics (for supply-chain jobs) are
common, too. “Niche job boards are particularly useful for cutting through the clutter
and finding talent for hard-to-fill roles, specialized positions, specific industries—or
to tap into unique candidate audiences, such as military veterans,” says Susan Vitale,
the chief marketing officer at Matawan, a N.J.-based recruitment software provider.10
Of course, most large companies post job openings on their own corporate websites,
usually under a “careers” link, along with information about the benefits of working for
their firms.
Other companies are taking Internet recruiting to a whole new level. Instead of
recruiters trying to figure out where to place individual ads and when to take them
down, they are using big data, robots, and software to do the job. Appcast is software
that trolls the Internet looking for candidates who are well suited for positions based on
the interests they express, where they go on the Web, and whether or not they appear
to be looking for jobs. Job ads then appear on their screens—just like ads for prod-
ucts do when you are shopping online. The software recruiting company FirstJob has
developed a chatbot named “Mya” to help recruit candidates for jobs. Mya converses
with candidates online to encourage them to apply—or not to apply—for certain jobs,
reviews their applications, and can even schedule interviews with them, among other
things.11
Social Media
As we indicated, to help establish their employer brands as well as recruit talent, firms
are utilizing social media websites, where they can create company pages, post and
advertise jobs, showcase their company’s attractive features, and join groups that target
certain types of professionals. Potential applicants can then “follow” companies they
89624_ch05_hr_152-204.indd 161 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
162 Part 3 Developing Effectiveness in Human Resources
are interested in working for. The online shoe seller Zappos no longer accepts résumés.
Instead, it uses social media to recruit applicants. By using social media, recruiters at
UPS say they were able to access a new applicant pool—namely, millennials—and sig-
nificantly increase the number of them applying with the company. UPS engages them
with conversations with other UPS employees and unscripted “day in the life” videos of
employees and interviews with senior managers explaining how they first started with
the company and possible career paths.12
LinkedIn has become the social media site of choice for recruiters—so much so
that it’s disrupting the market for job boards, advertisers, recruitment service firms,
and recruitment software companies. For a subscription fee, firms can use Linke-
dIn Recruiter to search its 400-million-plus member database for talented passive
jobseekers. Passive jobseekers are people who are not looking for jobs but could be
persuaded to take new ones given the right opportunity. Software developers such as
TalentBin and ZoomInfo have created applications that search the Web for passive
job candidates based on information they post on industry blogs, social networking
sites, and so forth.
Facebook has made it easier to find passive jobseekers, as well. Recruiters can create
job postings targeted at certain types of people’s newsfeeds and contact them via Mes-
senger if they want. Those who are interested in the job can simply click on the “Apply
Now” button, and their applications are automatically populated with information from
their Facebook profiles.13
A potential drawback of using social media, and the Internet in general, is that
some groups of people, including older adults and people with less than a high school
education, are less likely to go online. A study by the Kessler Foundation and National
Organization on Disability (NOD) found that only a little over half of adults with dis-
abilities go online. As a result, relying too heavily on electronic recruiting could hurt a
company’s diversity efforts.14
Mobile Recruiting
Mobile recruiting is the process of recruiting candidates via their mobile devices. People
around the world are glued to their mobile phones. For this reason, whatever social
networking or Internet platform an organization uses should have a mobile application
tied to it that people can use to search for jobs and apply for them.
Recruiters are also using text messages, sometimes to announce job openings and
to communicate information about interview schedules and speed up the recruitment
process. Text messages work well because they are inexpensive, easy to send, and fast.
Plus, because most people have their mobile devices on all of the time, they get the mes-
sages immediately instead of having to launch applications on their phones to get to a
site such as Facebook or LinkedIn.
Job Fairs
Job fairs can be a good way to cast a wide net for diverse applicants in a certain region. At
a job fair companies and their recruiters set up booths, meet with prospective applicants,
and exchange employment information. Often the fairs are industry specific.
Although job fairs often attract a lot of applicants, many of them might not be
qualified. Another problem is that they only attract applicants in the regional area in
which they are held.
One way to get around the latter problem is to hold an online virtual job fair and use
networks such as LinkedIn, Facebook, and Twitter to inform potential candidates about
passive jobseekers
People who are not look-
ing for jobs but could
be persuaded to take
new ones given the right
opportunity.
mobile recruiting
The process of recruit-
ing candidates via their
mobile devices.
virtual job fair
Job fairs conducted
online.
89624_ch05_hr_152-204.indd 162 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
163Chapter 5 Expanding the Talent Pool: Recruitment and Careers
it. During a virtual job fair, recruiters man “virtual booths” online, where they provide
links to their career resources, collect résumés, and talk with candidates via online chat
functions and webcams. Holding a virtual job fair can also be cost effective for both
recruiters and attendees because they do not have to pay travel costs.
Some larger companies, such as Procter & Gamble, host virtual fairs on their own
websites. Others, including Boeing and Citigroup, join virtual job fairs hosted by other
companies such as the job board Monster and Unicruit.com, which is a company that
hosts virtual job fairs designed to attract new graduates.15
Employee Referrals
The recruitment efforts of an organization can be greatly aided when its employees refer
potential candidates. In fact, word-of-mouth recommendations are the way most job
positions are filled. (Apparently there is truth to the phrase “It is not what you know,
but who you know.”) A number of studies have found that employee referrals are the
best source of applicants. Referred employees have much higher retention rates than
employees who are not referred and are hired in less than half the time as other candi-
dates, one study found.
Research shows that once hired, applicants referred by an employee tend to remain
with the organization longer, as well.16 Some firms have created referral pages on their
intranets to make it easier for employees to refer candidates and to track their progress
through the hiring process.17 Highlights in HRM 2 shows some additional ways firms
can encourage employee referrals.
There are some negative factors associated with employee referrals and profiles,
though. They include the possibility of corporate “inbreeding.” Because employees and
the people they refer tend to have similar backgrounds, firms that rely heavily on refer-
rals may intentionally or unintentionally screen out, and thereby discriminate against,
protected classes. In 2016, the U.S. Labor Department sued Plantir, a Silicon Valley data-
mining company, for not hiring enough Asians. It wasn’t that Plantir had intentionally
discriminated against Asians; it had simply relied too heavily on applicants its employees
had referred, most of whom weren’t Asian.
Some researchers have found that inbreeding occurs gradually as part of a three-
stage trend: According to the attraction–selection–attrition (ASA) model, in the
first stage (attraction) people with values similar to an organization are attracted
to it and become employees. In the second stage (selection), these employees then
choose applicants similar to themselves. In the final stage (attrition) employees who
do not fit in leave. The result is an ultra-homogenized organization.18 One way to
remedy the problem is by offering employees larger referral bonuses for underrep-
resented groups. Intel was able to increase the portion of women in its workforce
this way.19
Nepotism, which is the preference for hiring the relatives of employees, can
invite charges of favoritism. Various anti-nepotism laws exist at the local, state, and
federal levels. However, in other cultures, including Asia and the Middle East, nepo-
tism is the norm, and hiring managers need to be aware of it. But even in the United
States, nepotism gets mixed reviews, in part because family members are in an ideal
position to pass job knowledge and skills on to one another. Many corporate dynas-
ties (Ford Motor Company and the Rockefeller Foundation among them) have been
built on nepotism. Labor unions would not have flourished without it. In recent
years, a number of law firms and universities have dropped restrictions against hir-
ing spouses on the basis that they are prejudicial.20
nepotism
A preference for hiring
the relatives of current
employees.
89624_ch05_hr_152-204.indd 163 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Making Employee Referral Programs Work
�� Educate employees about the kinds of people the
organization wants to hire.
�� Acknowledge referrals promptly. Not doing so makes
employees feel as if their suggestions are poor ones
or are being ignored. Let the candidate and the refer-
ring employee know right away when a referral has
entered the system.
�� Reward employees with something they value such
as bonuses and recognition within the company for
referrals. Small rewards can be given for candidates
that meet the company’s requirements but are not
selected and larger rewards for successful matches.
Consider offering larger rewards for referrals that
improve a firm’s diversity.
�� Give employees the right tools. Make it easy for
employees to post or tweet information about job
openings to their online network of associates.
�� Measure results after the program is implemented
and study them in terms of the volume of referrals,
qualifications of candidates, and success of new hires
on the job.
Sources: Stephen V. Burks, Bo Cowgill, Mitchell Hoffman, and Michael
Housman, “The Value of Hiring through Employee Referrals,” Quarterly
Journal of Economics 130, no. 2 (February 2015): 805–39; “How a Talent
Management Plan Can Anchor Your Company’s Future,” HR Focus 81,
no. 10 (October 2004): 7–10; Susan M. Heathfield, “You Can Inspire Great
Employee Referrals,” http://humanresources.about.com; John Sullivan,
“Advanced Employee Referral Programs—Best Practices You Need to
Copy,” www.drjohnsullivan.com.
Highlights in HRM2
164
Re-recruiting
Re-recruiting is the process of keeping track of and maintaining relationships with
former employees to see if they would be willing to return to the firm. Former employees
that return to their former firms are sometimes referred to as “boomerang” employees.
At the accounting and consulting firm Deloitte, over 75,000 former employees are kept
track of via an online alumni network. Alumni networks are often hosted on Facebook
and LinkedIn or on the employees’ former firms’ websites.
Re-recruiting is an attractive option for recruiters. They don’t have to sift through
scores of résumés to find qualified applicants and have a better idea of how boomerang
employees will perform. Boomerang employees also tend to have better retention rates.21
Executive Search Firms
In contrast to public and private employment agencies, which help jobseekers find the
right job, executive search firms (often called “headhunters”) help employers find the
right person for a job. Firms such as Korn Ferry International, N2Growth, and Heidrick
& Struggles are top recruiting firms for executives. Executive search firms do not adver-
tise in the media for job candidates, nor do they accept a fee from the individual being
placed. The fees charged by search firms can range anywhere from 25 to 40 percent of
the annual salary for the position to be filled. A large number of CEOs are hired with
the help of executive search firms. However, newer data suggest that CEOs who are pro-
moted from within their organizations actually outperform those hired from the outside.
Educational Institutions
Educational institutions typically are a source of young applicants with formal training
but little full-time work experience. High schools are often a source of employees for
clerical and blue-collar jobs. Community colleges, with their various types of specialized
re-recruiting
The process of keeping
track of and maintaining
relationships with for-
mer employees to see if
they would be willing to
return to the firm.
89624_ch05_hr_152-204.indd 164 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
165Chapter 5 Expanding the Talent Pool: Recruitment and Careers
training, can provide candidates for technical jobs. These institutions can also be a
source of applicants for a variety of white-collar jobs, including those in the sales and
retail fields and some management trainee jobs. For technical and managerial positions,
companies generally look to colleges and universities. Campus recruiting is a win–win
for companies that need talent and schools trying to place students.
Rather than recruiting students from dozens of schools, which can be expensive,
more companies are targeting smaller numbers of colleges and forming closer part-
nerships with them. Employees guest lecture at the schools and develop relationships
with instructors, who then recommend students for jobs. Some companies are sending
their CEOs to campus because they have found that it puts a “face” on the company
and attracts more applicants.22 Figure 5.3 shows some of the steps firms can take to
strengthen their on-campus recruiting relationships.
Work-Study Programs and Internships. To attract high-demand graduates, in addi-
tion to offering higher pay, firms sometimes use work-study (co-op) programs and offer
low-interest loans for promising recruits, scholarships, and internships. Internships can
be a great way for firms to “try out” college students who want to work in their fields and
for students to decide if they want to work for an organization long term.
However, many internships are not as successful as they should be because the spon-
soring firms haven’t thought through how to effectively utilize their interns. This can lead
to bored interns who can, in turn, become disillusioned about their fields. Highlights in
HRM 3 shows steps companies can take to ensure their internships are successful.
Firms also have to be careful about whether or not their internships should be paid.
In recent years, interns have sued companies for wages claiming they did the work of
employees and should have been compensated as such or were promised full-time jobs
once their internships were over but were not hired. Figure 5.4 shows the criteria that
must be met if an intern is not to be paid, according to the U.S. Department of Labor.
Professional Associations and Labor Unions
Many professional associations and societies offer a placement service to members as
one of their benefits. For the mutual benefit of employers and job seekers, placement
centers are usually included at the national meetings of professional associations. The
• Invite professors and advisers to visit your office and take them to lunch.
• Invite them to bring a student group to the office.
• Send electronic press releases to students and bring them up to date on the firm’s latest
news and innovations.
• Provide guest speakers for classes.
• Conduct mock interviews, especially in years when not interviewing for full-time or
internship positions.
• Provide scholarships to students.
• Attend the campus career fair, even when the firm is not going to be hiring, so that its
name becomes known by the faculty and students.
• Offer job-shadowing programs for students.
Steps for Strengthening a Firm’s On-Campus Recruiting RelationshipsFigure 5.3
Sources: Bruce Busta, D’Arcy Becker, and Jane P. Saly, “Effective Campus Recruiting: The Faculty Perspective,” CPA
Journal 77, no. 7 (July 2007): 62–65; Deborah J. Sessions, “Recruiting Made Easy,” Journal of Accountancy 201, no. 5
(May 2006): 31–34.
89624_ch05_hr_152-204.indd 165 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Making Your Internship Program a Success
�� Build relationships with colleges and universities. Let
the career advisors at these schools know what you
are looking for and what you have to offer the interns
on an ongoing basis.
�� Make it clear the type of candidate you’re looking
for—for example, the required GPA, preferred or
required major, specific skills, attributes, and other
experience.
�� Develop a work-learning plan for each intern. Give
interns actual work related to their majors.
�� Create an internship handbook or website that
includes information on intern orientation, mentor-
ing, executive engagement, project work, and cross-
functional activity opportunities. Provide this to all of
the supervisors and mentors in the program as well as
the interns.
�� Set up a system for providing interns with feedback on
their performance, preferably at the midpoint of their
internship and again at the conclusion.
�� Survey interns and conduct interviews with them after
their internships to find out what went well and what
could be improved.
Sources: Michelle Bradford, “Follow Practical Advice to Limit Legal Chal-
lenges Regarding Internship Programs,” Campus Legal Advisor 16, no. 5
(2016): 6; “Getting the Most from Internship Programs,” Supply Chain
Management Review 13, no. 8 (2009): 34; Audrey Watters, “5 Tips for Cre-
ating an Internship Program for Your Startup,” www.readwriteweb.com;
Jean Scheid, “Designing Internship Programs,” www.brighthub.com; Penny
Loretto, “Developing an Internship Program,” http://internships.about.com.
Highlights in HRM3
Society for Human Resource Management (SHRM), for example, helps employers and
prospective HR employees come together.
Labor unions have been a principal source of applicants for blue-collar and some
professional jobs. Some unions, such as those in the maritime and construction indus-
tries, maintain hiring halls that can provide a supply of applicants, particularly for short-
term needs. Unions also offer their members training and in some cases apprenticeship
programs, making these organizations a good source of candidates.
Public Employment Agencies
Each of the 50 U.S. states maintains an employment agency that administers its
unemployment insurance program. The agencies work with employers to post their
openings in online job banks such as America’s Job Exchange and America’s Career
InfoNet (ACINet) and match unemployed qualified workers to the jobs so they can
1. The internship, even though it includes actual operation of the facilities of the employer, is
similar to training that would be given in an educational environment.
2. The internship experience is for the benefit of the intern.
3. The intern does not displace regular employees but works under close supervision of
existing staff.
4. The employer that provides the training derives no immediate advantage from the activi-
ties of the intern, and on occasion its operations may actually be impeded.
5. The intern is not necessarily entitled to a job at the conclusion of the internship.
6. The employer and the intern understand that the intern is not entitled to wages for the
time spent in the internship.
Unpaid Internship Guidelines Figure 5.4
166
89624_ch05_hr_152-204.indd 166 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
167Chapter 5 Expanding the Talent Pool: Recruitment and Careers
apply for them. In addition to matching unemployed applicants with job openings,
public employment agencies sometimes assist employers with apprenticeship programs,
employment testing, job analysis, evaluation programs, and community wage surveys.
Private Employment Agencies
Private employment agencies are companies that, for a fee, match people with full-time
jobs. The fee may be paid by the employer, the jobseeker, or both. It is not uncommon
for private employment agencies to charge an employer a 25 to 30 percent fee, based
on the position’s annual salary, if the employer hires an applicant found by the agency.
Private employment agencies often specialize in serving specific occupational or
geographic areas. When recruiting abroad, companies frequently use local employment
agencies because they understand a country’s culture, labor market, and better how
to recruit workers there. Companies also sometimes use private employment agen-
cies when they are trying to recruit many people or when they have had trouble in
the past recruiting enough applicants, finding applicants with the right skills, finding
diverse applicants, or finding the time or personnel needed to recruit, screen, and hire
applicants.
Staffing Agencies
Staffing agencies are firms that hire and place workers in temporary positions. Adecco,
ManpowerGroup, and Kelly Services are among the major U.S. staffing agencies.
“Temps” are typically used for short-term assignments or to help when managers cannot
justify hiring a full-time employee, such as for vacation fill-ins, for peak work periods,
or during an employee’s pregnancy leave or sick leave. A firm contracts with a staffing
agency, and the employees hired are paid by the staffing agency itself and are available
to work for multiple organizations.
Temps give organizations added flexibility because they can be used when needed.
In addition, the employment costs of temporaries are often lower than those of perma-
nent employees because temps are not provided with benefits and can be let go without
the firm having to file unemployment insurance claims. Many temporary employees are
eventually hired full time. Temping allows them and the firms they contract with to try
one another out before a permanent commitment is made.
One concern related to using temps is that they have less of an incentive to be loyal
to an employer and its clients or to go the extra mile to help a company achieve success.
Instead of hiring temps, the Hilton hotel chain sends full-time employees from one hotel
to another to address temporary spikes in demand. This strategy not only makes efficient
use of the hotel chain’s staff but also has helped it to develop an agile workforce.23
Independent Contractors
Independent contractors are workers who are self-employed and do project work on
a contract basis for organizations. Often these workers are referred to as “freelanc-
ers” because they are “free” to work for multiple organizations on multiple projects at
the same time. Independent contractors can be found on freelance job boards, staffing
agencies, and websites such as elance.com. Former and retired employees who want to
work on a freelance basis are also a good source of independent contractors for a firm
because they are familiar with its business, its personnel, and how work gets done in
the organization. Employers face similar concerns with contractors as they do tempo-
rary workers. Some experts believe the national security leaks the United States has
independent
contractors
Workers who are self-
employed and do
project work on a con-
tract basis for different
organizations.
89624_ch05_hr_152-204.indd 167 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
168 Part 3 Developing Effectiveness in Human Resources
experienced were due to the fact that leakers like Edward Snowden were independent
contractors and not actual employees of the agencies they worked for. Consequently,
they were less loyal to the agencies.
As with temps, a firm can use independent contractors as needed, and they don’t
receive benefits. In addition, companies don’t pay social security, unemployment, or
workers’ compensation taxes when they hire independent contractors. The independent
contractors must pay these taxes themselves. However, numerous companies, including
Lowe’s, Lufthansa, Microsoft, and FedEx, have been fined millions of dollars for mis-
classifying permanent workers as independent contractors in an effort to cut employ-
ment-related costs. To prevent such abuses, Congress and the U.S. Department of Labor
have established criteria companies should follow when deciding how to characterize
their workers. Highlights in HRM 4 offers some guidance firms can use to make this
determination.
However, the U.S. Supreme Court has ruled that there is no single test to determine
whether an employee is an independent contractor or not. To avoid any hint of impro-
priety, companies are increasingly requiring independent contractors to sign up with
staffing agencies and then hiring the contractors through them.
Employee Leasing
Employee leasing by professional employer organizations (PEOs) has grown rapidly
since the passage of the Tax Equity and Fiscal Responsibility Act of 1982. As we
explained in Chapter 1, more than 150,000 businesses and roughly 3 million U.S.
workers are involved in PEO arrangements, according to the National Association
of Professional Employer Organizations (NAPEO). Basically, a PEO—typically a
larger company—takes over the management of a smaller company’s HR tasks and
becomes a coemployer to its employees. The PEO performs all the HR duties of an
employer—recruiting, background checks, hiring, payroll, performance appraisal,
benefits administration, and other day-to-day HR activities—and in return is paid a
placement fee of normally 4 to 8 percent of payroll cost plus 9 to 20 percent of gross
wages. Unlike temporary agencies, which supply workers only for limited periods,
employee leasing companies place their employees with subscribers on a permanent
basis.
Because PEOs can coemploy a large number of people working at many different
companies, they can provide employees with benefits such as 401(k) and health plans
that small companies cannot afford. (The average client of a PEO is a business with 19
employees.) The Society of Human Resources Management reports that companies with
fewer than 50 employees can save anywhere from $5,000 to $50,000 in time and labor
costs annually by hiring a PEO.24
5.2b Internal Recruiting Methods
Most companies try initially to fill job vacancies above the entry-level position through
promotions and transfers. Internal candidates are readily available, get up to speed faster,
and there is less uncertainty about how they will perform. You also do not have to run
advertisements to find them, which can be costly.
By filling vacancies internally, an organization can capitalize on the investment
it has made in recruiting, selecting, training, and developing its current employees.
Promoting employees rewards them for their past performance and encourages them
employee leasing
The process of dismiss-
ing employees who are
then hired by a leasing
company (which handles
all HR-related activities)
and contracting with that
company to lease back
the employees.
89624_ch05_hr_152-204.indd 168 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
to continue their efforts. This can improve morale within the organization and sup-
port a culture of employee engagement. Promotion-from-within policies at Marriott,
Nordstrom’s, Nucor Steel, and Whole Foods have contributed to the companies’ overall
growth and success.25
However, at least one research study has found that managers often hire external
candidates rather than promote their current employees because they have a tendency
to overvalue unfamiliar candidates and undervalue known ones.26 This may be because
the managers are not yet as familiar with the external candidates’ flaws as they are with
internal candidates’ flaws. At other times, extremely good employees are prevented from
being promoted to other departments because their current managers are reluctant to
lose them.
Research by Matthew Bidwell suggests that internal candidates are likely to outper-
form external candidates. Bidwell looked at seven years of data and 5,300 employees
in different jobs in the financial industry. Even though external hires got paid nearly
20 percent more, they received significantly lower marks on their performance reviews
for their first two years on the job. External hires were also 61 percent more likely
to be fired. In addition, the productivity of business units and groups with a new hire
suffered because it took time for the groups to help the new employees learn their jobs
and become proficient at them.27
When qualified employees are passed over for external candidates (often whom
they are asked to train), a firm’s current employees can become disillusioned to the point
where they begin looking elsewhere for jobs, even when the external candidates hired
end up being very qualified for their positions. Employee surveys and other research
show that a lack of career advancement is a major reason why people quit their jobs.28
When experienced employees leave an organization they take with them years of
corporate knowhow that is hard to replace. Some signs that the firm needs to work
harder at grooming internal talent are shown in Figure 5.5. To lessen the chances of
losing top performers, some managers actively identify “at risk” employees and take
steps to retain these people.
Is a Worker an Independent Contractor—or Not?
Signs of independent contractor status include a person who:
�� Is free from direct supervision and control
�� Has an established business
�� Keeps a place of business and invests in facilities,
equipment, and supplies
�� Pays his or her own expenses
�� Assumes the risk for profits or losses
�� Sets his or her own schedule
�� Sets or negotiates his or her own pay rate
�� Offers services to other businesses (competitive or
noncompetitive)
�� Is free to refuse work offers
�� May choose to hire help
�� Carries insurance
�� Advertises in the electronic and/or print media
�� Uses business cards, stationery, and billheads
Source: Adapted from “Independent Contractor,” New York Department
of Labor, http://www.labor.ny.gov.
Highlights in HRM4
169
89624_ch05_hr_152-204.indd 169 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
170 Part 3 Developing Effectiveness in Human Resources
Internal Job Postings
Internal job postings are a quick way to find qualified employees interested in a posi-
tion. A small business might simply post a notice on a bulletin board in its break room.
Larger companies generally post their openings on their intranet sites. The intranets of
some companies alert employees about jobs in which they may be interested. As a posi-
tion becomes available, a list of employees interested in that position is retrieved, and
the records of these employees are reviewed to select possible candidates for interviews.
The employees can be electronically notified about interview schedules and track their
progress electronically through the various hiring stages.29
Identifying Talent through Performance Appraisals
Successful performers are often good candidates for a promotion. Identifying and devel-
oping all employees is a role that all managers should take seriously. A tool called a
nine-box grid is helping firms such as General Electric, Novartis, and others do this.
The grid helps managers by compiling appraisal and assessment data into a single visual
reference so they can see both an employee’s actual performance and potential per-
formance. This can then help managers determine what the developmental needs of
the employee are and what the person’s next steps within the organization might be.
Figure 5.6 is an example of a nine-box grid.
Skills Inventories and Replacement Charts
Recall from Chapter 2 that firms utilize talent reviews, or strategic meetings, to determine
if a company has the human resources it needs to compete in the future. The chapter also
discussed skills inventories, which help track an employee’s education, past work experi-
ence, vocational interests, specific abilities and skills, compensation history, and job tenure
to see how they can best be used. Procter & Gamble and HSBC are among the firms that
track their employees this way to locate capable employees who can be recruited to fill
open positions. Along with skill inventories, replacement charts are an important tool for
succession planning. At GE, for every position at or above a director level, two or three
people are usually identified who can easily step in when the current jobholder moves on.30
As we also discussed in Chapter 2, more firms are electronically capturing the quali-
fications of each of their employees. Companies such as Oracle and SAP have developed
automated staffing and skills management software that allow an organization to rapidly
screen its entire workforce to locate suitable candidates to fill an internal opening. The
data can also be used to predict the career paths of employees and to anticipate when
and where promotion opportunities might arise.31
nine-box grid
A comparative diagram
that includes appraisal
and assessment data to
allow managers to eas-
ily see an employee’s
actual and potential
performance.
1. It takes a long time to fill key positions.
2. Key positions can be filled only by hiring from the outside.
3. Key positions cannot be filled with confidence in the abilities of those chosen for them.
4. Replacements for positions often are unsuccessful in performing their new duties.
5. Promotions are made on the basis of whim, favoritism, or nepotism.
Warning Signs of a Weak Talent “Bench”Figure 5.5
Sources: Adapted from William Rothwell, Effective Succession Planning (New York: AMACOM, 2000); Victor Lipman,
“Why Employee Development Is Important, Neglected, and Can Cost You Talent,” Forbes (January 29, 2013),
https://www.forbes.com.
89624_ch05_hr_152-204.indd 170 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
171Chapter 5 Expanding the Talent Pool: Recruitment and Careers
5.3 Improving the Effectiveness
of Recruiting
How can a firm improve its effectiveness when it comes to recruiting? First, recruiters
need an accurate job analysis. What skills and abilities are they truly recruiting for? Have
they been precisely defined? Firms often neglect to update their job descriptions, which
in turn results in job postings that aren’t accurate and the wrong candidates applying for
jobs. Second, line managers and employees need to be intimately involved in the process.
Without their input, the hiring process is far more likely to fail. Third, a job-starting date
that works for both the organization and the potential new hire needs to be established.
Fourth, after the person has been hired, the firm should conduct a “debrief ” and identify
any lessons learned to improve the recruiting process.
Other questions a firm needs to ask itself are the following: How well is a company
doing when it comes to recruiting talent from all sources? Are some sources more effec-
tive than others? Have the firm’s recruiters been able to hire enough employees to meet
the company’s needs, including key personnel? Are the recruiters slow or fast when it
comes to filling positions? Are line managers happy with the process and the quality of
the people hired? Are the people who have been hired happy with their jobs and likely
to remain with the firm and advance in the organization? HR managers have many tools
available to them to gauge their efforts and improve their recruiting. Let’s now look at
a few of them.
5.3a Using Realistic Job Previews
One way organizations may be able to increase the effectiveness of their recruitment
efforts is to provide job applicants with a realistic job preview (RJP). An RJP informs
applicants about all aspects of the job, including both its desirable and undesirable
realistic job preview
(RJP)
Informing applicants
about all aspects of the
job, including both its
desirable and undesir-
able facets.
If you’re employed,
ask your boss what
methods he or she has
most successfully used
to recruit employees.
Compare your findings
with your classmates.
Does the recruiting
source seem to depend
upon the type of job?
LO 3
Source: © RapidBI.com 2000–2008
Novice showing high
potential/has
demonstrated high
potential in previous roles
Novice new in company/role.
Test in role. Has potential to
improve performance
Risk performance issues
Below Target
L
o
w
M
e
d
iu
m
H
ig
h
On Target
Performance
P
o
te
n
ti
a
l
Above Target
Capacity and/or capability for
progression after further
potential has been released
Developer may have potential
to do more through lateral
move/bigger responsibility.
Needs to be tested to ensure
capability is maximized
Highly valued, possibly a
specialist
Capacity and/or ability for
immediate advancement;
clear potential beyond current
role
High performer, ready for
additional challenge. Potential to
perform in another role at same
level (transferable skills)
High performer, hard to
replace, possibly a specialist
An Example of a Nine-Box GridFigure 5.6
89624_ch05_hr_152-204.indd 171 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
172 Part 3 Developing Effectiveness in Human Resources
facets. In contrast, a typical job preview presents the job in only positive terms. The RJP
might also include a tour of the working area, combined with a discussion of any nega-
tive health or safety considerations and time to talk candidly with the firm’s employees
about the upsides and downsides of the job.
Boeing posts video versions of its RJPs on YouTube. SunTrust Banks cut its recruit-
ment costs in half and upped its retention of tellers with an online RJP. At their con-
venience, candidates can perform various simulated teller tasks, such as looking up
account information and entering customer data, to see if they might like the job. Online
job previews can help candidates get a better feel for the work than a written description
provides.32
Proponents of RJPs believe that applicants who are given them are more likely to
remain on the job and be successful because they will experience fewer unpleasant
surprises. Yet some companies avoid RJPs because they worry that presenting both the
positive and negative aspects of a job could discourage applicants. However, downplay-
ing the negative aspects is likely to be counterproductive, because (1) it is more likely
to result in turnover, and (2) postings on social media sites such as Glassdoor and
LinkedIn enable applicants to research what current and ex-employees are saying about
companies and the jobs.
5.3b Surveys and Employee Profiles
Another way to improve a company’s recruiting is to survey managers about how satis-
fied they are with the process. Are managers happy with the time it takes to hire new
employees, the degree to which they need to be involved in the process, and the overall
quality of the people recruited? Why or why not? To find ways to reach out to and recruit
the right kinds of candidates some companies develop employee profiles by surveying
their top performers about what they like to do, what events they attend, what websites
they visit, and how they like to be contacted and recruited. New hires can also be sur-
veyed to see how satisfied they are. Last, candidates who turned down jobs often can
provide valuable information about why they did not accept the firm’s offer.
5.3c Recruiting Metrics
As we explained earlier in the chapter, recruiters should keep statistics on the sources
from which candidates are recruited and hired as well as the costs of each source. The
time it takes to recruit various employees from various sources as well as the qual-
ity of employees are other statistics recruiters collect and study. Doing so helps them
understand which recruiting sources work best for different employees, which allows
them to find better employees faster and at a lower cost. The following are some of the
metrics used.
Time to Fill
The time-to-fill metrics refer to the number of days from when a job opening is approved
to the date a person accepts and/or begins the job. Figure 5.7 shows how time-to-fill
metrics are calculated. Generally speaking, lower time-to-fill statistics are better. How-
ever, a trade-off has to be made between the time to fill a position and the quality of the
candidates needed for the position.
employee profiles
A profile of a worker
developed by studying
an organization’s top
performers to recruit
similar types of people.
time-to-fill
Metrics that refer to the
number of days from
when a job opening is
approved to the date a
person accepts the job
and begins it.
89624_ch05_hr_152-204.indd 172 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
173Chapter 5 Expanding the Talent Pool: Recruitment and Careers
Quality of Fill
Hiring quality employees is also a primary concern of recruiters. Firms have attempted
to develop a quality-of-fill metric that measures how well new hires have gotten “up
to speed,” are performing, and their retention levels. The quality-of-fill metric can be
calculated as follows:
5 1 1 4Quality of fill (PR HP HR ) N
where
5PR Average job performance rating of new hires
HP Percentage of new hires reaching acceptable productivity
within acceptable timeframe
5
5HR Percentage of new hires retained after 1 year
5N Number of performance indicators
Example:
5 5PR Average 3.5 on a 5.0 scale 70%
5 5HP of 100 new hires, 75 are meeting acceptable productivity levels 75%
5HP 80% of new hires have been retained
5N 3
5 1 1 4 5Quality of fill (70 75 80) 3 75%
Yield Ratio
Yield ratios help indicate which recruitment sources are most effective at producing
qualified job candidates. A yield ratio is the percentage of applicants from a particular
source that make it to the next stage in the selection process. For example, if 100 résumés
quality-of-fill
A metric that measures
how well new hires have
gotten “up to speed,” are
performing, and their
retention levels.
yield ratio
The percentage of appli-
cants from a particular
source that make it to
the next stage in the
selection process.
Position
Date Position
Approved
Date Offer
Accepted
Date Started
Work Selection Time
Time to
Start
Engineer 10/10/18 11/30/18 12/15/18 51 15
Marketing
Manager
10/11/18 11/24/18 12/16/18 44 22
Salesperson 10/12/18 11/13/18 11/20/18 32 7
Administrative
Assistant
10/13/18 11/7/18 11/14/18 25 7
Clerk 10/13/18 10/30/18 11/14/18 17 15
Averages 33.8 13.2
Time-to-Fill CalculationsFigure 5.7
89624_ch05_hr_152-204.indd 173 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
174 Part 3 Developing Effectiveness in Human Resources
were obtained from an employment agency and 17 of the applicants submitting those
résumés were invited for an onsite interview, the yield ratio for that agency would be
17 percent 4(17 100).
Yield ratios help firms determine which sources produce the most qualified appli-
cants. Yield ratios can also be used to determine how many total applicants a firm
typically needs to attract and advance to different stages in the hiring process to fill
different jobs.
Acceptance Rate
The acceptance rate is the percentage of applicants who accept a firm’s jobs after being
offered them. So, if over the course of a year a firm offers 100 applicants jobs, 90 of
whom accept them, the firm’s acceptance rate is 90 percent. A firm can track its accep-
tance rate for the company overall or particular jobs. Normally, high acceptance rates
are better.
If a firm has lower acceptance rates or declining acceptance rates, the firm and
its HR personnel must determine why employees are declining offers. Is the pay not
competitive? Does the firm have a problem with its branding? Are its recruiters, man-
agers, and employees doing a good job of “selling” the firm to potential applicants? Is
the firm looking toward the right sources to recruit applicants? If acceptance rates are
low, a firm may want to consider hiring a private employment agency to help improve
its recruiting.
Cost of Recruitment
The average cost of recruiting a new hire can be computed rather simply. The firm’s
total recruiting costs from all sources—including advertising, travel expenses, refer-
ral bonuses, and so on—are summed up and then divided by the number of people
hired:
Total recruiting costs Number of people hired Average recruiting cost per hire4 5
The same calculation can be used to determine the cost of recruiting from a single
source, such as employee referrals. To calculate this metric, the firm would divide the
total referral bonuses it paid employees by the number of people hired. So, if the firm
spent $10,000 on referral bonuses and hired 40 people in a given year, the average cost
of recruitment in terms of referral bonuses paid that year would be:
10,000 40 $250 per hire4 5
When combined with information about yield ratios, these calculations can pro-
vide valuable information to managers about the usefulness of different approaches
and sources of recruitment. For example, although ads and employee referrals may
both yield qualified applicants, managers may find that referral bonuses are a more
economical alternative.
An applicant tracking system (ATS) enables recruiters to electronically
post job openings, screen the uploaded profiles and/or the résumés of appli-
cants, rank them, and contact them via email for interviews. An ATS also tracks
the sources of applicants—from the various websites they use to apply for jobs
and how far they got in the process—and the time and costs related to hiring
acceptance rate
The percentage of appli-
cants who accept a firm’s
jobs after being offered
them.
applicant tracking
system (ATS)
A system recruiters use
to post job openings,
screen résumés and
uploaded profiles, con-
tact via email potential
candidates for inter-
views, and track the time,
costs, and other metrics
related to hiring people.
89624_ch05_hr_152-204.indd 174 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
175Chapter 5 Expanding the Talent Pool: Recruitment and Careers
people. Looking at this data can help recruiters fine-tune where and how they are
recruiting.33
Rather than employing an ATS, Google has used reams of data and analytics to fig-
ure out why it was having problems recruiting diverse candidates, particularly women
engineers. The company also developed an algorithm to predict which candidates have
the highest probability of succeeding once hired. Spokespeople for Google say the com-
pany is determined to bring the same level of rigor to personnel decisions as it does its
engineering decisions.34 Moreover, Google isn’t waiting for great candidates to come
for it. It’s a search-engine company after all. The company is using machine learning
and big data to suggest opportunities at Google aligned to a jobseeker’s skill sets and
interests.35
5.3d Retention: How Do We Keep Our Talent?
The flipside of recruiting is retaining employees. You’ve burnished your brand and
enticed people to join your organization. But what will make them remain with
your firm? Turnover drags down morale among a firm’s staff and takes a toll on
productivity. Replacing employees is extremely costly and time consuming. Yet a
recent Dale Carnegie Training study estimated that nearly a quarter of U.S. employ-
ees are planning to look for new jobs in the coming year, and 15 percent are already
doing so.36
Why are so many employees planning to leave their jobs? And, what, if anything,
can be done about it? Many managers believe employees leave their organizations for
better pay and benefits they can’t match. Google offers employees free massages and
rides back and forth to work. Some organizations are attracting and retaining employees
by offering them student-loan repayment assistance. The insurer Aetna is one of them.
Aetna will match $2,000 per year of an employee’s payments, for up to $10,000 total.
Programs such as these are helping companies retain Generation Z and millennial work-
ers, who tend to switch employers frequently.
But for many firms, especially smaller ones, matching pay and benefits such as these
isn’t possible. Perks that don’t cost a lot can go a long way toward retaining employees
though. Flextime, telecommuting, relaxed dress codes or no dress codes, summer hours,
and modest performance bonuses are examples. Requiring employees to shut off their
mobile phones after hours is another work-life balance perk firms are increasingly giv-
ing their employees.
However, contrary to what managers believe, factors other than pay and benefits
are usually what prompt employees to quit: They quit their jobs because they think their
input isn’t valued, they were a poor fit for the job in the first place, or they have too few
growth and advancement opportunities.
The Carnegie study found that leadership is the key reason for turnover. Supervi-
sors have to demonstrate interest in and empathy toward their employees but too few
do. Supervisors also need to help employees grow and develop, a topic that’s discussed
in the next section.
Some firms conduct “stay” interviews with longtime employees to determine why
they have remained with the firm for as long as they have. What do they like about it,
and what needs improving? Human resource managers can then use that information
to develop retention strategies.
89624_ch05_hr_152-204.indd 175 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
176 Part 3 Developing Effectiveness in Human Resources
5.4 Career Management: Developing
Talent over Time
As a manager or owner of firm, why might you want to help employees develop their
careers over time when you can just hire people in from the outside as you need them,
especially since they can quit their jobs at any time? Too often firms do just that. Their
career development and recruiting are reactive processes they engage in periodically
when a position needs to be filled.
Proactive companies see career development and recruiting functions as strategic
imperatives and, therefore, as an ongoing process designed to maximize the talents
of their employees and retain them. These companies study their firms’ strategies in
conjunction with their organizational charts, job analysis information, and external
factors such as the labor market and the competition, and then recruit proactively and
continually. At the Container Store, which regularly tops Fortune’s “100 Best Companies
to Work For,” store managers spend a couple of hours a week identifying potentially
good candidates for future potential openings.
Regardless of the source from which employees are recruited—internally or
externally—managers play a key role in expanding the talent pools of firms. Good man-
agers “grow” talent by listening to their employees’ aspirations, act as coaches, identify
their strengths and areas for improvement, and offer them continual feedback. Good
managers also ensure employees receive training, self-assessment tools, and information
about the organization and possible career paths within it. As you have learned, internal
recruiting is highly effective. It also builds loyalty between firms and their employees,
something that seems to be in short supply in today’s transaction-based labor market.
Figure 5.8 shows the steps in the career management process. For example, to plan their
careers, employees need organizational information—information that strategic planning,
forecasting, succession planning, and skills inventories can provide. Similarly, as they obtain
information themselves and use it to plan their careers, employees need to know what the
career paths within their organizations are and how managers view their performance.
5.4a The Goal: Matching the Needs of the Organization
to the Needs of Employees
A career development program should be viewed as a dynamic process that matches
the needs of the organization with the needs of employees as those needs change. Each
party has a distinct role to play in the process.
The Employee’s Role
Because having a successful career involves creating your own career path—not just fol-
lowing a path that has been established by the organization—employees need to take an
active role in planning their careers, especially in light of how fast the world of work is
changing. This includes identifying their knowledge, skills, abilities, interests, and values
and seeking out information about career options in conjunction with their managers.
Managers can help with the process by offering their subordinates continual feedback
about their performance and providing them with self-assessment tools, training, and
information about the organization and possible career paths within it. General Motors,
for example, has prepared a career development guide that groups jobs by fields of work
such as engineering, manufacturing, communications, data processing, financial, HR,
Why should both
employees and
their employers be
concerned about
career management
programs?
LO 4
89624_ch05_hr_152-204.indd 176 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
177Chapter 5 Expanding the Talent Pool: Recruitment and Careers
and scientific. These categories give employees an understanding of the career possibili-
ties in the various fields and logical ways to move from one area into another.
The Organization’s Role: Establishing a Favorable Career
Development Climate
Ideally, senior line managers and HR department managers should work together to
design and implement a career development system that reflects the goals and culture
of the organization. Says Karyn Maynard of the Container Store: “There is constant,
consistent communication with management on growth opportunities. Rather than
follow one career path, the company works to leverage employees’ talents for new and
different roles, as well as giving them as much exposure as possible to other positions
and responsibilities in the company to ensure they’re challenged.”37
Blending the Goals of Individual Employees with the Goals
of the Organization
As Figure 5.9 shows, the organization’s goals and needs should be linked with the indi-
vidual career needs of its employees in a way that improves the effectiveness of workers
and their satisfaction as well as achieves the firm’s strategic objectives. For example, if
2
34
1THE GOAL: MATCH
INDIVIDUAL AND
ORGANIZATIONAL NEEDS
The Goal: Matching
• Create a supportive
environment.
• Communicate the direction of
the company.
• Establish mutual goal setting
and planning.
INSTITUTE CAREER
DEVELOPMENT INITIATIVES
Career Development
Initiatives
• Provide self-assessments
and workshops.
• Provide career counseling.
• Provide career
self-management training.
• Give developmental
feedback.
IDENTIFY CAREER
OPPORTUNITIES AND
REQUIREMENTS
Opportunities and Requirements
• Identify future competency
needs.
• Establish job
progressions/career paths.
• Balance promotions,
transfers, exits, etc.
• Establish dual career paths.
GAUGE
EMPLOYEE POTENTIAL
Gauge Employee Potential
• Measure competencies
(appraisals).
• Establish talent inventories.
• Establish succession plans.
Steps in the Career Management ProcessFigure 5.8
89624_ch05_hr_152-204.indd 177 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
178 Part 3 Developing Effectiveness in Human Resources
the technology of a business is changing and new skills are needed, will the firm retrain
its employees to meet this need or hire new talent? Is there growth, stability, or decline
in the number of employees needed? If employees don’t have a good understanding the
goals of their firms, they could end up setting career goals that are a poor match for
the firm.
5.4b Identifying Career Opportunities and Requirements
To identify career opportunities and requirements managers have to continually analyze
the competencies required for jobs, progression among related jobs, and supply of ready
(and potential) talent available to fill those jobs. In Chapter 4, we discussed a variety of
ways this can be done, such as via questionnaires and interviews. Informal discussion
with different groups, such as new employees, managers, longtime employees, minority
employees, and technical and professional employees, is another way. Identifying the
needs and problems of these groups provides the starting point for the organization’s
career development efforts.
Begin with a Competency Analysis
In Chapter 4, we also discussed how firms analyze jobs carefully to identify and assign
weights to the knowledge and skills that each one requires. The system one major retailer
uses measures three basic competencies for each job: knowhow, problem-solving, and
accountability. Knowhow is broken down into three types of job knowledge: technical,
managerial, and human relations. Problem-solving and accountability also have several
dimensions. Scores for each of these three major competencies are assigned to each job,
and a total value is computed for each job. This information is then used to make certain
that a transfer to a different job provides an employee with the following experiences:
Blending the Needs of Individual Employees with the Needs of Their OrganizationsFigure 5.9
ORGANIZATION’S NEEDS
Strategic Operational
• Current competencies • Employee turnover
• Future competencies • Absenteeism
• Market changes • Recruiting
• Mergers, etc. • Outsourcing
• Innovation • Productivity
• Growth
• Downsizing
• Restructuring
INDIVIDUAL’S NEEDS
Personal Professional
• Age/tenure • Career stage
• Family concerns • Education & training
• Spouse’s employment • Promotion aspirations
• Ability to relocate • Performance
• Outside interests • Current career path
CAREER MANAGEMENT
89624_ch05_hr_152-204.indd 178 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
179Chapter 5 Expanding the Talent Pool: Recruitment and Careers
(1) an increase in at least one skill area on each new assignment, (2) an increase of at
least 10 percent in total points on each new assignment, and (3) assignments in several
different functional areas.38
Identify Job Progressions and Career Paths
Once the skill demands of jobs are identified and weighted according to their impor-
tance, it is then possible to plan job progressions. A new employee with no experience
is typically assigned to a “starting job.” After a period of time in that job, the employee
can be promoted to one that requires more knowledge and/or skill. While most orga-
nizations concentrate on developing job progressions for managerial, professional, and
technical jobs, progressions can and should be developed for all categories of jobs.
Job progressions then can serve as a basis for developing career paths—the lines of
advancement within an organization—for individuals. Figure 5.10 illustrates a typical
advancement for an HR associate for a large multinational corporation.
Career development and planning systems were once primarily focused on promo-
tions. However, in today’s flatter organizations and more dynamic work environment, an
individual’s career advancement can move along several different paths via promotions,
transfers, demotions, and even exits. A promotion is a change of assignment to a job
at a higher level in the organization. The new job normally provides an increase in pay
and status and demands more skill or carries more responsibility. To retain employees
and improve their promotability, many larger firms offer to reimburse employees for
getting advanced degrees and remaining with the company for a certain period of time.
“Corporate universities”—special facilities where employees receive training—are also
utilized. (We will talk more about these programs in Chapter 7.)
In flatter organizations, there are fewer promotional opportunities, so many individ-
uals find career advancement through lateral moves. A transfer occurs when an employee
is placed in another job for which the duties, responsibilities, status, and pay and benefits
job progressions
The hierarchy of jobs a
new employee might
experience, ranging from
a starting job to jobs
that successively require
more knowledge and/
or skill.
career paths
Lines of advancement
in an occupational field
within an organization.
promotion
A change of assignment
to a job at a higher level
in the organization.
transfer
The placement of an
employee in another
job for which the duties,
responsibilities, status,
and pay and benefits are
approximately equal to
those of the previous job
the person held.
Vice president,
HR
Corporate
HR director
Division
HR director
Corporate
HR manager
Asst. division
HR director
Plant
HR manager
Regional
HR manager
Asst. plant
HR manager
HR
supervisor
Regional HR
associate
HR
associate
Typical Line of Advancement in HR ManagementFigure 5.10
89624_ch05_hr_152-204.indd 179 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
are approximately equal to those of the previous job he or she held (although as an incen-
tive to make a transfer, organizations sometimes offer transferred employees small pay
increases). Individuals who look forward to change or want a chance to learn more about
their organizations and obtain different skills often seek out transfers. Frequently these
employees do so to augment their skills so they will be more promotable in the future.
A transfer sometimes requires the employee to change work group, workplace, work
shift, or organizational unit; it may even necessitate moving to another geographic area.
Thus, transfers make it possible for an organization to place its employees in jobs where there
is a greater need for their services and where they can acquire new knowledge and skills.
A downward transfer, or demotion, moves an individual into a lower-level job
that can provide developmental opportunities. Although a demotion is ordinarily
considered unfavorable, some individuals actually may request it to return to their
“technical roots.” Engineers and computer programmers who get promoted to man-
agers but end up missing their former jobs are examples. It is also not uncommon
for organizations to appoint temporary leaders (especially in team environments) to
positions with the understanding that they will eventually return to their former jobs.
Transfers, promotions, and demotions require individuals to adjust to new job
demands and usually to a different work environment. A transfer that involves moving to
a new location within the United States or abroad requires the person to not only adapt
to a new work environment but to new living conditions. Employees with families have
the added responsibility of helping family members adjust to the new living arrange-
ments. Even though some employers provide all types of relocation services—including
covering moving expenses, help selling a home, and providing cultural orientation and
language training—there is always some loss in the employee’s productivity during the
relocation process. Pretransfer training, whether it’s related to job skills or to the lifestyle
changes required is one of the most effective ways to reduce lost productivity.
Of course, many employees choose to exit their organizations as part of their career
development. When a person’s career opportunities within a firm are limited and his or
her skills are in demand externally, the best career options could be for the individual to
switch companies or to work as a freelancer, consultant, or entrepreneur. Although some
employees leave voluntarily, other employees are forced to leave. Larger organizations
often provide outplacement services to help terminated employees find jobs elsewhere.
Rather than laying off employees if it can help it, Scripps Health, a California-based
hospital group, has created a career center for workers who might otherwise lose their jobs.39
demotion
A downward transfer that
moves an individual into
a lower-level job that can
provide developmental
opportunities.
outplacement services
Services provided by
organizations to help ter-
minated employees find
a new job.
Career Path of Jeff Bezos, Founder of Amazon.com
1986—Graduated from Princeton University with a B.S. in
electrical engineering and computer science
1986—Hired by Fitel, a telecommunications and informa-
tion technology firm that created software for tracking
international stock trades
1988—Hired by Bankers Trust, Co., a financial firm that
specialized in risk management utilizing new sophisticated
computer systems
1990—Promoted to vice president
1990—Hired by D.E. Shaw, an investment and hedge fund
company
1992—Promoted to senior vice president
1995—Founded Amazon.com
Highlights in HRM Box5
180
89624_ch05_hr_152-204.indd 180 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
181Chapter 5 Expanding the Talent Pool: Recruitment and Careers
(See Case Study 1 at the end of the chapter.) However, even with the best career planning, it
is almost impossible for people to have perfect certainty about where their careers are going.
People change over time, and because of that, their needs and interests change. Moreover,
successful career paths often do not proceed in a lockstep manner. As Highlights in HRM 5
mentions, before founding Amazon.com, Jeff Bezos spent a number of years in the financial
industry. In terms of their career advancements, many people note that they were either
“in the right place at the right time” or carved out entirely new career paths for themselves.
Track Employees’ Career Stages
A person’s knowledge, skills, abilities, and attitudes as well as career aspirations change
with age and maturity. The challenges and frustrations people face at the same stages
in their careers are remarkably similar. A model describing these stages is shown in
Figure 5.11. The stages are (1) preparation for work, (2) organizational entry, (3) early
career, (4) midcareer, and (5) late career. The typical age range and the major tasks of
each stage are also presented in the figure.
The first stage—preparation for work—encompasses the period prior to entering
an organization, often extending until age 25. It is a period in which individuals must
acquire the knowledge, abilities, and skills they need to compete in the marketplace. The
second stage, typically from ages 18 to 25, is devoted to soliciting job offers and selecting
Stage 5: Late Career (ages 55–retirement):
Continue to improve one’s productivity, mentor other employees,
and prepare for retirement.
Stage 4: Midcareer (ages 40–55):
Reappraise early career and early adulthood goals, reaf�rm or modify
goals, continue to improve one’s productivity, and mentor other
employees.
Stage 3: Early Career (ages 25–40):
Learn job, learn organizational rules and norms, �t into chosen
occupation and organization, increase competence, pursue goals.
Stage 2: Organizational Entry (ages 18–25):
Obtain job offer(s) from desired organization(s), select appropriate
job based on complete and accurate information.
Stage 1: Preparation for Work (ages 0–25):
Develop occupational self-image, assess alternative occupations,
develop initial occupational choice, pursue necessary education.
Stages of Career DevelopmentFigure 5.11
89624_ch05_hr_152-204.indd 181 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
182 Part 3 Developing Effectiveness in Human Resources
appropriate jobs. During this period, a person might also be involved in preparing for
work. The next three stages entail fitting into a chosen occupation and organization(s),
modifying one’s goals, continuing to improve one’s productivity, helping groom other
employees, and finally preparing for retirement.
Offer Different Career Paths
As we have indicated, one of the ironies of organizations is that people in technical
careers—successful engineers, scientists, and so on—are often promoted right out of
their area of specialization into management. Instead of doing what they are good at,
they end up in jobs they aren’t well suited for or don’t enjoy.
The solution has been to develop dual career paths, or tracks, that provide for
progression in special areas such as information technology, finance, marketing, and
engineering, with compensation that is comparable to that received by managers at
different levels. As we explained in Chapter 2, Microsoft offers software engineers both
a management-focused and technical-specialist career track and allows them to move
back and forth between the two.
Fast-track programs are another way to give employees exposure to different types
of jobs, particularly younger employees with high potential who seek meaningful
training assignments whom a firm is trying to retain. In fast-track programs, “HIPOs”
(high-potential employees) progress rapidly through a number of managerial positions
designed to expose them to different functions within the organization. GE has an
Many new grads and seasoned professionals alike are
choosing to work for less-than-500-employee firms
because of the many advantages they offer, and smaller
firms are welcoming these workers with open arms. For
midterm and advanced career professionals, a smaller
company often means jumping straight into the limelight.
The change is rejuvenating because they find themselves
taking on more diverse responsibilities, getting involved in
new arenas, and seeing more clearly how their own efforts
impact the company’s results. “You are more likely to be lis-
tened to, and to feel that you are an important part of the
company and that your ideas really matter,” says Lindsey
Pollak, a management expert of next-generation career
trends. That’s what happened to Mike Barnes, a logistics
executive who went to work at Halton Co., a construction
equipment provider in Portland, Oregon. Barnes says the
closer connection to the mission of the business gave him
a level of job satisfaction he had not felt in a long time.
However, employees who opt for working in a small
firm cannot expect to find everything they might get
in a larger corporation. Tighter budgets mean smaller
Small Business Application
companies sometimes cannot afford to pay salaries equal
to those of big firms, and they often cannot provide the
support systems or perks, like generous expense accounts,
hefty bonuses, and company-paid smartphones. But many
small employers provide alluring trade-offs such as shorter
workweeks, less travel, and work-life balance incentives,
including telecommuting and flextime.
Where people decide to work really comes down to
determining how they are going to meet their career and
life goals. Notes management author and analyst Tony
Jacowski, “Your choice of organization should be based
on the quality of work experience you will gain rather than
the size of the organization.”
Sources: Michael Mazzeo, Paul Oyer, and Scott Schaefer, “What Small
Businesses Do Better than Corporate America,” Fortune (June 10,
2014), http://www.fortune.com; Sarah E. Needleman, “Moving to a
Small Company Can Lead to Big Rewards,” Wall Street Journal (March
5, 2008), http://online.wsj.com; Lindsey Pollak, “The Advantages of
Working for a Small Company,” http://www.lindseypollak.com; Tony
Jacowski, “Benefits of Working in a Small Company vs a Corporation,”
http://ezinearticles.com; Jacqueline Parks, “The Benefits of Working for
a Small Business,” http://www.associatedcontent.com.
Small Companies Often Offer Big Rewards
89624_ch05_hr_152-204.indd 182 10/26/17 5:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
183Chapter 5 Expanding the Talent Pool: Recruitment and Careers
intensive two-year program of this type. Employees in the program might, for example,
spend a number of months in the company’s energy division in Atlanta, its aviation
division in Cincinnati, and in Brazil working for GE’s oil and gas division.
However, proactive companies try to make the most of all of their talent rather
than just high-potential employees. It’s not uncommon for an employee to do poorly in
one position but be an excellent fit for another, or an employee who is burned out to be
reinvigorated by a different job role.
One way to help rank-and-file employees learn new skills, identify new roles they
might aim for in the future, and retain them is by allowing them to exchange or swap
jobs. Virgin America and PricewaterhouseCoopers have programs that allow flight
attendants and junior staffers, respectively, to swap jobs with their counterparts in the
United States and Australia. BNSF Railway allows employees to switch jobs in different
areas and in different locales. The swaps are referred to as “career development moves.”40
5.4c Career Development Initiatives
Workers today are not waiting to get laid off. They are taking charge of planning their
career paths and getting the skills and development they need to go from one job (and
employer) to the next. Employers who understand this trend can take preemptive action
by having career conversations with employees and implementing career management
programs to prevent them from leaving. Next, let’s look at some of them.41
Career Counseling
A key part of developing your talent pool is talking to your employees about their
current job activities and performance, personal and career interests and goals, per-
sonal skills, and suitable career development objectives. This can be provided by HR
staff members, managers and supervisors, or outside consultants. Often it is done as
part of the performance appraisals. Once the conversation has begun, how those goals
can be achieved and fit in with the organization’s goals can be discussed and a career
“action” plan for the employees established. The telecommunications company Verizon
has rolled out a program whereby career advisors counsel employees one on one and
hold periodic webinars and workshops about the career and education opportunities
the company offers. The firm also has an online career center with careers maps to help
employees chart possible job progressions.42
Some organizations have instituted “career self-management” programs to help
employees learn to continuously gather feedback and information about themselves and
their careers. Employees typically undertake self-assessments to increase their awareness of
their own career attitudes and values and attend workshops. In addition, they are encour-
aged to widen their viewpoint beyond the next company promotion to broader opportu-
nities in the marketplace, attend conferences, and develop good long-term relationships
with their bosses and colleagues. General Electric has developed an extensive set of career
development programs to help employees explore life issues that affect career decisions.43
Mentoring Programs
People often mention coworkers who positively influenced them early on in their
careers. Individuals who coach, advise, and encourage employees of a lesser rank are
called mentors. Millennials consistently say they want coaching and feedback. When
Deloitte surveyed millennials, it found the ones who planned to stay with their employ-
ers more than 5 years were twice as likely to have a mentor as those who did not.44
mentors
Individuals who coach,
advise, and encourage
employees of a lesser
rank.
89624_ch05_hr_152-204.indd 183 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Mentors need not be more senior employees, however. Reverse mentoring is
a program whereby younger employees are called on to mentor older employees
and executives about social media trends, new technology, and marketplace trends.
Hewlett-Packard, Cisco, and the advertising agency Ogilvy & Mather are among the
companies that have implemented reverse mentoring. Spencer Osborn, an executive
with Ogilvy and Mather, said his younger mentors helped him jazz up his Twitter
posts, which had a reputation for being boring. At Cisco, when the word got out that
some executives had younger mentors, other executives wanted mentors, too. Reverse
mentoring programs help younger employees feel valued and “heard” and can increase
their retention.45
Mentoring relationships don’t have to be formal though. Informal mentoring goes
on daily within every type of organization. Generally, the mentor initiates the rela-
tionship, but sometimes an employee will approach a potential mentor for advice.
Most mentoring relationships develop over time on an informal basis. They frequently
end that way, too. A study of 15 high-ranking executive women found that although
many of them lacked formal mentors, they had successfully engaged in a kind of
“360-degree” networking: The women made it a point to form and maintain relation-
ships with people above, below, and at the same level as themselves, which helped
advance their careers.46 Highlights in HRM 6 shows some of the myths about men-
toring relations. Highlights in HRM 7 shows how, as an employee you can take the
initiative to form a relationship with a mentor, even if your firm doesn’t have a formal
mentoring program.
Not surprisingly, mentoring and networking are being done electronically. “A lot of
our people work virtually, and [electronic] mentoring can erase geographic and busi-
ness-unit borders,” explained one IBM manager.47 At Rockwell Collins, a communica-
tion and aviation electronics company, nearly 6,000 employees utilize an e-mentoring
software solution. The software can connect to a firm’s existing talent management
software, gauge competency gaps, and match mentors and mentees based upon their
knowledge and learning needs.48
reverse mentoring
A program whereby
younger employees are
called on to mentor older
employees and execu-
tives about social media
trends, new technology,
and marketplace trends.
Myths about Mentors
�� Mentors exist only for career development. Sometimes
the mentor focuses on formal career development.
Sometimes the mentor is teacher, counselor, and
friend.
�� You need only one mentor. We can have multiple men-
tors in our lives. Different mentors provide different
things.
�� Mentoring is a one-way process. Learning flows both
ways. The mentor often learns from the protégé, so
the growth is reciprocal.
�� A mentor has to be older than the protégé. Age does not
matter. Experience and wisdom matter.
�� A mentor has to be the same gender and race as the
protégé. Seek mentors who are different from you.
�� Mentor relationships just happen. Being in the right
place at the right time can help, but don’t be afraid to
actively seek a mentor.
�� High-profile people make the best mentors. Prestige and
success can help, but good mentors are people who
challenge you according to your needs, readiness, and
aspirations.
�� Once a mentor, always a mentor. Over time, the men-
tor should let the protégé go his or her own way but
maintain contact. The relationship changes over time.
Highlights in HRM6
184
89624_ch05_hr_152-204.indd 184 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Tuition Assistance Programs
Large corporations often offer their employees tuition assistance to help them further
their careers if they take courses related to the firms’ businesses. For example, manag-
ers or would-be managers might be reimbursed for taking postgraduate classes such as
MBA courses or other courses related to their professional development. The terms of
the programs vary as do the amounts employees are reimbursed annually. Sometimes
the amount of reimbursement depends on the grade an employee earns in class. Com-
panies often require employees who are reimbursed for courses to remain with their
firms for a certain amount of time after completing the courses.
Career Plateau Initiatives
Career plateaus are common obstacles in the career development of employees. A
career plateau is a situation in which, for either organizational or personal reasons,
the probability of moving up the career ladder is low. There are three types of plateaus:
structural, content, and life. A structural plateau marks the end of promotions. A content
plateau occurs when a person has learned a job too well and is bored with day-to-day
activities. A life plateau is more profound and may feel like a midlife crisis. People who
experience life plateaus often have allowed work or some other major factor to become
the most significant aspect of their lives, and they experience a loss of identity and
self-esteem when they are no longer advancing in their careers. Figure 5.12 lists some
probing questions managers can ask themselves if they think their employees are expe-
riencing a career plateau.
Organizations can help individuals cope with plateaus by providing them with
opportunities for lateral growth or allowing them to choose their own assignments when
opportunities for advancement do not exist. Companies with international divisions
career plateau
A situation in which for
either organizational
or personal reasons the
probability of moving up
the career ladder is low.
Establishing a Relationship with a Mentor
1. Research the person’s background. The more you know
about your potential mentor, the easier it will be to
approach him or her and establish a relationship that
will work for both of you.
2. Make contact with the person. Introduce yourself or
have a mutual friend or acquaintance do it. Alter-
nately, get involved with your potential mentor in
business settings. That will help the mentor see your
skills in action.
3. Request help on a particular matter. Let the mentor
know that you admire him or her, and ask for help
in that arena. For example, you might say, “You’re
good at dealing with customers. Would it be ok if I
came to you for advice on my customers from time
to time?”
4. Consider what you can offer in exchange. Mentoring
is a two-way street. If you can do something for your
potential mentor then, by all means, tell him or her.
5. Arrange a meeting. Prepare a list of questions for the
meeting. Listen closely.
6. Follow up. Try some of your potential mentor’s sugges-
tions and share the results. Ask to meet on an ongoing
basis. Express appreciation and suggest that you meet
with your mentor regularly, or ask permission to get
help on an ad hoc basis.
Sources: Mattia Martin and Dario Cavenago, International Journal of
Training & Development 21, no. 1 (March 2017), 18–34; Jeff Barbian,
“The Road Best Traveled,” Training 39, no. 5 (May 2002): 38–42; Kathleen
Barton, “Will You Mentor Me?” Training and Development 56, no. 5 (May
2002): 90–92.
Highlights in HRM7
185
89624_ch05_hr_152-204.indd 185 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
186 Part 3 Developing Effectiveness in Human Resources
can encourage employees to take assignments abroad to expand their horizons, lead
philanthropic and volunteer activities for their firms, or take sabbaticals. A sabbatical is
an extended period of time during which an employee leaves an organization to pursue
other activities before returning to the firm. A sabbatical can help prevent employee
burnout and increase a person’s loyalty to a company. Some but not all sabbaticals are
paid. About 20 percent of companies on Fortune’s “100 Best Companies to Work For”
list offer paid sabbaticals. Some smaller companies do, too. The convenience-store chain
QuickTrip does for employees with 20 years of service.49 That might sound like a long
time to wait, but due its great employment practices, many QuickTrip employees end
up working for the firm for decades.
5.5 Developing a Diverse Talent Pool
As an employer, would you like to hire people who are extremely loyal to your firm
and likely to remain with it? Are their groups of employees you might have over-
looked who could help you grow your business? Firms look to diverse talent not only
for these reasons but to meet their legal obligations to provide equal employment
opportunities. Employers often develop formal EEO/affirmative action policies to
recruit and promote members of protected classes so that their representation at all
levels within the organization approximates their proportionate numbers in the labor
market.
However, the reasons to develop a diverse talent pool are not merely legal ones—
not by a long shot. Today, ethnic minorities represent approximately 30 percent of
the total U.S. population. In 2060, they are expected to comprise 60 percent of the
population. These groups have a growing amount of buying power. Some researchers
predict that companies that fail to diversify their talent pools will have a hard time
identifying with their target customers and competing with firms that do. But per-
haps most importantly, as companies face tougher competition in the United States
and abroad, they will need all the leadership, productivity, innovation, and creativity
the talent pool has to offer. A diverse talent pool increases the range of human capital
available to the firm.
sabbatical
An extended period
of time in which an
employee leaves an
organization to pursue
other activities and later
returns to his or her job.
“No” answers may indicate an employee is facing a career plateau.
1. Does the employee accept high visibility assignments
2. Has the employee continued to advance his or her education, both formal and
vocational?
3. Is the employee recognized by leaders in the organization, routinely promoted, and
rewarded?
4. Does the employee get high performance ratings and larger-than-normal raises?
5. Does the employee have a career plan with measurable objectives that has been
updated recently?
How are the career
challenges of minori-
ties both similar to and
different from those
of women in your
opinion?
LO 5
Career Plateau QuestionsFigure 5.12
Source: John Rosche, “Who’s Managing Your Career?” Contract Management 44, no. 2 (February 2004): 20–22.
89624_ch05_hr_152-204.indd 186 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
187Chapter 5 Expanding the Talent Pool: Recruitment and Careers
5.5a Women
Women make up a little under half of the total U.S. labor force and are the largest of the
protected classes. A major employment obstacle for women, both skilled and unskilled,
is the stereotyped thinking that persists within our society. Women traditionally have
been at a disadvantage because they have not been part of the so-called “good old boys’
network.” That network is an informal one of interpersonal relationships that has tra-
ditionally provided a way for senior (male) members of the organization to pass along
news of advancement opportunities and other career tips to junior (male) members as
well as to recommend them.
In the past, women were not as likely as men to have professional training and
preparation for entrance or advancement into management positions. But that’s not the
case today. Now, three of five U.S. college graduates are women, and according to the
U.S. Census Bureau, more women hold bachelor’s degrees than do men. Women also
hold 51.5 percent of management, professional, and related positions. At IBM, scores
of women run $100-million-plus divisions.
Still, the entire picture is not necessarily a rosy one. Women still make less than
men, on average, and sometimes feel as if the workplace is a “man’s world,” and the
proportion of women in top echelons of management, although growing, still remains
extremely low.50 In 2017, only 29 of the companies in the Fortune 500 were run by
women. But that is 26 more than there were in 2000. Although these data suggest that
there has been some progress, there is much left to do to break the “glass ceiling.”
Eliminating Women’s Barriers to Advancement
Glass ceiling audits are conducted by the U.S. Department of Labor to identify practices
that appear to hinder the upward mobility of both qualified women and minorities.
Black women in particular are at risk of not being promoted relative to other groups,
say labor economists.
Organizations are increasingly conducting their own glass ceiling audits prior to
government review to avoid fines and externally imposed corrective action. These
audits can document any ceilings and the reasons they exist. Self-audits are one
step toward tapping the potential of a diversified workforce. Following the largest
class-action suit ever brought in the United States, Walmart began conducting self-
audits. The company now has certain promotion goals for women and minorities. For
example, if 40 percent of the qualified people who apply for assistant store manager
positions are women, 40 percent of those hired should be women. JCPenney created
advisory teams to help increase the representation of women and minorities at the
senior management level and to find ways to make the company’s affirmative action
plan more effective. Each team is composed of 16 to 18 management associates. Firms
are establishing professional groups within their organizations to help minorities,
including women, connect with one another and combat their difficulty in advanc-
ing in organizations. At BNSF Railway, a women’s network serves as a system for
encouraging and fostering women’s career development and for sharing information,
experiences, and insights. Women in lower levels of the company are mentored by
women at higher levels. Corporate officers are invited to regularly scheduled network
meetings to discuss such matters as planning, development, and company perfor-
mance. Minorities and women are also breaking through the glass ceiling by starting
their own businesses. As one entrepreneur put it, “It’s not hard to break through the
glass ceiling when you own it.”
89624_ch05_hr_152-204.indd 187 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
188 Part 3 Developing Effectiveness in Human Resources
Accommodating Families
One of the major problems women have faced is balancing their careers with their
families. This is particularly true of single mothers, who are a growing segment of
the population. Women with young children often experience conflict between their
responsibility to the children and their duty to the employer. If the conflict becomes too
painful, they may decide to forgo their careers, at least temporarily, and leave their jobs.
In recent years, many employers, including AFLAC, SunTrust Banks, Quaker Oats
Company, Abbott Labs, Bristol-Myers Squibb, IBM, and the accounting firm KPMG,
have launched programs mutually advantageous to the career-oriented woman and the
employer. The programs, which include alternative career paths, extended leave, flex-
time, job sharing, and telecommuting, provide new ways to balance career and family.
AFLAC offers families hot take-home meals at their onsite cafeterias to ease the burden
of employees’ having to prepare dinner after leaving the office for the day. The company
also subsidizes babysitting for parents on Saturday nights so they can spend some free
time together.51 These efforts are paying off. Both IBM and KPMG, for example, report
that their programs have helped them retain and increase their numbers of women
workers.
Retaining employees who are part of dual-career couples can also be a challenge,
especially if an employee needs to be relocated or travel extensively. To help make the
transition easier, organizations now offer job-finding assistance for spouses of employ-
ees who are relocated, including payment of fees charged by employment agencies, job
counseling firms, and executive search firms.
Organizations are also developing networking relationships with other employers
to find jobs for the spouses of their relocating employees. These networks can provide
a way to “share the wealth and talent” in a community while simultaneously assisting in
the recruitment efforts of the participating organizations.52
Mary Barra broke
through many barriers
on her way to becom-
ing the CEO of GM.
Pe
te
M
ar
ov
ic
h/
Bl
oo
m
be
rg
/
G
et
ty
Im
ag
es
89624_ch05_hr_152-204.indd 188 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
189Chapter 5 Expanding the Talent Pool: Recruitment and Careers
Relocating dual-career couples to foreign facilities is a major issue that international
employers face. Fewer employees are willing to relocate without assistance for their
spouses. Many employers have developed effective approaches for integrating the vari-
ous allowances typically paid for overseas assignments when husband and wife work
for the same employer. Far more complex are the problems that arise when couples
work for two different employers. The problems associated with overseas assignments
of dual-career couples will be examined in greater detail in Chapter 15.
5.5b Minorities
Since the passage of the Civil Rights Act of 1964, many members of minority groups
have substantially improved their economic well-being. However, for many minorities,
employment opportunities still remain limited because of educational and societal dis-
advantages. The unemployment rates for minority youths are particularly high.
Black Collegian Online and Diversity Employers are two online job boards aimed
at minority jobseekers and companies that want to hire them. Facebook and LinkedIn
have functions that allow recruiters to create targeted advertising campaigns designed to
reach diverse groups. Community action agencies, civil rights organizations, and church
groups within communities can help recruiters reach inner-city residents.
Internships are another way in which organizations are building relationships
with prospective minority employees. The Chicago Tribune offers a newsroom training
program for aspiring minority journalists who want to work as news reporters. ABC,
NBC, CBS, and Fox networks work with the Emma L. Bowen Foundation to provide
internships, college scholarships, and postgraduate employment for minorities. The
defense contractor Lockheed Martin teamed up with Operation Enterprise, the Ameri-
can Management Association’s summer program for high school and college students,
to offer 10-week paid internships to students of America’s historically black colleges
and universities.53
Like with women’s networks, larger firms often have networks, or groups, minori-
ties can join to help them advance their careers. General Electric’s African-American
Forum (AAF) began informally but has grown into a major initiative.54 The company
also has forum networks for employees who are Asian and Pacific Americans, women,
Hispanics, gays, lesbians, bisexuals, and transgenders. Highlights in HRM 8 shows how
to design a tailored approach to diversity planning.
5.5c People Who Are Disabled
If someone told HR managers where they could find millions of working-age people
who are proven problem-solvers, provide a tax benefit for their companies, and have
higher retention rates than average employees, they likely would ask: “What’s the catch?”
Not only is there no catch, but such a group of potential employees also currently exists.
The group is those individuals with disabilities.55
According to the U.S. Census Bureau, more than 50 million Americans of working
age have a disability. Currently, about 18 percent of disabled workers are unemployed,
according to the Bureau of Labor Statistics.56 Of those who do not work, most would
like to. They often aren’t working because employers mistakenly believe there are no
jobs they might be able to do.
The Job Accommodation Network (JAN), sponsored by the U.S. Department of
Labor, is a site that connects disabled jobseekers with employers. JAN also provides
89624_ch05_hr_152-204.indd 189 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
information about how to accommodate different types of disabilities in the workplace.
According to data from the U.S. Department of Labor’s Office of Disability Employment,
15 percent of accommodations cost nothing; 51 percent cost between $1 and $500; 12
percent cost between $501 and $1,000; and 22 percent cost more than $1,000.57 Many
managers are unaware of how low cost most accommodations can be overall.
IBM hired its first disabled employee in 1914. This is not surprising, since the
company makes software and other products that help eliminate workplace barriers
for individuals with disabilities. IBM’s viewpoint is that no employee should be over-
looked because of a disability, thinking he or she may be the person to develop the next
generation of hardware or software from which the company will profit. Several of the
company’s researchers have a hearing impairment; they are responsible for world-class
work with innovations such as voice recognition technology.
IBM also participates in mentoring and internships for people with disabilties. The
Workforce Recruitment Program for College Students with Disabilities (WRP) is one
internship organization. WRP puts together profiles of thousands of college students
and recent graduates seeking summer internships or permanent employment nation-
wide with federal agencies. These profiles are then made available free of charge to busi-
ness owners. Similarly, the American Association for the Advancement of Science has
a program called Entry Point, which has placed hundreds of science and engineering
students with disabilities in internships in the public and private sectors.
Tips for Enhancing a Firm’s Diversity
�� Ascertain whether diversity is adequately represented
in the firm’s workforce by comparing company data to
the statistics on diversity within the general workforce
in the region. Diversity data within a firm should be
broken down and measured across various specific
categories, such as management, customer service,
accounting, and so forth.
�� Clearly define the goals of the diversity recruitment
and retention program, and ensure managers at all
levels understand its significance and support its
motives.
�� Understand demographic changes in the workforce.
�� Build long-term relationships with minority organiza-
tions, colleges, and other strategic resources.
�� Become the employer of choice for a diverse work-
force by developing a diversity-friendly corporate
culture and fostering a culturally sensitive work
environment. Showcase the fact with a diversity
statement on social media and your website. Include
diversity stats and photos, and testimonial videos of
minority employees at various levels.
�� Establish a presence among minority communities by
participating in job fairs, targeting recruitment adver-
tising to minority publications such as Diversity Inc.,
and monitoring websites where résumés of diverse
individuals are more likely to be found.
�� Use internal employee resource groups. Demonstrate
the organization’s commitment to diversity by making
it a formal part of the employee referral program.
�� Train hiring managers to ensure diverse applicants are
not discounted in the interviewing process because
they are different.
�� Measure the efficacy of these recruitment efforts, and
use the results to improve the program.
Sources: Condensed from Patricia Digh, “Getting People in the Pool:
Diversity Recruitment That Works,” HR Magazine 44, no. 10 (October
1999): 94–98; Sungjoo Choi, “Workforce Diversity and Job Satisfaction of
the Majority and the Minority,” Review of Public Personnel Administration
37, no. 1 (March 2017): 84–107; John Sullivan and Sally Baack, “Diversity
Recruiting Is a Failure: It’s Time to Raise the Bar,” http://www.multicultur-
aladvantage.com; Aaron Green, “Diversity Recruiting: Getting It Right,”
http://www.boston.com.
Highlights in HRM8
190
89624_ch05_hr_152-204.indd 190 10/26/17 5:42 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
191Chapter 5 Expanding the Talent Pool: Recruitment and Careers
5.5d Veterans
The federal government requires firms that do business with it to hire a certain per-
centage of workers who are veterans. But firms aren’t recruiting military personnel
just because they do business with the government and have to, but because it’s good
business. AT&T, Starbucks, Amazon, Capital One, and Lowe’s are among the many
companies that have found veterans to be a valuable source of candidates. Employers
say veterans have a good work ethic, are disciplined, follow the chain of command, and
make good decisions in different situations, such as mission types of operations. Accord-
ing to a study by CareerBuilder.com, 65 percent of employers said, given the choice
between two equally qualified applicants, they are more likely to hire the veteran.58
Numerous websites are dedicated to recruiting veterans. They include Veterans4Hire,
veteranrecruiting.com, and Milicruit.com. Milicruit holds virtual job fairs, which can
help vets apply for jobs while they are still enlisted, if they are disabled, or otherwise
are unable to travel to a regular job fair. Contacting and forming a relationship with a
military base is another way. Most military bases have career centers for people leav-
ing the military. These are often the first place military personnel turn to when they
are transitioning into civilian lives. The U.S. Department of Labor’s VETS program is
another good source. VETS has local veterans’ employment representatives across the
country dedicated to increasing the employment of former military members.59
5.5e Older Employees
A growing number of people over 65 are continuing to work—a trend that is likely to
increase as more babyboomers retire.60 The move has come both as a result of changing
workforce demographics, rising health care costs, and babyboomers spending down
their retirement savings.
During annual meet-
ings of shareholders
in 2017, Starbucks
announced a new goal
to hire 25,000 veterans
by 2025.
St
ep
he
n
Br
as
he
ar
/G
et
ty
Im
ag
es
89624_ch05_hr_152-204.indd 191 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
192 Part 3 Developing Effectiveness in Human Resources
Why should a company hire older workers? For one, because they have proven
employment experience, are reliable, and are more likely to remain with a firm than
job hop. They are also an excellent recruitment source to staff part-time and full-time
positions that are otherwise hard to fill. Independent contracting or consulting, on-call
work (such as substitute nursing or teaching), and temporary work in administrative or
IT roles are examples. Some retirees return or stay in the workforce at the request of their
employers, who cannot afford to lose the knowledge accumulated by longtime employ-
ees or their reliable work habits that have a positive effect on the entire work group.
But even though age discrimination is illegal, it is still a problem. Managers wonder
whether older employees are adaptable enough to learn new processes and technolo-
gies. Younger workers are more likely to get interviews than older people, studies have
shown. To counter problems such as these, the AARP, the advocacy group for retired
people, offers virtual job fairs and online videos to help its members assess, brush up on,
and learn new tech skills. The organization also partners with firms that recruit older
workers and offer them flexible work schedules and health benefits. The Home Depot,
Staples, and Toys “R” Us are some of the firms featured on the site. The AARP will even
pay an older worker’s wages and workers-compensation costs as part of a “try before
you hire” program it has with companies. After a trial period of working for a company,
the firm can decide whether or not it wants to hire the worker.
The decisions a company makes about talent
need to be considered within the context of the busi-
ness’s strategies: What types of positions are needed;
where the talent is needed and where can it be found;
the strength of the firm’s employment “brand”; how
the talent can be attracted; and who will recruit the
talent and make the final hiring decision. Which
internal and external sources and methods are used
in recruiting will depend on the strategy and goals of
the organization, conditions of the labor market, and
specifications of the jobs to be filled.
Outside candidates are recruited when inter-
nal talent is lacking or a firm wants to hire employees
with expertise from other organizations for competi-
tive reasons and to prevent the inbreeding of ideas
within their organization. To help meet a firm’s EEO
requirement and diversify its talent pools, firms also
look externally for candidates. Advertisements, the
Internet, social networks, mobile recruiting, employ-
ment agencies, tapping educational institutions and
professional associations, and re-recruiting are among
the many ways firms recruit external candidates.
Employers usually find it advantageous to
use internal promotions and transfers to fill as many
LO 1
LO 2
Summary
openings as possible above the entry level. Doing so
is faster, less expensive, and more likely to result in a
successful hire. It also builds loyalty among workers.
Internal job postings, performance appraisals, skills
inventories, and replacement charts are ways in which
firms identify internal talent.
HR managers have many tools available to
them to gauge their efforts and improve their recruit-
ing. Using realistic job reviews, surveying managers
and applicants about the process, and examining
metrics such as the cost per hire, time to fill a posi-
tion, yield ratios, and acceptance rates are some of
the ways in which firms evaluate their recruiting
efforts. An applicant tracking system (ATS) can help
a firm automatically track and calculate many of
these statistics. The flipside of recruiting is retain-
ing employees. Pay and benefits are important, but
nonmonetary aspects, such as the support of one’s
supervisor and the ability to further one’s career in
an organization, can ultimately lead to an employee’s
retention.
Identifying and developing talent is a responsi-
bility of all managers. A career development program
is a dynamic process that should integrate the career
LO 3
LO 4
89624_ch05_hr_152-204.indd 192 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
193Chapter 5 Expanding the Talent Pool: Recruitment and Careers
Name some companies with whom you have
done business. Then discuss how you view
their employer brands. Would you want to
work for them or not? How might these firms
improve their employer brands?
Think of a new type of business you would like
to start up or manage. Which sources would
you use to recruit employees who could help
you make it a success?
LO 1
LO 2
Explain how realistic job previews (RJPs) oper-
ate. As a manager or business owner, would you
use them?
How can a career management program help an
organization forced to downsize its operations?
What barriers to career advancement do
women and minorities face?
LO 3
LO 4
LO 5
Discussion Questions
goals of employees with the goals of the organization.
Job opportunities can be identified by studying jobs
and determining the knowledge and skills each one
requires. Once that is accomplished, key jobs can be
identified, and job progressions can be planned. These
progressions can then serve as a basis for developing
the career paths of employees. Employees need to be
made aware of the organization’s philosophy and its
goals; otherwise they will not know how their goals
match those of the organization. Firms can “grow”
their internal talent by offering employees different
career paths and programs, counseling them about
their careers, establishing mentoring and tuition assis-
tance programs, and helping them overcome career
plateaus.
The first step toward facilitating the career
development of women is to eliminate barriers to their
advancement. Creating professional networks for women,
providing them with managerial training and mentors,
and accommodating families have been found to be
effective ways to facilitate women’s career development.
A diversified workforce is composed of many
different groups, an important segment of which is
minority groups. Many organizations have special
programs such as internships that provide minority
groups with hands-on experience as well as special
training opportunities. Other groups that require the
attention of management are the disabled, veterans,
older workers, and dual-career couples, who often
need flexible working options.
LO 5
acceptance rate
applicant tracking system (ATS)
branding
career paths
career plateau
demotion
employee leasing
employee profile
independent contractors
internal labor market
job progressions
mentors
mobile recruiting
nepotism
nine-box grid
outplacement services
passive jobseekers
promotion
quality of fill
realistic job preview (RJP)
recruiting process outsourcing
(RPO)
re-recruiting
reverse mentoring
sabbatical
time to fill
transfer
virtual job fair
yield ratio
Key Terms
89624_ch05_hr_152-204.indd 193 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Career Management
2. Ask each person to identify his or her career goals and
how they have changed or are expected to change
over time.
3. Ask each person to describe the sequence of events
that led to where he or she is.
4. Ask each person what (if anything) he or she would
do differently. Ask what advice he or she has for you
about how to approach your career.
Do successful people plan their careers in advance and then
work toward their goals in a logical and sequential way? Or
does a career occur as a result of a person’s preparedness,
insight, and taking advantages of opportunities as they
arise?
Assignment
1. Form teams of four to six members. Identify three dif-
ferent people to interview about their careers. One
person should be in the early stages of his or her
career, one should be in midcareer, and one should be
in the final stages of his or her career.
194
CASE STUDY A Lifecycle Approach to Talent1
To build a workforce that can respond to the health-
care industry’s rapid transformation, Scripps Health,
in San Diego, accommodates the needs of employees
at the beginning, middle, and later stages in their
careers. The result is higher morale and impeccable
performance. “One-size-fits-all HR practices don’t
work when you want a diverse, knowledge-based
workforce,” says Victor Buzachero, corporate senior
vice president for innovation, human resources, and
performance management. “Originally many HR
practices were designed primarily to be consistent
and to avoid legal issues. Today our focus is on HR
practices that engage people and encourage a higher
contribution.”
For example, Scripps has implemented daily
“huddles,” where workers can offer input and affect
decisions—something especially prized by mil-
lennial employees. “In the past workers wanted a
supervisor who acted like a “boss.” Buzachero say,
“Today they want a supervisor who acts like a coach,
and we’re educating our supervisors to be strong
coaches.”
In one program, seasoned nurses are trained to
mentor recent nursing graduates to improve their
critical-thinking skills; as a result, the graduates indi-
cate they feel more prepared for their role. Scripps
currently offers over 1,870 skills-building, leadership
training, and continuing education units.
Scripps also encourages movement across the
organization to remain a career destination for talent
mid-career. For example, workers in medical surgi-
cal units can receive 26 weeks of training to shift into
areas where skilled workers are in short supply, such
as operating rooms.
Also, traditional retirement packages that max
out at age 60 can encourage these experienced work-
ers to leave, even if they want to continue working.
Scripps lets retirement plans continue to grow past
age 65, while allowing staged retirement programs
such as job sharing. “One of our most successful
clinical nursing units is managed by two women who
job share,” Buzachero says. “If we didn’t offer that
kind of flexibility, they may have gone somewhere
else.”
89624_ch05_hr_152-204.indd 194 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
195Chapter 5 Expanding the Talent Pool: Recruitment and Careers
This lifeycle approach creates a diverse workforce
able to address the healthcare industry’s mandate to
improve outcomes while cutting costs. “As patients
ask for more and more from us, we need a workforce
with all-encompassing view and innovative approach,
Buzachero says. “But we can only build a highly
skilled, varied workforce if we satisfy the many career
needs of a varied workforce.”
Questions
1. In what ways does the Scripps lifecycle approach
lead to a more diverse workforce?
2. Why are managers increasingly being encouraged
to act as coaches? Do you see any problems with a
manager acting as both a coach and a supervisor?
Source: Scripps Health.
Homegrown Talent: Mary Barra Rises to GM’s Top Post
When Mary Barra was a kid, she used to hang out in
the garage with her dad tinkering on cars. Little did her
father, a lifelong die-maker for GM’s Pontiac division,
know that his daughter would one day become the
CEO of the company and the first woman ever to lead a
major U.S. car manufacturer. But that’s what happened
in 2013. Barra was unanimously chosen by the board
members of General Motors to lead the company—a
decision employees cheered when they heard about
it over the loudspeakers at corporate headquarters.
Maybe they cheered because unlike GM’s previous
two CEOs, Barra was one of them. Having worked
in multiple departments at GM since she was 18, she
knows the car business through and through. “There’s
nobody with more years of honest ‘car guy’ credentials
than she has,” says Ross Gordon in the Ross School of
Business at the University of Michigan.
Barra, who grew up in a Detroit suburb, initially
began working for GM in the 1980s as part of a work-
study program. In this program, which is also referred
to as a co-op program, students alternate working
full time (for pay) and going to college. She earned
an undergraduate degree in electrical engineering
and GM later sent her to Stanford, where she got an
MBA. During her career she has rotated through vari-
ous positions at GM. Besides working in engineering
and design, she managed one GM’s manufacturing
plants and most recently was the senior vice president
for global product development and quality control.
Under her watch, the company has rolled out success-
ful models that have helped bring the company back
out of bankruptcy during the latest economic recession.
Barra has a reputation for getting results. Not
only does she know cars, she knows people and how
to manage them. When an updated version of the
Chevy Malibu floundered because of design and
other problems, she mobilized a team of employees
and found a way to fix the Malibu in record time. Her
great people management skills might explain why
when GM was going through bankruptcy, she was
put in charge of human resources for GM, an area
she had never worked in before. GM hoped putting
her in the job would prevent key talent from heading
for the exits during the bankruptcy process. It did
and GM bounced back. In 2016, GM sold more than
10 million vehicles worldwide, and its net income
exceeded $9 billion. GM’s Chevy Volt was named
North American Car of the Year in 2017, and the
company announced a partnership to develop on-
demand, self-driving vehicles in conjunction with the
ride-sharing company Lyft. In short, the company is
on a roll.
Sue Meisinger, formerly the president and CEO
of the Society of Human Resources Management,
says that Barra’s being named CEO underscores the
importance of HR personnel working in and under-
standing different areas of their firms. “If you’re
interested in a career path that extends beyond HR,
you need to have experience in multiple facets of the
business,” Meisinger says. She notes that for many
HR professionals, their crowning achievement is to
be the head of HR. Barra’s rise to CEO, however, will
have many of these professionals shifting their career
goals.
CASE STUDY 2
89624_ch05_hr_152-204.indd 195 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
196 Part 3 Developing Effectiveness in Human Resources
Sources: Tom Beaman, “CEO Mary Barra Revs Things Up at General
Motors,” Costco Connection 32, no 4 (April 2017): 45. Dee Ann Durbin
and Tom Krisher, “Barra Inherits a Stronger GM,” Associated Press
(December 29, 2013), www.ap.org; Dee Ann Durbin and Tom Krisher,
“GM Picks Woman CEO,” Associated Press (December 29, 2013),
www.ap.org; Chris Woodyard, “Who Is Mary Barra, the Next CEO of
GM?” USA Today (December 10, 2013), www.usatoday.com; Mary
Pyrillis, “Mary Barra, General Motors’ Next CEO Breaks Ground for
Women and HR,” Workforce (December 11, 2013), http://www
.workforce.com.
Questions
1. Mary Barra’s father worked at General Motors.
Was her hiring an example of nepotism? If you
were a business owner, would you want to hire
relatives of your employees? What would the pros
and cons of doing so be?
2. What role did Mary Barra play in advancing her
career? What role did GM play in “growing” her
career?
Notes and References
1. R. Bruab and David G. Allen, “Third Party Employment
Branding: Human Capital Inflows and Outflows following
‘Best Places to Work’ Certifications,” Academy of Management
Journal 59, no. 1 (2016): 90–112.
2. Blake Landua, “The Uncontained Culture of the Container
Store,” Human Resources IQ (March 6, 2008), http://www
.humanresources.iqu.com.
3. Sarah E. Needleman, “Play This Game and Win a Job,” Wall
Street Journal (March 14, 2016): R2.
4. Damali Curry Edwards, “People and Technology: A Win-
ning Recruiting Combination,” Career Planning and Adult
Development Journal 32 no. 3 (2016): 45; Edward P. Lazear,
Paul Oyer, Internal and External Labor Markets: A Personnel
Economics Approach, NBER (Working paper, 2003), http://
www.nber.org/papers/w10192.
5. Debbie Mack, “P&G Fights to Protect Its Bounty,” Corpo-
rate Legal Times 13, no. 135 (February 2003): 64; Alexandria
Sage, “Tesla Sues Ex-Autopilot Head over Recruiting,” Reuters
(January 27, 2017), http://reuters.com.
6. Jeff Tanner and Mary Anne Raymond, Principles of Marketing
(Washington, DC: FlatWorld Knowledge, 2016): 79.
7. Kazim Ladimeji “Five Ways to Significantly Increase Recruit-
ing Effectiveness,” Recruiter (September 28, 2012), https://
www.recruiter.com.
8. Lauren Krugel, “SkipTheDishes Apologies, Offers to Resched-
ule Interview,” Canadian Press (March 14, 2017), http://www
.thecanadianpress.com.
9. Henry S. Faber, Dan Silverman, and Till Von Wachter, “Deter-
minants of Callbacks to Job Applications: An Audit Study,”
The American Economic Review 106 no. 5 (2016): 314–18;
Douglas P. Shuit, “Monster Board Games,” Workforce Man-
agement 82, no. 2 (November 2003): 37–42; Joe Dysart, “New
Directions in Internet Recruiting,” Contractor Magazine 53,
no. 7 (July 2006): 33–36.
10. Roy Maurer, “Niche Job Boards Muscle into Recruiting
Marketplace,” SHRM (February 24, 2017), https://www
.shrm.org.
11. Allan Schweyer, “Robots in Recruiting: The Implications of AI
on Talent Acquisition,” Webinar, 2017, http://info.appcast.io.
12. Mike Vangel, “Social Recruitment Delivers Results for UPS,” Tal-
ent Management (August 13, 2013), http://www.talentmgt.com.
13. John E. Dunn, “Facebook’s New Job Service Sparks Privacy
Fears,” Naked Security (February 20, 2017), https://nakedse
curity.sophos.com.
14. Monica Anderson and Andrew Perri, “13% of Americans
Don’t Use the Internet. Who Are They?” Pew Research
(September 7, 2016); http://www.pewresearch.org.
15. Emily Glazer, “Virtual Fairs Offer Real Jobs,” Wall Street
Journal (October 31, 2011): B9.
16. Kazim Ladimeji, “Five Ways to Significantly Increase Recruit-
ing Effectiveness,” Recruiter (September 28, 2012), https://
www.recruiter.com.
17. Stephen V. Burks et al., “The Value of Hiring through
Employee Referrals,” The Quarterly Journal of Economics
(2015): qjv010; Jennifer Salopek, “Employee Referrals Remain
a Recruiter’s Best Friend,” Workforce Management (December
2010), http://www.workforce.com.
18. Sara Stockman and Greet Van Hoye, “Rewarding Employee
Referrals: Effects on Organizational Attractiveness,” 9th
Dutch HRM Network Conference, 2016; Jennifer Taylor
Arnold, “Employee Referrals at a Keystroke,” HRMagazine
51, no. 10 (October 2006): 82–88; VictoriaFurnes, “The New
Frontier,” Personnel Today (January 22, 2008): 13–16.
19. Greg Patrick Haudek, “A Longitudinal Test of the Attraction-
Selection-Attrition Model,” ETD Collection for Wayne State
University (January 1, 2001), Paper AAI3010091, http://digi
talcommons.wayne.edu.
20. Joshua Brustein, “Plantir Case Draws Attention to Discrimi-
natory Potential of Referral Programs,” Blooomerg (Septem-
ber 28, 2017), https://www.bloomberg.com.
21. Joanne B. Ciulla, “In Praise of Nepotism?” Business Ethics
Quarterly 15, no. 1 (January 2005): 153–61; Richard Reeve
and Gavin Sheridan, “Nepotism: Is It Back?” New Statesman
135 (September 29, 2003): 22–25.
22. Abbie J Shipp et al. “Gone Today but Here Tomorrow: Extend-
ing the Unfolding Model of Turnover to Consider Boomerang
Employees,” Personnel Psychology 67, no. 2 (2014): 421–462;
Melissa Korn, “Boomerang Employees,” Wall Street Journal
89624_ch05_hr_152-204.indd 196 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
197Chapter 5 Expanding the Talent Pool: Recruitment and Careers
Online (October 24, 2011), http://wjsonline.com; Madeline
Laurano, “Best Practices in Re-Recruiting Top Talent,” Bersin &
Associates (blog), (August 6, 2009), http://www.bersin.com.
23. Rachel Feintzeigm “CEOs Head Back to School,” Wall Street
Journal (February 2, 2017): B4.
24. Paul Benjamin Lowry and David Wilson, “Creating Agile
Organizations through IT,” The Journal of Strategic Infor-
mation Systems 25 no. 3 (2016): 211–26; Ed Frauenheim,
“Companies Focus Their Attention on Flexibility,” Workforce
Management (February 2011): 3–4.
25. Chris Pentilla, “Got It Covered: If You Can’t Afford to Offer
Employee Benefits on Your Own, Why Not Join Forces with
a PEO?” Entrepreneur 32, no. 2 (February 2004): 66–68; Bill
Leonard, “Small Firms Prepare for Aging Workforce,” HR
Magazine 53, no. 5 (May 2008): 32.
26. Robert Rodriguez, “Filling the HR Pipeline,” HR Magazine 49,
no. 9 (September 2004): 78–84; James W. Walker, “Perspec-
tives,” Human Resource Planning 25, no. 1 (2002): 12–14.
27. “Heading for the Fast Track: New Studies Examine Who Gets
Promoted and Why,” Knowledge@Wharton (August 10, 2005),
http//www. knowledge.wharton.upenn.edu.
28. Matthew Bidwell, “Paying More to Get Less: Specific Skills,
Matching, and the Effects of External Hiring versus Inter-
nal Promotion,” Administrative Science Quarterly (2011):
369–407.
29. Pamela Tate, “Calling on Career Development,” Talent
Management (January 7, 2014), http://www.talentmgt.com.
30. Pandey Smita and Mishra Sarika, “Analysis of the Pros and
Cons of Online Recruitment Methods in India,” International
Journal of Engineering and Management Sciences 6, no. 2
(2015): 65–67; The Pros and Cons of Online Recruiting,” HR
Focus 81 (April 2004): S2.
31. Matthew Bidwell and J.R. Keller, “Within or Without? How
Firms Combine Internal and External Labor Markets to Fill
Jobs,” Academy of Management Journal 57, no. 4 (2014):
1035–1055; Stanely Ragalevsky, “CEO Succession: Five Best
Practices for Internal Candidates,” Community Banker 17,
no. 2 (February 2008): 24–25.
32. “How to Implement an Effective Process for a New HR Man-
agement System,” HR Focus 82, no. 1 (January 2005): 3–4;
Connie Winkler, “Job Tryouts Go Virtual,” HR Magazine 51,
no. 9 (September 2006): 131–134.
33. Connie Winkler, “Job Tryouts Go Virtual.”
34. Colin Lee, “The Potential of Computer-aided Applicant Pre-
screening,” RSM Discovery-Management Knowledge 26, no. 2
(2016): 21–22; “Applicant Tracking System,” SearchCIO.com
(March 18, 2011), http://searchcio.techtarget.com.
35. BruceFecheyr-Lippens, Bill Schaninger, and Karen Tanner,
“Power to the New People Analytics,” McKinsey Quarterly 51,
no. 1 (2015): 61–63; John Sullivan, “How Google Is Using
People Analytics to Completely Reinvent HR,” TLNT (Febru-
ary 26, 2013), http://www.tlnt.com.
36. Sunil Bagai, “Google Brings Machine Learning to the Staff-
ing Industry,” B2C (November 18, 2016), http://www.business
2community.com.
37. “Dale Carnegie Training Global Leadership Study: USA
2016,” http://www.dalecarnegie.com.
38. Blake Landau, “The Uncontained Culture of the Container
Store,” Human Resources IQ (March 6, 2008), http://www
.human resourcesiq.com.
39. Jos Akkermans et al. “It’s All about CareerSKILLS,” Human
Resource Management 54, no. 4 (2015): 533–551; Peg
O’Herron and Peggy Simonsen, “Career Development Gets
a Charge at Sears Credit,” Personnel Journal 74, no. 5 (May
1995): 103–06; see also Jules Abend, “Behind the Scenes at:
Sears,” Bobbin 39, no. 11 (June 1998): 22–26; Shari Caudron,
“The De-Jobbing of America,” Industry Week 243, no. 16
(September 5, 1994): 30–36; Edward E. Lawler III, “From
Job-Based to Competency-Based Organizations,” Journal
of Organizational Behavior 15, no. 1 (January 1994): 3–15;
Douglas T. Hall, “Accelerate Executive Development—At
Your Peril!” Career Development International 4, no. 4
(1999): 237–239.
40. Erika Fry, “An Ex-Cop Comes to the Rescue,” Fortune (March
18, 2013): 38.
41. “Coworkers Get a Chance to Change Places,” Wall Street
Journal (February 21, 2012), http://online.wsj.com.
42. Hank Boyer, “Emerging Trends in Career Management,”
LinkedIn (February 2, 2016), https://www.linkedin.com.
43. Tate, “Calling on Career Development.”
44. Elaine Farndale et al., “Balancing Individual and Organiza-
tional Goals in Global Talent Management,” Journal of World
Business 49, no. 2 (2014): 204–214; “How a Talent Manage-
ment Plan Can Anchor Your Company’s Future,” HR Focus
81, no. 10 (October 2004): 7–10; “Heading for the Fast Track?
New Studies Examine Who Gets Promoted and Why,” Knowl-
edge@ Wharton (August 10, 2005), http://knowledge.whar
ton.upenn.edu.
45. Dona Dezube, “How a Workplace Mentoring Program Can
Benefit Your Company,” Tampa Bay Times (January 18,
2017), http://www.tampabay.com.
46. Leslie Kwoh, “Reverse Mentoring Cracks Workplace,” Wall
Street Journal (November 28, 2011): B7.
47. Tory Paez, “My Friend, My Mentor: The Benefits of Peer
Mentoring in the Workplace,” Catalyst (2016); Suzanne C.
de Janasz, Shery E. Sullivan, and Vicki Whiting, “Mentor
Networks and Career Success: Lessons for Turbulent Times,”
Academy of Management Executive 17, no. 4 (November
2003): 78–92; Kate Walsh and Judith Gordon, “Creating an
Individual Work Identity,” Human Resource Management
Review 18, no. 1 (March 2008): 46–61.
48. Jos Akkermans et al., “It’s All about CareerSKILLS,” Human
Resource Management 54 no. 4 (2015): 533–51; Larry Cam-
bron, “Career Development Pays,” Far Eastern Economic
Review 164, no. 42 (October 25, 2001): 83.
49. Kevin Jimmy, “A Dimensional Study on Employee Mentoring
and Coaching Management,” Scholedge International Journal
of Management & Development 2, no. 5 (2015): 64–67; Laura
M. Francis, “The Shifting Shape of Mentoring,” Training &
Development (September 2009), http://www.astd.org.
89624_ch05_hr_152-204.indd 197 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
198 Part 3 Developing Effectiveness in Human Resources
50. Sheryl Smolkin, “Sabbaticals Said to Reduce Burnout,
Improve Worker Loyalty,” Benefit News (May 17, 2016),
http://www.benefitnews.com.
51. Heidi Hartmann, Jeffrey Hayes, and Jennifer Clark, “How
Equal Pay for Working Women Would Reduce Poverty and
Grow the American Economy” (Washington, DC: Institute
for Women’s Policy Research, Briefing paper IWPR# C411,
January 10, 2014); Hope Yen, “Women Gain Ground against
Salary Disparity,” Fort Worth Star-Telegram (December 11,
2103): 6A.
52. Eunmi Chang, Hyun Chin, and Jieun Ye, “Organizational
Work-Family Culture and Working Mothers’ Affective Com-
mitment,” Human Resource Management 53, no. 5 (2014):
683–700; Alison Stein Wellner, “Welcoming Back Mom,”
HR Magazine 49, no. 6 (June 2004): 76–83; “Mothers’ Labor
Force Participation,” Monthly Labor Review 137, no. 5 (May
2004): 2; Brian Braiker and Anna Kuchment, “Just Do Not
Call Me Mr. Mom,” Newsweek 150, no. 15 (October 8, 2007):
52–55; Melissa Fletcher, “Working Moms Fully in Favor of
Going Part-Time,” Fort Worth Star-Telegram (August 30,
2007): E1, 9.
53. Courtney R. Masterson and Jenny M. Hoobler, “Care and
Career: A Family Identity-Based Typology of Dual-Earner
Couples,” Journal of Organizational Behavior 36, no. 1 (2015):
75–93; Janice Rosenberg, “Dual Career Couples Face Expen-
sive Choices,” Bankrate.com (July 2, 2007); Erin White, “Help
Increases for Partners of Relocated Workers,” Wall Street
Journal 251, no. 70 (March 25, 2008): D4.
54. “Recruiting Minorities,” Black Enterprise 35, no. 6 (January
2005): 53; Debbie Smith, “Building a New Diversity Road
Map,” Multichannel News 25, no. 38 (September 20, 2004): 82.
55. Yeung, “Finders Keepers,” 42–44; Janny Scott, “Nearly Half
of Black Men Found Jobless,” The New York Times (February
28, 2004), B1; Sylvia Ann Hewlett, Carolyn Buck Luce, and
Cornel West, “Leadership in Your Midst,” Harvard Business
Review 83, no. 11 (November 2005): 74–82.
56. Kathleen C. Brannen and Terrence M. Begley, “The Ameri-
cans with Disabilities Act: What It Means to Small Business
Owners,” Journal of Small Business Strategy 6, no. 1 (2015):
79–92; Joe Mullich, “Hiring without Limits,” Workforce
Management 83, no. 6 (June 1, 2004): 53–60; Julie Hotch-
kiss, “Growing Part-Time Employment among Workers
with Disabilities,” Economic Review 89, no. 3 (July 2004):
25–42; “Entry Point Interns Top 400 in Seventh Year,” Sci-
ence 301, no. 5637 (August 29, 2003): 1195; Kelly Butler,
“Ten Million Ways to Fill the Talent Gap,” Employee Benefit
News 21, no. 3 (March 2007): 22–24.
57. “Persons with a Disability: Labor Force Characteristics
Summary,” U.S. Bureau of Labor Statistics (June 21, 2016),
https://www.bls.gov; Sam Hananel, “New Rules Boost
Hiring of Vets, Disabled,” Associated Press (August 28,
2013), http://www.ap.org.
58. Nabanita Datta Gupta, Mona Larsen, and Lars Stage Thom-
sen, “Do Wage Subsidies for Disabled Workers Reduce
Their Nonemployment?” IZA Journal of Labor Policy 4
no. 1 (2015): 10; “As ADA Turns 20, Harris Interactive
Survey Finds Lifestyle and Economic Gaps Still Remain
between Americans with and without Disabilities,” Kessler
Foundation and National Organization on Disability (press
release), July 26, 2010.
59. Gregg Zoroya, “Wanted: Military Vets for Good Man-
agement Jobs,” USA Today (March 6, 2013), http://www
. usatoday.com.
60. Kimberly Curry Hall et al., “Connecting Veterans and
Employers” (2015); Jessica Miller-Merrell, “How to Recruit
Veterans,” GlassDoor (June 20, 2013), http://glassdoor.com.
61. Christopher Reynolds, “Boomers, Act II,” American Demo-
graphics 27, no. 8 (October 2004): 10–12; TheresaMinton-
Eversole, “Senate Forum Explores Ways to Keep Aging
Workforce Working,” HR Magazine 48, no. 10 (October 2003):
30; Carly Foster, “Rehiring Retirees among 2008’s Top Recruit-
ing Trends,” Employee Benefit News (January 8, 2008): 5.
89624_ch05_hr_152-204.indd 198 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
199
Personal Career Development
Because you are likely to spend more time working during your life than doing anything
else, it makes sense to plan your career. Although organizations can be a positive force
in the career development process, the primary responsibility for your career is yours.
A.1 Developing Personal Skills
and Competencies
Planning for a career involves more than simply acquiring specific job knowledge and
skills. You must also develop other skills to be successful as an employee. To succeed as
a manager, you must achieve still higher-level skills in the areas of communication, time
management, self-motivation, interpersonal relationships, and leadership. Highlights in
HRM 9 shows the competencies candidates “must have” today to successfully embark
on a career in any field.
A.2 Choosing a Career
People often have to do a lot of searching and changing of jobs before they find a career
that suits them. Counselors at colleges and universities, as well as those in private prac-
tice, help individuals evaluate their aptitudes, abilities, interests, and values as they relate
to selecting careers. Placement offices and continuing education centers also offer career
planning assistance.
Critical to your career planning is determining the long-term opportunities and sal-
aries in the occupational fields you are considering. Most job-related websites, including
Monster, CareerBuilder, Indeed, and LinkedIn contain free information about careers
and wages. Government sources include O*Net OnLine, America’s Career InfoNet, and
Career Outlook.
A.3 Self-Evaluation
Successful career development depends in part on an individual’s ability to conduct an
accurate self-evaluation. When you are doing a self-evaluation, you need to consider
factors that are personally significant to you. What activities do you like to do? Do you
Appendix
89624_ch05_hr_152-204.indd 199 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
“Must Have” Career Competencies
The following are “must have” career competencies accord-
ing to the National Association of Colleges and Employers.
�� Critical Thinking/Problem Solving: Exercise sound
reasoning to analyze issues, make decisions, and
overcome problems. The individual is able to obtain,
interpret, and use knowledge, facts, and data in
this process, and may demonstrate originality and
inventiveness.
�� Oral/Written Communications: Articulate thoughts
and ideas clearly and effectively in written and oral forms
to persons inside and outside of the organization. The
individual has public speaking skills; is able to express
ideas to others; and can write/edit memos, letters, and
complex technical reports clearly and effectively.
�� Teamwork/Collaboration: Build collaborative rela-
tionships with colleagues and customers representing
diverse cultures, races, ages, genders, religions, life-
styles, and viewpoints. The individual is able to work
within a team structure, and can negotiate and man-
age conflict.
�� Digital Technology: Leverage existing digital tech-
nologies ethically and efficiently to solve problems,
complete tasks, and accomplish goals. The individual
demonstrates effective adaptability to new and
emerging technologies.
�� Leadership: Leverage the strengths of others to
achieve common goals, and use interpersonal skills
to coach and develop others. The individual is able
to assess and manage his/her emotions and those of
others; use empathetic skills to guide and motivate;
and organize, prioritize, and delegate work.
�� Professionalism/Work Ethic: Demonstrate personal
accountability and effective work habits (e.g., punc-
tuality, working productively with others, and time
workload management), and understand the impact
of nonverbal communication on professional work
image. The individual demonstrates integrity and ethi-
cal behavior, acts responsibly with the interests of the
larger community in mind, and is able to learn from
his/her mistakes.
�� Career Management: Identify and articulate one’s
skills, strengths, knowledge, and experiences rel-
evant to the position desired and career goals, and
identify areas necessary for professional growth.
The individual is able to navigate and explore
job options, understands and can take the steps
necessary to pursue opportunities, and under-
stands how to self-advocate for opportunities in the
workplace.
�� Global/Intercultural Fluency: Value, respect, and
learn from diverse cultures, races, ages, genders,
sexual orientations, and religions. The individual
demonstrates openness, inclusiveness, sensitivity, and
the ability to interact respectfully with all people and
understand individuals’ differences.
Highlights in HRM9
like working alone or with other people? Do you like technical work or creative work?
Do you think you would like working in an office, or would you prefer another setting?
What have you always dreamed of doing?
A.3a Interest Inventories
Psychologists who specialize in career counseling typically administer a battery of tests.
The Strong Interest Inventory, developed by E. K. Strong Jr., was among the first of the
interest tests.1 Strong found people’s interests vary from occupation to occupation.
Strong’s assessment tool can help you learn the degree to which your interests corre-
spond with those of successful people in a wide range of occupations. Another inven-
tory that measures both interests and skills is the Campbell Interest and Skill Survey
200
89624_ch05_hr_152-204.indd 200 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
201Chapter 5 Expanding the Talent Pool: Recruitment and Careers
(CISS). Occupations are identified with advice about whether each of the occupations
should be “pursued,” “explored,” or “avoided” by the person who took the test. Both
tests can be taken online for a fee. About.com has a number of free self-assessments
as do other sites such as MyPlan.com, CareerPath, and LiveCareer. The O*Net Inter-
est Profiler is a free online interest assessment tool offered by the U.S. Department of
Labor.
Note, however, that people have taken interest and skills inventories that dissuaded
them from their chosen careers, pursued them anyway, and have become extremely suc-
cessful. If you find yourself in such a situation, do not be discouraged about your career
choice. Consider exploring the career further via internships, informational interviews,
and job shadowing (discussed next). Also, keep in mind that most people change careers
multiple times during their lives. If your first choice of a career is not what you hoped
it would be, you are always free to pursue another.
A.3b Informational Interviews, Job Shadowing,
and Internships
An informational interview is a conversation you have with someone in an occu-
pation that you are interested in. You invite the person to lunch or for coffee and
ask the individual what the job is really like—the good and the bad, qualifications
needed, the outlook for the career, and so forth. Most people are flattered to be
asked to provide career information and like to talk about what they do. How-
ever, make it clear that you are not soliciting the person for a job—just seeking
information.
Job shadowing is the process of observing someone in his or her own work envi-
ronment to better understand what he or she does. Generally this is done for a few
hours to a halfday. The website Virtualjobshadow.com provides videos of professionals
in approximately 100 different careers who explain their jobs. The site also contains
information about the earnings and outlook of professions, educational requirements,
and a search function that lists colleges that offer degrees for specific professions. People
who sign up for the site can also ask a professional questions they might have. As we
explained earlier in this chapter, internships can be a great way to experience a particular
field of work, as is volunteering. Check with your college advisor and career placement
center to find opportunities such as these.
Networking is a way to find out not only about different professions but different
employers you might be interested in working for. Some of the best places to network
include:
• Social media websites
• Your college alumni association or career office networking lists
• Your own extended family
• Your friends’ parents and other family members
• Your professors, advisors, coaches, tutors, and clergy
• Your former bosses and your friends’ and family members’ bosses
• Members of clubs, religious groups, and other organizations to which you belong
• All of the organizations near where you live or go to school2
informational interview
A conversation you have
with someone in a career
you are interested in
to gather information
about it.
job shadowing
The process of observing
someone in his or her
work environment to see
if the job is of interest
to you.
89624_ch05_hr_152-204.indd 201 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
202 Part 3 Developing Effectiveness in Human Resources
A.4 Choosing an Employer
Once you’ve made a career choice, even if only tentatively, the next major step is decid-
ing which employer you think you might want to work for and where. Numerous com-
pany directories containing information about privately and publicly held companies
are available. Hoovers.com is one online source, as is Vault.com. Corporate websites
are another source. Often under the “Investors” or “Media” tabs you can find press
releases issued by the companies in which you are interested. The releases often high-
light the initiatives companies are pursuing and the directions in which they are taking
their business. You can also sign up for Google Alerts to get news on companies you
are researching. Knowing something about an employer and industry can give you a
competitive edge in terms of getting an interview, landing a job, and negotiating a good
salary.
Once you have landed an interview, you have the opportunity to learn more about
an employer, including the type of people who work there, its corporate culture, benefits,
and so forth. If you are offered a job with the firm, a website such as Salary.com can help
you determine whether the firm’s offer is acceptable to you. CNNMoney.com’s cost of
living calculator, titled “How far will my salary go in another city?” can help you figure
out whether it is monetarily feasible to relocate for a job. Highlights in HRM 10 shows
the questions you should ask yourself before you accept a job offer with a particular
company.
A.5 Consider the Boundaryless Career
A generation ago, career success was synonymous with ascending a corporate hier-
archy over the course of a lifetime spent in a single firm. Today, however, individuals
pursuing boundaryless careers prefer to see themselves as self-directed “free agents”
who develop a portfolio of employment opportunities by proactively moving from
employer to employer, simultaneously developing and utilizing their marketable skills.
Employees pursuing boundaryless careers develop their human capital along dimen-
sions of industry and occupational knowledge. That is, they may be experts in com-
puter programming or have great insights into trends in the banking industry. In
contrast, individuals pursuing more traditional careers develop their knowledge in
ways specific to a given firm.
Alternately, you might want to become an entrepreneur. Being an entrepreneur—
one who starts, organizes, manages, and assumes responsibility for a business or other
enterprise—offers a personal challenge that many individuals prefer over being an
employee.3
A.6 Keeping Your Career in Perspective
For most people, work is a primary factor in the overall quality of their lives. Neverthe-
less, it is advisable to keep one’s career in perspective so that other important areas of
life are not neglected.
entrepreneur
One who starts,
organizes, manages, and
assumes responsibility
for a business or other
enterprise.
89624_ch05_hr_152-204.indd 202 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
A.6a Developing Off-the-Job Interests
How satisfied you are with your life is a product of many forces. When people complain
about not having a good work-life balance, often the problem is not too much work but
too little “life.”4 Some of the more important ingredients of “life” are physical health,
emotional well-being, harmonious interpersonal relationships, financial security, free-
dom from too much stress, and achievement of one’s goals. While a career can provide
some of the satisfaction that one needs, most people find it necessary to turn to interests
and activities outside their career. Off-the-job activities not only provide a respite from
daily work responsibilities but also offer satisfaction in areas unrelated to work. With
that said, it is up to you to decide what is important to you and how to spend your work
and off-the-job time. Your life is yours to live, and it is shorter than you think.
A.6b Balancing Marital and/or Family Life
As we have said, the one event that often poses the greatest threat to a family is reloca-
tion. Families often experience conflicts between the desire to advance the careers of
different parents and settling down in one place. If an employee is experiencing ambi-
guity and/or conflict with his or her work role, a low level of supervisory support, or
disappointment due to unfulfilled work expectations, this can affect his or her family
life as well. Other conflicts include work-life balance problems, such the need to spend
time with a person’s family members and to care for children, aging elders, or a spouse.
The different employment patterns in a family and dissimilarity in a couple’s career
orientations can take a toll on employees.
A number of employers are doing more today to help their employees cope with
these problems via alternative work options. Employees are also actively looking for
companies that have family-friendly policies. Working Mother magazine annually
publishes a survey of the 100 top companies in the United States for working parents.
Understand that “to be a success in the business world takes hard work, long hours,
persistent effort, and constant attention. To be a success in marriage takes hard work,
long hours, persistent effort, and constant attention. The problem is giving each its due
and not shortchanging the other.”5
Questions to Ask Yourself Before You Accept a Job
�� Have I been offered a fair salary? Is it comparable to
what other people in the same position are making
and work with my budget?
�� What is the benefit package and when am I eligible
for it?
�� Do I like my potential boss? Does he or she seem
like someone with whom I can have a good working
relationship?
�� Do I like my potential coworkers?
�� Will I be comfortable in this office environment?
�� Is the corporate culture in line with my own values,
attitudes, and goals?
�� Am I genuinely excited about the job?
�� Can I handle the commute to this job?
Sources: Liz Ryan, “Five Questions to Ask before You Accept a Job Offer,”
Forbes (January 1, 2015), https://www.forbes.com; Dawn Rosenberg
McKay, About.com, © 2007 About.com, Inc., a part of the New York Times
Company. All rights reserved.,
Highlights in HRM10
203
89624_ch05_hr_152-204.indd 203 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
204 Part 3 Developing Effectiveness in Human Resources
A.6c Planning for Retirement
Although you might be many years from retirement, it is never too early to plan for
it. In your 20s, you will want to begin a savings plan and start paying off your student
loans. As you get older, your goals will probably change. Perhaps you will want to buy a
home, and you will need money for a down payment. Regardless of what stage of your
life you are in, you should never neglect saving for your retirement throughout your
working years. A small sum of money saved early, compounded with interest over years,
can amount to millions of dollars. But if you wait until later, you will have to save a lot
of money for it to amount to as much.
Your employer can help you with some aspects of retirement planning by providing
you with information about tax-advantaged employer and individual savings plans. But
although employer-sponsored preretirement programs can be helpful (as we will see in
Chapter 11), planning for your own retirement is up to you. Do you want to travel or
live in another state or country? What kind of retirement does your spouse envision?
How much money will all of this require?
Your employer will not be able to answer these questions. However, by reading
about the subject of retirement and taking it seriously while you are young, you will be
able to answer these questions yourself. Planning early will help you set the stage for a
healthy and satisfying retirement as free as possible from worries—especially worries
that could have been avoided or minimized had you taken a few easy steps earlier in life.
entrepreneur informational interview job shadowing
Key Terms
Notes and References
1. E.K. Strong Jr., of Stanford University, was active in the mea-
surement of interests from the early 1920s until his death in
1963. Since then his work has been carried on by the staff of
the Measurement Research Center, University of Minnesota.
The Strong Interest Inventory is distributed by Consulting
Psychologists Press, Inc., to qualified people under an exclu-
sive license from the publisher, Stanford University Press.
2. Carol Carter, Keys to Business Communication (Upper Saddle
River, NJ: Pearson, 2012), Chapter 15.
3. Julie Rose, “The New Risk Takers,” Fortune Small Business
12, no. 2 (March 2002): 28–34; Jack Howard, “Balancing
Conflicts of Interest When Employing Spouses,” Employee
Responsibilities & Rights 20, no. 1 (March 2008): 29–43.
4. Jamie Eckle, “Randall Craig,” Computerworld 42, no. 26 (June
23, 2008): 36.
5. Maria Malik et al., “The Role of Work Life Balance in Job Sat-
isfaction and Job Benefit,” Journal of Applied Business Research
30, no. 6 (2014): 1627; Christopher Caggiano, “Married …
with Companies,” Inc. 17, no. 6 (May 1995): 68–76; Sue Shel-
lenbarger, “Sustaining a Marriage When Job Demands Seem
to Be Endless,” The Wall Street Journal (December 8, 1999):
B1; Johan A. Turner, “Work Options for Older Americans:
Employee Benefits for the Era of Living Longer,” Benefits
Quarterly 24, no. 3, (2008): 20–25.
89624_ch05_hr_152-204.indd 204 10/26/17 5:43 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
205
CHAPTER 6
Employee Selection
Learning Outcomes
After studying this chapter, you should be able to
Explain what the objectives of the employee selection
process are, its steps, and why the information gath-
ered during the process must be reliable and valid.
Describe the tools used to screen applicants, the
types of employment interviews and methods to
administer them, and the post-interview screening
tools firms use.
LO 1
LO 2
Compare the value of different types of employ-
ment tests and how their validity and reliability are
assessed.
Explain how firms evaluate the information they
collect on candidates and the decision strategies
they use to select employees.
LO 3
LO 4
D
im
itr
i O
tis
/G
et
ty
Im
ag
es
89624_ch06_hr_205-240.indd 205 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
206 Part 3 Developing Effectiveness in Human Resources
R
egardless of whether a company is large or small, it wants to hire the best and the
brightest employees. In addition, equal employment opportunity legislation, court
decisions, and the Uniform Guidelines (discussed in Chapter 3) make it critical for
the selection process to be done well: One group of researchers found that employers
lose approximately 90 percent of all hiring discrimination suits, and the average payout
per case is $1.5 million. The bottom line is good selection decisions make a difference.
So do bad ones.1
6.1 Overview of the Selection Process
Suppose you have started a small business, and a number of people have expressed
interest in working for you. Now you have to pick the right employees and avoid
the wrong ones. But how should this be done? And what happens if it is not done
correctly?
Selection is the process of choosing individuals who are qualified to fill exist-
ing or projected job openings. Figure 6.1 shows that the overall goal of selection
is to maximize “hits” and avoid “misses.” Hits are accurate predictions, and misses
are inaccurate ones. The cost of one type of miss would be the expense of hiring an
employee who turns out to be unsuccessful. The cost of the other type of miss is an
opportunity cost—someone who could have done a great job but did not get the
chance to do so.
selection
The process of choos-
ing individuals who are
qualified to fill existing or
projected job openings
J
o
b
P
e
rf
o
rm
a
n
c
e
MISS
Inaccurate prediction
(Person fails
on the job)
HIT
Accurate prediction
(Person would not
have succeeded
on the job)
High
H
ig
h
Low
L
o
w
MISS
Inaccurate prediction
(Person would
have succeeded
on the job)
HIT
Accurate prediction
(Person succeeds
on the job)
Predicted Success
The Goal of Selection: Maximize “Hits”Figure 6.1
Managers often under-
stand employees’ jobs
well. But how impor-
tant do you think it is
for them to understand
the job selection pro-
cess to make good
employment decisions?
LO 1
89624_ch06_hr_205-240.indd 206 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
207Chapter 6 Employee Selection
6.1a Begin with a Job Analysis
Job specifications help identify the competencies employees need for success—the
knowledge, skills, abilities, and other factors (KSAOs) that lead to superior performance.
Managers then use selection methods such as interviews, references, and preemploy-
ment tests to measure applicants’ KSAOs against the competencies required for the job.
Complete and clear job specifications help interviewers differentiate between qualified
and unqualified applicants and reduce the effect of an interviewer’s biases and preju-
dices. Applicants whose KSAOs are well matched to the jobs they are hired for are also
found to perform better and be more satisfied.2
Ordinarily, line managers are well acquainted with the skills, physical demands, and
other characteristics of the jobs in their organizations. Interviewers and members of the
HR department who participate in the selection process should become familiar with
the jobs and competencies needed to perform them as well. In addition to the require-
ments of the job, many organizations, including Morgan Stanley, Merck, Southwest
Airlines, and Starbucks, also try to hire individuals who match their values and cultures.
Recall from Chapter 2 that this process is referred to as values-based hiring. Zappos and
Salesforce.com are firms that give their employees the power to veto candidates they
don’t think will fit in with their cultures. In contrast, Facebook discourages hiring for
cultural fit because it can result in a lack of diversity.3
6.1b Steps in the Selection Process
The steps in the selection process and their sequence will vary, not only with the
organization, but also with the type of job being filled. Each step should be evaluated
in terms of its contribution to the process. The steps that typically make up the selec-
tion process are shown in Figure 6.2. Not all applicants will go through all of these
steps. Some will be rejected after the preliminary interview, others after taking tests,
and so on.
As Figure 6.2 shows, organizations gather information about applicants in a num-
ber of ways: via résumés, applications, interviews, tests, medical examinations, and
background and other checks. For an internal candidate not all of these steps may be
needed. The person might need to submit a résumé and go through an interview but
not necessarily a background investigation. However, some experts say it is a good
idea to treat internal and external candidates the same way because it helps ensure
no special treatment was given to any one candidate, and the best person for the job
is chosen.
6.1c Obtaining Reliable and Valid Information
Regardless of whether a position is filled internally or externally, the information gath-
ered about candidates must be reliable and valid. Reliability occurs when an interview,
test, or other selection procedure results in consistent information about a candidate
when repeated. A test that produces vastly different scores for individuals when admin-
istered to these same people a few days apart is unreliable. Likewise, unless an inter-
viewer judges the capabilities of an applicant to be the same today as yesterday, the
interviewer’s judgments are unreliable (i.e., unstable). Interrater reliability—agreement
among two or more raters—is one measure of a method’s consistency. Reliability also
refers to the extent to which two or more methods (e.g., interviews and tests) yield
similar results or are consistent with one another.
reliability
The degree to which an
interview, test, or other
selection procedures
result in consistent
information about a
candidate
89624_ch06_hr_205-240.indd 207 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
208 Part 3 Developing Effectiveness in Human Resources
Validity refers to the degree to which a test or selection procedure actually predicts
how well a person performs on the job. EEOC regulations require selection procedures
to be valid. Like a new medicine, a selection procedure must be validated before it is
used.4
6.2 Initial Screening
As an employer, would you want to interview all applicants who applied for one of your
jobs? Probably not. Doing so would be very time consuming, and because time is money,
it would be very expensive. Instead you would first want to screen out people who aren’t
qualified for the job. Next, let’s look at the tools you can use to do this.
6.2a Initial Screening Methods
Employers use many different pieces of information to try to determine if an applicant
will be successful on the job. The initial information tools for screening candidates
include résumés, cover letters, the Internet, phone screening, and application forms.
Cover Letters and Résumés
Résumés and cover letters continue to be used to assess applicants, especially for salaried
positions. Generally, these documents are reviewed first with an eye toward who can
be eliminated because they do not have the skills, abilities, education, or experience
validity
The degree to which a
test or selection proce-
dure actually measures
or predicts a person’s
ability to do a job
Note: Steps may vary. An applicant may be rejected after any step in the process.
Medical exam/drug test
Hiring decision
Preemployment tests
Reference and
background checks
Interviews
Completion of application
Submission
of resume
Many employers do
Internet searches to
turn up information
on job candidates. Can
you see any problem
related to doing so?
LO 2
Steps in the Selection ProcessFigure 6.2
89624_ch06_hr_205-240.indd 208 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
209Chapter 6 Employee Selection
outlined in the job description for the application. Did the applicant submit a thoughtful
cover letter? Or is he or she simply “spamming” companies with résumés? A lack of a
cover letter could be one way of eliminating applicants.
Was the cover letter well written? Well-written cover letters are important if a
requirement of the job is having good written communication skills, which is the case
for many jobs. For example, if a person who applied for an online customer service job
that includes writing chat messages to customers submitted a cover letter with numerous
typos, this could be grounds for passing over the person. Good writing skills might be
less important for a person who works as a Walmart greeter. Good verbal or interper-
sonal skills might suffice for this position.
Evaluating résumés can be a subjective process. Evaluators often have a difficult
time applying a set of consistent standards across multiple candidates or they consis-
tently apply standards that are irrelevant to success on the job. The fact that there is no
set format for writing résumés—that they vary from person to person—make them
difficult for people to screen as well. Bias can also enter the process. One research study
found that qualified applicants with black-sounding names had to send out 15 résumés
to get an interview, whereas candidates with white-sounding names only had to send
out 10.5
Developing clear evaluation criteria and a structured way to review résumés can
help make the process less subjective. Using an assessment grid like the one shown in
Figure 6.3 to take some of the guesswork out of the process. Job description criteria are
placed in the left-hand column of the grid, and candidates are then ranked based on a
scale as to whether the skills outlined in their résumés and cover letters match the job.
The totals for the candidates are then compared.
Rate each candidate on a scale of 1–5, with 5 being the highest rating.
Quantitative requirements Applicant A Applicant B Applicant C Applicant D
Business degree and/or MBA 5
Two years’ managerial experience 5
Ability to develop strategies 2
Ability to manage budgets 2
Qualitative requirements
Demonstrated interpersonal skills 4
Demonstrated coaching and develop-
ment skills
4
Ability to manage diverse teams and
work with other departments
4
Flexibility 3
Writing and verbal skills 4
Presentation skills 4
Level of integrity 4
Totals 41
Application/Résumé Assessment GridFigure 6.3
89624_ch06_hr_205-240.indd 209 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
210 Part 3 Developing Effectiveness in Human Resources
The downside of manually screening and assessing cover letters is that firm can get
hundreds of them for a single position. As you learned in Chapter 5, some companies
use software such as applicant tracking systems to screen résumés. For example, a hiring
manager or human resources representative will specify the educational and experience
levels a job requires and keywords that indicate experience. The software then scans the
résumés collected for that position, pulls a list of qualified candidates, and ranks them
according to how closely they match the job criteria. Some of the systems also prescreen
people who submit résumés by first asking them to take a short questionnaire to determine
how qualified they are. Résumé screening software isn’t perfect, though.6 Case Study 2 at
the end of the chapter takes a closer look at the pros and cons of résumé screening.
Internet Checks
According to a survey by the website CareerBuilder, about 60 percent of employers
research candidates using the Internet and social media sites, a practice that’s grown
exponentially.7 However, doing so can be problematic for a number of reasons:
1. It can be difficult to verify the authenticity of information posted online (i.e.,
did the candidate really post the information, or did someone else?) and easy to
confuse an applicant with someone else who has the same name, which could
result in a lawsuit. Some federal courts have ruled that employers must ensure the
information they collect online is verified by multiple sources.
2. Much of the information people post online isn’t job related. For example, recruit-
ers need to ensure they don’t screen out applicants because they discovered they
smoke or drink alcohol or engage in other activities that are not job related and
are, in fact, legal.8
3. Third, scouring the Internet and social media sites can inadvertently lead to dis-
crimination against members of protected classes.9
Another CareerBuilder survey found the biggest factor influencing an employer’s deci-
sion not to hire an applicant was provocative photos on social media, an issue that is
more likely to affect women than men. Religious discrimination can be a problem, too.
Researchers at Carnegie Mellon University found that applicants whose online profiles
indicated they were Muslim were less likely to get called for interviews than Christian
applicants.10
Companies are still in the process of developing policies related to social media and
Internet searches—that is, what information should be searched for and when, how it
should be documented, and by whom. To avoid discrimination, most HR experts advise
firms to not conduct any searches until after an applicant has been interviewed, and to
use the same search process for all candidates. Candidates should also be told during
their interviews that their public (not private) online profiles may be checked. Not all
applicants realize the checking occurs and could feel their privacy is violated without
such notice. At a minimum, advance notice gives candidates a chance to review and edit
their profiles or make them private, if they want.
Phone and Video Screening
Short phone interviews, or screening interviews, are often conducted, many times by
HR personnel, to narrow down the field and save managers time by eliminating can-
didates who are not likely to be hired. Video is being used to prescreen applicants as
well. To give employers a “preview” of themselves, some candidates post video résumés
video résumés
Short video clips that
highlight applicants’
qualifications beyond
what they can communi-
cate on their résumés
89624_ch06_hr_205-240.indd 210 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
211Chapter 6 Employee Selection
on YouTube and include links to them in their résumés and LinkedIn profiles.11 Video
résumés are short video clips that highlight applicants’ qualifications beyond what they
can communicate via their résumés and cover letters. The videos allow employers to
see how well they present themselves and decide whether they should be interviewed.
However, not all employers accept video resumes, and there is a concern they
can result in employers screening people based on their looks, sexes, or ethnicities
rather than their qualifications. To eliminate bias and recruit more diverse work-
forces, some companies actually strip out names and photos from résumés before
reviewing them. The recruiting software Hired does this automatically. Mehul Patel,
the CEO of Hired, says he can envision a day when virtual reality programs disguise
the appearances and voices of candidates, forcing recruiters and interviewers to focus
on their experience and skills.12
Application Forms
Application forms provide a fairly quick and systematic means of obtaining a variety
of information about the applicant, such as whether the applicant meets the minimum
requirements for experience, education, and so on. Even when applicants come armed
with elaborate résumés, they should complete application forms because it is a way to
gather consistent information about candidates. People, even those in high positions,
frequently exaggerate their qualifications on their résumés and omit unflattering infor-
mation. George O’Leary had to resign as head football coach at Notre Dame after falsely
claiming he had played football at New Hampshire and had a master’s degree from New
York University. Radio Shack CEO David Edmondson was forced to resign after claim-
ing on his résumé that he had earned college degrees in theology and psychology. Not
only had he not graduated, but the college he attended did not even offer a psychology
degree.13
Far fewer people lie on application forms relative to their résumés, a survey by
the job board CareerBuilder found. Most forms require an applicant to sign a state-
ment verifying the information on the form is true and granting the employer the
right to terminate the candidate’s employment if any of the information is found to
be false.14
However, the EEOC and the courts have found that many questions on applica-
tion forms discriminate against women and minorities and often are not job related.
Highlights in HRM 1 offers firms some guidelines about the types of questions that
should and should not be asked on an application form if a firm wants to stay out of
court.
Because of differences in state laws, organizations operating in more than one state
will find it difficult to develop one form that can be used nationally. For example, roughly
half of U.S. states and more than 150 cities have banned boxes applicants must check
about their criminal history because it can adversely affect minorities. Although it’s not
a federal mandate, the EEOC supports “banning the box” because it helps ex-offenders
reenter the workforce instead of being sidelined for life.15 When the boxes are present,
virtually anyone with even a minor conviction that may have occurred years ago will
get screened out.
That doesn’t mean a company can’t check a candidate’s criminal record later in the
hiring process for job-related reasons, though. If someone applying for a bookkeeper’s
job was recently convicted of embezzlement, a firm needs to be able to check that. Some
state laws require firms to delay asking about an applicant’s criminal history until after
an interview or provisional offer has been made to the candidate.
89624_ch06_hr_205-240.indd 211 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
6.3 Employment Interviews
Even though they are plagued by subjectivity and have shown to be poor predictors of
performance, employment interviews are almost always utilized in the selection process.
As Figure 6.4 shows, situational factors and candidate characteristics, such as a person’s
race and sex, can affect the perceptions of an interviewer and ultimately the interview’s
outcome. Nonetheless, firms continue to use interviews because (1) they are practical
when there are only a small number of applicants; (2) they serve other purposes, such
as public relations; and (3) interviewers trust their judgments when it comes to mak-
ing decisions about which candidates to choose. Even a limited understanding of the
variables in Figure 6.4 and periodic training have been shown to dramatically improve
the effectiveness of interviewers, however.16
What to Include—and Not to Include—on a Job Application Form
�� Application date. This helps managers know when
the form was completed and gives them an idea of
the time limit (e.g., one year) that the form should be
on file.
�� Educational background. Include blanks for high
school, college, and post-college attendance—but
not the dates attended, since that can be connected
with age.
�� Experience. Virtually any questions that focus on work
experience related to the job are permissible.
�� Arrests and criminal convictions. Don’t ask questions
about arrests. Questions about convictions and guilty
pleadings can be problematic if they are not related
to the job. Some states prohibit conviction ques-
tions, and the EEOC has indicated that they can have
a disparate impact on African American and Hispanic
workers.
�� Marital status and dependents. Don’t ask questions
about marital status or whether a person has depen-
dents or children.
�� National origin. Don’t ask questions about an appli-
cant’s national origin. However, it is acceptable to ask
whether the person is legally prevented from working
in the United States.
�� References. Most applications include blanks for the
names, addresses, and phone numbers of references
provided by applicants.
�� Disabilities. Don’t ask applicants questions designed
to elicit information about the existence, nature, or
severity of a disability. Inquiries about the ability of
the person to perform job functions, however, are
acceptable. Under the most recent guidelines issued
by the EEOC, employers can ask whether an applicant
needs reasonable accommodation—if the disability
is obvious or if the applicant has voluntarily disclosed
the disability.
Disclaimers
�� EEOC and at-will statements. State on the application
form that the firm does not discriminate and is an
EEOC employer. If your state allows it, the form should
state that all employees are hired at will. This gives
both employer and employee the right to end the
employment relationship at any time without reason.
�� Reference checks. Include language that gives the
hiring firm the right to contact the applicants’ previous
employers listed on the form and their résumés.
�� Employment testing. List any tests the applicant may
have to take and ask the applicant to sign the applica-
tion consenting to their use.
�� Information falsification. Notify applicants that any fal-
sification of the information they provide could result
in their disqualification or termination should they be
hired.
Highlights in HRM1
212
89624_ch06_hr_205-240.indd 212 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
213Chapter 6 Employee Selection
6.3a Types of Interviews
Interviewing methods differ in several ways. In highly structured interviews, the inter-
viewer determines the course that the interview will follow as each question is asked.
In a structured interview the applicant plays a larger role in determining the course
the discussion will take. Next, let’s look at the different types of interviews from the
least structured to the most structured. Note that different types of interview styles and
questions they utilize can be mixed and matched to yield a more complete picture of
candidates.
Nondirective Interviews
In a nondirective interview, the interviewer asks broad, open-ended questions—such
as “Tell me more about your experiences on your last job” —and allows the applicant
to talk freely with a minimum of interruption. The freedom afforded to the applicant
helps uncover information a candidate might not disclose during more structured
questioning. However, because the applicant determines the course of the interview,
the information gathered on one applicant can be vastly different from the informa-
tion gathered on another. Thus, the reliability and validity of these interviews are not
likely to be as great.
nondirective interview
An interview in which
the applicant is allowed
the maximum amount of
freedom in determining
the course of the discus-
sion, while the inter-
viewer carefully refrains
from influencing the
applicant’s remarks
APPLICANT
• KSAOs
• Education
• Experience
• Interests
• Perceptions
• Nonverbal cues
• Age, sex, race, etc.
CONTEXT
• Purpose of the
interview
• Laws and regulations
• Economic issues
• Physical settings
• Interview structure
INTERVIEWER(S)
• Experience/ training
• Age, sex, race, etc.
• Perceptions
• Nonverbal cues
• Goals
INTERVIEW
Process
Outcome
(Hiring Decision)
Variables in the Employment InterviewFigure 6.4
89624_ch06_hr_205-240.indd 213 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
214 Part 3 Developing Effectiveness in Human Resources
Structured Interviews
A structured interview has a set of standardized questions (based on a job analysis)
and an established set of answers against which applicant responses are rated. Thus,
it provides a more consistent basis for evaluating job candidates and predicting their
on-the-job performance. Weyerhaeuser Company, a forest products firm, has developed
a structured interviewing process. Candidates’ responses are rated on a five-point scale
relative to those answers, and the interviewers take notes for future reference and in
case of a legal challenge. Structured interviews are also less likely than nondirective
interviews to be attacked in court.17
Situational Interviews
A situational interview is a variation of a structured interview. A candidate is given
a hypothetical incident and asked how he or she would respond to it. The candidate’s
response is then evaluated relative to a preestablished standard. Many organizations
use situational interviews to select new college graduates because they may lack actual
situations in the workplace they can describe. Highlights in HRM 2 shows a sample
question from a situational interview used to select systems analysts at a chemical plant.
Behavioral Description Interviews
A behavioral description interview (BDI) focuses on actual work incidents in the inter-
viewee’s past and what the applicant did in response. To assess a potential manager’s
ability to handle a problem employee, an interviewer might ask, “Tell me about the last
time you disciplined an employee.”
A BDI assumes that past performance is the best predictor of future performance.
The format also may be somewhat less susceptible to applicant faking. In addition,
research indicates that the behavioral description interview is more effective than the
situational interview for hiring higher-level positions such as general managers and
executives.18
Sequential and Panel Interviews
A sequential interview is one in which a candidate is interviewed by multiple people,
one right after another. Sequential interviews are very common. They allow different
interviewers who have a vested interest in the candidate’s success to meet and evaluate
the person one-on-one. The interviewers later get together and compare their assess-
ments of the candidates.
In a panel interview, the candidate meets with a group of interviewers who each
take turns asking questions. After the interview, the interviewers pool their observa-
tions and their scores of the candidate. Because these interviews involve input from
multiple people, they tend to be more reliable and accepted as fair by candidates. If
the panels are composed of a diverse group of interviewers, there is some evidence
that hiring discrimination is minimized. 19 A panel interview also results in a shorter
decision-making period than if each applicant has to be interviewed by each inter-
viewer separately.
6.3b Methods for Administering Interviews
Most interviews take place in person. However, they can be administered in other ways
to broaden the talent pool and make interviewing easier, faster, and less costly.
structured interview
An interview in which a
set of standardized ques-
tions having an estab-
lished set of answers is
used
situational interview
An interview in which
an applicant is given a
hypothetical incident
and asked how he or she
would respond to it
behavioral description
interview (BDI)
An interview in which
an applicant is asked
questions about what he
or she actually did in a
given situation
sequential interview
A format in which a
candidate is interviewed
by multiple people, one
right after another
panel interview
An interview in which
a board of interviewers
questions and observes a
single candidate
89624_ch06_hr_205-240.indd 214 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Video and Phone Interviews
In an independent study of 500 HR managers at U.S. companies, 6 in 10 said their firms
often conduct video interviews via webcams and services such as Skype.20 Video inter-
views are convenient, low cost, and make it easier to interview people in different geo-
graphic areas, thereby expanding the talent pool. However, a study by DeGroote School
of Business at McMaster University in Ontario, Canada, found that candidates inter-
viewed via video came across as less likable. Some candidates may be more comfortable
on camera or using the technology than other candidates. The researchers suggested
video interviews
Interviews conducted
via videoconferencing or
over the Web
Sample Situational Interview Question
Question:
It is the night before your scheduled vacation. You are all packed and ready to go. Just before you get into bed, you receive
a call from the plant. A problem has arisen that only you can handle. You are asked to come in to take care of things. What
would you do in this situation?
Record Answer:
Scoring Guide:
Good: “I would go in to work and make certain that everything is OK. Then I would go on vacation.”
Good: “There are no problems that only I can handle. I would make certain that someone qualified was there to handle things.”
Fair: “I would try to find someone else to deal with the problem.”
Poor: “I would go on vacation.”
Highlights in HRM2
Video interviews make
it easy and cost-effec-
tive to interview can-
didates from different
geographic areas.LD
pr
od
/S
hu
tt
er
st
oc
k
215
89624_ch06_hr_205-240.indd 215 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
that at a minimum all candidates be treated the same in terms of the methods by which
they are interviewed.21
Phone interviews can be effective and actually help expand a company’s pool of talent
as well. Via phone, Pacific Islands Club, a resort in Guam, is able to recruit people from
around the world who want to work for the resort. After a successful phone interview,
Rebecca Cummings, a young graduate living in the United States, went to work for the
resort as an activities director. A face-to-face interview would have been cost prohibitive.22
Computer-Administered (Automated) Interviews
Nike, Safeway Cigna Insurance, and Pinkerton Security are among the many com-
panies that have used computer-assisted, or automated, interviews to gather infor-
mation as well as compare candidates. In a computer-administered (automated)
interview, the questions are administered to applicants via a computer. The inter-
views can be conducted at a firm’s facilities, using kiosks, via phone, or online.
A drawback of computer-administered interviews is that recruiters and manag-
ers can’t immediately ask candidates follow-up questions based on their answers.
Consequently, organizations use automated interviews mainly as a complement to,
rather than as a replacement for, live interviews. Automated interviews can also be
perceived as impersonal.23
When the grocer Giant Eagle needed to hire 1,000 employees, it utilized computer-
administered interviews at a Pittsburgh-area convention center. People who passed
them were then led to group interviews, where HR personnel worked with as many
as 20 applicants at a time. 24 Some firms use automated video interviewing services
like HireVue and VidCruiter.com. Applicants are invited to interview by email, given
passwords to log onto the sites, and questions to answer, which are then recorded by
their webcams and sent to the hiring firm. HireVue uses machine learning to analyze
the video, audio, and language metrics in the interviews and then rank candidates based
on previous top and bottom performers.
computer-administered
(automated) interview
Interviews in which the
questions are adminis-
tered to applicants via
computers. The inter-
views can be conducted
at a firm’s facilities, using
kiosks, online, or via
phone
Hiring Managers Reveal Mistakes Candidates Make during Job Interviews
The following are some memorable blunders that have
caused managers to not hire candidates.
�� “The candidate spoke no English, so he brought his
mother to translate for him during the interview. It
was for a customer-service position.”
�� “She kept telling me about her marital problems.”
�� “The candidate knew nothing about the job being
offered or our organization.”
�� “One guy ate a sandwich.”
�� “The candidate asked me to hurry up because she left
her child in the car.”
�� “He told me the only reason he was here was
because his mother wanted him to get a job.
He was 37.”
�� “One candidate did not wear shoes to the interview.”
�� “Body odor so bad I had to excuse myself midin-
terview and put lip gloss in my nose in order to get
through the rest.”
�� “One guy asked if we drug-tested and if we gave
advance notice (we are a drug treatment facility).”
Sources: CareerBuilder.com, Reader’s Digest.
Highlights in HRM3
216
89624_ch06_hr_205-240.indd 216 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
217Chapter 6 Employee Selection
6.3c Diversity Management: Could Your Questions
Get You into Legal Trouble?
What questions should be or should not be asked in an interview? The EEOC discour-
ages direct or indirect questions related to race, color, age, religion, sex, sexual orien-
tation, national origin, caregiver status, and other factors we talked about in Chapter
3. Some questions that interviewers once felt free to ask are now problematic. Asking
women (or men) if they are married or have children are examples. Several states have
fair employment practice laws that are more restrictive than federal legislation. In gen-
eral, if a question is job related, is asked of everyone, and does not discriminate against
a certain class of applicants, it is likely to be acceptable.
Employers should provide their interviewers with instructions on how to avoid
potentially discriminatory questions in their interviews. The examples of appropriate
and inappropriate questions shown in Highlights in HRM 4 can serve as guidelines for
application forms as well as preemployment interviews. Complete guidelines can be
developed from current information available from district and regional EEOC offices
and from state fair-employment practice offices.
6.4 Post-Interview Screening
After a candidate has been interviewed and appears to be a good potential new hire,
information about the person’s previous employment as well as other information
provided by the applicant is investigated.
6.4a Reference Checks
Organizations check the references of employees in a number of ways. Phone checks
are fast and make it easy for references to elaborate on a candidate. Prescient InfoTech,
a software development company in Fairfax, Virginia, first calls references to establish
contact and then emails them a two-page questionnaire, asking them to numerically
rank the applicant’s various job-related attributes. There is room at the end of the ques-
tionnaire for comments and recommendations.
The most reliable information usually comes from supervisors, who are in the best
position to report on an applicant’s work habits and performance. Verification related
to an applicant’s job title, duties, and pay level from a former employer’s HR office is
also very helpful. Highlights in HRM 5 includes a list of helpful questions to ask about
candidates when checking their references.25
Prior to checking a candidate’s references, the candidate must complete forms
permitting information to be solicited from former employers and other reference
sources. Even with these safeguards, organizations are often reluctant to put into writ-
ing an evaluation of a former employee for fear of being sued by the person. Many
employers will only verify former employees’ employment dates and positions. Even
firms that have refused to give an employee a recommendation have found themselves
sued. Other firms have been sued for knowing a former employee posed a danger to
others but failing to disclose it. Recognizing this predicament, a number of states have
enacted statutes offering protection from liability for employers who give references
in good faith.26
89624_ch06_hr_205-240.indd 217 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Appropriate and Inappropriate Interview Questions
APPROPRIATE QUESTIONS INAPPROPRIATE QUESTIONS
National origin What is your name?
Have you ever worked under a different name?
What is the origin of your name?
What is your ancestry?
Do you speak any foreign languages that may be perti-
nent to this job?
Age Are you over 18?
If hired, can you prove your age?
How old are you?
What is your date of birth?
Gender (Say nothing unless it involves a bona fide occupational
qualification.)
Are you a man or a woman?
Race (Say nothing.) What is your race?
Disabilities Do you have any disabilities that may inhibit your job
performance?
Are you willing to take a physical exam if the job
requires it?
Do you have any physical defects?
When was your last physical?
Height and weight (Not appropriate unless it is a bona fide occupational
qualification.)
How tall are you?
How much do you weigh?
Residence What is your address?
How long have you lived there?
What are the names and relationships of those
with whom you live?
Religion (You may inform a person of the required work schedule.) What church do you go to?
Military record Did you have any military education/experience perti-
nent to this job?
What type of discharge did you receive?
Education and
experience
Where did you go to school?
What is your prior work experience?
Is that a church-affiliated school?
When did you graduate?
Why did you leave?
What is your salary history?
Criminal record Have you ever been convicted of a crime?
(May not be appropriate unless not being convicted is a
bona fide occupational qualification.)
Have you ever been arrested?
Citizenship Do you have a legal right to work in the United States? Are you a U.S. citizen?
Marital/family
status
What is the name, address, and telephone number of a
person we may contact in case of an emergency?
Are you married, divorced, single?
Do you prefer Miss, Mrs., or Ms.?
Do you have any children? How old are they?
Highlights in HRM4
6.4b Background Checks
Background investigations, which require the consent of applicants, have become
standard procedure for many companies. Moreover, state courts have ruled that com-
panies can be held liable for negligent hiring if they fail to do adequate background
checks. Federal law requires comprehensive background checks for all child care pro-
viders, for example. It also prohibits convicted felons from engaging in financial and
negligent hiring
The failure of an orga-
nization to discover, via
due diligence, that an
employee it hired had
the propensity to do
harm to others
218
89624_ch06_hr_205-240.indd 218 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
security-oriented transactions. According to the Society of Human Resources Manage-
ment, companies are increasingly background-checking contingent workers given the
growth of the “gig” economy. Uber and Lyft drivers are examples. Some employers, but
certainly not all, rescreen their employees when they change jobs within their companies.
Among the checks are social security verification, past employment, education,
and certification and license verification. A number of other checks can be conducted
if they pertain to the job for which one is being hired. They include a driving-record
check (for jobs involving driving), a credit check (for money-handling jobs), a military
records check, and criminal records check.
To run background checks, firms must obtain clear and conspicuous written con-
sent from applicants beforehand (usually on a separate form). Applicants must also be
told if the information uncovered is going to be used to deny their employment; they
must be given a copy of the report(s), the right to dispute it (them), and time to do so.
This is important because it’s not uncommon for background checks to be inaccurate
or even include information about the wrong applicant.27 To comply with various laws,
many companies hire firms that specialize in background checks to conduct them for
them or use the Department of Homeland Security’s free e-Verify system.
Criminal Records Checks
According to the Society of Human Resources Management, most major firms check
candidates’ backgrounds for criminal records. However, as we have indicated, the EEOC
has found that they can have a disparate impact on black and Hispanic workers, who,
relative to other groups of people, have higher conviction and incarceration rates.
If criminal histories are taken into account, employers must also consider the nature
of the job. For example, it may make sense to disqualify an applicant convicted of theft
for a clerk’s position, but not drunk driving. Even if the person were convicted of theft,
Sample Reference-Checking Questions
�� What is your relationship to the applicant? Are you the
person’s supervisor, peer, or subordinate?
�� What were the start and end dates of the applicant’s
employment?
�� What were the applicant’s title and responsibilities?
�� In what areas did the applicant excel?
�� What unique, or exceptional, talents does the appli-
cant have?
�� In what areas did the applicant need improvement?
�� What was the applicant’s biggest accomplishment at
your organization?
�� How well does the applicant communicate with and
get along with others?
�� How does the applicant deal with conflicts and stress?
�� To what extent is the applicant driven to succeed?
�� Was the applicant punctual?
�� For what reason did the applicant leave your
organization?
�� Would you rehire the applicant?
�� Are there any serious problems with the applicant we
should know about?
�� Is there any additional information about the appli-
cant you would like to share with me?
Sources: “Four Reasons Why You Should Always Check References,”
Human Resources Today (December 29, 2015), http://www.humanre-
sourcestoday.com; Alison Doyle, “Reference Check Questions,” About.
com (March 24, 2011), http://www.about.com; Carolyn Hirschman, “The
Whole Truth,” HRMagazine 45, no. 6 (June 2000): 86–72.
Highlights in HRM5
219
89624_ch06_hr_205-240.indd 219 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
220 Part 3 Developing Effectiveness in Human Resources
the EEOC requires the employer to consider mitigating factors such as the individual’s
age at the time of conviction, how long ago it occurred, whether the person has been
successfully rehabilitated, or has worked successfully in the same type of work following
the conviction.28
Credit Checks
Credit checks used to be conducted primarily to screen applicants who handled money,
such as banking employees. However, the number of companies conducting credit check
tests has risen—even though the evidence is mixed as to whether there is a clear cor-
relation between good employees and good credit scores.29 Too often credit checks are
used when they are not really needed, and candidates tend to view them as invasive and
question their job relatedness. Eight of ten companies surveyed by the Society of Human
Resources have gone ahead and hired job candidates with negative credit scores.30
Credit checks can also adversely affect qualified applicants who have been unem-
ployed for long periods of time or faced bankruptcies or home foreclosures—problems
that became more common among workers during the last recession. The EEOC has
also warned employers that credit checks can have an adverse impact on some protected
groups. For reasons such as these, a number of states, including Washington, California,
Connecticut, Maryland, Illinois, and Hawaii, prohibit credit checks; many other states
and U.S. lawmakers are considering similar action.
6.5 Preemployment Tests
What if you have narrowed down the list of candidates you’re considering hiring but
still can’t decide among them? Is there a test you could use that would tell you which
ones would perform better than the others? That’s what people have wondered for years,
hence the development of preemployment tests.
A preemployment test is an objective and standardized device used to gauge a
person’s KSAOs relative to other individuals.31 Not all companies conduct preemploy-
ment tests, but many do. One of the drawbacks of preemployment tests is that they
create the potential for legal challenges by applicants claiming the tests they took were
discriminatory. FedEx used to administer a basic skills test for the purposes of promoting
employees, but it dropped the test following a lawsuit that alleged it was discriminatory.
The cost, time, and ease of administering and scoring the tests must also be consid-
ered. For some jobs, the costs of testing may outweigh the benefits. There is also some
evidence that the more tests that are required, the higher the likelihood of a lawsuit,
and the more important it is for companies to demonstrate their reliability and validity
in their procedures.32
It is a test developer’s responsibility to ensure it meets accepted standards of validity
and reliability.33 The data about a test’s reliability are ordinarily presented in the manual
for the test. However, a firm should not just take a developer’s word that its tests are
reliable and valid. One source of information about commercially available tests—the
Mental Measurements Yearbook (MMY)—contains descriptive information plus critical
reviews by experts of various types of tests. The firm should also check to be sure the test
was professionally validated in compliance with the Uniform Guidelines on Employee
Selection Procedures, that it has been vetted for disparate impact, and that it has not
been contested in court or by the EEOC.
preemployment test
An objective and stan-
dardized test used to
gauge a person’s knowl-
edge, skills, abilities, and
other characteristics
(KSAOs) relative to other
individuals
Personality tests, like
other tests used in
employee selection,
have been under attack
for several decades.
Why do you think
some applicants find
personality tests objec-
tionable? On what
basis could their use for
selection purposes be
justified?
LO 3
89624_ch06_hr_205-240.indd 220 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
221Chapter 6 Employee Selection
Keep in mind that even if a test is reliable and valid for positions in other organiza-
tions, it might not be reliable and valid for the positions in your organization because
they may be somewhat different. Managers therefore need to do a thorough job analy-
sis to determine the skills candidates actually need to be tested for and eliminate any
unnecessary or duplicate tests.
6.5a Types of Tests
We will talk more about what the EEOC demands as far as the validity of preemploy-
ment tests goes later in this section. First let’s look at the different types of preemploy-
ment tests.
Job Knowledge Tests
Job knowledge tests are achievement tests designed to measure people’s level of under-
standing, or knowledge, about a particular job. The Uniform CPA Examination used
to license certified public accountants is one such test. Most civil service examinations,
for example, are used to determine whether an applicant possesses the information and
understanding to do the job without further training.34 Job knowledge tests are also
used by the U.S. Armed Forces.
How do small businesses go about selecting employ-
ees to work at their firms? Not very systematically, some
human resources professionals and researchers say. “All
too often, employees are relatives or friends that lack
the basic skills to augment the organization’s ability to
be profitable/successful,” says an executive who coaches
other businesspeople to help them achieve superior
results.
Sometimes a small firm will make poor selections
because it is anxious to get someone hired when the
firm is short staffed. But if the wrong person is hired,
that only compounds the problem. Another pitfall is
being too confident about the right “type” of person for
the job, which can cause hiring managers to make snap
judgments about candidates based on casual conversa-
tions, before examining the candidates’ qualifications
for the job. Properly vetting candidates not only can
lead to better employees, but can also help a company
defend itself should it be accused of discriminatory
practices. And at least one research study has found
that the use of formal recruitment and selection tech-
niques gives employees a positive perception of their
Small Business Application
firms and their bosses and results in greater loyalty to
their organizations.
Adding structure to the selection process doesn’t
have to be difficult. You can map out the qualifica-
tions for the job on a form similar to the one shown in
Figure 6.3. Then develop a series of open-ended and situ-
ational questions designed to elicit information about the
candidate’s job knowledge, conscientiousness, interest in
the work, and how well his or her personality squares with
the job.
Once you have the questions drafted, ask the same
questions of all candidates. Last, embezzlement and theft
can be particularly devastating to small businesses, so do
run background checks on employees and check their ref-
erences, even if you know the candidates. You might be
surprised by what you find.
Sources: Robert N. Lussier and Joel Corman, “There Are Few Differ-
ences between Successful and Failed Small Businesses,” Journal of
Small Business Strategy 6, no. 1 (2015): 21–34; “Selecting the Best,”
Elitefts (November 9, 2010), http://www.elitefts.com/; Barbara Reda
and Linda Dyer, “Finding Employees and Keeping Them: Predicting
Loyalty in the Small Business,” Journal of Small Business & Entrepreneur-
ship 23, no. 3 (2010): 445.
Adding Structure to the Employee Selection Process in Small Businesses
89624_ch06_hr_205-240.indd 221 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
222 Part 3 Developing Effectiveness in Human Resources
Work Sample Tests
Work sample tests, or job sample tests, require the applicant to perform tasks that are
actually a part of the work required on the job. Examples include a map-reading test
for traffic control officers, a lathe test for machine operators, and a test to determine
if an administrative assistant understands Microsoft Office. Computer simulations are
sometimes used, particularly when testing a candidate might prove dangerous. Anyone
who wants to become a pilot in the armed services and fly multimillion-dollar jets, for
example, must undergo this type of testing. (Case Study 1 looks at different simulations
firms are using.) Like job knowledge tests, when work sample tests are constructed from
a carefully developed outline that experts agree includes the major job functions, the
tests are considered effective, reliable, valid, and fair.35
Assessment Center Tests
An assessment center test is used to evaluate candidates, often as a group, as they par-
ticipate in a series of situations that resemble what they might be called on to handle
on the job. Some assessment centers, which are where the tests are professionally con-
ducted, take a “day in the life” approach. Candidates “report to work” at the assessment
center and receive the usual steady diet of emails and other interruptions, meet with
various role-players who play different characters, and handle manufactured events
while they are observed and recorded.36 Because they are costly, assessment centers are
often used to select managers and executives.
Cognitive Ability Tests
Cognitive ability tests measure mental capabilities such as general intelligence, verbal fluency,
numerical ability, and reasoning ability. The Scholastic Aptitude Test (SAT) and Graduate
Management Aptitude Test (GMAT) are examples. The Wonderlic Personnel Test is a cog-
nitive ability test also used by many organizations, including the National Football League.
Figure 6.5 shows some items that could be used to measure different cognitive abilities.
Although cognitive ability tests can be developed to measure very specialized areas
such as reading comprehension and spatial relations, many experts believe that the validity
assessment center test
A process by which man-
agerial candidates are
evaluated at an assess-
ment center as they
participate in a series of
situations that resemble
what they might need to
handle on the job
With jobs that require
specific skills, it is quite
common for employ-
ers to ask candidates
to demonstrate their
abilities through work
sample tests.
fiz
ke
s/
Sh
ut
te
rs
to
ck
89624_ch06_hr_205-240.indd 222 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
223Chapter 6 Employee Selection
Examples of Questions on a Cognitive Ability TestFigure 6.5
of cognitive ability tests simply reflects their connection to general intelligence. Past stud-
ies of general intelligence, such as IQ, have shown to be good predictors of performance
across a wide variety of jobs. However, newer studies suggest that this may be more of a
perception in Western cultures, and that choosing people with the highest IQs might not
always lead to hiring the best candidates.37 Cognitive ability tests also have to be job related
and carefully validated. Ford Motor Co. settled a $1.6 million case with the EEOC for hav-
ing implemented a cognitive ability test that had a disparate impact on black applicants.
Biographical Data (Biodata) Tests
Biographical data tests (biodata tests) collect biographical information about candidates
who has shown to correlate with on-the-job success. Candidates are questioned about
events and behaviors that reflect attitudes, experiences, interests, skills, and abilities. Typi-
cally the questions relate to events that have occurred in a person’s life and ask what the
person typically did in those situations. The idea is that past behavior is the best predictor of
future behavior. For example, a question on a biodata test might ask, “How do you handle
stressful situations?” or “How often have you put aside tasks to complete another, more
difficult assignment?” Test takers choose one of several predetermined alternatives to best
match their past behavior and experiences. Because it costs about $100,000 to train an air-
traffic controller, in 2014, the Federal Aviation Administration (FAA) instituted a biodata
test to identify people who can handle the high-stress, high-stakes work without quitting.38
A response to a single biodata question is of little value. Rather, it is the pattern of
responses across several different situations that give biographical data the power to pre-
dict future behavior on the job. Although biodata tests have been found to be good predic-
tors of on-the-job success, they are sophisticated and must be professionally developed and
validated. Another drawback is that the questions might not appear to be clearly related
to the job being tested for, so applicants might question the test’s validity. So many people
with aviation experience failed the FAA test that it came under fire. The personal nature
of biodata questions can also lead applicants to believe the tests invade their privacy.39
Verbal 1. What is the meaning of the word “surreptitious”?
a. covert c. lively
b. winding d. sweet
Quantitative 2. Divide 50 by 0.5 and add 5. What is the result?
a. 25 c. 95
b. 30 d. 105
Reasoning 3. __________ is to boat as snow is to _________.
a. Sail, ski c. Water, ski
b. Water, winter d. Engine, water
Mechanical 4. If gear A and gear C are both turning counterclockwise, what is
happening to gear B?
a. It is turning counterclockwise. c. It remains stationary.
b. It is turning clockwise. d. The whole system will jam.
Answers: 1. a, 2. d, 3. c, 4. b
89624_ch06_hr_205-240.indd 223 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
224 Part 3 Developing Effectiveness in Human Resources
Personality and Interest Inventories
During the 1990s, testing by the U.S. Army found that cognitive ability tests were the
best predictors of how well soldiers were able to acquire job knowledge and, ultimately,
of their technical proficiencies. But personality tests were the better predictors of their
motivation, such as their leadership efforts and propensity to adhere to rules. Years of
research show that five dimensions can summarize personality traits. The “Big Five”
factors are as follows:
1. Extroversion—the degree to which someone is talkative, sociable, active, aggres-
sive, and excitable.
2. Agreeableness—the degree to which someone is trusting, amiable, generous, toler-
ant, honest, cooperative, and flexible.
3. Conscientiousness—the degree to which someone is dependable and organized and
perseveres in tasks.
4. Neuroticism—the degree to which someone is secure, calm, independent, and
autonomous.
5. Openness to experience—the degree to which someone is intellectual, philosophical,
insightful, creative, artistic, and curious.40
Well-known personality tests include the California Psychological Inventory (CPI);
the 180-question Caliper test, whose users range from FedEx to the Chicago Cubs; and
the Predictive Index, which complies with EEOC guidelines.
Although there is some evidence to show that personality tests can help
predict how well a person will perform on the job, historically the connection
between the two has been quite low. There is also some concern that the tests
can easily be “faked” by applicants trying to give hiring firms the answers they
think they want to hear. Personality tests can also be problematic if they inadver-
tently discriminate against individuals who would otherwise perform effectively,
which is why several states severely restrict their usage.41 In addition, personal-
ity tests that reveal anything about a person’s mental impairment or a psycho-
logical condition, even inadvertently, violate the Americans with Disabilities Act.
Rather than being used to make hiring decisions, personality and interest inventories
may be most useful for helping people with their occupational selection and career
planning.
Polygraph Tests
The polygraph, or lie detector, is a device that measures the changes in breathing,
blood pressure, and pulse of a person who is being questioned. Questions typically
cover such items as whether a person uses drugs, has stolen from an employer, or
has committed a serious undetected crime. The growing swell of objections to the
use of polygraphs in employment situations culminated in the passage of the fed-
eral Employee Polygraph Protection Act of 1988. The act generally prohibits using lie
detectors for prehire screening and random testing of a firm’s current employees and
applies to all private employers except pharmaceutical companies and security service
firms.42 Federal, state, and local governments can use polygraphs to screen applicants,
but normally they are used only for law-enforcement personnel and high-security
CIA- and FBI-type jobs.
89624_ch06_hr_205-240.indd 224 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
225Chapter 6 Employee Selection
Honesty and Integrity Tests
In response to the restrictions imposed by the Employee Polygraph Protection Act,
employers have begun using honesty and integrity tests. The questions that might
appear on an integrity test include the following:
• How likely would you be to report a coworker you discovered was stealing office
supplies?
• Should an employee who lied on the application be fired if the falsification is
uncovered?
Kansas-based Payless ShoeSource used an honesty test that reduced employee theft by
20 percent, the company claims.43
Although some studies have shown that honesty tests are valid for predicting job
performance as well as a wide range of disruptive behaviors such as theft, disciplinary
problems, and absenteeism, other studies have questioned their validity.44 It is possible
that the tests “work” not because they predict behavior but because they deter less-than-
honest applicants from joining a company. Evolv, an assessment company, is one of a
number of firms attempting to improve the accuracy of honesty and integrity tests by
using big data and other analysis technology in the process.45
Physical Ability Tests
For some jobs, employers need to assess a person’s physical abilities. Particularly for
demanding and potentially dangerous jobs such as those held by firefighters and police
officers, physical abilities such as strength and endurance tend to be good predictors
not only of performance but also of accidents and injuries.46
Source: http://www.marinecorpstimes.com/article/20140127/NEWS/301270047/
Marine-Corps-struggles-challenge-making-women-do-pullups
Like other organiza-
tions, the Marine Corp
has had to ensure its
physical abilities tests
are job related.
89624_ch06_hr_205-240.indd 225 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
226 Part 3 Developing Effectiveness in Human Resources
Physical ability tests must be used cautiously as well. In the past, requirements for
physical characteristics such as strength, agility, height, and weight were often deter-
mined by an employer’s unvalidated notion of what should be required. This often
put women and disabled job applicants at a disadvantage. After a Dial Corp. plant in
Fort Madison, Iowa, began using a strength test, the company was sued. Prior to the
test’s use, nearly 50 percent of the people hired at the plant were women. Once the
test was implemented, the percentage dropped dramatically. An appeals court ruled
the test had a disparate impact on women because, although injuries at the plant
fell, they only did so after the company instituted new safety rules, which happened
years before the strength test was implemented.47 Because of situations such as these,
physical requirements have been questioned and modified so as to represent typical
job demands.
Medical Examinations
A medical examination is one of the later steps in the selection process because the law
prohibits it being administered to an applicant before he or she has been made a con-
ditional employment offer and agreed to undergo it. A medical examination can only
be given to ensure that the health of an applicant is fit for duty.48 The Americans with
Disabilities Act limits the types of medical inquiries and examinations employers may
use and states that all exams must be directly related to the requirements of the job.
Furthermore, the ADA prohibits companies from screening out a prospective employee
because he or she has an elevated risk of on-the-job injury or a medical condition that
could be aggravated because of job demands.
Drug Tests
In the United Sates, not only do employers have the right to use drug tests to screen
candidates who use illegal substances, but roughly half of them do. Different states have
different laws regarding drug testing. In some states, drug tests can only be given to
candidates after they have been extended job offers conditional upon their passing the
tests. A candidate can refuse to take the test, but that is tantamount to turning down
the job.49 As with other background checks, candidates must be given the results of the
tests and the right to dispute them.
However, some studies have failed to show that drug testing makes the workplace
safer or leads to improvements in the performance of workers. Relatively few applicants
test positive for drugs (about 4 percent). In fact, legal drugs such as alcohol and pre-
scription painkillers such as opioids appear to create more problems than illegal drugs
in the workplace.50 Marijuana is legal for recreational use in a number of states, which
complicates the use of what drugs can be tested for, and it can be medically prescribed.
It is also not uncommon for “false positives” to occur—that is, for a test to mistakenly
show someone has used illegal drugs when he or she hasn’t. Over-the-counter drugs
can lead to false positives.
For reasons such as these and because candidates view them as invasive, some com-
panies no longer conduct drug tests on job candidates. Or should a candidate fail a drug
test, they allow the candidate to retake it to ensure its accuracy. Other companies say
drug testing has saved them thousands of dollars in workers’ compensation and other
costs. The weight of the evidence suggests that testing is most appropriate for high-risk
and safety-critical positions and those required by state and federal laws.
The U.S. Department of Labor suggests that if a company wants to implement
drug testing, it seek legal advice and follow the testing standards federal agencies
89624_ch06_hr_205-240.indd 226 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
227Chapter 6 Employee Selection
follow—namely, the procedures established by the Substance Abuse and Mental Health
Services Administration (SAMHSA). Of course, not testing job candidates for drugs
doesn’t mean firms can’t continue to have drug-free workplace policies requiring
employees to come to work sober.
6.5b Determining the Validity of Tests
The Uniform Guidelines (see Chapter 3) recognizes and accepts different approaches to
validating tests (and selection procedures in general): criterion-related validity, content
validity, and construct validity.
Criterion-Related Validity
The extent to which a test significantly correlates with important work behaviors is
known as criterion-related validity. How well a person performs on a test, for example,
is compared with his or her actual production records, supervisor’s ratings, training
outcomes, and other measures of on-the-job success. Sales figures are commonly used
for sales jobs. In production jobs, the quantity and quality of output are likely to be the
best indicators of job success.
There are two types of criterion-related validity: concurrent and predictive.
Concurrent validity is the extent to which the test scores of a firm’s current employees
correlate with their job performance. To test concurrent validity, a firm obtains data
from its current employees at about the same time that test scores (or other predictor
information) are obtained. For example, a supervisor would rate a group of clerical
employees on the quantity and quality of their performance. These employees would
then be given a clerical aptitude test, and their scores would be compared with the
supervisor’s ratings to determine the degree of relationship between them. Establishing
the concurrent validity of a test prior to administering it to candidates can be quick
and convenient because the firm has employees readily available to take the test. The
drawback of this approach is that current employees have a great deal more experience,
so their scores may not be comparable to candidates’ scores.
Predictive validity involves testing candidates and obtaining criterion data after the
individuals have been hired and on the job for a period of time. For example, candidates
would be given clerical aptitude tests, which would then be filed away for later study.
After the individuals have been on the job for several months, supervisors (who should
not know the employees’ test scores) are asked to rate them on the quality and quantity
of their performance. The test scores are then compared with the supervisors’ ratings.
If the scores and supervisor’s ratings are in line with one another, the test has predictive
validity and can be used to test subsequent job candidates. Obviously this approach to
testing will take longer to develop than the concurrent approach.
Regardless of the method used, cross-validation is essential. Cross-validation is a
process in which a test or battery of tests is administered to a different sample of people
(drawn from the same population) for the purpose of verifying the results obtained from
the original validation study. One way to measure a test’s validity is to administer it to an
organization’s current employees and create a benchmark score to which candidates’ scores
can be compared. This is what FedEx has agreed to do before administering any new tests.
Correlation methods are generally used to determine the relationship between pre-
dictor information such as test scores and criterion data. The correlation scatterplots
in Figure 6.6 illustrate the difference between a selection test with zero validity (A) and
one with high validity (B). Each dot represents a person.
criterion-related
validity
The extent to which a
selection tool predicts,
or significantly correlates
with, important work
behaviors
concurrent validity
The extent to which the
test scores of current
employees correlate with
their job performance
predictive validity
The extent to which
candidates’test scores
match criterion data
obtained from them after
they have been hired and
on the job for a period
of time
cross-validation
Verifying the results
obtained from a valida-
tion study by administer-
ing a test or test battery
to a different sample
(drawn from the same
population)
89624_ch06_hr_205-240.indd 227 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
228 Part 3 Developing Effectiveness in Human Resources
Note that in scatterplot A, there is no relationship between test scores and success
on the job; in other words, the validity is zero. In scatterplot B, those who score low
on the test tend to have low success on the job, whereas those who score high on the
test tend to have high success on the job, indicating high validity. In actual practice, we
would apply a statistical formula to the data to obtain a coefficient of correlation referred
to as a validity coefficient. Correlation coefficients range from 0.00, denoting a complete
absence of relationship, to 11.00 and to –1.00, indicating a perfect positive and perfect
negative relationship, respectively.
Combining two or more procedures such as an interview or a test can improve the
validity of a firm’s selection process. The higher the overall validity is, the greater the
chances are of hiring individuals who will be the better performers.
Content Validity
When it is not feasible to use the criterion-related approach, often because of limited
samples of employees or applicants are available for testing, the content method is used.
Content validity is assumed to exist when a test adequately samples the knowledge
and skills a person needs to do a particular job. The closer the content of the selection
instrument is to actual work samples or behaviors, the greater its content validity is.
For example, a test for accountants has high content validity when it requires appli-
cants to solve accounting problems representative of those found on the job. Asking an
accountant to lift a 60-pound box, however, is a selection procedure that has content
validity only if the job description indicates that accountants must be able to meet this
requirement.
Content validity is the most direct and least complicated type of validity to
assess. It is generally used to evaluate the job knowledge and skill tests. Unlike the
criterion-related method, content validity is not expressed as a correlation. Instead,
an index is computed (from the evaluations of an expert panel) that indicates the
content validity
The extent to which a
selection instrument,
such as a test, adequately
samples the knowledge
and skills needed to do a
particular job
A B
Low High HighScore
S
u
c
c
e
s
s
o
n
t
h
e
J
o
b
S
u
c
c
e
s
s
o
n
t
h
e
J
o
b
ScoreLow
Low Low
High High
Coefficient of correlation .00 Coefficient of correlation .75
Correlation ScatterplotsFigure 6.6
89624_ch06_hr_205-240.indd 228 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
229Chapter 6 Employee Selection
relationship between the content of the test items and a person’s performance on the
job.51 Although content validity does have its limitations, it has made a positive con-
tribution to job analysis procedures and the role expert judgments play in sampling
and scoring procedures.
Construct Validity
The extent to which a test measures a theoretical construct, or trait, is known as
construct validity. Typical constructs are intelligence, mechanical comprehension, and
anxiety. They are in effect broad, general categories of human functions that are based
on the measurement of many discrete behaviors. For example, the Bennett Mechanical
Comprehension Test consists of a wide variety of tasks that measure the construct of
mechanical comprehension.
Measuring construct validity requires showing that the psychological trait is related
to a satisfactory job performance and that the test accurately measures the psychologi-
cal trait. There is a lack of literature covering this concept as it relates to employment
practices, probably because it is difficult and expensive to validate a construct and to
show how it is job related.52
As you can tell from this discussion, developing valid selection procedures, espe-
cially selection tests, can be complicated and require expertise. Employers should ensure
that tests and selection procedures are not adopted casually. If a selection procedure
screens out a protected group, the employer should determine whether there is an
equally effective alternative selection procedure that has less adverse impact and, if so,
adopt the alternative procedure. Because valid custom tests are more defensible in court
if applicants challenge them, many large organizations that subject applicants to multiple
tests hire outside vendors with industrial-organizational psychologists on staff to help
them develop selection procedures.
6.6 Reaching a Selection Decision
You now have a wealth of information about the candidates who want to work for you.
How do you weigh it all so as to make a final decision? Next, we’ll take a look at the
various approaches you might use.
6.6a Summarizing Information about Applicants
Once you have gathered relevant information about multiple applicants, you have to
systematically organize and evaluate it. Summary forms and checklists such as the one
shown in Figure 6.7 can be used to ensure that all of the pertinent information about
applicants has been included. Fundamentally, an employer is interested in what an
applicant can do and will do. Evaluating candidates on the basis of information you
have assembled should focus on these two factors, as Figure 6.8 shows. The “can-do”
factors include a candidate’s knowledge and skills, as well as the aptitude (potential)
for acquiring new knowledge and skills. The “will-do” factors include the candidate’s
motivation, interests, and other personality characteristics. Both factors are essential
to successful performance on the job. The employee who has the ability (can do) but
is not motivated to use it (will not do) is little better than the employee who lacks the
necessary ability.
construct validity
The extent to which a
selection tool measures
a theoretical construct
or trait
How have your skills,
knowledge, apti-
tudes, and motivation
affected the types of
jobs you have applied
for in the past or
how well you did a
particular job?
LO 4
89624_ch06_hr_205-240.indd 229 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
230 Part 3 Developing Effectiveness in Human Resources
Position:
Candidate Name:
Interviewer Name:
Interview Date:
Complete the comments section as you interview the candidate. After the interview, circle your ratings for each section,
and then add them together for a final score. The ratings scale is as follows:
RATINGS SCALE
1. Negligible or doesn’t meet requirements
2. More needed
3. Adequate
4. Exceeds requirements
Education
Comments:
Rating: ________________________________
Experience
Comments:
Rating: ________________________________
Job Knowledge
Comments:
Rating: ________________________________
Job Skills
Comments:
Interest in Position
Comments:
Rating:
Problem Solving Ability
Comments:
Rating: ________________________________
Communication Skills
Comments:
Rating: ________________________________
Leadership Skills
Comments:
Rating: ________________________________
________________ TOTAL POINTS
Rater’s Recommendation:
Candidate Evaluation FormFigure 6.7
“Can-Do” and “Will-Do” Factors in Selection DecisionsFigure 6.8
JOB
PERFORMANCE
“WILL DO”
• Personality
• Values
• Motivation
“CAN DO”
• Knowledge
• Skills
• Abilities
89624_ch06_hr_205-240.indd 230 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
231Chapter 6 Employee Selection
It is much easier to measure what individuals can do than what they will do. The
can-do factors are readily evident from test scores and verified information. What the
individual will do can only be inferred. Employers can use the responses to interview
and application form questions and references to obtain information for making infer-
ences about what an individual will do.
6.6b Decision-Making Strategy
The strategy used to make personnel decisions for one type of job, such as a manager,
will differ from those used to make decisions for other types of job, such as a clerk or
technician. Although many factors have to be considered, the following are some of the
questions firms must consider when deciding on whom to hire:
1. Should the individuals be hired according to their highest potential or according
to the needs of the organization?
2. At what grade or wage level should the individual be hired?
3. Should the selection be based on finding an ideal employee to match the job cur-
rently open, or should a candidate’s potential for advancement in the organization
be considered?
4. Should individuals who are not qualified but trainable be considered?
5. Should overqualified individuals be considered?
6. What effect will the decision have on the firm’s affirmative action plans and diver-
sity goals?
In addition to these factors, a firm must decide which selection approach to use: the
clinical (personal judgment) approach or the statistical approach, which are discussed
next.
Clinical Approach
Using the clinical approach, those making the selection decision review all the data on
the applicants. Then, on the basis of their understanding of the job and the individu-
als who have been successful in that job, they make a decision. Different evaluators
will make different decisions about an applicant when they use the clinical approach
because each of them will make different judgments about the applicant’s strengths and
weaknesses. Unfortunately, personal biases and stereotypes are frequently covered up
by what appear to be rational reasons for either accepting or rejecting a candidate. The
clinical approach can also lead to a homogenous workforce because, as you learned in
Chapter 5, according to the attraction–selection–attrition (ASA) model, people are often
tempted to hire applicants like themselves.
Statistical Approach
The statistical approach to decision making is more objective. It involves identifying
the most valid predictors and weighting them using statistical methods such as multiple
regression.53 Quantified data such as scores or ratings from interviews, tests, and other
procedures are then combined according to their weighted value. Individuals with the
highest combined scores are selected. Compared to the clinical approach, the statistical
approach has shown to be superior in a wide variety of situations.
With a strictly statistical approach, a candidate’s high score on one predictor (such
as a cognitive ability test) will make up for a low score on another predictor (such as
89624_ch06_hr_205-240.indd 231 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
232 Part 3 Developing Effectiveness in Human Resources
the interview). For this reason, this model is a compensatory model. However, it is
frequently important for applicants to achieve some minimum level of proficiency on
all selection dimensions. When this is the case, a multiple cutoff model can be used in
which only those candidates who score above the minimum cutoff on all dimensions
are considered. A selection from that subset of candidates is then made.54
A variation of the multiple cutoff model is the multiple hurdle model. After
candidates go through an initial evaluation stage, those who score well advance to the
next stage. The process continues through several stages (hurdles) before a final decision
is made. This approach is especially useful when either the testing or training procedures
are lengthy and expensive.
Each of the statistical approaches requires that a decision be made about where
the cutoff lies—that point in the distribution of scores above which a person should
be considered and below which the person should be rejected. The score that the
applicant must achieve is the cutoff score. Depending on the labor supply and diver-
sity and antidiscrimination considerations, it may be necessary to lower or raise the
cutoff score.
The effects of raising and lowering the cutoff score are illustrated in Figure 6.9.
Each dot in the center of the figure represents the relationship between the test score
compensatory model
A selection decision
model in which a high
score in one area can
make up for a low score
in another area
multiple cutoff model
A selection decision
model that requires an
applicant to achieve
some minimum level of
proficiency on all selec-
tion dimensions
multiple hurdle model
A selection decision
model in which only the
applicants with the high-
est scores at an initial test
stage go on to subse-
quent stages
C B A
Test Scores
C
ri
te
ri
o
n
o
f
S
u
c
c
e
s
s
7 5 3 1
8 6 4 2
Satisfactory
Unsatisfactory
S
a
ti
sf
a
c
to
ry
U
n
sa
ti
sf
a
c
to
ry
Test Scores Scatterplot with Hypothetical CutoffsFigure 6.9
89624_ch06_hr_205-240.indd 232 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
233Chapter 6 Employee Selection
(or a weighted combination of test scores) and the criterion of success for one indi-
vidual. The elliptical pattern of the dots indicates the test has a fairly high validity.
Note that the high-scoring individuals are concentrated in the satisfactory job success
category, whereas the low-scoring individuals are concentrated in the unsatisfactory
category.
If the cutoff score is set at A, only the individuals represented by areas 1 and 2 will
be accepted. Nearly all of them will be successful. If more employees are needed, the
cutoff score can be lowered to point B. In this case, a larger number of potential failures
will be accepted, as shown in quadrants 2 and 4. Even if the cutoff is lowered to C, the
total number of satisfactory individuals selected (represented by the dots in areas 1,
3, and 5) exceeds the total number selected who are unsatisfactory (areas 2, 4, and 6).
Thus, the test serves to maximize the selection of probable successes and to minimize
the selection of probable failures. This is all we can hope for in terms of predicting on-
the-job success: the probability of selecting a greater proportion of individuals who will
be successful rather than unsuccessful.
A related factor helps ensure the best qualified people are selected: having an
adequate number of candidates from which to make a selection. This factor is typically
expressed in terms of a selection ratio, which is the ratio of the number of applicants
to be selected to the total number of applicants. A ratio of 0.10, for example, means
that 10 percent of the applicants will be selected. A ratio of 0.90 means that 90 percent
will be selected. If the selection ratio is low, only the most promising applicants will
be hired. When the ratio is high, very little selectivity will be possible because even
applicants with mediocre abilities will have to be hired to fill the firm’s vacancies.
When this is the situation, a firm’s managers can fall prey to what some experts call
the “desperation bias”—choosing someone because you are in a pinch. It is a com-
mon problem among managers because of the many time and operating constraints
they face.
6.6c Final Decision
In large organizations, managers or supervisors usually make the final decision about
whom to hire, and communicate it to the human resources department. HR personnel
then notify the candidate about the decision and make a job offer. The HR department
should confirm the details of the job, working arrangements, hours, wages, and so on
and specify a deadline by which the applicant must reach a decision. If, at this point,
findings from the medical examination or drug test are not yet available, an offer is
often made contingent on the applicant passing the examination. This information can
be verbally communicated initially. It is commonplace to first contact candidates by
phone to inform them of the offer. The offer should then be put in writing, generally in
a letter to the candidate.
The process of notifying internal candidates is slightly different. Generally, the hir-
ing manager contacts the candidates personally and informs them of the decision. How-
ever, it is still important to put the offer in writing if an internal candidate is chosen so
there is no ambiguity or dispute about its terms.
Rejecting both internal candidates and external candidates is a difficult task, but
rejecting internal candidates can be particularly tricky. Most internal candidates seek-
ing a promotion are valuable employees their firms would rather not lose. The manager
delivering the bad news should explain to the employee that the person who got the job
has skills more closely aligned with the firm’s needs but that the process has given the
selection ratio
The number of appli-
cants compared with the
number of people to be
hired
89624_ch06_hr_205-240.indd 233 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
234 Part 3 Developing Effectiveness in Human Resources
organization a better understanding of her or his background when future job openings
arise. The manager should also explain that the decision was made in a systematic way
based on objective criteria but that it was nonetheless a hard one to make.55
Last, organizations should not fail to notify candidates who are not chosen for the
position. This happens too often with both internal candidates and external candidates.
It is not uncommon for external candidates to be customers of the firms to which they
apply. Not letting them know about the employment decision can jeopardize that rela-
tionship. The same is true for internal candidates. One employee lamented that after
applying internally for a job, no one contacted him or the other candidates to tell them
they did not get the job. They only learned about it after a manager sent out an email
about the new hire. “After 10-plus years of working for the company, I felt I deserved
better treatment than that,” says the employee.
The employee selection process should start
with a job analysis. The steps in the selection process
and their sequence will vary, not only with the orga-
nization, but also with the type and level of jobs to be
filled. The employee selection process should provide
reliable and valid information about applicants so that
their qualifications can be carefully matched with the
job’s specifications. The information that is obtained
should be clearly job related, predict success on the
job, and be free from discrimination. Reliability refers
to the consistency of test scores over time and across
measures. Validity refers to what a test or other selec-
tion procedure is supposed to measure and how well
it actually measures it.
Initial applicant screening tools include
résumés and cover letters, application forms, ref-
erences, Internet checks and phone screening, and
sometimes short electronic questionnaires. Despite
problems with its validity, the employment interview
remains central to the selection process. Depending
on the type of job, applicants could be interviewed
by one person, members of a work team, or other
individuals in the organization. Structured inter-
views have been found to be better predictors of
the performance of job applicants than nonstruc-
tured interviews. Some interviews are situational
and can focus on hypothetical situations or actual
behavioral descriptions of a candidate’s previous
work experiences. Most interviews are conducted in
person, but they can also be conducted via video,
LO 1
LO 2
Summary
phone, or administered by a computer (automated).
Post-interview screening tools include reference and
background checks, including criminal, drug, and
credit checks.
Preemployment tests are more objective than
interviews and can give managers a fuller sense of the
capabilities of different candidates. A wide range of
tests exist. Cognitive ability tests are especially valuable
for assessing verbal, quantitative, and reasoning abili-
ties. Personality and interest-inventory tests are per-
haps best used for placement or career development.
Job knowledge and work sample tests are achieve-
ment tests that are useful for determining whether a
candidate can perform the duties of the job without
further training. Physical ability tests can be used to
prevent accidents and injuries, particularly for physi-
cally demanding work. However, they must not be
used if they have a disparate impact on candidates in
protected classes. Medical examinations and drug tests
should only be administered after a conditional offer
of employment has been made. A test’s validity can be
assessed in terms of whether the measurement is based
on a job specification (content validity), whether test
scores correlate with performance criteria (predictive
validity), and whether the test accurately measures
what it purports to measure (construct validity).
In the process of making decisions, all “can-
do” and “will-do” factors should be assembled and
weighted systematically so that the final decision
LO 3
LO 4
89624_ch06_hr_205-240.indd 234 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
235Chapter 6 Employee Selection
can be based on a composite of the most reliable and
valid information. Although the clinical approach
to decision making is used more than the statistical
approach, the former lacks the accuracy of the lat-
ter. Compensatory models allow a candidate’s high
score on one predictor to make up for a low score
on another. When the multiple cutoff model is used,
only those candidates who score above a minimum
cutoff level remain in the running. A variation of the
multiple cutoff is the multiple hurdle model, which
involves several stages and cutoff levels. Organiza-
tions should not fail to notify candidates who are not
chosen for jobs. Those who are chosen should receive
their offers in writing so the terms are clearly agreed
upon and be given a time limit to either accept or
reject the offer.
assessment center test
behavioral description interview
(BDI)
compensatory model
computer-administered (auto-
mated) interview
concurrent validity
construct validity
content validity
criterion-related validity
cross-validation
multiple cutoff model
multiple hurdle model
negligent hiring
nondirective interview
panel interview
predictive validity
preemployment test
reliability
selection
selection ratio
sequential interview
situational interview
structured interview
validity
video interviews
video résumés
Key Terms
Is there a “best” employment process stepwise?
What steps must come first and last?
Compare briefly the major types of employ-
ment interviews described in this chapter.
Which type would you prefer to conduct?
Why?
LO 1
LO 2
What characteristics do job knowledge and job
sample tests have that often make them more
acceptable to candidates than other types of tests?
What is meant by the term criterion as it is
used in personnel selection? Give some exam-
ples of criteria used for jobs with which you
are familiar.
LO 3
LO 4
Discussion Questions
89624_ch06_hr_205-240.indd 235 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Designing Selection Criteria and Methods
2. Next, identify how you would evaluate candidates
with these qualities. What tools would you use (appli-
cations, interviews, cognitive or ability tests, work
samples, etc.) and why? Justify the cost and time
required to conduct each.
3. After you have identified your selection criteria and
methods, do a “reality check” in a real organiza-
tion. Interview a manager who employs someone
in that job. For example, if the job you selected is
salesperson, go to a local business to learn how
they select individuals for sales jobs. Compare what
you thought would be a good selection approach
with what you learned from the company you
visited.
4. Identify the reasons for any discrepancies between
your approach and theirs. Which approach do you
think is better?
Making hiring decisions is important but difficult. Without good
information, managers have almost no chance of making the
right choice. They may as well randomly choose a candidate.
The information-gathering process begins with a sound
understanding of the job: the tasks, duties, and responsibili-
ties associated with it, and the knowledge, skills, and abili-
ties needed to do it. A job analysis should be done to make
certain that all managers have assembled all of the informa-
tion they need to ensure a good person–job fit. However, this
information may not be enough. Other information about
the company’s values and philosophy are likely to be required
to ensure that a good person–organization fit results.
Assignment
1. Working in teams of four to six individuals, choose a
job with which you are familiar and identify the KSAOs
needed to do it well.
Job Candidate Assessment Tests Go Virtual
A growing number of preemployment tests simulate a
job’s functions and are being conducted via computer
or on the Web. You can liken them to video games
but within a work setting. Toyota, Starbucks, the paint
maker Sherwin Williams, and numerous financial
firms such as SunTrust Banks, KeyBank, and National
City Bank have successfully used virtual job simula-
tions to assess applicants.
At Toyota, applicants participating in simulations
read dials and gauges, spot safety problems, and use
their ability to solve problems as well as their general
ability to learn as assessed. The candidates can see and
hear about the job they’re applying for from current
Toyota employees. National City Bank has used virtual
assessments to test call-center candidates and branch
manager candidates. Call-center candidates are given
customer-service problems to solve, and branch man-
ager candidates go through a simulation that assesses
their ability to foster relationships with clients and
make personnel decisions.
The virtual assessments tools, which are produced
by companies such as Shaker Consulting Group, Pro-
files International, and others, do not come cheap. But
although they can cost tens of thousands of dollars,
larger companies that can afford them are saying they
are worth it. The benefits? Better qualified candidates,
faster recruiting, and lower turnover among employ-
ees hired. KeyBank says that by using virtual testing
tools, it realized savings of more than $1.75 million
per year due to lower turnover.
Candidates also seem to like the assessments
because they provide a more realistic job preview
and make them feel like they are being chosen for
jobs on more than just their personalities or how
they performed during an interview. “It was a very
insightful experience that made you think about
what exactly you like and dislike in the workplace
and if you really enjoy helping customers and have
patience to do so,” says one candidate tested for a
customer service job.
CaSE STuDy 1
236
89624_ch06_hr_205-240.indd 236 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
237Chapter 6 Employee Selection
trouble with simulations, games, or computers but
might make good employees. You should still use the
U.S. Department of Labor’s “whole person approach”
to hiring, says one HR professional. The whole person
approach factors in the results of a variety of accepted
tests along with prior actual performance and inter-
view results to get the most complete picture of an
employee or candidate.
Questions
1. What do you think are the prime advantages and
disadvantages of “virtual tryouts”?
2. Do you think there would be any EEOC concerns
regarding this system?
3. Do you think virtual job tryouts might be bet-
ter suited for some jobs than others? If so, which
ones?
Sources: Sarah Needleman, “Play This Game and Win a Job!” Wall
Street Journal (March 14, 2016): R2; Karen Vilardo, “KeyBank’s Success
with the ‘Virtual Job Tryout,’” Journal of Corporate Recruiting Leadership
5, no. 4 (May 2010): 24; Ira S. Wolfe and “Success Performance Solu-
tions,” The Total View Newsletter (May 12, 2010); Connie Winkle, “HR
Technology: Job Tryouts Go Virtual,” HR Magazine (September 1, 2006),
http://www.shrm.org/; Gina Ruiz, “Job Candidate Assessment Tests Go
Virtual,” Workforce Management Online (January 2008), http://www
.workforce.com; “Clients and Case Studies,” Shaker Consulting Group
(March 27, 2011), http://www.shakercg.com.
It is not just younger candidates who play a lot
of video games who like the tests. Older candidates
do as well. “We haven’t seen any adverse impact,”
says Ken Troyan, chief staffing officer for SunTrust
Banks. “There’s some mythology—if you will—about
older people not being computer-savvy, and that’s just
not so.” One study found that the simulations also
tend to result in less of a gap between minority and
white candidates than when paper-and-pencil tests
are used.
A handful of software companies have developed
games that don’t mirror work tasks but actual video
games you would play for fun. “Bomba Blitz” and
“Meta Maze” are two mobile games developed by the
preemployment-testing company Knack. According
to Knack, the games utilize behavioral neuroscience
and big data—in this case, the game scores and deci-
sion-making traits of thousands of different types of
workers—to match people with jobs.
HR experts warn that companies need to be sure
they aren’t simply buying glitzy simulations that don’t
translate well to the jobs for which they are hiring.
Games like those produced by Knack are just now
starting to be used, and firms generally aren’t solely
relying on them to make hiring decisions. Also, the
tools could potentially eliminate candidates who have
CaSE STuDy Pros and Cons of Cleaning Up the “Resu-mess”2
HR and hiring managers often find themselves
swamped by résumés because they are so easy to send
with a click of a button. Some large retailers can get
a million or more résumés a year. Even small busi-
nesses get flooded with them. When Raising Cain, a
Louisiana-based fast-food chain, opened an office in
Dallas, the firm needed to hire 35 people. It received
10,000 résumés and had to hire an outside firm to help
sort through them.
Applicant tracking systems and résumé screen-
ing software are helping harried HR personnel, man-
agers, and business owners cope with the problem.
After résumés are screened and reviewed, interviews
can be scheduled automatically using a firm’s email
system and electronic calendar, and job offers sent
to candidates to sign electronically and return. Many
job boards have résumé screening capabilities and
algorithms to recommend candidates similar to the
way Amazon.com recommends products based on
what a person has purchased in the past.
Not all HR professionals are fans of résumé
screening software, however. Managers tend to use
huge numbers of key words so that very few appli-
cants can make it past the screen. Different kinds of
software can have different kinds of glitches. The soft-
ware might not read certain types of fonts or reject a
résumé of a good candidate if it contains a single typo.
Unqualified applicants have learned to “pepper” their
résumés with a job’s keywords to get past résumé-
screening software.
Peter Cappelli, a University of Pennsylvania pro-
fessor, has written a book called Why Good People
Can’t Get Jobs. Cappelli relates an incident in which
an HR manager put his own résumé through his
89624_ch06_hr_205-240.indd 237 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
238 Part 3 Developing Effectiveness in Human Resources
1. Philip L. Roth et al., “Social Media in Employee-Selection-
Related Decisions a Research Agenda for Uncharted Terri-
tory,” Journal of Management (2013), 0149206313503018;
Kate Z. Williams, Meline M. Schaffer, and Lauren E. Ellis,
“Legal Risk in Selection: An Analysis of Processes and Tools,”
Journal of Business & Psychology 28, no. 4 (December 2013),
DOI: 10.1007/s10869-013-9299-4.
2. Misty L. Loughry, Matthew W. Ohland, and D. Dewayne
Moore, “Development of a Theory-Based Assessment of
Team Member Effectiveness,” Educational & Psychologi-
cal Measurement 67, no. 3 (June 2007): 505–524; Patrick D.
Converse, Fredrick L. Oswald, Michael A. Gillespie, Kevin A.
Field, and Elizabeth B. Bizot, “Matching Individual to Occu-
pations Using Abilities and the O*NET,” Personnel Psychology
57, no. 2 (Summer 2004): 451–488.
3. Rachel Feintzeig, “Cultural Fit Plays Role in Hiring,” Wall
Street Journal (October 12, 2006), https://www.wsj.com.
4. Joe Williams, “Bringing the Human Touch to Recruit-
ment,” Bloomberg Businessweek (January 24, 2011), http://
bx.businessweek.com.
5. Mary-Kathryn Zachary, “Discrimination without Intent,”
Supervision 64, no. 5 (May 2003): 23–29; Neal Schmitt, Wil-
liam Rogers, David Chan, Lori Sheppard, and Danielle Jen-
nings, “Adverse Impact and Predictive Efficiency of Various
Predictor Combinations,” Journal of Applied Psychology 82,
no. 5 (October 1997): 719–730.
6. Gary N. Burns et al., “Effects of Applicant Personality on
Resume Evaluations,” Journal of Business and Psychology 29,
no. 4 (2014): 573–591; Michael Luo, “‘Whitening’ the Résumé,”
company’s screening process and got rejected. In
another instance, an engineering firm received more
than 25,000 résumés for a job but none of the candi-
dates made it past electronic screening.
There is also a lack of the human touch and judg-
ment in the process. Résumé-screening software can’t
easily pick up on candidates’ “soft” skills, such as a
person’s ability to interact well with other people. And
managers don’t end up seeing interesting résumés—
résumés from people who have different skills or life
experiences that would translate well to the job. Con-
sequently, a lot of people who would make excellent
employees never get a glance.
Some recruiters have found ways to avoid the
downsides of automatic résumé screening altogether.
Kevin Mercuri, president of Propheta Communica-
tions, a public relations firm in New York City, got
tired of being swamped by résumés. Now when he
needs to recruit personnel, he posts a message about
job openings on his LinkedIn page. “I get people
vouching for each applicant, so I don’t have to spend
hours sorting through résumés,” he says.
Questions
1. What impact do you think résumé screening tools
are having on HR departments? What about line
managers? Would you use the software to screen
résumés?
2. How might the drawbacks associated with résumé
screening software be addressed?
Sources: Ryan Craig, “Blame Bad Applicant Tracing for the Soft Skills
Shortage at Your Company,” TechCrunch (March 5, 2017), https://
techcrunch.com; Dave Wessel, “Software Raises the Bar for Hiring,”
Wall Street Journal (May 31, 2012), http://online.wsj.com; Darren Dahl,
“Tapping the Talent Pool … without Drowning in Resumés,” Inc. 31
no. 3 (April 2009): 122; Anne Kadet, “Did You Get My Résumé?” Smart
Money (February 27, 2009), http://www.smartmoney.com; Drew Robb,
“Screening for Speedier Selection,” HR Magazine 49, no. 9 (September
2004): 143–147.
Notes and References
New York Times (December 5, 2009), http://www.nytimes.
com.
7. Roy Mauer, “Know Before You Hire: 2017 Employment
Screening Trends,” Society of Human Resources Management
(January 25, 2017), https://www.shrm.org.
8. Op cit.
9. Alexander Reicher, “The Background of Our Bing: Internet
Background Checks in the Hiring Process,” Berkeley Technol-
ogy Law Journal 28, no. 1 (Spring 2013): 115–153.
10. Jennifer Valentino DeVries, “Bosses May Use Social Media
to Discriminate against Job Seekers,” Wall Street Journal
(November 20, 2013), https://www.wsj.com.
11. Lisa Takeuchi Cullen, “It’s a Wrap: You’re Hired,” Time
(February 22, 2007, http://time.com.
12. Hanna Kuchler, “Silicon Valley Tactics for Waging War on
Biases in the Workplace” (March 7, 2017), https://www.ft.com.
13. “A New Assistant at Georgia Tech Made False Claims,” The
New York Times (January 29, 2002), D7; Stephanie Armour,
“Security Checks Worry Workers; Padded Résumés Could Be
Exposed,” USA Today (June 19, 2002): B1.
14. Scott Bennet, The Elements of Résumé Style: Essential Rules for
Writing Résumés and Cover Letters that Work. (AMACOM,
2014); “Busted,” Training Development 60, no. 12 (December
2006): 19; Pamela Babock, “Spotting Lies,” HRMagazine 48,
no. 10 (October 2003): 46–51; Tammy Prater and Sara Bliss
Kiser, “Lies, Lies, and More Lies,” A.A.M. Advance Manage-
ment Journal 67, no. 2 (Spring 2002): 9–14.
15. Max Mihelich, “Check on Background Checks,” Workforce.
com (September 23, 2013), http://www.workforce.com.
89624_ch06_hr_205-240.indd 238 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
239Chapter 6 Employee Selection
16. Amy Maingault, John Sweeney, and Naomi Cossack, “Inter-
viewing, Management Training, Strikes,” HRMagazine 52, no.
6 (June 2007): 43; James Bassett, “Stop, Thief!” Gifts & Deco-
rative Accessories 104, no. 1 (January 2003): 130–134; Richard
A. Posthuma, Frederick Morgeson, and Michael Campion,
“Beyond Employment Interview Validity: A Comprehensive
Narrative Review of Recent Research and Trends over Time,”
Personnel Psychology 55, no. 1 (Spring 2002): 1–8.
17. Robert Gatewood, Hubert S. Feild, and Murray Barrick,
Human Resource Selection (Nelson Education, 2015); Yen-
Chun Chen, Wei-Chi Tsai, and Changya Hu, “The Influences
of Interviewer-Related and Situational Factors on Interviewer
Reactions to High Structured Job Interviews,” International
Journal of Human Resource Management 19, no. 6 (June 2008):
1056–1071; Jesus F. Salgado and Silvia Moscoso, “Compre-
hensive Meta-Analysis of the Construct Validity of the
Employment Interview,” European Journal of Work and Orga-
nizational Psychology 11, no. 3 (September 2002): 299–325.
18. Julia Levashina et al., “The Structured Employment Inter-
view: Narrative and Quantitative Review of the Research Lit-
erature,” Personnel Psychology 67, no. 1 (2014): 241–293; Allen
Huffcutt, Jeff Weekley, Willi Wiesner, Timothy Degroot,
and Casey Jones, “Comparison of Situational and Behavior
Description Interview Questions for Higher-Level Positions,”
Personnel Psychology 54, no. 3 (Autumn 2001): 619–644.
19. Allen I. Huffcutt, Satoris S. Culbertson, and William S.
Weyhrauch, “Employment Interview Reliability”, International
Journal of Selection and Assessment 21, no. 3 (2013): 264–76;
Peter Herriot, “Assessment by Groups: Can Value Be Added?”
European Journal of Work & Organizational Psychology 12, no.
2 (June 2003): 131–146; Salgado and Moscoso, “Comprehen-
sive Meta-Analysis”, Amelia J. Prewett-Livingston, John G.
Veres III, Hubert S. Field, and Philip M. Lewis, “Effects of Race
on Interview Ratings in a Situational Panel Interview,” Journal
of Applied Psychology 81, no. 2 (April 1996).
20. Delroy L. Paulhus et al., “Self-Presentation Style in Job Interviews,
“Journal of Applied Social Psychology 43, no. 10 (2013): 2042–59;
“Survey: Six in Ten Companies Conduct Video Job Interviews,”
PR Newswire (August 30, 2012), http://www.prnewsire.com.
21. Julia Thomas, “Video Killed the Interview Star,” DeGroote
School of Business (July 29, 2013), http://www.degroote.
mcmaster.ca.
22. Carol Carter, Keys to Business Communication (Upper Saddle
River, NJ: Pearson, 2012): Chapter 15.
23. Darren Dahl, “Tapping the Talent Pool…without Drowning
in Resumés,” Inc. 31, no. 3 (April 2009): 122.
24. Joe Smydo, “Giant Eagle Job Fairs Attract Hundreds,” Pitts-
burgh Post-Gazette (September 21, 2014), http://www.post-
gazette.com.
25. Jack Welch and Suzy Welch, “Hiring Is Hard Work,” Business
Week Online, no. 4091 (July 7, 2008): n.p.; Michele V. Rafter,
“Candidates for Jobs in High Places Sit for Tests That Size Up
Their Mettle,” Workforce Management 83, no. 5 (May 2004):
70–73.
26. Kira Vermond, “References Done Right,” Profit 26, no. 2 (May
2007): 101; Kathleen Samey, “A Not-So-Perfect Fit,” Adweek
44, no. 47 (December 1, 2003): 34; Ann Fisher, “How Can We
Be Sure We’re Not Hiring a Bunch of Shady Liars?” Fortune
147, no. 10 (May 26, 2003).
27. “New Employee Privacy Rights in Oregon and Washington,”
Venulex Legal Summaries (2007 Q3): 1–4; Barry J. Nadell,
“The Cut of His Jib Doesn’t Jibe,” Security Management 48,
no. 9 (September 2004): 108–114.
28. Will Dobbie et al., Bad Credit, No Problem? (National Bureau
of Economic Research, 2016): w22711; Mary-Kathryn,
“Labor Law for Supervisors,” Supervision 67, no. 2 (February
2006): 22–23; “Some Job-Screening Tactics May Be Illegal,”
Fort Worth Star-Telegram (August 12, 2010): 5A; Katherine
Erdel, “Changes May Prompt Review of Background Check
Policies,” Corporate Counsel Guide 24 (2014): 12B–13B.
29. Marsha Nielsen and Kristine Kuhn, “Late Payments and Leery
Applicants: Credit Checks as a Selection Test,” Employee
Responsibilities & Rights Journal 21, no. 2 (June 2009): 115.
30. Beth Braverman, “Employers Running Credit Checks on Job
Applicants Must Tread Carefully,” CreditCards.com (July 25,
2016), http://www.creditcards.com.
31. Elizabeth D. MacGillivray, Juanita H. Beecher, and Diedre M.
Golden, “Employment Testing: The New Hot Button Issue for
Federal Agencies—and Other Legal Developments,” Global
Business & Organizational Excellence 27, no. 3 (March-April
2008): 68–78.
32. “EEOC Clarifies the Definition of Who Is an ‘Applicant’ in
the Context of Internet Recruiting and Hiring,” Fair Employ-
ment Practices Guidelines, no. 587 (April 1, 2004): 3–13; Kath-
ryn Tyler, “Put Applicants’ Skills to the Test,” HRMagazine 45,
no. 1 (January 2000): 74–80.
33. Standards that testing programs should meet are described in
Standards for Educational and Psychological Tests (Washing-
ton, DC: American Psychological Association, 1999).
34. Hershey H. Friedman, Linda Weiser Friedman, and Chaya
Leverton, “Increase Diversity to Boost Creativity and Enhance
Problem Solving,” Psychosociological Issues in Human
Resource Management 4, no. 2 (2016): 7–33; John Bret Becton,
Hubert S. Feild, William F. Giles, and Allison Jones-Farmer,
“Racial Differences in Promotion Candidate Performance
and Reactions to Selection Procedures: A Field Study in a
Diverse Top-Management Context,” Journal of Organizational
Behavior 29, no. 3 (April 2008): 265–285.
35. Rachel Suff, “Testing the Water: Using Work Sampling for
Selection,” IRS Employment Review, no. 802 (June 18, 2004):
44–49; Leonard D. Goodstein and Alan D. Davidson, “Hiring
the Right Stuff: Using Competency-Based Selection,” Compen-
sation & Benefits Management 14, no. 3 (Summer 1998): 1–10.
36. Stuart Crandell, “Assessment Centers in Talent Management:
Strategies, Use, and Value,” Talent Management (January 7,
2008), http://www.talentmgt.com.
37. Ken Richardson and Sarah H. Norgate, “Does IQ Really
Predict Job Performance?” Applied Development Science
89624_ch06_hr_205-240.indd 239 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
240 Part 3 Developing Effectiveness in Human Resources
19, no. 3 (2011): 153–69; Matthew Night, “Does IQ Predict
Performance at Work?” CNN (February 28, 2011), http://edi-
tion.cnn.com; Noelle Murphy, “Testing the Waters: Employ-
ers’ Use of Selection Assessments,” IRS Employment Review
852 (August 4, 2006): 42–48.
38. Candice Rudd, “FAA’s Bid to Expand Air Traffic Hiring Pool
Hits Turbulence,” Newsday (April 24, 2016), http://www
.newsday.com.
39. “Biographical Data (Biodata) Tests,” Personnel Selection and
Resource Center (Washington DC: U.S. Office of Personnel
Management, 2011), http://apps.opm.gov.
40. Jesús F. Salgado and Gabriel Táuriz, “The Five-Factor Model,
Forced-Choice Personality Inventories and Performance,”
European Journal of Work and Organizational Psychology 23,
no. 1 (2014): 3–30; Timothy Judge and Joyce Bono, “Five-
Factor Model of Personality and Transformational Leader-
ship,” Journal of Applied Psychology 85, no. 5 (October 2000):
751–765; J. Michael Crant and Thomas S. Bateman, “Charis-
matic Leadership Viewed from Above: The Impact of Proac-
tive Personality,” Journal of Organizational Behavior 21, no. 1
(February 2000): 63–75.
41. Jason L. Huang et al., “Personality and Adaptive Performance
at Work,” Journal of Applied Psychology 99, no. 1 (2014): 162;
Frederick P. Morgeson, Michael A. Campion, Robert L. Dip-
boye, John R. Hollenbeck, Kevin Murphy, and Neal Schmitt,
“Reconsidering the Use of Personality Tests in Personnel
Selection Contexts,” Personnel Psychology 60, no. 3 (Autumn
2007): 683–729; Gregory Hurtz and John Donovan, “Person-
ality and Job Performance: The Big Five Revisited,” Journal of
Applied Psychology 85, no. 6 (December 2000): 869–879.
42. Julie Furr Youngman, “The Use and Abuse of Pre-Employ-
ment Personality Tests,” Business Horizons (2017); Lawrence
Peikes and Meghan D. Burns, “Polygraph Test Request
Unlawful,” HRMagazine 50, no. 7 (July 2005): 110; “Pretext
for Discrimination: How to Avoid Looking Like a Liar,” Fair
Employment Practices Guidelines, no. 592 (September 1,
2004): 1–3; Gillian Flynn, Diane D. Hatch, and James E. Hall,
“Know the Background of Background Checks,” Workforce
81, no. 9 (September 2002): 96–98.
43. “If the Shoe Fits,” Security Management 40, no. 2 (February
1996): 11; Michelle Cottle, “Job Testing: Multiple Choices,”
The New York Times (September 5, 1999): 3, 10.
44. Taya R. Cohen et al., “Moral Character in the Workplace,”
Journal of Personality and Social Psychology 107, no. 5 (2014):
943; Thomas J. Ryan, “Nerves of Steal,” SGB 37, no. 6 (June
2004): 8–10; D. S. Ones, C. Viswesvaran, and F. L. Schmidt,
“Comprehensive Meta-Analysis of Integrity Test Validities:
Findings and Implications for Personnel Selection and The-
ories of Job Performance,” Journal of Applied Psychology 78
(August 1993): 679–703.
45. Steve Lorh, “Big Data, Trying to Build Better Workers,” New
York Times (April 20, 2013), http://www.nytimes.com.
46. Paul Zielbauer, “Small Changes Could Improve Police Hiring,
Panel Says,” The New York Times (January 7, 1999): 8; Lynn
McFarland and Ann Marie Ryan, “Variance in Faking across
Noncognitive Measures,” Journal of Applied Psychology 85, no.
5 (October 2000): 812–21.
47. Robert Gatewood, Hubert S. Feild, and Murray Barrick,
Human Resource Selection (Nelson Education, 2015); Maria
Greco Danaher, “Strength Test Falls,” HRMagazine 52, no. 2
(February 2007): 115–116; M.S. Sothmann, D.L. Gebhardt,
T.A. Baker, G.M. Kastello, and V.A. Sheppard, “Performance
Requirements of Physically Strenuous Occupations: Validat-
ing Minimum Standards for Muscular Strength,” Ergonomics
47, no. 8 (June 22, 2004): 864.
48. Kenneth G. Dau-Schmidt, Matt Finkin, and Robert Cov-
ington, Legal Protection for the Individual Employee (West
Academic, 2016); Michael Adams, Ben Van Houten, Robert
Klara, and Elizabeth Bernstein, “Access Denied?” Restaurant
Business 98, no. 2 (January 15, 1999): 36–48; “Medical Screen-
ing: Are Employers Going Too Far?” Employee Benefit Plan
Review 53, no. 11 (May 1999): 42–43.
49. “News Briefs,” Security Director’s Report 13, no. 18 (August
2013): 6.
50. Ibid.
51. Philip Bobko, Philip L. Roth, and Maury A. Buster, “The
Usefulness of Unit Weights in Creating Composite Scores:
A Literature Review, Application to Content Validity, and
Meta-Analysis,” Organizational Research Methods 10, no. 4
(October 2007): 689–709.
52. Deniz S. Ones, Chockalingam Viswesvaran, and Frank L
Schmidt, “No New Terrain: Reliability and Construct Valid-
ity of Job Performance Ratings,” Industrial & Organizational
Psychology 1, no. 2 (June 2008): 174–79; D. Brent Smith and
Lill Ellingson, “Substance versus Style: A New Look at Social
Desirability in Motivating Contexts,” Journal of Applied Psy-
chology 87, no. 2 (April 2002): 211–219; Ken Craik, et al.,
“Explorations of Construct Validity in a Combined Mana-
gerial and Personality Assessment Programme,” Journal of
Occupational and Organizational Psychology 75, no. 2 (June
2002): 171–193.
53. Multiple regression is a statistical method for evaluating the
magnitude of effects of more than one independent variable
(e.g., selection predictors) on a dependent variable (e.g., job
performance) using principles of correlation and regression.
54. Patricia M. Buhler, “Managing in the New Millennium,”
Supervision 68, no. 11 (November 2007): 17–20; Ann Marie
Ryan, Joshua Sacco, Lynn McFarland, and David Kriska,
“Applicant Self-Selection: Correlates of Withdrawal from a
Multiple Hurdle Process,” Journal of Applied Psychology 85,
no. 2 (April 2000): 163–179.
55. “Considering and Evaluating Internal Candidates for Senior-
Level Nonprofit Positions,” Bridgestar (March 27, 2011),
http://www.bridgestar.org.
89624_ch06_hr_205-240.indd 240 16/10/17 2:57 pm
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
241
CHAPTER 7
Training and Development
Learning Outcomes
After studying this chapter, you should be able to
Discuss the scope of training and development and
its strategic aspects.
Describe how a training needs assessment should
be done.
Describe the factors that must be taken into
account when designing a training program.
LO 1
LO 2
LO 3
Identify the types of training-delivery methods
organizations use.
Explain how the effectiveness of training programs
are evaluated, and describe some of the additional
training programs conducted by firms.
LO 4
LO 5
Be
to
C
ha
ga
s/
Sh
ut
te
rs
to
ck
89624_ch07_hr_241-278.indd 241 10/26/17 5:48 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
242 Part 3 Developing Effectiveness in Human Resources
W
orkplace training used to be rather boxlike. It focused on teaching employees to
do particular activities—operate machines, process work, and so forth. However,
as the workplace has shifted from “touch labor” to “knowledge workers” (see
Chapter 1), the focus of training has shifted as well. Companies are realizing that workers
need not only operational knowhow but also superior job expertise; knowledge about
competitive, industry, and technological trends; and the ability to continually learn and
utilize new information. These characteristics better help an organization adapt and inno-
vate to compete far more effectively in today’s fast-paced global business world. Because
training plays a central role in nurturing, strengthening, and expanding the capabilities of
a firm in this way, it has become part of the backbone of strategic management.
7.1 The Scope of Training
Many new employees come equipped with most of the knowledge, skills, and abilities
needed to start work. Others require extensive training before they are ready to make
much of a contribution to the organization. The term training is often used casually
to describe almost any effort initiated by an organization to foster learning among its
members. However, many experts distinguish between training, which tends to be more
narrowly focused and oriented toward short-term performance concerns, and develop-
ment, which, as you learned in Chapter 5, tends to be oriented more toward broadening
an individual’s skills for future responsibilities. The two terms tend to be combined into
a single phrase—training and development—to recognize the combination of activities
organizations use to increase the knowledge and skills of employees.
Research shows that an organization’s revenues and overall profitability are posi-
tively correlated to the amount of training it gives its employees. According to Training
magazine’s ongoing industry report, U.S. businesses provide each of their employees
between 35 and 55 hours, on average, of training annually.1 By contrast, the 100 best
U.S. companies to work for, as cited by Fortune magazine, provide their employees with
approximately double that amount of training and sometimes even more. New employ-
ees hired by the Ritz Carlton hotel chain get over 300 hours of training. The greatest
proportion of training is spent on rank-and-file employees and supervisors.
It’s not unusual for
large corporations to have
their own “universities”
where they train their
employees and future
managers. Hamburger
University, operated by
McDonald’s Corporation
near Chicago, is probably
the best known corporate
university. General Elec-
tric has a 53-acre training
campus north of New York
City, where about 10,000
What aspects of train-
ing plans do you think
are strategic, and how
are these plans similar
or dissimilar to the col-
lege and career plans
you have created for
yourself?
LO 1
Hamburger University,
located at headquar-
ters in Oak Brook,
Illinois, is McDonald’s
management training
center.
Q
ila
i S
he
n/
G
et
ty
Im
ag
es
89624_ch07_hr_241-278.indd 242 10/26/17 5:48 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
243Chapter 7 Training and Development
people attend classes each year. The Campbell’s Soup Company operates Campbell
University, which has a 2-year program focused on personal leadership development
for both aspiring and seasoned managers.
So how much does all of this corporate training cost? About $70 billion annually.
That’s a significant amount of money, so firms want to ensure it’s well spent.
U.S. businesses spend nearly four times as much on informal instruction as they do
formal instruction, however. The informal instruction ranges from simple, on-the-job
instruction to sophisticated skills training conducted on multimillion-dollar simula-
tors. Other types of training include regular training given to new hires, customer ser-
vice and communication-skills training, and compliance training—training employees
must receive as a result of various legal mandates, such as EEO requirements or OSHA
requirements. Airline attendants must undergo mandatory safety training designated
by the Federal Aviation Administration. Train crews must annually undergo training
mandated by the Federal Railroad Administration.
7.1a A Strategic Approach to Training
Managers should keep a close eye on their firm’s goals and strategies and orient their
training accordingly. Is it the firm’s goal to develop new product lines? If so, how should
this goal affect its training initiatives? Is the firm trying to lower its costs of production
so it can utilize a low-cost strategy to capture new business? If so, are there training
initiatives that can be undertaken to deliver on this strategy?
Unfortunately, some organizations fail to make the connection between train-
ing and an organization’s goals. Instead, they do whatever the competition is doing or
what is the latest trend. As a result, training programs are often misdirected, poorly
designed, and inadequately evaluated—not to mention a waste of money. One, not all
of a firm’s strategic initiatives can be accomplished with training. Two, not all training
programs—no matter how widely they are adopted by other organizations—will be a
strategic imperative for your firm.
Because business conditions change rapidly, as does technology, keeping abreast of
the types of training a firm’s employees need to remain competitive can be a challenge.
If employees consistently fail to achieve their productivity objectives, this might be a
signal that training is needed. Likewise, if organizations receive an excessive number
of customer complaints, this, too, might suggest a firm’s training is inadequate. Larger
firms typically have chief learning officers, who are high-ranking executives responsible
for ensuring a company’s training is timely, well designed, and focused on the firm’s
strategic issues.
To ensure a firm’s training and development investment has the maximum impact
possible, a strategic and systematic approach should be used that involves four phases:
1. A needs assessment based on the firm’s competitive objectives: What training
does the firm really need?
2. Program design: Given those needs, how should the training program best designed
or structured?
3. Implementation: How should the program be delivered—that is, by what method?
4. Evaluation: How can the firm tell if the training program is really working?
Figure 7.1 presents these elements. We will use it as a framework for organizing the
material in this chapter.
chief learning officers
A high-ranking executive
responsible for fostering
employee learning and
development within the
firm
89624_ch07_hr_241-278.indd 243 10/26/17 5:48 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
244 Part 3 Developing Effectiveness in Human Resources
7.2 Phase 1: Conducting the Needs
Assessment
If you own or manage a business, how would you figure out what types of training your
employees need and how much of it? The following are some of the most common types
of training employees are given. “Hard skills” refer to the tangible and teachable skills
needed to do a job. Learning to operate a machine is an example. “Soft skills” refer to
subjective skills that are harder to measure, requiring more discretion or judgment, but
equally valuable in the workplace. Working well with other people is an example of a
soft skill.
Hard-Skills Training
• On-the-job training for new hires
• Basic skills training
• Budgeting and accounting training
• Machinery operating training
• IT/computer training
• Customer service training
• Compliance (regulations) training
Soft-Skills Training
• Ethics training
• Diversity training
• Leadership training
• Communications training
• Team training
• Time management training
• Interpersonal skills training
To determine what type of training your firm needs, you must conduct a training
needs assessment. However, a study conducted a few years ago by the American Society
for Training and Development found that organizations conduct needs assessments less
than 50 percent of the time. This situation has improved somewhat, in part because
If you were launching
a new business,
what factors would
you look at to do
a training-needs
assessment for the
organization?
LO 2
• Objectives
• Trainee Readiness
• Principles of Learning
Phase Two:
Design
• Reactions
• Learning
• Behavior
• Results
Phase Four:
Evaluation
• Organization
• Task Analysis
• Person Analysis
Phase One:
Needs Assessment
• Methods
• Learning Outcomes
Phase Three:
Implementation
Strategic Model of Training and DevelopmentFigure 7.1
89624_ch07_hr_241-278.indd 244 10/26/17 5:48 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
245Chapter 7 Training and Development
tighter training budgets have forced firms to ensure that their training is well aligned
with their objectives. Being able to quickly assess the training your employees need is
especially important for small businesses that may not have the time or resources to
do lengthy needs assessment analyses. Doing a needs assessment does not need to be
a laborious task, as this chapter’s small-business feature shows.2 As Figure 7.2 shows, a
needs assessment consists of three parts: an organization analysis, a task analysis, and a
person analysis. Each of these steps will be discussed next.
7.2a Organization Analysis
An organization analysis is an examination of a firm’s environment, goals, strategies,
performance, and resources so as to determine what training it should do. For this pur-
pose, HR personnel typically collect data such as information on the quality of a firm’s
goods or services, its absenteeism, turnover, and number of accidents. The availability
of potential replacements and the time required to train them are important factors in
organization analysis. Other issues include technological change, innovation, globaliza-
tion, quality and process improvement, mergers and acquisition, and restructuring—all
of which necessitate training. Why? Because they frequently require employees and
managers to take on new roles and responsibilities and adjust to new cultures and ways
of doing business.
Economic and public policy issues influence corporate training needs as well. For
example, terrorist and cyber attacks continue to change the training that airport and
airline workers need, as well as police, IT and transportation employees, nuclear power
plant employees, and even security staff at theme parks.3 Finally, trends in the workforce
itself affect a firm’s training needs. As older workers near retirement, younger workers
need the training and knowledge to take their place.
Conducting an organization analysis also involves examining a firm’s resources—
technological, financial, and human—available to conduct the training. HR departments
are under constant pressure to make the most of their training dollars. When budgets
are tight, training and development are usually the first programs to be cut. Compa-
nies such as Darden Restaurants, Ford, and Merck have used information technology
to significantly cut their training budgets. Other companies outsource their training
programs, or at least part of them, to external firms to cut costs or to take advantage of
organization analysis
An examination of an
organization’s environ-
ment, goals, strategies,
performance, and
resources so as to deter-
mine what training it
should do
Needs Assessment for TrainingFigure 7.2
• ORGANIZATION ANALYSIS
• TASK ANALYSIS
• PERSON ANALYSIS
…of environment, strategies, and resources
to determine where to emphasize training.
…of the activities to be performed in order
to determine the KSAOs needed.
…of performance, knowledge, and skills in
order to determine who needs training.
89624_ch07_hr_241-278.indd 245 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
246 Part 3 Developing Effectiveness in Human Resources
expertise the firm lacks. Other organizations purchase “off the shelf ” course materials
developed by training companies rather than develop their own. Another trend is for
companies to partner with firms in their supply chains to jointly train their employees
more cost effectively.4
7.2b Task Analysis
The second step in training-needs assessment is task analysis. A task analysis involves
reviewing the job description and KSAOs of a particular position, including the specific
actions and behaviors required to do it. In other words, a task analysis goes beyond just
the “what” of a job and also includes the “how.”
If the job is new or jobs are changing, the first step in a task analysis is to list all the
tasks or duties included in the job. The second step is to list the steps the employee needs
to take to complete each task. The type of performance for each task (i.e., manipulation,
speech, and discrimination), along with the skills and knowledge necessary to do it, can
then be identified. For example, in the task of taking a chest X-ray, a radiologist correctly
positions the patient (manipulation), gives special instructions (speech), and checks
the proper distance of the X-ray tube from the patient (discrimination). The types of
skills and knowledge that trainees need can be determined by observing and question-
ing skilled jobholders or by reviewing job descriptions. This information helps trainers
select program content and choose the most effective training methods.
Jobs are changing so quickly today that instead of focusing on a fixed sequence of
tasks, firms are finding that their employees need more flexible sets of competencies to
task analysis
The process of determin-
ing a training program’s
content by studying the
tasks and duties a job
involves
Do environmental scanning. Continually look at what is
going on in your industry and organization to anticipate
upcoming training needs. Enlist the help of employees
and managers in the process. Question managers about
their strategic goals and their impact on the organization,
and gear your analysis accordingly.
Do internal scanning. Determine what skills are most
important to acquire in terms of your organization’s cur-
rent and future needs. Which ones will provide the biggest
payback?
Gather organizational data. Performance data for your
firm (such as errors, sales, and customer complaints) and
staffing data (such as turnover and absenteeism) can be
very helpful as a starting point.
Develop a plan. Once the training need has been iden-
tified, identify various ways to deliver it and consider
the costs and benefits of each. Determine what kind of
Small Business Application
growth or other measure is a reasonable result of the
training.
Utilize state and local government programs. Many
state and local governments have programs to help small
businesses train their employees. For example, the Texas
Workforce Commission will pay small businesses in Texas
up to $1,800 annually in tuition and fees for each new full-
time employee hired and trained at a local college. (For a
current employee, the program covers tuition and fees up
to $900 annually.)
Make the needs-assessment process ongoing. Repeat
these activities as your business needs change.
Sources: Patti Greene, “Five Affordable and Effective Ways Small Busi-
ness Owners Could Better Train Employees,” Forbes (October 21, 2016),
https://www.forbes.com; “TWC Launches Small Busin.ess Employee
Training Program,” Your Houston News (November 20, 2010), http://www.
yourhoustonnews.com; “Employee Training Tips,” D&B.com, http://small-
business.dnb.com; Ron Zemke, “How to Do a Needs Assessment When
You Think You Don’t Have Time,” Training 35, no. 3 (March 1998): 38–44.
A Small Business’s Guide to Quickly Assessing Its Training Needs
89624_ch07_hr_241-278.indd 246 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
247Chapter 7 Training and Development
adapt. A competency assessment focuses on the sets of skills and knowledge employees
need to be successful, particularly for decision-oriented and knowledge-intensive jobs.
A competency assessment goes beyond simply describing the traits employees must have
to successfully perform the work. It also captures elements of how those traits should be
used within an organization’s context and culture. That might include the motivation
levels of employees, their interpersonal skills, and so on. “It’s easy for top performers to
become experts in a certain niche, but ‘talent factories’ focus on creating generalists,”
explains one HR consultant. “To get the most from talented employees, they should
know how to handle a wide range of functions.”5
Instead of offering a laundry list of training plans as it used to, Amway has estab-
lished job competencies for its employees around the world. The competencies denote
the particular skills each employee needs for his or her job and a training “road map”
to get them there.6 Highlights in HRM 1 shows an example of a partial competency
assessment tool used for evaluating a manager.
7.2c Person Analysis
A person analysis is the process of determining which employees require training and,
equally important, which do not. This helps organizations avoid providing all employ-
ees training when some do not need it. In addition, a person analysis helps managers
determine what prospective trainees are able to do currently so that the programs can
be designed to provide training that will benefit them.
Performance appraisal information can also be used to conduct a person analy-
sis. However, although performance appraisals might reveal which employees are not
meeting the firm’s expectations, for example, they typically do not reveal why. If the
performance is due to ability problems, training is likely to be a good solution. If the
performance is due to poor motivation or factors outside an employee’s control, train-
ing might not be the answer. Conducting a deeper performance diagnosis is discussed
in Chapter 8 on performance appraisals. Ultimately, managers have to sit down with
employees to talk about areas for improvement so that they can jointly determine the
training or other approaches that will have maximum benefit.7 A person analysis along
with appraisal information can also be used to determine the training someone needs
for a new position, a promotion, or to take on new responsibilities.
7.3 Phase 2: Designing the Training Program
Once you have assessed your firm’s training needs, the next step is to design the training
program. Experts believe that the design of training programs should focus on at least
four related issues: (1) the training’s instructional objectives, (2) readiness of trainees
and their motivation, (3) principles of learning, and (4) characteristics of instructors.
7.3a Developing Instructional Objectives
After conducting organization, task, and person analyses, managers should have a more
complete picture of their firms’ training needs. On the basis of this information, they can
more formally state the desired outcomes of training via written instructional objectives,
which describe the skills or knowledge to be acquired and/or the attitudes to be changed. The
learning objectives at the beginning of this chapter are examples of instructional objectives.
competency
assessment
An analysis of the sets
of skills and knowledge
needed for decision-
oriented and knowledge-
intensive jobs
person analysis
The process of determin-
ing the specific individu-
als who need training in
an organization
instructional objectives
The desired outcomes
of a training program
What has your college
experience taught
you about how
people learn that
can be applied to the
workplace?
LO 3
89624_ch07_hr_241-278.indd 247 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The objectives should be performance centered. Performance-centered objectives
typically include precise terms, such as “to calculate,” “to repair,” “to adjust,” “to con-
struct,” “to assemble,” and “to classify.”8 For example, the stated objective for one training
program might be, “Employees trained in team methods will be able to perform the
different jobs of their team members within six months.”
7.3b Assessing the Readiness and Motivation of Trainees
Two preconditions for learning affect the success of those who are to receive train-
ing: readiness and motivation. Trainee readiness refers to whether or not the experi-
ence and knowledge of trainees have made them ready to absorb the training. Do
they have the background knowledge and the skills necessary to absorb what will be
presented?
It is often desirable to group individuals according to their readiness, as deter-
mined by test scores or other assessment information, and to provide alternative
types of instruction for those who need it. The receptiveness and readiness of partici-
pants in training programs can be increased by having them complete questionnaires
A Competency Assessment for a Managerial Position
For each item, select the number that best describes the
manager’s characteristics. For items that do not apply, select
NA (not applicable). For other items for which you lack suf-
ficient observations or documentary evidence, select DK
(don’t know).
4 – Exemplary
3 – Proficient
2 – Progressing
1 – Needs Assistance
NA – Not Applicable
DK – Don’t Know
Competency 1: Behaves professionally and encourages other
staff members to do likewise.
4 3 2 1 NA DK
Evidence:_______________
Competency 2: Behaves ethically and encourages staff
members to do likewise.
4 3 2 1 NA DK
Evidence:_______________
Competency 3: Uses a variety of modes of communication
and conveys information fully and clearly.
4 3 2 1 NA DK
Evidence:_______________
Competency 4: Seeks input from all levels and demonstrates
fairness and consistency.
4 3 2 1 NA DK
Evidence:_______________
Competency 5: Engages in an open style of manage-
ment and is open to criticism from supervisors and
subordinates.
4 3 2 1 NA DK
Evidence:_______________
Competency 6: Searches for and embraces innova-
tive solutions to improve department’s programs and
products.
4 3 2 1 NA DK
Evidence:_______________
Highlights in HRM1
248
89624_ch07_hr_241-278.indd 248 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
249Chapter 7 Training and Development
about why they are attending training and what they hope to accomplish as a result
of it.
The other precondition for learning is trainee motivation. The organization needs
to help employees understand the link between the effort they put into training and the
payoff. Why is the training important? What will happen if it does not occur? More-
over, what is in it for the individual employee? By focusing on the trainees themselves,
managers can create a training environment that is conducive to learning. Unless they
are nearing retirement, most employees are motivated by training if it can help them
perform better, advance their careers, or both.
7.3c Incorporating the Principles of Learning
What makes some types of training more effective than others? Training has to build
a bridge between employees and the organization. One important step in this transi-
tion is giving full consideration to the psychological principles of learning—that is, the
characteristics of training programs that help employees grasp new material, make sense
of it in their own lives, and transfer it back to their jobs. All things considered, training
programs are likely to be more effective if they incorporate the principles of learning
shown in Figure 7.3.
Modeling
Meaningfulness
of presentation
Feedback
and reinforcement
PRINCIPLES
OF LEARNING
Goal
setting
Individual
differences
Active practice
and repetition
Whole-versus-
part learning
Experiential
learning
Massed,
distributed,
and continuous
learning
Principles of LearningFigure 7.3
89624_ch07_hr_241-278.indd 249 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
250 Part 3 Developing Effectiveness in Human Resources
Goal Setting
In some cases, goal setting can simply take the form of a “road map” of the course or
program, its objectives, and its learning points.9 When trainers take the time to explain
the training’s goals and objectives to trainees—or when trainees are encouraged to set
goals on their own—the level of interest, understanding, motivation, and effort directed
toward the training is likely to increase. Allowing employees to undergo training in
areas that they want to pursue can be very motivating, as can enlisting employees to
train other employees with the information they learn. Who in an organization does
not want to be called upon for their expertise?
Meaningfulness of Presentation
Trainees will be better able to learn new information if it is presented using terminology
they can understand and the training is connected with things already familiar to them.
This is the reason why trainers frequently use colorful examples to which trainees can
relate. The examples make the material meaningful. In addition, material should be
arranged so that each experience builds on preceding ones. In this way, trainees are able
to integrate the experiences into a usable pattern of knowledge and skills.
Modeling
The old saying “A picture is worth a thousand words” applies to training. Just as exam-
ples increase the meaningfulness of factual material or new knowledge in a training
environment, modeling increases the salience of behavioral training. In other words,
people learn by mimicking other people. For example, if you were learning to ride a
horse, it would be much easier to watch someone do it—and then try it yourself—than
to read a book or listen to a lecture and hope you can do it right.10
Modeling can take many forms. Real-life demonstrations and recorded demon-
strations, visual aids, pictures, and drawings can get the message across. In some cases,
modeling the wrong behavior can even be helpful if it shows trainees what not to do
and then clarifies the right behavior.
Individual Learning Differences
People learn at different rates and in different ways. Visual learners absorb information
best through pictures, diagrams, and demonstrations. Verbal learners absorb informa-
tion best through spoken or written words. Similarly, some learners who do horribly in
large lecture settings excel in small discussion groups.
Trainers can help accommodate different learning styles in a variety of ways. The
key is to avoid delivering the material in only one way. So, for example, instead of
delivering a monologue, trainers should incorporate variety into their presentations.
They should use visual aids, encourage the participation of learners by including them
in demonstrations, and ask them questions about their own experiences. Hands-on
activities and breaking large groups into smaller groups for specific activities can also
help trainers accommodate different learning styles.11
Active Practice and Repetition
Trainees should be given frequent opportunities to practice what they will ultimately
be expected to do. An individual being taught how to operate a machine should have
an opportunity to practice on it. A manager being taught how to train should be given
supervised practice in training.
89624_ch07_hr_241-278.indd 250 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
251Chapter 7 Training and Development
Practice causes behaviors to become second nature. For example, when you first
learned to drive a car, you focused a great deal on the mechanics: “Where are my hands,
where are my feet, and how fast am I going?” As you practiced driving, you began to
think less about the mechanics and more about the road, the weather, and the traffic.
Other forms of learning are no different—by practicing, a trainee can forget about dis-
tinct behaviors and concentrate on the subtleties of how they are used.
Experiential Learning
Experiential learning refers to the process of learning by experience or “doing,” often out-
side the classroom and without traditional ready-made learning content. Experiential learn-
ing might sound like hands-on learning, which can be a part of experiential learning, but it
is more than that. It involves not only engaging in an activity, but reflecting on it, critically
analyzing it—and potentially improving upon it—and then applying it in new situations
or settings. Benjamin Franklin once said, “Tell me and I forget, teach me and I remember,
involve me and I will learn.” Experiential learning corresponds to the “involve me and I will
learn” part of Franklin’s statement. Simulations, games, and special assignments, which we
will discuss later in the chapter, fall into the category of experiential learning.
Whole-versus-Part Learning
Most jobs and tasks can be broken down into parts that lend themselves to further analysis.
Learning to sell a product is an example. The process can essentially be broken down into
a few discrete steps: finding customer opportunities; uncovering a prospective customer’s
needs by learning the proper questions to ask him or her; presenting the firm’s product in
a way that meets those needs; and finally, learning how and when to ask the customer to
buy the product (closing the deal). If the task can be broken down successfully, it probably
should be to facilitate learning; otherwise, it should probably be taught as a unit.
Programmed instruction, which is also referred to as self-paced learning, is often used
to break down learning into sequences for employees to learn at their own pace. After being
presented with a small segment of information, the trainee is required to answer a question,
either by writing in a response or selecting one on a computer. If the response is correct,
the trainee is presented with the next step (or screen) in the material. If the response is
incorrect, further explanatory information is given, and the trainee is told to try again.
Massed, Distributed, and Continuous Learning
Another factor that determines the effectiveness of training is the amount of time
devoted to practice in one session. Should trainees be given training in five 2-hour
periods or in ten 1-hour periods? It has been found in most cases that spacing out the
training will result in faster learning and longer retention. This is the principle of distrib-
uted learning. Rather than a serious of events, continuous learning is an ongoing process
whereby employees are continually acquiring new skills and knowledge via training,
observing more experienced workers, and asking for help from others when they need it.
A person’s training progress, measured in terms of either mistakes or successes, can
be plotted on a learning curve like the one in Figure 7.4. In many learning situations,
there are times when progress does not occur. Such periods show up on the curve as a
fairly straight horizontal line called a plateau. A plateau can occur because of reduced
motivation or because a person gets discouraged when he or she does not always per-
form a new task as well as hoped. It is a natural phenomenon, and learners usually
experience a spontaneous recovery later, as Figure 7.4 shows.
experiential learning
The process of learning
by “doing,” reflecting on
it, critically analyzing it,
and applying it in new
situations or settings
89624_ch07_hr_241-278.indd 251 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
252 Part 3 Developing Effectiveness in Human Resources
Feedback and Reinforcement
Can any learning occur without feedback? Some feedback comes from trainees them-
selves via self-monitoring, whereas other feedback comes from trainers, fellow trainees,
and the like. Feedback can help individuals focus on what they are doing right and what
they are doing wrong. Think about when you first learned how to throw a baseball, ride
a bicycle, or swim. Someone, perhaps a parent, told you what you were doing right and
what things to correct. As you corrected those things, you perhaps got better.
As a follow-up to training or as part of the training itself, managers can use relatively
simple rewards to discourage undesired behaviors and encourage and maintain desired
behaviors. Doing so is a form of behavior modification. Behavior modification operates
on the principle that behavior that is rewarded, or positively reinforced, will occur more
frequently, whereas behavior that is penalized or unrewarded will decrease in frequency.
The retailer Nordstroms has found that nothing more than words of encouragement
and feedback are needed to strengthen employee behaviors. This approach is often used
in smaller companies that don’t have particularly formal or sophisticated rewards sys-
tems. However, more tangible rewards such as prizes, awards, and ceremonies can help
reinforce desirable behaviors.
Encouragement is most effective when it is given immediately after a trainee suc-
cessfully accomplishes a certain task. This is why some employers, including Nordstroms
and Whole Foods, have instituted spot rewards programs, which award employees “on
the spot” when they do something particularly well during training or on the job. The
awards can consist of cash, gift cards, time off, or anything else employees value.
7.3d Characteristics of Instructors
The success of any training effort will depend in large part on the teaching skills and
personal characteristics of the people doing the training. What separates good train-
ers from mediocre ones? Often a good trainer is one who shows a little more effort or
demonstrates more instructional preparation. However, training is also influenced by
the trainer’s personal manner and characteristics such as his or her knowledge of the
behavior modification
A technique that
operates on the principle
that behavior that is
rewarded, or positively
reinforced, will be exhib-
ited more frequently
in the future, whereas
behavior that is penal-
ized or unrewarded will
decrease in frequency
spot rewards
Programs that award
employees on the spot
when they do something
particularly well during
training or on the job
Time (Weeks)
P
e
rf
o
rm
a
n
c
e
High
Low
Plateau
A Typical Learning CurveFigure 7.4
89624_ch07_hr_241-278.indd 252 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
253Chapter 7 Training and Development
subject, enthusiasm and sincerity, interest in trainees, sense of humor, ability to com-
municate clearly, and willingness to provide individual assistance to trainees. Because
they can have a huge impact on the workforce, organizations should reward managers
who are excellent trainers. Too often managers are not recognized for their contribu-
tions to this important aspect of HRM.
7.4 Phase 3: Implementing the Training
Program—Training Delivery Methods
Have you ever sat through a less-than-great training session and thought to yourself,
“There has got to be a better way to get this material across”? Perhaps what was lacking
was the right training method. Choosing the right one depends on the KSAOs to be
learned. To organize our discussion of various training methods, we have placed them
along the learning continuum shown in Figure 7.5—from learning that is very reactive
and passive to learning that is very active. For example, if the material is mostly factual
or designed to create a shift in employee attitudes, methods such as lecture, classroom,
or online instruction may be fine. However, if the training involves a large behavioral or
skill component, more hands-on methods such as on-the-job training or a special job
assignment are likely to work better.12 In other words, the method should be matched
to the learning outcome you are trying to achieve.
Keep in mind that many of the methods are used to train both nonmanagers and
managers, although some are more used predominantly for one group than the other. In
addition, multiple training methods are often used in conjunction with different types of
learners. Using multiple methods is referred to as blended learning. As Figure 7.6 shows,
traditional classroom instruction delivered by lecturers continues to be the number-one
What training methods
have you personally
experienced? Which
were most effective in
your opinion, and why?
LO 4
OJT/Apprenticeship
Simulation/Game
E-Learning /LMS
Behavior Modeling
Role Playing
Coaching/Feedback
Case Study
Seminar/Conference
Blended Learning
Classroom/Lecture
Learning Outcomes
Tr
a
in
in
g
M
e
th
o
d
s
Special Assignment
Internship/Co-op
Attitudes
P
as
si
ve
(In
te
r)
A
c
ti
ve
Knowledge Skills
Learning Outcomes Differ by Training MethodFigure 7.5
89624_ch07_hr_241-278.indd 253 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
254 Part 3 Developing Effectiveness in Human Resources
training delivery method for formally training employees. However, its popularity has
been steadily dropping relative to electronic-based methods, which we will discuss shortly.
On-the-Job Training
By far the most common informal method used to train employees is on-the-job
training (OJT). By some estimates, 80 to 90 percent of employee learning occurs via OJT.
OJT has the advantage of providing hands-on experience under normal working condi-
tions and an opportunity for the trainer—a manager or senior employee—to build good
relationships with new employees. Figure 7.7 shows the basic steps of an OJT program.
Although it is used by all types of organizations, OJT is sometimes poorly imple-
mented because of its informal nature. To overcome these problems, training experts
suggest firms develop realistic goals and measures for the training as well as plan a spe-
cific training schedule for each trainee. Conducting periodic evaluations after the train-
ing is completed can help ensure employees have not forgotten what they have learned.
KLM Royal Dutch Airlines uses OJT to train its flight attendants. The airline places
trainees in the classroom for a certain period and then gives them additional training
during evaluation flights. On these flights, experienced flight attendants provide OJT
based on a list of identified job tasks. Some tasks, such as serving meals and snacks,
are demonstrated during the actual delivery of services to passengers. Other tasks are
presented to trainees, away from passengers, between meal service.13
An extension of OJT is apprenticeship training. With this method, individuals enter-
ing the skilled trades are given thorough instruction and experience, both on and off the
job. Machinists, aviation mechanics, and electricians are examples of people who hold
skilled-trade jobs. Generally, an apprentice is paid 50 percent of a skilled journey worker’s
wage to start with, but the wage increases at regular intervals as the apprentice’s job skills
on-the-job training
(OJT)
A method by which
employees are given
hands-on experience
with instructions from
their supervisor or other
trainer
apprenticeship training
A system of training in
which a worker entering
the skilled trades is given
thorough instruction
and experience, both on
and off the job, in the
practical and theoretical
aspects of the work
Source: Adapted from “2016 Training Industry Report,” Training (November–December 2016): 36.
Classroom Instruction
Online or Computer
(no instructor)
Virtual Classroom/Webcast/Video Broadcasting
(instructor from a remote location)
Social Media Learning/Collaboration
Mobile Devices
Percentage of Training Hours
Delivered by Method
Blended Learning
2.9%
5%
41%
30.4%
27.5%
16.4%
0 10 20 30 40 50
Training Delivery MethodsFigure 7.6
89624_ch07_hr_241-278.indd 254 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
255Chapter 7 Training and Development
increase. When the apprentice successfully completes the apprenticeship, he or she becomes
a certified journey-level worker earning full pay.14 Case Study 2 at the end of the chapter
explains how Whirlpool Corporation is utilizing apprenticeships to hire new employees.
Apprenticeship programs originated in Europe centuries ago and are still used
extensively there. In the United States, tens of thousands of organizations have registered
their programs with the U.S. Department of Labor’s Office of Apprenticeships and state
agencies. There are apprenticeships available in a wide range of industries, including
construction and manufacturing and the telecommunications, arts, and health fields.
Special Assignments
Special job assignments (discussed in Chapter 5) involve assigning trainees, who are
often but not always on managerial tracks, to different jobs in different areas of a firm,
often in different regions and countries. In some cases, they are groomed by other man-
agers in understudy assignments to do important job functions. Job rotation and lateral
transfers also provide trainees with a variety of hands-on work experiences. Special
projects, task forces, and junior boards give trainees an opportunity to study an organiza-
tion’s challenges, make decisions about them, discuss what aspects of the projects went
right and wrong, and plan and work on new initiatives.
Cooperative Training, Internships, and Governmental Training
Similar to apprenticeships, cooperative training programs combine practical on-the-job
experience with formal classes. For example, a student might alternate work at an orga-
nization for one semester (for pay) and then go to school the next semester. Many
cooperative training
A training program
that combines practical
on-the-job experience
with formal educational
classes
Source: Scott Snell, University of Virginia.
The PROPER Way to Do On-the-Job TrainingFigure 7.7
Prepare. Decide what employees need to be taught. Identify the best
sequence or steps of the training. Decide how best to demonstrate these
steps. Have materials, resources, and equipment ready.
Reassure. Put each employee at ease. Learn about his or her prior
experience, and adjust accordingly. Try to get the employee interested,
relaxed, and motivated to learn.
Orient. Show the employee the correct way to do the job. Explain why it is
done this way. Discuss how it relates to other jobs. Let him or her ask lots
of questions.
Perform. When employees are ready, let them try the job themselves. Give
them an opportunity to practice the job and guide them through rough
spots. Provide help and assistance at first, then less as they continue.
Evaluate. Check the employees’ performance, and question them on how,
why, when, and where they should do something. Correct errors; repeat
instructions.
Reinforce and Review. Provide praise and encouragement, and give
feedback about how the employee is doing. Continue the conversation and
express confidence in his or her doing the job.
P
R
O
P
E
R
89624_ch07_hr_241-278.indd 255 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
256 Part 3 Developing Effectiveness in Human Resources
organizations, including Fannie Mae,
General Motors, Burger King, Champion
International, Cray, Inc., and the insurance
company UNUM, have invested millions
of dollars in educational cooperative train-
ing programs in conjunction with high
schools and colleges.
Internship programs, which we discussed
in Chapter 5, are jointly sponsored by col-
leges, universities, and a variety of organiza-
tions. The programs offer students the chance
to get real-world experience while finding out
how they will perform in work organizations.
Organizations benefit by getting student-
employees with new ideas, energy, and eager-
ness to accomplish their assignments. Some
universities and community colleges allow
students to earn college credits for success-
fully completing internships.
The federal government and various
state governments work together with pri-
vate employers to sponsor training pro-
grams for new and current employees at
career centers nationwide that take place at American Job Centers, which are also known
as “Career One Stop” centers, or “Workforce Development” centers. The centers help
workers find jobs, help employers find qualified workers, and provide job training and
other employment services all under one roof (hence the name One Stop). 3M, Honeywell,
and General Mills are just a few of the companies involved in the One Stop program.15
Simulations
Simulations are used when it is either impractical or unwise to train employees on the
actual equipment used on the job. An obvious example is training employees to oper-
ate aircraft, spacecraft, and other highly technical and expensive equipment. Southwest
Airlines has 10 full-motion 737 flight simulators at its training center adjacent to South-
west’s headquarters at Dallas’s Love Field. During each 4-hour training situation in a
simulator, a flight crew faces more abnormal flight situations than it would in a lifetime.
The Federal Aviation Administration developed a simulator to dramatically speed up
the training of air traffic controllers, a process that used to take as long as 5 years. Vari-
ables such as wind speed, precipitation, and the number of airplanes to be guided can
be adjusted on the simulator to test the ability of trainees.
The distinction between simulators like the cockpits at Southwest Airlines that
move/jostle flight crews about and computer-based simulations has blurred. To train
its forklift operators, the aluminum company Alcoa uses a computer simulation called
Safedock. In the simulation, trainees perform common tasks such as moving loads from
one end of a loading area to the other. If a trainee makes a wrong move, he or she
instantly sees the consequences: The forklift might end up driving off the dock or crash-
ing into another forklift.16 Medical students and doctors are putting on virtual reality
headsets to train for different types of trauma care, too.17
Simulations can also be used to help employees and managers make tactical deci-
sions. Marriott International has a computer program called Business Acumen to train
Apprenticeships are
a good way to recruit
and train employees.
©
ru
nz
el
ko
rn
/S
hu
tt
er
st
oc
k.
co
m
89624_ch07_hr_241-278.indd 256 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
257Chapter 7 Training and Development
its managers on the finer points of hotel operation. The program simulates hotel opera-
tion scenarios such as budgetary decisions.18 The Federal Emergency Management
Agency has used simulations to help managers better respond to crises. In one computer
simulation, a chemical cloud engulfs a city, and managers attempt to respond dynami-
cally to the various problems it creates.
Games
Games are becoming more popular for training purpose, a phenomenon that’s being
referred to as to the “gamification” of learning. Sometimes the games resemble actual
tasks done in the workplace. At other times, the games communicate principles that
can be transferred to the job. Because games have a competitive component and are
fun, trainers have found people are more likely to want to engage with them as well as
remember what they learned from them. Generation Zers and millennials tend to like
them. To train its retail employees, many of whom are younger, Bloomingdales uses
games they can load on a wide variety of devices and play during slow times on the job.
Employees report that the games have given them more confidence in their selling skills
and increased their desire to participate in corporate training.19
Games (and simulations) do not always require a computer, however. Motorola
developed a noncomputer-based simulation called “Equal Employment Opportunity:
It’s Your Job” to teach the basic principles of equal employment opportunity to manag-
ers. Trainees get caught up in the competitive spirit of the game and at the same time
absorb and remember government regulations. They also become aware of how their
own daily decisions affect their employer’s compliance with these regulations.
E-Learning
The training methods we just discussed are evolving into what trainers today refer to
as e-learning. E-learning covers a wide variety of electronic applications such as Web
and computer-based training (CBT), and social networks. It includes the delivery of
e-learning
Learning that takes place
via electronic media
Pilots are trained
with flight simulators
to help them make
the right decision
for critical situations
without the risk.
A
rt
er
ra
/G
et
ty
Im
ag
es
89624_ch07_hr_241-278.indd 257 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
258 Part 3 Developing Effectiveness in Human Resources
content via the Internet, intranets and extranets, mobile devices, DVDs, podcasts, and
“virtual classrooms” found in the gaming platform Second Life.20 E-learning need not
be expensive. Many e-learning training programs use existing applications employ-
ees are familiar with such as PowerPoint, Word, Adobe Acrobat, and audio and video
files that can be easily uploaded and viewed or listened to online using computers and
mobile devices.
Increasingly, e-learning involves the use of a learning management system (LMS),
which combines a company’s e-learning, employee assessment tools, and other train-
ing functions into one electronic tool, often custom built for the firm by software ven-
dors. Using the software, managers can assess the skills of employees, register them
for courses, deliver interactive learning modules directly to employees’ desktops when
they need or want them, evaluate and track their progress, and determine when they
are ready to be promoted.
A major advantage of e-learning is that it allows the firm to bring training to employ-
ees, which is generally more efficient and cost effective than the other way around. The
nuclear power plant industry is a case in point: Nuclear power plant training is frequent
and time consuming. For workers just to remove their protective gear and commute to
a separate training venue can take an hour or more. One nuclear power company that
switched to e-learning reported that it saved nearly $1 million and 10,000 employee-
hours in a single year by doing so.21
Just-in-Time Training and Microlearning E-learning also allows companies to offer
individual training to employees exactly when and where they need it, which is referred
to as just-in-time training. Just-in-time training helps alleviate the boredom trainees
experience during full-blown training courses, and employees are more likely to retain
the information when they can immediately put it to use.
learning management
system (LMS)
Online system that pro-
vides a variety of assess-
ment, communication,
teaching, and learning
opportunities
just-in-time training
Electronic training
delivered to trainees
when and where they
need it to do their jobs
Virtual reality headsets
are being used to train
people in different
occupations, includ-
ing people in medical
occupations. iSt
oc
kp
ho
to
.c
om
/y
oh
4n
n
89624_ch07_hr_241-278.indd 258 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
259Chapter 7 Training and Development
Microsoft has created hundreds of short audio and video clips the company’s sales
professionals can download onto their mobile devices as they need them. Long training
courses pulled people away from making sales, and with so many products continually
being launched, it was difficult for them to keep up to date if they had to take frequent
training sessions. Also, employees didn’t remember the training if they could not put it
to use immediately.22
To be sure, shorter training sessions are definitely a growing trend. Duolingo is
one of a number of e-learning companies that offers microlearning training sessions.
Microlearning refers to training sessions that take place in very short timeframes, usu-
ally 5 minutes or less. Between rides, Uber drivers in Colombia, Brazil, and Mexico can
use the Duolingo app to improve their English-language skills. When the drivers com-
plete a certain number of lessons, they are allowed to provide rides to English-speaking
riders.23 Microlearning and just-in-time training are examples of distributed learning
rather than mass learning.
MOOCs Recall from Chapter 1 that a MOOC is an online course anyone can take.
Although they were initially used in academia, MOOCs are now being used by busi-
nesses. To help its client companies find web developers with coding experience, the
recruiting company Aquent launched a MOOC. Thousands of people signed up for a
coding course Aquent hosted. A couple of hundred went on to get jobs.24
Rather than developing their own MOOCs, Bank of America, Qualcomm, and
other firms are assigning employees content aligned to their training in already-existing
MOOCs. There are literally thousands of MOOCs. Udacity, edX, Coursera, and Khan
Academy are some of the major MOOC providers.
Like other types of online learning, the lack of contact with other people can be
a problem for some learners. Some MOOCs allow students to have classroom discus-
sions virtually with other people. Others include application assignments and projects.
Still others allow instructors to record audio comments or videos about what’s going
on in the course each week, which can help keep learners engaged.25
Social Media About 5 percent of the training hours delivered to employees involve
social media sites, such as blogs and wikis (sites where people can post information as
they can on Wikipedia).26 When U.S. soldiers were having problems using a grenade
launcher, a unit commander posted a question on one of the Army’s internal social
media sites. Shortly thereafter, someone who had experienced a similar problem posted
a simple solution. The Cheesecake Factory restaurant chain trains employees by letting
them upload and share video snippets on job-related topics, including how best to pre-
pare certain foods and provide good customer service.27
Workplace by Facebook and Yammer are two corporate social media tools firms can
use, but even a basic community page on LinkedIn or Facebook will work: A trainer can
set up a page to provide information about an upcoming training session, post materials
for it, and engage participants by allowing them to ask questions, volunteer answers, and
collaborate with one another before and after the session.28
Behavior Modeling
Behavior modeling is a learning approach in which work behaviors are modeled, or
demonstrated, and trainees are asked to mimic them. Behavior modeling consists of
four basic components:
1. Learning points. For example, the learning points might describe the skill, why
it’s important for trainees to learn, and when it should be utilized.
microlearning
Training sessions that
take place in a very short
timeframe, usually 5 min-
utes or less
behavior modeling
A learning approach in
which work behaviors
are modeled, or demon-
strated, and trainees are
asked to mimic them
89624_ch07_hr_241-278.indd 259 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
260 Part 3 Developing Effectiveness in Human Resources
2. Modeling. Participants might view a video in which a manager deals with an
employee in an effort to improve his or her performance. The manager would model
how specifically to deal with the situation and demonstrate the learning points.
3. Practice. Trainees then practice the behaviors modeled.
4. Feedback and reinforcement. The trainer and other trainees reinforce the behavior
with praise, approval, encouragement, and attention. Digitally recording the ses-
sions can also be very instructive.
Behavior modeling seems to work, according to various studies. Military training
is a classic example of how behavior modeling can work. Drill sergeants model the
behavior expected of new recruits, who, in turn, by emulating them, develop discipline
and confidence.29
Role-Playing
Role-playing consists of playing the roles of others, often a supervisor and a subordinate
who are facing a particular problem, such as a disagreement or a performance problem.
Role-playing is used not only for managers, but also to train salespeople to question
customers to understand their needs for goods and services. Health care professionals
also use role-playing to learn to question patients and be empathetic and sensitive to
their concerns. Virgin America uses role-playing exercises to help employees lean how
to deal with irate or unruly passengers.
Computer programs that simulate role-playing have also been developed. Virtual
Leader, a product by SimuLearn, is one such program: Management trainees interact with
animated “employees”—some of whom are more cooperative than others. The trainees are
then given feedback as to how well they applied their managerial skills to each situation.
Coaching
Coaching consists of a continuing flow of instructions, comments, and suggestions from
the manager to a subordinate. Coaching is more than just a flow of instruction though.
It is a flow of encouragement and support meant to help people not just do their jobs
right and get ahead but become leaders.
Part of coaching involves talking to one’s employees about what their goals are and
being excited about their achieving those goals, even if it means good employees will
ultimately leave your department and you will have to replace them with new ones and
begin the process anew. Once a manager understands the employee’s goals, the manager
can design ways to help them grow their skills by taking on new leadership responsibili-
ties, training and mentoring other employees, spearheading projects, and then providing
the individual with performance feedback on.30
One way to coach employees being groomed as managers is to allow them to par-
ticipate in managers’ staff meetings. This can help them become more familiar with the
problems and events occurring outside their immediate areas and how they are handled
by exposing them to the ideas and thinking of other managers. Note, however, that coach-
ing is important for all employees to receive—not just employees who are on managerial
tracks. Many top managers as well as rank-and-file employees say that without coaching
they would never have accomplished for their organizations what they might have.
Case Studies
A particularly useful method used in classroom learning situations is the case study. The
FBI’s Integrated Case Scenario method is used as part of a multiweek training program
for all new FBI agents. Using documented examples, case-study participants learn how
89624_ch07_hr_241-278.indd 260 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
261Chapter 7 Training and Development
to analyze (take apart) and synthesize (put together) facts, become conscious of the many
variables on which management decisions are based, and, in general, improve their deci-
sion-making skills.31 Figure 7.8 provides a set of guidelines for when and how to conduct
case studies.
Seminars and Conferences
Seminars and conferences, like classroom instruction, are useful for bringing groups of
people together for training and development. Seminars and conferences can be used
to communicate ideas, policies, or procedures, but they are also good for raising points
of debate and discussing issues (usually with the help of a qualified leader) that have
no set answers or resolutions. For this reason, seminars and conferences are often used
when change is an organization’s goal.
Outside seminars and conferences are often conducted jointly with universities
and consulting firms. Associations and third-party organizations, such as the American
Management Association, the Conference Board, and the Center for Creative Leader-
ship, also offer many different types of management seminars. The construction and
mining equipment manufacturer Caterpillar is one company that, in conjunction with
an outside consulting firm, has developed a training program to groom new managers
so it would have enough of them to effectively run the company in the coming decade.
Caterpillar began with a series of high-level meetings and strategy sessions. Out of those
meetings 11 characteristics were identified that the company seeks in its managers and
leaders.
Classroom (Lecture) Instruction
You might wonder why firms use classroom training when so many other interactive
(often electronic) methods are available. Some of the advantages of classroom instruc-
tion relate to motivation and attendance. Have you ever taken a self-paced course that
lacked a classroom setting? If so, you might have had a hard time completing it. As
one professor put it, “When it comes to learning, just getting to class is half the battle.”
In addition, if a trainee experiences problems, a live instructor is generally in the best
position to help the trainee.
Classroom training need not necessarily take place in a classroom per se. Electronic
Data Systems uses videoconferencing to train its employees wherever they are in the
world rather than having them travel to one location. The company conducted a “coach-
ing skills for leaders” program for 1,500 managers in 41 countries via videoconferencing.
When Using Case Studies …
• Decide which goals can best be achieved by using case studies.
• Identify available cases that might work or consider writing your own.
• Set up the activity—including the case material, the room or place, and the schedule.
• Give all participants a chance to take part in the discussions and activities and try to keep
the groups small.
• Bridge the gap between the theories presented in case studies and how they can actually
be put into practice in your organization.
Case StudiesFigure 7.8
Source: Adapted from Albert A. Einsiedel Jr., “Case Studies: Indispensable Tools for Trainers,” Training and Development
(August 1995): 50–53.
89624_ch07_hr_241-278.indd 261 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
262 Part 3 Developing Effectiveness in Human Resources
Blended Learning
Blended learning is the use of both in-person classroom learning and online learning.
Blended learning is effective because different people learn better in different ways, and
it breaks up the tedium of a single learning technique. For example, to instruct flight
crew trainees, airlines play actual cockpit audio recorded on airplanes involved in acci-
dents. After listening to the recordings, the trainees discuss the behavior of the crew
during the crisis. Recordings of trainees themselves can also be used. Golf and tennis
coaches frequently record their students to let them see their mistakes and then provide
them with verbal instructions for improvement. Figure 7.6 shows blended learning is
the third most common way firms deliver training to their employees.
7.5 Additional Training and
Development Programs
In addition to training to address the demands of a particular job, many employers
develop training programs to meet the special needs of employees. In this final section,
we summarize some of these programs, including orientation training and onboarding,
basic skills training, team training, cross-training, and ethics and diversity training.
Intercultural training will be covered in Chapter 15.
7.5a Orientation and Onboarding
Orientation is the formal process of familiarizing new employees with the organiza-
tion, their jobs, and their work units. Like training, which emphasizes the what and the
how, orientation often stresses the why. It outlines the organization’s philosophy and is
designed to influence employee attitudes about their role and work they will be doing.
An organization’s HR department ordinarily is responsible for coordinating orienta-
tion activities and providing new employees with information about their conditions of
employment, pay, benefits, and other areas not directly under a supervisor’s direction.
Those responsible for conducting the orientation often use checklists so no aspect of the
orientation is overlooked. The checklist would include such things as (1) an introduc-
tion to other employees, (2) an outline of training, (3) attendance, conduct, and appear-
ance expectations, (4) the conditions of employment, such as hours and pay periods,
(5) an explanation of job duties, standards, and appraisal criteria, (6) safety regulations,
(7) a list of the chain of command, and (8) an explanation of the organization’s purpose
and strategic goals. Highlights in HRM 3 shows the types of materials new hires can be
given and the various steps that can ease their transition into the workplace.32 To be sure
no materials are forgotten, companies often post orientation materials on their intranets
and then provide new hires with passwords to access the sites.
Some organizations combine orientation programs with computer-based training.
Macys cut its orientation training time in half this way, orienting 2,500 new employees
in just 6 weeks. New hires at SumTotal Systems, an e-learning company based in Bel-
levue, Washington, go online for virtual tours of the company’s various departments
with introductions to company leaders sprinkled throughout. Of course, these types
of programs supplement—but do not replace—the value of face-to-face orientations.33
Onboarding is the process of systematically socializing new employees to help
them get “on board” with an organization. Onboarding goes beyond just orienting new
employees to their new environment. It brings them into the organization’s fold so that
blended learning
The use of both in-person
classroom learning and
online learning
orientation
The formal process
of familiarizing new
employees with the
organization, their jobs,
and their work units
onboarding
The process of system-
atically socializing new
employees to help them
get “on board” with an
organization
To what extent do
firms need to utilize
additional training pro-
grams? Does it depend
on the type of firm or
the types of employees
who need training?
LO 5
89624_ch07_hr_241-278.indd 262 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
they truly feel as if they are a part of it. This is important because new hires are at a high
risk of quitting.
Many new hires quit their jobs not because they can’t handle the job tasks but
because they are going through culture shock within the new organization. When new
employees quit soon after being hired, companies are then forced to begin recruiting,
interviewing, and screening candidates all over again. The best recruiting and selection
processes are therefore of little value if a firm is not able to retain the people it hires.
To help new hires avoid culture shock, some companies make videos and podcasts
available to them before they even begin work. The mission and goals of an organiza-
tion, a mini-tour of its facilities, and interviews with current employees talking about
what they like about the organization are featured. Executives are often featured as well,
which helps new hires develop an early understanding of who’s who in the organization.
In some firms, experienced coworkers serve as volunteer “sponsors,” or buddies,
for incoming employees. In addition to providing them with practical help they are an
important source of information about the culture of the organization, different work-
groups, and what is expected of employees. These relationships help with the socializa-
tion of new employees and contribute significantly to their long-term success within
the organization. PepsiCo has a buddy system for new hires. The company’s Barcelona
unit created a YouTube video explaining where they need to go on their first day and
what to expect. They also get a set of written information, and a box of PepsiCo chips
and sodas as a welcome gift.
Southwest Airlines approaches onboarding as a welcoming party. “It was so much fun
and so informative,” remarked one eager new employee after Southwest’s onboarding pro-
cess.34 New employees always start on Fridays at CityMax.com, a build-your-own-website
service in Vancouver, British Columbia. On Fridays, people are in a better mood, more
relaxed, and are more willing to spend time getting to know new hires.35
Checklist for Orienting New Employees
Orientation Items
�� Welcome information outlining the company back-
ground’s, corporate vision, and mission statement
�� Map of the facility, including parking information
�� Computer passwords, security cards, and parking
decals
�� Current organizational chart
�� Information about where to find the firm’s corporate
news, intranet sites, and bulletin boards
�� Phone numbers, email addresses, and locations of key
personnel and help desk personnel
�� A copy of the employee’s specific job goals and job
description
�� Lists of unique terms in the industry, company, and job
�� Training class schedules
�� Safety and emergency procedures
�� The organization’s policy handbook, including the
firm’s EEOC policies, office hours, dress code, vacation,
and email and Internet rules
�� List of employee benefits, including insurance plans
�� Holiday schedule
Follow-Up Activities
�� Ensure that employee has completed the required
paperwork, including benefit enrollment forms
�� Revisit the employee’s performance standards
�� Schedule the employee’s first performance appraisal
meeting
Highlights in HRM2
263
89624_ch07_hr_241-278.indd 263 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
264 Part 3 Developing Effectiveness in Human Resources
7.5b Basic Skills Training
Remedial, or basic skills, training for adults has grown to be a full-blown educational
industry on which businesses now spend billions of dollars annually. A report by the
National Endowment for the Arts recently concluded that employers ranked the lack of
reading and writing skills as the top deficiencies in new hires. Although literacy levels
today are similar to what they were in 1970, the economy has changed drastically since
then. Most U.S. workers today need to be able to read and analyze complex, often very
technical material to succeed. Recently the Pew Research Center conducted a survey
of young people between the ages of 18 and 34 and found that most of them felt they
lacked the education and training to get ahead, a situation exacerbated by the high cost
of college. “Jobs that don’t have much in the way of skills have moved out of the United
States or are not living-wage jobs,” says Timothy Shanahan, a professor of urban educa-
tion and reading at the University of Illinois at Chicago. The basic skills employees need
in addition to reading, writing, and computing include speaking, listening, problem-
solving, working in teams, and leading other people.36
Smith & Wesson, Hewlett-Packard, Motorola, and the City of Phoenix instituted
basic skills assessment programs to teach reading, math, and communication skills to
employees who show some level of deficiency. Ford, Polaroid, United Technologies,
and AT&T are among the many companies who now offer remedial courses to their
employees, many of which are conducted in-house.
The National Institute for Literacy connects employers, learners, volunteers, social
service providers, and others with literacy programs in all 50 states and U.S. territories.
Employees and employers need only go to the institute’s online directory and type in
their locations to find the literacy help centers nearest them. A number of states offer
businesses tax credits for conducting remedial training (and other types of training) for
their employees.37
Recognizing that the skills gap is increasing, colleges and companies have begun
teaming up to bridge the gap. For example, Pierce College, a 2-year college in California
(which had previously concentrated on preparing students for 4-year colleges), now
provides remedial instruction to employees at the offices of more than 30 companies in
the San Fernando Valley area, where the college is located.
To implement a successful program in basic and remedial skills, managers should
do the following:
1. Explain to employees why and how the training will help them in their jobs.
2. Relate the training to the employees’ goals.
3. Respect and consider participants’ experiences and use them as a resource.
4. Use a task-centered or problem-centered approach so that participants learn by
doing.
5. Give employees feedback on their progress toward meeting their learning objectives.
7.5c Team Training
As we discussed earlier in the book, organizations rely on teams to help them attain their
strategic and operational goals. Whether the team is an aircrew, a research team, or a
manufacturing or service unit, the contributions of the individual members of the team
are not only a function of the KSAOs of each individual but also of the interaction of
89624_ch07_hr_241-278.indd 264 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
265Chapter 7 Training and Development
the team members. The teamwork behaviors of effective teams are shown in Figure 7.9.
Team training focused on team roles, group dynamics, and problem-solving provides
skills needed to function effectively as a team.38
Games are often used in team training as is adventure-based learning. Adventure-
based learning is the use of adventures, such as games, trust activities and problem-
solving initiatives for the personal and social development of participants.39 Combine
the TV shows The Amazing Race and Survivor with corporate training, and you will get
an idea of what adventure-based learning is. Adventure-based learning is a type of expe-
riential learning (learning by experience). Facebook, Google, Reebok, Coca-Cola, and
Dell are among the companies that have utilized adventure-learning for team-building
purposes.
How effective is the adventure-based learning method? It depends. “The most
creative way to teach valuable lessons of leadership and communication is to engage
employees in an unexpected activity that is carefully designed and backed by parallels to
real-life situations,” says Chad Michael, the founder of AdVenture Games, a San Diego
company that provides corporate training. “If the team building activity does not come
with lessons learned and a creative way to instill valuable skill sets, the investment is no
more effective than an afternoon at the park.”
adventure-based
learning
The use of adventures,
such as games, trust
activities, and problem-
solving initiatives,
for the personal and
social development of
participants
PROCESS DYNAMICS
• Meeting skills
• Problem solving
• Brainstorming
• Decision making
• Negotiation skills
• Goal setting
• Presentation skills
• Process analysis
• Task evaluation
• Customer/vendor analysis
• Project planning
• Information management
• Creativity
BEHAVIOR DYNAMICS
• Member communications
• Conflict resolution
• Building trust
• Establishing norms
• Handling difficult members
• Diversity awareness
• Team development stages
• Team issues/concerns
• Team benefits
• Features of good teams
• Negotiations
TEAM TRAINING
Team Training SkillsFigure 7.9
89624_ch07_hr_241-278.indd 265 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
266 Part 3 Developing Effectiveness in Human Resources
7.5d Cross-Training
Closely related to team training is cross-training. Cross-trained employees learn how to
do different jobs within an organization as well as their own. Part of the motivation for
cross-training is that it gives firms flexible capacity. Workers can be shifted when and
where they are needed. Cross-training represents a shift from Henry Ford’s assembly
line production to flexible production. Coca-Cola’s Fountain Manufacturing Opera-
tion (which makes the syrup for Coke and Diet Coke) developed team training for its
manufacturing employees. The program focuses on three skill categories: (1) technical,
(2) interpersonal, and (3) team action. The technical component, called Four-Deep
Training, requires each individual to learn four different jobs to allow for team flexibility.
Some companies have used cross-training to keep their workers and plants in the
United States versus offshoring them. Pace Worldwide, a Maryland-based company that
sells soldering equipment, watched all of its competitors move offshore. To compete
with its low-cost rivals abroad, Pace grouped workers into teams and trained each team
to build an entire product as well as different products. “Some of the people could only
do certain things, and if they had no work, they would just sit and wait,” said one Pace
manager. “Now they have ownership of it all.” Employees have an incentive to learn
because their hourly wages get bumped up as they master more skills.
Now Pace builds products to meet actual customer demand rather than storing
inventory, which is more costly, and it has been able to shorten its production times and
move its operations into one building versus two.
By keeping workers interested and motivated, cross-training can cut turnover,
increase productivity, pare down labor costs, and lay the foundation for careers rather
than dead-end jobs. At Boston’s The Gourmet Pizza, employees begin cross-training
their first day on the job. They cycle through every function in the back and front of the
restaurant and then plot their own course. If they are interested in the bar, they have the
cross-training
The process of train-
ing employees to do
multiple jobs within an
organization
AdVenture Games is
a San Diego-based
company that pro-
vides companies with
adventure-based
games. The games are
designed to improve
employees’ strategic
leadership and cre-
ativity, among other
things.
iS
to
ck
.c
om
/B
lu
Iz
60
89624_ch07_hr_241-278.indd 266 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
267Chapter 7 Training and Development
opportunity to work there in various positions; those who want to become managers
or franchise owners learn the entire operation, a process that takes 8 to 12 months.40
In addition to making them more productive, research shows that cross-training gives
employees the “big picture,” making them more creative and better problem-solvers.41
7.5e Ethics Training
Ethics training became more prevalent in companies following a number of high-profile
corporate scandals in the early 2000. Corporate scandals are, of course, not new to the
twenty-first century. The most common forms of ethics violations, such as harassment,
health and safety, and wage-and-hour violations, are related to employment laws.
Government contractors and subcontractors with contracts that last for 120 days
or more and are more than $5 million are required by law to have business ethics codes
and compliance policies and procedures. Other organizations are not legally required
to. However, in the event of a violation, those that have “effective programs to prevent
and detect violations of law” will face reduced penalties under U.S. federal sentencing
guidelines.
Workers who are responsible for areas that expose them to ethical lapses are likely
to require special training. Employees who do the purchasing for their firms are one
example. Likewise, some firms offer special training to their overseas personnel who
work in countries in which corruption and bribery are prevalent. (We will talk more
about bribery in Chapter 15, which covers international topics.) Bringing in an outside
expert trained in ethics or values-based management can be helpful as can surveying
employees, managers, and sometimes even customers about what they believe the ethi-
cal state of their companies are and where improvements could be made. Other efforts a
firm can take to ensure employees at all levels are behaving ethically and legally include
establishing toll-free ethics hotlines and secure email addresses where employees can
confidentially report violations they have noticed.
Some firms have chief ethics officers—high-ranking managers directly responsible
for fostering the ethical climate within their firms and ensuring compliance. The Busi-
ness Roundtable Institute for Corporate Ethics, the Ethics Resource Center, and Ethics &
Compliance Officer Association are some additional sources human resource managers
can turn to in order to develop ethics training programs. Keep in mind, however, that
employees take their cues from top managers and mirror their behavior. If these people
don’t behave ethically, no ethics training program within a company can be effective.
7.5f Diversity and Inclusion Training
Diversity training programs were designed in response to an increase in globalization, an
awareness of the varied demographics of the workforce, challenges of affirmative action,
dynamics of stereotyping, changing values of the workforce, and potential competitive
payoffs from bringing different people together for a common purpose. There are basi-
cally three types of diversity training: (1) awareness building, which helps employees
appreciate the benefits of diversity; (2) training to prevent discrimination, harassment,
and associated lawsuits, which for some firms is a major reason why they conduct them;
and (3) skill building, which provides employees with the KSAOs necessary for working
with people who are different from them with regard to race, gender, and age.42
The San Francisco 49ers football team underwent diversity training after Lindsey
McLean, a retired gay trainer with the team, admitted publicly that he was gay and that
chief ethics officers
A high-ranking manager
directly responsible for
fostering the ethical
climate within the firm
89624_ch07_hr_241-278.indd 267 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
268 Part 3 Developing Effectiveness in Human Resources
he had endured taunts and humiliation from players at times during his 24 years with
the 49ers. “We’re trying to create an environment where we can talk about these things
and eliminate the problems and violence that can take place and help them understand
that they can create an environment that people can work in, even if they are different,”
said one 49ers manager.43
The effectiveness of diversity training has come to be debated, however. A compre-
hensive review of 31 years of data from 830 midsize to large U.S. workplaces found that
following diversity training even fewer minorities and women were being promoted into
management at firms. But that does not necessarily mean that diversity training in and
of itself has led to fewer promotions for women and minorities. Moreover, not all diver-
sity training was ineffective, the review found. Rather, it showed that mandatory pro-
grams—solely avoiding liability in discrimination lawsuits—were the problem. When
diversity training is voluntary and undertaken to increase awareness of the problem and
advance a company’s business goals, it can be quite effective.44 This is one of the reasons
why companies are increasingly focusing on inclusion. An inclusive workplace is one in
which people are treated fairly and with respect, and are supported and encouraged to
participate in all aspects of the organization.
7.6 Phase 4: Evaluating the Training Program
How can you figure out whether the training program you conducted was successful? A
variety of methods are available to assess the extent to which a firm’s training programs
improve learning, affect behavior on the job, and impact the bottom-line performance
of an organization. Figure 7.10 shows that four basic criteria are available to evaluate
training: (1) reactions, (2) learning, (3) behavior, and (4) results. Some of these criteria
are easier to measure than others, but each is important in that it provides different
information about the success of the training. The combination of these criteria can
give a total picture of a training program to help managers decide where problem areas
lie, what to change about the program, and whether to continue it.
Criteria for Evaluating TrainingFigure 7.10
Reactions
L
e
a
rn
in
g
Results
B
e
h
a
vi
o
r
89624_ch07_hr_241-278.indd 268 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
269Chapter 7 Training and Development
7.6a Criterion 1: Reactions
One of the simplest approaches to evaluating a training program is to assess participants’
reactions to it. In addition to indicating whether they enjoyed the training, they can give
insights into the content and techniques they found most useful. They can critique the
instructors, suggest ways to improve the training, and indicate whether or not it should
be continued.
However, positive reactions to a training session are no guarantee it has been suc-
cessful. It may be easy to collect glowing comments from trainees, but as gratifying as
this information is, it may not be useful to the organization unless it translates into
tangible, improved on-the-job performance based on the firm’s strategic goals. Reaction
measures should not stop with assessing the training’s entertainment value.45
7.6b Criterion 2: Learning
Beyond what participants think about the training, did they actually learn anything?
Testing the knowledge and skills of trainees before and after a training program will
help determine their improvement. The skill and knowledge levels of employees who
have undergone a training program can also be compared to employees who have not.
Federal Express took this approach. The company studied 20 van drivers who attended
a weeklong new hire training program. The company then compared the performance
of these drivers with a control group of 20 drivers who had received only OTJ training.
FedEx found that the drivers who had been formally trained made fewer package pro-
cessing errors, saving the company about $500 per trained driver.46
7.6c Criterion 3: Behavior
The transfer of training refers to how well employees apply what they have learned to
their jobs. There are several ways to assess the transfer of learned skills back to the job.
At Xerox, trainers observe trainees once they return to their regular positions, interview
the trainees’ managers about their progress later on, and examine their post-training
performance appraisals.
You might be surprised to learn that much of what is learned in a training program
never gets used back on the job. To maximize the transfer of training, managers and
trainers can take several approaches:
1. Feature identical elements. Have conditions in the training program come as close
as possible to those on the job. For example, instead of verbally explaining a
manufacturing process, it is better to demonstrate it on a factory floor.
2. Focus on general principles, if necessary. When jobs change or the work environment
cannot be matched exactly, trainers often stress the general principles behind the
training rather than focusing on rote behavior. This approach helps trainees learn
how to apply the main learning points to varying conditions on the job.
3. Establish a climate for transfer. In some cases, trained behavior is not imple-
mented because old approaches and routines are still reinforced by people within
the organization. To prevent this kind of problem, firms need to encourage their
managers to embrace the strategic changes their organizations are seeking to
implement and reinforce and reward trainees for applying the new skills or
knowledge.
transfer of training
The effective application
of principles learned to
what is required on the
job
89624_ch07_hr_241-278.indd 269 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
270 Part 3 Developing Effectiveness in Human Resources
4. Give employees transfer strategies. Particularly in settings that are not conducive
to transfer, managers should provide trainees with strategies and tactics for deal-
ing with their transfer environment. One approach, called relapse prevention (RP),
teaches individuals how to anticipate and cope with the inevitable setbacks they will
encounter back on the job—that is, a relapse into former behaviors.47
7.6d Criterion 4: Results, or Return on Investment (ROI)
Human resource managers are under pressure from top managers to show that their
training programs produce bottom-line results.48 Most organizations today measure
their training in terms of its return on investment (ROI), which is also sometimes
referred to as the utility the firm gets for its training dollars. A company’s ROI refers to
the benefits it derives from training compared to what it costs.
The benefits can include higher revenues generated, increased productivity,
improved quality, lower costs, more satisfied customers, higher job satisfaction, lower
employee turnover, and greater innovation. To put a dollar value on these benefits, HR
managers use various types of data such as sales data, human resources and financial
data, and employee survey and control group data gathered from various sources within
the organization.
To put a dollar value on the firm’s training costs, the company calculates the direct
costs of the programs (materials, software, employee travel and meals, meeting site
costs, equipment, trainers’ salaries or fees, etc.) as well as the indirect costs of the pro-
grams (participants’ salaries and the productivity they lose while they are attending the
training).
Recall that benchmarking is the practice of comparing data and statistics from
your operations, such as training, against those of recognized leaders in your industry.
The American Society of Training has developed training benchmarks from hundreds
of different companies to which other firms can compare the data on their training
costs, staffing, administration, design, development, and delivery of training programs.
Benchmarks such as these can help organizations evaluate their current and future
training programs. Highlights in HRM 3 shows several aspects of training that can be
benchmarked.
As e-learning continues to change training, the benchmarks for it are changing as
well. Measures such as the extent to which learning content has been accessed, down-
loaded, and the ratings given it by users are likely to become new measures of how well
a firm’s training programs are working.49
Some HR experts think managers can get overly preoccupied with ROI calculations
and benchmarking. Why? Because often the benefits of training can be intangible or
take a long time to appear. Measuring participants’ reactions can be done immediately,
of course. However, measuring improved employee skills, customer satisfaction, and
so forth can take somewhat longer, and factors other than training can also affect these
measures. Finally, the development of groundbreaking new products or processes can
also be sparked by training but take years to develop, making them hard to attribute to
training. Developments such as these nonetheless can transform organizations.
The key to improving a training program’s effectiveness is continually evaluating it.
The information generated by the evaluations then feeds back into Phase 1 of the train-
ing process, as shown in Figure 7.1. By tying the training closely to key performance
metrics and then measuring the training’s impact against them, a firm will be in a better
position to improve its programs over time.50
89624_ch07_hr_241-278.indd 270 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Benchmarking HR Training
MEASUREMENT HOW TO CALCULATE
Percent of payroll spent on training Total training expenditures 4 total payroll
Training dollars spent per employee Total training expenditures 4 total employees served
Average training hours per employee Total number of training hours (hours 3 participants) 4 total employees trained
Percent of employees trained per year Total number of employees receiving training 4 total employee population
HRD staff per 1,000 employees Number of human resource development staff 4 total employee population
3 1,000
Cost savings as a ratio of training Total savings in scrap or waste 4 dollars invested expenses in training
Profits per employee per year Total yearly gross profits 4 total number of employees
Training costs per student hour Total costs of training 4 total number of hours of training
Highlights in HRM3
The types of training given employees range
from simple, on-the-job instruction to sophisticated
skills training conducted on multimillion-dollar simu-
lators. Training programs cover a broad range of sub-
jects and involve personnel at all levels. The goal of
training is to contribute to an organization’s overall
strategic goals. To be effective, training programs need
to be developed systematically. This approach consists
of four phases: (1) needs assessment, (2) program
design, (3) implementation, and (4) evaluation.
The needs assessment phase begins with an
organization analysis. Managers must establish a con-
text for training by deciding where training is needed,
how it connects with their firms’ strategic goals, and
how their companies’ resources can best be used in
terms of training. A task analysis is used to identify
the knowledge, skills, and abilities employees need. A
person analysis is used to identify which people need
training.
When designing a training program, managers
need to consider the two preconditions for learning:
the readiness and motivation of trainees. In addition,
the principles of learning should be considered to
LO 1
LO 2
LO 3
Summary
create an environment that is conducive to learning.
These principles include goal setting, the meaning-
fulness of presentation, modeling, individual dif-
ferences, active practice and repetition, experiential
learning, whole-versus-part learning, massed, dis-
tributed, and continuous learning, and feedback and
reinforcement.
A wide variety of methods are available to train
personnel. On-the-job training is one of the most com-
monly used methods. Apprenticeship training and
internships are especially effective. On-the-job expe-
riences include coaching, understudy assignments,
job rotation, lateral transfers, project and committee
assignments, and staff meetings. Off-the-job experi-
ences include analysis of case studies, role-playing,
and behavior modeling.
Classroom training is still the most popular way
to train employees. However, e-learning methods,
such as simulations, games, just-in-time learning,
microlearning, and social media are rapidly becom-
ing more popular. Using multiple methods, or what
is called blended learning, has been found to be most
effective.
LO 4
271
89624_ch07_hr_241-278.indd 271 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
272 Part 3 Developing Effectiveness in Human Resources
What economic, social, and political forces
have made employee training even more
important today than it was in the past?
What analyses should be done to determine
the training needs of an organization? After the
needs are determined, what is the next step?
Which principles of learning do you see dem-
onstrated in your own classes? In what ways
might you bring other principles into them?
Suppose that you are the manager of an
accounts receivable unit in a large company.
LO 1
LO 2
LO 3
LO 4
You are switching to a new system of billing
and record-keeping and need to train your
three supervisors and 28 employees in the new
procedures. What training method(s) would
you use? Why?
Participants in a training course are often
asked to evaluate the course by means of a
questionnaire. What are the pros and cons of
this approach? Are there better ways of evalu-
ating a course?
LO 5
Discussion Questions
Employers develop different training programs
for various purposes. Orientation training allows new
hires to more quickly acquire the knowledge, skills, and
attitudes that increase the probabilities of their success
within the organization. Onboarding programs help
new hires feel like they truly are a part of a firm. This is
important because new hires are at a high risk of quit-
ting. Basic skills training, team and cross-training, eth-
ics training, and diversity training are other programs
commonly conducted by organizations.
LO 5 The effectiveness of training can be evalu-
ated on several criteria: participants’ reactions, the
amount of learning they have acquired, their behav-
ioral changes on the job, and bottom-line results such
as the program’s return on investment. The transfer
of training is measured via examination of the degree
to which trained skills are demonstrated back on the
job. Benchmarking and utility analysis help evaluate
the impact of training and provide the information for
further needs assessment.
LO 6
adventure-based learning
apprenticeship training
behavior modeling
behavior modification
blended learning
chief ethics officer
chief learning officers
competency assessment
cooperative training
cross-training
e-learning
experiential learning
instructional objectives
just-in-time training
learning management system (LMS)
microlearning
on-the-job training (OJT)
onboarding
organization analysis
orientation
person analysis
spot rewards
task analysis
transfer of training
Key Terms
89624_ch07_hr_241-278.indd 272 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Most Americans are familiar with Whirlpool. Whirl-
pool, which is based in Benton Harbor, Michigan, and
has been in business for more than century, is perhaps
best known for the washers and dryers it makes. But
the company also makes refrigerators, freezers, and
cooking appliances that it sells under various other
brand names around the world (Amana, Maytag,
KitchenAid, and Roper are some of them).
During the last economic recession appliance
sales plummeted, and Whirlpool was forced to lay off
thousands of workers. Although budgets were being
slashed, Whirlpool needed to develop managers who
could lead the company through the downturn as
well as provide training that would have a measurable
impact at a lower cost.
Previously Whirlpool University, the company’s
100-acre learning division located at its corporate
headquarters, had used mainly classroom learn-
ing. The university now has a learning management
system and conducts online training. A series of
30-minute modules are used to help familiarize and
onboard new hires. In addition, Whirlpool now takes
a “closed-loop” approach to training. Instead of just
doing popular types of training other companies were
doing, it surveys managers to find out what types of
training Whirlpool truly needed and what types it
didn’t and then designs training programs based on
those specific needs.
Because they are central to the training and devel-
opment of their employees and in the best position to
HRM Experience
Training and Learning Principles
f. Mass versus distributed learning
g. Active practice
h. Feedback
i. Experiential learning
3. Give the trainer 10 to 15 minutes to train the group in
making a paper airplane. The observer/recorder will
keep notes of effective and ineffective training tech-
niques (demonstrated learning principles).
4. Have someone from each team—not the trainer—
volunteer to come before the class for a friendly
competition. The instructor will give each team
member 2 minutes to make a paper airplane. Then,
just for fun, they can compete by seeing which one
flies the farthest. (No wagering, please.)
5. To finish the exercise, the observers/recorders will lead
a discussion of the learning principles that were dem-
onstrated. If the principles were incorporated for this
activity, discuss why they might not be incorporated
in other training settings.
Even though it is not difficult to do so, a surprising number of
training programs don’t explicitly incorporate the principles
of learning (goal setting, modeling, individual differences,
and feedback). To prove incorporating them is not difficult to
do, complete the following assignment for building a paper
airplane.
Assignment
1. Form teams of four to six members. Identify someone
on the team who knows how to make a paper air-
plane. That person will be the trainer.
2. Identify someone who will be the observer/recorder.
That person will not participate in the training but will
write down how many (and how effectively) principles
of learning are used in the instruction:
a. Goal setting
b. Modeling
c. Meaningfulness
d. Individual differences
e. Whole versus part learning
Whirlpool Mixes Up Its Managerial Training: Closed-Looped
Method Brings Learning Full Circle
CASE STUDY 1
273
89624_ch07_hr_241-278.indd 273 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
274 Part 3 Developing Effectiveness in Human Resources
millennials, the company has partnered with high
school and colleges to offer an onsite apprenticeship
program called “Work, Earn, and Learn.” In 2017,
Whirlpool’s CEO, Jeff Fettig, was one of a number of
corporate executives who met with President Don-
ald Trump to talk about saving American jobs and
encourage the support of vocational training for the
high-tech skills manufacturers today need. “The jobs
are there, but the skills are not,” said one executive at
the meeting.
Questions
1. Why are a needs assessment and ongoing training
important for firms like Whirlpool to conduct?
2. How do you think Whirlpool’s training strategy
will need to change in the future?
Source: Greg Sowinski, “Manufacturers Prep to Replace Retiring Work-
force,” LimaOhio.com (March 5, 2017), http://limaohio.com; Christopher S.
Rugaber, “U.S. Factory CEOs to Trump: Jobs Exist; Skills Don’t,” Chicago Tri-
bune (February 24, 2017), http://www.chicagotribune.com; Garry Kranz,
“Whirlpool Adopts E-Learning for Leadership,” Workforce (November 14,
2012), http://www.workforce.com; Tamara Patrick, “Unleashing a Learn-
ing Partnership with Managers,” ATD (August 16, 2012), http://www.astd
.org; Tamara Patrick, “Whirlpool University Re-Invents in the Face of the
Recession,” Management Innovation Exchange (September 16, 2011),
http://www .managementexchange.com.
observe and coach rank-and-file employees, to train
managers, Whirlpool utilizes a 12-month-long inter-
mittent training program called Leading People. The
program consists of blended learning, including pre-
work modules managers do online, followed by class-
room training, business projects, and seminars with
top managers. A manager’s direct reports provide an
initial baseline assessment of his or her skills, and then
the manager is assessed again following the training.
James Crawford, in Whirlpool’s Chicago division, said
the training helped him become a better leader. “It
helped me pinpoint weak spots in my leadership prac-
tices and then gave me a strategy for turning those
weaknesses into strengths,” Crawford says. The man-
agers are later surveyed as to how well the training is
working and what can be done to improve it. In other
words, there is a feedback system in place, hence the
“closed-loop” moniker. That way, the design, delivery,
and redesign of the training is a continuous circle and
constantly being improved over time.
The closed-loop feedback system has helped
Whirlpool continue to assess and alter its train-
ing to adapt to new conditions. For example, today
Whirlpool isn’t laying off employees; it’s trying to hire
more of them as its older workers retire. To attract
CASE STUDY Loews Hotels: Training for Four-Diamond Service and More2
Most people expect to receive great service at four-
diamond hotels. But that’s not good enough for Loews.
The New York–based hotel chain, which has proper-
ties in 16 cities across the United States and Canada,
tries to “wow” every one of its guests with high-quality
accommodations, impressive surroundings, personal-
ized service, and thoughtful amenities for a luxurious
experience.
A key element of success at Loews is the exten-
sive training it provides its employees. Whether they
work at the front desk, as housekeepers, accountants,
or marketing managers, they learn about the big-
picture goals of the company and how the quality
of service differentiates one company from another
in the hotel business. “The key is to train all depart-
ments of your organization to be customer-centric,”
says Jon Tisch, the company’s co-chairman. “Thinking
about customers can’t be left to marketing and sales
alone. Manufacturing, R&D, strategy, management,
all have to be focused on the needs and desires of the
customer.”
Customer-facing employees at Loews undergo
classroom training, including role-playing and simu-
lations to learn how to deal with customers. “Living
Loews,” a 2-day training program, teaches employ-
ees not only the finer points of etiquette but how to
really sell the Loews experience—even when things
go wrong. “We’re all human, so mistakes can hap-
pen,” Tisch explains. “But when they do, we train our
coworkers to impress our guests with an extraordinary
recovery that we hope they’ll remember even more.”
Training sessions such as “Green” training,
“Loews Meeting Experience,” “Loews Pool Concierge”
program, “Spa 101,” and the “YouFirst” guest loyalty
89624_ch07_hr_241-278.indd 274 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
275Chapter 7 Training and Development
the opportunity to join the company’s management
training program.
So successful is the training at Loews that even
trainers are impressed. Douglas Kennedy, the founder
and president of the Kennedy Training Network,
which specializes in hospitality training, says he was
knocked out by his experience while conducting
training at Loews’s various properties. Kennedy says
he’s gotten very spoiled during his overnight stays at
Loews hotels: “I’m sure it will be a rude awakening
next month when I return to staying in more typical
upscale hotels.”
Questions
1. How do the training programs at Loews relate to
the company’s business strategy?
2. Why does the company encourage its employees
to focus on the customers’ needs versus other
metrics?
Sources: Amy Bertrand, “Luxury Hotel Trends to Watch,” St. Louis
Today (February 4, 2014), http://www.stltoday.com; Jill Busch “Train-
ing Reveals Rankings for 2011 Top 125,” Training Magazine (February
8, 2011), http://www.trainingmag.com; Ann LaGreca, “Loews Hotels
CEO Jonathan Tisch on the Essence of Customer Service: Experience,
Service and Quality,” Knowledge@Emory (July 11, 2007), http://knowl-
edge.emory.edu; “Loews Hotels Named Among ‘Top 125’ by Training
Magazine,” Hotel and Motel Management (March 9, 2009), http://www.
hospitalityworldnetwork.com; Holly Dolezalek, “We Train to Please”
Training 45, no. 3 (March–April 2008): 34–35.
program ensure that customers of all types who use
the hotel’s various services get top-notch service.
The training does not end with the sessions,
though. Once it is over, training managers go out on
the front lines to do spot checks and offer feedback to
employees to make sure the training really “sticks.” A
train-the-trainer program and other managerial work-
shops such as “Communicating Loews” help managers
promote the hotel brand and inspire their employees
to do so as well. A comprehensive executive training
program covers topics ranging from communication
and salesmanship to public speaking and presentation
skills.
Loews also tries to “grow” its own talent. Most
training managers, for example, are promoted from
line-level jobs or from operations, so they know the
company’s processes and culture firsthand. The com-
pany also has a tuition assistance program.
To recruit undergraduates, Loews offers paid
summer internships. Interns work in a variety of areas
such as the rooms division, food and beverage depart-
ment, sales and marketing, and human resources.
Each intern is assigned a mentor and given opportu-
nities to network by attending operational meetings.
At the conclusion of their internships they complete a
report on their experience. Successive year internships
give them exposure to additional functional areas,
project work, supervisory experience, and ultimately
Notes and References
1. “2016 Training Industry Report,” Training (November–
December 2016): 31.
2. Peter Franks, Stephen Hay, and Tim Mavin, “Can Compe-
tency-Based Training Fly?: An Overview of Key Issues for
AB Onitio Pilot Training,” International Journal of Train-
ing Research 12, no. 2 (2014): 132–47; Lori Freifeld, “Best
of the Best,” Training 45, no. 2 (February 2008): 8; David
Dubois and William Rothwell, “Competency-Based or a
Traditional Approach to Training?” Training and Develop-
ment 58, no. 4 (April 2004): 46–59; see also Irwin L. Gold-
stein and J. Kevin Ford, Training in Organizations: Needs
Assessment, Development and Evaluation, 4th ed. (Belmont,
CA: Wadsworth, 2002). For the classic citation on needs
assessment, see William McGehee and Paul W. Thayer,
Training in Business and Industry (New York: John Wiley
and Sons, 1961).
3. Mackenzie Adams and Maged Makramalla, “Cybersecurity
Skills Training: An Attacker-Centric Gamified Approach,”
Technology Innovation Management Review. 5, no. 1 (2015);
Liam Lahey, “RFIDs Touted as Standard for Airport Security,”
Computing Canada 28, no. 13 (June 21, 2002): 21; Caroline
Wilson, “Ensuring a Smooth Ride,” Security Management 46,
no. 8 (August 2002): 92.
4. Laurie Bassi and Daniel McMurrer, “How’s Your Return on
People?” Harvard Business Review 8, no. 3 (March 2004): 18;
Tracy Mauro, “Helping Organizations Build Community,”
Training and Development 56, no. 2 (February 2002): 25–29.
5. Sanghamitra Chaudhuri and Kenneth R. Bartlett, “The Rela-
tionship Between Training Outsourcing and Employee Com-
mitment to Organization,” Human Resource Development
International 17, no. 2 (2014): 145–163; Brad Long, “Strategic
Human Resource Management and the Worker’s Experience,”
89624_ch07_hr_241-278.indd 275 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
276 Part 3 Developing Effectiveness in Human Resources
Journal of Individual Employment Rights 12, no. 3 (2007):
265–282; “E-Learning and Teleconferencing Join Needs
Assessment to Control Training Costs,” Managing Training
& Development, no. 3 (December 2003): 1; Thomas Gainey,
Brian Klaas, and Darla Moore, “Outsourcing the Training
Function: Results from the Field,” Human Resource Planning
25, no. 1 (2002): 16; Sarah Fister Gale, “Creative Training:
Doing More with Less,” Workforce 80, no. 10 (October 2001):
82–88.
6. Peter Franks, Stephen Hay, and Tim Mavin, “Can Compe-
tency-Based Training Fly?”; Scott A. Yorkovich, Gregory S.
Waddell, and Robert K. Gerwig, “Competency-based Assess-
ment Systems: Encouragement Toward a More Holistic
Approach,” Proceedings of the Northeast Business & Econom-
ics Association (2007): 77–81; Patty Davis, Jennifer Naughton,
and William Rothwell, “New Roles and New Competencies
for the Profession: Are You Ready for the Next Generation,”
Training and Development 58, no. 4 (April 2004): 26–38;
David Dubois and William Rothwell, “Competency-Based or
a Traditional Approach to Training?” Training and Develop-
ment 58, no. 4 (April 2004): 46–59.
7. Allison S. Gabriel et al., “The Supervisor Feedback Environ-
ment Is Empowering, But Not all the Time: Feedback Orien-
tation as a Critical Moderator,” Journal of Occupational and
Organizational Psychology 87, no. 3 (2014): 487–506; Gary
Kranz, “Special Report: More to Learn,” Workforce Manage-
ment (January 2011), http://www.workforce.com/.
8. Nima Jafari Navimipour and Batool Zareie, “A Model for
Assessing the Impact of E-learning Systems on Employ-
ees’ Satisfaction,” Computers in Human Behavior 53 (2015):
475–485; Thomas Hoffman, “Motivation: These IT Leaders
Keep Staffers Upbeat during Lean Times by Targeting What
Drives Them: Technology and Training,” Computerworld 38,
no. 1 (January 5, 2004): 39; Elwood Holton, Reid Bates, and
Sharon Naquin, “Large-Scale Performance-Driven Training
Needs Assessment: A Case Study,” Public Personnel Manage-
ment 29, no. 2 (Summer 2000): 249–267.
9. Alice Hsiaw, “Goal-Setting and Self-Control,” Journal of Eco-
nomic Theory 148, no. 2 (2013): 601–626; Debbie Schachter,
“How to Set Performance Goals: Employee Reviews Are
More Than Annual Critiques,” Information Outlook 8, no. 9
(September 2004): 26–30; “Burger Olympics,” Training 41,
no. 7 (July 2004): 20; Jason A. Colquitt and Marcia J. Simmer-
ing, “Conscientiousness, Goal Orientation, and Motivation
to Learn during the Learning Process: A Longitudinal Study,”
Journal of Applied Psychology 83, no. 4 (August 1998): 654–665.
10. Leroy Hannes et al., “Mindfulness, Authentic Functioning,
and Work Engagement: A Growth Modeling Approach,”
Journal of Vocational Behavior 82 no. 3 (2013): 238–247;
Annette Towler and Robert Dipboye, “Effects of Trainer
Expressiveness, Organization, and Trainee Goal Orienta-
tion on Training Outcomes,” Journal of Applied Psychology
86, no. 4 (August 2001): 664–673; Steve Kozlowski, Stanley
Gully, Kenneth Brown, and Eduardo Salas, “Effects of Train-
ing Goals and Goal Orientation Traits on Multidimensional
Training Outcomes and Performance Adaptability,” Organi-
zational Behavior and Human Decision Processes 85, no. 1
(May 2001): 1–31.
11. The classics by Albert Bandura include Social Foundations of
Thought and Action: A Social Cognitive Theory (Englewood
Cliffs, NJ: Prentice Hall, 1986) and A Social Learning Theory
(Englewood Cliffs, NJ: Prentice Hall, 1977); see also Melesa
Altizer Bolt, Larry Killough, and Hian Chye Koh, “Testing the
Interaction Effects of Task Complexity in Computer Train-
ing Using the Social Cognitive Model,” Decision Sciences
32, no. 1 (Winter 2001): 1020; Rose M. Marra et al., “Why
Problem-based Learning Works,” Journal on Excellence in
College Teaching 25, no. 3/4 (2014): 221–238; Susan Pedersen
and Min Liu, “The Transfer of Problem-Solving Skills from a
Problem-Based Learning Environment: The Effect of Model-
ing an Expert’s Cognitive Processes,” Journal of Research on
Technology in Education 35, no. 2 (Winter 2002): 303–321.
12. Chadwick Reese and Debra Hunter, “What about the Middle
Man? The Impact of Middle Level Managers on Organiza-
tional Learning,” Journal of Management 4, no. 1 (2016):
17–25; Joe M. Ricks, Jacqueline A. Williams, and William
A. Weeks, “Sales Trainer Roles, Competencies, Skills, and
Behaviors: A Case Study,” Industrial Marketing Management
37, no. 5 (July 2008): 593–609; John L. Bennett, “Trainers as
Leaders of Learning,” Training and Development 55, no. 3
(March 2001): 42–45; Ruth Palombo Weiss, “Deconstructing
Trainers’ Self-Image,” Training and Development 55, no. 12
(December 2001): 34–39.
13. Josep-Maria Batalla-Busquets and Carmen Pacheco-Bernal,
“On-the-Job e-Learning: Workers’ Attitudes and Perceptions,”
The International Review of Research in Open and Distributed
Learning 14, no. 1 (2013): 40–64; “Eight Steps to Better On-
the-Job Training,” HRFocus 80, no. 7 (July 2003): 11; Alison
Booth, Yu-Fu Chen, and Gylfi Zoega, “Hiring and Firing: A
Tale of Two Thresholds,” Journal of Labor Economics 20, no.
2 (April 2002): 217–48.
14. Information found on the Apprenticeship page, Spokane
Community College website (February 9, 2005), http://www
.scc.spokane.edu/tech/apprent.
15. Yeonsoo Kim, “Use of Career One Stop and Career Network in
US,” Talent Management Monthly 121 (2015): 83; “Workforce
Investment Act: One-Stop Centers Implemented Strategies to
Strengthen Services and Partnerships, but More Research and
Information Sharing Is Needed,” General Accounting Office
Reports & Testimony 2003, no. 7 (July 2003).
16. Dominic Gorecky, Mohamed Khamis, and Katharina Mura,
“Introduction and Establishment of Virtual Training in the
Factory of the Future,” International Journal of Computer Inte-
grated Manufacturing 30, no. 1 (2017): 182–90; Sarah Fister
Gale, “Virtual Training with Real Results,” Workforce Manage-
ment (December 2008), http://www.workforce.com.
89624_ch07_hr_241-278.indd 276 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
277Chapter 7 Training and Development
17. Joanne Viviano, “Ohio Doctors Employ Virtual Reality to
train for Trauma Care,” Columbus Dispatch (March 26, 2017),
http://www.dispatch.com; “Soup to Nuts: Simulator Manu-
facturing Is a Lucrative but Risky Business, Which Is Why
Market Leader CAE Has Tapped into the More Stable World
of Flight Training,” Air Transport World 40, no. 5 (May 2003):
69–71; “SimsSir: Modeling and Simulation Are Leading the
Assault on New Learning Technologies That Are Winning
Favor with the U.S. Military,” Training and Development 57,
no. 10 (October 2003): 46–52.
18. Erika Darling et al., “Effective Game-Based Training at the
Point of Need,” in Advances in Human Factors, Business Man-
agement, Training and Education (New York: Springer Inter-
national Publishing, 2017): 677–685; Adam Kirby “Guest
Service Is Fun and Games,” Hotels 42, no. 5 (May 2008): 71–72;
Dan Heilman, “Putting Games to Work: Game-Based Train-
ing Is Shaping Up to Be One of This Generation’s Primary
Teaching Tools, in Business and Elsewhere,” Computer User
22, no. 2 (February 2004): 14–16.
19. Judy Mottl, “Bloomingdales, Altar’d State Share Associate
Training Success Stores,” Retail Customer Experience (February
28, 2017), https://www.retailcustomerexperience.com.
20. Anjali Bal et al., “Second Best in Second Life: Teaching Mar-
keting Cases in a Virtual World Environment,” Proceedings of
the 2010 Academy of Marketing Science (AMS) Annual Con-
ference, Springer International Publishing, 2015; Aili McCo-
nnon, “The Games Managers Play,” BusinessWeek (June 25,
2007): 12.
21. Phil Britt, “E-Learning on the Rise in the Classroom: Com-
panies Move Content Online: Cisco Systems’ Employees and
Partners Routinely Watch Videos on the Internet,” ECon-
tent 27, no. 11 (November 2004): 36–41; Heather Johnson,
“The Whole Picture: When It Comes to Finding Out How
Employees Feel about Training, Many Companies Fail to Get
a Clear Picture,” Training 47, no. 7 (July 2004): 30–35.
22. Ravi Rajputh et al., “Interactive Materials Development Using
the Rapid e-Learning Method—Examples from the Field”
(2016); “What to Do Now That Training Is Becoming a Major
HR Force,” HRFocus (February 2005): 5–6; Tammy Galvin,
“The Delivery,” Training 38, no. 10 (October 2001): 66–72;
Kenneth G. Brown, “Using Computers to Deliver Training:
Which Employees Learn and Why?” Personnel Psychology 54,
no. 2 (Summer 2001): 271–296; Bill Roberts, “E-Learning New
Twist on CBT,” HRMagazine 46, no. 4 (April 2001): 99–106.
23. Lara Kolodny, “A New Way to Train Workers, One Small Bite
at a Time,” Wall Street Journal (May 13, 2016), https://www.
wsj.com.
24. Garry Kranz, “Online Learning Gets Massive, Open,” Work-
force Management (August 13, 2013), http://www.workforce
.com.
25. David Ong et al., “Reducing Employee Learning and Devel-
opment Costs: The Use of Massive Open Online Courses
(MOOC),” Development and Learning in Organizations:
An International Journal 30, no. 5 (2016): 18–21; Geoffrey
Fowler, “An Early Report Card e-ln MOOCs,” Wall Street
Journal (October 8, 2013), http://online.wsj.com.
26. “2016 Training Industry Report” Training (November-
December 2016): 31.
27. “Learning 2.0: Improving Workforce Productivity,” Workforce
Management (April 2010), http://www.workforce.com.
28. Bill Leonard, “Social Media Can Enhance Employee Learn-
ing,” HR Today (May 20, 2015), https://www.shrm.org.
29. T.L. Stanley, “Be a Good Role Model for Your Employees,”
Supervision 65, no. 5 (January 2004): 5–8; Gary May and Wil-
liam Kahnweiler, “The Effect of a Mastery Practice Design
on Learning and Transfer in Behavior Modeling Training,”
Personnel Psychology 53, no. 2 (Summer 2000): 353–73.
30. Jason J. Dahling et al., “Does Coaching Matter? A Multilevel
Model Linking Managerial Coaching Skill and Frequency to
Sales Goal Attainment,” Personnel Psychology (2015); Avery
Augustine, “How to Coach Your Really Good Employees,”
Forbes (January 22, 2014), http://www.forbes.com.
31. Amir Elnaga and Amen Imran, “The Effect of Training on
Employee Performance,” European Journal of Business and
Management 5, no. 4 (2013): 137–47; Chris Whitcomb, “Sce-
nario-Based Training to the F.B.I.,” Training and Development
53, no. 6 (June 1999): 42–46; Anne Hoag, Dale Brickley, and
Joanne Cawley, “Media Management Education and the Case
Method,” Journalism and Mass Communication Educator 55,
no. 4 (Winter 2001): 49–59.
32. M. Srimannarayana, “Designing New Employee Orientation
Programs an Empirical Study,” Indian Journal of Industrial
Relations 51, no. 4 (2016): 620–33; Mike Frost, “Creative
New Employee Orientation Programs,” HRMagazine 47, no.
8 (August 2002): 120–121; Marilyn Moats Kennedy, “Setting
the Right Tone, Right Away,” Across the Board 36, no. 4 (April
1999): 51–52.
33. Vurain Tabvuma, Yannis Georgellis, and Thomas Lange,
“Orientation Training and Job Satisfaction: A Sector and
Gender Analysis,” Human Resource Management 54, no. 2
(2015): 303–321; Emmanuella Plakoyiannaki, Nikolaos Tzo-
kas, Pavlos Dimitratos, and Michael Saren, “How Critical Is
Employee Orientation for Customer Relationship Manage-
ment? Insights from a Case Study,” Journal of Management
Studies 45, no. 2 (March 2008): 268–93.
34. Kathryn Tyler, “Take New Employee Orientation off the Back
Burner,” HRMagazine 43, no. 6 (May 1998): 49–57; Noel
Tichy, “No Ordinary Boot Camp,” Harvard Business Review
79, no. 4 (April 2001): 63–70.
35. Gail B. Caldwell and Cam Caldwell, “Ten Classic Onboard-
ing Errors–Violations of the HRM-Employee Relationship,”
Business and Management Research 5, no. 4 (2016): 47; Leigh
Buchanan, “How to Make New Hires Feel at Home,” Inc. (June
8, 2010), http://www.inc.com.
36. “Corporate America Can’t Write,” Work & Family Newsbrief
(January 2005): 4; Matt Bolch, “School at Work,” Training 39,
89624_ch07_hr_241-278.indd 277 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
278 Part 3 Developing Effectiveness in Human Resources
no. 2 (February 2002); Slav Kanyba, “Community Colleges
React to Job-Training Request,” San Fernando Valley Business
Journal 9, no. 2 (June 7, 2004): 1–2.
37. Michael A. Verespej, “The Education Difference,” Industry
Week 245, no. 9 (May 6, 1996): 11–14; Richard D. Zalman,
“The Basics of In-House Skills Training,” HRMagazine 34, no.
2 (February 1990): 74–78; Ron Zemke, “Workplace Illiteracy—
Shall We Overcome?” Training 26, no. 6 (June 1989): 33–39.
38. “Behavior-Based Sales Team Training Produces a 56%
Increase in Revenues,” Managing Training & Development
(April 2004): 1.
39. Marg Cosgriff, “Walking Our Talk: Adventure-Based Learn-
ing and Physical Education,” Journal of Physical Education,
New Zealand 33, no. 2 (September 2000): 90.
40. J.K. Winch, X Cai, and G.L. Vairaktarakis, “Cyclic Job Sched-
uling in Paced Assembly Lines with Cross-Trained Workers,”
International Journal of Production Research 45, no. 4 (Feb-
ruary 2, 2007): 803–28; Lisa Bertagnoli, “The Ten-Minute
Manager’s Guide to …Cross-Training Staff,” Restaurants &
Institutions 114, no. 18 (August 15, 2004): 26–28; Wallace J.
Hopp and Mark P. Van Oyen, “Agile Workforce Evaluation: A
Framework for Cross-Training and Coordination,” IIE Trans-
actions 36, no. 10 (October 2004): 919–941.
41. Tomislav Hernaus, Matej Černe, and Miha Škerlavaj, “Going
the Extra Mile: Cross-Training, Relational Job Design, and
Extra-Role Behavior of High-Skilled and Low-Skilled Work-
ers,” International HRM Workshop (2016); Lorraine Mirabella,
“Productivity Gains in Maryland Mean Less Hiring But More
Job Cross-Training,” The Baltimore Sun (via Knight-Ridder/
Tribune Business News) (April 17, 2004).
42. Gary Stern, “Small Slights Bring Big Problems,” Workforce 81,
no. 8 (August 2002): 17.
43. “49ers Decide to Add Diversity to Training Camp,” The New
York Times (July 8, 20014): D3.
44. Shankar Vedantam “Most Diversity Training Ineffective,
Study Finds, Washington Post (January 19, 2008), http://www
.washingtonpost.com.
45. Jolyn Gelens et al., “Talent Management and Organizational
Justice: Employee Reactions to High Potential Identifica-
tion,” Human Resource Management Journal 24, no. 2 (2014):
159–175; Heather Johnson, “The Whole Picture: When It
Comes to Finding Out How Employees Feel about Training,
Many Companies Fail to Get a Clear Picture,” Training 47,
no. 7 (July 2004): 30–35; Martin Delahoussaye, “Show Me the
Results,” Training 39, no. 3 (March 2002): 28–29; Reinout van
Brakel, “Why ROI Isn’t Enough,” Training and Development
56, no. 6 (June 2002): 72–74.
46. “Dissatisfaction with Job Training Contributes to Low Job
Satisfaction,” Managing Training & Development (November
2003): 8; James Pershing and Jana Pershing, “Ineffective Reac-
tion Evaluation,” Human Resource Development Quarterly 12,
no. 1 (Spring 2001): 73–90.
47. Anna Grohmann and Simone Kauffeld, “Evaluating Training
Programs: Development and Correlates of the Questionnaire
for Professional Training Evaluation,” International Journal of
Training and Development 17, no. 2 (2013): 135–55; Andreas
Putra, “Evaluating Training Programs: An Exploratory Study
of Transfer of Learning onto the Job at Hotel A and Hotel B,
Sydney, Australia,” Journal of Hospitality and Tourism Man-
agement 11, no. 1 (April 2004): 77–78.
48. Delahoussaye, “Show Me the Results,” 28–29; van Brakel,
“Why ROI Isn’t Enough,” 72–74.
49. Richard J. Wagner and Robert J. Weigand, “Can the Value of
Training Be Measured? A Simplified Approach to Evaluat-
ing Training,” The Health Care Manager 23, no. 1 (January–
March 2004): 71–79; van Brakel, “Why ROI Isn’t Enough,”
72–74; Sarah Fister Gale, “Measuring the ROI of E-Learning,”
Workforce 81, no. 8 (August 2002): 74–77; Earl Honeycutt,
Kiran Karande, Ashraf Attia, and Steven Maurer, “A Utility-
Based Framework for Evaluating the Financial Impact of
Sales Force Training Programs,” Journal of Personal Selling
and Sales Management 21, no. 3 (Summer 2001): 229–38.
50. Bradford S. Bell et al., “100 Years of Training and Development
Research: What We Know and Where We Should Go” (2017);
“Three Quick and Easy Ways to Gauge Your Training Out-
comes,” IOMA’s Report on Managing Training & Development
(January 2005): 4–5; “Use This Eight-Step Process to Predict
the ROI of Your Training Programs,” IOMA’s Human Resource
Department Management Report (December 2004): 4–5; Ellen
Drost, Colette Frayne, Keven Lowe, and J. Michael Geringer,
“Benchmarking Training and Development Practices: A Multi-
Country Comparative Analysis,” Human Resource Management
41, no. 1 (Spring 2002): 67–86; Daniel McMurrer, Mark Van
Buren, and William Woodwell, “Making the Commitment.”
89624_ch07_hr_241-278.indd 278 10/26/17 5:49 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
279
CHAPTER 8
Performance Management
Learning Outcomes
After studying this chapter, you should be able to
Explain what performance management is and how
the establishment of goals, ongoing performance
feedback, and the evaluation process are part of it.
Describe the different sources of performance-
management information.
LO 1
LO 2
Explain the various methods used to evaluate the
performance of employees.
Outline the characteristics of effective performance
review meetings and feedback sessions and ways in
which the performance of employees can be improved.
LO 3
LO 4
w
av
eb
re
ak
m
ed
ia
/S
hu
tt
er
st
oc
k
89624_ch08_hr_279-317.indd 279 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
280 Part 3 Developing Effectiveness in Human Resources
8.1 Performance Management Systems
We have discussed some of the ways that you as a manager can acquire top-notch
employees and train and develop them. But how do you know if your efforts are really
paying off in terms of what the employees are contributing once they are on the job?
Performance management is the process of creating a work environment in which
people can perform to the best of their abilities in order to meet a company’s goals. It is
an entire work system that flows from a company’s goals. Figure 8.1 shows the elements
of a performance management process.
Performance reviews are the result of a process by which a manager evaluates an
employee’s performance relative to the requirements of his or her job, the goals set
with his or her manager, and then uses the information to show the person where
improvements can be made and how. The reviews are a tool organizations can use to
develop employees. Performance reviews are also referred to as performance appraisals
and performance evaluations.
Typically performance reviews are delivered annually, biannually, or sometimes
on a quarterly basis. However, firms are finding that more frequent short reviews
that provide employees with feedback regularly are more effective. At RoundPegg, a
hiring startup that develops social applications, all employees have quarterly reviews,
or “feedback sessions,” that last just 20 minutes. “My job here isn’t just to make sure
everyone is crossing their T’s and dotting their I’s,” says Brent Daily, RoundPegg’s
cofounder and chief operating officer. “My job is to remove the obstacles they face and
allow them to do what they do best.”1
In Figure 8.1, the performance review is just part of the performance management
process. Aligning the goals of employees with those of the firm, providing workers with
continual on-the-job feedback, and encouraging and rewarding them for a job done
well are critical, too.
You might compare a performance review to taking a test in college. Do tests moti-
vate you? Do they make you want to truly excel, or do you just want to get through them?
Now compare your test-taking experience with an experience in which your instructor
talked to you about your career plans, complimented you on your performance, and
offered you suggestions for improving it. That probably motivated you more.
We hope you can see the analogy we are making. Employers have to look at how
well you are doing on the job, just as your university has to test you to be sure you
graduate with the qualifications people in society expect. But your performance in either
scenario consists of so much more than that. This is why organizations need to look at
the performance management system as a whole, to motivate and foster the growth of
employees so they can contribute the maximum value to the firm. Reviews are simply a
logical extension of the day-to-day performance management process, not the end goal.2
8.1a The Purposes of Performance Management
Figure 8.2 shows the other two most common purposes of performance management
programs—developmental and administrative. Next, let’s look at each purpose.
Developmental Purposes
A performance management system gives managers a concrete framework they can use
to gather information about the performance of employees, provide them with feedback,
and discuss their goals and how they align with the organization’s goals. The goal is to
performance
management
The process of creating
a work environment in
which people can per-
form to the best of their
abilities
performance reviews
A process in which a
manager evaluates an
employee’s performance
relative to the require-
ments of his or her job
and uses the informa-
tion to show the person
where improvements can
be made and how
Does your school have
a performance man-
agement system in
place to help students
succeed? If so, how do
you think the system
might be similar or dif-
ferent to performance
management systems
in the workplace?
LO 1
89624_ch08_hr_279-317.indd 280 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
281Chapter 8 Performance Management
build on a person’s strengths, eliminate potential weaknesses, and further his or her
career while improving the performance of the organization as well. By taking a devel-
opmental approach to the performance management process, managers help employees
understand that the feedback they are getting is designed to improve their future com-
petencies and further their careers, and are not being conducted simply to judge them.
Companies such as GE and Microsoft are among the organizations that have redesigned
their performance management programs to focus more on ongoing employee feedback,
support, development, and learning. The idea is to shift the role of manager from that
of “judge” to one of “coach.”3
Administrative Purposes
Performance management programs provide input that can be used for the entire range
of HRM activities, such as determining the relative worth of jobs, recruiting criteria,
validating selection tests, promotions, transfers, layoffs, and pay decisions. “Pay-for-
performance” systems—basing employees’ pay on their achievements—is found in all
types of organizations. Studies have shown employees who earn performance-based pay
©
C
en
ga
ge
STEP 3:
Ongoing
performance
feedback provided
STEP 2:
Behavioral expectations
and standards set and
then aligned with employee
and organizational goals
STEP 1:
Goals set to
align with higher
level goals
STEP 6:
HR decision
making (e.g.,
pay, promotion,
etc.)
STEP 5:
Formal review
or feedback
session conducted
STEP 4:
Performance
appraised by
manager and others
Steps in the Performance Management ProcessFigure 8.1
89624_ch08_hr_279-317.indd 281 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
282 Part 3 Developing Effectiveness in Human Resources
are more satisfied.4 Performance management programs also provide input for talent
reviews: strategic meetings to determine if a company has the human resources it needs
to compete in the future. Performance data can also be used for HR planning.
Yet another purpose of having a performance management system is to docu-
ment HRM actions that can result in legal action. Equal employment opportunity
and affirmative action directives require employers to maintain accurate, objective
employee performance records. Without them, firms will be unable to defend them-
selves against possible discrimination charges when it comes to promotions, salaries,
and terminations. Finally, the success of the entire HR program depends on knowing
how the performance of employees compares with the goals established for them.
8.1b Why Performance Management Systems
Sometimes Fail
Performance reviews often fall short of their potential. But why? According to a survey
by the Society for Human Resource Management, only half of HR professionals say
annual performance reviews are an accurate appraisal of an employee’s performance.
Forty-nine percent believe their firms’ performance-review process needs to be reevalu-
ated.5 Employees and managers alike often dread appraisals, and complain that they are
time consuming and ineffective.
Many people fault the formal review process. They believe it discourages teamwork
by focusing on workers’ individual achievements rather than what their teams or firms
accomplish. (Who gets the best rating and the biggest raise? Who does not?) Others
contend that reviews are useful only at the extremes—for highly effective or highly inef-
fective employees—and are not as useful for the majority of employees in the middle.
Other people point out that reviews often focus on short-term achievements rather than
long-term improvement and learning. Still others complain that the only feedback they
get is during formal reviews, or they aren’t done at all. This can especially be a problem
in small businesses, as this chapter’s small business feature shows. A more complete list
of the reasons why formal reviews fail is shown in Figure 8.3.
DEVELOPMENTAL
Provide performance feedback
Identify individual strengths and weaknesses
Recognize individual performance
achievements
Help employees identify goals
Evaluate goal achievement of employees
Identify individual training needs
Determine organizational training needs
Allow employees to discuss concerns
Improve communication
Provide a forum for leaders to help
employees
Document personnel decisions
Promote employees
Determine transfers and assignments
Identify performance problems and
develop ways to correct them
Make retention, termination, and layoff
decisions
Validate selection criteria
Meet legal requirements
Evaluate training programs/progress
Assist with human resources planning
Make reward and compensation decisions
ADMINISTRATIVE
Purposes of a Performance ReviewFigure 8.2
89624_ch08_hr_279-317.indd 282 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
283Chapter 8 Performance Management
Let Me Count the Ways … Reasons Why Performance
Reviews Can Fail
Figure 8.3
Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating &
Refrigeration News 216, no. 16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of
Executive Appraisals,” Journal of Compensation and Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Perfor-
mance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.
• Inadequate preparation on the part of the manager.
• The employee is not given clear objectives at the beginning of performance period.
• The manager may not be able to observe performance or have all the information.
• The performance standards may not be clear.
• Inconsistent ratings among supervisors or other raters.
• Manager rates employee’s personality rather than performance.
• The halo effect, contrast effect, or some other perceptual bias.
• Inappropriate time span for review (either too short or too long).
• Overemphasis on uncharacteristic performance.
• Inflated ratings because managers do not want to deal with “bad news.”
• Subjective or vague language in written reviews.
• Organizational politics or personal relationships cloud judgments.
• No thorough discussion of causes of performance problems.
• Manager may not be trained at evaluation or giving feedback.
• No follow-up and coaching after the review.
So now you have your own business. That means you can
dispense with those pesky, time-consuming performance
reviews everyone dreads, right? You never liked them as an
employee. In fact, maybe they helped solidify your desire
to work for yourself. Why would you like them any more as
a manager, entrepreneur, or small business owner?
Do not be so fast to dump formal performance
reviews. Without them, you might end up “flying blind”
when it comes to some important performance metrics.
“In a small business in particular, the performance review
is like a dashboard—it gives you all kinds of gauges about
quality, job knowledge, and customer service,” says Robert
Chanin, the director of client services for the Alcott HR
Group. “If there isn’t any gauge, you don’t know if your
business is doing well or not.”
By contrast, put a good performance management
system in place and the sky is the limit, says Barrie Gross,
a human resources expert and employment law attor-
ney. “They’re one of the tools businesses can use to get
employees more involved, increase their motivation,
and help them achieve success,” Gross explains. Evalu-
ating your employees also lets them know they are not
just human cogs in the production process—that you
care about them, their involvement in the firm, and their
Small Business Application
personal goals. This can help a small business retain its
top employees rather than losing them to big compa-
nies where they are often treated more impersonally. The
feedback can be verbal, if the reviews are for development
purposes only. However, if the reviews are used in con-
junction with raises and promotions, they should be writ-
ten in order to provide a firm with greater legal protection.
Small businesses can utilize off-the-shelf systems
consisting of either printed forms or software. Featherlight
and Halogen’s Performance product are two web-based
systems. Generally, a manager can customize the review
forms by selecting elements from a list of attributes and
behaviors that describe on-the-job success for a position.
Performance reviews are not about the forms,
though. They are a two-way discussion. In addition to
your employees learning about how they can improve
their performance, the reviews can help you learn how to
improve yours.
Sources: Leanne Hoaglund-Smith, “Small Business Roles and
Responsibilities, Require Clarity, Documentation,” Chicago Tribune
( February 10, 2017), http://www.chicagotribune.com; Amy Linn, “Boost
Performance with Performance Reviews,” Small Business Review, http://
smallbusinessreview.com; David Javitch, “How to Survive Employee
Appraisals,” Entreprenur.com, http://www.entrepreneur.com.
Does a Small Business Need to Formally Evaluate Its Employees?
89624_ch08_hr_279-317.indd 283 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
284 Part 3 Developing Effectiveness in Human Resources
For reasons such as these, a substantial number of organizations, including Adobe
Systems, the Gap, Microsoft, GE, and IBM have abolished their performance reviews in
favor of continuous feedback and coaching.6 Adobe has an ongoing “check-in” system
employees and their managers use to give each other feedback. Written reviews aren’t
requried.7 (See Case Study 1 at the end of the chapter.) But although many people have
predicted that formal performance reviews will one day be obsolete, firms continue to
use them, often for legal reasons such as justifying promotions and pay decisions.
8.2 Developing an Effective Performance
Management System
A firm’s HR department ordinarily has the primary responsibility for overseeing and
coordinating its performance management system. However, managers from the com-
pany’s operating departments must also be actively involved, particularly when it comes
to helping establish the objectives for the program, ensure they are aligned with a com-
pany’s strategic goals, and actually translate to on-the-job efforts.
Employees are more likely to accept and be satisfied with a performance management
system when they have the chance to participate in its development. Asking experienced
employees to help identify important job behaviors and SMART goals also helps ensure
the system accounts for all of the tasks that need to be done in an organization, especially
when major changes in the firm and its jobs are taking place.8
8.2a What Are the Performance Standards?
Performance standards should be based on job-related requirements derived from a job
analysis and reflected in an employee’s job description and job specifications. Estab-
lishing SMART goals can be very helpful for this purpose. SMART goals are goals that
SMART goals
Goals that are specific,
measurable, achievable,
realistic, and time-based
Do you think as an
employee you would
be in a good position
to appraise your boss?
What aspects of his or
her performance might
you be in a good posi-
tion to appraise?
LO 2
SMART goals can help
improve the perfor-
mance of employees
as well as remove the
vagueness and subjec-
tivity of performance
reviews.
m
ar
ek
ul
ia
sz
/S
hu
tt
er
st
oc
k
89624_ch08_hr_279-317.indd 284 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
285Chapter 8 Performance Management
are specific, measurable, attainable, realistic, and time-based—hence, the abbreviation
SMART. Realistic and specific performance standards that are actually attainable in a
certain amount of time (given the firm’s current resources and employee’s abilities), mea-
surable, and written down communicate precise information to employees. For example,
“the ability and willingness to handle customer orders” is not as good a performance
standard as “all customer orders will be filled in 4 hours with a 98 percent accuracy rate
in 2019.” When the standard is expressed in specific, measurable terms, comparing an
employee’s performance against it results in more accurate feedback. The ultimate goal is
to create effective goals that will work for your employees, says Gary Foster, customized
training program manager at Minnesota’s Ridgewater College. “It’s not an easy task; it’s
not a short task, but it can be done.”9
As Figure 8.4 shows, there are four basic elements that must be considered when
establishing performance standards: strategic relevance, criterion deficiency, criterion
contamination, and reliability.
Strategic Relevance
Strategic relevance refers to the extent to which the performance standards relate to the
strategic objectives of the organization. For example, if an organization has established
a standard that “95 percent of all customer complaints are to be resolved in one day,”
then it is relevant for the firm’s customer service representatives to be held to this stan-
dard when evaluated. Companies such as 3M and Buckman Laboratories have strategic
objectives to the effect that a certain percent of their sales are to be generated from
recently developed products. These objectives are then translated into performance
standards for their employees. General Motors and Whirlpool’s strategic objectives
include cost, quality, and speed, and the two companies have developed metrics to iden-
tify and compare their performance around the world on these measures. A strategy-
driven review process also provides the documentation HR managers require to justify
training expenses needed to close any gaps between employees’ current skills and those
they will need in the future to execute the firm’s strategy. Moreover, because they provide
Establishing Performance StandardsFigure 8.4
Reliability: Measures that
are consistent across
raters and over time
Criterion deficiency: Aspects of actual
performance that are not measured
Actual performance
Strategic relevance:
Performance standards
linked to organizational
goals and competencies
Zone of valid
assessment
Performance measures
Criterion contamination:
Elements that affect the
appraisal measures that
are not part of the actual
performance
89624_ch08_hr_279-317.indd 285 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
286 Part 3 Developing Effectiveness in Human Resources
evidence of a person’s performance, review metrics based on a firm’s strategy are more
defensible in court.10
Criterion Deficiency
The performance standards should capture the entire range of an employee’s perfor-
mance. When they focus on a single criterion (such as sales revenues) to the exclusion
of other important but less quantifiable performance dimensions (such as customer
service), then the performance management system is said to suffer from criterion
deficiency.11
Criterion Contamination
Just as performance criteria can be deficient, they can also be contaminated. There
are factors outside an employee’s control that can influence his or her performance. A
comparison of performance of production workers, for example, should not be contami-
nated by the fact that some work with newer machines than others do. A comparison
of the performance of traveling salespeople should not be contaminated by the fact that
territories differ in terms of their sales potential.12
Reliability
As we discussed in Chapter 6, reliability refers to the stability or consistency of a stan-
dard or the extent to which individuals tend to maintain a certain level of performance
over time. Reliability can be measured by correlating two sets of ratings made by a
single rater or by two different raters. For example, two managers would rate the same
individual. Their ratings would then be compared to determine interrater reliability.
To make sure managers are rating employees consistently, some companies use
a process called calibration. During calibration meetings, a group of supervisors, led
by their managers and facilitated by an HR professional, discuss the performance of
individual employees to ensure all managers apply similar standards to all of the firm’s
employees. The supervisors begin the process by rating employees whose performances
are especially good or especially poor. They then attempt to rate employees who are
more in the middle and try to achieve a consensus on their performance. Initially, the
ratings are likely to vary considerably simply because some managers are hard raters
and others are not. Over subsequent review periods and calibration meetings, however,
the ratings should begin to converge, or become more similar.
As we will discuss, calibration meetings can be particularly helpful when it comes
to training new managers to appraise employees. The meetings can also be very useful
after a merger or acquisition—especially one that is global. Why? Because differences in
the corporate cultures and performance standards of the formerly separate companies
can cause the same employees to be rated quite differently. When Lawson Software,
a Minnesota-headquartered firm, grew from 1,400 employees in 3 countries to 4,000
employees in 30 countries, it successfully used calibration to be sure its managers across
the globe were assessing employees accurately.13
Fairness and Acceptability
One of the main concerns employees have about performance management systems
in general and reviews is fairness. Organizational politics, a firm’s culture, the orien-
tation of its managers, history, and current competitive conditions can all affect how
managers view how well their employees are doing on the job as well as rate them.14
Sometimes managers inflate reviews because they want to obtain higher salaries for
calibration
A process whereby
managers meet to
discuss the performance
of individual employees
to ensure their employee
reviews are in line with
one another
89624_ch08_hr_279-317.indd 286 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
287Chapter 8 Performance Management
their employees or because higher ratings for their subordinates make them look good
as supervisors.
Even when reviews are supposed to be confidential, employees often have a keen
sense about whether the process is fair or not, or at least they think they do. Employees
who believe the system is unfair are likely to consider the process a waste of time or feel
frustrated and cynical. As we discussed earlier in the section on developing a manage-
ment performance system, if employees are allowed input as to what constitutes a good
performance and how the performance management system operates, they are more
likely to believe it’s fair, and the program is more likely to be successful.
Acceptability relates to how hard or difficult it is to administer and use the perfor-
mance management system. If using it is time consuming or difficult, or if it’s hard to
see how it’s really helping the organization, the system is likely to fail.
8.2b Do Your Performance Reviews Comply with the Law?
Performance reviews must meet certain legal requirements, just like selection proce-
dures must.15 Carefully defined and measurable performance standards are required.
In one landmark case, the U.S. Supreme Court found that employees had been ranked
against a vague standard, open to each supervisor’s own interpretation.16 The decision
prompted organizations to try to eliminate vagueness of descriptions for attitudes, coop-
eration, dependability, initiative, and leadership. For example, the trait “dependability”
can be made much less vague if it is spelled out in terms of employee tardiness and/or
unexcused absences.
Other court decisions indicate that employers might face legal challenges when
reviews indicate an employee’s performance is acceptable or above average but then the
person is later passed over for promotion, disciplined for poor performance, discharged,
or laid off from the organization. In another U.S. Supreme Court case, an employee
claimed she was terminated because the company she worked for said she had a poor
attitude. The problem? Her reviews stated that she was “a pleasure to work with and
handles herself in a professional manner,” and that she “hit the ground running in east-
ern and is doing an excellent job for that department. The staff in eastern is enjoying
her presence.” The court ruled in her favor.17
Other companies have faced legal battles because their performance reviews dis-
criminated against older workers, minorities, and women. A researcher who studied
250 reviews of high-achieving tech workers found that women received far more critical
reviews than men.18
So, from a legal perspective, performance reviews can be a double-edged sword. You
need them to help employees perform better and document your actions as a manager,
but if they are poorly done or inaccurate, or you don’t make decisions based on them,
you can find yourself in legal trouble. To avoid problems such as these, performance
reviews should meet the following legal guidelines:
• Performance ratings must be job related, with performance standards developed
through a job analysis. Only evaluate those areas that are necessary for effective
job performance.
• Employees must be provided with clear, written job standards in advance of their
reviews so they understand what they need to do to get top ratings.
• Managers who conduct the reviews must be able to observe the behavior they are
rating. This implies having measurable standards with which to compare employee
behavior.
89624_ch08_hr_279-317.indd 287 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
288 Part 3 Developing Effectiveness in Human Resources
• Do not allow performance problems to continue unchecked. Document problems
when they occur and refer to them in employees’ reviews. This information may
prove decisive should an employee take legal action. Supervisors should be trained to
use review forms correctly and apply the review standards when making judgments.
• A firm’s HR department should review the evaluations to see if minority groups are
being adversely impacted.
• The reviews should be discussed openly with employees and counseling or correc-
tive guidance offered to help poor performers improve their performance. Be open
to the possibility that employees could be transferred to other positions that better
suit their abilities.
• An appeals procedure should be established to enable employees to express their
disagreement with the evaluations.19
HR professionals should also review the supervisors’ review comments that could
indicate the firm is not complying with the law. Consider the following comments: “Ted
was absent for several weeks in 2017, which adversely affected operations.” If some of Ted’s
absences were taken in conjunction with the Family Medical Leave Act, the comment
could be used in court to show Ted was deprived of his right to take leave under the act
without being retaliated against.20 Having reviews examined by a supervisor’s superior can
also reduce the chance of biased reviews and evaluations that could be legally problematic.
8.2c Sources of Performance Review Information
Given the complexity of today’s jobs, it’s unrealistic to presume that one person can
fully observe and evaluate an employee’s performance. At IBM, employees are regularly
reviewed by a broad cross section of the company’s leaders, not just their immediate
bosses. As Figure 8.5 shows, the raters can include supervisors, peers, team members,
employees themselves, their subordinates, customers, vendors, and suppliers.
Superior
Te
am
V
e
n
d
o
rs
Peers
S
u
p
p
lie
rs
Subordinates
Self
Cu
sto
m
er
s
m
em
be
rs
Alternative Sources of ReviewsFigure 8.5
89624_ch08_hr_279-317.indd 288 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
289Chapter 8 Performance Management
Manager/Supervisor
The manager and/or supervisor evaluation has traditionally been used to evaluate the
performance of employees. Supervisors are in the best position to perform this func-
tion, although it may not always be possible for them to do so. Managers with many
subordinates often complain they don’t have time to fully observe the performance of
each of them. The managers must then rely on the employees’ performance records. If
reliable and valid measures are not available, the review is likely to be less than accurate
as a result. (Recall our earlier discussion of criterion deficiency and criterion contami-
nation.) In addition, research has shown that the ratings managers give employees they
have known for less than 1 year are less reliable, which can be a drawback of relying
solely on information from managers.21
The Employee
In many firms, employees are asked to provide feedback on self-evaluation forms. A
self-evaluation can increase an employee’s involvement in the review process and get
the employee thinking about his or her strengths and weaknesses. In other words, self-
evaluations serve as a catalyst for discussion. The employee and his or her manager then
discuss the employee’s job performance and agree on a final evaluation.
It’s not uncommon for employees to present themselves highly favorably in self-evalu-
ations or believe they will give them more influence over their performance ratings. If that
expectation is not met, an employee can become frustrated. For this reason, self-evaluations
are often best used for developmental purposes rather than for administrative decisions.22
Subordinates
Subordinate evaluations have been used by both large and small organizations to give
managers feedback on how their subordinates view them.23 Subordinates are in a good
position to provide feedback to their managers because they are in frequent contact with
their superiors and occupy a unique position from which to observe many performance-
related behaviors, such as their leadership ability, ability to delegate, employee support-
iveness, and so on. The information gathered is often used for developmental rather
than administrative purposes. Evidence suggests that when managers heed the advice
of their subordinates, their own performance can improve substantially. To avoid any
problems with retaliation, subordinate evaluations should be submitted anonymously
and the results combined in a single report. The manager’s supervisor then uses the
information as part of the person’s final evaluation.24
Peers
Individuals of equal rank who work together are increasingly asked to evaluate each
other using a peer evaluation. With peer evaluations, coworkers complete a review on
the employee. The information is then usually combined and given to the employee’s
supervisor for use in the person’s final evaluation. One advantage of peer evaluations is
that they can sometimes provide more accurate and valid information about employ-
ees. Supervisors often see employees putting their best foot forward. Those who work
together on a regular basis may see a more realistic picture. Peers can readily identify the
leadership and interpersonal skills of their coworkers along with their other strengths
and weaknesses. For example, a superior asked to rate a patrol officer on a dimension
such as “dealing with the public” might not have had much opportunity to observe it.
Fellow officers, on the other hand, likely would have.
manager and/or
supervisor evaluation
A performance
evaluation done by an
employee’s manager
and often reviewed by
a manager one level
higher
self-evaluation
A performance
evaluation done by
the employee being
evaluated, generally
on an evaluation form
completed by the
employee prior to the
evaluation meeting
subordinate
evaluation
A performance evalua-
tion of a superior by an
employee, which is often
used for developmental
rather than for adminis-
trative purposes
peer evaluation
A performance evalua-
tion done by one’s fellow
employees, generally
on forms compiled into
a single profile for use
in the evaluation meet-
ing conducted by the
employee’s manager
89624_ch08_hr_279-317.indd 289 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
290 Part 3 Developing Effectiveness in Human Resources
For employees who have trouble confronting their coworkers about problems, the
reviews provide a forum in which to address issues and resolve conflicts. They also pro-
vide an opportunity to hand out praise.25 However, peer evaluations alone should not be
used to make administrative decisions related to salaries, bonuses, promotions, and other
major decisions about an employee. They should also be kept confidential, so interper-
sonal rivalries or hurt feelings don’t result among coworkers. Instead of listing individual
comments and ratings from an employee’s peers, the ratings should be tallied to arrive at
a composite score, and the comments summarized by the worker’s supervisor.
Team Members
An extension of the peer evaluation is the team evaluation. In a team setting, it may
be nearly impossible to distinguish one individual’s contribution. To address this issue,
organizations such as Google, Boeing, and Apple have used team evaluations to evaluate
the performance of their teams as a whole.26 These companies believe that team evalua-
tions can help break down barriers between individual employees and encourage a joint
effort on their part.
Frequently, the system is complemented by the use of team incentives or group
variable pay (see Chapters 10 and 16). When Apple developed the iOS 10 (operating
system), team rewards were used. No one member of the 600-person team could receive
an exceptional performance review unless the entire team did.27
Customers
Customer evaluations are another source of performance review information. FedEx,
Best Buy, and Isuzu are among the companies that have utilized external customers
to provide feedback for their employees’ evaluations. Other companies survey their
vendors and suppliers as part of the review process. By including the firm’s busi-
ness partners in the performance reviews, managers hope to produce more objective
reviews, more effective employees, more satisfied customers, and a better business
performance.28
In contrast to external customers, internal customers include anyone inside the orga-
nization who depends on an employee’s work output. For example, managers who rely
on the HR department for selecting and training employees would be candidates for
conducting internal customer evaluations of employees in the department or the depart-
ment as a whole. For both developmental and administrative purposes, internal custom-
ers can provide extremely useful feedback about the value added by an employee or team
of employees.
8.2d Putting It All Together: 360-Degree Evaluations
Companies such as Intel, Morgan Stanley, and Disney are among the many organi-
zations that have used a multiple-rater approach—or 360-degree evaluation—that
combines various sources of performance review information.29 Jobs are multifaceted,
and different people see different things. As the name implies, 360-degree feedback is
intended to provide employees with as accurate a view of their performance as possible
by getting input from all angles: supervisors, peers, subordinates, customers, and the
like. The information is then compiled into a single document, which is synthesized by
the employee’s manager as part of the overall evaluation. Figure 8.6 shows a list of the
advantages and disadvantages of a 360-degree review.
team evaluation
A performance evalu-
ation that recognizes
team accomplishments
rather than individual
performance
customer evaluation
A performance evalua-
tion that includes evalu-
ations from both a firm’s
external and internal
customers
360-degree evaluation
A performance evalua-
tion done by different
people who interact with
the employee, generally
on forms compiled into a
single document for use
in the evaluation meet-
ing conducted by the
employee’s manager
89624_ch08_hr_279-317.indd 290 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
291Chapter 8 Performance Management
8.2e Training Appraisers
Training appraisers can vastly improve the performance review process. A weakness
of many performance review programs is that raters are not adequately trained for
the task, and so the feedback they provide their subordinates is not as accurate or use-
ful as it might be, or is actually destructive According to one HR manager: “What’s
not important is the (review) form or the (measuring) scale. What’s important is that
managers can objectively observe people’s performance and objectively give feedback
on that performance.” Nonetheless, in a survey of 55 HR managers from medium and
large companies, more than half said their companies did either little or no assessment
of how well their supervisors do reviews.30 In addition to providing supervisors with
training, firms should make accurately evaluating and developing their subordinates a
standard by which the supervisors themselves will be evaluated.
Establishing a Review Plan
A training program for raters is most effective when it follows a systematic process that
begins by explaining the objectives of the firm’s performance management system and
its philosophy on reviews. For example, the rater needs to know the purpose for which
the review is to be used. Using the review for compensation decisions rather than devel-
opment purposes can affect how the rater evaluates the employee, and it may change
the rater’s opinion of how the review form should be completed. The mechanics of the
rating system should also be explained, including how managers keep performance
records and review them, how frequently the reviews are to be conducted, who will
conduct them, what the standards of performance are, and how to go about preparing
for reviews. In addition, evaluation training should alert raters to the weaknesses and
problems of reviews so they can be avoided.
Sources: Compiled from David A. Waldman, Leanne E. Atwater, and David Antonioni, “Has 360-Degree Feedback Gone Amok?” Academy of Man-
agement Executive 12, no. 2 (May 1998): 86–94; Bruce Pfau, Ira Kay, Kenneth Nowak, and Jai Ghorpade, “Does 360-Degree Feedback Negatively
Affect Company Performance?” HRMagazine 47, no. 6 (June 2002): 54–59; Maury Peiperl, “Getting 360-Degree Feedback Right,” Harvard Business
Review 79, no. 1 (January 2001): 142–147; Joyce E. Bono and Amy E. Colbert, “Understanding Responses to Multi-Source Feedback: The Role of
Core Self-Evaluations,” Personnel Psychology 58, no. 1 (Spring 2005): 171–205.
Pros and Cons of 360-Degree ReviewsFigure 8.6
CONS
• The system is complex in combining all the responses.
• The feedback can be intimidating and cause resentment if employees feel the respondents
have “ganged up” on them.
• There may be conflicting opinions, though they may all be accurate from the respective
standpoints.
• Raters must undergo some training.
• Employees may collude or “game” the system by giving invalid evaluations to one another.
• Raters may not feel accountable if their reviews are anonymous.
PROS
• The system is more comprehensive because feedback is gathered from multiple perspectives.
• It may lessen bias and prejudice since feedback comes from more people, not one individual.
• The feedback from peers and others may improve an employees’ self-development.
89624_ch08_hr_279-317.indd 291 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
292 Part 3 Developing Effectiveness in Human Resources
Eliminating Rating Errors
Eliminating the subjective errors made by managers in the rating process is an extremely
important part of evaluating the performance of an employee. The “halo error,” dis-
cussed in Chapter 6 when we looked at selecting employees, can occur during the review
process if raters do not have carefully developed descriptions of the employee behaviors
being rated. The “horn error” is the opposite of the halo effect. It occurs when a manager
focuses on one negative aspect about an employee and generalizes it into an overall poor
rating. A personality conflict between a manager and his or her employees increases
the probability of the horn effect, which can lead to a high level of frustration on the
employee’s part if it is not corrected.31
Distributional Errors. A distributional rating error occurs when a single rating
is skewed toward an entire group of employees. For example, raters who are reluctant
to assign either extremely high or extremely low ratings commit the error of central
tendency. In this case, all employees are rated about average. It is also common for some
raters to give unusually high or low ratings. For example, a manager might erroneously
assert, “All my employees are excellent” or “None of my people are good enough.” These
beliefs give rise to what is called leniency or strictness error.32
One way to reduce distributional errors is to explain to raters that when you are
looking at large groups of employees, you should generally expect to find significant
differences among them. Using clearly defined characteristics or dimensions of per-
formance and providing meaningful descriptions of behavior on the scale, known as
“anchors,” can help raters determine how individual employees should be rated. Another
approach is to require ratings to conform to a forced distribution, which is also some-
times referred to as forced ranking. Managers appraising employees under a forced dis-
tribution system are required to place a certain percentage of employees into various
performance categories. For example, a firm may require that 10 percent of ratings be
poor (or excellent). This is similar to the requirement in some schools that instructors
error of central
tendency
A performance rating
error in which all employ-
ees are rated about
average
leniency or strictness
error
A performance rat-
ing error in which the
appraiser tends to give
employees either unusu-
ally high or unusually low
ratings
forced distribution
A performance ranking
system whereby raters
are required to place a
certain percentage of
employees into various
performance categories
Performance evalu-
ation programs are
most effective when
managers have been
properly trained to
adequately observe
and give feedback to
their employees.
A
nd
re
y_
Po
po
v/
Sh
ut
te
rs
to
ck
89624_ch08_hr_279-317.indd 292 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
293Chapter 8 Performance Management
grade on a curve. A variation of this is peer ranking, whereby employees in a work group
are ranked against one another from best to worst. The rankings are then used to deter-
mine pay raises. Some companies go so far as to terminate low-ranking employees. As
you can probably tell, ranking systems can be controversial and divisive.
Although forced distribution and peer ranking may solve leniency and strictness
errors, they can create other rating errors—particularly if most employees are perform-
ing above the standard, in the middle, or below the standard. Similarly, with peer rank-
ing, three employees all performing nearly at the same level would have to be ranked
one, two, and three. That process creates a misleading picture of how well the individuals
are performing, which in turn affect their pay, promotability, and so forth. Moreover,
if the system has a disparate impact on a legally protected group, such as a minority or
older employees, it can result—and has resulted—in discrimination lawsuits. GE, which
pioneered forced ranking, found this out firsthand. Other companies, including Ford,
Goodyear, and Microsoft, abandoned their forced ranking systems after lawsuits, lower
morale, decreased teamwork, and destructive employee competition ensued following
their use. Eventually even GE discontinued the practice. The company now has a mobile
app employees and managers can use to request feedback and provide each other with
performance-related comments.33 In addition, not all corporate cultures are conducive
to forced ranking systems. For example, at Starbucks, which fosters a corporate climate
based on teamwork, using a forced ranking system would probably be counterproductive.
Because teamwork is so important in organizations today, companies are starting to
use crowdsourcing as part of their performance management systems. In an HR context,
crowdsourcing involves continually gathering feedback, compliments, and suggestions
from the different people who work with an employee using “social recognition” soft-
ware and mobile apps. (You can think of the applications as being somewhat analogous
to “liking” something someone posts on Facebook.) Achievers and Globoforce are two
such brands. Hey Taco and Growbot are two crowdsourcing add-ons that can be used
with the popular chat platform Slack. When employees are recognized by other workers
for doing a good job, they get points that translate into monetary and other rewards,
such as time off or gift cards. 3M, the Marriott and Starwood hotel chains, and the
pharmaceutical company Eli Lilly are using this type of software.
To track the performance of its sales agents and motive them, the Home Shopping
Network (HSN) uses a game module that enables agents to earn badges of increasing
difficulty that reflect their performance.34 Badgeville is a performance-management
game Samsung and the accounting firm Deloitte have used to motivate their call center
representatives and salespeople. The games make attaining one’s performance goals
more fun. Digital “leaderboards” that show at a glance who is “winning” in various areas
spark competition without hampering teamwork.
Temporal Errors. Some rating errors are temporal in that the performance review
is biased either favorably or unfavorably depending on the way performance informa-
tion is selected, evaluated, and organized by the rater over time. For example, when the
evaluation is based largely on the employee’s recent behavior, good or bad, the rater has
committed the recency error. Managers who give higher ratings because they believe
an employee is “showing improvement” may unwittingly be committing recency error.
Having the rater routinely document employee accomplishments and failures through-
out the whole review period can minimize the recency error. One way for managers to
do this is by keeping a diary or a log.
Contrast Error. A contrast error occurs when an employee’s review is biased either
upward or downward because of another employee’s performance. For example, an
recency error
A performance rating
error in which the evalu-
ation is based largely
on the employee’s
most recent behavior
rather than on behavior
throughout the evalua-
tion period
contrast error
A performance rat-
ing error in which an
employee’s review is
biased either upward or
downward because of
comparison with another
employee just previously
evaluated
89624_ch08_hr_279-317.indd 293 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
294 Part 3 Developing Effectiveness in Human Resources
A dashboard in Achiev-
ers allows managers to
see which employees
are being recognized
by other people for
their contributions.
A
ch
ie
ve
rs
.c
om
, h
tt
p:
//
w
w
w
.a
ch
ie
ve
rs
.c
om
/s
ol
ut
io
ns
/e
m
pl
oy
ee
-r
ec
og
ni
tio
n#
/i
m
ag
es
/4
average employee may appear very productive when compared with a poor performer.
However, that same employee could appear unproductive when compared with a star
performer. Contrast errors are most likely when raters are required to rank employees
in order from the best to the poorest.35
Similar-to-Me Error. The similar-to-me error occurs when a supervisor inflates
the reviews of people with whom they have something in common. For example, if
both the manager and the employee are from the same state or went to the same schools,
the manager may unwittingly have a more favorable impression of the employee. The
similar-to-me error can be powerful, and when the similarity is based on race, religion,
gender, or some other protected category, it can result in discrimination.
Furthermore, raters should be aware of any stereotypes they may hold toward
particular groups. For example, one study found that men who experience conflicts
between family and work received lower overall performance ratings than men who did
not experience such conflicts. Women, on the other hand, were judged no differently
whether they experienced family–work conflicts or not.36
Holding “mock” calibration meetings can help trainers improve the accuracy of
their ratings. The training can pay off, particularly when participants have the opportu-
nity to (1) observe other managers making errors, (2) actively participate in discovering
similar-to-me error
A performance
rating error in which
an appraiser inflates the
review of an employee
because of a mutual
personal connection
89624_ch08_hr_279-317.indd 294 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
295Chapter 8 Performance Management
their own errors, and (3) practice job-related tasks to reduce the errors they tend to
make.37 Google, which often conducts performance reviews with input from employee
groups, has compiled a “cognitive biases” list for employees to refer to as they discuss
ratings.38 Other companies, including the consulting firm Accenture and the software
developer SAP, are experimenting with machine learning to collect data on employees’
work and analyze it to get an unbiased picture of a person’s performance.39 Machine
learning is a type of artificial intelligence that allows computers to discover new insights
in data without being programmed where to look for it.40
Feedback Training
A training program for raters should provide some pointers managers can use to provide
performance feedback to employees on an ongoing basis and during formal reviews and
feedback sessions. During formal reviews in particular, many managers are as nervous
about giving feedback as employees are about receiving it. Oftentimes they just want
them to be over. When this happens managers do not engage employees in much of a
conversation during the reviews, which is a major drawback.
Managers need to understand that employees want to know how they are doing
and how they can improve. They are less eager to be appraised or judged. This is why
it is important for their managers to provide them with ongoing feedback and not just
“dump on them” during a review. If an employee is doing something wrong, waiting
for a formal evaluation later in the year to communicate that information is the wrong
approach. The person needs to be corrected immediately.
Even when appraising an outstanding employee, managers often are reluctant to
evaluate an employee’s performance. Sometimes it is as simple as the manager lacks
the skills to execute an effective performance review session; sometimes there is never
enough money to recognize even the top performer. So reviews are postponed or han-
dled poorly, and the result is that even the organization’s best performers are left frus-
trated, angry, disillusioned, and demotivated.
Conflicting purposes of the review can also hamper the effectiveness of the feed-
back employees receive. For example, if a review program is used to determine an
employee’s future pay and at the same time to motivate the person to perform better,
the two purposes can end up conflicting with one another. Often when salary decisions
are discussed during a performance review, they tend to become the dominant topic of
conversation, and managers spend a lot of time justifying their pay decisions. As a result,
ways to improve the employee’s future job performance get less discussion.
Feedback training should cover at least three basic areas: (1) communicating effec-
tively so as to gain the employee’s support, (2) diagnosing the root causes of performance
problems, and (3) setting goals and objectives for the employee to achieve in conjunc-
tion with the feedback. A checklist like the one in Highlights in HRM 1 can be used to
help supervisors prepare for performance review meetings.
8.3 Performance Review Methods
Now that you understand more about performance management, the question is, How
do you go about measuring, or appraising, it? Performance review methods can be
broadly classified as measuring traits, behaviors, or results. Trait approaches based
on people’s characteristics continue to be used despite their subjectivity. Behavioral
approaches provide more action-oriented information to employees and may be best
for development. The results-oriented approach has become more popular because it
focuses on the measurable contributions that employees make to the organization.
As an employee, would
you rather be evaluated
on your personal
traits or characteristics,
your on-the-job
behaviors, or the
results you get? Would
it depend upon the job
you were doing?
LO 3
89624_ch08_hr_279-317.indd 295 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
296296
Supervisor’s Checklist for a Formal Performance Review Meeting
Scheduling
1. Schedule the meeting and notify the employee 10
days to 2 weeks in advance.
2. Ask the employee to prepare for the session by
reviewing his or her performance, job objectives, and
development goals.
Preparing
1. Review the performance documentation collected
throughout the year. Concentrate on work patterns
that have developed.
2. Be prepared to give specific examples of above- or
below-average performance.
3. If the performance meets or exceeds expectations,
discuss this and ways to reinforce it. When the per-
formance falls short of expectations, determine what
changes need to be made.
4. After the review is written, set it aside for a few days
and then review it again.
Conducting the Review
1. Select a private location that is comfortable and free
of distractions.
2. Discuss each area of performance one at a time and
address both the employee’s strengths and shortcom-
ings in that area.
3. Be specific and descriptive, not general and judgmen-
tal. Report occurrences rather than evaluating them.
4. Discuss your differences and resolve them.
5. Jointly discuss and design plans for taking corrective
action if necessary as well as plans for growth and
development.
6. Maintain a professional and supportive approach to
the discussion.
Highlights in HRM1
8.3a Trait Methods
Trait approaches are designed to measure the extent to which an employee possesses
certain characteristics—such as dependability, reactivity, initiative, and leader-
ship—that are viewed as important for the job and the organization in general. Trait
methods became popular because they are easy to develop. However, if not designed
carefully on the basis of job analysis, trait evaluations can be notoriously biased and
subjective.
Graphic Rating Scales
In the graphic rating scale method, each trait or characteristic to be rated is represented
by a scale on which a rater indicates the degree to which an employee possesses that
trait or characteristic. An example of this type of scale is shown in Highlights in HRM 2.
In HRM 2, the dimensions are defined briefly, and some attempt is made to define the
points on the scale. Defining them precisely helps reduce subjectivity.41
Mixed-Standard Scales
Rather than evaluating traits according to a single scale, with a mixed-standard scale
method, the rater is given three specific randomly sequenced descriptions of each trait:
superior, average, and inferior. As Highlights in HRM 3 shows, supervisors evaluate
employees by indicating whether their performance is better than, equal to, or worse
than the standard for each behavior.
graphic rating scale
method
A trait approach to per-
formance rating whereby
each employee is rated
according to a scale of
characteristics
mixed-standard scale
method
A trait approach to per-
formance rating similar
to other scale methods
but based on a com-
parison with (better than,
equal to, or worse than) a
standard
89624_ch08_hr_279-317.indd 296 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
297297
Forced-Choice Method
The forced-choice method requires the rater to choose from statements, often in pairs,
that appear equally favorable or equally unfavorable but are designed to distinguish
between successful and unsuccessful performance. For example, forced-choice pairs
might include the following:
1. __________ (a) Works hard __________ (b) Works quickly
2. __________ (a) Shows initiative __________ (b) Is responsive to customers
3. __________ (a) Work is reliable __________ (b) Performance is good
The rater then selects one statement from the pair without knowing which state-
ment correctly describes successful job behavior. Because it’s not immediately clear
which response results in a higher rating, less bias results.
forced-choice method
A trait approach to per-
formance rating that
requires the rater to
choose from statements
designed to distinguish
between success-
ful and unsuccessful
performance
A Graphic Rating Scale with Comments
Highlights in HRM2
Appraise employee’s performance in PRESENT ASSIGNMENT. Check ( ) most
appropriate square. Appraisers are urged to freely use the “Remarks” sections
for significant comments descriptive of the individual.
1. KNOWLEDGE OF
WORK:
Understanding of all
phases of his/her
work and related
matters
2. INITIATIVE:
Ability to originate
or develop ideas
and to get things
started
3. APPLICATION:
Attention and
application to
his/her work
4. QUALITY OF
WORK:
Thoroughness,
neatness, and
accuracy of work
5. VOLUME OF
WORK:
Quantity of
acceptable work
Needs instruction Has required knowledge Has exceptional knowledge
or guidance of own and related work of own and related work
Remarks:
Lacks imagination Meets necessary requirements Unusually resourceful
Remarks:
Wastes time Steady and willing worker Exceptionally industrious
Needs close supervision
Remarks:
Needs improvement Regularly meets Consistently maintains
recognized standards highest quality
Remarks:
Should be increased Regularly meets Unusually high output
recognized standards
Remarks:
89624_ch08_hr_279-317.indd 297 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
298298
Example of a Mixed-Standard Scale
DIRECTIONS: Indicate whether the individual’s performance
is above (1), equal to (0), or lower than (2) each of the follow-
ing standards.
1. ______ Employee uses good judgment when address-
ing problems and provides workable alternatives;
however, at times does not take actions to prevent
problems. (medium PROBLEM-SOLVING)
2. ______ Employee lacks supervisory skills; frequently
handles employees poorly and is at times argumenta-
tive. (low LEADERSHIP)
3. ______ Employee is extremely cooperative; can be
expected to take the lead in developing cooperation
among employees; completes job tasks with a positive
attitude. (high COOPERATION)
4. ______ Employee has effective supervision skills;
encourages productivity, quality, and employee devel-
opment. (medium LEADERSHIP)
5. ______ Employee normally displays an argumentative
or defensive attitude toward fellow employees and job
assignments. (low COOPERATION)
6. ______ Employee is generally agreeable but becomes
argumentative at times when given job assignments;
cooperates with other employees as expected.
(medium COOPERATION)
7. ______ Employee is not good at solving problems;
uses poor judgment and does not anticipate potential
difficulties. (low PROBLEM-SOLVING)
8. ______ Employee anticipates potential problems
and provides creative, proactive alternative
solutions; has good attention to follow-up. (high
PROBLEM-SOLVING)
9. ______ Employee displays skilled direction, effectively
coordinates unit activities, is generally a dynamic
leader, and motivates employees to high performance.
(high LEADERSHIP)
Highlights in HRM3
Essay Method
The essay method requires the rater to write a description of the employee’s perfor-
mance and make recommendations for his or her development. Often the method
is combined with other rating methods because it provides additional descriptive
information about an employee’s performance that can’t be described with a rating
scale. Essays also provide an excellent opportunity for supervisors to point out the
unique characteristics of employees, including their promotability, special talents,
skills, strengths, and weaknesses. A limitation of the essay method is that it can be
subjective.
8.3b Behavioral Methods
As you have learned, trait-oriented performance reviews can be vague and subjective. In
contrast, behavioral methods specifically describe which actions should (were or were
not) be exhibited on the job. Let’s look at some behavioral methods.
Critical Incident Method
Recall from Chapter 4 that a critical incident occurs when employee behavior results in
unusual success or failure. The manager keeps a log or diary for each employee through-
out the review period and notes specific critical incidents related to how well they per-
form. The critical incident method can also help a manager counsel employees when
they are having performance problems. It also increases the objectivity of the review by
requiring the rater to use job performance criteria to justify the ratings.42
essay method
A trait approach to
performance rating that
requires the rater to write
a statement describing
an employee’s behavior
89624_ch08_hr_279-317.indd 298 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
299Chapter 8 Performance Management
Behavioral Checklist Method
The behavioral checklist method requires the rater to check statements on a list that
describe characteristics of the employee’s behavior. A checklist developed for salespeople
who sell electronic products might include the following:
• Questions customers about their needs.
• Identifies products that meet customers’ needs.
• Keeps abreast of new developments in technology.
• Processes orders correctly.
Behaviorally Anchored Rating Scale
A behaviorally anchored rating scale (BARS) consists of a series of five to ten vertical
scales—one for each important dimension of performance. These dimensions are
“anchored” by behaviors identified through a critical incident job analysis. The criti-
cal incidents are placed along the scale and are assigned point values according to the
opinions of experts. A BARS for a job dimension for firefighters is shown in the upper
portion of Highlights in HRM 4.
A BARS is typically developed by a committee that includes both subordinates
and managers. Employee participation can lead to greater acceptance of the perfor-
mance review process and of the performance measures that it uses. The procedures
followed in developing a BARS also result in scales that have a high degree of content
validity.
Behavior Observation Scale
A behavior observation scale (BOS) is similar to a BARS in that they are both based
on critical incidents. However, the lower portion of Highlights in HRM 4 shows
that rather than asking the evaluator to choose the most representative behavioral
anchor, a BOS is designed to measure how frequently each of the behaviors has been
observed.
8.3c Results Methods
Rather than looking at employees’ traits or on-the-job behaviors, many organizations
evaluate employees’ accomplishments—such as the sales and output results they achieve.
Employees are responsible for their outcomes along with discretion over the way they
accomplish them (within limits). Advocates of results-based reviews argue that they are
more objective and empowering for employees.
Sales, Productivity, and Quality Measures
Salespeople are evaluated on the revenue they bring in. Production workers are
evaluated on the number of units they produce and perhaps the scrap rate or
number of defects detected in their work. Executives are frequently evaluated on
the basis of a company’s profits or growth rate. Each of these measures directly
links what employees accomplish to results that benefit the organization. In
this way, results-based reviews can directly align an employee and an organiza-
tion’s goals.
behaviorally anchored
rating scale (BARS)
A behavioral approach to
performance rating that
consists of a series of ver-
tical scales, one for each
important dimension of
job performance
behavior observation
scale (BOS)
A behavioral approach to
performance rating that
measures the frequency
of observed behavior
89624_ch08_hr_279-317.indd 299 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
BARS and BOS Examples
Example of a BARS for Firefighters
FIREFIGHTING STRATEGY: Knowledge of Fire Characteristics.
This area of performance assesses the ability of a firefighter
to understand fire characteristics to develop the best strat-
egy for fighting a fire.
HIGH 7 —Finds the fire when no one else can
6 — Correctly assesses the best point of
entry for fighting fire
5 — Uses the type of smoke as indicator
of type of fire
AVERAGE 4 —Understands basic hydraulics
3 — Cannot tell the type of fire by observ-
ing the color of flame
2 — Cannot identify the location of the
fire
LOW 1 — Will not change the firefighting strat-
egy in spite of flashbacks and other
signs that accelerants are present
Source: Adapted from Landy, Jacobs, and Associates. Reprinted
with permission.
Sample Items from Behavior Observation
Scales
For each behavior observed, use the following scale:
5 represents almost always 95–100% of the time
4 represents frequently 85–94% of the time
3 represents sometimes 75–84% of the time
2 represents seldom 65–74% of the time
1 represents almost never 0–64% of the time
SALES PRODUCTIVITY NEVER ALWAYS
1. Reviews individual
productivity results
with manager
1 2 3 4 5
2. Suggests to peers
ways of building sales
1 2 3 4 5
3. Uncovers specific
needs for each contact
1 2 3 4 5
4. Keeps account plans
updated
1 2 3 4 5
5. Follows up on
customer leads
1 2 3 4 5
Highlights in HRM 4
But there are some problems with results-based reviews. For jobs that are more ser-
vice oriented, it is not enough to simply look at production or sales figures. Factors such
as cooperation, adaptability, initiative, and concern for human relations are important
to the job success of employees, too. If these factors are important job standards, they
should be added to the evaluation review. Thus, to be realistic, both the results and the
methods or processes used to achieve them should be considered.43
Management by Objectives
One method that attempts to overcome some of the limitations of results-based reviews
is management by objectives (MBO). Employees establish objectives (such as produc-
tion costs, sales per product, quality standards, and profits) by consulting with their
managers and are then evaluated based on their meeting those objectives.44 An MBO
system (Figure 8.7) consists of a cycle that begins with setting the organization’s common
goals and objectives and ultimately returns to that step. The system acts as a goal-setting
process whereby objectives are established for the organization (Step 1), departments
(Step 2), and individual managers and employees (Step 3).
As Figure 8.7 shows, employees help establish specific goals, but those goals are
based on a broad statement of an employee’s responsibilities prepared by the person’s
management by
objectives (MBO)
A philosophy of
management that
rates the performance
of employees based
on their achievement
of goals set mutu-
ally by them and their
managers
300
89624_ch08_hr_279-317.indd 300 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
301Chapter 8 Performance Management
supervisor. The employee-established goals are then discussed with the supervisor and
jointly reviewed and modified until both parties are satisfied with them (Step 4). The
goal statements are accompanied by a detailed account of the actions the employee
proposes to take to reach the goals and how they will be measured (the metrics).
During periodic reviews, the progress the employee makes toward the goals is then
assessed (Step 5). The goals and metrics may be changed at this time as new or additional
information is received. After a period of time, the employee does a self-evaluation and
documents what he or she has accomplished. The person and his or her manager then
jointly review and discuss the self-evaluation (Step 6). The final step (Step 7) is review-
ing the connection between the employee’s performance and the organization’s. Notice
how the steps in an MBO program are similar to the steps in Figure 8.1 at the beginning
of the chapter but are more specific.
The Balanced Scorecard
The balanced scorecard (BSC), which we first discussed in Chapter 2, can be used to
appraise individual employees, teams, business units, and the corporation itself. A BSC
review takes into account four related categories: (1) financial measures, (2) customer
measures, (3) process measures, and (4) learning measures. Highlights in HRM 5 shows
how a balanced scorecard in the financial category translates to a personal scorecard
for an employee. The corporation’s financial objectives have already been spelled out on
the top of the scorecard. Then the various business unit targets are added, followed by
Step 5b:
New inputs
are then
provided
Step 7:
Review of
organization
performance
Step 6:
Final
review
Step 5a:
Inappropriate
goals /metrics
deleted
Step 2:
Department
goals and
metrics
Step 1:
Organization
goals and
metrics
Step 3B:
Subordinate
proposes
goals and
metrics
Step 3A:
Supervisor
lists goals and
metrics for
subordinate Step 4:
Mutual
agreement of
goals and
metrics
Step 5:
Interim
review
MANAGEMENT BY OBJECTIVES
Performance Review under an MBO ProgramFigure 8.7
89624_ch08_hr_279-317.indd 301 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
A Balanced Scorecard that Translates to a Personal Scorecard
CORPORATE OBJECTIVES
• Double our corporate value in 7 years. ❏ Corporate
• Increase our earnings by an average of 20% per year. ❏ Business Unit
• Achieve an internal rate of return 2% above the cost of capital. ❏ Team/Individual
• Increase production by 20% in the next decade.
Corporate Targets and Business-Unit Targets Team/Individual Objectives
2018 2019 2020 2021 2014 2015 2016 2017 1.
Financial (millions of dollars)
100 120 160 180 Earnings
35 55 85 100 Net profits
15 35 65 75 Net cash flow 2.
Operating (millions of dollars)
35 35 40 50 Production and development
costs
30 30 35 30 Overhead and operating costs
100 105 108 110 Total annual production
( million units)
3.
Highlights in HRM5
Team/Individual Measures Targets
1.
2. 4.
3.
4.
Source: Adapted from Robert Kaplan and David Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review
(January–February 1996): 75–85.
the target objectives of the firm’s teams and individual employees. The scorecard helps
an employee see clearly how his or her performance ties in to the overall performance
of the firm.
The BSC review method is similar to an MBO system in that it translates broad
corporate goals into divisional, departmental, team, and individual goals in a cascad-
ing way. This ensures that implementing the firm’s strategy becomes “everyone’s” job.
8.3d Which Performance Review Method Should You Use?
Figure 8.8 lists some of the strengths and weaknesses of trait, behavior, and results
approaches to appraising employees. Although traditionally researchers and HR man-
agers believed that the more sophisticated and time-consuming methods offer more
302
89624_ch08_hr_279-317.indd 302 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
303Chapter 8 Performance Management
useful information, that view has been called into question. Even a simple system, when
used properly, can initiate a discussion between managers and employees that genuinely
leads to a better performance. Says Ronald Gross, an industrial psychologist and human
resources consultant: “I’ve seen many systems fail miserably because they’re too com-
plex, too time-consuming, and too burdensome. I’ve never seen a system fail because
it was too simple.”45
The accounting firm Deloitte uses a form with only four measures that it admin-
isters quarterly. For example, one measure asks evaluators to use a five-point scale to
answer the following question: “Given what I know of this person’s performance, I would
always want him or her on my team.”46 One way to assess whether an organization’s
review system is effective is by doing an annual, or at least periodic, audit of the process
using a survey instrument that both managers and employees complete on a periodic
basis. This should give HR a better sense of whether the review process is improving.
8.4 Performance Review Meetings
and Feedback Sessions
After you have evaluated how well your employees are doing using one or more review
methods, how should you begin to present the information to them in a review meeting
or feedback session? The format for the meeting or session will be determined in large
part by its purpose, type of performance management system used, and organization of
a firm’s review form. A formal performance evaluation should be scheduled far enough
in advance to allow the subordinate and manager to prepare for the discussion. Usually
10 days to 2 weeks is a sufficient amount of lead time.
Sometimes discussing an employee’s past performance and future development
goals can make for a meeting or feedback session that is too long. It can also be difficult
for a supervisor to perform the role of both evaluator and counselor in the same review
ADVANTAGES DISADVANTAGES
Trait
Method
1. Are inexpensive to develop
2. Use meaningful dimensions
3. Are easy to use
1. Have a high potential for rating errors
2. Are not useful for employee counseling
3. Are not useful for allocating rewards
4. Are not useful for promotion decisions
Behavioral
Methods
1. Use specific performance dimensions
2. Are acceptable to employees and superiors
3. Are useful for providing feedback
4. Are fair for reward and promotion decisions
1. Can be time consuming to develop/use
2. Can be costly to develop
3. Have some potential for rating error
Results
Methods
1. Have less subjectivity bias
2. Are acceptable to employees and superiors
3. Link individual performance to organizational
performance
4. Encourage mutual goal setting
5. Are good for reward and promotion decisions
1. Are time consuming to develop/use
2. May encourage a short-term perspective
3. May use contaminated criteria
4. May use deficient criteria
A Summary of Various Review MethodsFigure 8.8
As a manager, how
might you get an
employee who is reluc-
tant to talk during a
review to share his or
her thoughts?
LO 4
89624_ch08_hr_279-317.indd 303 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
304 Part 3 Developing Effectiveness in Human Resources
period. Dividing the meeting into two sessions, one for the performance review and the
other for the employee’s growth plans, can be helpful.
8.4a Types of Performance Review Meetings
and Feedback Sessions
There are three basic types of formats for providing feedback during a performance
review meeting or feedback session: tell-and-sell, tell-and-listen, and problem-solving.
No one format is best for every review session. Rather, managers can use one or more
of the formats depending on the purpose of the session, the topic being discussed, and
the receptiveness of the employee.
• Tell-and-Sell. The skills required in the tell-and-sell format include the ability to
persuade an employee to change his or her behavior in a certain way. This requires
a manager to skillfully use motivational and persuasive techniques to try to change
the behavior. But because there is less communication on the part of the employee
with this format, it is less than ideal when used for this purpose. However, the
tell-and-sell format may be used if other formats haven’t worked, the employee is
resistant to change, or the employee is reluctant to participate in the discussion.
• Tell-and-Listen. In the tell-and-listen format, the appraiser or supervisor commu-
nicates the strong and weak points of an employee’s job performance during the first
part of the session. During the second part of the session, the employee’s feelings
about the review are thoroughly explored. The tell-and-listen method gives both
managers and employees the opportunity to release and iron out any frustrating
feelings they might have.
• Problem-Solving. This format is the most proactive. Listening, accepting, and
responding to feelings are essential elements of it. However, the format goes beyond
an interest in the employee’s feelings. It seeks to obtain the employees’ buy-in for a
mutually agreed-upon way to overcome obstacles and actually improve the person’s
actual performance. One of the ways in which a problem-solving format is accom-
plished is by beginning with the employee’s self-evaluation. That way, the manager
and employee can compare where they agree and disagree, and focus on problem-
solving instead of the manager trying to convince the employee he or she is right.
8.4b Conducting the Performance Review Meeting
or Feedback Session
There are no hard-and-fast rules for how to conduct a review, but the guidelines that
follow can increase the willingness of employees to accept feedback, discuss their perfor-
mance and improve it, and increase their overall satisfaction with the feedback process.
Ask for a Self-Evaluation
Research shows that employees are more satisfied and view review systems as more fair
when they have input into the process. A self-evaluation can be used to discuss areas in
which the manager and the employee have reached different conclusions—not so much
to resolve the “truth” as to work toward the resolution of problems. A self-evaluation
also ensures that the employee knows against what criteria he or she is being evaluated,
eliminating any potential surprises.
89624_ch08_hr_279-317.indd 304 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
305Chapter 8 Performance Management
Invite Participation
Communication is a two-way street. Most experts advise supervisors to encourage their
employees to speak freely and listen closely to what they have to say. The more likely
an employee is an active participant in the discussion, the more likely it is that any root
causes and obstacles to his or her performance will be uncovered and constructive ideas
for improvement developed. In addition, research suggests that an employee’s ability
to participate in the discussion is strongly related to the person’s satisfaction with the
feedback delivered, the extent to which the person believes it is fair and useful, and the
desire to improve his or her performance. As a rule of thumb, supervisors should spend
only about 30 to 35 percent of the time talking. They should spend the rest of the time
listening to the information their employees volunteer and their responses to questions.
Express Appreciation
Because praise is a powerful motivator and employees are seeking positive feedback,
it is frequently beneficial to start the session by expressing appreciation for what the
employee has done well. Surprisingly, not all supervisors actually think to do this. They
should. A performance review is the perfect time to tell people they are valued, top
performers in particular, so they feel encouraged and motivated to continue to come to
work day after day and remain with the firm.
Starting the meeting by talking about what the employee is doing well will also
make the person less defensive and more likely to talk about aspects of the job that are
not going so well. Don’t, however, deliberately “sandwich” positive statements followed
by negative ones, which are then followed by positive statements. If you do, the indi-
vidual will be less likely to take the praise seriously and view it instead as a way to soften
the bad news. Furthermore, if employees are given feedback on their performance on a
regular basis, there will be no need to sandwich bad news between good news.
Be Supportive and Demonstrate That You Care
One of the better techniques for engaging an employee is for the manager to ask: “What
can I do to help?” Employees frequently attribute performance problems to either real
or perceived obstacles (such as bureaucratic procedures or inadequate resources). By
being open and supportive, the manager conveys to the employee that he or she will try
to eliminate roadblocks and will work with the employee to achieve a higher standard
of performance. Good managers also demonstrate during reviews and on the job that
not only do they support their employees work efforts and ways to improve them, they
care about them personally and want to help them get what they want out of life. No
one wants to be just a “cog in the machine.”
Minimize Criticism
Even the most stoic employees can absorb only so much criticism before they start to
get defensive. If an employee has many areas in need of improvement, managers should
focus on the issues that are most problematic or most important to the job. In other
words, criticism should be given in small doses.
Some tips for using criticism constructively include the following:
• Consider whether it’s really necessary. Sometimes a manager’s frustration with a per-
formance problem is little more than “letting off steam.” Be sure that the criticism
focuses on a recurrent problem or a consistent pattern of behavior over which the
employee has control.
89624_ch08_hr_279-317.indd 305 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
306 Part 3 Developing Effectiveness in Human Resources
• Consider the person’s ability to handle it. Everyone handles criticism differently.
Some people are able to handle it well. Others react very negatively to even the
slightest criticism.
• Be specific and don’t exaggerate. Sometimes we overstate problems in order to be
convincing or to demonstrate our concern. Try to keep criticism simple, factual, and
to the point. Avoid using terms such as always, completely, and never.
• Watch your timing. Properly timed criticism can often mean the difference between
success and failure. Even good criticism given late in the day, for example, can touch
a raw nerve if the employee is tired. Take a break or save it for another day.
• Make improvement your goal. It’s hard to change a person’s behavior with a single
conversation, so “laying it on the line” is not probably a good idea. Instead of getting
into a “blame game” in which both manager and employee enter into a potentially
endless discussion of why a situation has occurred, focus on the problem and come
up with a solution to it.47
Establish Goals
The final step is establishing goals for the next performance-management cycle. Jointly
establishing goals and then revisiting and revising them at the end of the cycle is a
critical part of the review process. Revisiting goals during a performance review also
emphasizes the ongoing nature of the process.
Because one of the major purposes of the review meeting or feedback session is to
improve an employee’s future performance, his or her manager should focus the person’s
attention on the future rather than the past:
• Emphasize strengths on which the employee can build rather than weaknesses to
overcome.
• Drop unproductive tasks.
• Limit improvement plans to a few important items that can be accomplished within
a reasonable period of time and spell out how they will be achieved. The plans
might include a list of resources, contact information for people who can help the
employee achieve the goals, and timetables for following up to ensure they are met.
• Highlight how both the employee and firm will excel if the goals are achieved.
Follow Up Day to Day
Often both managers and employees are frequently happy to finish formal performance
reviews and file away the review form. As we have emphasized, a better approach is to
have informal talks periodically to follow up on the issues that were discussed. This puts
managers in more of a coaching role versus that of a judge.
For example, as a sales manager, should you wait to appraise your employees once
or twice a year? Probably not. Most likely you would want to monitor their sales on a
weekly and monthly basis. Has a particular salesperson met his or her customer-contact
numbers this week? Why or why not? Is the salesperson closing deals with the people
he or she does contact? If at the 6-month mark, the salesperson isn’t making his or her
goals, how can you help the person if you haven’t provided the individual with ongoing
feedback? The lack of sales will be hard to make up at this point.
It’s not just salespeople who need continual feedback. All types of employees can
benefit from ongoing performance conversations with their managers. “Millennials and
Gen Z-ers don’t want hierarchy, formal feedback processes and appraisals,” says Nicholas
Greschner, the Canadian director of human resources for the consulting firm Accenture.
89624_ch08_hr_279-317.indd 306 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
307Chapter 8 Performance Management
“They demand real-time, in-person feedback, forward-looking conversations and sup-
port to grow their careers.”48 Once the manager and employees have a series of discus-
sions, there is an ebb and flow of ideas, some with the potential to serve as catalysts for
improvement within the company.49 The ultimate purpose is to better both parties.
Providing employees with feedback on a continuous basis also helps them know
where they stand if and when they receive formal reviews. As a result, the anxiety they
experience is often alleviated, and a more meaningful conversation with them and their
supervisors can take place. If employees are surprised by their reviews, it is probably
safe to say that their supervisors have not been providing them much ongoing feedback.
8.4c Improving Performance
What if one of your employees is performing poorly? What can you do to help the
person perform better? This requires some diagnosis of the situation. But although
performance management systems can often tell us who is not performing well, they
typically cannot reveal why.
Identifying the Sources of Ineffective Performance
A person’s performance is a function of several factors, but perhaps it can be boiled
down to three primary concerns: ability, motivation, and environment. Each individual
has a unique pattern of strengths and weaknesses that play a part. But talented employ-
ees with low motivation are not likely to succeed. In addition, other factors in the work
environment—or even in the external environment, which includes personal, family,
and community concerns—can affect a person’s performance either positively or nega-
tively. To diagnose a poor performance managers should focus on these three interactive
elements. Figure 8.9 provides a better picture of how these three factors (ability, motiva-
tion, and environment) can influence people’s performance.
As Figure 8.10 shows, if an employee’s performance is not up to standards, the
cause could be a skill problem (a lack of knowledge, abilities, or technical competen-
cies), an effort problem (a lack of motivation to get the job done), or some problem in
the external conditions of work (poor economic conditions, worker shortages due to
downsizing, difficult sales territories, etc.). Problems in any one of these areas could
cause the person’s performance to suffer.
Too often, however, managers assume that poor performance is due first to lack of abil-
ity, second to poor motivation, and third to external conditions an employee faces. Ironi-
cally, research also suggests that we tend to draw exactly the opposite conclusion about our
Factors That Affect an Employee’s PerformanceFigure 8.9
MOTIVATION
• Career ambition
• Goals and expectations
• Job satisfaction and
frustrations
• Fairness perceptions
• Relations with
coworkers
ENVIRONMENT
• Equipment/materials
• Job design
• Economic conditions
• Unions
• Rules and policies
• Managerial support
• Laws and regulations
ABILITY
• Technical skills
• Interpersonal skills
• Problem-solving skills
• Analytical skills
• Communication skills
• Physical limitations
89624_ch08_hr_279-317.indd 307 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
308 Part 3 Developing Effectiveness in Human Resources
own performance. We first attribute poor performance to external constraints such as bad
luck or factors out of our control. If the problem is internal, then we typically attribute it to
temporary factors such as low motivation or energy (“I had a bad day”). Only as a last resort
are we likely to admit our poor performance might be due to our abilities or lack of them.
This difference in opinion between the two parties can result in a negative feedback
cycle if it’s not handled properly. A manager who assumes an employee isn’t motivated or
not capable may begin to treat the person differently (perhaps by supervising the individual
too closely or watching for the employee’s next mistake). This is likely to decrease the
employee’s motivation and result in a lower performance level by the person. Seeing this
might confirm the manager’s initial belief that the employee does not “measure up.” As you
can probably tell, this “set-up-to-fail” syndrome can be self-fulfilling and self-reinforcing.50
Performance Diagnosis
So what can be done to diagnose the real reasons for poor performance? More spe-
cifically, how can managers identify the root causes and get to work on a solution that
improves performance? By comparing different performance measures, managers can
begin to get an idea of the underlying causes of performance problems.
For example, as Figure 8.10 shows, results measures cannot distinguish between
ability, motivation, and the situational determinants of performance. So if someone is
not achieving the desired results, it could be due to one or more of these factors. In
contrast, behavioral measures are less affected by external constraints. So if someone
is demonstrating all the desired behaviors but is not achieving the desired results, logic
suggests that it might be due to factors beyond his or her control. Similarly, other kinds
FACTORS AFFECTING PERFORMANCE
Ability
R
e
su
lt
s
B
e
h
av
io
r
C
o
m
p
e
te
n
c
y
Motivation Environment
P
E
R
F
O
R
M
A
N
C
E
M
E
T
R
IC
ACTION
If an employee demonstrates low
competency, training and
development is needed.
If an employee demonstrates
desired behavior, but does not
achieve results, situational factors
may be affecting performance.
Changing the context, job design,
etc. may be most helpful.
If an employee has necessary
competencies, but does not exhibit
desired behaviors, there may be a
motivational problem. Coaching
and/or reward incentives may be
helpful.
Competency
measures only
show “can do”
factors such as
knowledge, skill,
and/or ability.
Behavioral measures are affected by
both ability and motivation (“can do”
and “will do”). Behaviors tend to be
less contaminated by environmental
factors.
Results measures are affected by ability, motivation, and
external environment.
Performance DiagnosisFigure 8.10
89624_ch08_hr_279-317.indd 308 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
309Chapter 8 Performance Management
of diagnoses are possible by comparing still other measures of performance. Only by cor-
rectly diagnosing the causes of performance problems can managers—and employees—
hope to improve them.
Managing Ineffective Performance
Once the sources of performance problems are known, a course of action can be
planned. This might involve providing training in areas that would increase the knowl-
edge and skills the employee needs to perform effectively. A transfer to another job or
department might give an employee a chance to become a more effective member of
the organization. In other instances, different ways to motivate the individual might
have to be found. Sometimes underperformers simply do not understand exactly what
is expected of them. However, once their responsibilities are clarified, they are in a posi-
tion to take the corrective actions needed to improve their performance.
Focus on Changing the Behavior, Not the Person
A bad performance on the part of an employee is likely to make his or her supervisor’s
job harder. As hard as it might be to do, the supervisor has to try to separate the employee
from the behavior—it is not the employee who is bad but his or her actions exhibited on the
job. One way to communicate this to employees is to not make suggestions about personal
traits they should change but instead to suggest more acceptable ways of performing. For
example, instead of focusing on a person’s “unreliability,” a manager might focus on the fact
that the employee “has been late to work seven times this month.” It is difficult for employ-
ees to change who they are; it is usually much easier for them to change how they act.
If the ineffective performance persists, it may be necessary to transfer the employee,
take disciplinary action, or discharge the person from the organization. Not only is the
ineffective behavior likely affecting the manager and the organization as a whole, but
it is also probably affecting the person’s coworkers. Whatever action is taken, however,
should be done legally, fairly, and with an understanding of the feelings of the individual
involved. A new manager is likely to need training in this area because it is one of the
most difficult aspects of supervising people.
Performance management is the process of
creating a work environment in which people can
perform to the best of their abilities to meet a com-
pany’s goals. Performance reviews and feedback
sessions, which are used for administrative and
development purposes, are the result of a process
in which a manager meets with and evaluates an
employee’s performance relative to the requirements
of his or her job and uses the information to show
the person where improvements could be made and
why. The reviews are just part of the performance
management process, however. Aligning the goals of
employees with that of the firm, providing employees
with continual on-the-job feedback, and rewarding
them are critical as well.
LO 1
Summary
Although some firms believe performance
reviews are ineffective and no longer use them, most
organizations continue to do so. The ultimate success
or failure of a performance review program depends
on the philosophy underlying it, its connection with
the firm’s business goals, and the attitudes and skills of
those responsible for its administration.
Information about how well employees are
performing can be derived from a variety of sources,
including the employee, his or her supervisor, peers,
customers, suppliers, and subordinates. Using mul-
tiple sources is frequently a good idea because differ-
ent individuals see different facets of an employee’s
performance.
LO 2
89624_ch08_hr_279-317.indd 309 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
310 Part 3 Developing Effectiveness in Human Resources
Performance management systems must comply
with the law and, like selections tests, be job related,
valid and reliable, and free from criterion deficiency
and contamination. Employees must understand their
performance standards in advance, and appraisers
must be able to observe job performance, be trained,
and have an appeals procedure established. Some
companies hold calibration meetings to compare the
behavior of employees and ensure their managers are
accurately evaluating their performance.
Several methods can be used to gauge the perfor-
mance of employees. These include trait approaches (such
as graphic rating scales, mixed-standard scales, forced-
choice forms, and essays), behavioral methods (such as
critical incident ratings, checklists, BARS, and BOS), and
results methods (MBO). The choice of method depends
on the purpose of the review. Trait methods are simple to
LO 3
develop and complete, but they are more subjective and
less useful for providing feedback. Behavioral methods
provide more specific information for giving feedback
but can be time consuming and costly to develop. Results
methods are more objective and can link an employee’s
performance to the organization as a whole. However,
they may encourage a short-term perspective (such as
meeting annual goals) and may not encourage subtle yet
important aspects of performance.
Although there are various approaches to review
meetings, research suggests that employee participation
and goal setting lead to higher satisfaction and improved
performance. Discussing problems with employees,
showing support for them, minimizing criticism, and
rewarding them when they perform well are critical.
During the meeting, performance deficiencies can be
discussed and plans for improvement can be made.
LO 4
behavior observation scale (BOS)
behaviorally anchored rating scale
(BARS)
calibration
contrast error
customer evaluations
error of central tendency
essay method
forced-choice method
forced distribution
graphic rating scale method
leniency or strictness error
management by objectives (MBO)
manager and/or supervisor
evaluation
mixed-standard scale method
peer evaluation
performance review
performance management
recency error
self-evaluation
similar-to-me error
SMART goals
subordinate evaluation
team evaluation
360-degree evaluation
Key Terms
Describe how the performance management
process is linked to employee selection, train-
ing, and development.
What sources could be used to evaluate the
performance of people working in the follow-
ing jobs?
a. Sales representative
b. Robotics engineer
c. Director of nursing in a hospital
d. HR manager
e. Air traffic controller
Three types of review meetings are described
in this chapter.
LO 1
LO 2
LO 3
a. What different skills are required for each?
What reactions can one expect from using
these different skills?
b. How can a manager develop the skills
needed to conduct a problem-solving type
of meeting?
c. Which method do you feel is the least
desirable? Why?
Discuss how you would go about diagnosing
an employee’s performance problems. List sev-
eral factors to consider.
LO 4
Discussion Questions
89624_ch08_hr_279-317.indd 310 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
311
HRM Experience
Performance Diagnosis
2. Clark Griswold works in research and development for a
chemical company that makes nonnutritive food addi-
tives. His most recent assignment has been the develop-
ment of a nonnutritive aerosol cooking spray, but the
project is way behind schedule and seems to be going
nowhere. CEO Frank Shirley is decidedly upset and has
threatened that if things do not improve, he will suspend
bonuses again this year, as he did last year. Clark feels
dejected because without the bonus he will not be able
to make a down payment on the family’s swimming pool.
3. Tommy Callahan Jr. recently graduated from college
after 7 years and returned home to Sandusky, Ohio. His
father, Big Tom Callahan, the owner of Callahan Motors,
offers Tommy a job in the auto parts factory that makes
brake pads. The factory is in severe danger of going
under unless sales of the company’s new brake pads
increase dramatically. Tommy must go on the road
with Richard (Big Tom’s right-hand man) in a last-ditch
effort to save the company. But Tommy proves to be
unfocused, inexperienced, and lacking in confidence.
Sales call after sales call he meets with rejection, even
when the prospect looks promising. Customers express
some concern about a warranty on the brake pads,
but Richard believes that Tommy’s inexperience and
awkward approach are the big problems.
Managing the performance of employees is a vital—yet
delicate—responsibility. One of the toughest aspects of per-
formance management is assessing why someone is not
performing well. Although it may be easy to spot who is not per-
forming well, it is not always easy to diagnose the underlying
causes of the person’s poor performance (such as their moti-
vation, ability, and external constraints). But without a correct
diagnosis, it is nearly impossible to fix the problem. Managers
also need to coach employees to improve their performance.
Assignment
The following are descriptions of three different employees.
Describe what the potential causes of poor performance for
each of the following employees might be and solutions that
could enhance the person’s performance.
1. Carl Spackler is the assistant greenskeeper at Bush-
wood Country Club. Over the past few months,
members have been complaining that gophers are
destroying the course and digging holes in the greens.
Although Carl has been working evenings and week-
ends to address the situation, the problem persists.
Unfortunately, his boss is interested only in results,
and because the gophers are still there, he contends
that Carl is not doing his job. He has accused Carl of
“slacking off ” and threatened his job.
CASE STUDY Adobe Ditches Formal Performance Reviews—And Wants to Help
Other Companies Do So Too
1
As we explained in the chapter, an increasing number
of companies are no longer conducting formal per-
formance reviews. However, most still do. In a recent
survey of 1,500 U.S. office workers, 88 percent of them
reported receiving formal written reviews—often with
rankings—usually on an annual basis.
The survey, which was conducted by Adobe Sys-
tems, the maker of Acrobat, Photoshop, and Flash
software, also revealed the following bad news about
formal performance reviews:
• More than half of office workers feel that formal
performance reviews have no impact on how they
do their jobs (59 percent) and are a needless HR
requirement (58 percent).
• Eighty percent of office workers would prefer
feedback in the moment rather than a progress
review after a certain number of months.
• Performance reviews are extremely stressful for
both managers and employees. Rankings and
ratings create competition among employees and
result in even more stress.
• A surprisingly large number of workers, both
male and female, reported actually crying after a
89624_ch08_hr_279-317.indd 311 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
312 Part 3 Developing Effectiveness in Human Resources
performance review and either looked for another
job or quit their jobs shortly afterward.
• Nearly two-thirds of millennials (61 percent)
would switch jobs to a company with no formal
performance reviews even if the pay and job level
were the same.
For reasons such as these, Adobe stopped doing
formal reviews in 2012. The effort to ditch them began
somewhat haphazardly: Donna Morris, then a senior
vice-president of human resources for Adobe, believed
the firm’s 360 employee reviews and ranking process
was too complex, bureaucratic, and ate up massive
amounts of time for which the company saw little or
no return. She also believed they created barriers to
teamwork and innovation because being ranked for
compensation seemed to pit employees against one
another.
The problem was something Morris had been
thinking about at Adobe’s offices in India while being
interviewed for a major business publication in the
country. The reporter conducting the interview asked
Morris what new cutting-edge HR practices Adobe
was implementing. Suffering from jetlag, offhandedly
she responded: “We plan to abolish the annual perfor-
mance review format.”
Quickly Morris’s announcement made headlines.
There was just one problem with it: She had only been
contemplating ending formal performance reviews.
She hadn’t actually cleared the idea with her CEO.
Needless to say, when she got back to Adobe’s office
in the United States, she had some explaining to do.
Morris wrote her case for ending performance
reviews and posted it on the company’s intranet. She
encouraged employees and managers to examine
Adobe’s current review practice to figure out how
to improve it, which they subsequently did. What
they discovered was troubling. Adobe’s managers
were spending in excess of 80,000 hours annually
on the reviews. Worse yet, feeling demoralized by
their reviews and rankings, a high number of Adobe
employees quit after having them. That was making it
hard for Adobe to retain talent, especially because it’s
located in Silicon Valley, where the demand for tech
employees is high.
Instead of formal performance reviews, today
Adobe employees have periodic “check-ins” with their
managers who offer them feedback, help with on-the-
job problems, and ideas for their growth and develop-
ment. No written review is required.
So does the new check-in system work? Yes. In
surveys, employees say the check-ins make perfor-
mance conversations easier, and less stressful, and
that they get better feedback. Voluntary turnover has
dropped dramatically.
In fact, Adobe believes its check-in system works
so well it is helping other companies adopt it—for
free. No software purchase necessary. The company
has posted information about the system and all of its
associated documents available on its pubic website.
Among the items posted are worksheets and discus-
sion guides for managers and employees and FAQs
(frequently asked questions) about how the check-in
process works and how to implement it.
“We love talking to other companies who are con-
sidering a move away from structured performance
reviews, and many have adopted some form of check-
in already,” says Morris. “Now we want to make it
easier to share our experience with people who are
exploring a model like this—whether they’re in tech-
nology or a totally different industry.”
Questions
1. Why did Adobe need a new performance man-
agement system? What drawbacks might there be
to the company’s check-ins?
2. Are formal performance reviews always bad?
Why or why not?
Sources: David Burkus, “How Adobe Scrapped Its Performance Review
System and Why It Worked,” Forbes (June 1, 2016); Kate Samuelson,
“Twenty-five Percent of Men Cry after a Progress Review, Study Shows,”
Forbes (January 13, 2017); “Adobe Study into Performance Reviews
Shows Office Workers Waste Time and Tears,” Which-50, https://which-
50.com; “About Adobe Check-in,” Adobe.com (April 2, 2017).
89624_ch08_hr_279-317.indd 312 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
313Chapter 8 Performance Management
When it comes to gathering data and analyzing it
to build new and better products, few companies
do it as well as Google. Recently Google decided to
use its info-tech expertise to answer an important
question: Since people make the difference between
good and great companies, could a data-driven, ana-
lytical approach be used to improve Google’s human
resources management function? Such an approach
worked for Billy Beane, so surely it could work for
Google, couldn’t it? Recall from Chapter 1 that
Beane, the manager of the Oakland A’s, dramatically
improved players and the team using data and statis-
tics. (Actor Brad Pitt dramatized Beane’s efforts in the
movie Moneyball.)
One thing Google wanted to know was if it could
“build” better bosses. Why? Because despite the
many job perks Google’s workers get, the company’s
employee turnover rate was surprisingly high. It’s been
said that the number 1 reason people leave their jobs is
because of their bosses. Could this be true at Google?
And if so, could the behaviors of good bosses be pin-
pointed and used to improve the performance of not-
so-good bosses? The researchers at Google wanted to
find out. They also wanted to answer these questions
using data from their own organization to find out
precisely what would work for Google rather than
other organizations.
To answers these questions, a team of 25-plus
Google researchers and scientists began studying
the company’s supervisors using their performance
reviews, surveys from their employees, interviews,
and observations of their behaviors. Over 10,000
observations were collected on 100 variables to
determine how well the supervisors were perform-
ing. Initially, not all supervisors were thrilled to be
evaluated by their subordinates and “put under the
microscope.” Consequently, the effort took some “sell-
ing” to Google’s top management. The fact that the
researchers could point to dramatic differences in the
overall ratings employees gave different managers and
that some teams performed much better than others
helped fuel the fire to get “Project Oxygen” off the
ground. (Presumably a good boss gives you room to
breathe, whereas a bad boss can suck the life right out
of you, hence the project’s name.)
Once concluded, Project Oxygen yielded a wealth
of information, some which mirrored conventional wis-
dom and some which did not: Teams with higher-rated
managers performed better, the employees in them
were happier, and they stayed with the company longer.
Their managers had more impact on how the employees
felt about their jobs than any other factor. However, it
turned out that best bosses weren’t the ones with the
greatest technical expertise, as Google had anticipated.
Instead they were those who are even tempered, help
their employees think through problems without micro-
managing them, and care about them as people. Google
then used the information it gathered to implement
training and coaching programs to quickly improve the
managerial skills of its worst performing managers.
Specifically, Google identified eight behaviors you
should engage in if you want to be a good boss—at
least at Google:
1. Be a good coach.
2. Empower your team and don’t micromanage.
3. Express interest in team members’ success and
personal well-being.
4. Be productive and results oriented.
5. Be a good communicator and listen to your team.
6. Help your employees with career development.
7. Have a clear vision and strategy for the team.
8. Have key technical skills so you can help advise
the team.
Questions
1. Why isn’t having the greatest amount of technical
expertise the key to being a good supervisor at
Google?
2. Does Google’s research on the performance of its
managers surprise you? Why or why not?
Sources: Brad Hall, “Google’s Project Oxygen Pumps Fresh Air into
Management,” TheStreet (February 11, 2014), https://www.thestreet
.com; Adam Bryant, “Google’s Quest to Build a Better Boss,” New York
Times (March 12, 2011), http://www.nytimes.com; Meghan Casserly,
“Google’s Failed Quest to Find Managers Are Evil, and Why You Should
Care,” Forbes (July 17, 2103), http://www.forbes.com; Judith Aquino,
“Eight Traits of Stellar Managers as Defined by Googlers,” Business
Insider (March 15, 2011), http://www.businessinsider.com.
CASE STUDY 2 “Project Oxygen” Resuscitates Google’s Poor-Performing Bosses
89624_ch08_hr_279-317.indd 313 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
314 Part 3 Developing Effectiveness in Human Resources
1. Ladan Nikravan, “A Needed Change: Make Reviews Pro-
active, Not Reactive,“ Forbes (September 29, 2013), http://
forbes.com.
2. Susan Scherreik, “Your Performance Review: Make It Per-
form,” Businessweek, no. 3762 (December 17, 2001): 139; Dick
Grote, “Performance Evaluations: Is It Time for a Makeover?”
HRFocus 77, no. 11 (November 2000): 6–7; “Employers Need
to Do a Better Job of Performance Management,” Managing
Training & Development (April 2003): 8; Christopher D. Lee,
“Feedback, Not Appraisal,” HRMagazine 51, no. 11 (Novem-
ber 2006): 111–114; R. L. Cardy and B. Leonard, Performance
Management: Concepts, Skills, and Exercises (Armonk NY: M.
E. Sharpe, Inc., 2011).
3. Jason J. Dahling, et al., “Does Coaching Matter?” Person-
nel Psychology (2015); Donna Doldwasser, “Me a Trainer?”
Training 38, no. 4 (April 2001): 60–66; Rebecca Ganzel, “Mike
Carter,” Training 38, no. 7 (July 2001): 28–30; Carla Joinson,
“Making Sure Employees Measure Up,” HRMagazine 46, no.
3 (March 2001): 36–41; Morton D. Rosenbaum, “Gratitude
Adjustment: When a Pat on the Back Isn’t Enough,” Meetings
& Conventions 39, no. 7 (June 2004): 20; James W. Smither,
Manuel London, and Richard R. Reilly, “Does Performance
Improve Following Multisource Feedback?” Personnel Psy-
chology 58, no. 1 (Spring 2005): 33–67.
4. Janet Wiscombe, “Can Pay for Performance Really Work?”
Workforce 80, no. 8 (August 2001): 28–34; Charlotte Garvey,
“Meaningful Tokens of Appreciation: Cash Awards Aren’t
the Only Way to Motivate Your Workforce,” HRMagazine
49, no. 8 (August 2004): 101–106; Lisa D. Sprenkle, “Forced
Ranking: A Good Thing for Business?” Workforce.com.
5. Heather R. Huhman, “Five Ways HR Technology Can Improve
Performance Reviews,” Entrepreneur (July 23, 2014), https://
www.entrepreneur.com; Don Pontefract, “Only 55 Percent
of Employees Feel as Though Performance Management
Appraisals Are Effective,” Forbes (March 31, 2015), https://
www.forbes.com; Drew Robb, “Building a Better Workforce:
Performance Management Software Can Help You Identify
and Develop High-Performing Workers,” HRMagazine 49,
no. 10 (October 2004): 86–93.
6. Sunnie Giles, “Turning Performance Reviews into a Vehicle
for Radical Innovation,” Forbes (March 28, 2017), https://
www.forbes.com; Jonathan A. Segal, “86 Your Appraisal
Process?” HRMagazine 45, no. 10 (October 2000): 199–206;
Barry Witcher and Rosie Butterworth, “Honshin Kanri: How
Xerox Manages,” Long-Range Planning 32, no. 3 (June 1999):
323–332.
7. Jeff Kauflin, “Hate Performance Reviews? Good News?
They’re Getting Shorter and Simpler,” Forbes (March 9, 2017),
http:// https://www.forbes.com.
8. David Javitch, “How to Survive Employee Appraisals,” Entre-
preneur.com (April 23, 2011), http://www.entrepreneur.com.
9. Juliana Thill, “Set Goals to Get Results,” Crow River Media
(April 5, 2017), http://www.crowrivermedia.com.
10. Mahmoud Javidmehr and Mehrdad Ebrahimpour, “Perfor-
mance Appraisal Bias and Errors: The Influences and Conse-
quences,” International Journal of Organizational Leadership
4, no. 3 (2015): 286; Doug Cederblom, “From Performance
Appraisal to Performance Management: One Agency’s Experi-
ence,” Public Personnel Management 31, no. 2 (Summer 2002):
131–140; “Anonymous 360-Feedback Drives Vauxhall Strat-
egy,” Personnel Today (August 19, 2003): 16; Cindy Romaine,
“Staying Relevant: Competencies and Employee Reviews,”
Information Outlook 8, no. 7 (April 2004): 21–25; Jerry K.
Palmer and James M. Loveland, “The Influence of Group Dis-
cussion on Performance Judgments: Rating Accuracy, Con-
trast Effects, and Halo,” Journal of Psychology 142, no. 2 (March
2008): 117–130; “When Promotions Are on the Line, Follow
Your Criteria and Beware Supervisor Bias,” HR Specialist: Ohio
Employment Law 3, no. 12 (December 2009): 2.
11. Jason D. Shaw and Nina Gupta, “Let the Evidence Speak
Again! Financial Incentives Are More Effective than We
Thought,” Human Resource Management Journal 25, no. 3
(2015): 281–293; “Job Complexity, Performance, and Well-
Being: When Does Supplies-Values Fit Matter?” Personnel
Psychology 57, no. 4 (Winter 2004): 847–880.
12. Joel Lefkowitz, “The Role of Interpersonal Affective Regard
in Supervisory Performance Ratings: A Literature Review and
Proposed Causal Model,” Journal of Occupational and Orga-
nizational Psychology 73, no. 1 (March 2000): 67–85; Scott
Highhouse, “Assessing the Candidate as a Whole: A Historical
and Critical Analysis of Individual Psychological Assessment
for Personnel Decision Making,” Personnel Psychology 55, no.
2 (Summer 2002): 363–397.
13. Joanne Sammer, “Calibrating Consistency,” HRMagazine
53, no. 1 (January 2008): 73–75; Jennie Sumelius, et al.,
“What Determines Employee Perceptions of HRM Process
Features?” Human Resource Management 53, no. 4 (2014):
569–592.
14. Silva Karkoulian, Guy Assaker, and Rob Hallak, “An Empiri-
cal Study of 360-degree Feedback, Organizational Justice,
and Firm Sustainability,” Journal of Business Research 69, no.
5 (2016): 1862–1867; Kathryn Bartol, Cathy Durham, and
June Poon, “Influence of Performance Evaluation Rating Seg-
mentation on Motivation and Fairness Perceptions,” Journal
of Applied Psychology 86, no. 6 (December 2001): 1106–1119;
Anne P. Hubbell, “Motivating Factors: Perceptions of Justice
and Their Relationship with Managerial and Organizational
Trust,” Communication Studies 56, no. 1 (March 2005): 47;
Rebecca M. Chory-Assad, “Room for Improvement,” Train-
ing 40, no. 11 (December 2003): 18–20; Deanna M. Merritt,
“Appraising the Performance Appraisal,” Supervision 68, no. 4
(April 2007): 3–5.
Notes and References
89624_ch08_hr_279-317.indd 314 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
315Chapter 8 Performance Management
15. Brito v. Zia Company, 478 F.2d 1200 (10th Cir. 1973); Treena
L. Gillespie and Richard O. Parry, “Fuel for Litigation? Links
between Procedural Justice and Multisource Feedback,” Jour-
nal of Managerial Issues 18, no. 4 (Winter 2006): 530–546;
Suzanne Tsacoumis and Michelle Davis King, “Litigation
Driven Human Resource Management Changes,” Advancing
Human Resource Project Management (2014): 48–72.
16. Albemarle Paper Company v. Moody, 422 U.S. 405 (1975);
Terry Gillen, “Appraisal: When Best Practice Is Bad Practice,”
People Management 11, no. 19 (September 29, 2005): 58.
17. Ladan Nikravan, “It’s Not Just About Performance: Time to
Think Differently,” Forbes (September 29, 2013), http://www.
forbes.com.
18. Kieran Snyder, “High Achieving Men and Women Are
Described Differently in Reviews,” Fortune (August 26, 2014),
http://fortune.com.
19. Gillian Flynn, “Getting Performance Reviews Right,” Work-
force 80, no. 5 (May 2001): 76–78; David C. Martin, Kathryn
M. Bartol, and Patrick E. Kehoe, “The Legal Ramifications of
Performance Appraisal: The Growing Significance,” Public
Personnel Management 29, no. 3 (Fall 2000): 381; Deanna M.
Merritt, “Appraising the Performance Appraisal,” Supervision 68,
no. 4 (April 2007): 3–5; Kevin R. Murphy, “Perspectives on the
Relationship between Job Performance and Ratings of Job Per-
formance,” Industrial & Organizational Psychology (June 2008):
197–205; Cindy Miller, “Performance Appraisals in a Legal Con-
text,” HR Info (July 8, 2008), http://cindymiller.wordpress.com/.
20. Suzanne Tsacoumis and Michelle Davis King, “Litigation
Driven Human Resource Management Changes,” Advancing
Human Resource Project Management (2014): 48–72; “Loose
Lips Lose Lawsuits: Screen Performance Reviews for FMLA
Comments,” Business Management Daily (August 31, 2010),
http://www.businessmanagementdaily.com.
21. Silva Karkoulian, Guy Assaker, and Rob Hallak, “An Empiri-
cal Study of 360-degree Feedback, Organizational Justice,
and Firm Sustainability,” Journal of Business Research 69,
no. 5 (2016): 1862–1867; Joan Brett and Leanne Atwater,
“360-Degree Feedback: Accuracy, Reactions, and Perceptions
of Usefulness,” Journal of Applied Psychology 86, no. 5 (Octo-
ber 2001): 930–942; Bruce Pfau, Ira Kay, Kenneth Nowak,
and Jai Ghorpade, “Does 360-Degree Feedback Negatively
Affect Company Performance?” HRMagazine 47, no. 6 (June
2002): 54–59; Maury Peiperl, “Getting 360-Degree Feedback
Right,” Harvard Business Review 79, no. 1 (January 2001):
142–147; Robert Gandossy and Tina Kao, “Talent Wars:
Out of Mind, Out of Practice,” Human Resource Planning 27,
no. 4 (December 2004): 15–20; Nima Jafari Navimipouret,
et al., “Expert Cloud: A Cloud-Based Framework to Share
the Knowledge and Skills of Human Resources,” Computers
in Human Behavior 46 (2015): 57–74.
22. Corey E. Miller and Carl L. Thornton, “How Accurate Are
Your Performance Appraisals?” Public Personnel Management
(Summer 2006): 153–162; Edward J. Inderrieden, Robert E.
Allen, and Timothy J. Keaveny, “Managerial Discretion in the
Use of Self-Ratings in an Appraisal System: The Antecedents
and Consequences,” Journal of Managerial Issues 16, no. 4
(Winter 2004): 460–484.
23. Michael C. Campion, Emily D. Campion, and Michael A.
Campion, “Improvements in Performance Management
through the Use of 360 Feedback,” Industrial and Organi-
zational Psychology 8, no. 1 (2015): 85–93; Jeffrey Seglin,
“Reviewing Your Boss,” Fortune 143, no. 12 (June 11, 2001):
248; Ann Harrington, “Workers of the World, Rate Your
Boss!” Fortune 142, no. 6 (September 18, 2000): 340–342;
Robert Thompson, “Management Lite: Less Control, More
Innovation,” HRMagazine 44, no. 8 (August 1999): 10.
24. Brett and Atwater, “360-Degree Feedback,” 930–942; Paula
Silva and Henry L. Tosi, “Determinants of the Anonymity of
the CEO Evaluation Process,” Journal of Managerial Issues 16,
no. 1 (Spring 2004): 87–103.
25. Angelo S. DeNisi and Kevin R. Murphy, “Performance
Appraisal and Performance Management: 100 Years of Prog-
ress?” (2017); John Drexler Jr., Terry Beehr, and Thomas
Stetz, “Peer Appraisals: Differentiation of Individual Perfor-
mance on Group Tasks,” Human Resource Management 40,
no. 4 (Winter 2001): 333–345.
26. Tammy L. Rapp, et al., “The Role of Team Goal Monitor-
ing in the Curvilinear Relationship between Team Efficacy
and Team Performance,” Journal of Applied Psychology 99,
no. 5 (2014): 976; Scott and Einstein, “Strategic Performance
Appraisal in Team-Based Organizations,” 107–116; Debbie
Kibbe and Jill Casner-Lotto, “Ralston Foods: From Greenfield
to Maturity in a Team-Based Plant,” Journal of Organizational
Excellence 21, no. 3 (Summer 2002): 57–67; Simon Taggar and
Mitchell Neubert, “The Impact of Poor Performers on Team
Outcomes: An Empirical Examination of Attribution The-
ory,” Personnel Psychology 57, no. 4 (Winter 2004): 935–969.
27. Stephanie Vozza, “Why Employees at Apple and Google Are
More Productive,” FastCompany (March 13, 2017), https://
www.fastcompany.com.
28. Michael Cohn, “Best Buy Beefs Up Customer Value at the Call
Center,” Internet World 8, no. 6 (June 2002): 42–43; Joe Kohn,
“Isuzu Has IDEA for Boosting Sales,” Automotive News 76, no.
5973 (March 4, 2002): 41; D. L. Radcliff, “A New Paradigm
of Feedback,” Executive Excellence 19, no. 4 (April 2002): 20;
Neeraj Bharadwaj and Anne Roggeveen, “The Impact of Off-
shored and Outsourced Call Service Centers on Customer
Appraisals,” Marketing Letters 19, no. 1 (January 2008): 13–23.
29. Kenneth M. Nowack, “360 Feedback: From Insight to
Improvement,” Public Manager 44, no. 2 (2015): 20; Pfau,
Kay, Nowak, and Ghorpade, “Does 360-Degree Feedback
Negatively Affect Company Performance?” 54–59; Peiperl,
“Getting 360-Degree Feedback Right,” 142–147; Jack
Kondrasuk and Matt Graybill, “From Paper to Computer,”
The Human Resource Professional 13, no. 6 (November–
December 2000): 18–19.
89624_ch08_hr_279-317.indd 315 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
316 Part 3 Developing Effectiveness in Human Resources
30. Seymour Adler, et al., “Getting Rid of Performance Ratings:
Genius or Folly? A Debate,” Industrial and Organizational
Psychology 9, no. 2 (2016): 219–252; Gary E. Roberts, “Per-
spectives on Enduring and Emerging Issues in Performance
Appraisal,” Public Personnel Management 27, no. 3 (Fall 1998):
301–320; William Hubbartt, “Bring Performance Appraisal
Training to Life,” HRMagazine 40, no. 5 (May 1995): 166, 168;
Filip Lievens, “Assessor Training Strategies and Their Effects
on Accuracy, Interrater Reliability, and Discriminant Valid-
ity,” Journal of Applied Psychology 86, no. 2 (April 2001): 255–
264; Dick Grote, “Performance Appraisals: Solving Tough
Challenges,” HRMagazine 45, no. 7 (July 2000): 145–150;
Leslie A. Weatherly, “Performance Management: Getting It
Right from the Start,” HRMagazine 49, no. 3 (March 2004):
S1-S12.
31. E. Deepa, R. Palaniswamy, and S. Kuppusamy, “Effect of Per-
formance Appraisal System in Organizational Commitment,
Job Satisfaction and Productivity,” Journal of Contemporary
Management Research 8, no. 1 (2014): 72; Gary P. Latham
and Kenneth N. Wexley, Increasing Productivity through Per-
formance Appraisal, 2nd ed. (Reading, MA: Addison-Wesley,
1994), 137.
32. Jeffrey R. Spence and Lisa M. Keeping, “The Road to Per-
formance Ratings Is Paved with Intentions,” Organizational
Psychology Review 3, no. 4 (2013): 360–383; Lefkowitz, “The
Role of Interpersonal Affective Regard in Supervisory Per-
formance Ratings,” 67–85; Edwin Arnold and Marcia Pulich,
“Personality Conflicts and Objectivity in Appraising Perfor-
mance,” The Health Care Manager 22, no. 3 (July– September
2003): 227; Krista Uggersly and Lorne M. Suksy, “Using
Frame-of-Reference Training to Understand the Implications
of Rater Idiosyncrasy for Rating Accuracy,” Journal of Applied
Psychology 93, no. 3 (May 2008): 711–719.
33. “Times Are Changing: The Future of Performance Man-
agement and Reviews,” Business.com (February 22, 2017),
https://www.business.com; Christopher Bartlett and Andrew
McLean, “GE’s Talent Machine,” Harvard Business School
(2006), Case # 9–304-049.
34. “HSN Enhances Employee Engagement with Nice Perfor-
mance Management,” BusinessWire (March 8, 2017), http://
www.businesswire.com.
35. Sue H. Moon, Steven E. Scullen, and Gary P. Latham, “Pre-
carious Curve Ahead: The Effects of Forced Distribution
Rating Systems on Job Performance,” Human Resource Man-
agement Review 26, no. 2 (2016): 166–179; Gail Johnson,
“Forced Ranking: The Good, the Bad, and the Alternative,”
Training 41, no. 5 (May 2004): 24–31; Christine A. Amalfe
and Eileen Quinn Steiner, “Forced Ranking Systems: Yes-
terday’s Legal Target?” New Jersey Law Journal (March 28,
2005); Jessica Marquez, “Is GE’S Ranking System Broken?”
Workforce Management 86, no. 12 (June 25, 2007): 1–3.
36. Andrew Li, Jessica Bagger, and Russell Cropanzano, “The
Impact of Stereotypes and Supervisor Perceptions of
Employee Work–Family Conflict on Job Performance Rat-
ings,” Human Relations 70, no. 1 (2017): 119–145; Adam B.
Butler and Amie Skattebo, “What Is Acceptable for Women
May Not Be for Men: The Effect of Family Conflicts with
Work on Job-Performance Ratings,” Journal of Occupational
and Organizational Psychology 77, no. 4 (December 2004):
553–564; Cheri Ostroff, Leanne E. Atwater, and Barbara J.
Feinberg, “Understanding Self-Other Agreement: A Look at
Rater and Ratee Characteristics, Context, and Outcomes,”
Personnel Psychology 57, no. 1 (Summer 2004): 333–337;
Mike Schraeder and Jim Simpson, “How Similarity and Lik-
ing Affect Performance Appraisals,” Journal for Quality &
Participation 29, no. 1 (Spring 2006): 34–40.
37. Lisa Keeping and Paul Levy, “Performance Appraisal Reac-
tion: Measurement, Modeling, and Method Bias,” Journal of
Applied Psychology 85, no. 5 (October 2000): 708–723.
38. Adam Bryant, “Google’s Quest to Build a Better Boss,” New
York Times (March 12, 2011), http://www.nytimes.com.
39. Braveteta Hassell, “Machine Learning Could Mean a Lot for
People Management,” Chief Learning Officer (November 30,
2016), http://www.clomedia.com.
40. “Machine Learning: What It Is and Why It’s Important,” SAS
.com (April 2, 2017), https://www.sas.com.
41. Kristina E. Chirico, M. Ronald Buckley, Anthony R. Wheeler,
Jeffrey D. Facteau, H. John Bernardin, and Danielle S. Beu,
“A Note on the Need for True Scores in Frame-of-Reference
(FOR) Training Research,” Journal of Managerial Issues 16,
no. 3 (Fall 2004): 382–398; Christopher D. Lee, “Feedback,
Not Appraisal,” HRMagazine 51, no. 11 (November 2006):
111–114.
42. Patrick Kampkötter, “Performance Appraisals and Job Sat-
isfaction,” The International Journal of Human Resource
Management (2016): 1–25; Stephen C. Behrenbrinker, “Con-
ducting Productive Performance Evaluations in the Asses-
sor’s Office,” Assessment Journal 2, no. 5 (September–October
1995): 48–54; Aharon Tziner, Christine Joanis, and Kevin
Murphy, “A Comparison of Three Methods of Performance
Appraisal with Regard to Goal Properties, Goal Perception,
and Rate Satisfaction,” Group & Organization Management
25, no. 2 (June 2000): 175–190.
43. Daniel Bachrach, Elliot Bendoly, and Philip Podsakoff, “Attri-
butions of the ‘Causes’ of Group Performance as an Alterna-
tive Explanation of the Relationship between Organizational
Citizenship Behavior and Organizational Performance,”
Journal of Applied Psychology 86, no. 6 (December 2001):
1285–1293; Susan Leandri, “Measures That Matter: How to
Fine-Tune Your Performance Measures,” Journal for Quality
and Participation 24, no. 1 (Spring 2001): 39–41.
44. Peter F. Drucker, The Practice of Management (New York:
Harper & Brothers, 1954), reissued by HarperCollins in 1993;
Janice S. Miller, “High Tech and High Performance: Man-
aging Appraisal in the Information Age,” Journal of Labor
Research 24, no. 3 (Summer 2003): 409–425.
89624_ch08_hr_279-317.indd 316 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
317Chapter 8 Performance Management
45. Deloris McGee Wanguri, “A Review, an Integration, and a
Critique of Cross-Disciplinary Research on Performance
Appraisals, Evaluations, and Feedback,” Journal of Business
Communications 32, no. 3 (July 1995): 267–293; Tziner, Joanis,
and Murphy, “A Comparison of Three Methods of Performance
Appraisal,” 175–190; “Good Appraisal Is Simple, Happens Often,
Experts Say”; Joanna Haworth, “Measuring Performance,” Nurs-
ing Management—UK 15, no. 3 (June 2008): 22–28.
46. Jeff Kauflin, “Hate Performance Reviews? Good News?
They’re Getting Shorter and Simpler,” Forbes (March 9, 2017),
http:// https://www.forbes.com.
47. Kwok Leung, Steven Su, and Michael Morris, “When Is Criti-
cism Not Constructive? The Roles of Fairness Perceptions and
Dispositional Attributions in Employee Acceptance of Critical
Supervisory Feedback,” Human Relations 54, no. 9 (Septem-
ber 2001): 1155–1187; Ted Pollock, “Make Your Criticism Pay
Off,” Electric Light & Power 81, no. 1 (January 2003): 31; “Five
Ways to Tackle Poor Performers,” Law Office Management &
Administration Report 6, no. 12 (December 2006): 9.
48. Virginia Galt, “Is It Time to Retire the Employee Ranking
System?” Globe and Mail (March 10, 2017), http://www
.theglobeandmail.com.
49. “Focus on Success,” Aftermarket Business 115, no. 2 (February
2005): 1.
50. Helen Wilkie, “The Tricky Art of Criticism,” HRMagazine 49,
no. 12 (December 2004): 77–83.
89624_ch08_hr_279-317.indd 317 11/17/17 11:39 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
318
CHAPTER 9
Managing Compensation
Learning Outcomes
After studying this chapter, you should be able to
Distinguish a strategic compensation program from
one that is non-strategic.
Determine how to design pay systems.
LO 1
LO 2
Estimate whether or not a pay system is consistent
within the firm as well as comparable to industry
standards and government laws.
Design a compensation scorecard.
LO 3
LO 4
PO
RT
RA
IT
IM
A
G
ES
A
SI
A
B
Y
N
O
N
W
A
RI
T/
Sh
ut
te
rs
to
ck
89624_ch09_hr_318-355.indd 318 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
319Chapter 9 Managing Compensation
C
ompensation is a way to increase employee loyalty and to decrease the likelihood
that employees will be hired away by competitors. It reflects a strategic move
on the part of the company to show that its employees are the most important
component for success.1 So why focus on compensation to retain talent? Why not hire
employees who will be more loyal? Why not improve the training programs or evalu-
ation systems? The answer is simple: Compensation is directly linked to an employee’s
livelihood. Employees can receive stellar training, copious growth opportunities, and
be completely satisfied with their work and environment, but they will not show up to
work if there is no paycheck in return.
9.1 What Is Compensation?
Compensation consists of three main components: direct compensation encompasses
employee wages and salaries, incentives, bonuses, and commissions; indirect compensa-
tion comprises the many benefits supplied by employers; and nonfinancial compensation
includes employee recognition programs, rewarding jobs, organizational support, work
environment, and flexible work hours to accommodate personal needs (see Figure 9.1).
Compensation
Nonfinancial
• Recognition
programs
• Rewarding work
• Organizational
support
• Work environment
• Flexibility
Direct
• Wages/Salary
• Incentives
• Bonuses
• Commissions
Indirect
• Benefits
Compensation ComponentsFigure 9.1
89624_ch09_hr_318-355.indd 319 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
320 Part 4 Implementing Compensation and Security
The way these three components of compensation are allocated sends a message to
the employees about what management believes is important and the types of activities
it encourages.2 However, for an employer, compensation constitutes a sizable operating
cost. Ravin Jesuthasan, compensation specialist at Towers Perrin, notes, “Labor costs
are a significant portion of expenses for any organization and a very substantial portion
for some, but companies continue to spend on pay programs without any evidence of
business relevance.”3 This means that compensation should be managed strategically to
ensure that costs are kept down while employee motivation and performance are kept
up. Achieving such a balance is no easy task.
In this chapter, we will help you learn how to strategically align the three aspects of
compensation with an organization’s objectives, design a pay mix based on the compen-
sation strategy, implement the mix using a series of pay tools, and assess the compensa-
tion system using a scorecard. We will also discuss how government regulation might
influence these decisions about compensation (see Figure 9.2 for details). In Chapter 10,
we will review financial incentive plans for employees. Employee benefits that are part
of the total compensation package are discussed in Chapter 11.
9.2 Strategic Compensation
What is strategic compensation? Simply stated, it is the compensation of employees in
ways that enhance motivation and growth, while at the same time aligning their efforts
with the objectives of the organization. Strategic compensation has redefined the role
and perceived contribution of compensation. No longer merely a “cost of doing busi-
ness,” when used strategically, compensation becomes a tool to secure a competitive
advantage.
Developing a compensation strategy requires that the organizational objectives are
first analyzed. What does the company want to be known for? What are its growth
projections? What are its core competencies? Once you figure this out, you can then
Should compensation
systems differ depend-
ing upon the company’s
objectives?
LO 1
Compensation
Assessment
• Compensation
scorecard
Compensation
Strategy
• Linking
compensation
to objectives
• Pay-for-
performance
• Bases for
compensation
Compensation
Implementation
—Pay Tools
• Salary surveys
• Wage curve
• Pay grades
• Rate ranges
• Competence –
based pay
Compensation
Design—Pay Mix
• Internal factors
• External factors
• Job evaluation
systems
Government Regulation Factors
Compensation AlignmentFigure 9.2
89624_ch09_hr_318-355.indd 320 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
321Chapter 9 Managing Compensation
decide what types of behaviors and skills will be rewarded. By rewarding specific skills
and behaviors, you demonstrate that you are willing to pay for performance and not
just for showing up to work. Then, as part of your strategy you need to decide on the
compensation base most appropriate for the types of jobs in your company. For example,
you might want to pay a sales representative based more on commission and a manager
more on a yearly salary.
Strategic compensation goes beyond determining the appropriate market rates to
pay employees, although market rates are one element of compensation planning. Stra-
tegic compensation should also purposefully link compensation to the organization’s
mission and general business objectives. For example, while a company’s decision to
increase base pay for all its employees is a strategic move to be more competitive with
market rates, companies should also recognize that base pay is not everything. For
example, one product development manager stated, “I could be making much more
than I’m getting at Google, but I chose Google because of the flexibility to grow and
work on exciting new products … plus, where else can you get a chef making you
breakfast, lunch, and dinner anytime you want?”4 In this regard, Google has not only
aligned its compensation strategy with the external market, it has also aligned it with
its desire to be a flexible and innovative company that capitalizes on the creativity of its
people. Commenting on the importance of strategic compensation to organizational
success, compensation specialists Gerald Ledford and Elizabeth Hawk note, “Companies
throughout the economy have begun to rethink their compensation systems in search
for competitive advantage.”
Additionally, strategic compensation serves to mesh the monetary payments made
to employees with other HR initiatives, such as recruitment, selection, training, reten-
tion, and performance appraisal. For example, starting pay can make a difference in
whether or not someone will apply for the job. A compensation specialist speaking to
one of the authors noted, “The linkage of pay levels to labor markets is a strategic policy
issue because it serves to attract or retain valued employees while affecting the organi-
zation’s relative payroll budget.” For example, colleges such as University of Arkansas,
Fayetteville; Bridgewater State University, Monroe College; and Brown Mackie College
know that they cannot attract or retain qualified professors unless their pay strategy is
linked to competitive market rates.
Many fast-food restaurants, such as Burger King, Taco Bell, and Blimpie’s—
traditionally low-wage employers—have needed to raise their starting wages to attract
a sufficient number of job applicants to meet staffing requirements. If pay rates are
high, it creates a large applicant pool from which organizations raise their selection
standards and hire better-qualified employees. This in turn can reduce employer train-
ing costs. When employees perform at exceptional levels, their performance apprais-
als may justify an increased pay rate. For these reasons and others, an organization
should develop a formal program to manage employee compensation. Step one of
this program is to develop a compensation strategy that is linked to the organization’s
objectives.
9.2a Linking Compensation to Organizational Objectives
In a radical reconsidering of compensation strategy, Zappos has moved toward paying
employees based on their skills rather than their position. This move came from an
ongoing transition from a traditional management structure to a holacracy, a system
where work is organized around roles rather than titles and employees report to teams
89624_ch09_hr_318-355.indd 321 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
322 Part 4 Implementing Compensation and Security
instead of individual supervisors. When this transition was completed, Zappos began
using a system of badges to represent roles rather than job titles to determine compensa-
tion. Employees are free to earn badges as they wish, with a chance to earn more and plot
a unique path in the company. The idea behind the badges is similar to leveling up in a
video game—Zappos CEO Tony Hsieh is hoping the badge-based compensation system
will encourage employees to focus on building skills rather than climbing a corporate
latter and to explore different aspects of the company, rather than adhering to a strict
hierarchy of roles. This idea is in line with some of Zappos basic cultural values, such
as pursuing growth and learning; being adventurous, creative, and open-minded; and
embracing and driving change.”5
The new compensation landscape requires that managers be more strategic about
their compensation decisions. Managers must first and foremost understand the strate-
gic objectives of the organization in relation to the industry in which it operates. Next,
they need to move away from paying for a specific position or job title to rewarding
employees on the basis of their individual competencies or work contributions to the
organizational objectives, similar to the Zappos emerging pay strategy. In fact, a sample
of Fortune 500 companies headquartered in America, Europe, and Asia showed that pay
for performance that is linked to organizational objectives is a primary component of
most compensation systems.6
As part of linking compensation systems to company objectives, managers need
to consider what kinds of compensation create value. Managers are asking questions
such as: “How will this pay program help to retain and motivate valued employees?”
and “Does the benefit or pay practice affect the administrative cost?” If a component of
the compensation package—whether benefits, base pay, incentives, or other—doesn’t
advance either the employee or the organization, it should be removed from the com-
pensation program.7 It is not uncommon for organizations to establish very specific
goals for linking their organizational objectives to their compensation program.8 For-
malized compensation goals serve as guidelines for managers to ensure that wage and
benefit policies achieve their intended purpose.
The #Fightfor15 move-
ment on Twitter and
in the streets, many
Americans advocated
a minimum wage
increase of $15 per
hour.
FR
ED
ER
IC
J
. B
RO
W
N
/G
et
ty
Im
ag
es
89624_ch09_hr_318-355.indd 322 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
323Chapter 9 Managing Compensation
For instance, tech companies such as Google, Oracle, Twitter, LinkedIn, and
MoneyDesktop (MX) have adopted what is known as an Objectives and Key Results
(OKR) system to tie compensation to objectives. The OKR system originally came from
Intel and represents a simple way of linking compensation to performance. Here’s how
it works:
1. Set up an objective for your team and the individuals within the team. Your
objective should be definitive and measurable. For instance, don’t say, “I want
my website to be faster.” Say, “I want my website to be 30 percent more efficient.”
2. Set up a number of key results that are quantifiable that your team and each member
of the team must complete by a specific time period.
To be successful at the OKR system, you need to have an annual checkup with
quarterly check-ins. The check-ins should be at the team level, at the manager level, and
at the individual team member level. They all work together to keep the company on
track toward its objectives. At Google, all OKRs are public from Larry Page on down.
Posting the OKRs helps people know what everyone is working on.9
While not all companies tie OKRs to compensation, if you do there are a few things
you must remember:
1. Clarify expectations. If you intend to reward contributors who go above and
beyond to complete their objectives, you must first identify the criteria for out-
standing performance versus just completing your OKRs on time.
2. Balance aspirational with operational. Some OKRs can be big stretch goals while
others can be simply operational. Once you’ve determined how many of the goals
were stretch from stuff that needed to be done, you can determine a ratio and
increase people’s performance based on work that they did that was a stretch.
3. Consider additional performance factors. Hitting your objectives demonstrates
hard work, but they do not cover everything that should be rewarded. For example,
you may want to reward people for developing their skills, attitude and professional-
ism, and the difficulty of the OKRs.
4. Drive collaboration, not competition. One of the biggest dangers that comes from
rewarding people based on reaching their OKRs is that they may focus too much
on their individual OKRs at the expense of those of a team or group. So you might
want to provide bonuses or pay raises based on a combination of individual-level
and group-level OKRs.10
9.2b The Pay-for-Performance Standard
In a study from the Institute for Corporate Productivity, researchers found that nearly
half of the high-performing organizations surveyed recognized their long-term com-
petitive advantage came from motivating and rewarding their top talent.11
The pay-for-performance standard in these companies serves to raise productivity
and lower labor costs in today’s competitive economic environment, which will be
discussed in more depth in Chapter 10.
The term “pay-for-performance” refers to a wide range of compensation options,
including merit-based pay, bonuses, salary commissions, job and pay banding, team/
group incentives, and various gainsharing programs. (Gainsharing plans are discussed
in Chapter 10.) Each of these compensation systems seeks to differentiate between the
pay-for-performance
standard
A standard by which
managers tie compensa-
tion to employee effort
and performance
89624_ch09_hr_318-355.indd 323 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
324 Part 4 Implementing Compensation and Security
pay of average performers and that of outstanding performers. The Bridges to Excellence
program seeks to increase performance of health care professionals by switching to a
pay-for-performance system. Rather than using a traditional salary-based compensa-
tion strategy, doctors are rewarded based on quality of care rather than quantity, thus
increasing motivation and performance. Now, more than half of health care organiza-
tions utilize some form of pay-for-performance, and studies have even shown that doc-
tors on pay-for-performance plans have improved performance, better patient health,
and reduced cost of care.12
Motivating Employees through Compensation
Pay constitutes a quantitative measure of an employee’s relative worth. For most employ-
ees, pay has a direct bearing not only on perceived fairness, but also on the status and
recognition they may be able to achieve both on and off the job. Because pay represents
a reward received in exchange for an employee’s contributions, it is essential, accord-
ing to the equity theory, that the pay be equitable in terms of those contributions. It is
essential also that an employee’s pay be equitable in terms of what other employees are
receiving for their contributions.
Pay Equity
Simply defined, equity embraces the concept of fairness. Equity theory, also referred to
as distributive fairness, is a motivation theory that explains how people respond to situ-
ations in which they feel they have received less (or more) than they deserve.13
For employees, pay equity is achieved when the compensation received is equal to
the value of the work performed. There are three kinds of pay equity:
1. External equity—people in similar jobs compare themselves to what others are
making in different organizations.
2. Internal equity—people compare themselves to peers in different jobs in the same
organization.
3. Individual equity—people compare themselves to others in their organization with
the same job.
Research clearly demonstrates that employees’ perceptions of pay equity, or ineq-
uity, can have dramatic effects on their motivation for both work behavior and produc-
tivity. Managers must, therefore, develop strategic pay practices that are both internally
and externally equitable.
Expectancy Theory and Pay
Another tool to help determine your compensation strategy is expectancy theory. The
expectancy theory of motivation predicts that one’s level of motivation depends on the
attractiveness of the rewards sought and the probability of obtaining those rewards.14
Expectancy theory holds that employees should exert greater work effort if they have
reason to expect that it will result in a reward that is valued.15 To motivate this effort,
the value of any monetary reward should be attractive. Employees also must believe
that good performance is valued by their employer and will result in their receiving the
expected reward.
Figure 9.3 shows the relationship between pay-for-performance and the expectancy
theory of motivation. The model predicts, first, that high effort will lead to high perfor-
mance (expectancy). For example, if an employee believes she has the skills and abilities
pay equity
An employee’s percep-
tion that compensation
received is equal to
the value of the work
performed
89624_ch09_hr_318-355.indd 324 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
325Chapter 9 Managing Compensation
to perform her job and if she works hard (effort), then her performance will improve or
be high. Second, high performance should result in rewards that are appreciated by the
employee (valued). Elements of the compensation package are said to have instrumen-
tality when an employee’s high performance leads to monetary rewards that are valued.
As previously stated, pay for performance leads to a feeling of pay satisfaction, and this
feeling should reinforce one’s high level of effort.
Thus, how employees view compensation can be an important factor in determin-
ing the motivational value of compensation. Furthermore, the effective communication
of pay information together with an organizational environment that elicits employee
trust in management can contribute to employees’ having more accurate perceptions
of their pay. The perceptions employees develop concerning their pay are influenced
by the accuracy of their knowledge and understanding of the compensation program’s
strategic objectives.
Pay Secrecy
Misperceptions by employees concerning the equity of their pay and its relationship to
performance can be created by secrecy about the pay that others receive. Secrecy can
generate distrust in the compensation system, reduce employee motivation, and inhibit
organizational effectiveness. Yet pay secrecy seems to be an accepted practice in many
organizations. A U.S. survey found that about half of all workers, women and men, say
they work in a place where discussions of pay are “either discouraged or prohibited and/
or could lead to punishment.”16
There are a few reasons why management refuses to divulge salary information.
Managers may want to reduce conflict between people about their pay, especially if an
employee makes less than someone they consider an inferior.17 Secrecy can also cover
up inequalities in internal pay structure, such as in the epic employment discrimination
case Ledbetter v. Goodyear Tire & Rubber Co. In the case, the plaintiff may have found
out that she was being paid less than men doing the same job and remedied the problem
much earlier if she had been allowed to ask about other workers’ pay.
Now it is harder for managers to maintain pay secrecy among employees with
Internet salary survey data such as Glassdoor. Ready access to free online salary sur-
veys gives employees an approximate idea of how their salary compares to others
Value
linkage
Valued
monetary
rewards
High
performance
Pay
satisfaction
High
effort
Expectancy
linkage
Pay-for-Performance and Expectancy TheoryFigure 9.3
89624_ch09_hr_318-355.indd 325 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
326 Part 4 Implementing Compensation and Security
nationally or locally, which has been encouraging companies like Whole Foods Mar-
ket to switch to pay transparency. For Whole Foods, pay transparency is part of their
compensation strategy. Their approach is to release pay information with opportuni-
ties to ask managers questions about pay, understand the connection between pay
and performance, and encourage competition and create goals to improve workplace
performance.
9.2c The Bases for Compensation
Work performed in most private, public, and not-for-profit organizations has tradi-
tionally been compensated based on hourly work. These employees are classified as
hourly employees, or wage earners, and are normally paid only for the time they work.
Piecework compensation, in which employees are paid according to the number of
units they produce, is another kind of compensation, though it is far less prevalent than
hourly work as a basis for compensating employees.
Those whose compensation is computed on the basis of weekly, biweekly, or
monthly pay periods are classified as salaried employees. Salaried employees, unlike
hourly employees, are generally paid the same for each pay period, even though
they occasionally may work more hours or fewer than the regular number of hours
in a period. They also usually receive certain benefits not provided to hourly
employees.
Another basis for compensation centers on whether employees are classified as non-
exempt or exempt under the Fair Labor Standards Act (FLSA).17 Nonexempt employees
are covered by the act and must be paid at a rate of one and a half times their regular
pay rate for time worked in excess of 40 hours in their workweek. Most hourly workers
employed in interstate commerce are considered nonexempt workers under the FLSA.
Employees not covered by the overtime provision of the FLSA are classified as exempt
employees. The U.S. Department of Labor (DOL) considers employees as exempt when
their primary duty includes “the exercise of discretion and independent judgment with
respect to matters of significance.”18 This includes managers, supervisors, and a large
number of white-collar employees. There are other classifications for exemption, so
employers should check the exact terms and conditions of exemption before classifying
employees as either exempt or nonexempt. (see “Exemption from Overtime Provisions”
in Figure 9.4).
To help in these types of decisions, larger companies will often use compensation
consultants. A study showed that about 86 percent of large U.S. companies use a com-
pensation consultant to help them with their compensation strategy and pay mix.19
9.3 Compensation Design—The Pay Mix
An employee may ask, “How is my pay determined?” In practice, a combination of inter-
nal and external factors can directly or indirectly influence the rates at which employees
are paid. The interaction of these factors constitutes the pay mix, as shown in Figure 9.5.
For example, the area pay rate for administrative assistants might be $11.50 per hour.
However, one employer may elect to pay its administrative assistants $14.25 per hour
because of their excellent performance. The influence of government legislation on the
pay mix will be discussed later in the chapter.
hourly work
Work paid on an hourly
basis
piecework
Work paid according
to the number of units
produced
nonexempt employees
Employees covered by
the overtime provisions
of the Fair Labor Stan-
dards Act
exempt employees
Employees not covered
by the overtime provi-
sions of the Fair Labor
Standards Act
Say you get hired
making $10 per hour.
What most helps you
determine if that is an
appropriate amount?
LO 2
89624_ch09_hr_318-355.indd 326 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
327Chapter 9 Managing Compensation
Category Job Duties Required
Executive Primary duty must be managing the enterprise, or managing a customarily recognized department
or subdivision of the enterprise; must customarily and regularly direct the work of at least two or
more other full-time employees or their equivalent; and must have the authority to hire or fire other
employees, or the employee’s suggestions and recommendations as to the hiring, firing, advance-
ment, promotion, or any other change of status of other employees must be given particular weight.
Administrative Primary duty must be the performance of office or non-manual work directly related to the manage-
ment or general business operations of the employer or the employer’s customers; and includes the
exercise of discretion and independent judgment with respect to matters of significance.
Learned Primary duty must be the performance of work requiring advanced knowledge, defined as work
which is predominantly intellectual in character and which includes work requiring the consistent
exercise of discretion and judgment; the advanced knowledge must be in a field of science or learn-
ing; and the advanced knowledge must be customarily acquired by a prolonged course of special-
ized intellectual instruction.
Creative Primary duty must be the performance of work requiring invention, imagination, originality, or talent
in a recognized field of artistic or creative endeavor.
Computer Must be employed as a computer systems analyst, computer programmer, software engineer or
other similarly skilled worker in the computer field. The primary duty must consist of (1) the applica-
tion of systems analysis techniques and procedures, including consulting with users, to determine
hardware, software or system functional specifications; (2) the design, development, documentation,
analysis, creation, testing, or modification of computer systems or programs, including prototypes,
based on and related to user or system design specifications; (3) the design, documentation, testing,
creation, or modification of computer programs related to machine operating systems; or (4) a com-
bination of the aforementioned duties, the performance of which requires the same level of skills.
Outside Sales Primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for
services or for the use of facilities for which a consideration will be paid by the client or customer; and
must be customarily and regularly engaged away from the employer’s place or places of business.
Highly
Compensated
The regulations contain a special rule for “highly-compensated” workers who are paid total annual
compensation of $100,000 or more. A highly-compensated employee is deemed exempt under Sec-
tion 13(a)(1) if the employee earns total annual compensation of $100,000 or more, which includes at
least $455 per week paid on a salary basis; the employee’s primary duty includes performing office or
non-manual work; and the employee customarily and regularly performs at least one of the exempt
duties or responsibilities of an exempt executive, administrative, or professional employee.
Other Teachers are exempt if their primary duty is teaching, tutoring, instructing, or lecturing in the activ-
ity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an
educational establishment.
Practice of Law or Medicine: An employee holding a valid license or certificate permitting the
practice of law or medicine is exempt if the employee is actually engaged in such a practice. An
employee who holds the requisite academic degree for the general practice of medicine is also
exempt if he or she is engaged in an internship or resident program for the profession.
Six Excluded Employee GroupsFigure 9.4
Source: Adapted from Vicki M. Lambert, “The top three FLSA violations and how to avoid them,” ADP, 2008.
9.3a Internal Factors
The internal factors that influence pay rates are the organization’s compensation strat-
egy, the worth of a job, an employee’s relative worth in meeting job requirements, and
an employer’s ability to pay.
89624_ch09_hr_318-355.indd 327 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
328 Part 4 Implementing Compensation and Security
Compensation Strategy
Highlights in HRM 1 illustrates the compensation strategies of two organizations, Tri
Star Performance and Preventive Health Care. The strategy of Preventive Health Care
is to be an industry pay leader, while Tri Star Performance seeks to be pay competitive.
Both employers strive to promote a compensation policy that is internally fair.
Tri Star Performance and Preventive Health Care, like other employers, will estab-
lish numerous compensation objectives that affect the pay employees receive. At a
minimum, both large and small employers should set pay policies reflecting (1) the
internal wage relationship among jobs and skill levels, (2) the external competition,
or an employer’s pay position relative to what competitors are paying, (3) a policy of
rewarding employee performance, and (4) administrative decisions concerning ele-
ments of the pay system such as overtime premiums, payment periods, and short- or
long-term incentives.
Worth of a Job
Organizations without a formal compensation program generally base the worth of
jobs on the subjective opinions of people familiar with the jobs. In such instances,
pay rates may be influenced heavily by the labor market or, in the case of unionized
employers, by collective bargaining. Organizations with formal compensation pro-
grams, however, are more likely to rely on a system of job evaluation to aid in rate
determination. (This topic will be covered later in the chapter under pay structure.)
Job evaluation can assist the organization in maintaining some degree of control over
its pay structure, even when rates are subjected to collective bargaining. The use of
job evaluation is widespread in both the public and the private sectors. The cities of
Chicago and Miami use job evaluation in establishing pay structures, as do Google,
Goldman Sachs, and GM. The jobs covered most frequently by job evaluation are cleri-
cal, technical, and various blue-collar groups, as well as managerial and top executive
positions.
In today’s competitive environment, compensation professionals believe that the
worth of a job should be based on more than market prices or job evaluation programs.
Factors Affecting the Pay MixFigure 9.5
Ji
m
W
es
t/
A
la
m
y
PAY
MIX
Compensation
strategy of
organization
Worth of job
Employee’s relative
worth
Employer’s ability
to pay
Conditions of the
labor market
Area pay rates
Cost of living
Collective bargaining
Legal requirements
INTERNAL
FACTORS
EXTERNAL
FACTORS
89624_ch09_hr_318-355.indd 328 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
329Chapter 9 Managing Compensation
Rather, a job’s value should be based on the total value delivered to the organization.
That is, some jobs may simply be more important to organizational success than others
regardless of how they are internally evaluated.20 Valuing work not only properly enables
organizations to price “important” jobs effectively, but also provides insight into how a
job relates to the organization’s objectives and can attract and retain the right talent to
drive organizational performance.21
Employee’s Relative Worth
In both hourly and salary jobs, employee performance can be recognized and rewarded
through promotion and with various incentive systems. (The incentive systems
used most often will be discussed in Chapter 10.) Superior performance can also be
rewarded by granting merit raises on the basis of steps within a rate range established
for a job class. If merit raises are to have their intended value, however, they must be
determined by an effective performance appraisal system that differentiates between
employees who deserve the raises and those who do not. This system, moreover, must
provide a visible and credible relationship between performance and any raises received.
Unfortunately, too many so-called merit systems provide for raises to be granted auto-
matically. As a result, employees tend to be rewarded more for merely being present
than for being productive on the job.
Employer’s Ability to Pay
Pay levels are limited by earned profits and other financial resources available to employ-
ers. Competition and recessions can force prices down and reduce the income from
which compensation payments are derived. In such situations, employers have little
choice but to reduce wages and/or lay off employees or, even worse, to go out of busi-
ness. This is especially true for small businesses. In a survey of small businesses about
performance and financial decisions, half of the respondents stated that the reason they
Several factors should
be taken into consid-
eration when deter-
mining how much a
worker like this one
should be paid.
Fr
an
ce
s
Ro
be
rt
s/
A
la
m
y
89624_ch09_hr_318-355.indd 329 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
didn’t hire more employees is because of high wages and benefit costs, and almost a third
cited the uncertain economic climate.22
Furthermore, an organization’s ability to pay is determined in part by the productiv-
ity of its employees. This productivity is a result not only of employee performance, but
of the amount of capital the organization has invested in labor-saving equipment. Gen-
erally, increases in capital investment reduce the number of employees required to per-
form the work and increase an employer’s ability to provide higher pay for employees.
9.3b External Factors
The major external factors that influence pay rates include labor market conditions, area
pay rates, cost of living, collective bargaining if the employer is unionized, and legal require-
ments. The legal requirements of compensation will be discussed later in the chapter.
Labor Market Conditions
The labor market reflects the forces of supply and demand for qualified labor within
an area. These forces help influence the pay rates required to recruit or retain compe-
tent employees. It must be recognized, however, that counterforces can reduce the full
impact of supply and demand on the labor market. The economic power of unions, for
example, may prevent employers from lowering pay rates even when unemployment is
high among union members. Government regulations also may prevent an employer
from paying at a market rate less than an established minimum.
Comparison of Compensation Strategies
Compensation strategies and objectives can differ
widely across large and small employers as well as across
employers in the private and public sectors. Here are the
compensation strategies at Tri Star Performance and
Preventive Health Care.
Highlights in HRM1
Tri Star Performance Preventive Health Care
• Promote pay-for-performance practices • Be a pay leader in the health care industry
• Pay market-competitive compensation • Promote open and understandable pay practices
• Achieve internal and external pay equity • Ensure fair employee treatment
• Achieve simplicity in compensation programs • Offer benefits promoting individual employee needs
• Strive for employee commitment and a collaborative
work environment
• Offer compensation rewarding employee creativity and
achievements
• Promote gender fairness in pay and benefits • Offer compensation to foster the strategic mission of the
organization
• Comply with all governmental compensation
regulations
• Obtain employee input when developing compensation
practices
• Minimize increased fixed costs • Emphasize performance through variable pay and stock
options
330
89624_ch09_hr_318-355.indd 330 10/20/17 12:10 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
331Chapter 9 Managing Compensation
Area Pay Rates
A formal pay structure should provide rates that are in line with those being paid by other
employers for comparable jobs within the area. Data pertaining to area pay rates may be
obtained from local wage surveys. Wage survey data may be obtained from a variety of
sources, including the American Management Association, Administrative Management
Society, U.S. Department of Labor, and Federal Reserve Banks. Smaller employers such
as the Woodsmith Corporation and Golden State Container use government surveys
to establish rates of pay for new and senior employees. Many organizations, such as the
City of Atlanta, Delta Airlines, and Progress Energy, conduct their own surveys. Others
engage in a cooperative exchange of wage information or rely on various professional
associations for these data. A high percentage of wage data surveys are inexpensive—less
than $100—and are therefore available to all employers, regardless of size.
Wage surveys (discussed fully later in the chapter) serve the important function of
providing external pay equity between the surveying organization and other organiza-
tions competing for labor in the surrounding labor market. Importantly, data from area
wage surveys can be used to prevent the rates for jobs from drifting too far above or
below those of other employers in the region.
Big business can woo job candidates by offering com-
prehensive compensation packages that include stock
options, consistent pay raises, security, and sometimes
even a Starbucks in the lobby. While small businesses
cannot offer these things, they can offer more customized
pay packages to deal with employees’ individual needs.
For example, not having a complex and bureaucratic
compensation system means a small company can more
readily adjust its employees’ wages to match those of the
external market. If the small business is private, there are
many opportunities to attract and retain top talent by
padding lower salaries with stock in the company. By offer-
ing shares of a private company as a form of compensa-
tion, small, private companies can offer the possibility for
its employees to make larger sums of money in the future.
Offering shares or options to buy shares as a form of com-
pensation can be extremely attractive, as employees can
make a lot of money when their young company finally
goes public and is sold on the stock market. For example,
when Snap, owner of Snapchat, became a public com-
pany in 2017, hundreds of the employees who were with
the company early on made enough to become instant
millionaires.23
Following is a list of specific things small businesses
can do to compete with the compensation packages of big
business:
Small Business Application
1. Tailor the pay mix to individual employee needs
and wants. For example, one employee may value
greater bonus opportunities than base pay, while
another may want the money the company would
spend on health insurance to be paid in salary.
2. Provide stock options in high-growth environ-
ments. Potential employees will find the oppor-
tunity to be part of a high-growth company as an
exciting and potentially lucrative risk.
3. Provide faster promotions. Express how the small-
ness of your company allows people to move into
new and exciting positions quickly, without the
bureaucratic red tape found in big business.
4. Provide frequent contact to top management. Not
being able to interact with and receive mentoring from
top management is a major concern for young talent.
Smaller companies are able to offer more of these
types of growth opportunities than larger competitors.
5. Provide a greater sense of personal involvement.
One of the advantages of a small company is that
they can treat their employees like family. In an age
of depersonalized billion-dollar companies, a sense
of belongingness, where you know the company
cares about you, can go a long way in compensat-
ing for lower pay.
Compensation for Small Businesses
89624_ch09_hr_318-355.indd 331 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
332 Part 4 Implementing Compensation and Security
Cost of Living
Because of inflation, compensation rates have to be adjusted upward periodically to help
employees maintain their purchasing power. Employers make these changes with the
help of the consumer price index (CPI). The CPI is a measure of the average change in
prices over time in a fixed “market basket” of goods and services. The Bureau of Labor
Statistics collects price information on a monthly basis and calculates the CPI for the
nation as a whole and various U.S. city averages.
CPI figures can have important consequences for organizational morale and pro-
ductivity. Granting wages based largely on “cost-of-living” figures will not inspire higher
employee performance because pay is unrelated to individual performance and may
cause valued employees to leave the organization. Furthermore, should cost-of-living
increases be discontinued, managers can expect disgruntled employees who may be less
likely to receive merit raises.
Employees who work under a union contract may receive wage increases through
escalator clauses found in their labor agreement. These clauses provide for cost-of-
living adjustments (COLA) in wages based on changes in the CPI. The most common
adjustments are 1 percent per hour for each 0.3- or 0.4-point change in the CPI. COLAs
are favored by unions during particularly high periods of inflation.
Collective Bargaining
One of the primary functions of a labor union is to bargain collectively over conditions
of employment, the most important of which is compensation.24 The union’s goal in
each new agreement is to achieve increases in real wages—wage increases larger than
the increase in the CPI—thereby improving the purchasing power and standard of liv-
ing of its members.
consumer price index
(CPI)
A measure of the average
change in prices over
time in a fixed “market
basket” of goods and
services
escalator clauses
Clauses in labor agree-
ments that provide for
quarterly cost-of-living
adjustments in wages,
basing the adjustments
on changes in the con-
sumer price index
real wages
Wage increases larger
than rises in the con-
sumer price index, that is,
the real earning power
of wages
Employee wages may
be based in part on
how much money peo-
ple in that area need
for day-to-day living.
St
ok
ke
te
/S
hu
tt
er
st
oc
k
89624_ch09_hr_318-355.indd 332 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
333Chapter 9 Managing Compensation
9.4 Job Evaluation Systems
As we discussed earlier, one important component of the pay mix is the worth of
the job. Organizations formally determine the value of jobs through the process of
job evaluation. Job evaluation is the systematic process of determining the rela-
tive worth of jobs to establish which jobs should be paid more than others within
the organization and therefore helps establish internal equity between various jobs.
The relative worth of a job may be determined by comparing it with others within
the organization or by comparing it with a scale that has been constructed for this
purpose.
Three traditional methods of comparison provide the basis for the principal systems
of job evaluation:
1. Rank the value of jobs from highest to lowest.
2. Classify jobs so they can be benchmarked internally and externally.
3. Award points to each job based on its link to organizational objectives.
Such a job valuation system can prove effective not only in designing employee
compensation, but in determining whether a job can be contracted to a local or offshore
company—a major decision that should always take into account the value of the job.
For example, Delta Airlines brought back more than 4,500 customer service jobs from
overseas to the United States. They reported that “customers weren’t happy with the ser-
vice they got from operators based [overseas].” We will begin by discussing the simpler
nonquantitative approaches and conclude by reviewing the more popular quantitative
system and work evaluation. Regardless of the methodology used, it is important to
remember that all job evaluation methods require varying degrees of managerial judg-
ment. Also, those involved in evaluating jobs must consider the impact of the Americans
with Disabilities Act on the process (see Chapter 3).
9.4a Job Ranking System
The simplest and oldest system of job evaluation is the job ranking system, which
ranks jobs on the basis of their relative worth. Job ranking can be done by a single
individual knowledgeable about all jobs or by a committee comprising of management
and employee representatives. For one technique, the ranker(s) arranges cards, one
for each job with a list of their duties and responsibilities, in order of the importance
of the jobs.
The basic disadvantage of the job ranking system is that it is not a very precise
measure of each job’s worth, can only be used on a small number of jobs, and only indi-
cates the relative importance of the job, not the differences in the degree of importance
that may exist between jobs. Its simplicity, however, makes it ideal for use by small
businesses.
9.4b Job Classification System
In the job classification system, jobs are classified and grouped according to a series of
predetermined grades. Successive grades require increasing amounts of job responsi-
bility, skill, knowledge, ability, or other factors selected to compare jobs, and is widely
job evaluation
A systematic process of
determining the relative
worth of jobs to establish
which jobs should be
paid more than others
within an organization
job ranking system
The simplest and oldest
system of job evaluation
by which jobs are arrayed
on the basis of their rela-
tive worth
job classification
system
A system of job evalu-
ation in which jobs are
classified and grouped
according to a series of
predetermined wage
grades
89624_ch09_hr_318-355.indd 333 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
334 Part 4 Implementing Compensation and Security
used by municipal and state governments.24 For example, Grade GS-1 from the federal
government grade descriptions reads as follows:
GS-1 includes those classes of positions the duties of which are to perform, under
immediate supervision, with little or no latitude for the exercise of independent
judgment (A) the simplest routine work in office, business, or fiscal operations; or
(B) elementary work of a subordinate technical character in a professional, scientific,
or technical field.
The descriptions of each of the job classes constitute the scale against which the
specifications for the various jobs are compared. Managers then evaluate jobs by com-
paring job descriptions with the different wage grades to “slot” the job into the appro-
priate grade. While this system has the advantage of simplicity as well, the point system
is more precise.
9.4c Point System
The point system is a quantitative job evaluation procedure that determines a job’s
relative value by calculating the total points assigned to it.25 The principal advantage
of the point system is that it provides a more refined basis for making judgments than
either the ranking or classification system and thereby can produce results that are
more valid and less easy to manipulate. It has been successfully used by high-visibility
organizations such as Digital Equipment Company, Met Life, Johnson Wax, Prudential
Financial, TransAmerica, and many other public and private organizations, large and
small. Although point systems are rather complicated to establish, once in place they
are relatively simple to understand and use.
The point system permits jobs to be evaluated quantitatively on the basis of fac-
tors or elements—commonly called compensable factors—that constitute the job.26
Some compensable factors might include fiscal accountability, leadership, teamwork,
and project accountability. The number of compensable factors an organization uses
depends on the nature of the organization and the jobs to be evaluated. Once selected,
compensable factors will be assigned weights according to their relative importance to
the organization. For example, if responsibility is considered extremely important to the
organization’s objectives, it could be assigned a weight of 40 percent. Next, each factor
will be divided into a number of degrees. Degrees represent different levels of difficulty
associated with each factor.
The Point Manual
The point system requires the use of a point manual. The point manual is, in effect, a
handbook that contains a description of the compensable factors and the degrees to
which these factors may exist within the jobs. The point value assigned to a job represents
the sum of the numerical degree values of each compensable factor that the job possesses.
Using the Point Manual
Job evaluation under the point system is accomplished by comparing the job descrip-
tions and job specifications, factor by factor, against the various factor-degree descrip-
tions contained in the manual. Each factor within the job being evaluated is then
assigned the number of points specified in the manual. When the points for each factor
point system
A quantitative job evalu-
ation procedure that
determines the relative
value of a job by the total
points assigned to it
89624_ch09_hr_318-355.indd 334 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
335Chapter 9 Managing Compensation
have been determined from the manual, the total point value for the job as a whole can
be calculated.
9.4d Work Valuation
Work valuation is a relatively new job evaluation system championed to meet the
demands of a dynamic business environment. The cornerstone for work valuation is
that work should be valued relative to the business goals of the organization rather than
by an internally applied point-factor job evaluation system.28 As noted by one compen-
sation specialist, “Valuing work properly enables organizations to not only price indi-
vidual jobs effectively, but provides insight into how jobs relate to overall organizational
goals and objectives and how roles ultimately contribute to organizational success.”29
Additionally, work valuation serves to direct compensation dollars to the type of work
pivotal to organizational goals.
9.4e Job Evaluation for Management Positions
Because management positions are more difficult to evaluate and involve certain
demands not found in jobs at the lower levels, some organizations do not attempt
to include them in their job evaluation programs for hourly employees. Rather, they
employ either a standardized (purchased) program or customize a point method to
fit their particular jobs. However, regardless of the approach adopted, point plans for
executive and managerial employees operate similarly to those for other groups of
employees.
One of the better-known standardized job evaluation programs for evaluating
executive, managerial, and professional positions is the Hay profile method, developed
by Edward N. Hay.
The three puzzle pieces that constitute the evaluation in the “profile” are knowl-
edge (or knowhow), mental activity (or problem-solving), and accountability
work valuation
A job evaluation system
that seeks to measure a
job’s worth through its
value to the organization
Hay profile method
A job evaluation tech-
nique using three
factors—knowledge,
mental activity, and
accountability—to evalu-
ate executive and mana-
gerial positions
Know-
How
Accountability
Hay Evaluation Profile
Problem-Solving
Hay Evaluation ProfileFigure 9.6
89624_ch09_hr_318-355.indd 335 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
336 Part 4 Implementing Compensation and Security
(Figure 9.6). These factors represent the most important aspects of all executive
and managerial positions. The profile for each position is developed by determin-
ing the percentage value to be assigned to each of the three factors. Jobs are then
ranked on the basis of each factor, and point values that make up the profile are
assigned to each job on the basis of the percentage-value level at which the job is
ranked.
9.5 Compensation Implementation—Pay
Tools
Compensation design systems, such as job evaluations, provide for internal equity
and serve as the basis for pay rate determination. They do not in themselves deter-
mine the pay rate. The evaluated worth of each job in terms of its rank, class,
points, or monetary worth must be implemented into an hourly, daily, weekly, or
monthly pay rate. To appropriately implement compensation, specific tools must
be incorporated. The primary compensation tool used to set pay is the wage and
salary survey.
9.5a Wage and Salary Surveys
The wage and salary survey is a survey of the wages paid by employers in an orga-
nization’s relevant labor market—local, regional, or national—depending on the job.
The labor market is frequently defined as the area from which employers obtain cer-
tain types of workers. The labor market for office personnel would be local, whereas
the labor market for engineers would be national and even global. It is the wage and
salary survey that permits an organization to maintain external equity—that is, to
pay its employees wages equivalent to the wages similar employees earn in other
establishments.
When job evaluation and wage survey data are used jointly, they link the
likelihood of both internal and external equity. Although surveys are conducted
primarily to gather competitive wage data, they can also collect information on
employee benefits or organizational pay practices (such as overtime rates or shift
differentials).
Collecting Survey Data
Conducting surveys and collecting information may take up time and resources, but
survey data lets Human Resource professionals stay aware of the employment mar-
ket and continue to attract and retrain top talent.30 Many organizations conduct their
own wage and salary surveys, and a variety of “preconducted” pay surveys are avail-
able to satisfy the requirements of most public and not-for-profit or private employ-
ers. The Bureau of Labor Statistics (BLS) is the major publisher of wage and salary
data. The BLS publishes the National Compensation Survey (NCS), a statistically valid
and comprehensive compensation program of wage, salary, and benefit information31
(see Highlights in HRM 2).
wage and salary survey
A survey of the wages
paid to employees of
other employers in the
surveying organization’s
relevant labor market
As an HR manager,
what resources can you
use to determine if pay
is appropriate?
LO 3
89624_ch09_hr_318-355.indd 336 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Bureau of Labor Statistics National Compensation Survey
NCS data are used by managers and compensation special-
ists in large and small organizations to answer such ques-
tions as the following:
�� How much must I pay accountants in Atlanta,
Georgia?
�� Is a 3-percent benefits increase comparable to that of
other employers in the manufacturing industry?
�� Is vision coverage a prevalent benefit among large
employers in the Northeast?
�� How have wage costs changed over the past year?
How the NCS Survey Works
The National Compensation Survey is an area-based survey.
Wage and benefit data are collected from a predetermined set
of 154 metropolitan and nonmetropolitan areas through the
50 states and the District of Columbia to represent the United
States. Compensation information is collected from such
diverse locations as Knoxville, Tennessee; Pittsburgh, Pennsyl-
vania; Reno, Nevada; and Richland-Kennewick-Pasco, Wash-
ington. All areas are selected to produce regional estimates
for nine broad geographic divisions and four broad regions.
Within each area, a scientific sample of establishments
represents all area establishments. An “establishment” is a
single physical location, such as a plant, warehouse, corpo-
rate office, or retail outlet. State and local government offices
are also included in the survey.
Once an establishment has been chosen for inclusion in
the survey, a BLS economist selects occupations within that
establishment to represent all occupations in the establish-
ment. The BLS limits the selection to a small number of occu-
pations to reduce the survey burden for employers. Data are
collected for all incumbents in a selected occupation.
The selected occupations are then classified based on
the Census Bureau’s occupation classification system. The
census classification categorizes approximately 450 indi-
vidual occupations into 10 major groupings such as sales,
professional specialty, technical and machine operators,
assemblers, and inspectors. For the occupations selected,
wage and benefit data are collected. Items included in the
collection of wages are time-based payments, piece rates,
commissions, hazard pay, and other items directly related
to the work being performed. A variety of benefit data are
collected, including paid vacations, paid holidays, paid sick
leave, shift differentials, and nonproduction bonuses.
Highlights in HRM2
Salary Surveys
Wage and benefits survey data can be found on numerous websites. The previ-
ously mentioned National Compensation Survey is an example. Also readily avail-
able are commercial products such as those offered at Salary.com or Glassdoor.
Other, less well-known places to find salary information include the Salary Wizard,
Comp Analyst, and Survey Finder. Survey Finder has a database of hundreds of
compensation surveys offered by more than 50 independent vendors. Managers and
compensation specialists can search for applicable surveys for either purchase or
participation.31
The race for free salary data is currently being won by Glassdoor. It was not origi-
nally built, however, for companies to discover how to pay their employees. Rather,
Glassdoor provided a safe platform where people could anonymously share informa-
tion about their pay and company in return for free information about other com-
panies and salaries. Glassdoor now provides a platform where you can view salary
information, company reviews, and job postings. You can even figure out who the
top paying companies are and target your search accordingly. For example, in 2017
337
89624_ch09_hr_318-355.indd 337 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
338 Part 4 Implementing Compensation and Security
Glassdoor listed the 25 highest paying companies in the United States. Looks like
consulting and technology companies may be the way to go… if you’re interested in
high pay.
1. A.T. Kearney
• Median Total Compensation:
$167,534
• Median Base Salary: $143,620
• Industry: Consulting
2. Strategy&
• Median Total Compensation:
$160,000
• Median Base Salary: $147,000
• Industry: Consulting
3. Juniper Networks
• Median Total Compensation:
$157,000
• Median Base Salary: $135,000
• Industry: Technology
4. McKinsey & Company
• Median Total Compensation:
$155,000
• Median Base Salary: $135,000
• Industry: Consulting
5. Google
• Median Total Compensation:
$153,750
• Median Base Salary: $123,331
• Industry: Technology
6. VMware
• Median Total Compensation:
$152,133
• Median Base Salary: $130,000
• Industry: Technology
7. Amazon Lab126
• Median Total Compensation:
$150,100
• Median Base Salary: $138,700
• Industry: Technology
8. Boston Consulting Group
• Median Total Compensation:
$150,020
• Median Base Salary: $147,000
• Industry: Consulting
Glassdoor collects sal-
ary data from employ-
ees who anonymously
volunteer salary infor-
mation and comments
about employers in
return for access to
salary and company
information about
other companies.
G
la
ss
do
or
.c
om
r
89624_ch09_hr_318-355.indd 338 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
339Chapter 9 Managing Compensation
9. Guidewire
• Median Total Compensation:
$150,020
• Median Base Salary: $135,000
• Industry: Technology
10. Cadence Design Systems
• Median Total Compensation:
$150,010
• Median Base Salary: $140,000
• Industry: Technology
11. Visa
• Median Total Compensation:
$150,000
• Median Base Salary: $130,000
• Industry: Finance
12. Facebook
• Median Total Compensation:
$150,000
• Median Base Salary: $127,406
• Industry: Technology
13. Twitter
• Median Total Compensation:
$150,000
• Median Base Salary: $133,000
• Industry: Technology
14. Box
• Median Total Compensation:
$150,000
• Median Base Salary: $130,000
• Industry: Technology
15. Walmart eCommerce
• Median Total Compensation:
$149,000
• Median Base Salary: $126,000
• Industry: Technology
16. SAP
• Median Total Compensation:
$148,431
• Median Base Salary: $120,000
• Industry: Technology
17. Synopsys
• Median Total Compensation:
$148,000
• Median Base Salary: $130,000
• Industry: Technology
18. Altera
• Median Total Compensation:
$147,000
• Median Base Salary: $134,000
• Industry: Technology
19. LinkedIn
• Median Total Compensation:
$145,000
• Median Base Salary: $120,000
• Industry: Technology
20. Cloudera
• Median Total Compensation:
$145,000
• Median Base Salary: $129,500
• Industry: Technology
21. Salesforce
• Median Total Compensation:
$143,750
• Median Base Salary: $120,000
• Industry: Technology
22. Microsoft
• Median Total Compensation:
$141,000
• Median Base Salary: $125,000
• Industry: Technology
23. F5 Networks
• Median Total Compensation:
$140,200
• Median Base Salary: $120,500
• Industry: Technology
24. Adobe
• Median Total Compensation:
$140,000
• Median Base Salary: $125,000
• Industry: Technology
25. Broadcom
• Median Total Compensation:
$140,000
• Median Base Salary: $130,000
• Industry: Technology
89624_ch09_hr_318-355.indd 339 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
340 Part 4 Implementing Compensation and Security
9.5b The Wage Curve
The relationship between the relative worth of jobs and their pay rates can be repre-
sented by means of a wage curve. This curve may indicate the rates currently paid for
jobs within an organization, new rates resulting from job evaluation, or rates for similar
jobs currently being paid by other organizations within the labor market. A curve may
be constructed graphically by preparing a scattergram consisting of a series of dots that
represent the current pay rates. As shown in Figure 9.7, a freehand curve is then drawn
through the cluster of dots in such a manner as to leave approximately an equal number
of dots above and below the curve. The wage curve can be relatively straight or curved.
This curve can then be used to determine the relationship between the value of a job
and its pay rate at any given point on the line.
9.5c Pay Grades
From an administrative standpoint, it is generally preferable to group jobs into
pay grades and to pay all jobs within a particular grade the same rate or rate range.
When the classification system of job evaluation is used, jobs are grouped into grades
as part of the evaluation process. When the point system is used, however, pay grades
must be established at selected intervals that represent either the point or the evaluated
monetary value of these jobs. The graph in Figure 9.8 illustrates a series of pay grades
designated along the horizontal axis at 50-point intervals.
wage curve
A curve in a scattergram
representing the rela-
tionship between rela-
tive worth of jobs and
pay rates
pay grades
Groups of jobs within a
particular class that are
paid the same rate
$10.50
10.00
9.50
9.00
8.50
8.00
7.50
7.00
150 200 250 300
POINT VALUE OF JOBS
W
A
G
E
R
A
T
E
S
350 400 450
Freehand Wage CurveFigure 9.7
89624_ch09_hr_318-355.indd 340 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
341Chapter 9 Managing Compensation
The grades within a pay structure may vary in number.33 The number is deter-
mined by such factors as the slope of the wage curve, the number and distribution of
the jobs within the structure, and the organization’s wage administration and promo-
tion policies. The number utilized should be sufficient to permit difficulty levels to be
distinguished but not so great as to make the distinction between two adjoining grades
insignificant.
9.5d Rate Ranges
Although a single rate may be created for each pay grade, as shown in Figure 9.8, it is
more common to provide a range of rates for each pay grade. The rate ranges may be
the same for each grade or proportionately greater for each successive grade, as shown
in Figure 9.9. Rate ranges constructed on the latter basis provide a greater incentive for
employees to accept a promotion to a job in a higher grade.
Rate ranges generally are divided into a series of steps that permit employees to
receive increases up to the maximum rate for the range on the basis of merit or seniority
or a combination of the two. Most salary structures provide for the ranges of adjoin-
ing pay grades to overlap. The purpose of the overlap is to permit an employee with
Evaluated Points
W
A
G
E
R
A
T
E
S
$10.50
10.00
9.50
9.00
8.50
8.00
7.50
7.00
150 200 250 300 350 400 450
PAY GRADES
21 3 4 5 6 7 8
Organization wage curve
Single Rate StructureFigure 9.8
89624_ch09_hr_318-355.indd 341 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
342 Part 4 Implementing Compensation and Security
experience to earn as much as or more than a person with less experience in the next
higher job classification.
The final step in setting up a wage structure is to determine the appropriate
pay grade into which each job should be placed on the basis of its evaluated worth.
Traditionally, this worth is determined on the basis of job requirements without
regard to the performance of the person in that job. Under this system, the per-
formance of those who exceed the requirements of a job may be acknowledged by
merit increases within the grade range or by promotion to a job in the next higher
pay grade.34
Organizations may pay individuals above the maximum of the pay range when
employees have high seniority or promotional opportunities are scarce. Wages paid
above the range maximum are called red circle rates. Because these rates are exceptions
to the pay structure, employers often “freeze” these rates until all ranges are shifted
upward through market wage adjustments.
red circle rates
Payment rates above
the maximum of the pay
range
W
A
G
E
R
A
T
E
S
$10.50
10.00
9.50
9.00
8.50
8.00
7.50
7.00
Red
circle
rate
Range
overlapRate range
Midpoint
Range steps
Maximum rate
Wage curve
Minimum rate
150 200 250 300 350 400 450 500
Evaluated Points
PAY GRADES
21 3 4 5 6 7 8
Rate Range StructureFigure 9.9
89624_ch09_hr_318-355.indd 342 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
343Chapter 9 Managing Compensation
9.5e Competence-Based Pay
The predominant approach to employee compensation is still the job-based system.
Unfortunately, such a system often fails to reward employees for their skills or the
knowledge they possess or to encourage them to learn a new job-related skill. Addi-
tionally, job-based pay systems may not reinforce an organizational culture stressing
employee involvement or provide increased employee flexibility to meet overall produc-
tion or service requirements. Therefore, organizations such as Frito-Lay, Nortel Net-
works, Sherwin-Williams, and Honeywell have introduced competence-based pay plans.
Competence-based pay, also referred to as skill-based pay or knowledge-based pay,
compensates employees for the different skills or increased knowledge they possess rather
than for the job they hold in a designated job category.35 Regardless of the name, these
pay plans encourage employees to earn higher base wages by learning and performing a
wider variety of skills (or jobs) or displaying an array of competencies that can be applied
to a variety of organizational requirements. For example, in a manufacturing setting, new
tasks might include various assembly activities carried out in a particular production
system or a variety of maintenance functions. Within service organizations, employees
might acquire new knowledge related to advanced computer systems or accounting pro-
cedures. Organizations will grant an increase in pay after each skill or knowledge has been
mastered and can be demonstrated according to a predetermined standard.
Competence-based pay systems represent a fundamental change in the attitude of
management regarding how work should be organized and how employees should be
paid for their work efforts. The most frequently cited benefits of competence-based pay
include greater productivity, increased employee learning and commitment to work,
improved staffing flexibility to meet production or service demands, and reduced effects
of absenteeism and turnover, because managers can assign employees where and when
needed. Competence-based pay also encourages employees to acquire training when
new or updated skills are needed by an organization.
Unfortunately, competence-based plans bring some long-term difficulties. Some
plans limit the amount of compensation employees can earn, regardless of the new skills
or competencies they acquire. Thus, after achieving the top wage, employees may be
reluctant to continue their educational training. Perhaps the greatest challenge in pay-
ing individuals for their skills, knowledge, and competencies is developing appropriate
measures. It is difficult to write specific knowledge and skill descriptions for jobs that
employees perform and then establish accurate measures of acquired skills or knowledge.
Broadbanding
Organizations that adopt a competency-based or skill-based pay system frequently use
broadbanding to structure their compensation payments to employees. Broadbanding
simply collapses many traditional salary grades into a few wide salary bands. Broad-
bands may have midpoints and quartiles, or they may have extremely wide salary ranges
or no ranges at all. Banding encourages lateral skill building while addressing the need
to pay employees performing multiple jobs with different skill level requirements. Addi-
tionally, broadbands help eliminate the obsession with grades and, instead, encourage
employees to move to jobs in which they can develop in their careers and add value
to the organization. Paying employees through broadbands enables organizations to
consider job responsibilities, individual skills and competencies, and career mobility
patterns in assigning employees to bands.36 In all, such pay tools help more effectively
implement a compensation strategy.
competence-based pay
Pay based on an
employee’s skill level,
variety of skills pos-
sessed, or increased job
knowledge
broadbanding
Collapses many tradi-
tional salary grades into
a few wide salary bands
89624_ch09_hr_318-355.indd 343 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
344 Part 4 Implementing Compensation and Security
9.6 Government Regulation of Compensation
In addition to data from salary surveys and competence-based assessments, compensation
implementation is also subject to state and federal regulations. A majority of states have
minimum wage laws or wage boards that fix minimum wage rates on an industry-by-
industry basis. When an employee is subject to both the state and federal minimum wage
laws, the employee is entitled to the higher of the two minimum wages (see Highlights
in HRM 3 for state minimum wage laws). Most states also regulate hours of work and
overtime payments.
Wage and Hour Provisions
It’s important to know the difference and details between minimum wage, overtime,
and compensatory time.
Minimum Wage Rate – The minimum wage prescribed by federal law has been raised many
times, from an original figure of $0.25 per hour to $7.25 per hour
on July 24, 2009. This is where the minimum wage stands today
(see Highlights in HRM 5 for the federal minimum wage poster that
employers are required to display).
– Assessed every few years and adjusted for cost-of-living factors
(e.g., consumer price index).
– Applies to actual earning rate BEFORE any added overtime premiums.
Overtime Wage Rate – 1.5 times the base rate must be paid for all hours worked over 40 during
a given week.
– Base wage rate must include incentive payments or bonuses received
during that period.
– Employees paid on piecework basis must receive premium for overtime
work.
Compensatory Time
(Comp Time)
– When employees are given time off in return for overtime work.
– Granted at 1.5 times the number of hours worked as overtime.
*The FLSA does not require severance pay, sick leave, vacation, or holidays.
Under the FLSA, an employer must pay an employee for whatever work the
employer “suffers or permits” the employee to perform, even if the work is done away
from the workplace and even if it is not specifically expected or requested. This condi-
tion could likely occur when employees work away from headquarters and are unsu-
pervised or when they telecommute on a frequent basis.
Minimum Wage and Pay Compression
Some argue that increases in the minimum wage may lead to pay compression. Pay rate
compression means that differences between low- and high-paying jobs decrease. It occurs
when less experienced, often junior employees, earn as much or more than experienced
employees due to high starting salaries for new employees. It also occurs when the mini-
mum wage requirements push up salaries for lower tier salaries but not for higher tier. Both
lower- and higher-paid jobs experience pay compression. For example, if starting hourly
wages for preschool teachers is $9.00 and preschool teacher aides is $7.25, a minimum
wage increase to $9.00 would bring both to essentially the same starting wage (the U.S.
median salary for preschool teachers is $12.23, while the bottom 10 percent make $9.00).37
The reasons pay compression occurs are usually more market based than govern-
ment based. For example, the scarcity of qualified applicants in computers, engineering,
pay rate compression
Compression of pay
between new and
experienced employees
caused by the higher
starting salaries of new
employees; also the
differential between
hourly workers and their
managers
89624_ch09_hr_318-355.indd 344 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
and other professional and technical fields has forced starting salaries for these occu-
pations to be at or near the salaries paid employees with considerable experience and
seniority. Pay compression can also occur when hourly employees, at the top of their
pay grades, earn only slightly less than managers at the low end of their pay grades.
Identifying pay rate compression and its causes is far simpler than implementing
organizational policies to alleviate its effect. Organizations wishing to minimize the
problem may incorporate the following ideas into their pay policies:
• Reward high-performance and merit-worthy employees with large pay increases.
• Design the pay structure to allow a wide spread between hourly and supervisory
employees.
Minimum Wage Laws in the States
Note: Where federal and state law have different minimum wage rates, the higher standard applies.
Highlights in HRM3
WA
$11.00
OR
$9.75
ID
$7.25
UT
$7.25
NV
$8.25
CA
$10.50
AZ
$10.00 NM
$7.50
CO
$9.30
WY
$7.25
MI
$8.15
ND
$7.25
2017 MINIMUM WAGE BY STATE
SD
$8.65
NE
$9.00
KS
$7.25
OK
$7.25
TX
$7.25
LA
$7.25
AR
$8.50
MO
$7.70
IA
$7.25
MN
$9.50
WI
$9.25
IL
$8.25
IN
$7.25
MI
$8.25
OH
$8.15
KY
$7.25
MS
$7.25
AL
$7.25
GA
$7.25
NC $7.25
VA
$7.25
PA
$7.25
NY
$9.70
ME
$9.00
CT
$10.10
WV
$7.25
FL
$8.10
TN $7.25
AK
$9.80
HI
$9.25
SC
$8.75
$9.50 and above $8.50–$9.30 $7.50–$8.40 $7.25
DE
$8.25
MA
$11.00
MD
$8.75
ME
$9.00
NH
$7.25
NJ
$8.44
RI
$9.60
VT
$10.00
DC
$11.50
345
89624_ch09_hr_318-355.indd 345 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
• Prepare high-performing employees for promotions to jobs with higher salary
levels.
• Provide equity adjustments for selected employees hardest hit by pay compression.38
Since pay rate compression is largely an internal pay equity concern, if not addressed
fairly, it can cause low employee morale, leading to issues of reduced employee perfor-
mance, hard feelings between employees, higher absenteeism and turnover, and even
delinquent behavior such as employee theft.
Child Labor Provisions
Another concern with the minimum wage is that the “floor” it imposes makes it more
difficult for high school students and young adults to find jobs. Many employers who
might otherwise be willing to hire these individuals are unwilling to pay them the same
rate as adults because of their lack of experience.
Age 16 is the basic minimum age required for employment. At age 16 youth can be
employed for unlimited hours in any occupation that is not declared hazardous by the
Worldwide Minimum Wages
Highlights in HRM4
$16.88Australia
France
New Zealand
United Kingdom
Canada
Japan
United States
Spain
Greece
South Korea
Portugal
Hong Kong
Argentina
Poland
Brazil
Russia
China
Mexico
Phillipines
Afghanistan
India
Sierra Leone
$12.09
$11.18
$9.83
$9.75
$8.17
$7.25
$5.57
$5.06
$4.31
$4.19
$3.87
$3.79
$2.83
$1.98
$0.97
$0.80
$0.66
$0.61
$0.57
$0.28
$0.03
Minimum Wages Around The World
346
89624_ch09_hr_318-355.indd 346 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Federal Wage Poster
Highlights in HRM5
For additional information:
1-866-4-USWAGE
(1-866-487-9243) TTY: 1-877-889-5627
WWW.WAGEHOUR.DOL.GOV
EMPLOYEE RIGHTS
UNDER THE FAIR LABOR STANDARDS ACT
THE UNITED STATES DEPARTMENT OF LABOR WAGE AND HOUR DIVISION
$5.85PER.HOUR
BEGINNING JULY 24, 2007
$7.25
BEGINNING JULY 24, 2009
$6.55PERHOUR PERHOUR
BEGINNING JULY 24, 2008
FEDERAL MINIMUM WAGE
OVERTIME PAY
YOUTH
EMPLOYMENT
TIP CREDIT
ENFORCEMENT
ADDITIONAL
INFORMATION
At least 1 times your regular rate of pay for all hours worked over 40 in a workweek.
An employee must be at least 16 years old to work in most non-farm jobs and at least 18 to work in non-farm
jobs declared hazardous by the Secretary of Labor.
Youths 14 and 15 years old may work outside school hours in various non-manufacturing, non-mining, non-haz-
ardous jobs under the following conditions:
No more than
• 3 hours on a school day or 18 hours in a school week;
• 8 hours on a non-school day or 40 hours in a non-school week.
Also, work may not begin before 7 a.m. or end after 7 p.m., except from June 1 through Labor Day,
when evening hours are extended to 9 p.m. Different rules apply in agricultural employment. For
more information, visit the YouthRules! Web site at www.youthrules.dol.gov.
Employers of “tipped employees” must pay a cash wage of at least $2.13 per hour if they claim a tip credit
against their minimum wage obligation. If an employee’s tips combined with the employer’s cash wage of at
least $2.13 per hour do not equal the minimum hourly wage, the employer must make up the difference.
Certain other conditions must also be met.
The Department of Labor may recover back wages either administratively or through court action, for the
employees that have been underpaid in violation of the law. Violations may result in civil or criminal action.
Civil money penalties of up to $11,000 per violation may be assessed against employers who violate the youth
employment provisions of the law and up to $1,100 per violation against employers who willfully or repeatedly
violate the minimum wage or overtime pay provisions. This law prohibits discriminating against or discharging
workers who file a complaint or participate in any proceedings under the Act.
• Certain occupations and establishments are exempt from the minimum wage and/or overtime pay provisions.
• Special provisions apply to workers in American Samoa and the Commonwealth of the Northern Mariana
Islands.
• Some state laws provide greater employee protections; employers must comply with both.
• The law requires employers to display this poster where employees can readily see it.
• Employees under 20 years of age may be paid $4.25 per hour during their first 90 consecutive calendar days
of employment with an employer.
• Certain full-time students, student learners, apprentices, and workers with disabilities may be paid less than
the minimum wage under special certificates issued by the Department of Labor.
1
2/
WHD Publication 1088 (Revised June 2007)
U.S. Department of Labor Employment Standards Administration Wage and Hour Division
89624_ch09_hr_318-355.indd 347 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
348 Part 4 Implementing Compensation and Security
U.S. secretary of labor. For example, a 16-year-old could not work as a coal miner, but
she could work at the local snow-cone shack. Children ages 14 and 15 can also be hired
in specified jobs outside of school hours for limited periods of time each day and each
week. Employees under 20 years old can be paid $4.25 per hour during their first 90
calendar days with an employer. Such pay is considered training pay. Finally, employers
of “tipped employees” must pay at least $2.13 per hour if they claim a tip credit against
their minimum wage obligations. If an employee’s tips combined with the employer’s
pay of at least $2.13 do not equal the minimum hourly wage, the employer must make
up the difference.39
Pay Equity Provisions
Laws exist to protect employees against pay discrimination. Yet, pay discrimination is
still found in many companies today. For example, in 2017 Wells Fargo paid $35.5 mil-
lion as part of a settlement of a putative class-action lawsuit that alleged discrimination
against African American advisors. A group of African American brokers and trainees
alleged that they had been excluded from certain business opportunities and higher-up
teams because of race. In addition to the monetary settlement, Wells Fargo agreed to set
up resources to focus on recruiting more diverse trainees and hire from a more diverse
applicant pool, along with other changes to their management training.40 Figure 9.10
further examines pay inequality based on race and gender.
9.7 Compensation Assessment
Getting your compensation system up and running is not the end of your task as a
manager. Once it has been implemented, assessing the effectiveness of your compensa-
tion system is vitally important to linking compensation with strategy. With the right
What tools would you
use to determine if
your company’s pay
was appropriate for the
market?
LO 4
Race and Ethnicity Male Weekly Income Female Weekly Income
Women’s Earnings
as % of Male
Earnings
All Races 854 691 81.00%
White Alone, not
Hispanic
879 710 81%
Black or African
American only
665 599 90%
Asian only 1055 770 73%
Hispanic or Latino
(any race)
592 521 88%
Race and Gender Pay InequalityFigure 9.10
Source: Bureau of Labor Statistics, Current Population Survey, “Table 37: Median Weekly Earnings of Full-time
Wage and Salary Workers by Selected Characteristics, 2012,” Annual Averages (2013). http://www.census.gov/
hhes/www/cpstables/032010/perinc/new05_001.htm
89624_ch09_hr_318-355.indd 348 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
349Chapter 9 Managing Compensation
measures, you can (1) help the company detect potential compensation problems,
(2) make compensation decisions more transparent, and (3) improve the alignment of
compensation decisions with organizational objectives. The compensation scorecard
collects and displays the results for all the measures that a company uses to monitor and
compare compensation among internal departments or units. While different compa-
nies will use different measures of compensation, the scorecard creates a comparative
tool within the organization that can reinforce desired outcomes that are unique to the
company’s strategy.
Managers in companies without compensation scorecards often struggle to know if
the promotions, raises, bonuses, and pay adjustments they make are in line with the rest
of the organization and its strategy. A scorecard improves transparency of how people
are rewarded and makes managers responsible for how they spend company money.
Most compensation scorecards are completed once a year by HR.
For example, Figure 9.11 represents an example of a compensation scorecard.
Each functional department in the company reports the average performance rat-
ing received by its employees on a scale of 1 (low) to 5 (high). This measure helps
to show managers where they are in terms of evaluating their employees. Average
merit increases are also gathered. The company had budgeted enough money for a
4 percent increase, on average. If the average merit increase you give your employ-
ees is above this 4 percent level, then the additional money needed to compensate
employees in your function will need to be drawn from elsewhere in the company.
Grade inflation is the growth or decline of the average salary grade distribution. It
shows whether or not you vary in pay raises on a year-to-year basis. Compa ratio is a
measure of the appropriateness of the salaries given by a function. In essence it is an
internal benchmark of salaries. Functions with a compa ratio below 100 percent are
considered to be paying their employees below the company norm. Finally, a measure
of the percent of annual incentives in relation to organizational targets helps to assess
whether a function is meeting its targets and paying its employees in accordance with
those objectives.41
compensation
scorecard
Displays the results for all
the measures that a com-
pany uses to monitor and
compare compensation
among internal depart-
ments or units
Function
Average Performance
Rating (1–5)
Average Merit
Increase (4% Budget) Grade Inflation Compa Ratio
Annual Incentive
(% of Target)
Marketing 3.4 4.3% –3% 101% 100%
R&D 3.2 4.4% 0% 98% 102%
Production 4.0 4.2% 12% 96% 105%
Sales 4.1 3.4% 8% 99% 100%
Customer Service 3.6 3.6% 17% 88% 110%
* Grade inflation is determined by calculating the percentage change in the number of employees in each grade in comparison to the year before.
** Compa ratio is actual salary divided by the midpoint of the salary range. It is a gauge of the appropriateness of the organization’s salary ranges.
*** The direct correlation between profit growth over a three-year period relative to LTI expense.
Sample Compensation ScorecardFigure 9.11
Source: Reprinted by permission of The Segal Group, Inc., parent of The Segal Company and its Sibson Consulting Division. © 2011. All rights
reserved.
89624_ch09_hr_318-355.indd 349 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
350 Part 4 Implementing Compensation and Security
Establishing strategic compensation programs
requires an assessment of organizational objectives
in relation to specific employment goals—employee
retention for continued growth, compensation distri-
bution to ensure employees feel treated fairly, com-
munication of compensation methods to increase
employee understanding of organizational objectives,
and adherence to a budget for cost efficiencies, for
instance. Compensation must reward employees for
past efforts (pay for performance) while motivating
employees’ future performances. Internal and exter-
nal equity of the pay program affects employees’ con-
cepts of fairness. Organizations must balance each of
these concerns while still remaining competitive. The
ability to attract and retain qualified employees while
controlling labor costs is a major factor in allowing
organizations to remain viable in the domestic or
international markets.
The basis on which compensation payments
are determined and the way they are administered
can significantly affect employee productivity and the
achievement of organizational goals. Internal influ-
ences include the employer’s compensation policy,
worth of the job, performance of the employee, and
LO 1
LO 2
Summary
employer’s ability to pay. External factors influencing
pay rates include labor market conditions, area pay
rates, cost of living, outcomes of collective bargaining,
and legal requirements.
Wage surveys determine the external equity of
jobs. Data obtained from surveys will facilitate estab-
lishing the organization’s wage policy while ensuring
that the employer does not pay more, or less, than
needed for jobs in the relevant labor market. The wage
structure will be determined based on wage surveys,
but will vary based on job function and individual skill
differences. Companies use wage curves, pay grades,
and rate ranges to group jobs together and to allow for
individual employee differences within each type of
job. These wage structures will also depend upon the
legal requirements around wage.
The effectiveness of a compensation system
can be assessed by using a compensation scorecard.
The scorecard collects and displays where all depart-
ments and functions sit in terms of their relative
compensation. It increases the transparency of com-
pensation systems, the accountability of managers,
and helps companies align their compensation deci-
sions with organizational objectives.
LO 3
LO 4
broadbanding
compensation scorecard
competence-based pay
consumer price index (CPI)
escalator clauses
exempt employees
Hay profile method
hourly work
job classification system
job evaluation
job ranking system
nonexempt employees
pay equity
pay grades
pay rate compression
pay-for-performance standard
piecework
point system
real wages
red circle rates
wage and salary survey
wage curve
work valuation
Key Terms
89624_ch09_hr_318-355.indd 350 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Why This Salary?
Occupation Median Annual Salary
Wind turbine service technician $51,050
Physical therapist $84,020
Statistician $80,110
Ambulance driver $23,740
Genetic counselors $72,090
Interpreter and translator $44,190
Optometrist $103,900
1. What factors may account for the wide differences
among salaries for different occupations?
2. What factors may account for the differences among
salaries for the identical occupation in the same
organization?
3. What factors may account for the differences among
salaries for the identical occupation in different
organizations?
You may work individually or in teams to complete this skill-
building exercise. The Occupational Outlook Handbook pub-
lished by the U.S. Bureau of Labor Statistics can be found at
http://www.bls.gov.
A question frequently asked is, “Why is that person paid
more than I am when we both perform the same job?” The
answer to this question lies in understanding the compo-
nents of the pay mix as discussed in this chapter. While we
may disapprove of the idea that someone is paid more
or less than we are for similar work; nevertheless, factors
both internal and external to the organization influence the
final salary paid to a job or a specific person. Often we have
little control over the pay mix factors. However, at other
times, we can improve our wage by gaining additional job
experience or seniority or by obtaining increases in job
knowledge or skills. This project is designed to give you
experience in understanding why jobs are paid different
salaries.
Assignment
Shown here are the annual median salaries paid in some
of the fastest growing occupations in America based on
expected growth rates from now until 2024. Study the sala-
ries paid to these workers and then answer the questions
that follow as to why the differences in salaries exist. Relate
these reasons to the internal and external factors of the pay
mix that are discussed in the text.
351
Tomax Corporation has 400 employees and
wishes to develop a compensation policy to
correspond to its dynamic business strategy.
The company wishes to employ a high-quality
workforce capable of responding to a competi-
tive business environment. Suggest different
compensation objectives to match Tomax’s
business goals.
Since employees may differ in terms of their
job performance, would it not be more feasible
to determine the wage rate for each employee
on the basis of his or her relative worth to the
organization? Explain.
LO 1
LO 2
Describe the basic steps in conducting a wage
and salary survey. What are some factors to
consider? One of the objections to granting
wage increases on a percentage basis is that
the lowest-paid employees, who are having the
most trouble making ends meet, get the small-
est increase, while the highest-paid employees
get the largest increase. Is this objection a valid
one? Explain.
What is a compensation scorecard and how
does it help align a company’s strategy with its
compensation system?
LO 3
LO 4
Discussion Questions
89624_ch09_hr_318-355.indd 351 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
352 Part 4 Implementing Compensation and Security
CASE STUDY Pay Decisions at Performance Sports1
Katie Perkins’s career objective while attending Rock-
ford State College was to obtain a degree in small busi-
ness management and to start her own business after
graduation. Her ultimate desire was to combine her
love of sports and a strong interest in marketing to
start a mail-order golf equipment business aimed spe-
cifically at beginning golfers.
After extensive development of a strategic busi-
ness plan and a loan in the amount of $75,000 from
the Small Business Administration, Performance
Sports was begun. Based on a marketing plan that
stressed fast delivery, error-free customer service,
and large discount pricing, Performance Sports grew
rapidly. At present the company employs 16 people:
8 customer service representatives earning between
$11.25 and $13.50 per hour; 4 shipping and receiv-
ing associates paid between $8.50 and $9.50 per hour;
2 clerical employees each earning $8.25 per hour; an
assistant manager earning $15.25 per hour; and a gen-
eral manager with a wage of $16.75 per hour. Both the
manager and assistant manager are former customer
service representatives.
Perkins intends to create a new managerial posi-
tion, purchasing agent, to handle the complex duties of
purchasing golf equipment from the company’s numer-
ous equipment manufacturers. Also, the mail-order cat-
alog will be expanded to handle a complete line of tennis
equipment. Since the position of purchasing agent is
new, Perkins is not sure how much to pay this person.
She wants to employ an individual with 5 to 8 years of
experience in sports equipment purchasing.
While attending an equipment manufacturers’
convention in Las Vegas, Nevada, Perkins learns that
a competitor, East Valley Sports, pays its customer ser-
vice representatives on a pay-for-performance basis.
Intrigued by this compensation philosophy, Perkins
asks her assistant manager, George Balkin, to research
the pros and cons of this payment strategy. This
request has become a priority because only last week
two customer service representatives expressed dis-
satisfaction with their hourly wage. Both complained
that they felt underpaid relative to the large amount of
sales revenue each generates for the company.
Questions
1. What factors should Perkins and Balkin consider
when setting the wage for the purchasing agent
position? What resources are available for them
to consult when establishing this wage?
2. Suggest advantages and disadvantages of a pay-
for-performance policy for Performance Sports.
3. Suggest a new payment plan for the customer ser-
vice representatives.
CASE STUDY An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay2
For many businesses in today’s belt-tightening econ-
omy, decisions on pay need to be strategic to ensure
that employees are treated fairly and to ensure that
businesses can remain viable. This requires know-
ing what your competitors pay their employees and
knowing your own salary budget. But knowing what
your competitors are paying can be both valuable and
painful.
As a primary stakeholder and former CEO of
Costa Vida, a fast-growing chain of fresh Mexican
restaurants, Nathan Gardner knew he was compet-
ing against some restaurant chains with competitive
compensation systems. Costa Vida is a fresh Mexican
grill featuring Baja-inspired foods that are made from
scratch daily. Following a trip to Cabo San Lucas on
the Baja Coast in Mexico, Costa Vida founders JD and
Sarah Gardner were inspired with a vision: Bring the
freshly made local cuisine with the vibrant lifestyle to
the United States. They started their first restaurant in
2001, and after just 13 years, Costa Vida has more than
50 franchises in Arizona, California, Colorado, Flor-
ida, Idaho, Illinois, Nevada, New Mexico, Missouri,
Oklahoma, Oregon, Texas, Washington, Wyoming,
and Utah, and as of 2017, 3 locations in Canada.
89624_ch09_hr_318-355.indd 352 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
353Chapter 9 Managing Compensation
One of the main challenges Costa Vida faces is the
fierce competition for customers as well as employees.
“You’d be surprised how much of a difference having
good employees in all areas of the business makes,”
commented Nathan.
“For the fast-casual food industry,” remarked
Nathan, “you are dependent upon your people. If
you don’t treat your people well, they won’t treat your
customers well. If your customers aren’t treated well,
you have no business.” For months, Nathan agonized
over how he could develop a competitive compensa-
tion plan that matched the objectives of the organiza-
tion, but that fell in line with the tight budget of each
individually owned franchise unit. He stated, “We, of
course, leave the final compensation decision to the
franchise owner, but we do all we can to educate and
persuade our franchisees to be competitive and fair. In
the long run, this is how they can maintain a superior
level of customer satisfaction.”
Nathan pointed out that a strong benchmark for
them has been In-N-Out Burger. In-N-Out started
in California and is known for its great compensa-
tion package. They start out all their new “associ-
ates” (aka employees) at a minimum of $10 an hour.
They also offer flexible schedules to accommodate
school and other activities, paid vacation, free meals,
and a 401k retirement plan. For full-time associates
they provide medical, dental, vision, life, and travel
insurance coverage. Their reason for paying so high
is based on a strategy that lower turnover and more
committed workers will lead to better service. “What
In-N-Out does for their employees is truly amazing,”
commented Nathan. “We often see employees moving
from one fast-food chain to another, but we rarely see
employees coming from In-N-Out.”
Nathan had a tough challenge ahead in trying to
convince his franchise owners and managers to think
more strategically about their pay systems. He needed
to help them realize that paying wages and offering
other compensation benefits that were better than
their competitors may mean lower profit margins up
front, but that the returns would be greater in the long
run. He also needed to offer evidence to show that this
was not just about being fair, but it was about being
strategic. The restaurant business is a fast and fierce
industry and companies come and go all the time.
What was it going to take for Costa Vida to stay for
the long haul?
Questions
1. Why is it important for pay to be externally fair?
2. Why is it important for pay to be internally fair?
3. What should Costa Vida’s compensation strategy
look like? Hint: What are the company objectives
and how can employee pay help to achieve those
objectives?
4. What should the pay structure look like? What
pay mix would you recommend?
5. How should Nathan communicate a new com-
pensation strategy to his franchisee owners and
managers?
6. What effect will paying higher wages have on
Costa Vida in the short term? What effect will it
have in the long term? Explain.
Notes and References
1. S. Morris, S. Alvarez, J. Barney, and J. Molloy, “Firm-Specific
Human Capital Investments as a Signal of General Value:
Revisiting Assumptions about Human Capital and How it is
Managed,” Strategic Management Journal (press, 2017).
2. Jennifer M. George and Gareth R. Jones, Understanding
Organizational Behavior, 6th ed. (Boston, MA: Prentice
Hall, 2012), Chapter 3; Debra L. Nelson and James Campbell
Quick, Organizational Behavior: Science, the Real World, and
You, 8th ed. (Mason, OH: South-Western, Cengage Learning,
2013), Chapter 16.
3. For a frequently referenced book on strategic compensation
planning, see Edward E. Lawler III, Strategic Pay: Aligning
Organizational Strategies and Pay Systems (San Francisco:
Jossey-Bass, 1990). See also Susan E. Jackson and Randall S.
Schuler, Managing Human Resources: Through Strategic Part-
nerships, 9th ed. (Mason, OH: South-Western, 2006), Chapter 9.
4. Personal interview with Product Development Manager at
Google.
5. Daniel Rothberg,. “With No Bosses, How Do Zappos
Employees Get Raises?” Las Vegas Sun, (July 15, 2015), https://
lasvegassun.com/news/2015/jul/15/no-bosses-how-do-
zappos-employees-get-raises/; Zappos, “Why Us? Our Core
Values.” (March 2017), http://jobs.jobvite.com/zappos/p/
why#values.
89624_ch09_hr_318-355.indd 353 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
354 Part 4 Implementing Compensation and Security
6. Jonathon Trevor, Can Pay Be Strategic: A Critical Exploration
of Strategic Pay in Practice (London, England: Palgrave
Macmillan, 2011).
7. Hai-Ming Chen and Yi-Hua Hsien, “Key Trends in the Total
Reward System of the 21st Century,” Compensation and Ben-
efits Review 38, no. 6 (November–December 2006): 64.
8. Jay Yarow, “This is the Internal Grading System Google Uses
for Its Employees—And You Should Use It Too,” Business
Insider (January 6, 2014).
9. Nick Ushkoff, “Can OKRs Be Tied to Compensation?” Atiim
(March 27, 2017).
10. Stephen Miller, “Study: Pay for Performance Pays Off,” Society
for Human Resource Management (September 14, 2011), https://
www.shrm.org/resourcesandtools/hr-topics/compensation/
pages/paysoff.aspx
11. Health Care Incentives Improvement Institute (HCI3),
“Pay-for-Performance: Will the Latest Payment Trend
Improve? ” http://w w w.hci3.org/thought-leadership/
why-incentives-matter/pay-performance.
12. For one of the classic articles on equity theory, see J. Stacey
Adams, “Integrity in Social Exchange,” in L. Berkowitz (ed.),
Advances in Experimental Social Psychology (New York: Aca-
demic Press, 1965), 276–299.
13. Victor H. Vroom, Work and Motivation (San Francisco:
Jossey-Bass, 1994). This landmark book, originally pub-
lished in 1964, integrates the work of hundreds of researchers
seeking to explain choice of work, job satisfaction, and job
performance.
14. Joseph E. Champoux, Organizational Behavior: Integrating
Individuals, Groups, and Organizations, 5th ed. (New York:
Routledge, 2017), Chapter 8.
15. Ariane Hegewisch, Claudia Williams, and Robert Drago, “Pay
Secrecy and Wage Discrimination Fact Sheet,” Institute for
Women’s Policy Research, ((January 2014).
16. Julie Cook Ramirez, “The End of Secrecy?” Human Resource
Executive Order (February 4, 2016). http://www.hreonline
.com/HRE/view/story.jhtml?id5534359883.
17. Detailed discussion of exempt and nonexempt rules under the
Fair Labor Standards Act can be found at http://www.dol.gov.
18. U.S. Department of Labor, “Exemption for Executive, Admin-
istrative, Professional, Computer & Outside Sales Employees
Under the Fair Labor Standards Act (FLSA),” https://www.dol
.gov/whd/overtime/fs17a_overview .
19. David Lepak and Scott Snell, “The Human Resource Archi-
tecture: Toward a Theory of Human Capital Allocation and
Development,” Academy of Management Review 24, no. 1
(1999): 31–48.
20. Konrad Reiher, “Compensation and Benefits: Job Evaluation,”
Handbook of Human Resources Management, Matthias Zeuch
(ed.) (2015): 1–14. See also Robert L. Heneman, Peter V.
LeBlanc, and Tim L. Reynolds, “Using Work Valuation
to Identify and Protect the Talent Pool,” WorldatWork 11,
no. 2 (Third Quarter 2002): 31–41; James R. Bowers,
“Valuing Work: An Integrated Approach,” WorldatWork 12,
no. 2 (Second Quarter 2003): 28–39.
21. Federal Reserve Bank of New York, “Spring 2014 Small Busi-
ness Credit Survey” (2014), https://www.newyorkfed.org/
smallbusiness/Spring2014/index.html.
22. Tracy Lien, “Snap’s IPO Could Make Some Employees Mil-
lionaires While Others Are Left Out,” LA Times (February 28,
2017).
23. Jerry Jasinowski, “Reshoring Means More Jobs,” Huff-
ington Post (October 25, 2013), http://www.huffing-
tonp ost.com/j er r y-jasinowski/reshor ing_b_4162947.
html. See also Jennifer Goforth Gregory, “8 Custom-
ized Benefits to Keep Employees Happy,” American
Express Open Forum (October 22, 2012), https://www.
americanexpress.com/us/small-business/op enfor um/
articles/8-customized-benefits-to-keep-employees-happy/.
24. For information on the federal job classification system, go to
http//www.opm.gov.
25. Emin Kahya, “Revising the Metal Industry Job Evaluation Sys-
tem for Blue-Collar Jobs,” Compensation and Benefits Review
38, no. 6 (November–December 2006): 49.
26. “Performing Job Evaluations,” Society for Human Resource
Management (October 27, 2016).
27. Lance A. Berger and Dorothy R. Berger, The Compensation
Handbook: A State-of-the-Art Guide to Compensation Strategy
and Design, 5th ed. (New York: McGraw-Hill, 2015). See also
Robert L. Heneman, Peter V. LeBlanc, and Howard Risher,
“Work Valuation Addresses Shortcomings of Both Job Evalu-
ation and Market Pricing,” Compensation and Benefits Review
35, no. 1 (January–February 2003): 7–11.
28. Pawel Fiedor, “Job Evaluation for Knowledge-Based Orga-
nizations,” European Conference on Knowledge (September
2013): 860–867.
29. “The True Value of Salary Surveys,” Human Resource Perfor-
mance Solutions (March 2014), http://www.hrperformances-
olutions.net/files/hrperf/1033/file/whitepapers/03.2014%20
WhitepaperTrueValueofSalarySurveys .
30. The Bureau of Labor, http://www.bls.gov.
31. Nona Tobin, “Can Technology Ease the Pain of Salary Sur-
veys?” Public Personnel Management 31, no. 1 (Spring 2002):
65–76.
32. John H. Davis, Statistics for Compensation: A Practical Guide to
Compensation Analysis (Hoboken, NJ: Wiley, 2011). See also
Curt Finch, “How to Create an Effective Pay Structure,”
Employee Benefit Plan Review 61, no. 10 (April 2007): 26.
33. Organizations may have a compensation program that pays
a differential based on geographic location. See Thomas
J. Atchison, “Branch Office Salary Structure,” Compensa-
tion and Benefits Review 39, no. 3 (June 2007): 35; James R.
Guzak, Barbara Crandall, and Hoda Alavinejad. “Compen-
sation and Culture: A Configurational Fit Between Systems
89624_ch09_hr_318-355.indd 354 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
355Chapter 9 Managing Compensation
and Culture Types,” Southwest Academy of Management Pro-
ceedings (2017): 88–97, http://www.swamfbd.org/uploads/
SWAM_Proceedings_2017 #page588.
34. Mirta Diaz-Fernandez, Alvaro Lopez-Cabrales, and Ramon
Valle-Cabrera, “What Companies Pay For: The Strategic Role
of Employee Competencies,” European Journal of Interna-
tional Management 3, no. 4 (2009): 439–456.
35. PayScale,“The Advantages of Broadbanding” (April 28, 2011),
http://www.payscale.com/compensation-today/2011/04/
advantages-of-broadbanding.
36. Payscale.com (April 4, 2017), http://www.payscale.com/research/
US/Job5Preschool_Teacher%2C_(but_not_Special_Education)/
Hourly_Rate.
37. Stephen Bruce, “The 9 Steps to Solving Pay Compression,”
HR Daily Advisor (January 9, 2012), http://hrdailyadvisor.blr.
com/2012/01/09/the-9-steps-to-solving-pay-compression/.
38. “Child Labor Bulletin 101 WH-1330,” United States Depart-
ment of Labor. Wage and Hour Division (WHD) (April 4,
2017).
39. Mason Braswell, “Wells Fargo Advisors to Pay $35.5 Million
to Settle Race Discrimination Suit.” Advisor Hub (January 3,
2017), https://advisorhub.com/wells-fargo-advisors-pay-
35-5-million-settle-race-discrimination-suit/.
40. Petr Snapka and Andrea Copikova, “Balanced Scorecard and
Compensation,” International Conference on Business and
Economics Research 16 (2011), https://images.template.net/
wp-c ontent/uplo ads/2016/06/30090322/C ost-B as e d-
Performance-Scorecard .
89624_ch09_hr_318-355.indd 355 10/20/17 12:11 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
356
CHAPTER 10
Pay-for-Performance:
Incentive Rewards
Learning Outcomes
After studying this chapter, you should be able to
Implement a strategic incentive program.
Detect when and what types of individual
incentives are appropriate.
Differentiate how gains may be shared with
employees under different group incentive plans
like the Scanlon plan and improshare gainsharing
systems.
LO 1
LO 2
LO 3
Differentiate between profit sharing plans and
explain advantages and disadvantages of these
programs as an alternative to individual and group
incentive systems.
Understand how to apply different incentive sys-
tems designed for professionals and executives.
LO 4
LO 5
Fu
se
/G
et
ty
Im
ag
es
89624_ch10_hr_356-384.indd 356 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
357Chapter 10 Pay-for-Performance: Incentive Rewards
S
tudies show that pay-for-performance plans can increase job satisfaction, commit-
ment to the company, and trust in management—if handled correctly.1 The pro-
cess of (1) choosing the right incentive plans based on organizational objectives,
(2) setting up performance measures, and (3) administering those incentive plans may
seem a bit daunting—especially since so much can go wrong.
In this chapter, we will discuss incentive plans in terms of the objectives they hope
to achieve and the various factors that may affect their success. Because many organi-
zations have implemented broad-based incentive programs to differentiate employees
and their performance, for discussion purposes we have grouped incentive plans into
three broad categories: individual incentive plans, group incentive plans, and enterprise
incentive plans, as shown in Figure 10.1.2 At the end of the chapter, we also discuss some
special incentive plans for professional employees and executives.
10.1 Strategic Reasons for Incentive Plans
A major element of strategic compensation management is the use of incentive plans,
also called variable pay programs. Variable pay programs consist of bonuses, incentives,
or recognition for good work. They allow organizations to reward employees for contin-
ued contributions. More than 80 percent of companies globally are offering variable pay
programs. In fact, 2017 saw a bump in variable pay as many employers were using it to
compensate for low increases in fixed pay.3 Variable pay is more flexible than fixed pay
(salaries, hourly wages), as variable pay is attached to fixed costs that allow flexibility
to increase, decrease, or maintain future payments to employees as business conditions
warrant.4 Most HR managers see variable pay as strategic because it allows the orga-
nization to align its employees’ interests and outcomes with those of the organization.
However, an additional strategic component that HR managers seem to forget is
that variable pay can be used to exercise fairness and equity within the organization. As
variable pay
Tying pay to some
measure of individual,
group, or organizational
performance
Individual Group Enterprise
Piecework Team compensation Profit sharing
Standard hour plan Scanlon plan Stock options
Bonuses Improshare Employee stock ownership plans
(ESOPs)
Merit pay
Lump sum merit pay
Incentive awards
Sales incentives
Professional employee incen-
tive plans
Executive incentive plans
Types of Incentive PlansFigure 10.1
What do you think is
the most successful
characteristic of a suc-
cessful incentive plan?
LO 1
89624_ch10_hr_356-384.indd 357 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
358 Part 4 Implementing Compensation and Security
a result, variable pay not only motivates employees to do what the organization wants
them to do, it also ensures that employees feel the organization is fair and responsive to
their individual contributions.
For example, it has been said that “no good deed goes unpunished.” For employees
who make valuable contributions, this is sometimes not far from the truth. Professors
James Oldroyd and Shad Morris pointed out that those with “high potential” are more
likely to get burned out and leave their organization than their more average performing
peers. The reason? Feelings of pay inequity. Many high-performing employees feel that
because of their high performance they are asked to take on additional work and are
bombarded with overwhelming amounts of request for help without additional pay. As
a result, challenges meant to be energizing can feel like punishment for success if they
are not attached to additional rewards.5
One of the difficulties faced by companies during difficult times is that they ask every-
one to tighten their belts, yet high performers know their market worth and like to be
rewarded for it. Furthermore, even employees who are not high performers work harder
(and seem happier) when they work for a company that rewards people who deserve it.6
Incentive rewards are based entirely upon a pay-for-performance philosophy (see
Chapter 9). Incentive pay plans establish a performance “threshold” (a baseline per-
formance level) that an employee or group of employees must achieve to qualify for
incentive payments (see Figure 10.2).
Incentive plans create an operating environment that champions a philosophy of
shared commitment through the belief that every individual contributes to organiza-
tional performance and success.
10.1a Incentive Plans as Links to Organizational Objectives
Contemporary arguments for incentive plans focus on linking compensation rewards,
both individual and group, to organizational goals. Specific company goals or objectives
might be to lower labor costs, improve customer satisfaction, expand product markets,
or maintain high levels of productivity and quality. By meshing compensation and orga-
nizational objectives, managers believe that employees will assume “ownership” of their
jobs, thereby improving their effort and overall job performance. Incentive pay is highly
valued as a compensation strategy to attract and retain top-performing employees.7
Figure 10.3 summarizes the major advantages of incentive pay programs as noted by
researchers and HR professionals.
Performance
Basically, do your job…
better than your coworkers.
You + Pay-for-performance in a Nutshell
R
e
w
a
rd
s
Pay-for-Performance PhilosophyFigure 10.2
89624_ch10_hr_356-384.indd 358 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
359Chapter 10 Pay-for-Performance: Incentive Rewards
Do incentive plans work? The answer is both yes and no. Various studies, along
with reports from individual organizations, show a measurable relationship between
incentive plans and improved organizational performance.8 However, the degree
of success obtained depends on several factors including (1) identifying important
organizational metrics by which to measure employee performance, and (2) a cus-
tomized incentive plan which effectively measures employee output and rewards
exceptional employee performance.9 For example, President Trump has supported
policies that “financially reward employees who do a good job…” within the govern-
ment sector. The Department of Defense now requires better linking of performance
to rewards such as bonuses and promotions. As a result, the Department of Defense
is now more interested in aligning an individual’s work quality to organizational
objectives.10
Unfortunately, studies also show that variable pay plans may not achieve their
proposed objectives or lead to organizational improvements. First, incentive plans
sometimes fail to satisfy employee expectations for pay gains. Second, management
may have failed to give adequate attention to the design and implementation of the
plan, leaving employees confused about how incentive payments are calculated. Third,
employees may have little ability to affect performance standards. Furthermore, the
success of an incentive plan will depend on the environment that exists within an
organization. A plan is more likely to work in an organization where morale is high,
employees believe they are being treated fairly, and there is harmony between employ-
ees and management.11
10.1b Requirements for a Successful Incentive Plan
For an incentive plan to succeed, employees must believe in it. Employees must be able
to see a clear connection between the incentive payments they receive and their job per-
formance. This connection is more visible if there are objective quality or quantity stan-
dards by which they can judge their performance. Management should guard against
incentive payments being seen as an entitlement. Instead, these payments should be
Advantages of Incentive Pay ProgramsFigure 10.3
• Incentives focus employee efforts on specific performance targets. They provide real moti-
vation that produces important employee and organizational gains.
• Incentive payouts are variable costs linked to the achievement of results. Base salaries are
fixed costs largely unrelated to output.
• Incentive compensation is directly related to operating performance. If performance
objectives (quantity and/or quality) are met, incentives are paid. If objectives are not
achieved, incentives are withheld.
• Incentives foster teamwork and unit cohesiveness when payments to individuals are
based on team results.
• Incentives are a way to distribute success among those responsible for producing that
success.
• Incentives are a way to increase equity and justice in an organization.
• Incentives are a means to reward or attract top performers when salary budgets are low.
89624_ch10_hr_356-384.indd 359 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
360 Part 4 Implementing Compensation and Security
viewed as a reward that must be earned through effort. This perception can be strength-
ened if the incentive money is distributed to employees in a separate check. Compen-
sation specialist Joanne Sammer notes the following as characteristics of a successful
incentive plan12:
• Identify important organizational metrics that encourage employee behavior.
• Involve employees. Incentive programs should seem fair to employees.
• Find the right incentive payout. Payout formulas should be simple and
understandable.
• Establish a clear link between performance and payout.
10.2 Setting Performance Measures
As we discussed in Chapter 7 on “Appraising and Managing Performance,” measuring
and differentiating performance among employees is one of the most difficult tasks
you will face as a manager. This is especially the case when your assessments are used
to distribute rewards.13 You will need to be able to distinguish between individual
contributions and those made by a group. You will need to be able to avoid biases
based on who you like and dislike, different personalities, and political agendas. At
the group level, you will need to distinguish how much one group contributed over
another group, even if the work they do is highly interdependent.14 In sum, measur-
ing individual, group, and enterprise-level contributions can be extremely complex.
Measuring in a way that makes employees feel they are being treated unfairly can lead
to serious problems. See Figure 10.4 for details on the do’s and don’ts of measuring
performance for incentives.
If done correctly, however, measurement can communicate the importance of
established organizational goals. For example, if the organization desires to be a
Measurement DOs and DON’TsFigure 10.4
Individual Pay Group Pay Enterprise Pay
Do • measure things that are quanti-
tative and simple
• measure work that is indepen-
dent of others’ contribution
• measure in a way that shows a
relationship between work and
performance
• measure when work is group
interdependent
• measure in a way that shows a
relationship between work and
performance
• measure when work is organiza-
tionally interdependent
• measure results that employees
can control
• measure in a way that shows a
relationship between work and
performance
Don’t • measure based on who you like
and dislike
• measure based on personalities
• measure based on political
preferences
• measure without considering
contributions of peers
• measure without considering
contributions of other teams
• measure unless there is a mecha-
nism for teams to discipline their
“slackers”
• measure unless employees can
see how their work actually con-
tributes to the enterprise
• measure without considering
effects of the environment (e.g.,
economic downturns)
89624_ch10_hr_356-384.indd 360 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Setting Performance Measures—The Keys
Establishing meaningful performance measures is one of
the important and difficult challenges facing management
today. Before managers or supervisors develop and imple-
ment organizational measures, they should consider the fol-
lowing guidelines:
�� Performance measures—at all organizational levels—
must be consistent with the strategic goals of the organi-
zation. Avoid nonrelevant measures or metrics that are
not closely linked to the business or what employees
do in their work.
�� Define the intent of performance measures and
champion the cause relentlessly. Demonstrate that
performance measures are, in fact, good business
management and hold managers and employees
accountable for their success.
�� Involve employees. A critical step in any measurement
program is the development of an employee involve-
ment strategy outlining the nature of employee
participation, implementation, and ongoing manage-
ment of the performance management program. Seg-
ment the workforce based on the nature of the work
and the potential for impact. Consider which metrics
require customization. Acceptance of a performance
measurement program is heightened when employ-
ees “buy into” the process.
�� Consider the organization’s culture and workforce demo-
graphics when designing performance measures. For
example, organizations with a more traditional hierar-
chical structure may need more time to introduce per-
formance metrics compared to flatter organizations,
which are more fluid and less steeped in control-and-
command characteristics.
�� Widely communicate the importance of performance
measures. Performance messages are the principles
and guidelines that communicate to employees what
the required performance levels are and why the orga-
nization needs to achieve those levels of success.
Highlights in HRM1
leader in quality, then performance indexes may focus on customer satisfaction,
timeliness, or being error free. If being a low-priced producer is the goal, then
emphasis should be on cost reduction or increased productivity with lower accept-
able levels of quality. While a variety of performance options are available, most
focus on quality, cost control, or productivity. Highlights in HRM 1 provides five
proven guidelines on how to establish and maintain an effective performance mea-
surement program.
10.3 Administering Incentive Plans
While incentive plans based on productivity can reduce direct labor costs, to achieve
their full benefit they must be carefully thought out, implemented, and maintained. A
cardinal rule is that thorough planning must be combined with a “proceed with caution”
approach. Three of the more important points are:
1. Allowing incentive payments to become pay guarantees defeats the motivational
intent of the incentive. Poor performance must go unrewarded.
2. Annual salary budgets must be large enough to reward and reinforce exceptional
performance.
3. The overhead costs associated with plan implementation and administration must
be determined.
361
89624_ch10_hr_356-384.indd 361 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
362 Part 4 Implementing Compensation and Security
10.4 Individual Incentive Plans
One word, flexibility, describes the design of individual incentive plans.15 For example,
technology, job tasks and duties, and organizational goals (such as being a low-cost
producer) impact the organization’s choice of incentive pay programs. Incentive pay-
ments may be determined by the number of units produced, achievement of specific
performance goals, or productivity improvements in the organization as a whole.
10.4a Piecework
One of the oldest incentive plans is based on piecework. Under straight piecework,
employees receive a certain rate for each unit produced. Their compensation is deter-
mined by the number of units they produce during a pay period. At Steelcase, an office
furniture maker, employees can earn more than their base pay, often as much as 35
percent more, through piecework for each slab of metal they cut or chair they uphol-
ster. Under a differential piece rate, employees whose production exceeds the standard
output receive a higher rate for all of their work than the rate paid to those who do not
exceed the standard.
The piecework system is more likely to succeed when units of output can be mea-
sured readily, the quality of the product is less critical, the job is fairly standardized, and
a constant flow of work can be maintained.
straight piecework
An incentive plan under
which employees receive
a certain rate for each
unit produced
differential piece rate
A compensation rate
under which employ-
ees whose production
exceeds the standard
amount of output
receive a higher rate for
all of their work than
the rate paid to those
who do not exceed the
standard amount
For small businesses, incentive plans can be both a bless-
ing and a curse. They provide a great way to align the inter-
ests of the employees directly with those of the owner, but
managing them can also be time consuming and lead to
feelings of inequity.
While the potential pitfalls of incentive systems in
smalls businesses are great, the potential benefits are
worth the risk. The key is to understand these risks and
then to manage them. Below are some things small busi-
nesses can do to help administer incentive plans:
1. Keep incentive plans simple. The easier it is for
employees to know how they can be rewarded,
the more likely they will buy into the incentive
system.
2. Treat the plan as a work in process. Small business
owners need to be open with their employees
by communicating that they are trying to reward
employees in a fair and equitable manner.
3. Set a minimum requirement around what consti-
tutes average performance. Employees need to
Small Business Application
know that it is only after the employee exceeds
general expectations that the additional rewards
begin to kick in.
4. Decide when the rewards will be provided to the
employee. The closer you can tie incentives to per-
formance, the more likely you will be able to sustain
that behavior.
5. Separate rewards from employees’ regular pay.
When employees can see that they are actually
being given something extra based on their per-
formance, they make a clearer distinction between
showing up for work and actually contributing. It is
also important to make sure that these bonuses are
known by others in the organization, as doing so
acts as a reward in and of itself.
6. Refine your measures and make sure employees
are happy with them. Communicating with your
employees is key to making sure incentive plans do
not end up being scrapped the month after they are
administered.
Administering Incentive Plans for Small Businesses
If Google paid its pro-
grammers based on
how many programs
they wrote per day,
what would happen?
LO 2
89624_ch10_hr_356-384.indd 362 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
363Chapter 10 Pay-for-Performance: Incentive Rewards
Computing the Piece Rate
The incentive rates must be based on hourly wage rates that would otherwise be paid
for the type of work being performed. For example, the standard time for producing
one unit of work in a job paying $12.75 per hour was set at 12 minutes. The piece rate
would be $2.55 per unit, computed as follows:
=
60 (minutes per hour)
12(standard time per hour)
5 units per hour
=
$12.75(hourly rate)
5(units per hour)
2.55 per unit
Piecework: The Drawbacks
Despite their obvious advantages—including their direct tie to a pay-for-performance
philosophy—piecework systems have a number of disadvantages that offset their useful-
ness. One of the most significant weaknesses of piecework, as well as of other incentive
plans based on individual effort, is that it may not always be an effective motivator. If
employees believe that an increase in their output will provoke disapproval from fellow
workers (often referred to as “rate busting”), they may avoid exerting maximum effort
because their desire for peer approval outweighs their desire for more money. Also, jobs
in which individual contributions are difficult to distinguish or measure or in which
the work is mechanized to the point that the employee exercises very little control over
output may be unsuited to piecework. Piecework may also be inappropriate in the fol-
lowing situations:
• When quality is more important than quantity.
• When technology changes are frequent.
• When productivity standards on which piecework must be based are difficult to
develop.
Importantly, piecework incentive systems can work against an organizational cul-
ture promoting workforce cooperation, creativity, or problem-solving because each of
these goals can infringe on an employee’s time and productivity and, therefore, total
pay earned.
10.4b Standard Hour Plan
Another common incentive technique is the standard hour plan, which sets incentive
rates on the basis of a predetermined “standard time” for completing a job. If employees
finish the work in less than the expected time, their pay is still based on the standard
time for the job multiplied by their hourly rate. However, while standard hour plans can
motivate employees to produce more, employers must ensure that equipment mainte-
nance and product quality do not suffer as employees strive to do their work faster to
earn additional income.
10.4c Bonuses
A bonus is an incentive payment given to employees beyond their normal base wage.
It is frequently given at the end of the year and does not become part of base pay.
standard hour plan
An incentive plan that
sets rates based on the
completion of a job in a
predetermined standard
time
bonus
An incentive payment
that is supplemental to
the base wage
89624_ch10_hr_356-384.indd 363 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
364 Part 4 Implementing Compensation and Security
Bonuses can be a powerful tool to increase future performance. For instance, if
the link between pay and performance is clearly established, bonuses can be one of the
most effective tools to increase future performance. For example, a study on bonuses
versus actual pay raises showed that improving one’s pay through merit increases by 1
percent would increase future performance by 2 percent. However, if the same money
was applied to pay-for-performance bonuses, the employee’s performance increases by
15 percent. Indeed, providing a strong pay-for-performance link for bonuses can dra-
matically improve employee productivity.16
A great example of a company that uses bonuses effectively is One Week Bath
(https://www.oneweekbath.com/). One Week Bath has a weekly spreadsheet showing
the up-to-date profits an employee is making for the company. Employees can see the
bonus they have earned so far and view a forecasted profit for the company and personal
bonus for the remainder of the year. The bonuses are effective because they’re objective,
not dependent on some manager’s performance assessment. They are also transparent—
people know in advance what they will receive and how big it will be.17
When some special employee contribution is to be rewarded, a spot bonus is used.
A spot bonus, as the name implies, is given “on the spot,” normally for some employee’s
effort not directly tied to an established performance standard. Lauren Sejen, compensa-
tion expert with Watson Wyatt Worldwide, notes, “I think spot bonuses are one of the
most underutilized forms of rewards, given how well employees respond to them. These
plans make perfect sense.”18
10.4d Merit Pay
A merit pay program (merit raise) links an increase in base pay to how successfully an
employee performs his or her job. Unlike bonuses, once merit increases are given they
become part of base pay, regardless of future performance. Merit raises can serve to
motivate if employees perceive the raise to be related to the performance required to
earn it.19 Figure 10.5 shows that as incentive plans become too complex, they can act
as a disincentive.
However, research shows that a merit increase in the range of 7 to 9 percent is
necessary to serve as a pay motivator.20 Employees may welcome lower percentage
amounts, but low salary increases may not lead to significantly greater effort on the
spot bonus
An unplanned bonus
given for employee’s
effort unrelated to an
established performance
measure
The more you base people’s pay on merit, the better they perform. However, as incentive plans
become more complex and are less associated with daily performance, they tend to decrease
employee motivation.
Incentive plans
Reality
Expectations
M
o
ti
va
ti
o
n
Merit PayFigure 10.5
89624_ch10_hr_356-384.indd 364 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
365Chapter 10 Pay-for-Performance: Incentive Rewards
part of employees to drive business results. Consequently, with low salary budgets (see
Chapter 9), organizations wishing to reward top performers will be required to dis-
tribute a large portion of the compensation budget to these individuals.21 A meaning-
ful merit increase will catch the attention of top performers while sending a signal to
poor-performing employees. A strategic compensation policy must differentiate between
outstanding and good or average performance.
Problems with Merit Raises
Merit raises may not always achieve their intended purpose. As CEO of BetterWorks,
Kris Duggan, stated: “It doesn’t make sense to only give employees one numeric, formal
review. Imagine if your Fitbit gave you your step count at the end of each year. It’d have
absolutely no impact on the way you work. Managers should be reviewing employees’
work at least quarterly and convening to discuss progress frequently, in some cases
weekly or monthly.”22
Compensation specialists recognize the following problems with merit pay plans:
1. Money available for merit increases may be inadequate to satisfactorily raise all
employees’ base pay.
2. Managers may have no guidance in how to define and measure performance; there
may be vagueness regarding merit award criteria.
3. Employees may not believe that their compensation is tied to effort and perfor-
mance; they may be unable to differentiate between merit pay and other types of
pay increases.
4. Employees and their managers may hold different views of the factors that contrib-
ute to job success.
5. Merit pay plans may create feelings of pay inequity.23
While there are no easy solutions to these problems, organizations using a true
merit pay plan often base the percentage pay raise on merit guidelines tied to perfor-
mance appraisals. For example, a certain pay increase, such as “3 percent,” will be tied
to a certain performance evaluation, such as “above average.” The percentages may
change each year, depending on various internal or external concerns such as profit
levels or national economic conditions as indicated by changes in the consumer price
index. To prevent all employees from being rated outstanding or above average, man-
agers may be required to distribute the performance rating according to some prees-
tablished formula (such as only 10 percent can be rated outstanding). Additionally,
when setting merit percentage guidelines, organizations should consider individual
performance along with such factors as training, experience, and current earnings.
10.4e Incentive Awards and Recognition
Incentive awards and employee recognition are an important part of an employer’s pay-
for-performance compensation strategy. In 2011, a study by the American Psychological
Association found that 43 percent of employees feel they receive inadequate nonmonetary
awards and recognition for their contributions at work. In fact, almost a third (32 percent) of
employees indicated that they intended to seek employment elsewhere within the next year.24
For example, if you have worked in a restaurant as a server you will know that a
little recognition goes a long way. For example, a popular app used to recognize servers
for upselling is called “IncentivizeMe.”
merit guidelines
Guidelines for award-
ing merit raises that are
tied to performance
objectives
89624_ch10_hr_356-384.indd 365 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
366 Part 4 Implementing Compensation and Security
IncentivizeMe gamifies the sometimes daunt-
ing task of upselling food. Employees can choose to
compete with one another to see who can upsell the
most. This app provides performance-based rankings
aimed at normalizing sections worked and different
shifts, so that employees are judged on their upselling
rather than their total sales volume. This app has been
especially effective for millennial workers who see
fairness in ratings as key to their motivation.25
Awards are used to recognize productivity gains,
special contributions or achievements, and service to
the organization. Popular noncash incentive awards
include merchandise, personalized gifts, theater or
sports tickets, vacations, dining out, gift certificates
or gift cards, and personalized clothing. Employers
should take care to tie awards to performance and
deliver awards in a timely, sincere, public, and specific
way. Most importantly, noncash incentive awards
should support business goals and objectives.
A great example of a company good at offering
noncash incentives is Atlassian. Atlassian is a soft-
ware company based in Sydney, Australia. Atlassian
focuses on making products for developers and proj-
ect managers. However, Atlassian does something differently. Every quarter, Atlassian
gives its employees 24 hours to innovate however they want. This program is called a
ShipIt Day.26
Greg Boswell, a strategic business partner and “appreciatologist” at O. C. Tanner,
notes, “Employers are now thinking of awards and employee recognition more strategi-
cally with programs closely aligned to their business goals”27 (see Figure 10.6). For exam-
ple, if quality improvement is a business goal, then recognition needs to be tied to those
behaviors that further the achievement of quality. Highlights in HRM 2 provides sug-
gestions for noncash incentive awards based on the generational grouping of employees.
IncentivizeMe app
provides performance-
based rankings and
built-in contests to
show how servers are
doing at upselling
rather than just com-
paring number of sales
they have.
In
ce
nt
iv
iz
eM
e.
co
m
Incentives
Find this balance and you will solve
world hunger… at the very least,
increase company pro�ts.
Organizational
objectives
Employee incentives should align with organizational objectivesFigure 10.6
89624_ch10_hr_356-384.indd 366 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Lessons Learned: Designing Effective Team Incentives
Will your team incentive program be successful? While there
are no exact keys to success, team compensation specialists
cite the following as important components of a meaningful
team incentive plan.
�� Are organizational members—employees and
managers—predisposed to a team incentive
reward system? Is there a cultural readiness for
team compensation? If change is indicated, what
information needs to be given to all organizational
employees?
�� Enlist total employee and managerial support for the
incentive effort. While top management support is
critical, without the encouragement of employees
and middle- and lower-level managers (those directly
involved in the program implementation), team incen-
tive programs invariably fail.
�� When developing new programs, include repre-
sentatives from all groups affected by the incentive
effort—labor, management, employees. Inclusion,
not exclusion, serves to build trust and understanding
of the program’s intent, and its overall importance to
organizational success.
�� Establish effective, fair, and precise measurement stan-
dards. Selected performance measures should be key
indicators of organizational success. Do not attempt
to measure everything. Employees should be able to
directly influence the performance measures selected.
Furthermore, performance measures should be challeng-
ing but realistic and obtainable. Standards must encour-
age increased effort without becoming entitlements.
�� Incentive payout formulas must be seen as fair, be
easy for employees to calculate, offer payouts on
a frequent basis, and be large enough to encour-
age future employee effort. The goal is to create a
pay-for-performance environment. When standards
are not met, explain why the reward was not earned.
�� Determine how incentive rewards will be distributed.
Will team members receive equal dollar awards, or will
team members receive differential payments based on
such factors as seniority, skill levels, rates of pay, mem-
ber contributions, and so forth?
�� Communicate, communicate, communicate. Constantly
champion the benefits of the incentive awards to employ-
ees and their contribution to organizational success.
Highlights in HRM2
Nonmonetary rewards
let employees know
they are valued, which
is why more and more
companies are using
incentives like these
to recognize high
performance.
©
Ca
ia
im
ag
e/
Pa
ul
B
ra
db
ur
y/
G
et
ty
Im
ag
es
367
89624_ch10_hr_356-384.indd 367 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
368 Part 4 Implementing Compensation and Security
10.4f Sales Incentives
The enthusiasm and drive required in most types of sales work demand that sales
employees be highly motivated. Incentive plans must provide a source of motivation
that will elicit cooperation and trust.
Unique Needs of Sales Incentive Plans
Incentive systems for salespeople are complicated by the wide differences in the types
of sales jobs. These range from department store clerks who ring up customer pur-
chases to industrial salespeople at McGraw-Edison who provide consultation and other
highly technical services. Salespeople’s performance may be measured by the dollar vol-
ume of their sales and by their ability to establish new accounts. Other measures are the
ability to promote new products or services and to provide various forms of customer
service and assistance that do not produce immediate sales revenues.28 Performance
standards for sales employees are difficult to develop, but if done right can motivate
employees to improve performance.
Gamification is one way to provide a fun way to motivate sales teams. Around
50 percent of sales organizations run sales competitions multiple times throughout the
year.29 For example, when companies use games to have employees and teams compete
with one another or even teams outside of the office, they tend to see improvements in
performance. According to one study, 71 percent of companies who use gamification
for their sales associates see anywhere from 11 to 50 percent increases in measured sales
performance.30
But successful gamification of sales teams is much more than providing simple
contests. It consists of doing these six things well:
1. Reward behaviors immediately. For example, create an immediate contest
between two sales members to see who can make a sale within the next 20 min-
utes. Immediately provide a $25 Amazon gift card to the person who wins. The
idea is to reward behavior immediately after it is performed.
2. Reward behaviors consistently. Sales reps are enthusiastic about competitions that
align with their goals and that set challenging but realistic benchmarks. Consistency
changes gamification from gimmicky, one-off events to a strategic part of team
culture.
3. Reward the correct behaviors. Sometimes sales contests can reinforce the wrong
behaviors, like not helping colleagues with their own sales. Sometimes you can
create a contest within a team for highest number of sales assists. For example,
John Stockton, former Utah Jazz player, is still remembered for having the highest
number of point assists in National Basketball League history.31
4. Use data-driven gamification. Knowing when employees are most likely to suc-
ceed or when lulls may occur in sales can help you strategically start a game or
contest between teams when the time is right. Maybe you have a slow hour at 4
p.m. before everyone is ready to go home. Use this time to start a sales competition
between teams to boost sales.
5. Use team games. When you have one team competing against another team or
office it helps drive motivation through camaraderie. Reps work hard not to let their
teammates down and feel motivated by a cause greater than themselves.
6. Use public recognition more often than money. Sales reps are more motivated by
public recognition than they are by prizes and money. As a result, some companies
89624_ch10_hr_356-384.indd 368 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
369Chapter 10 Pay-for-Performance: Incentive Rewards
communicate game outcomes via email and “cc” the boss as well. This may even
lead to the boss reaching out to congratulate the employee in a public setting—
something that drives employee loyalty.32
Types of Sales Incentive Plans
Compensation plans for sales employees may consist of a straight salary plan, a
straight commission plan, a combination salary and commission plan, or a sales plus
bonus plan.33 A straight salary plan permits salespeople to be paid for performing
various duties not reflected immediately in their sales volume. It enables them to
devote more time to providing services and building up the goodwill of customers
without jeopardizing their income. The principal limitation of the straight salary plan
is that it may not motivate salespeople to exert sufficient effort in maximizing their
sales volume.
On the other hand, the straight commission plan, based on a percentage of sales,
provides maximum incentive and is easy to compute and understand. For example,
total cash compensation might equal total sales volume times some percentage of total
sales, perhaps 2 percent. Straight commission plans encourage aggressive selling, which
might be needed in highly competitive industries. Under a straight commission plan,
salespeople may be allowed a salary draw. A draw is a cash advance that must be paid
back as commissions are earned.34
However, the straight commission plan is limited by the following disadvantages:
1. Salespeople will stress high-priced products.
2. Customer service after the sale is likely to be neglected.
3. Earnings tend to fluctuate widely between good and poor periods of business, and
turnover of trained sales employees tends to increase in poor periods.
4. Salespeople are tempted to grant price concessions.
The combined salary and commission plan is the most widely used sales incen-
tive program. For example, the most common pay mix (see “pay mix” in Chapter 9) for
salespersons responsible for new accounts is 50 percent base pay and 50 percent variable
pay. For salespersons servicing existing accounts, the pay distribution will lean more
toward base pay and less toward commission. The ratio of base salary to commission
can be set to fit organizational objectives.
Another type of sales incentive plan is a salary plus bonus plan, where the payout
can be paid on a monthly, quarterly, or yearly schedule contingent based upon the
salesperson achieving targeted sales goals such as number of sales calls made, account
servicing, or quality of sales.
10.5 Group Incentive Plans
The emphasis on cost reduction and productivity has led many organizations to
implement a variety of group incentive plans. Group plans enable employees to
share in the benefits of improved efficiency realized by major organizational units
or various individual work teams. These plans encourage a cooperative—rather than
individualistic—spirit among all employees and reward them for their total contribu-
tion to the organization.
straight salary plan
A compensation plan
that permits salespeople
to be paid for perform-
ing various duties that
are not reflected imme-
diately in their sales
volume
straight commission
plan
A compensation plan
based on a percentage
of sales
combined salary and
commission plan
A compensation plan
that includes a straight
salary and a commission
salary plus bonus plan
A compensation plan
that pays a salary plus
a bonus achieved by
reaching targeted sales
goals
Is there ever a time you
would prefer to be paid
based on how your
team performs versus
how you perform?
LO 3
89624_ch10_hr_356-384.indd 369 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
370 Part 4 Implementing Compensation and Security
10.5a Team Compensation
The team incentive plan rewards team members with an incentive when agreed-on
performance standards are met or exceeded. Team incentives seek to establish a psy-
chological climate that fosters team member cooperation and a collective desire to fulfill
organizational goals and objectives.
One catch with setting team compensation is that not all teams are alike (see
Chapter 4). For example, cross-functional teams, self-directed teams, and task-force
teams make it impossible to develop one consistent type of team incentive plan. With
a variety of teams, managers find it difficult to adopt uniform measurement standards
or payout formulas for team pay.35
When team compensation is decided upon, organizations typically use the
three-step approach to establishing team incentive payments. First, they set per-
formance measures upon which incentive payments are based. Improvements in
efficiency, product quality, or reduction in materials or labor costs are common
benchmark criteria. For example, if labor costs for a team represent 30 percent of
the organization’s sales dollars and the organization pays a bonus for labor cost sav-
ings, then whenever team labor costs are less than 30 percent of sales dollars, those
savings are paid as an incentive bonus to team members. Second, the size of the
incentive bonus must be determined. At Thrivent Financial for Lutherans, health
insurance underwriters can receive team incentive bonuses of up to 10 percent of
base salary. However, the exact level of incentive pay depends on overall team per-
formance and the company’s performance over a year. Third, a payout formula is
established and fully explained to employees. The team bonus may be distributed
to employees equally, in proportion to their base pay or on the basis of their relative
contribution to the team.
The following are some noted problems associated with team compensation:
• Individual team members may perceive that “their” efforts contribute little to team
success or to the attainment of the incentive reward.
• Team members may be afraid that one individual may make the others look bad,
or that one individual may put in less effort than others but share equally in team
rewards—the “free-rider” effect.
• Complex payout formulas or insufficient payout rewards.
10.5b Gainsharing Incentive Plans
Gainsharing plans are organizational programs designed to increase productivity or
decrease labor costs and share monetary gains with employees. These plans are based
on a mathematical formula that compares a baseline of performance with actual produc-
tivity during a given period. When productivity exceeds the baseline, an agreed-upon
amount of savings is shared with employees. Inherent in gainsharing is the idea that
involved employees will improve productivity through more effective use of organiza-
tional resources.
There are many variations of gainsharing plans, such as the Scanlon plan and impro-
share plans. The Scanlon plan emphasizes participative management and encourages
cost reductions by sharing with employees any savings resulting from those reductions.
Improshare plans are based on the number of finished goods that the employee work
teams complete in an established period.
team incentive plan
A compensation plan in
which all team members
receive an incentive
bonus payment when
production or service
standards are met or
exceeded
gainsharing plans
Programs under which
both employees and
the organization share
financial gains accord-
ing to a predetermined
formula that reflects
improved productivity
and profitability
89624_ch10_hr_356-384.indd 370 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
371Chapter 10 Pay-for-Performance: Incentive Rewards
The Scanlon Plan
The Scanlon plan is a specific type of gainsharing plan. The philosophy behind the
Scanlon plan is that employees should offer ideas and suggestions to improve productiv-
ity and, in turn, be rewarded for their constructive efforts. Improvement or gains largely
come from “working smarter, not harder.” Figure 10.7 illustrates the Scanlon plan sug-
gestion process, including the duties and responsibilities of two important groups—the
shop and the screening committees.
Financial incentives under the Scanlon plan are ordinarily offered to all employees
(a significant feature of the plan) on the basis of an established formula. This formula
is based on increases in employee productivity as determined by a norm that has been
established for labor costs.
Improshare
Improshare—improved productivity through sharing—is another gainsharing program.
Individual production bonuses are typically based on how much an employee produces
above some standard amount, but improshare bonuses are based on the overall pro-
ductivity of the work team. Improshare output is measured by the number of finished
products that a work team produces in a given period. Both production (direct) employ-
ees and nonproduction (indirect) employees are included in the determination of the
bonus.36
scanlon plan
A bonus incentive
plan using employee
and management
committees to gain
cost-reduction
improvements
improshare
A gainsharing program
under which bonuses
are based on the overall
productivity of the work
team
Feedback
Feedback
Feedback
Problem recognition
Individual employee
suggestion
Production
“Shop” committees
Organization
“Screening” committee
Management
Measurement/evaluation
PURPOSE
• Evaluate suggestions affecting
several departments
• Review performance to
determine bonus or deficit
• Oversee entire program
• Keep top management informed
PURPOSE
• Solicit suggestions
• Follow up on suggestions
• Discuss suggestions with
employees
• Implement suggestions
Scanlon Plan Suggestion ProcessFigure 10.7
89624_ch10_hr_356-384.indd 371 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
372 Part 4 Implementing Compensation and Security
The bonus is based on productivity gains that result from reducing the time it
takes to produce a finished product. The employees and the company each receive
payment for 50 percent of the improvement. Since a cooperative environment benefits
all, improshare promotes increased interaction and support between employees and
management.
Lessons from the Scanlon Plan and Improshare
Perhaps the most important lesson to be learned from the Scanlon plan and improshare—
or any gainsharing program—is that management expecting to gain the cooperation of its
employees in improving efficiency must permit them to become involved psychologically
as well as financially in the organization. If employees are to contribute maximum effort,
they must have a feeling of involvement and identification with their organization, which
does not come out of the traditional manager-subordinate relationship.
10.6 Enterprise Incentive Plans
Enterprise incentive plans differ from individual and group incentive plans in that
all organizational members participate in the plan’s compensation payout. Enterprise
incentive plans reward employees on the basis of the success of the organization over
an extended time period—normally a year, but the period can be longer. Enterprise
incentive plans seek to create a “culture of ownership” by fostering a philosophy of
cooperation and teamwork among all organizational members. Common enterprise
incentive plans include profit sharing, stock options, and employee stock ownership
plans (ESOPs).
10.6a Profit Sharing Plans
Profit sharing is any procedure by which an employer pays, or makes available to all
regular employees, special current or deferred sums based on the organization’s profits.
As defined here, profit sharing represents cash payments made to eligible employees at
designated time periods, as distinct from profit sharing in the form of contributions to
employee pension funds.
Profit sharing plans are intended to give employees the opportunity to increase
their earnings by contributing to the growth of their organization’s profits. These con-
tributions may be directed toward improving product quality, reducing operating costs,
improving work methods, and building goodwill rather than just increasing rates of
production.
A popular example of a highly successful profit sharing plan is the one in use at
Lincoln Electric. This plan was started in 1934 by J. F. Lincoln, president of the com-
pany. Each year the company distributes a large percentage of its profits to employees in
accordance with their salary level and merit ratings. It is not uncommon for employees’
annual bonuses to exceed 50 percent of annual wages. The success of Lincoln Electric’s
incentive system depends on a high level of contribution by each employee. Unquestion-
ably there is a high degree of respect among employees and management for Lincoln’s
organizational goals and for the profit sharing program. As a result, Lincoln Electric
has been profitable every year since 1934, and as of 2017 has had 84 years of paying
employees profit sharing bonuses.37
employee stock owner-
ship plans (ESOPs)
Stock plans in which an
organization contributes
shares of its stock to an
established trust for the
purpose of stock pur-
chases by its employees
profit sharing
Profit sharing is any
procedure by which an
employer pays, or makes
available to all regular
employees, special
current or deferred sums
based on the organiza-
tion’s profits
Do you believe that
individual employees
can actually impact a
firm’s performance?
LO 4
89624_ch10_hr_356-384.indd 372 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
373Chapter 10 Pay-for-Performance: Incentive Rewards
Variations in Profit Sharing Plans
Profit sharing plans differ in the proportion of profits shared with employees and in
the distribution and form of payment. The amount shared with employees may range
from 5 to 50 percent of the net profit. In most plans, however, about 20 to 25 percent of
the net profit is shared. Profit distributions may be made to all employees on an equal
basis, or they may be based on regular salaries or some formula that takes into account
seniority and/or merit. The payments may be disbursed in cash, deferred, or made on
the basis of combining the two forms of payments.
Weaknesses of Profit Sharing Plans
In spite of their potential advantages, profit sharing plans are also prone to certain weak-
nesses. The profits shared with employees may be the result of inventory speculation,
climatic factors, economic conditions, national emergencies, or other factors over which
employees have no control. Conversely, losses may occur during years when employee
contributions have been at a maximum. The fact that profit sharing payments are made
only once a year or deferred until retirement may reduce their motivational value. If a
plan fails to pay off for several years in a row, this can have an adverse effect on produc-
tivity and employee morale.
10.6b Stock Options
What do the following companies—Apple, Google, Coca-Cola, Starbucks, Nike, Quaker
Oats, and Sara Lee—have in common? The answer: Each of these diverse organizations
offers a stock option program to its employees.38 Stock option plans grant to employees
the right to purchase a specific number of shares of the company’s stock at a guaranteed
price (the option price) during a designated time period.
Organizations that offer stock option programs to employees do so with the belief
that there is some incentive value to the systems. By allowing employees to purchase
stock, the organization hopes they will increase their productivity, assume a partnership
role in the organization, and thus cause the stock price to rise.39 Highlights in HRM 3
explain how stock option plans work.
Unfortunately, in the wake of various corporate scandals, employee stock option
plans have come under attack from stockholder groups, government officials, and the
general public. Criticism largely focuses on the extravagance of executive stock option
plans and dubious corporate accounting procedures.40 Nevertheless, despite these faults,
stock options continue to be a popular and efficient way to pay for the performance of
employees and managers. When stock prices rise, employee stock plans can be finan-
cially rewarding to employees.
10.6c Employee Stock Ownership Plans
According to the National Center for Employee Ownership, in 2016 nearly 7,000 orga-
nizations have ESOPs for their employees.41 Columbia Forest Products, Hy-Vee, Publix
Super Markets, Herff Jones, The Tribune Co., U.S. Sugar, The Bureau of National Affairs,
and Scheels All Sports are organizations with established ESOPs. W. L. Gore and Associ-
ates also decided that employee stock ownership was an effective and innovative way to
give employees a share of the company’s success.
89624_ch10_hr_356-384.indd 373 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
An ESOP is an employer established trust that qualifies as a tax-exempt employee
trust under Section 401(a) of the Internal Revenue Code. Under an ESOP employees
do not actually buy shares. Instead, the company contributes its own shares to the
plan, contributes cash to buy its own stock (often from an existing owner), or, most
commonly, has the plan borrow money to buy stock, with the company repaying
the loan. All of these uses have significant tax benefits for the company, the employ-
ees, and the sellers. The ESOP holds the stock for employees, and they are routinely
informed of the value of their accounts. Stock allocations can be based on employee
wages or seniority. When employees leave the organization or retire, they can sell
their stock back to the organization, or they can sell it on the open market if it is
traded publicly.
Advantages of Employee Stock Ownership Plans
Encouraged by favorable federal income tax provisions, employers use ESOPs to pro-
vide retirement benefits for their employees. Favorable tax incentives permit a portion
of earnings to be excluded from taxation if that portion is assigned to employees in the
form of shares of stock. Employers can therefore provide retirement benefits for their
employees at relatively low cost because stock contributions are in effect subsidized by
the federal government. ESOPs can also increase employees’ pride of ownership in the
organization, providing an incentive for them to increase productivity and help the
organization prosper and grow.
Problems with Employee Stock Ownership Plans
Generally, ESOPs are more likely to serve their intended purposes in publicly held
companies than in privately held ones. A major problem with the privately held
company is its potential inability to pay back the stock of employees when they
retire. These employees do not have the alternative of disposing of their stock on
the open market. Thus, when large organizations suffer financial difficulties and
the value of the companies’ stocks falls, so does the value of the employees’ retire-
ment plan.
How Stock Option Plans Work
Here is an example of a typical employee stock option
plan. An employee is granted the option to purchase 1,000
shares of the company’s stock at the current market price of
$5 per share (the “grant” price). The employee can exercise
the option at $5 per share—typically the exercise price will
be equal to the price when the options are granted. Plans
allow employees to exercise their options after a certain
number of years or when the company’s stock reaches a cer-
tain price. If the price of the stock increases to $20 per share,
for example, the employee may exercise his or her options
to buy 1,000 shares at $5 per share and then sell the stock at
the current market price of $20 per share.
Companies sometimes revalue the price at which the
options can be exercised. This may happen, for example,
when a company’s stock price has fallen below the original
exercise price. Companies revalue the exercise price as a way
to retain their employees.
Source: Adapted from “Employee Stock Options Fact Sheet, National
Center for Employee Ownership,” http://www.nceo.org/.
Highlights in HRM3
374
89624_ch10_hr_356-384.indd 374 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
375Chapter 10 Pay-for-Performance: Incentive Rewards
Other problems with ESOPs include the following:
• The more retirement income comes from these plans, the more dependent a pen-
sioner becomes on the price of company stock. Future retirees are vulnerable to
stock market fluctuations as well as to management mistakes.
• Unlike traditional pension plans, ESOP contributions are not guaranteed by the feder-
ally established Pension Benefit Guaranty Corporation (see Chapter 11), a major draw-
back to employees should their employer face serious financial setbacks or closure.
10.7 Incentives for Professional Employees
When it comes to individual, team, and enterprise incentives, professional employees—
engineers, scientists, and attorneys, for example—are no different than anyone else. They
want to be rewarded for good work. However, where many companies often mess up is by
applying the same individual and team-based pay-for-performance principles used in tradi-
tional jobs (e.g., manufacturing, clerical). For example, many companies offer cash bonuses
to professionals who complete projects on or before deadline dates. They also pay individu-
als for new patents, publications, or for completing certain tasks within a given time frame.
Unfortunately, what often works for employees conducting more specified tasks does not
work for employees whose work is ambiguous, complex, and requires creative thought.42
It turns out that individual incentives narrow a person’s focus. They concentrate the
mind. That is why they work in so many circumstances. However, for professional employ-
ees, where the task is complex and the solution is not easy to figure out, it is important to
motivate employees to be more creative. Pay for performance, unless it is a longer-term
incentive, can be problematic in this case. This clip explains why pay for performance
can be problematic, if not used wisely: https://www.youtube.com/watch?v=5JB6PZrgZjw
So how should you incentivize your professional workers? Pay is still important, but
it should be based more on overall performance over time, and it should not limit them
to a set of certain tasks. In other words, make sure your incentives are based around the
impact of someone’s work and not just that a certain task was completed. Such rewards
should provide (1) autonomy to the worker, (2) opportunity to master a skill, and (3)
purpose (e.g., helping to build a better organization, curing cancer, alleviating pov-
erty).43 See Figure 10.8 to understand what areas incentive plans need to cover.
Do professionals and
executives deserve to
be incentivized dif-
ferently than the rest
of us?
LO 5
Autonomy Mastery
Incentive plans
that ACTUALLY
motivate employees.Purpose
Things to Consider When Managing ProfessionalsFigure 10.8
89624_ch10_hr_356-384.indd 375 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
376 Part 4 Implementing Compensation and Security
10.8 Incentives for Executives
10.8a The Executive Pay Package
Executive compensation plans consist of five basic components: (1) base salary, (2)
short-term incentives or bonuses, (3) long-term incentives or stock plans, (4) benefits,
and (5) perks.44 Each of these elements may receive different emphasis in the execu-
tive’s compensation package depending on various organizational goals and executive
needs.45
Executive Base Salaries
Executive base salaries represent between 30 and 40 percent of total annual compensa-
tion.46 An analysis of executive salaries shows that the largest portion of executive pay is
received in long-term incentive rewards and bonuses. Regardless, executives of Fortune
500 firms routinely earn an annual base salary in excess of $500,000, with executives in
very large corporations earning considerably more. The levels of competitive salaries in
the job market exert perhaps the greatest influence on executive base salaries. An orga-
nization’s compensation committee—normally members of the board of directors—will
order a salary survey to find out what executives earn in comparable enterprises.47 For
example, by one estimate, over 90 percent of companies in the Standard & Poor’s 500
stock index use a technique called competitive benchmarking when setting executive pay
or to remain competitive for executive talent.48 Company boards reason that a CEO who
does not earn as much as his or her peers is likely to “take a hike.” Comparisons may
be based on organization size, sales volume, or industry groupings. Thus, by analyzing
the data from published studies, along with self-generated salary surveys, the compen-
sation committee can determine the equity of the compensation package outside the
organization.
Executive Short-Term Incentives
Annual bonuses represent the main element of executive short-term incentives.49
Most organizations pay their short-term incentive bonuses in cash (in the form of a
supplemental check), in keeping with their pay-for-performance strategy. By provid-
ing a reward soon after the performance and thus linking it to the effort on which it
is based, they can use cash bonuses as a significant motivator. Deferred bonuses are
used to provide a source of retirement benefits or to supplement a regular pension
plan.
Incentive bonuses for executives should be based on the contribution the indi-
vidual makes to the organization. Incentive bonuses may be based on a percentage
of a company’s total profits or a percentage of profits in excess of a specific return on
stockholders’ investments. In other instances, the payments may be tied to an annual
profit plan whereby the amount is determined by the extent to which an agreed-upon
profit level is exceeded. Payments may also be based on performance ratings or the
achievement of specific objectives established with the agreement of executives and the
board of directors.
More organizations are tying operational yardsticks to the traditional financial
gauges when computing executive pay. Called balanced scorecards, these yardsticks
may measure things such as customer satisfaction, the ability to innovate, or product
or service leadership.50
89624_ch10_hr_356-384.indd 376 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
377Chapter 10 Pay-for-Performance: Incentive Rewards
Executive Long-Term Incentives
Stock options are the primary long-term incentive offered to executives.51 The principal
reason driving executive stock ownership is the desire of both the company and outside
investors for senior managers to have a significant stake in the success of the business.
Figure 10.9 highlights several common forms of long-term incentives.
Short-term incentive bonuses are criticized for causing top executives to focus on
quarterly profit goals to the detriment of long-term survival and growth objectives.
Important to stockholders are such performance results as growth in earnings per share,
return on stockholders’ equity, and, ultimately, stock price appreciation. A variety of
incentive plans, therefore, have been developed to tie rewards to these performance
results, particularly over the long term. Additionally, stock options can serve to retain
key executive personnel when exercising the options is linked to a specified vesting
period, perhaps two to four years (this type of incentive is called “golden handcuffs”).
Executive Benefits
The benefits package offered to executives may parallel one offered to other groups of
employees. Various programs for health insurance, life insurance, retirement plans, and
vacations are common. However, unlike other employee groups, the benefits offered to
executives are likely to be broader in coverage and free of charge. Additionally, execu-
tives may be given financial assistance in the form of trusts for estate planning, payment
of mortgage interest, and legal help.52
Executive Perks
Perquisites (or perks) are nonmonetary rewards given to executives and are a means of
demonstrating the executive’s importance to the organization. Some examples of perks
may include company plane/car, large insurance policies, financial planning, income
perquisites
Special nonmonetary
benefits given to execu-
tives; often referred to
as perks
Stock options Rights granted to executives to purchase shares of their organization’s stock at an established
price for a fixed period of time. Stock price is usually set at market value at the time the option is
granted.
Stock appreciation
rights (SARs)
Cash or stock award determined by increase in stock price during any time chosen by the exec-
utive in the option period; does not require executive financing.
Stock purchase Opportunities for executives to purchase shares of their organization’s stock valued at full mar-
ket or a discount price, often with the organization providing financial assistance.
Phantom stock Grant of units equal in value to the fair market value or book value of a share of stock; on a spec-
ified date the executive will be paid the appreciation in the value of the units up to that time.
Restricted stock Grant of stock or stock units at a reduced price with the condition that the stock not be trans-
ferred or sold (by risk of forfeiture) before a specified employment date.
Performance units Grants analogous to annual bonuses except that the measurement period exceeds one year.
The value of the grant can be expressed as a flat dollar amount or converted to a number of
“units” of equivalent aggregate value.
Performance shares Grants of actual stock or phantom stock units. Value is contingent on both predetermined per-
formance objectives over a specified period of time and the stock market.
Types of Long-Term Incentive PlansFigure 10.9
89624_ch10_hr_356-384.indd 377 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
378 Part 4 Implementing Compensation and Security
tax preparation, and chauffeur service along with family perks of children’s education,
spouse travel, and estate planning. However, the dark side of perks is that they are
viewed as wasteful spending and overly lavish. Even so, perks may save executive time
or improve executive health.
Highlights in HRM 4 shows the more common perks offered to executives.
10.8b Executive Compensation: Ethics and Accountability
In 2017, the chief executives of American companies got a collective raise of 3.1 percent,
which is not much different than the 3.0 percent average salary increases for manage-
ment and salaried employees.53 But 3.1 percent of executive pay is much more than that
of an average salaried employee.
Almost three in four Americans think CEOs and top-level executives are overpaid.
Yet at the same time, most Americans still underestimate how much CEOs make. When
asked how much the average CEO is paid in the largest 500 U.S. companies, the median
guess was about $1 million per year.54
So what is the real answer? The median compensation for CEOs of the biggest 500
U.S. companies is $10.3 million—10 times what most Americans think.55 Consider the
total compensation drawn by the following executives, shown in Figure 10.10.56
While the average American may believe executives are overpaid, corporate com-
pensation committees justify big bonuses in the following ways57:
1. Large financial incentives are a way to reward superior performance.
2. Business competition is pressure-filled and demanding.
3. Good executive talent is in great demand.
4. Effective executives create shareholder value.
Others justify high compensation as a fact of business life, reflecting market
compensation trends.
“200 Highest-Paid CEOs 2016,” New York Times, http://www.equilar.com/reports/38-2-new-york-times-200-
highest-paid-ceos-2016.html
$
9
4
.6
0
C
o
m
p
e
n
sa
ti
o
n
in
m
ill
io
n
s
CEO names and companies
Da
ra
K
ho
sr
ow
sh
ah
i
Ex
pe
di
a
(E
XP
E)
Ro
be
rt
A.
Ig
er
W
al
t D
isn
ey
(D
IS
)
M
ar
iss
a
A.
M
ay
er
Ya
ho
o!
(Y
HO
O
)
M
ar
c
Be
ni
of
f
Sa
le
sf
or
ce
.c
om
(C
RM
)
In
dr
a
K.
N
oo
yi
Pe
ps
ic
o
(P
EP
)
Je
ffr
ey
W
ei
ne
r
Li
nk
ed
in
(L
NK
D)
Re
ed
H
as
tin
gs
Ne
t�
ix
(N
FL
X)
St
ev
e
El
ls
Ch
ip
ot
le
M
ex
ic
an
…
Sh
er
ily
n
S.
M
cc
oy
Av
on
P
ro
du
ct
s
(A
VP
)
CEO PAY
$
4
3
.5
0
$
3
6
.0
0
$
3
3
.4
0
$
2
2
.2
0
$
1
9
.9
0
$
1
6
.6
0
$
1
3
.8
0
$
1
2
.7
0
CEO PAYFigure 10.10
89624_ch10_hr_356-384.indd 378 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
379Chapter 10 Pay-for-Performance: Incentive Rewards
Nevertheless, with the large compensation packages awarded to top-level execu-
tives, cries for performance accountability and openness abound. Many argue that such
exorbitant pay gaps are not only bad for the reputations of firms that pay them, but
also that such gaps can create discontent in a general population—threatening the very
foundation on which pay for performance was established. Just think of the presidential
election won by Donald Trump. Part of his platform was that the pay difference between
the average worker and top-level executives was too great.58 While not all executive pay
is exorbitant and not all executive performance is poor, nevertheless angry employees,
union groups, government officials, and stockholders argue for change.
10.8c Executive Compensation Reform
Several important changes will impact future executive compensation. First, the Internal
Revenue Service (IRS) always looks for tax code violations in connection with hefty
executive pay packages. The IRS makes executive pay a part of every corporate audit.59
Second, the Securities and Exchange Commission has disclosure rules that require com-
panies listed on the New York Stock Exchange and NASDAQ to disclose the true size of
their top executive pay packages. Companies must reveal details on accumulated pension
benefits, deferred compensation, and perks that exceed more than $10,000 in total value.
Also, companies must provide a plain-English table that summarizes executives’ vari-
ous forms of compensation.60 Third, the Financial Accounting Standards Board (FASB)
requires that stock options be recognized as an expense on income statements. Com-
panies and compensation committees must now weigh the benefits provided by stock
option programs against the potential charge to earnings.61 Finally, the Dodd–Frank Wall
Street Reform and Consumer Protection Act (Pub. L. 111–203) requires companies to
disclose the median total compensation of all its employees in comparison to the total
CEO compensation and gives shareholders of a company “say on pay,” which means
that voting shareholders of a company must ultimately approve of its executive salaries.
The success of an incentive pay plan depends
on the organizational climate in which it must oper-
ate, employee confidence in it, and its suitability to
employee and organizational needs. Importantly,
employees must view their incentive pay as being
equitable and related to their performance. Perfor-
mance measures should be quantifiable, be easily
understood, and bear a demonstrated relationship to
organizational performance.
Piecework plans pay employees a given rate for
each unit satisfactorily completed. Employers imple-
ment these plans when output is easily measured and
when the production process is fairly standardized.
Bonuses are incentive payments above base wages
paid on either an individual or team basis. A bonus is
offered to encourage employees to exert greater effort.
LO 1
LO 2
Summary
Standard hour plans establish a standard time for job
completion. An incentive is paid for finishing the job
in less than the preestablished time. These plans are
popular for jobs with a fixed time for completion.
Paying employees a straight salary allows them
to focus on tasks other than sales, such as service and
customer goodwill. A straight commission plan causes
employees to emphasize sales goals. A combination of
salary and commission or bonus provides the advan-
tages of both the straight salary and the straight com-
mission form of payments.
The Scanlon and improshare gainsharing plans
pay bonuses to employees unrelated to profit levels.
Each of these plans encourages employees to maximize
their performance and cooperation through sugges-
tions offered to improve organizational performance.
LO 3
89624_ch10_hr_356-384.indd 379 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
380 Part 4 Implementing Compensation and Security
The Scanlon plan pays an employee a bonus based on
saved labor cost measured against the organization’s
sales value of production. The improshare bonus is
paid when employees increase production output
above a given target level.
Profit sharing plans pay employees sums of
money based on the organization’s profits. Cash pay-
ments are made to eligible employees at specified
times, normally yearly. The primary purpose of profit
sharing is to provide employees with additional income
through their participation in organizational achieve-
ment. Employee commitment to improved produc-
tivity, quality, and customer service will contribute
to organizational success and, in turn, to their com-
pensation. Profit sharing plans may not achieve their
stated gains when employee performance is unrelated
LO 4
to organizational success or failure. This may occur
because of economic conditions, other competition,
or environmental conditions. Profit sharing plans can
have a negative effect on employee morale when plans
fail to consistently reward employees.
Professionals not wanting to move into admin-
istrative positions are often offered different tracks
where they can continue to increase in their com-
pensation and status without moving into manage-
ment. This may mean that these professionals have
more say in decisions in the company—maybe even
more say than their managers. Executives are often
offered very elaborate incentives based on how well
the company does. Because executives stand to gain
more from the decisions they make, they also often
stand to lose more.
LO 5
bonus
combined salary and commission
plan
differential piece rate
employee stock ownership plans
(ESOPs)
gainsharing plans
improshare
merit guidelines
perquisites
profit sharing
salary plus bonus plan
Scanlon plan
spot bonus
standard hour plan
straight commission plan
straight piecework
straight salary plan
team incentive plan
variable pay
Key Terms
Working individually or in groups, identify the
factors for a successful incentive plan.
Contrast the differences between straight
piecework, differential piece rate, and standard
hour plans. Explain where each plan might
best be used.
A frequently heard complaint about merit
raises is that they do little to increase employee
effort. What are the causes of this belief? Sug-
gest ways in which the motivating value of
merit raises may be increased.
What are the reasons behind the different pay-
ment methods for sales employees?
LO 1
LO 2
LO 2
LO 2
What are the reasons for the success of the
Scanlon and improshare plans?
Because of competitive forces within your
industry, you have decided to implement a
profit sharing plan for your employees. Discuss
the advantages of profit sharing and identify
specific characteristics that will ensure success
for your plan.
Create a list of different types of incentives
companies can offer professionals not inter-
ested in administrative positions.
LO 3
LO 4
LO 5
Discussion Questions
89624_ch10_hr_356-384.indd 380 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Awarding Salary Increases
group. She is divorced and has three young children
to support.
b. Russell Watts earns a salary of $36,000. His annual
performance appraisal was average. Several members
of the work group have spoken to you about the dif-
ficulty involved in Russell’s job. They feel that it is a
tough and demanding job and that he is doing his
best.
c. Jack Perkins earns $31,250. His performance appraisal
was below average, and he seems to have difficulty
adjusting to his coworkers. Jack has had a difficult
time this past year. His wife passed away early in the
year, and his father has recently been diagnosed as
terminally ill.
d. Rick Jacobson earns $28,000. His performance
appraisal was above average. He is respected by his
peers and is generally considered to be a “good guy.”
e. Paula Merrill earns $28,850. Her performance appraisal
was very high. Her peers are upset because they feel
that she is working only to provide a second income.
Moreover, her peers see her as trying to “show them up.”
Share your results with other class members. Be prepared to
explain your allocation of money.
Because pay for performance is an important factor gov-
erning salary increases, managers must be able to defend
the compensation recommendations they make for their
employees. Merit raises granted under a pay-for-performance
policy must be based on objective appraisals if they are to
achieve their intended purposes of rewarding outstanding
employee performance. As managers know, however, they
must deal with other factors that can affect salary recommen-
dations. These may include the opinions of the employee’s
peers or extenuating circumstances such as illness or family
responsibilities. The purpose of this exercise is to provide you
with the experience of granting salary increases to employ-
ees based on their work performance and other information.
Assignment
Following are the work records of five employees. As their
supervisor, you have just completed their annual appraisal
reviews, and it is now time to make recommendations for
their future salary. Your department budget has $5,780 allo-
cated for salary increases. Distribute the $5,780 among your
employees based on the descriptions for each subordinate.
a. Janet Jenkins currently earns $41,000. Her perfor-
mance appraisal rating was very high. She is respected
by her peers and is felt to be an asset to the work
CASE STUDY United States Auto Industry Back on Top … of CEO Pay1
During the financial crisis, many executives’ pay was
stifled, reduced, or even withheld. Among the hard-
est hit was the U.S. auto industry. Shareholder groups,
union leaders, political officials, and the general public
all demanded change in the way auto industry execu-
tives were getting rich while their cars were getting
poor. For example, Ford made some major cuts for its
executives and its employees.
This is why people were shocked to find out
that for 2011 the CEO of Ford, Alan Mulally, was to
receive $56.5 million in stock awards. Even today, it
is one of the richest pay packages ever given to a top
executive in the auto industry—and it is even after
all the clamor over sky-high executive paychecks. Is
it too much?
That depends on who you ask. For most, it
seems unreasonable that a boss would make more
than 1,000 times the pay of the average worker. How-
ever, if you ask Ford workers who have seen Mulally
steer Ford back from the edge of bankruptcy, they
probably would not complain too much. If you asked
Ford’s shareholders, it would be hard for them to
381
89624_ch10_hr_356-384.indd 381 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
382 Part 4 Implementing Compensation and Security
overlook the fact that Ford shares have gone from
$1.56 when Mulally first took over to $14 a share.
If you ask Ford dealers, they may be too busy sell-
ing one of the strongest lineups of cars around to
answer.
Of course, no one really knows if Ford would
have been sitting in such a good position regardless
of Mulally. On one hand, there are plenty of factors,
such as a national economic recovery, that led to Ford’s
improvements that Mulally clearly could not have had
a finger on. On the other hand, there are plenty of
companies that would be willing to pay $50 million if
they knew their company would rebound as Ford has
under Mulally.
Questions
1. Are CEOs and key corporate executives worth the
large pay packages they receive? Explain.
2. Do you agree with Peter Drucker that corporate
executives should receive compensation packages
no larger than a certain percentage of the pay of
hourly workers? Explain.
3. Will the Dodd–Frank Wall Street Reform and
Consumer Protection Act giving shareholders the
right to vote on executive pay influence the size of
these packages in the future? Explain.
Source: Adapted from Phil LeBeau, “Mulally and Bill Ford Collect $100
Million Pay Package,” CNBC (March 8, 2011).
CASE STUDY Team-Based Incentives: Not Your Usual Office2
Done-Deal Paper Inc. operates throughout central
Pennsylvania with offices in Scranton, Harrisburg,
and Altoona. Providing paper and paper needs to
most of Central Pennsylvania, Done-Deal is one of
the top two competitors in the area.
In January 2018, Conner Carell, office manager
of one of the branch offices for Done-Deal, somehow
convinced company president and CEO Bailey Zucker
that they needed to change the way their sales repre-
sentatives were incentivized. He argued, “putting our
sales reps into teams will not only increase coopera-
tion, but it will increase sales … right now there are
too many sales being lost that could have been won
through a team effort.” Most of the time, sales made to
clients required multiple interactions by multiple reps
anyway. Bailey agreed with Conner and pointed out
that teamwork can also improve morale and synergy.
Based on these assessments, Conner organized his 20
sales reps into 4 teams of 5 reps. Sales teams would
pool their commissions regardless of who initiated and
worked on the sale. After the first year of this team-
based incentive program, sales commissions across the
four groups varied dramatically. For instance, the high-
est paid employees in a team made, on average, $50,000
more than the lowest paid team members.
During August 2016, Conner sent to all 20 sales
reps a survey requesting feedback on the satisfaction
with teams and, specifically, the team-based incen-
tive rewards program. While survey results were
generally positive, not everyone was happy in the
office. Problems could be grouped into the following
categories:
1. Some sales representatives believed that various
team members did not “buy into” the team con-
cept and were simply “free riding”—benefiting
from the efforts of higher performing reps.
2. There was a general feeling that some teams were
assigned difficult regions that prevented them
from achieving higher sales.
3. Teams did not always display the motivation and
synergy expected, since “bickering” was prevalent
between stars and their lesser performing peers.
Average performers complained that star reps
made them look bad.
4. At least a third of the sales staff felt the incen-
tive rewards program was unfair and asked for a
return to individual sales incentives.62
Questions
1. Do results from the survey illustrate typical com-
plaints about teams and specifically about team
incentive rewards? Explain.
2. If appropriate, what changes would you recom-
mend to improve the incentive reward program?
Be specific.
3. Would management have benefited from
employee involvement in the initial design and
implementation of the program? Explain.
89624_ch10_hr_356-384.indd 382 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
383Chapter 10 Pay-for-Performance: Incentive Rewards
Notes and References
1. Chidiebere Ogbonnaya, Kevin Daniels, and Karina Nielsen,
“Research: How Incentive Pay Affects Employee Engagement,
Satisfaction, and Trust,” Harvard Business Review (March 15,
2017).
2. Patricia K. Zingheim and Jay R. Schuster, “Designing Pay
and Rewards in Professional Service Companies,” Com-
pensation and Benefits Review 39, no. 1 (January–February
2007): 55.
3. “WorldatWork 2016–2017 Salary Budget Survey,” Woarl-
datWork.com; Stephen Miller, “Bonus Binge: Variable Pay
Outpaces Salary,” Society for Human Resource Management
(August 11, 2016).
4. Kerry Chou, “Hedge Your Bets with Variable Pay,”
WorldatWork (2011), http://w w w.worldatwork.org/
adimComment?id548615.
5. James Oldroyd and Shad Morris, “Catching Falling Stars: A
Human Resource Response to Social Capital’s Detrimental
Effect of Information Overload on Star Employees,” Academy
of Management Review (July 2012): 396–418.
6. Jean Martin and Conrad Schmidt, “How to Keep Your Top
Talent,” Harvard Business Review (May 2010): 54–61.
7. John A. Menefee and Ryan O. Murphy, “Rewarding and
Retaining the Best,” Benefits Quarterly 20, no. 3 (Third Quar-
ter 2004): 13–21; Anthony Nyberg, “Retaining Your High
Performers: Moderators of the Performance-Job Satisfaction-
Voluntary Turnover Relationship,” Journal of Applied Psychol-
ogy 95, no. 3 (2010): 440–453.
8. Enno Siemsen, Sridhar Balasubramanian, and Aleda V. Roth,
“Incentives That Induce Task-Related Effort, Helping, and
Knowledge Sharing in Workgroups,” Management Science
53, no. 10 (October 2007): 1533.
9. Ann Bares, “Incentive Plan Design Begins with Good Ques-
tions,” Workforce Management (October 2008); Fay Hansen,
“Control and Customization,” Workforce Management 86,
no. 19 (November 5, 2007): 42, http://www.workforce.com
/articles/14112; Luis R. Gomez-Mejia, Pascual Berrone, and
Monica Franco-Santos, Compensation and Organizational
Performance: Theory, Research and Practice (Armonk, NY:
M. E. Sharpe Publishing, 2010).
10. Joe Abusamra, “Here Comes Pay for Performance!” Federal
Times (March 8, 2017).
11. M. Franco-Santos, “Performance Measurement Issues, Incen-
tive Application and Globalization,” in L. R. Gomez-Mejia
and S. Werner (eds.), Global Compensation: Foundations and
Perspectives (London: Routledge, 2008), 41–56.
12. Joanne Sammer, “Weighing Pay Incentives,” HR Magazine 52,
no. 6 (June 2007): 64.
13. M. Franco-Santos. “Performance Measurement Issues, Incen-
tive Application and Globalization,” in L. R. Gomez-Mejia
and S. Werner (eds.), Global Compensation: Foundations and
Perspectives (London: Routledge, 2008), 41–56.
14. J. M Welbourne and L. R. Gomez-Mejia, “Team-based Incen-
tives,” in L. A. Berger and D. R. Berger (eds.), The Compen-
sation Handbook: A State of the Art Guide to Compensation
Strategy and Design (New York: McGraw-Hill, 2008).
15. George T. Milkovich and Jerry M. Newman, Compensation,
10th ed. (Boston: McGraw Hill Irwin, 2010).
16. Michael C. Sturman, “Using Your Pay System to Improve
Employees’ Performance: How You Pay Makes a Difference,”
Cornell Hospitality Report 6, no. 13 (2006): 4–20.
17. Bill Fotsch and John Case, “How to Build Incentive Plans That
Actually Work,” Forbes (August 24, 2015).
18. Chris Taylor, “On-the-Spot Incentives,” HR Magazine 49, no.
5 (May 2004): 80–84.
19. Don Hellriegel and John W. Slocum, Jr., Organizational Behavior,
12th ed. (Mason, OH: South-Western, 2009), Chapter 6.
20. Employee perceptions of appropriate pay raises likely depend
on the employer’s ability to pay and the economics of the
period. For example, when it is known that an employer’s abil-
ity to pay is great and the economics of the industry are strong,
then employees will expect larger percentage merit raises.
21. Susan J. Wells, “No Results, No Raise,” HR Magazine 50, no.
5 (May 2005): 76.
22. Dana Wilkie, “Instead of Rating Performance with Numbers,
How About Adjectives?” Society for Human Resource Manage-
ment (July 6, 2016).
23. Stephen Miller, “Employers Seek Better Approaches to Pay
for Performance,” Society for Human Resource Management
(February 8, 2016); David E. Terpstra and Andre L. Honoree,
“Employees Responses to Merit Pay Inequity,” Compensation
and Benefits Review 37, no. 1 (January/February 2005): 51.
24. Donna M. Airoldi, “Two New Studies Show Significant Lack
of Workplace Satisfaction and Employee Recognition,” Incen-
tive (March 9, 2011), http://www.incentivemag.com/News/
Industry/Articles/Two-New-Studies-Show-Significant-Lack-
of-Workplace-Satisfaction-and-Employee-Recognition/.
25. Ward Olgreen, “Modern-Day Motivation for Restaurant
Employees,” IncentiveMag (March 10, 2017).
26. https://www.atlassian.com/company/shipit (March 21, 2017).
27. Charlotte Garvey, “Meaningful Tokens of Appreciation,” HR
Magazine 49, no. 9 (August 2004): 102.
28. Beitelspacher, L.S., Baker, T.L., Rapp, A. and Grewal, D., 2017.
Understanding the long-term implications of retailer returns
in business-to-business relationships. Journal of the Academy
of Marketing Science, pp.1–21.
29. “Sales Performance Optimization Study: 2016 Key Trends
Analysis,” CSO Insights, 2016 Miller Heimen Group, Inc.
30. Bob Marsh, “Gamification and Sales: Is It Working?” Sales-
force Blog (March 21, 2017), https://www.salesforce.com/
blog/2013/08/gamification-and-sales.html.
31. http://www.espn.com/nba/history/leaders/_/stat/assists
(March 21, 2017).
89624_ch10_hr_356-384.indd 383 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
384 Part 4 Implementing Compensation and Security
32. Jonathan Lautaha, “7 Sales Gamification Secrets to Drive Pro-
ductivity,” Insidesales.com blog (February 5, 2016).
33. Jim Stockmann, “Change on the Horizon: An Analysis of
Sales Compensation Practices,” Workspan (April 2007): 41.
34. Amy Lyman, “Nordstrom—Great Service for Over 100 Years:
Best Company for 25 Years,” 2009 Great Place to Work Insti-
tute, www.greatplacetowork-conference.com.
35. George T. Milkovich and Jerry M. Newman, Compensation,
10th ed. (Boston: McGraw Hill Irwin, 2010).
36. The standard of improshare’s measurement system is the base pro-
ductivity factor (BPF), which is the ratio of standard direct labor
hours produced to total actual hours worked in a base period. The
productivity of subsequent periods is then measured by enlarging
standard direct labor hours earned by the BPF ratio to establish
improshare hours (IH). The IH is then compared with actual
hours worked in the same period. If earned hours exceed actual
hours, 50 percent of the gain is divided by actual hours worked to
establish a bonus percentage for all employees in the plan.
37. https://www.glassdoor.com/Reviews/Lincoln-Electric-
Reviews-E3658.htm (March 22, 2017).
38. Jason Kovac, “Stock Options,” Workspan (August 2006): 23.
See also Seymour Burchman and Blair Jones, “The Future
of Stock Options: From Starring Role to Ensemble Player,”
WorldatWork 13, no. 1 (First Quarter 2004): 29–38.
39. Mamdough Farid, Vincent Conte, and Harold Lazaus,
“Toward a General Model for Executive Compensation,” Jour-
nal of Management Development 30, no. 1 (2011): 61–74; Ira
T. Kay and Steve Seelig, “Revising the Use of a Management
Stock Purchase Plan to Increase Management Ownership,”
Journal of Deferred Compensation 11, no. 3 (Spring 2006): 24.
40. Chris Matthews and Matthew Heimer, “The 5 Biggest Corpo-
rate Scandals of 2016,” Fortune (December 28, 2016); Raquel
Meyer Alexander, Mark Hirchey, and Susan Scholz, “Back-
dating Employee Stock Options: Tax Implications,” The CPA
Journal 77, no. 10 (October 2007): 24. See also T. Thomas Cot-
tingham III, “The Stock Options Backdating Scandal: Critical
First Response,” Risk Management 54, no. 6 (June 2007): 12.
41. Based on research conducted by The National Center for
Employee Ownership (NCEO) in 2016. The NCEO is a pri-
vate, nonprofit membership and research organization that
serves as the leading source of accurate, unbiased information
on employee stock ownership plans (ESOPs), broadly granted
employee stock options and related programs, and ownership
culture. The NCEO can be reached at http://www.nceo.org or
by phone at (510) 208–1300.
42. Dan Ariely, Anat Bracha, and Stephan Meier, “Doing Good
or Doing Well? Image Motivation and Monetary Incentives
in Behaving Prosocially,” American Economic Review 99, no. 1
(2009): 544–555; Karl Duncker and Lynne Lees, “On Problem
Solving,” Psychological Monographs 58, no. 5 (1945).
43. D. H. Pink, Drive: The Surprising Truth about What Motivates
Us. (New York: Penguin, 2011).
44. Mark Reilly and Brian Enright, “A New Approach to Execu-
tive Compensation,” Workspan (August 2007): 45.
45. Seymour Burchman and Blair Jones, “Executive Compensa-
tion as a Support for Growth Strategy,” WorldatWork 15, no.
3 (Third Quarter 2006): 39.
46. Total annual compensation is the sum of an executive’s annual
and long-term compensation. Annual compensation consists
of salary, bonus, and other yearly pay. Long-term compensa-
tion consists of stock awards, the value of any stock options
exercised during the year, and any other long-term compen-
sation (such as payouts from long-term incentive plans, direc-
tor’s fees, and special bonuses).
47. Edward E. Lawler III and David Finegold, “CEO Compensa-
tion: What Board Members Think,” WorldatWork 16, no. 3
(Third Quarter 2007): 38.
48. “2017 Salary Guide,” CEO Update, 2017; Mercedes Erick-
son, “Peer Benchmarking and Trends in Executive Com-
pensation: 2016 Update,” Audit Analytics, http://www
.auditanalytics.com/blog/peer-benchmarking-and-trends-in-
executive-compensation-2016-update/.
49. Brandon Cherry, “Executive Bonus Plans: Recent Trends in
Equity Compensation,” Workspan (January 2007): 22.
50. Darrell Rigby and Barbara Bilodeau, “Selecting Management
Tools Wisely,” Harvard Business Review 85, no. 12 (December
2007): 20.
51. Brad Hill and Christine Tande, “What’s Next for Execu-
tive Incentives Now That Options Are Limited?” Workspan
(September 2007): 47.
52. Pam Delaney, “Filling the Executive Benefits Gap,” Workspan
(November 2007), 69.
53. WorldatWork 2016–2017 Salary Budget Survey (2017).
54. Kara Brandeisky, “Most Americans Can’t Guess the Average
CEO’s Salary. Can You?,” Money (February 5, 2016).
55. Ibid.
56. “200 Highest-Paid CEOs 2016,” New York Times, http://www
.equilar.com/reports/38-2-new-york-times-200-highest-
paid-ceos-2016.html
57. Steven N. Kaplan, “Are CEOs Overpaid?” WorldatWork 16,
no. 3 (Third Quarter 2007): 22. See also Ira Kay and Steve
Van Putten, Myths and Realities of Executive Pay (Cambridge,
MA: Cambridge University Press, 2007); Jessica Marquez, “5
Questions: in Defense of CEO Pay,” Workforce Management
86, no. 16 (September 27, 2007): 8.
58. Tim Perry, “Candidate Donald Trump Thought CEO Pay
Was Too High. Does the SEC?” CBSNews.com (February 9,
2017).
59. Louis Lavelle, “Everybody Should Be a Little Nervous,” Busi-
ness Week (December 22, 2003): 42.
60. Seymour Burchman and Blair Jones, “A New Day for
Executive Compensation,” Workspan (January 2007): 15.
See also “Out at Home Depot,” Business Week (January 15,
2007): 56.
61. Mark Gimein, “The Bottom Line on Options,” Business Week
(April 3, 2006): 32. See also Peter Burrows, “Is Steve’s Job
Untouchable?” Business Week (January 15, 2007): 28.
62. Fictional case adapted from the Network Cable, Inc. case.
89624_ch10_hr_356-384.indd 384 11/17/17 11:41 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
385
CHAPTER 11
Employee Benefits
Learning Outcomes
After studying this chapter, you should be able to
Detect cost-effective strategies companies use to
develop benefits plans.
Identify and explain the employee benefits required
by law.
LO 1
LO 2
Describe the types of work-life benefits that
employers may provide.
Describe the different types of retirement
programs and pension plans and the regulations
related to them.
LO 3
LO 4
w
av
eb
re
ak
m
ed
ia
/S
hu
tt
er
st
oc
k
89624_ch11_hr_385-415.indd 385 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
386 Part 4 Implementing Compensation and Security
A
pproximately three in five people report benefits and perks being among their top
considerations before accepting a job.1 Maybe this is why companies like Netflix
provide one paid year of maternity and paternity leave to new parents, or why
Spotify covers costs for egg freezing and fertility assistance, or why Airbnb gives its
employees an annual stipend of $2,000 to travel and stay in an Airbnb listing anywhere
in the world.2 Despite how cool many of these benefits may be, the cost of provid-
ing them has been climbing sharply. Due to increased access to employer information
through social media and search engines, employees are increasingly aware of the ben-
efits they receive and how they compare to what other companies are offering. Hence,
benefits act as a key source of advantage (or disadvantage) for companies.
11.1 Elements of a Successful Benefits
Program
Benefits can represent more than 50 percent of the total payroll costs an employer
pays, depending upon the types of benefits it offers. Some benefits are legally required,
whereas others are voluntarily granted by employers. Figure 11.1 shows the proportion
of total pay U.S. organizations, on average, pay to their employees in the form of benefits,
and a breakdown of how much goes to each.
Benefits are expensive, which is why companies pay close attention to them.
Health care costs, which have been growing at double and triple the rate of inflation,
are of particular concern. Managers are also concerned about the affordable health
Wages
69%
Retirement and
savings 4.5%
Health, life,
and disability
insurance 8.8%
Paid leave
7%
Supplemental
pay 2.3%
Legally required
bene�ts
7.8%
Benefits
30.3%
Where a Dollar of Employee Compensation Goes in the United StatesFigure 11.1
Source: Employer Costs per Hour Worked (Washington DC: U.S. Bureau of Labor Statistics: 2011), http://www.bls
.gov/news.release/ecec.t01.htm.
89624_ch11_hr_385-415.indd 386 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
387Chapter 11 Employee Benefits
care laws proposed by Congress in 2017. We will discuss more about health care
reform later in the chapter along with health care cost-containment measures firms
are implementing.
Many forces must be kept in balance for a benefits program to succeed. For example,
a firm’s managers must consider how to fund its benefits program and sustain it, as
well as the tax consequences related to it. The needs of a company’s employees also
must be considered because they can differ significantly from firm to firm. If the firm’s
industry is unionized, this will affect the types of benefits the firm is likely to have to
offer. So will the benefits its competitors are offering and the organization’s strategic
objectives. Microsoft, for example, picks up the full tab for medical care for all of its
U.S. employees and their dependents, which is unusual. But Microsoft does so because
one of its strategic objectives is to attract the top talent in the country. The benefits
plan also needs to be compatible with the organization’s strategic compensation plan
(see Chapter 9), including its total rewards strategy.3
11.1a Selecting Benefits
In designing a benefits program, a firm can purchase detailed compensation data or hire
outside firms to help in the designing process. Before a new benefit is introduced, its
need should first be determined through consultation with employees. Designing ben-
efits programs with employee participation means employees are more satisfied with the
final benefits plan. And employees who are satisfied with their benefits are more likely
to be satisfied with their jobs. Opinion surveys are also a common method for obtaining
employee input. Many organizations establish committees composed of managers and
employees to administer, interpret, and oversee their benefits policies. The Leadership
and Learning Center in Salem, Massachusetts, a professional development organization,
has decreased turnover from 40 percent in the 1990s to the single digits in recent years.
The reason? A benefits committee. Twice a year, employees break into committees to
administer benefits survey and revise the benefits plan, giving employees much more
responsibility and say in their own benefits packages.4
Flexible Benefits
To serve their intended purpose, employee benefits programs must adapt to the changes
that are continually occurring within our society. As you have learned, three generations
of employees now occupy the workplace, and each places a different priority on their
benefits. Consequently, firms have to think about designing a benefits strategy that
appeals to each group. For example, Millennial employees are probably less likely to be
concerned with having pensions than babyboomers. Likewise, Generation X employees
who are raising their families are more likely to want family-friendly benefits and health
care for their dependents than babyboomers and Millennial employees. There are also
more single-parent families and two-earner couples in the workplace than there have
been in the decades past. As you can see, benefits programs need to take into account a
highly diversified workforce to attract highly capable employees.
To make it easier to accommodate the individual needs of different employees, a
wide range of organizations have begun offering flexible benefits plans, also known
as cafeteria plans. Rather than one-size-fits-all plans, these plans allow individual
employees to choose the benefits that are best suited to their particular needs. They also
prevent certain benefits from being wasted on employees who have no need for them.
Furthermore, companies realize they can get a better return on investment by tailoring
flexible benefits plans
(cafeteria plans)
Benefit plans that enable
individual employees to
choose the benefits that
are best suited to their
particular needs.
What makes benefits so
expensive? Would you
rather have the addi-
tional money being
paid for your benefits?
LO 1
89624_ch11_hr_385-415.indd 387 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
388 Part 4 Implementing Compensation and Security
benefits to an employee’s stage of life or family status.5 Compensation specialists often
see flexible benefits plans as ideal. Employees select the benefits of greatest value to
them, while employers manage benefits costs by limiting the dollars employees have
to spend.
Typically, employees are offered a basic or core benefits package of life and health
insurance, sick leave, and vacation. Requiring a core set of benefits ensures that employ-
ees have a minimum level of coverage to protect against unforeseen financial hardships.
Employees are then given a certain amount of funds to purchase whatever other benefits
they need through the plan. Other benefit options might include prepaid legal services,
financial planning, dental insurance, and long-term care insurance. Some of the less-
routine options include elder care, public transportation vouchers, and even pet insur-
ance. These are optional, since not every employee will need or want services such as
these, so they are optional.
11.1b Administering Benefits
With the wide variety of benefits offered to employees today, administering an orga-
nization’s benefits program can be both costly and time-consuming. Even for small
employers with 30 to 40 employees, keeping track of each employee’s use of a benefit
or request for a change of benefits can be cumbersome. Fortunately, online employee
benefit systems have become mainstream for both large and small employers. Employees
are provided with passwords that allow them to get information about their benefits
plans, enroll in their plans of choice, change their coverage, or simply inquire about the
status of their various benefit accounts without contacting a HR representative. Online
benefits systems are often referred to as employee self-service (ESS) systems and can result
in significant cost savings in benefits administration, improving accuracy of decisions,
decreasing processing time, and greater employee satisfaction.6 This system is so suc-
cessful because it gives employees the information and responsibility of personalizing
and tracking their own benefits.
As with the benefits themselves, it can be helpful to obtain feedback on differ-
ent online systems a firm is investigating and adopting by asking employees to “test
drive” them. If a system is difficult to navigate, employees will end up calling the human
resources department for assistance, defeating the purpose of the system.
11.1c Communicating Employee Benefits
Communicating the costs of benefits is a key part of an effective benefits strategy. One
survey from a research and consulting firm found that 4 of 10 U.S. employees lack any
knowledge of the costs of their benefits, and of the 60 percent who think they know
the cost of their benefits, only 15 percent could provide a reasonable estimate.7 But
even as employees become more aware of the cost of their benefits, many of them
still do not realize exactly what employers are paying or why they try to keep benefits
costs down.
Communicating employee benefits information improved significantly with the
passage of the Employee Retirement Income Security Act (ERISA) in 1974. The act
requires that employees be informed about their pension and certain other benefits in
a manner calculated to be understood by the average employee. Additionally, employ-
ees can sue their employers for misleading them about health and welfare benefits
under ERISA.
89624_ch11_hr_385-415.indd 388 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
389Chapter 11 Employee Benefits
In one settlement, Providence Health & Services, a nonprofit hospital chain, paid
$352 million to settle a proposed class action accusing the organization of using religious
affiliation as church exemption to avoid ERISA requirements of minimum funding and
failing to protect employees’ retirement plans.8 This and other settlements underscore
the importance of communicating benefit information accurately and unambiguously.
When communicating employee benefits, the best advice is to use multiple media
techniques. Different employee groups have different ways of learning and distinct pref-
erences for how they receive information. Also, the level of complexity of the benefit
information being communicated is likely to determine media selection.9 Because about
a third of IKEA’s employees are Millennials, the company was worried if it only mailed
out benefit information to these employees, many of them would not bother to open
the packages. So in addition to mailing information the company used Twitter to send
a weblink to its benefits site and remind employees about the firm’s benefit enrollment
deadline. “We wanted to talk to our co-workers in a way they are talking,” says Beth
Gleba, corporate information manager for IKEA, North America.10
Samsung is a company using its own technology to build employee engagement
to help recruit and retain talent. In 2012, Samsung switched to an online, flexible ben-
efits portal called Highlights, but still struggled to get the staff to take advantage of the
choices and flexibility of the benefits plan. So to communicate the benefits package of
Highlights, Samsung rebranded the package and its communication strategy. Not only
was the Highlights interface easier to access and use, but Samsung passed out gifts to
the staff like a piggy bank or a pedometer with the Highlights logo to highlight the new
wealth and lifestyle benefits categories. They also used online materials, text messages,
and physical posters and infographics to get employees to think more seriously about
the benefits offered alongside salary. Samsung, once struggling to engage staff about
their benefits, now has reached the stage where 95 percent of its employees have used
Highlights.11
Some general pointers for designing benefits information regardless of the medium
include the following:
• Avoid complex language when describing benefits. Clear, concise, and understand-
able language is a must.
• Explain the purpose behind a benefit and the value it offers employees. Be upfront
about the pros and cons of different benefit plans.
• Use graphics whenever possible to make the information understandable at a glance.
• Provide numerous examples to illustrate how a benefit choice might affect different
types of employees, depending upon their personal circumstances.
Even if employees can access their benefits information online, most firms periodi-
cally mail out printed benefit statements that detail the status of an employee’s benefits.
See the Highlights in HRM 1 for an example of how to calculate your total compensa-
tion based on salary and benefits. Notice how the employee’s total compensation is
highlighted so that the full value of the benefits received is easier to see.
Cost Containment Strategies
Many firms have either begun requiring employees to pay part of the cost of their ben-
efits or, if they were already doing so, increasing the amounts they pay in the form of
premiums, copays, and deductibles. In addition, it is not uncommon for larger compa-
nies to cut the health care plans they once provided their retirees.
89624_ch11_hr_385-415.indd 389 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
390 Part 4 Implementing Compensation and Security
Containing Medical Benefits Costs
What is causing the growth in health care costs? The rise has been attributed to many
factors. One is the overuse of costly health care services by consumers. This is part of the
reason why firms have turned to health savings accounts and high-deductible health
insurance plans (HDHPs). In conjunction with HDHPs, employees are provided with
a health care spending account (HSA) they and their employers can contribute to on a
pretax basis. In addition, employees can deduct the amounts they contribute from their
earnings when they pay their income taxes. An advantage of HSAs is that the funds
remaining in the account at the end of the year belong to the employee, even if he or
she leaves the company. Employees often like HDHPs for this reason and because the
regular premiums deducted from their paychecks for insurance are generally lower than
they are with other types of health care plans such as health maintenance organizations
(HMOs) and preferred provider organizations (PPOs).
The downside is that with an HDHP, when employees receive treatment, they have
to pay either a percentage of their care or all of it until they meet a high threshold
called a deductible. These expenses are generally higher than the copays and deductibles
associated with other types of plans. Because of this, employees are more conscious of
medical costs. They have an incentive to spend their health care funds wisely and over
high-deductible health
insurance plan (HDHP)
A medical insurance plan
characterized by high
deductibles but lower
premiums for workers
and a health spend-
ing account to which
employers contribute
funds employees can
keep should they leave
the organization.
Employers must use a
variety of techniques
to communicate the
complexities of ben-
efits programs to their
employees.
So
ur
ce
: h
tt
p:
//
bl
og
s.
in
te
l.c
om
/j
ob
s/
89624_ch11_hr_385-415.indd 390 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
391Chapter 11 Employee Benefits
time to increase the value of their health savings accounts. For this reason, HDHPs are
sometimes referred to as consumer-driven plans.
HDHPs do seem to help control costs. However, because they work differently and
require higher out-of-pocket costs for employees, HR managers need to carefully explain
how they work and show employees how much long-term savings they can accumulate
for their long-term medical care. Also, some studies have shown that employees with
HSAs tend to put off preventive care so as to grow their HSAs. This can be a mistake if
an employee later develops a serious and costly disease that could have been prevented
with early screening and treatment.
Because HMOs and PPOs offer discounted rates, they have become another vehi-
cle for reducing costs. Health maintenance organizations (HMOs) are organizations
of physicians and other health care professionals that provide a wide range of services
to subscribers and their dependents on a prepaid basis. Employees pay a small fixed
fee called a copay, often $25 or $30, whenever they get medical treatment. Employers
pay a fixed annual fee to the HMO to cover the majority of their employees’ medical
costs. Because they must provide all covered services for a fixed dollar amount, HMOs
generally emphasize preventive care and early intervention. Employees who sign up
for the plan must choose a general-practice physician, called a primary-care physician,
from the HMO’s list of doctors. Their primary-care physicians provide them with their
basic medical care. However, to see a specialist, employees need a referral from their
primary-care physicians. This helps keep costs down as well, because specialists charge
fees that are generally higher than those charged by primary-care physicians. The copays
employees pay to see specialists are also slightly higher, which gives employees an incen-
tive to see their primary-care physicians first.
A preferred provider organization (PPO) is a group of physicians who establish
an organization or a network of doctors that guarantee lower costs to the employer
through lower service charges or agreed-on utilization controls (such as a reduced
number of diagnostic tests per employee). Unlike HMOs, where employees may have
limited choices when it comes to the doctors they see, PPOs allow employees to select
their doctor of choice from a wider list of physicians (participating doctors). Normally,
a number of physicians are available to choose from for different medical needs, and
employees do not need a referral to see a specialist. Small copays are a common feature
of PPOs as well. Employees also have the option of using a doctor outside of the PPO,
but it costs more.
Employers sometimes couple PPOs and HMOS with different types of tax-
advantaged accounts employees can use to pay their out-of-pocket health care expenses
such as their copays, the cost of prescription drugs, and so forth. A health reimburse-
ment account (HRA) allows employees to be reimbursed by their companies for their
out-of-pocket expenses. Employees do not have to pay taxes on the amounts they are
reimbursed, which is what they would have to do if the reimbursements were made
through their paychecks. A flexible spending account (FSA) is another type of account
employees use to pay for their health-related expenses. Employees fund these accounts
by having money deducted from their paychecks. The money deducted is not subject
to taxes, so workers have more to spend on their health care than they would without
the accounts. Companies can make contributions to FSAs as well. A disadvantage of
FSAs is that funds not used by the end of the plan year revert back to one’s employer.
In addition, many companies—even Fortune 500 companies—are limiting the plans
employees can choose from to all but the least expensive ones and conducting audits to
be sure non-eligible dependents of employees are not being covered.
health maintenance
organizations (HMOs)
Organizations of physi-
cians and health care
professionals that pro-
vide a wide range of ser-
vices to subscribers and
dependents on a prepaid
basis.
preferred provider
organization (PPO)
A network of physicians
who establish an orga-
nization that guarantees
lower health care costs
to employers and their
employees.
89624_ch11_hr_385-415.indd 391 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
392 Part 4 Implementing Compensation and Security
Containing Dental, Optical, and Mental Health Benefits Costs
Dental plans are designed to help pay for dental care costs and to encourage employees
to receive regular dental attention. Like medical plans, dental care plans may be oper-
ated by insurance companies, dental service corporations, those administering Blue
Cross/Blue Shield plans, HMOs, and groups of dental care providers. Typically, the
insurance pays a portion of the charges, and the subscriber pays the remainder. Optical
benefits work in a similar way. These benefits generally cover or offset the cost of see-
ing an optometrist once or twice a year as well as the cost of contact lenses and glasses
purchased periodically.
Almost all workers with health coverage receive mental health benefits as part of
their plans. However, prior to 2009, most plans had limits on inpatient hospital stays
and outpatient visits, and the copays were often higher than they were for medical-care
copays. The Mental Health Parity and Addiction Equity Act of 2008 changed that. In
terms of the costs and access to care, the law requires group health plans to treat mental
health benefits the same way they do medical and surgical benefits.12
Containing Additional Costs
An aging U.S. population, high obesity rates, and the health problems associated with
them are three other reasons cited for rising health care costs. To combat these problems,
companies are offering employees lower health care premiums for adopting healthy hab-
its and activities. Wellness programs (discussed shortly) are a part of this effort. Con-
versely, firms are also penalizing employees for unhealthy habits by charging them higher
health care premiums for habits such as smoking.13 To help cope with the rising costs of
drugs, companies are encouraging their employees to use generic drugs and buy 90-day
supplies through designated mail-order pharmacies that provide them at a discount.
One of the more dramatic moves companies are making is waiving the deduct-
ibles and copays for medical tourism. This means employees can pay less if they are
willing to travel abroad for medical pro-
cedures where they often cost only a
fraction of what they do in the United
States.14 Figure 11.2 shows the countries
Americans most utilize for treatment
abroad and the approximate cost of
procedures as a percentage of U.S. costs.
Value-Based Health Initiatives
A small but growing number of employ-
ers are turning to what is being called
value-based health initiatives. Value-
based initiatives focus on more than
cost-cutting. Companies pursuing this
strategy look at the medical care their
employees most use and need—such as
treatment for asthma, high blood pres-
sure, or diabetes—and target benefits
and health programs toward them. For
example, Cerner Corporation, an elec-
tronic health record system for health
Many employers offer
incentives for employ-
ees who take care of
their health, such as
discounts on health
club memberships.
Lu
ck
y
Bu
si
ne
ss
/S
hu
tt
er
st
oc
k.
co
m
89624_ch11_hr_385-415.indd 392 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
393Chapter 11 Employee Benefits
care providers like hospitals and clinics, noticed that many of their employees didn’t pur-
chase the medicine they needed to handle their anxiety or depression. So they reduced
the out-of-pocket costs and waived copayments for prescriptions for antidepressants
for employees and their families. Because of this policy change, Cerner Corporation
employees were more likely to use or start a new medication for anxiety or depression
and reported positive health outcomes.15
Wellness Programs
Wellness programs are employer-sponsored programs designed to encourage employ-
ees to maintain and improve their health and well-being by getting regular checkups,
eating properly, exercising, and managing their stress levels so as to prevent costly and
protracted illnesses. The Home Depot has a broad corporate wellness program to priori-
tize employee health and demonstrates the kinds of strategies other firms can use when
formulating their own wellness programs. The Home Depot offers resources like healthy
cooking and physical fitness programs with such resources as cookbooks, discounts to
health club chains, and chats with coaches to set goals and create a 12-week journey to
better health; health challenges every summer for a chance to win cash prizes; smoking
cessation programs with free one-on-one coaching and nicotine patches; free onsite flu
shots; and wellness recognition programs where employees nominate one employee
who sets and achieves their wellness goal for a prized patch to wear on their apron and
recognition from The Home Depot.16
Disease Management Programs
Via medically trained personnel, disease management programs provide patients and
their caregivers with information on monitoring and treating medical conditions, while
coordinating communication between them, their health care providers, employers, and
insurers. Bank One Corporation of Chicago developed such a program when manag-
ers noticed high absenteeism among employees with diabetes, asthma, and depression.
wellness programs
Employer-sponsored
programs designed to
encourage employees
to maintain and improve
their health and well-
being by getting regular
checkups, eating prop-
erly, exercising, and man-
aging their stress levels
so as to prevent costly
and protracted illnesses.
disease management
programs
Programs that provide
patients and their care-
givers with information
on monitoring and
treating medical condi-
tions, while coordinating
communication between
them, their health care
providers, employers,
and insurers.
Source: Adapted from Reuters, Deloitte, and the research findings of Joseph Woodman, the author of Patients Without Borders.
Singapore
India
Costa Rica
Thailand
Mexico
Approximate cost relative to the U.S.—percent
Medical Tourism by Country
Five of the countries visited most often for medical treatment
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
The Cost of Medical Procedures Abroad as a Percentage of U.S. CostsFigure 11.2
89624_ch11_hr_385-415.indd 393 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
394 Part 4 Implementing Compensation and Security
Disease management programs can also be
used in conjunction with the rehabilitation
of employees who are injured on the job to
help them recover more quickly and return
safely to work.
Employee Assistance Programs
To help workers cope with a wide variety of
problems that interfere with the way they
perform their jobs, all kinds of organiza-
tions, including the New York Mets, USAA,
the Los Angeles Police Department, and Levi
Strauss, have developed employee assistance
programs (EAPs). An employee assistance
program typically provides diagnosis, coun-
seling, and referral for advice or treatment
when necessary for problems related to alco-
hol or drug abuse, emotional difficulties,
and financial or family difficulties.17 The
main intent is to help employees solve their
personal problems or at least to prevent problems from turning into crises that affect
their ability to work productively. To handle crises, many EAPs offer 24-hour hotlines
employees can call. After Cerner Corporation offered its employees an EAP program, the
company’s outpatient mental health care costs declined by nearly 41 percent.18
Counseling Services
An important part of an EAP is the counseling services it provides to employees. While
most organizations expect managers to counsel subordinates, some employees may have
problems that require the services of professional counselors. Most organizations refer
such individuals to outside counseling services such as family counseling services, mar-
riage counselors, and mental health clinics. Some organizations have a clinical psycholo-
gist, counselor, or comparable specialist on staff to who employees may be referred.
11.2 Employee Benefits Required by Law
Legally required employee benefits constitute 19 percent of the benefits package that
employers provide. These benefits include employer contributions to social security,
unemployment insurance, and workers’ compensation insurance. We will discuss each
of these benefits.
11.2a Social Security Insurance
The Social Security Act was designed to protect workers against the loss of earnings
resulting from old age and unemployment. The act was later amended to include dis-
ability, or, in the case of dependents, the death of the worker supporting them. Together
the programs have become referred to as Old Age, Survivors, and Disability Insurance
(OASDI). According to the Social Security Administration, in 2017 over 62 million
people received retirement benefits from social security.19
employee assistance
programs (EAPs)
Services provided by
employers to help work-
ers cope with a wide
variety of problems that
interfere with the way
they perform their jobs.
Does the government
require too many or
too few benefits for
employees?
LO 2
Walk while you work?
To combat obesity and
other health problems,
GlaxoSmithKline,
Humana, Mutual of
Omaha, and Best Buy
have begun utilizing
treadmill desks like the
one shown here. The
treadmills move at a
slow speed so employ-
ees do not get hot and
sweaty and out of
breath.
Ri
ch
ar
d
Se
nn
ot
t/
Tr
ib
un
e
Co
nt
en
t A
ge
nc
y
LL
C
/
A
la
m
y
89624_ch11_hr_385-415.indd 394 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
A Personalized Statement of Benefits Costs
Highlights in HRM1
Chris Smith
123 Maple Street
Pittsburgh, PA 15212
Your Total Compensation Report
Enclosed is a personalized Statement prepared speci�cally for you. This
statement shows the contributions made by your company toward your
total compensation package. As you review this statement, you will see
that the value of your bene�ts, added to your annual pay, produce your total
compensation. The statement is designed to show how much your
service is valued by your company.
Thank you for your service,
Jonathan Bigg, President
Department: Marketing
Disclaimer: Neither ComPackage Corp. nor your employer shall be liable for any errors or omissions in this report generated using the ComPackage software. The contents of this report are for illustrative purposes only
and are not intended to be, nor shall they constitute, a de�nitive statement of your compensation package. Calculation totals may differ on account of rounding. Any questions regarding your compensation package should be
directed to your employer.
COMPackage Corp © 2010 This Total Compensation Report was created by © COMPackage Corp. http://www.compackage.com
Base Pay
$40,000 +
Other Cash Benefits
$1,600 +
Company-Paid Benefits
$19,579 =
Total Compensation
$61,179
Pay
Base Pay Total $ 40,000
Salary $ 40,000
Other Income Total $ 1,600
Holiday Bonus $ 200
Annual Bonus $ 500
Performance Bonus $ 900
Total Compensation Package
(Your Base Pay and Company-Paid Bene�ts)
$40,000
Your Base
Pay
+
$21,179
Company-Paid
Bene�ts and Cash
=
$61,179
Your Total
Compensation
53% Your Company-Paid Benefits and Cash represent
an additional 53% of Your Base Pay!
Additional Company Perks
Free Coffee Service
Annual Holiday Gala
Annual Company Picnic
Insurance Benefits Total $ 6,917 $ 4,703
Health Insurance $ 5,770 $ 2,885
Dental Insurance $ 577 $ 288
Vision Insurance $ 344 $ —
Short-Term Disability $ 133 $ —
Long-Term Disability $ 93 $ —
A�ac Short-Term Disability $ — $ 680
A�ac Personal Accident $ — $ 522
A�ac Cancer $ — $ 328
Retirement Benefits Total $ 3,425 $ 4,175
Social Security $ 2,579 $ 2,579
Medicare $ 596 $ 596
401K $ 250 $ 1,000
Time Off Benefits Total $ 3,320 $ —
PTO $ 3,320 $ —
Mandated Benefits Total $ 1,747 $ —
Federal Unemployment $ 56 $ —
State Unemployment $ 179 $ —
Worker’s Compensation $ 1,512 $ —
Special Benefits Total $ 4,170 $ —
Free Parking $ 2,400 $ —
Fun Fridays Food Fests $ 250 $ —
Cell/PC/Technology $ 600 $ —
Education/Training $ 920 $ —
Benefits Total $ 19,579 $ 8,878
69% Your Company-Paid Benefits represent 69%
of your Total Benefits!
89624_ch11_hr_385-415.indd 395 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
396 Part 4 Implementing Compensation and Security
OASDI has become nearly universal for work performed in the United States, cov-
ering approximately 96 percent of the American workforce. Workers excluded from
coverage include railroad workers and civil service employees covered by their own
systems as well as farmers, domestic workers, and the self-employed whose earnings do
not meet certain minimum requirements.20 The Social Security program is supported
by means of a tax levied against an employee’s earnings that must be matched by the
employer in each pay period. In 2017, the tax was 6.2 percent, though the percentage
can vary depending on economic conditions.21 The tax revenues are used to pay three
major types of benefits: (1) retirement benefits, (2) disability benefits, and (3) survivors’
benefits. Because of the continual changes that result from legislation and administrative
rulings, as well as the complexities of making determinations of an individual’s rights
under social security, we will describe these benefits only in general terms.
Retirement Benefits
To qualify for retirement benefits, a person must have reached retirement age and be
fully insured. A fully insured person has earned 40 credits—a maximum of 4 credits a
year for 10 years, based on annual earnings, a figure adjusted annually. The amount of
monthly social security retirement benefits is based on earnings, adjusted for inflation,
over the years an individual is covered by social security. Under Social Security guide-
lines, an individual’s full retirement age depends on the year of his or her birth. Workers
born after 1928 can collect full benefits once they’ve earned 40 credits, about 10 years
of work.22 Because of longer life expectancies, for those born after that date, the age to
collect full benefits has been gradually raised to age 67.
Disability Benefits under Social Security
Social Security pays benefits to people who cannot work because they have a medi-
cal condition that is expected to last at least a year or result in death. Although some
government programs provide money to people with partial disabilities or short-term
disabilities, Social Security does not.23 In addition to disability payments to the worker,
certain members of an employee’s family, such as spouses over 62 and dependent chil-
dren, may qualify for benefits based on the person’s work history. The Social Security
Administration uses a five-step process to decide if a worker is disabled and eligible to
collect benefits. Highlights in HRM 2 outlines this process.
Survivor’s Benefits
Survivors’ benefits represent a form of life insurance paid to members of a deceased per-
son’s family who meet the eligibility requirements.24 Survivors’ benefits can be paid only
if the deceased worker had credit for a certain amount of time spent in work covered by
social security. The exact amount of work credit needed depends on the worker’s age at
death. As with other benefits discussed earlier, the amount of benefit survivors receive
is based on the worker’s lifetime earnings doing work covered by social security.
Medicare
The Social Security Administration also administers the Medicare program, which is
funded by a separate payroll tax. Retired people age 65 or older are eligible for Medi-
care, which includes both medical and hospital insurance and prescription drug cover-
age.25 The program helps with the cost of health care, but it does not cover all medical
expenses or the cost of most long-term care.26 A portion of the payroll taxes is paid by
89624_ch11_hr_385-415.indd 396 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Who Is Eligible to Collect Disability Payments under the Social Security Act?
If you experience a disability, the Social Security Administra-
tion in conjunction with a state agency will use the following
five-step process to determine if you are eligible to collect
benefits.
1. Are you working? If you are working and your
earnings average more than a certain amount each
month, you will generally not be considered disabled.
The amount changes each year. If you are not work-
ing, or your monthly earnings average this amount
or less, a state agency will then look at your medical
condition.
2. Is your medical condition “severe”? For the state
agency to decide that you are disabled, your medical
condition must significantly limit your ability to do
basic work activities—such as walking, sitting, and
remembering—for at least one year. If your medical
condition is not that severe, the state agency will not
consider you disabled. If your condition is that severe,
the state agency goes on to step 3.
3. Is your medical condition on the List of Impair-
ments? The state agency has a list of impairments
that describes medical conditions that are consid-
ered so severe that they automatically mean that
you are disabled as defined by law. If your condition
(or combination of medical conditions) is not on this
list, the state agency looks to see if your condition is
as severe as a condition that is on the list. If the sever-
ity of your medical condition meets or equals that of
a listed impairment, the state agency will decide that
you are disabled. If it does not, the state agency goes
on to step 4.
4. Can you do the work you did before? At this step, the
state agency decides if your medical condition prevents
you from being able to do the work you did before. If it
does not, the state agency will decide that you are not
disabled. If it does, the state agency goes on to step 5.
5. Can you do any other type of work? If you cannot
do the work you did in the past, the state agency
looks to see if you would be able to do other work. It
evaluates your medical condition, your age, education,
past work experience, and any skills you may have
that could be used to do other work. If you cannot do
other work, the state agency will decide that you are
disabled. If you can do other work, the state agency
will decide that you are not disabled.
Source: Disability Benefits, SSA Publication No. 05-10029 (Washington,
DC: U.S. Social Security Administration, 2010), www.ssa.gov/diplan
/dqualify5.htm.
Highlights in HRM2
397
workers and matched by their employers. In 2017, workers and their employers each
paid 1.45 percent on every dollar of salary or wages paid.27 Medicare is also financed
in part by monthly medical premiums deducted from social security recipient’s checks.
One of the concerns employers have about Medicare relates to the eligibility age.
As explained, it is currently 65, but legislators are considering increasing the age to 67
as they have done with social security.28
11.2b Unemployment Insurance
Unemployment insurance is part of a national program administered by the U.S. Depart-
ment of Labor under the Social Security Act and coordinated with the states. It protects
workers who lose their jobs through no fault of their own. Employers entirely foot the
bill for this benefit via a payroll tax, which can vary widely by the state. The rates firms
pay also depend upon their layoff records, or what is referred to as their experience rat-
ings. Generally speaking, a firm with a record of laying off large numbers of employees
will have to pay a higher rate than those that do not. This means that companies most
likely to lay people off will have to pay a larger share of unemployment taxes that end up
89624_ch11_hr_385-415.indd 397 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
398 Part 4 Implementing Compensation and Security
going to their former workers. In addition, these tax rates will vary from one state to the
next. As you can see, unemployment taxes are something HR managers must consider
when they make decisions about where to locate their operations and hire employees
as well as lay them off.
Employees who are laid off are generally eligible for up to 26 weeks of unemployment
insurance benefits during their unemployment. During periods of high unemployment,
the federal government has sometimes passed legislation extending the amount of weeks
employees can collect benefits.
Workers eligible for unemployment benefits must submit an application for unem-
ployment compensation with their state employment agencies, register for available
work, and be willing to accept any suitable employment that may be offered to them.
However, the term “suitable” gives individuals considerable discretion in accepting or
rejecting job offers. The amount of compensation workers are eligible to receive, which
also varies by the state, is determined by a worker’s previous wage rate and length of
employment.
11.2c Workers’ Compensation Insurance
Workers’ compensation insurance is a system whereby employers purchase private or
state-funded insurance to cover employees injured at work. Workers’ compensation law
is governed by statutes in every state. Therefore, specific laws vary with each jurisdic-
tion. For example, each state has different regulations governing the amount and dura-
tion of lost income benefits, including provisions for medical and rehabilitation services
and how the state system is administered. Workers’ compensation laws also provide
death benefits to surviving spouses and dependents.
Workers’ compensation insurance covers workers injured on the job, whether
injured on the workplace premises, elsewhere, or in an auto accident while on busi-
ness. It does not matter if the employee was at fault. In addition, workers that collect
compensation cannot sue their employers for their injuries unless gross negligence by
the employer led to the injury or the employer lacked the level of insurance required by
law. Workers’ compensation insurance also covers certain work-related illnesses. Before
any workers’ compensation claim will be allowed, the work-relatedness of the disability
must be established. Also, the evaluation of the claimant by a physician trained in occu-
pational medicine is an essential part of the claim process.
While employers in all states pay “workers’ comp” insurance, the amount they pay—
through payroll taxes—varies. Like with unemployment insurance rates, the rate an
employer pays depends upon its experience rating, which is based on various factors
including the company’s frequency and severity of employee injuries (referred to as the
company’s experience rating). Not surprisingly, organizations will strive to have good
safety records (see Chapter 12 on creating a safe work environment) in order to pay a
lower payroll tax rate.
11.2d COBRA Insurance
We first discussed COBRA in Chapter 3. Recall that the Consolidated Omnibus Budget
Reconciliation Act mandates that employers make health care coverage—at the same
rate the employer would pay—available to employees, their spouses, and their depen-
dents on termination of employment, death, or divorce.29 The coverage must be offered
for 18 to 36 months, depending on qualifying guidelines.
workers’ compensation
insurance
State-mandated insur-
ance provided to work-
ers to defray the loss
of income and cost of
treatment due to work-
related injuries or illness.
89624_ch11_hr_385-415.indd 398 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
399Chapter 11 Employee Benefits
11.2e Benefits Provided by the Patient Protection
and Affordable Care Act
In 2010, the Patient Protection and Affordable Care Act (PPACA) became law. This act,
along with the Health Care and Education Reconciliation Act of 2010, comprises the
health care reform platform that went into effect in 2014.
The key provisions all employers need to consider are the following:
• Firms that employ 50 or more people who work 30 or more hours per week but
do not offer them health insurance will have to pay a penalty to the government.
Also, firms with 200 full-time employees are required to automatically enroll new
full-time employees in their health care plans.
• Employers must offer coverage for their employee’s children until they turn 26.
• No copays or deductibles can be charged to employees and their dependents for
certain “essential” health care services, which are generally preventive care related.
• Lifetime dollar limits on key health care benefits are not allowed.
• Employees cannot lose their insurance coverage solely because of an honest mistake
they or their employers made on their insurance applications.
As of 2017, the Affordable Care Act was being contested by President Trump
and the Republican congressional leaders. They insisted that they would retain the
crucial part of the law: the promise that people can buy insurance even if they’ve
had illnesses in the past. However, some of the proposed changes included opt-out
provisions that would not require insurers to cover a standard, minimum package
of benefits to everyone. Insurers would also be able to charge more for people who
have prior illness.30
11.2f Benefits Provided under the Family
and Medical Leave Act
The Family and Medical Leave Act (FMLA) applies to employers having 50 or more
employees during 20 or more calendar workweeks in the current or preceding year.31
A covered employer must grant an eligible employee up to a total of 12 workweeks of
unpaid leave in a 12-month period for one or more of the following reasons:
• Birth of and care for a newborn child
• Adoption or foster care placement of a child
• Care for an immediate family member (spouse, child, or parent) with a serious
medical condition
• Serious health condition of the employee32
Under the FMLA, employees are eligible to take leave if they have worked for
their employers for at least 12 months, have at least 1,250 hours of service, and
work in organizations that have 50 or more employees within a 75-mile radius. An
employer can require that the need for medical leave be supported by a certifica-
tion issued by a health care provider. Highlights in HRM 3 shows the federally
required poster for the FMLA. In studying the poster, note the other important
stipulations, such as enforcement and unlawful acts, which are of direct concern
to managers.
89624_ch11_hr_385-415.indd 399 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
400 Part 4 Implementing Compensation and Security
Parents of newborn
children are guar-
anteed 12 weeks of
unpaid leave under
the provisions of the
Family and Medical
Leave Act.
O
JO
Im
ag
es
L
td
/
A
la
m
y
This law affects an organization’s benefits program in several of its provisions: It
mandates continuation of medical coverage, it prohibits loss of accrued benefits, it
provides for restoration of benefits after leave, it permits substitution of paid leave
and vacation during leave, it makes communication and notice compulsory, and
it prohibits waiver of benefits. On return from FMLA leave, an employee must be
restored to his or her original job or to an “equivalent” job. Equivalent jobs are those
identical to the original job in terms of pay, benefits, and other employment terms
and conditions.
Employers need to check their state employee-leave laws as well. Some states pro-
vide rights to employees that are greater than those provided by the FMLA. Wisconsin
is an example. Two states—California and New Jersey—require employers to provide
paid leave to parents following childbirth or adoption.33
In January 2008, Congress passed the National Defense Authorization Act that
amended the FMLA to provide eligible employees working for covered employers
new leave rights related to military service. Specifically, an eligible employee who is
the spouse, son, daughter, parent, or next of kin of a covered service member who
is recovering from a serious illness or injury sustained in the line of duty on active
duty is entitled to up to 26 weeks of leave in a single 12-month period to care for
the service member. Importantly, managers or supervisors with legal or administra-
tive questions regarding the FMLA are advised to seek assistance from HR before
proceeding with an employee’s FMLA leave request. Also, employers cannot penalize
employees for requesting or taking FMLA leave in an employment action including
hiring, promotion, transfer, training, disciplinary action, or awards for attendance (not
missing work).
89624_ch11_hr_385-415.indd 400 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Your Rights under the Family and Medical Leave Act
Employers are required to provide employees with this
general notice about FMLA, which must be posted at the
worksite (or electronically) and published in an employee
handbook or given to new employees upon hire.
Highlights in HRM3
EMPLOYEE RIGHTS AND RESPONSIBILITIES
UNDER THE FAMILY AND MEDICAL LEAVE ACT
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
For additional information or to file a complaint:
1-866-4US-WAGE (1-866-487-9243) TTY: 1-877-889-5627
www.dol.gov/whd
U.S. Department of Labor | Wage and Hour Division
WHD Publication 1420 Revised April 2016
WHD Publication 1420 Revised January 2009
Leave Entitlement
Eligible employees who work for covered employers can take up to
12 weeks of unpaid, job-protected leave in a 12-month period for
the following reasons:
• The birth of a child or placement of a child for adoption or
foster care
• To bond with a child (leave must be taken within 1 year of the
child’s birth or placement)
• To care for the employee’s spouse, child, or parent, who has a
qualifying serious health condition
• For the employee’s own qualifying serious health condition
that makes the employee unable to perform the employee’s job
• For qualifying exigencies related to the foreign deployment of
a military member who is the employee’s spouse, child, or
parent
An eligible employee who is a covered servicemember’s spouse,
child, parent, or next of kin may also take up to 26 weeks of FMLA
leave in a single 12-month period to care for the servicemember with
a serious injury or illness.
An employee does not need to use leave in one block. When it is
medically necessary or otherwise permitted, employees may take
leave intermittently or on a reduced schedule.
Employees may choose, or an employer may require, use of
accrued paid leave while taking FMLA leave. If an employee
substitutes accrued paid leave for FMLA leave, the employee must
comply with the employer’s normal paid leave policies.
Benefits and Protections
While employees are on FMLA leave, employers must continue
health insurance coverage as if the employees were not on leave.
Upon return from FMLA leave, most employees must be restored
to the same job or one nearly identical to it with equivalent pay,
benefits, and other employment terms and conditions.
An employer may not interfere with an individual’s FMLA rights
or retaliate against someone for using or trying to use FMLA leave,
opposing any practice made unlawful by the FMLA, or being
involved in any proceeding under or related to the FMLA.
Eligibility Requirements
An employee who works for a covered employer must meet three
criteria in order to be eligible for FMLA leave. The employee must:
• Have worked for the employer for at least 12 months
• Have at least 1,250 hours of service in the 12 months before
taking leave*
• Work at a location where the employer has at least 50
employees within 75 miles of the employee’s worksite
*Special “hours of service” requirements apply to airline flight
crew employees.
Requesting Leave
Generally, employees must give 30-day advance notice of the need
for FMLA leave. If it is not possible to give a 30-day notice, an
employee must notify the employer as soon as possible and,
generally, follow the employer’s usual procedures.
Employees do not have to share a medical diagnosis, but must
provide enough information to the employer so it can determine if
the leave qualifies for FMLA protection. Sufficient information
could include informing an employer that the employee is or will
be unable to perform his or her job functions, that a family member
cannot perform daily activities, or that hospitalization or continuing
medical treatment is necessary. Employees must inform the
employer if the need for leave is for a reason for which FMLA
leave was previously taken or certified.
Employers can require a certification or periodic recertification
supporting the need for leave. If the employer determines that the
certification is incomplete, it must provide a written notice
indicating what additional information is required.
Employer Responsibilities
Once an employer becomes aware that an employee’s need for
leave is for a reason that may qualify under the FMLA, the
employer must notify the employee if he or she is eligible for
FMLA leave and, if eligible, must also provide a notice of right and
responsibilities under the FMLA. If the employee is not eligible,
the employer must provide a reason for ineligibility.
Employers must notify its employees if leave will be designated as
FMLA leave, and if so, how much leave will be designated
as FMLA leave.
Enforcement
Employees may file a complaint with the U.S. Department of
Labor, Wage and Hour Division, or may bring a private lawsuit
against an employer.
The FMLA does not affect any federal or state law prohibiting
discrimination or supersede any state or local law or collective
bargaining agreement that provides greater family or medical leave
rights.
Note: Other federally required posters are reproduced in Chapters 3, 9, and 12M.
89624_ch11_hr_385-415.indd 401 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
402 Part 4 Implementing Compensation and Security
11.3 Work-Life Discretionary Benefits
Eddie Bauer, an outdoor clothing and equipment supplier, offers its employees take-
out dinners and one paid “balance day” off a year. eBay sets aside spaces at its San Jose,
California, campuses as prayer and meditation rooms where employees can “decom-
press” during the workday. Ben & Jerry’s employees have access to a nap room. At Mitre,
a nonprofit researcher, employees can take up to a week of paid time off to help with
scouting trips or volunteer projects. These organizations, like many others, are seeking
to create a work-life organizational climate that allows employees to balance their work
with their personal needs. Why? One research report shows that 60 percent of employ-
ees prefer to have work-life balance benefits, and that employees are 20 percent more
engaged in and satisfied with their job when they’ve hit the right work-life balance.34
And work-life balance programs not only retain talent but can be a factor in attract-
ing and recruiting potential employees. And as Millennials trend toward dominating
the job market, attracting this demographic means adjusting programs to include the
kinds of benefits they want, like 401(k) matching, onsite nutritionists, corporate-wide
community events and challenges, the ability to work from home, and opportunities to
volunteer or contribute to social causes.35 To appeal to this broad demographic group
and other employees concerned about the environment, some companies have begun
offering their employees “green” benefits. Clif Bar & Company gives employees $6,500
toward the purchase of a hybrid car.
11.3a Child and Elder Care
Consider this: Every week, child care providers in the United States look after nearly
11 million children under the age of 5 whose parents are working.36 This, combined
with increased employment of women with dependent children, illustrates the unprec-
edented demand for child care arrangements. Some employers, such as Fel-Pro, Merck,
Syntex, Baptist Hospital of Miami, and Ben & Jerry’s, promote onsite or near-site child
care centers. Employer-sponsored dependent care spending accounts allow employees
to set aside a portion of their pay before taxes to care for a dependent child. If a mom
has to travel with a breastfeeding child, Zillow will pay for them to ship their breast
milk back home; and Facebook provides $4,000 in “Baby Cash” to employees with a
newborn.37
Similarly, according to a study of AARP and the National Alliance for Caregiv-
ing, today more than 39 million Americans are caring, unpaid, for an elderly parent.
The term elder care, as used in the context of employment, occurs when an employee
provides care to an elderly relative while remaining actively at work. The majority of
caregivers are women.38
Beyond the loss of organizational productivity and higher employee costs, a grow-
ing concern of employers is the negative effects of caregiving on employee health. Not
surprisingly, caregivers in the workforce suffer higher levels of physical, emotional, and
financial stress since they find it difficult to respond to the demands of balancing work
and family.39 To help employees meet the challenges of caregiving, organizations may
offer elder care counseling, educational fairs and seminars, printed resource materials,
support groups, and special flexible schedules and leaves of absence.40 Employers may
also band together for better elder care. The Partnership for Elder Care—a consortium
of American Express, JPMorganChase, Philip Morris, and other companies—use the
resources of the New York City Department of Aging, a public information and aging
elder care
Care provided to an
elderly relative by an
employee who remains
actively at work.
What additional types
of benefits would be
most attractive to you?
LO 3
89624_ch11_hr_385-415.indd 402 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
403Chapter 11 Employee Benefits
support agency. In addition, an increasing number of employers supply or subsidize
temporary care for employees’ elders and children when their regular arrangements
fall through so these employees can come to work. A benefit such as this is referred to
as a backup care program. Home Depot, for example, offers a backup care program to
its employees. The program provides a discount to employees who need spur-of-the-
moment care so they can come to work.
11.3b Payment for Time Not Worked
The “payment for time not worked” category of benefits includes paid vacations,
bonuses given in lieu of paid vacations, payments for holidays not worked, paid
sick leave, military and jury duty, and payments for absence due to a death in the
family or other personal reasons. Figure 11.1 showed that these benefits consti-
tute another large expenditure—7 percent—of an employer’s total payroll costs, on
average.41
Paid time off is not mandatory in the United States, though. This contrasts sharply
with the policies other countries around the world, including Austria, Peru, Spain, the
United Arab Emirates, Finland, and Italy, where employees must be given 30 paid days
off annually.42 In fact, until recently China was the only other country that did not offer
any paid time off. Now the United States is the only one.43
Vacations with Pay
Despite the fact that vacation pay is not required in the United States, most employers
generally agree that vacations are essential to the well-being of an employee. Research
shows that workers who use their vacation time are more productive and less prone to
job-related burnout.44 Exactly how much paid vacation time firms provide their employ-
ees varies by a firm’s industry, locale, size, and other factors. Employees in the United
States who work for large companies often get 10 paid days of vacation a year. To qualify
for longer vacations of 3, 4, or 5 weeks, one may expect to work for 7, 15, and 20 years,
respectively.
Most companies require their employees to take their vacation days by the end of
the year or forfeit them (“use it or lose it”). An increasing number of employees say
they are too busy at work to take all the vacation days they are allotted. According to
one survey, Americans hand back more than $21 billion in unused vacation dollars to
their employers each year.45 Some companies, however, let their employees “roll over” at
least some of their vacation days to the following year. Of those that do, the average they
allow workers to roll over is 20 days, according to a survey by the Society for Human
Resources Management.46
Paid Holidays
The federal government recognizes 10 legal public holidays, which are shown in
Figure 11.3. However, private employers are not required to offer employees these days
off or pay employees for them. Many companies do, though. Organizations that have to
remain open during holidays (emergency services providers such as hospitals, transpor-
tation companies, etc.) often pay employees who work on holidays extra pay for doing
so. Many organizations also give workers an additional 2 or 3 days off at their discretion
for personal use.
Of course, not all employees celebrate all the holidays their companies recog-
nize, particularly Christian holidays. A variety of arrangements can be made for these
backup care program
A benefit program
whereby an employer
provides or subsidizes
temporary care for its
employee’s elders or
children when their
regular arrangements fall
through.
89624_ch11_hr_385-415.indd 403 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
404 Part 4 Implementing Compensation and Security
• New Year’s Day, January 1
• Martin Luther King, Jr. Day, the third Monday in January
• President’s Day, the third Monday in February
• Memorial Day, the last Monday in May
• Independence Day, July 4
• Labor Day, the first Monday in September
• Columbus Day, the second Monday in October
• Veterans Day, November 11
• Thanksgiving Day, the fourth Thursday in November
• Christmas Day, December 25
Federally Recognized Holidays in the United StatesFigure 11.3
Although competing with large companies on the basis
of benefits might seem impossible, small business own-
ers still have some other “cards” they can play that bigger
companies might not offer. For example, if they cannot
offer extensive benefits, it is not uncommon for small
businesses to offer stock or shares in the company to
their employees. Flexible work hours and arrangements
are also a low-cost strategic benefit small businesses can
offer their employees without first having to cut through
a lot of corporate red tape.
Another way small businesses can augment their
benefits programs is by partnering with companies that
offer discount programs to employers’ workers. Price
Optical offers a discount program for employers who
are not able to provide vision benefits for their employ-
ees. Discounts for homeowners, automobile and group
life insurance, dental and chiropractic care, health club
Small Business Application
memberships, and weight-control programs are other
benefits small businesses can procure on behalf of their
employees as well as tickets to entertainment events and
product discounts.
Finally, if a small business wants its employees
to have benefits but does not want to either provide
or administer them, it can contract with a professional
employer organization (PEO). Recall from Chapter 1 that a
PEO is typically a larger company that for a fee takes over
the management of a smaller company’s HR tasks and can
provide employees with benefits that small companies
cannot afford.
Sources: Gwen Moran, “The Business of Better Benefits,” Entrepreneur
(May 2011), http://www.workforce.com; Vicki Powers, “Green Benefits
Helpful in a Down Economy,” Workforce Management (May 2009),
http://www.workforce.com; “Cost Shifting Initiatives,” Broad Reach Ben-
efits [blog] (February 15, 2011), http://broadreachbenefits.com/blog.
Creative Benefit Strategies Can Help Small Businesses Compete
employees. For example, they might be allowed to work the holidays and then take off
other days as a substitute. Or they might be allowed to use personal days, vacation days,
or, as a last resort, take the holidays they do not want to work off without pay. Another
trend is to give all employees a certain number of paid days they can use as holidays
whenever they want.
Sick Leave
There are several ways in which employees may be compensated during periods when
they are unable to work because of illness or injury. Most public employees, as well as
many in private firms, receive a set number of sick leave days each year to cover such
absences. Where permitted, sick leave that employees do not use can be accumulated
89624_ch11_hr_385-415.indd 404 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
405Chapter 11 Employee Benefits
to cover prolonged absences. Accumulated vacation leave may sometimes be used as a
source of income when sick leave benefits have been exhausted. Some employers also
make group insurance that provides income protection during a long-term disability
available. As discussed earlier in the chapter, worker’s compensation partially reim-
burses the income employees lose during absences resulting from job-related injuries.
Sabbaticals
A sabbatical is paid (or unpaid) time away from a job for 4 or more weeks that employ-
ees take off to renew themselves before returning to work. Historically, sabbaticals have
been associated with academia, but in the 1960s, companies, including McDonald’s,
began to adopt them. Fortune magazine has added sabbaticals to their criteria for nam-
ing the 100 Best Companies to Work For.47 For example, Epic Systems Corporation, a
Wisconsin-based health care software company, offers employees a paid 4-week sabbati-
cal to pursue their creative talents after 5 years at the company. For small businesses that
need to temporarily cut their payroll costs, unpaid sabbaticals can be a short-term alter-
native to layoffs and a way to reward valuable employees who never previously imagined
they would be able to take a significant amount of time off to pursue other activities.
Severance Pay
Severance pay is a one-time payment sometimes given to an employee who is being
involuntarily terminated. The severance pay may cover only a few days’ wages or wages
for several months. The pay received usually depends on the employee’s years of service.
Employers that are downsizing often use severance pay as a means of lessening the nega-
tive effects of unexpected termination of employees. Other triggers for severance pay
include job elimination, voluntary separation programs, or refusal of a reassignment or
relocation. Employees who quit do not ordinarily receive severance pay. An employee
who accepts severance pay is generally required to sign a release agreement waiving his
or her right to take any kind of legal action against the company. To avoid legal action,
companies sometimes offer severance pay to employees fired for cause.
Supplemental Unemployment Benefits
While not required by law, in cyclical industries, unemployment compensation is aug-
mented by supplemental unemployment benefits (SUBs) paid for by employers. The min-
ing industry is an example. If the price of a metal being mined falls sharply (which is not
an uncommon occurrence), the firms mining the metal often slow down production until
the price rises again. SUBs help attract employees to industries such as this. The amount
of the benefits is generally determined by an employee’s length of service and wage rate.
11.3c Life Insurance
One of the oldest and most popular employee benefits is group term life insurance,
which provides death benefits to beneficiaries and may also provide accidental death
and dismemberment benefits. The premium costs are normally paid by the employer,
with the face value of the life insurance equal to two times the employee’s yearly wages.
These programs frequently allow employees to purchase additional amounts of insur-
ance for nominal charges. In addition, many companies allow employees to purchase life
insurance for their spouses and dependents via their company plans. This is an attractive
benefit because the rates employees pay for the insurance is often lower when purchased
through their company plans.
sabbatical
Paid (or unpaid) time
away from a job for 4 or
more weeks employees
take off to renew them-
selves before returning
to work.
severance pay
A one-time payment
sometimes given to an
employee who is being
involuntarily terminated.
supplemental
unemployment
benefit (SUB)
A plan that enables an
employee who is laid
off to draw weekly ben-
efits from the employer,
which draws from a
fund created for this
purpose, in addition to
state unemployment
compensation.
89624_ch11_hr_385-415.indd 405 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
406 Part 4 Implementing Compensation and Security
11.3d Long-Term Care Insurance
Long-term care insurance is designed to pay for nursing home and other medical-related
costs during old age. Because the workforce is aging and people are living longer, a small
but growing number of employers are finding that long-term care insurance can be a stra-
tegic benefit to attract and retain employees, particularly workers caring for older parents
and relatives. Many of these employees have experienced firsthand the challenges of car-
ing for aging loved ones who were unable to prepare properly for their long-term needs.
11.3e Other Benefits and Services
Credit Unions
Credit unions exist in many organizations to serve the financial needs of employees and
attract potential employees. They offer a variety of deposits as well as other banking ser-
vices and make loans to their members. Although the employer may provide office space
and a payroll deduction service, credit unions are operated by the employees under
federal and state legislation and supervision. Because credit unions are owned by their
members, they often charge lower banking fees and offer loans at lower rates. Generally,
credit unions are located near an employer’s facility, making it fast and convenient for
employees to do their banking there. The service employees receive is also often more
personal than the service they would get from bigger banks.
Educational Assistance
Proactive employers view educational assistance programs, also called tuition aid, as a
strategic business tool to support talent management and develop leadership.48 To be eli-
gible for tuition aid, an employee may have to meet a length of service requirement and
show that classes taken relate to job performance or organizational career development.
Employers may pay full or partial tuition costs plus related expenses such as books and
supplies. For example, PwC offers its employees $1,200 per year for student loan debt
reimbursement.49
Figure 11.4 shows some of the other benefits firms are offering employees that
we have not already mentioned in this chapter. In summary, although benefits are
expensive, they can be a good way for a company to differentiate itself, strengthen its
employer “brand” to attract top talent, and retain that talent. However, both small and
large employers need to implement their benefit plans strategically as well as continually
monitor their effectiveness and costs.
Retirement Programs
Airline pilots are legally required to retire at age 65. However, for most other professions
in the United States there is no law mandating a retirement age. Therefore, whether
an employee elects to retire depends on various factors such as personal and financial
condition and health, other family obligations, the extent to which he or she receives
satisfaction from work, and the ability to meet changing job demands.
Preretirement and Phased Retirement Programs
Although most people eagerly anticipate retirement, many of them find that it requires
a major financial lifestyle adjustment. Employers sometimes offer preretirement plan-
ning seminars and workshops to help make employees aware of the kinds of adjustments
they may need to make when they retire. The topics covered can include pension plans,
Are companies today
offering sufficient
retirement benefits?
LO 4
89624_ch11_hr_385-415.indd 406 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
407Chapter 11 Employee Benefits
health insurance coverage, Social Security and Medicare, personal financial planning,
wellness and lifestyles, and the process of adjusting to being around one’s spouse 24/7!
To help older workers get used to the idea of retirement, some organizations experi-
ment with “retirement rehearsal.” Polaroid, for example, offers employees an oppor-
tunity to try out retirement through an unpaid 3-month leave program and allows
its employees to gradually cut their hours before retirement. This kind of program is
referred to as phased retirement. Formal phased retirement programs are common in
other countries but rarer in the United States because employees often need to get their
health care coverage through their employers until they turn 65. At this point they can
go on Medicare. However, as more babyboomers want to continue to work and employ-
ers seek to retain them, the number of phased retirement programs is expected to grow.
11.3f Pension Plans
Pensions reward employees for their years of service with a company by providing them
with income when they retire. However, like with other discretionary benefits, the deci-
sion whether to offer a pension plan is up to the employer.
Types of Pension Plans
There are two major ways to categorize pension plans: (1) according to contributions
made by the employer and (2) according to the amount of pension benefits to be paid.
In a contributory plan, contributions to a pension plan are made jointly by employees
and employers. In a noncontributory plan, the contributions are made solely by the
employer. When pension plans are classified by the amount of pension benefits to be
paid, there are two basic types: defined benefit plan and defined contribution plan.
Under a defined benefit plan,50 the amount an employee is to receive on retirement is
specifically set forth. The amount employees collect is usually based on their years of
service, average earnings during a specific period of time, and age at time of retirement.
While a variety of formulas exist for determining pension benefits, the one used most
often is based on the employee’s average earnings (usually over a 3- to 5-year period
immediately preceding retirement), multiplied by the number of years of service with
the organization. A deduction is then made for each year the retiree is under age 65. For
phased retirement
A program that allows its
employees to gradually
cut their hours before
retiring.
contributory plan
A pension plan in which
contributions are made
jointly by employees and
employers.
noncontributory plan
A pension plan in which
contributions are made
solely by the employer.
defined benefit plan
A pension plan in which
the amount an employee
is to receive on retire-
ment is specifically set
forth.
• Business travel insurance
• Time off for children’s school activities
• Work-at-home arrangements/telecommuting
• Onsite cafeterias and take-home food
• Onsite laundry, dry cleaning, and hair-dressing services
• Employee referral bonuses
• Donation-gift matching
• Adoption assistance
• Onsite nurses and doctors
• Shuttle services for commuters
• Onsite massage services
• College scholarships
Other Benefits Organizations Offer EmployeesFigure 11.4
89624_ch11_hr_385-415.indd 407 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
408 Part 4 Implementing Compensation and Security
example, an employee with a 4-year preretirement annual salary of $55,000 and 30 years
of service may receive a yearly retirement payment of $23,000.
A defined contribution plan establishes the basis on which an employer will con-
tribute to the pension fund. The contributions may be made through profit sharing,
thrift plans, matches of employee contributions, employer-sponsored individual retire-
ment accounts (IRAs), and various other means. The amount of benefits employees
receive on retirement is determined by the funds accumulated in their accounts and how
well the investments purchased with the funds have grown over time. In other words,
the amount employees get is not certain. As a result, these plans pose more financial risk
for employees than defined benefit plans do. However, employers have come to prefer
them because they do not have to shoulder all of the responsibility of funding them. In
1989, 39 percent of private sector employees were covered by defined benefit pension
plans. Today, only 18 percent are.51 Even Fortune 100 firms are scrapping their defined
benefit plans. According to a survey by the HR consulting firm Watson Wyatt, today
most Fortune 100 companies now offer their new salaried employees only a defined
contribution plan.
401(k) Savings Plans
401(k) plans started to become extremely popular as an employee-savings vehicle begin-
ning in the 1980s. This is a type of defined contribution plan named after section 401(k)
of the Internal Revenue Code. The plan allows employees to save through payroll deduc-
tions that reduce their taxable income and have their contributions matched by the
employer. Usually the employer matches the employee contributions at the rate of 25 to
50 cents for every worker dollar contributed.
401(k) plans have been widely embraced by companies as a replacement for costly
defined benefit pension funds. Today, about 60 percent of households nearing retirement
defined contribution
plan
A pension plan that
establishes the basis on
which an employer will
contribute to the pen-
sion fund.
Many baby boomers
in the United States
are continuing to work
long past the tradi-
tional retirement
age of 65.
ra
co
rn
/S
hu
tt
er
st
oc
k.
co
m
89624_ch11_hr_385-415.indd 408 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
409Chapter 11 Employee Benefits
have 401(k)-type of accounts.52 However, unlike defined benefit pension plans, which
guarantee payments based on years of service, the 401(k) plan guarantees nothing. The
return depends entirely on how much money goes into the plan, the rate of return on
the investments purchased with the funds contributed, and, with stock-funded plans,
the price of the company’s stock. Economic downturns and stock market crashes take
a heavy toll on 401(k) accounts.
Cash Balance Pension Plans
Along with 401(k) saving plans, a significant development in pension planning has been
cash balance saving plans.53 With cash balance plans, the employer makes a yearly con-
tribution into an employee’s retirement savings account.54 The contributions are based
on a percentage of the employee’s pay—typically 4 percent. Additionally, the employee’s
account earns annual interest, often tied to the 30-year Treasury rate. For example, an
employee earning $35,000 a year would receive a yearly contribution of $1,400 to his
or her account. After a year, the account would receive an interest credit of around
5 percent. Employees can normally roll their account balances into a personal IRA
should they change jobs.
Federal Regulation of Pension Plans
Private pension plans are subject to federal regulation, including vesting rules, under
ERISA.55 Vesting is a process that guarantees pension-plan participants will receive
their pensions when they reach retirement age, regardless of their employment status
at that time. In other words, the benefits cannot be revoked, even if the employee no
longer works for the company. Vesting prevents companies from laying off employ-
ees before they retire so they are unable to collect their pensions. Under ERISA, all
pension plans must provide employees with vested rights to their accrued benefits
after they meet a certain minimum years of service, say, 5 years. So, for example, an
employee leaves the company prior to the minimum years of service, the person would
lose any money the firm contributed to his or her pension. However, employers can
pay out a departing employee’s vested benefits if the present value of the benefit is
small.
The Employee Retirement Income Security Act also requires minimum funding
standards be followed to ensure pension benefits will be available to employees when
they retire.56 Currently the pensions of many older companies are underfunded, how-
ever. GM, Chrysler, U.S. Steel, and Delta Air Lines are among them. In addition, many
state and local governments are facing billions in pension shortages due to the last
recession. Equally worrisome are the number of pension plans in danger of failing
altogether.
The Employee Retirement Income Security Act also created the Pension Benefit
Guaranty Corporation (PBGC), a federal government agency. The PBGC ensures that
if a plan is terminated, guaranteed minimum benefits are paid to participants. When
companies go through bankruptcy proceedings, they often try to cancel their pension
obligations, leaving employees to rely on the PBGC for retirement income. Unfortu-
nately for retirees, the monthly pension payments from the PBGC are often significantly
less than those promised under a company’s original retirement plan. Another growing
concern is that the PBGC—which has a $34 billion deficit of its own that has been grow-
ing annually—will be unable to meet its financial obligations.57 The PBGC is supported
by premiums paid by employers. To improve its funding situation, the agency has asked
Congress to allow it to increase the premiums it charges employers.
Vesting
A guarantee of accrued
pension benefits to par-
ticipants at retirement
age, regardless of their
employment status at
that time.
89624_ch11_hr_385-415.indd 409 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
410 Part 4 Implementing Compensation and Security
11.3g Domestic Partner Benefits
More employers are granting benefits to employees who establish domestic partner-
ships, which can consist of both same-sex and unmarried opposite-sex couples. Viacom,
Gannett Company (publisher of USA Today), Levi Strauss, Silicon Graphics, Warner
Bros., and Stanford University are among the many organizations that offer benefits to
domestic partners of employees. Most Fortune 500 companies now provide benefits to
same-sex partners.
The definition of a domestic partnership varies from company to company. How-
ever, Apple Computer’s definition, which is as follows, is typical: A domestic partner,
the company says, is “a person over age 18 who shares living quarters with another adult
in an exclusive, committed relationship in which the partners are responsible for each
other’s common welfare.” Employers that offer domestic partnership coverage typically
require employees to sign an “Affidavit of Domestic Partnership” attesting that they meet
certain conditions such as the following:
• A minimum age requirement
• A requirement that the couple live together
• A specification of financial interdependence
• A requirement that the relationship be a permanent one
• A requirement that each not be a blood relative58
Organizations that offer benefits to domestic partners are simply extending current
benefits, normally full medical and dental plans, to all employees.
HR decisions about domestic partnership benefits need to take into account local
and state laws and how they are being implemented. For example, several California
cities, including Berkeley, Los Angeles, Oakland, and San Francisco, have adopted an
ordinance that requires all companies with city contracts to extend domestic partner
benefits to their employees who reside in the city or who work on contracts for the city.59
The cost of health care programs has become
the major concern in the area of employee benefits.
Organizations are taking a variety of approaches to
contain health care costs. Included among them are
the relative preference shown for each benefit by
managers and employees, the estimated cost of each
benefit and the total amount of money available for
the entire benefits package, and how it compares to
the competition. Through committees and surveys, a
benefits package can be developed to meet employees’
needs. Through the use of flexible benefit, or cafeteria
plans, employees are able to choose the benefits that
are best suited for their individual needs.
LO 1
Summary
Nearly a quarter of the benefits package that
employers provide is legally required. These benefits
include employer contributions to social security,
unemployment insurance, workers’ compensation
insurance, and state disability insurance. Social secu-
rity taxes collected from employers and employees are
used to pay three major types of benefits: (1) retire-
ment benefits, (2) disability benefits, and (3) survi-
vors’ benefits. Payroll deductions and taxes are also
legally required to fund the government program,
Medicare. Medicare provides medical and hospital
insurance and prescription drug coverage for people
over 65.
LO 2
89624_ch11_hr_385-415.indd 410 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
411Chapter 11 Employee Benefits
Included in the category of benefits that
involve payments for time not worked are vacations
with pay, paid holidays, sick leave, and severance pay.
Some companies offer their employees paid sabbati-
cals. A typical practice in the United States is to give
employees 10 days of vacation leave and 10 holidays.
In addition to vacation time, most employees, par-
ticularly in white-collar jobs, receive a set number of
sick leave days. A one-time payment of severance pay
may be given to employees who are being terminated.
Other types of discretionary benefits that employers
typically provide include EAPs, counseling services,
educational assistance plans, child care, and elder care.
For most professions in the United States,
there is no mandatory retirement age. The topics
LO 3
LO 4
covered can include pension plans, health insurance
coverage, Social Security and Medicare, personal
financial planning, wellness and lifestyles, and the
general process of adjusting to retirement. Whether
to offer a pension plan is the employer’s prerogative.
However, once a plan is established, it is then sub-
ject to federal regulation under ERISA to ensure that
benefits will be available when an employee retires.
Two pension plans are available—defined benefit
and defined contribution. With a defined benefit
plan, the amount an employee receives on retirement
is based on years of service, average earnings, and
age at time of retirement. Two of the most significant
trends are the growth of 401(k) plans and cash bal-
ance pension plans, both of which are defined con-
tribution plans.
backup care program
contributory plan
defined benefit plan
defined contribution plan
disease management programs
elder care
employee assistance programs
(EAPs)
flexible benefits plans (cafeteria
plans)
health maintenance organizations
(HMOs)
high-deductible health insurance
plan (HDHP)
noncontributory plan
phased retirement
preferred provider organization (PPO)
sabbatical
severance pay
supplemental unemployment
benefit (SUB)
vesting
wellness programs
workers’ compensation insurance
Key Terms
Many organizations are concerned about the
rising cost of employee benefits and ques-
tion their value to the organization and to the
employees. In your opinion, what benefits are
of greatest value to employees? To the organi-
zation? Why?
Employers are required by law to provide spe-
cific benefits to employees. What laws mandate
benefits to employees, and what are the provi-
sions of those laws?
LO 1
LO 2
Working in teams of 3 or 4, assume your team
was hired as a benefits consultant to a small
business having 50 to 60 employees. What ben-
efits do you believe this employer should offer,
given limited resources? Justify your reasons
for offering these benefits.
Describe 401(k) pension plans, listing their
advantages and disadvantages.
LO 3
LO 4
Discussion Questions
89624_ch11_hr_385-415.indd 411 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Understanding Employer Benefit Programs
or other employers in your area. Once the information
is gathered, be able to identify (1) each benefit offered,
(2) what the benefit provides the employee, (3) employee
eligibility (if required), and (4) how the benefit is paid for
(employer, employee, or a combination of both). Compare
benefit packages. Be prepared to discuss your findings with
the class.
This exercise will help you more fully understand the benefits
discussed in this chapter. Additionally, you will explore, in
detail, the benefits and services offered by your employer
and other employers in your area.
Assignment
Working in teams of four to six individuals, obtain infor-
mation on the benefits package offered by your employer
Adobe’s Family-Friendly Benefits: An Unexpected Backlash
Adobe Consulting Services (ACS), a provider of HR
software application systems, prides itself on the variety
of benefits it offers employees. In addition to health care,
pension, and vacation benefits, the company also offers
an attractive family-friendly benefits package includ-
ing flexible schedules, child and elder care assistance,
counseling services, adoption assistance, and extended
parental leave. Unfortunately, sometimes the company’s
progressive work-life policy experiences a backlash from
several employees, as the following case illustrates.
In March 2011, Teresa Wheatly was hired by
Adobe as a software accounts manager. With excellent
administrative and technical skills, plus 4 years of expe-
rience at Adaptable Software, Adobe’s main competitor,
Teresa became a valued addition to the company’s mar-
keting team. As a single mother with two grade-school
children, Teresa received permission to take Fridays off.
She was also allowed to leave work early or come in late
to meet the demands of her children. Teresa is one of
11 software account managers at Adobe.
The problem for Adobe, and particularly for Janis
Blancero, director of marketing, began in the fall of
2011. On September 15, Dorothy McShee, citing
“personal reasons”—which she refused to discuss—
requested a 4-day workweek for which she was will-
ing to take a 20 percent cut in pay. When Dorothy
asked for the reduced work schedule, she sarcastically
quipped, “I hope I don’t have to have kids to get this
time off.” On October 3, Juan Batista, a world-class
marathon runner, requested a flexible work hours
arrangement to accommodate his morning and
afternoon training schedule. Juan was registered to
run the London, England, marathon in May 2013. Just
prior to Juan’s request, Susan Woolf asked for and was
granted an extended maternity leave to begin after the
birth of her first child in December.
If these unexpected requests are not enough,
Blancero has heard comments from senior account
managers about how some employees seem to get
“special privileges,” while the managers work long
hours that often require them to meet around-the-
clock customer demands. Janis has adequate reason to
believe that there is hidden tension over the company’s
flexible work hours program. Currently, Adobe has no
formal policy on flexible schedules. Furthermore, with
the company’s growth in business combined with the
increasing workload of software account managers
and the constant service demands of some custom-
ers, Blancero realized that she simply cannot grant all
the time-off requests of her employees.
Questions
1. Do managers like Janis Blancero face a more
complicated decision when evaluating the per-
sonal requests of employees versus evaluating
employees’ individual work performance? Explain.
2. a. Should Adobe establish a policy for granting
flexible work schedules? Explain.
b. If you answered yes, what might that policy contain?
3. If you were Janis Blancero, how would you resolve
this dilemma? Explain.
CASE STUDY 1
412
89624_ch11_hr_385-415.indd 412 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
413Chapter 11 Employee Benefits
CASE STUDY Evaluate the Work-Life Climate in Your Company2
What is the quality of the work-life environment in
your company? The following survey provided by the
Work and Family Connection will help provide a “case
analysis” of the climate in your organization. Answers
to the 20 questions will provide clear insights about
your company’s position in the work-life area.
Agree or Disagree with the Following
Statements
1. My manager or supervisor treats my work-life
needs with sensitivity.
2. It is usually easy for me to manage the demands
of both work and home life.
3. My career path at this company is limited because
of the pressure of home life demands.
4. My job at this company keeps me from maintain-
ing the quality of life I want.
5. My manager or supervisor is supportive when
home life issues interfere with work.
6. My manager or supervisor focuses on results,
rather than the time I am at my desk.
7. My manager or supervisor has a good under-
standing of flexible work hour practices.
8. If I requested a flexible work arrangement, my
manager or supervisor would support me.
9. My manager or supervisor is often inflexible or
insensitive about my personal needs.
10. I believe my manager or supervisor treats me with
respect.
11. My manager or supervisor allows me informal
flexibility as long as I get the job done.
12. My manager or supervisor tends to treat us like
children.
13. My manager or supervisor seldom gives me praise
or recognition for the work I do.
14. My manager or supervisor seems to care about
me as a person.
15. I would recommend this company to others.
16. The work I do is not all that important to this
company’s success.
17. If I could find another job with better pay, I would
leave this organization.
18. If I could find another job where I would be
treated with respect, I would take it.
19. If I could find another job where I could have
more flexibility, I would take it.
20. I am totally committed to this company.
For a perfect score, you should answer “Disagree”
to questions 3, 4, 9, 12, 13, 16, 17, 18, and 19 and
“Agree” to all the rest, 1, 2, 5, 6, 7, 8, 10, 11, 14, 15,
and 20.
To score, begin by giving yourself 20 points. Then
deduct one point for every “wrong” response from the
total score.
If your score is 18 to 20: Congratulations! Your
organization is leading the nation in flexibility and
supportiveness.
If your score is 14 to 17: Your organization is
probably more supportive and flexible than most, but
you have room to grow.
If your score is 11 to 13: You could be open to
other job offers in the race for talent among employees.
If your score is 10 or less: Your managers will need
help to manage the twenty-first-century workforce.
Source: Used with permission of the Work and Family Connection,
5195 Beachside Drive, Minnetonka, Minnesota 55343; 1-800-487-
7898, or http://www.workfamily.com.
89624_ch11_hr_385-415.indd 413 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
414 Part 4 Implementing Compensation and Security
1. “Glassdoor’s 5 Job Trends to Watch in 2016,” Glassdoor team
(January 12, 2016).
2. “Top 20 Employee Benefits & Perks,” Glassdoor Team
(February 3, 2016).
3. “Total Rewards” is all of the tools available to an employer
that may be used to attract, motivate, and retain employees.
Total rewards include everything the employee perceives to
be of value resulting from the employment relationship.
4. Mark Harbeke, “5 Workplace Committees to Form and Their
Business Benefits,” Inc.com (January 5, 2011), http://www
.inc.com/guides/2011/01/5-workplace-committees-to-form
-and-their-business-benefits.html.
5. Barbara A. W. Eversole, Donald L. Venneberg, and Cindy
L. Crowder, “Creating a Flexible Organizational Culture to
Attract and Retain Talented Workers Across Generations,”
Advances in Developing Human Resources 14, no. 4 (2012):
607–25.
6. Dianna L. Stone, Diana L. Deadrick, Kimberly M. Lukaszewski,
and Richard Johnson, “The influence of technology on the future
of human resource management,” Human Resource Management
Review 25, no. 2 (June 2015): 216–31.
7. Stephen Miller, “Employees Value Benefits, Don’t Understand
Costs,” Society for Human Resource Management (April 20,
2011).
8. Kat Greene, “Providence Health to Pay $352M To End ERISA
Suit,” Law360 (October 24, 2016).
9. JoAnn Davis, “Communication: It Is More Than Distributing
Information,” Employee Plan Benefits Review 62, no. 1 (Ju1y
2007): 5.
10. Jeremy Smerd, “Tweeting Benefits in 140 Characters or
Less,” Workforce Management (August 2009), http://www
.workforce.com.
11. Robert Crawford, “Samsung Evolves Benefits Strategy,”
Employee Benefits (November 5, 2014), https://www.employ-
eebenefits.co.uk/issues/november-2014/samsung-evolves
-benefits-strategy/.
12. Jeffrey A. Buck, “The Looming Expansion And Transformation
of Public Substance Abuse Treatment under the Affordable Care
Act,” Health Affairs 30, no. 8 (2011): 1402–10.
13. Bahaudin G. Mujtaba and Frank J. Cavico, “A Review of
Employee Health and Wellness Programs in the United
States,” Public Policy and Administration Research 355, no. 4.
(2013): 1–16.
14. Corinne Marie Karuppan, “Employer-Based Coverage and
Medical Travel Options: Lessons for Healthcare Managers,”
Journal of Healthcare Management 59, no. 3 (May/June 2014):
210–23.
15. Kimberly J. Reid, Kathleen M. Aguilar, Eric Thompson, and
Ross M. Miller, “Value-Based Benefit Design to Improve
Medication Adherence for Employees with Anxiety or
Notes and References
Depression,” American Health & Drugs Benefits 8, no. 5 (July-
August 2015): 263–71.
16. “The Fortune 100 and Their Fitness and Wellness Programs,”
Health Fitness Revolution (August 15, 2015), http://www
.healthfitnessrevolution.com/fortune-100-fitness-wellness
-programs/.
17. Jodi M. Jacobson and Paul Sacco, “Employee Assistance
Program Services for Alcohol and Other Drug Problems:
Implications for Increased Identification and Engagement in
Treatment,” The American Journal on Addictions, 21, no. 5
(2012): 468–75.
18. Charlotte Huff, “Employers Collaborate to Custom-
ize Health Coverage,” Workforce (October 18, 2010), http:
//www.workforce.com/2010/10/18/employers-collaborate-to
-customize-health-coverage/.
19. “Social Security Administration Fact Sheet,” (April 4, 2017),
https://www.ssa.gov/news/press/factsheets/basicfact-alt .
20. Since the Social Security Act is continually subject to amend-
ment, readers should refer to the literature provided by the
nearest Social Security office for the most current details per-
taining to the tax rates and benefit provisions of the act.
21. “Contribution and Benefit Base,” Social Security Administra-
tion (March 28, 2017), https://www.ssa.gov/oact/cola/cbb
.html.
22. “How You Earn Credits,” Social Security Administration
(2017), https://www.ssa.gov/pubs/EN-05-10072 .
23. As an example, the Social Security Administration manages the
Supplemental Security Income (SSI) program, which makes
payments to people with low incomes who are age 65 or older
or are blind or have disabilities. However, SSI is not paid for by
social security taxes but by U.S. Treasury’s general funds.
24. “How You Earn Credits,” Social Security Administration
(2017), https://www.ssa.gov/pubs/EN-05-10072 .
25. Ibid.
26. You may think that Medicaid and Medicare are the same.
Actually, they are two different programs. Medicaid is a state-
run program that provides hospital and medical coverage for
people with low income and little or no resources. Each state
has its own rules about who is eligible and what is covered
under Medicaid. Some people quality for both Medicare and
Medicaid. For more information about the Medicaid pro-
gram, contact your local medical assistance agency, social
services, or welfare office.
27. “Tax Topic 751–Social Security and Medicare Withholding
Rates,” Internal Revenue Service (March 28, 2017), https://
www.irs.gov/taxtopics/tc751.html.
28. “Raising Medicare Age Could Cost Employers $4.5 Billion,”
Workforce Management (March 2011), http://www.workforce
.com.
29. COBRA, P.L. 99–272, 100 Stat. 82 (1986).
89624_ch11_hr_385-415.indd 414 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
415Chapter 11 Employee Benefits
30. Margot Sanger-Katz, “Republican Health Proposal Would
Undermine Coverage for Pre-Existing Conditions,” The New
York Times (April 4, 2017).
31. FLMA, P.L. 103–3, 107 Stat. 6 (1993).
32. A “serious health condition” means an illness, injury, impair-
ment, or physical or mental condition that involves any
period of incapacity or treatment connected with patient
care.
33. Janet Walsh, “Americans Value Moms, but Policies Don’t,”
Huffington Post (May 5, 2011), http://www.huffingtonpost
.com.
34. Natalie Hackbarth, Aaron Brown, and Henry Albrecht,
“Workplace Well-Being: Provide Meaningful Benefits to
Energize Employee Health, Engagement, and Performance,”
Quantum Workplace (2016), www.limeade.com/content
/uploads/2016/12/Workplace-Well-Being_FINAL .
35. Ibid.
36. “Child Care in America: 2016 State Fact Sheets,” Child
Care Aware of America (2016), www.usa.childcareaware.
org/wp-content/uploads/2016/07/2016-Fact-Sheets-Full
-Report-02-27-17 .
37. “Top 20 Employee Benefits & Perks,” Glassdoor Team
(February 3, 2016).
38. “Caregiving in the U.S.: 2015 Report,” AARP and National
Alliance for Caregiving (June 2015), www.aarp.org/content
/dam/aar p/ppi/2015/careg iving-in-t he-unite d-st ates
-2015-report-revised .
39. Ibid.
40. Bill Mulcany, “Why You Should Be Caring for Your Caregiv-
ers,” Workspan (June 2007): 37.
41. Bureau of Labor Statistics. U.S. Department of Labor, Employer
Costs for Employee Compensation (September 2013).
42. “Mandatory Time Off around the Globe,” Open Forum
(May 2, 2011), http://www.openforum.com.
43. Rebecca Ray, Milla Sanes, and John Schmidt, “No-Vacation
Nation Revisited,” Center for Economic and Policy Research
(2013).
44. Oi Ling Siu, Cary L. Cooper, and David R. Phillips, “Interven-
tion Studies on Enhancing Work Well-Being, Reducing Burn-
out, and Improving Recovery Experiences among Hong Kong
Health Care Workers and Teachers,” International Journal of
Stress Management 21, no. 1 (2014).
45. Catherine A. Allen, “Burned Out?” Life Science Leader
(May 3, 2011), http://www. lifescienceleader.com.
46. “No One in the Private Sector Gets Unlimited Vacation and
Sick Leave,” Politifact (January 28, 2011), http://www.politifact
.com.
47. Catherine A. Allen, “Burned Out?” Life Science Leader
(May 3, 2011), http://www.lifescienceleader.com.
48. Dorothy Martin, “Tuition Assistance Programs as a Strategic
Investment: The Importance of Measurement,” Society for
Human Resource Management (September 1, 2016), https://
www.shrm.org/hr-today/trends-and-forecasting/special
-reports-and-expert-views/pages/dorothy-martin.aspx.
49. “Top 20 Employee Benefits & Perks,” Glassdoor Team
(February 3, 2016).
50. “Types of Retirement Plans,” United States Department of
Labor (March 28, 2017), https://www.dol.gov/general/topic
/retirement/typesofplans.
51. Wiatrowski, William J., “The Last Private Industry Pension Plans:
A Visual Essay,” Bureau of Labor Statistics. Rep. 2012. Print.
52. E. S. Browning, “Boomers Find 401(k) Plans Fall Short,” Wall
Street Journal (February 19, 2011), Print.
53. Jessica Marquez, “Cash-Balance Plans Make a Comeback,”
http//www.workforce.com/section/02/feature/25/16/23
/index.html.
54. “Cash Balance Pension Plans,” U.S. Department of Labor
(January 2014),. www.dol.gov/sites/default/files/ebsa/about
-ebsa/our-activities/resource-center/faqs/faq_consumer
_cashbalanceplans .
55. ERISA, P.L. 93-406, 88 Stat. 829 (1974).64
56. Carolyn Hirschman, “Overseeing Pension Management,” HR
Magazine 49, no. 7 (July 2004): 66.
57. Michael A. Fletcher, “Pension Benefit Guarantee Corp. Run-
ning $34 Billion Deficit,” Washington Post (November 2012).
58. Pay and Leave Administration, U.S. Office of Personal Man-
agement, http://www.opm.gov.
59. “Domestic Partner Benefits: Facts and Background,” Employee
Benefit Research Institute (February 2009), www.ebri.org/pdf
/publications/facts/0209fact .
89624_ch11_hr_385-415.indd 415 11/17/17 4:59 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
416
CHAPTER 12
Promoting Safety and Health
Learning Outcomes
After studying this chapter, you should be able to
Summarize the general provisions of the Occupa-
tional Safety and Health Act (OSHA).
Describe the measures managers and employees
can take to create a safe work environment.
LO 1
LO 2
Identify ways to control and eliminate various
on-the-job health hazards.
Describe the programs organizations utilize to build
better health among their workforces.
LO 3
LO 4
da
nc
ho
oa
le
x/
G
et
ty
Im
ag
es
89624_ch12_hr_416-447.indd 416 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
417Chapter 12 Promoting Safety and Health
C
lose to 90 percent of all companies in the United States use some form of health
and safety program. Safety programs are plans of action to prevent accidents or
occupational diseases. Health programs are plans of action to encourage the
health and wellness of employees. Health and safety programs ensure that employees
stay safe and healthy so they can continue to work. This lowers costs for the company.
However, current research shows that health programs not only save the company
money through fewer sick days, workers’ compensation, disability payments, and replac-
ing employees who are injured or killed, but these programs also increase employee
productivity. “When you give people the tools and the opportunity to be physically
and mentally healthier, it’s not just that they’re more likely to be at work,’ said Lamar
Pierce, professor at Washington University. “Those employees are also more likely to be
productive.”1
12.1 Safety and Health: It’s the Law
Consider the facts shown in Figure 12.1.
The total impact of worker injury and death is roughly $140 billion per year. See
the breakdown of where these costs occur in Figure 12.2.
Providing workers a safe and healthy environment is not just good for business
and the right thing to do. It is the law. In 1970 Congress passed the Occupational Safety
and Health Act (OSHA).2 The mission of OSHA is to “assure the safety and health of
America’s workers by setting and enforcing standards; providing training, outreach,
and education; establishing partnerships; and encouraging continual improvements in
workplace safety and health” (see Figure 12.3).
Despite the figures in the infographic, the act has been very effective in reducing
the number of injuries resulting in lost work time, the incident rate of specific injuries
such as back problems, and the number of job-related deaths. Today, most employees
report that the safety conditions in their organizations are very good.
12.1a OSHA’s Coverage
OSHA covers all private sector employees and public employees in state and local
governments. Self-employed workers are not covered by the law. Federal agencies are
required to establish and maintain a safety and health program that is monitored by
OSHA.
12.1b OSHA Standards
One of the responsibilities of OSHA is to develop and enforce mandatory job safety
and health standards. These standards cover the workplace, machinery and equipment,
materials, power sources, processing, protective clothing, first aid, and administrative
requirements. To comply with OSHA, employers need to become familiar with those
Why do you think
so many safety and
health laws have been
enacted?
LO 1
89624_ch12_hr_416-447.indd 417 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
418 Part 4 Implementing Compensation and Security
Job Safety Statistics, 2016Figure 12.1
The Human Toll
estimated non-fatal workplace
illnesses each year
427,000
estimated fatal workplace
illnesses each year
53,000
Nearly 11
American workers
die on the job
each day.
Christopher, 22, died
when a crane fell on
him.
Teresa, 42, died while
working in extreme heat.
John, 56,
died after
being struck
by metal
doors.
120
80
60
40
20
0
-20
4,000 a year.
That’s about
Nearly 12,900 U.S. workers are injured
on the job each day—about
4,700,000 a year.
Source: © 2016 National Safety Council. http://www.nsc.org/measure/pages/jse-infographic.aspx.
standards that are applicable to their establishments and to ensure that their employees
use personal protective gear and equipment when required for safety. Employers can be
cited and fined if they do not comply with OSHA standards.3
OSHA can begin standards-setting procedures on its own initiative or on petition
from other parties, including the Secretary of Health and Human Services (HHS) and
the National Institute for Occupational Safety and Health (NIOSH). Other bodies that
may also initiate standards-setting procedures are state and local governments and any
nationally recognized standards-producing organization, employer, or labor representa-
tive (see Figure 12.4). NIOSH, however, is the major source of standards. As an agency
of the Department of Health and Human Services, it is responsible for conducting
research on various safety and health problems, including the psychological factors
involved.4
89624_ch12_hr_416-447.indd 418 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
419Chapter 12 Promoting Safety and Health
Source: © 2016 National Safety Council. http://www.nsc.org/measure/pages/jse-infographic.aspx.
$140 billion
Total economic cost of worker
injury and death, including:
$45.7 billion
Wage and productivity losses
$44.7 billion
Administrative expenses
$31.7 billion
Medical costs
$46 billion
Estimated cost of fatal workplace
illnesses
$12 billion
Estimated cost of nonfatal workplace
illnesses
Cost of Worker Injury and DeathFigure 12.2
1. Setting and
enforcing standards
2. Providing training
3. Outreach
4. Education
5. Establishing
partnerships
6. Continual
improvement
The MISSION of
OSHA MissionFigure 12.3
89624_ch12_hr_416-447.indd 419 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
420 Part 4 Implementing Compensation and Security
12.1c Enforcing OSHA
Standards
OSHA is authorized to conduct work-
place inspections, issue citations, and
impose penalties on employers. In
recent years OSHA has stepped up its
enforcement activities. In 2016, OSHA
conducted 31,948 federal inspections,
and 43,105 state plan inspections.5
Figure 12.5 shows the most frequently
violated OSHA standards resulting from
these federal and state inspections.
Workplace Inspections
Under OSHA, “upon presenting appro-
priate credentials to the owner, operator,
or agent in charge,” an OSHA compli-
ance officer is authorized to do the
following:
• Enter without delay and at reasonable times any factory, plant, establishment, con-
struction site or other areas, workplace, or environment where work is performed
by an employee of an employer; and
• Inspect and investigate during regular working hours, and at other reasonable times,
and within reasonable limits and in a reasonable manner, any such place of employ-
ment and all pertinent conditions, structures, machines, apparatus, devices, equip-
ment and materials therein, and to question privately any such employer, owner,
operator, agent, or employee.6
Because it slowed them
down, the workers who
built New York’s skyline
in the early 1900s were
actually discouraged
from using safety
devices such as ropes
to prevent falls. Not
surprisingly, a dispro-
portionate number
of workers fell to their
deaths.
SS
PL
/G
et
ty
Im
ag
es
The national institute for
occupational safety
and health
Employers
State
and Local
Governments
P
e
ti
ti
o
n
Pe
titi
on
Petition Pe
tit
ion
OSHA
Sets new
standards
“NIOSH”
(The major
source)
“HHS”
The secretary
of health
and human
services
OR
OSHA can
begin standards-
setting on its
own initiative!
How OSHA Standards are SetFigure 12.4
89624_ch12_hr_416-447.indd 420 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
421Chapter 12 Promoting Safety and Health
Citations and Penalties
OSHA citations may be issued immediately following the inspection or later by mail.
Citations tell the employer and employees which regulations and standards are alleged
to have been violated and the amount of time allowed for their correction. The employer
must post a copy of each citation at or near the place the violation occurred for three
days or until the violation is abated, whichever is longer.
Under the act, OSHA may cite the following violations and propose the following
penalties:
• Other-Than-Serious: A violation that has a direct relationship to job safety and
health but one unlikely to cause death or serious physical harm. Such a penalty
could be as low as $100; however, OSHA may propose a penalty of up to $12,675
for each violation depending upon the circumstances.
• Serious: A violation for which there is substantial probability that death or serious
physical harm could result and the employer knew, or should have known, of the
hazard. The average penalty imposed by OSHA for serious violations is now $3,000
to $4,000. The maximum penalty is $12,675 for each violation.
• Willful: A violation that the employer intentionally and knowingly commits or a
violation that the employer commits with plain indifference to the law. OSHA may
propose penalties of up to $126,749 for each violation.7
Source: https://www.osha.gov/oshstats/commonstats.html. Accessed April 11, 2017.
1.
Fall
protection
Top 9
2.
Hazard
communication
3.
Scaffolding
construction
4.
Respiratory
protection
5.
Control of
hazardous
energy
6.
Powered
industrial
trucks
7.
Ladders,
construction
8.
Machinery
9.
Electrical,
wiring
methods
most frequently
violated
OSHA
standards in
2016!
Most Frequently Violated OSHA StandardsFigure 12.5
89624_ch12_hr_416-447.indd 421 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
422 Part 4 Implementing Compensation and Security
If a willful violation results in the death of an employee, OSHA can assess penalties
up to $250,000 for an individual or $500,000 for a corporation, imprisonment of up to
6 months, or both. The largest ever fine by OSHA was an $82 million penalty levied in
2009 against the oil giant BP after a 2005 explosion killed 15 workers and injured 170
others at a BP refinery in Texas.8 OSHA can adjust any penalty downward depending on
the employer’s good faith (such as demonstrating effort to comply with the act), history
of previous violations, and size of business.9 However, the agency can adjust penalties
upward, too. OSHA’s Severe Violator Enforcement Program (SVEP) identifies employers
with repeated, serious citations, and, among other things, subjects them to increased,
multi-worksite inspections and higher penalties.
An example of the SVEP in action was when OSHA issued 57 citations for safety
violations and $3.4 million in fines to a Japanese-owned auto manufacturing company
called Sunfield Incorporated in 2016. The fines were in response to Sunfield’s failure to
disconnect machinery from a power supply, failure to prevent sudden movement before
maintenance/service, and failure to train workers in operating machine presses safely.10
12.1d OSHA Consultation Assistance
Besides helping employers identify and correct specific hazards, OSHA can help employ-
ers develop and implement effective workplace safety and health programs that empha-
size preventing worker injuries and illnesses.
Onsite Consultation
OSHA provides free onsite consultation services. Consultants from the state government
or private contractors help employers identify hazardous conditions and determine cor-
rective measures. Employers also may receive training and education services.11 No
citations are issued in connection with a consultation, and the consultant’s files cannot
be used to trigger an OSHA inspection. Additionally, the consultations may qualify
employers for a 1-year exemption from routine OSHA inspections.
Cooperative Programs
Voluntary, cooperative relationships among employers, employees, unions, and OSHA
can be a useful alternative to traditional OSHA enforcement procedures. There are four
specific cooperative programs—alliances, strategic partnerships, voluntary protection
programs, and the Safety and Health Achievement Recognition Program.12 Figure 12.6
describes the roles of each cooperative program.
12.1e Responsibilities and Rights under OSHA
Both employers and employees have certain responsibilities and rights under OSHA.
We will discuss only those that relate directly to the management of human resources.
Employers’ Responsibilities and Rights
In addition to providing a hazard-free workplace and complying with the applicable
standards, employers must inform all their employees about the safety and health
requirements of OSHA. Specific employer responsibilities are listed in OSHA’s publica-
tion All about OSHA and illustrated in Highlights in HRM 1. Employers are also required
to keep certain records and to compile and post an annual summary of work-related
89624_ch12_hr_416-447.indd 422 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
423Chapter 12 Promoting Safety and Health
injuries and illnesses. From these records, organizations can compute their incidence
rate—the number of injuries and illnesses per 100 full-time employees during a given
year. The standard formula for computing the incidence rate is shown by the following
equation, in which 200,000 equals the base for 100 full-time workers who work 40 hours
a week, 50 weeks a year:
Incidence rate Number of injuries and illnesses 200,000
Total hours worked by all employees during period covered
5
3
It is the employer’s responsibility to provide employees with protective equipment
when necessary and ensure it is used. Employers must also provide their workers with
safety training and be prepared to discipline employees for failing to comply with safety
rules. In addition, employers must not discriminate against employees who exercise
their rights under the act by filing complaints with OSHA.13
Employees’ Responsibilities and Rights
Employees are required to comply with all applicable OSHA standards, to report haz-
ardous conditions, and to follow all employer safety and health rules and regulations,
including those prescribing the use of protective equipment. Workers have a right to
demand safe and healthy conditions on the job without fear of punishment. They also
have many rights that pertain to requesting and receiving information about safety and
health conditions.14 For example, most states—and federal law—require that employers
provide information to employees about the hazardous chemicals they handle. Com-
monly known as right-to-know laws, these statutes require employers and manufac-
turers to give employees information about the toxic and hazardous substances they
could come into contact with on the job and what the health risks related to those
substances are.
right-to-know laws
Laws that require
employers to advise
employees about the
hazardous chemicals
they handle.
Cooperative programs:
1.
Alliances
Organizations
collaborate with
OSHA to improve
safety health.
Long-term
Agreements
between
Employers and
OSHA to improve
safety and health.
Try to establish a
cooperative
relationship
between Employers
and OSHA
(the middle-men)
A certi�cation
program that
recognizes small
employers with
exemplary
achievements in
workplace safety
and health.
2.
Strategic
partnership
programs (SPPs)
3.
Voluntary
protection
programs (VPPs)
4.
Safety and health
achievement
recognition
program (SHARP)
There are 3:
1. Star
2. Merit
3. Demonstration
Cooperative ProgramsFigure 12.6
89624_ch12_hr_416-447.indd 423 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
What Are My Responsibilities under the OSH Act?
If you are an employer the OSH Act covers, you must:
�� Meet your general duty responsibility to provide a
workplace free from recognized hazards that are caus-
ing or are likely to cause death or serious physical
harm to employees, and comply with standards, rules,
and regulations issued under the act.
�� Be familiar with mandatory OSHA standards and
make copies available to employees for review upon
request.
�� Inform all employees about OSHA.
�� Examine workplace conditions to make sure they con-
form to applicable standards.
�� Minimize or reduce hazards.
�� Make sure employees have and use safe tools and
equipment (including appropriate personal protec-
tive equipment) and that such equipment is properly
maintained.
�� Use color codes, posters, labels, or signs when needed
to warn employees of potential hazards.
�� Establish or update operating procedures and com-
municate them so that employees follow safety and
health requirements.
�� Provide training required by OSHA standards (hazard
communication, lead, etc.).
�� Report to the nearest OSHA office within eight hours
of any fatal accident or one that results in the hospital-
ization of three or more employees.
�� Keep OSHA-required records of work-related injuries
and illnesses, and post a copy of the totals from the
last page of OSHA No. 200 during the entire month of
February each year. (This applies to employers with 11
or more employees.)
�� Post, at a prominent location within the workplace, the
OSHA poster (OSHA 2203) informing employees of their
rights and responsibilities. (In states operating OSHA-
approved job safety and health programs, the state’s
equivalent poster and/or OSHA 2203 may be required.)
�� Provide employees, former employees, and their
representatives access to the Log and Summary of
Occupational Injuries and Illnesses (OSHA 200) at a
reasonable time and in a reasonable manner.
�� Provide access to employee medical records and
exposure records to employees or their authorized
representatives.
�� Cooperate with the OSHA compliance officer by fur-
nishing names of authorized employee representa-
tives who may be asked to accompany the compliance
officer during an inspection. (If none, the compli-
ance officer will consult with a reasonable number
of employees concerning safety and health in the
workplace.)
�� Not discriminate against employees who properly
exercise their rights under the act.
�� Post OSHA citations at or near the worksite involved.
Each citation, or copy thereof, must remain posted
until the violation has been abated, or for three work-
ing days, whichever is longer.
�� Abate cited violations within the prescribed period.
If you are an employee the OSH Act covers, you should:
�� Read the OSHA poster at the job site.
�� Comply with all applicable OSHA standards.
�� Follow all employer safety and health rules and regula-
tions, and wear or use prescribed protective equip-
ment while engaged in work.
�� Report hazardous conditions to the supervisor.
�� Cooperate with the OSHA compliance officer conduct-
ing an inspection if he or she inquires about safety
and health conditions in your workplace.
�� Exercise your rights under the act in a responsible
manner.
Source: OSH Act, OSHA Standards, Inspections, Citations and Penalties
(Washington, DC: Occupational Safety and Health Administration, May
20, 2011), http://www.osha.gov.
Highlights in HRM1
89624_ch12_hr_416-447.indd 424 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
425Chapter 12 Promoting Safety and Health
What are some of the
safety programs at your
college?
LO 212.2 Promoting a Safe Work Environment
Typically, a firm’s HR department or the industrial relations department is responsible
for its safety program. The HR department typically coordinates the safety communi-
cation and training programs, maintains safety records required by OSHA, and works
closely with managers and supervisors in a cooperative effort to make the program a
success.
12.2a Creating a Culture of Safety
Lower-level operational managers and supervisors have traditionally been the bed-
rock for encouraging health and safety in their organizations.15 Indeed, one study by
the American Institute of Plant Engineers showed that there was a direct correlation
between an increase in the commitment to safety by managers and a decrease in acci-
dents (see Figure 12.7).
However, firms today try to create a “culture” of safety within their organizations
that goes beyond managing operational processes and reducing accidents.16 A culture
of safety exists when everyone within an organization consciously works to improve its
safety and health conditions. HR managers play a key role in this effort. “HR execu-
tives should be the point persons on creating and making sure that a corporate safety
culture exists,” Carolyn Merritt, the late chairperson of the U.S. Chemical Safety Board
(CSB) once noted. “These are the people who have their fingers on the culture pulses of
the organization.”17 The Highlights in HRM 2 will help you assess your knowledge and
awareness of safety and health issues.
Some companies periodically conduct fitness-for-duty evaluations on their cur-
rent employees. Fitness-for-duty evaluations are similar to prehire physical exams but
can be done any time during employment. They determine an employee’s physical,
mental, and emotional fitness and are most often used for safety or security-sensitive
positions. For example, federal rules require nuclear-plant workers to undergo random
fitness-for-duty evaluations on the job to determine if they have been using alcohol or
drugs.
The Key Role of the Supervisor
Like HR managers, supervisors play a key role in
their employer’s safety programs. One of a super-
visor’s major responsibilities is to communicate
to an employee the need to work safely.18 Proper
work procedures, the use of protective clothing and
devices, and potential hazards should be explained
thoroughly.19 Moreover, supervisors must continu-
ally observe employees at work, reinforce safe prac-
tices, and immediately correct behaviors that are
unsafe.20
Proactive Safety Training Programs
In certain occupational areas, safety and health
training is legally required. For example, employ-
ers regulated by a federal agency called the Pipeline
and Hazardous Materials Safety Administration
fitness-for-duty
evaluations
Evaluations randomly
conducted to determine
an employee’s physical,
mental, and emotional
fitness for a job.
OSHA regulations
mandate the use of
protective equipment
in recognized hazard-
ous conditions.
M
ar
ce
l T
ho
m
as
/G
et
ty
Im
ag
es
89624_ch12_hr_416-447.indd 425 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
426 Part 4 Implementing Compensation and Security
are legally required to provide their employees with environmental-safety protection
training. When training is mandated, employers must keep accurate records of all
employee education. Violations can incur criminal penalties.
Most organizations have a safety awareness program that entails the use of several
different media. Safety lectures and courses and printed and audiovisual material are
common.21 The use of games has also become an interactive way to provide employees
with safety training. Costco and Amazon.com, for example, have successfully used a
product called Safety Bingo to motivate employees on a daily basis to create a safety-
conscious atmosphere and remind them of their safety goals.22
HR professionals and safety directors in particular advocate employee involvement
when designing and implementing safety programs.23 Employees can offer valuable
ideas regarding specific safety and health topics to cover, instructional methods, and
proper teaching techniques. Furthermore, employees are more likely to embrace safety
training when they feel a sense of ownership in the instructional program.24
12.2b Enforcing Safety Rules
Firms communicate specific safety rules and regulations in a variety of ways, including
through supervisors, bulletin board notices, employee handbooks, and signs attached
to equipment. In additional to safety labels and signs, many companies prominently
display in their workplaces the number of consecutive days they have operated without
an injury. The idea is to motivate employees to keep the injury-free “streak” going and
possibly set new records for injury-free performance.
12.2c Investigating and Recording Accidents
The supervisor and a member of the safety committee should investigate every acci-
dent, even those considered minor. Such an investigation may determine the factors
contributing to the accident and reveal what corrections are needed to prevent it from
happening again.
Total
# of
worker
accidents
Low Managers’
commitment
to safety
High
How Manager Commitment to Safety Reduces Worker AccidentsFigure 12.7
89624_ch12_hr_416-447.indd 426 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
OSHA requirements mandate that employers with 11 or more employees main-
tain records of work-related occupational injuries and illnesses.25 As stated in an ear-
lier section, OSHA also requires a Log of Work-Related Injuries and Illnesses (OSHA
Form 300) to be maintained by the organization. All recordable cases are to be entered
in the log. A recordable case is any injury or illness that results in any of the following:
death, days away from work, restricted work or transfer to another job, or medical
treatment beyond first aid. Other problems employers must record as work-related
include loss of consciousness or diagnosis of a significant injury or illness by a health
care professional.26 Figure 12.8 illustrates OSHA’s diagram for classifying accidents
under the law. For every recordable case written in the log, an Injury and Illness Inci-
dent Report (OSHA Form 301) is to be completed. OSHA Form 301 requires answers
to questions about the case. Each year OSHA Form 300A, Summary of Work-Related
Injuries and Illnesses, must be completed and posted in a conspicuous place or places
where notices to employees are customarily posted. Remember, when completing all
OSHA forms, employers must not list the name of an injured or ill employee if the
case has “privacy concerns,” such as those involving sexual assault, HIV infection,
and mental illness.27
We conclude our discussion of OSHA by showing the OSHA poster that employ-
ers are required to display at the workplace (see Highlights in HRM 4 later in the
chapter).
12.2d Safety Hazards and Issues
Workers face many different safety hazards on the job, which differ depending upon
their occupations. It is impossible to discuss all of them in this chapter. However, we
will discuss a number of hazards that have been getting a great deal of attention from
HR managers and firms lately.
recordable case
Any occupational death,
illness, or injury to be
recorded in the log
(OSHA Form 300).
Test Your Safety Smarts
Take the following quiz to evaluate your knowledge and
awareness of safety and health issues. The answers are found
at the end of this chapter.
1. True or False? Employers have the right to be told by an
Occupational Safety and Health Administration (OSHA)
compliance officer the reason why it is undergoing a
workplace inspection by the government agency.
2. True or False? Employers have the legal right to have
a company representative accompany OSHA compli-
ance officers on inspections.
3. True or False? OSHA requires employers to give its
inspectors access to employees when inspecting
medical and safety records of their firms.
4. True or False? In order to correct potential health and
safety problems, employers have the right to know
the name of an employee who files a complaint with
OSHA.
5. Which causes more accidents: unsafe acts or unsafe
conditions?
6. True or False? Employers are required to provide
employee training on OSHA standards.
7. True or False? Employers are required to allow
OSHA inspectors on premises for unannounced
inspections.
8. True or False? Employers have 24 hours to report to
OSHA accidents that result in a fatality.
Highlights in HRM2
427
89624_ch12_hr_416-447.indd 427 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
428 Part 4 Implementing Compensation and Security
Fatigue
Few safety issues have been in the news more lately than employee fatigue. You have prob-
ably heard about air traffic controllers who have fallen asleep on the job and could not be
awakened by pilots trying to contact them. Fatigue is more of a problem in organizations
that operate around the clock or have night shifts. Studies show that 30 to 50 percent of
night-shift workers report falling asleep at least once a week while on the job, according to
Dr. Charles Czeisler, chief of sleep medicine at Brigham and Women’s Hospital in Boston.28
Fatigue may not result in life-or-death consequences for most jobs. Nonetheless man-
agers, employees, and the public are concerned about how it affects workplace safety and
performance. The regulations in certain industries limit the number of hours employees
can work per shift. The airline industry is one such industry. However, even with the lim-
its, workers are finding themselves fatigued. Some experts say downsizing may be a factor
as fewer workers are being asked to cover more shifts. Recently the U.S. government vowed
it would give air traffic controllers an extra hour off between shifts to combat fatigue.
Continental has given its pilots permission to call in and report if they’re too fatigued to fly.
Although OSHA currently has no fatigue standard, it is seeking to establish one,
and unions are increasingly negotiating fatigue contracts. Employees at Dow Chemical’s
Medical
treatment
(other than
first aid)
Loss of
conscious-
ness
Days away
from work
Restricted
work or
job transfer
Diagnosis by
a healthcare
professional
None of
these
Then case must
be recorded
An illness
Results from a work accident or
from an exposure in the work
environment and is
Does not result from a work
accident or from an exposure
in the work environment
An injury that involves
Note: A case must involve a death, or an illness,
or an injury to an employee.
A death
Then case is not
to be recorded
IF A CASE:
Guide to Recording Cases under the Occupational Safety and Health ActFigure 12.8
89624_ch12_hr_416-447.indd 428 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
429Chapter 12 Promoting Safety and Health
Freeport, Texas, facility have negotiated a fatigue standard in their new labor contract.
Under the new agreement, employees who work three consecutive 16-hour days must
receive a 24-hour break. Employees on regular shifts must get a 48-hour break if they
work 21 days in a row.29
Distracted Driving
Do you know what the leading cause of worker fatalities each year is? Motor vehicle
crashes come in first. Moreover, according to a National Highway Traffic Safety Admin-
istration study, people who send text messages while driving are 23 times more likely to
crash than other drivers, and distracted driving accounts for 80 percent of all accidents.
When it comes to mass transit, the consequences of distracted driving can be catastrophic.
To help prevent distracted driving accidents, a growing number of employers are
adopting mandatory cell-phone policies for their employees. A survey of more than
2,000 employers conducted by the National Safety Council found that 58 percent had
some type of cell-phone usage policy in place, and roughly one-quarter of those sur-
veyed prohibit both handheld and hands-free devices while driving for some or all
employees.30 Other companies are doing more than establishing policies. OSHA does
not have specific regulations on distracted driving.
Workplace Violence
The NIOSH defines workplace violence as “any physical assault, threatening behavior,
or verbal abuse occurring in the work setting. It includes, but is not limited to, beat-
ings, stabbings, suicides, shootings, rapes, near suicides, psychological traumas such as
threats, obscene phone calls, an intimidating presence, and harassment of any nature
such as being followed, sworn at, or shouted at.”
Approximately 27 percent of American adults have past or current experience with
bullying in the workplace. Bullying is a form of violence; it is the repeated, health-harm-
ing mistreatment of one or more persons by one or more other people. It can consist of
verbal abuse or offensive behaviors that are threatening, humiliating, intimidating, or
interfere with someone’s ability to work. For example, bullying can be found when one
employee withholds information or resources from another employee, treats the victim
in a disrespectful way, interferes with work activities, or prevents someone from express-
ing themselves. Due to lack of legislation, workplace bullying is currently pursued under
Title VII antidiscrimination laws.31
In a Zogby poll, 35 percent of American adults said they had been bullied at work. Not
only does bullying lead to lower morale, it can result in deadly suicides, violence, and homi-
cides in the workplace.32 A number of countries around the world, including France and
Sweden, have enacted laws against bullying. Today, all U.S. states have an antibullying law.33
Reducing Workplace Violence. In addition to protecting workers at high risk of on-
the-job assaults, OSHA recommends firms analyze their workplaces to uncover areas
of potential violence and develop violence prevention programs and training for their
employees. To begin, background checks on job applicants should be conducted to
ensure they don’t have histories showing a propensity toward aggression or violence.34
Remember, employers can be sued for negligent hiring if they do not take this step and
workplace injury occurs as a result. Managers, supervisors, and employees should also
be trained to recognize violence indicators such as those listed in Figure 12.9.
Last, but certainly not least, a firm’s HR department must effectively communi-
cate to a firm’s employees that it has zero tolerance for violence.35 Organizations such
89624_ch12_hr_416-447.indd 429 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
430 Part 4 Implementing Compensation and Security
as Garden Fresh, a restaurant chain, Enterprise Rent-a-Car, JetBlue Airways, and Ritz
Carlton have formalized workplace violence prevention policies informing employees
that aggressive employee behavior will not be tolerated. Employees should encourage
employees to report any possible or observed incidents to their firm’s HR departments.
Some firms have set up hotlines for employees to report incidents without having to fear
repercussions for “getting involved.”
Workplace Emergencies
According to OSHA, a workplace emergency is an unforeseen situation that threatens
employees, customers, or the public; disrupts or shuts down operations; or causes physi-
cal or environmental damage. Emergencies can be natural or manmade. In addition to
workplace violence, they can include the following:
• Floods
• Hurricanes
• Tornadoes
• Fires
• Toxic gas releases
• Chemical spills
• Radiological accidents
• Explosions
• Civil disturbances and terrorism.
OSHA requires companies to have emergency action plans to deal with incidents
such as these. An emergency action plan must include, among other things, procedures
emergency action plans
A plan an organization
develops that contains
step-by-step procedures
for dealing with various
emergency situations.
Violence Indicators: Know the Warning Signs Figure 12.9
The following behaviors should be taken seriously when assessing situations of potential
violence:
• Direct or veiled threatening statements
• Recent performance declines, including concentration problems and excessive excuses
• Insubordination and severe reactions to criticism
• Prominent mood or behavior changes; despondence
• Preoccupation with guns, knives, or other weapons
• Deliberate destruction of workplace equipment; sabotage
• Fascination with stories of violence or war
• Reckless or antisocial behavior; evidence of prior assaultive behavior
• Aggressive behavior or intimidating statements; yelling or using profanity
• Written messages of violent intent; exaggerated perceptions of injustice
• Serious stress, legal, or financial problems in one’s personal life
• Intruding on other people’s privacy by pestering, spying on, or stalking them
• Obsessive desire to harm a specific group or person
• Violence against a family member
• Substance abuse
Sources: Adapted from Violence in the Workplace: Risk Factors and Prevention Strategies, NIOSH Bulletin #59; David
D. Van Fleet and Ella W. Van Fleet, “Preventing Workplace Violence: The Violence Volcano Metaphor,” Journal of Applied
Management and Entrepreneurship 12, no. 3 (July 2007): 17; Bella L. Galperin and Joanne D. Leck, “Understanding the
Violent Offender in the Workplace,” Journal of American Academy of Business 10, no. 2 (March 2007): 114.
89624_ch12_hr_416-447.indd 430 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
431Chapter 12 Promoting Safety and Health
for reporting a fire or other emergency, evacuating a facility, and accounting for employ-
ees after an evacuation. The plan must also include procedures for employees who must
remain in facilities to ensure critical plant operations continue, as well as procedures for
workers performing rescue and medical duties. A copy of the emergency action plan
should either be provided to employees or kept in a convenient location where employ-
ees can access it. Organizations with 10 or fewer employees are allowed to communicate
their emergency plans orally to employees.
Highlights in HRM 3 shows a readiness-assessment checklist that organizations
can complete to determine how prepared they are for an emergency. OSHA Publication
3088, How to Plan for Workplace Emergencies and Evacuations, is also a helpful guideline
for employers.
Crisis Management Teams
Organizations such as Motorola and Circle K Corporation have implemented formal
crisis management teams. These teams, composed of hourly and managerial employ-
ees, work in conjunction with HR to conduct initial risk assessment surveys, develop
emergency action plans, test them, and perform crisis intervention during emergency
events. For example, a crisis management team would investigate a threat reported by an
employee. The team’s mandate would be to gather facts about the threat, decide whether
the organization should intervene, and, if so, determine the most appropriate method
of doing so. Figure 12.10 shows what a crisis management team or other manager could
do to calm an angry employee, for example.
Crisis management teams and HR managers play a key role when it comes to getting
employees back to work and paid on time following an emergency. Crisis management
teams are also responsible for disseminating public information and addressing the press.
If you try to defuse a tense situation, remember that anger frequently results from a person’s feel-
ing of being wronged, misunderstood, or unheard. Keep the following tips in mind to guide you.
• Strive to save the employee’s dignity during an angry confrontation. Do not attack a per-
son’s rash statements or continue a muddled line of thinking.
• Hold all conversations in private. Do not allow the employee to create an embarrassing
public situation for himself or herself, yourself, or other employees.
• Always remain calm. Anger or aggressiveness on your part will trigger a similar response
in the employee.
• Listen to the employee with an open mind and nonjudgmental behavior. Give the
employee the benefit of hearing him or her out.
• Recognize the employee’s legitimate concerns or feelings. Agree that the employee has a
valid point and that you will work to correct the problem.
• If the employee is very emotional or if the engagement seems out of control, schedule a
delayed meeting so people can calm down.
• Keep the discussion as objective as possible. Focus on the problem at hand, not the per-
sonalities of individuals. A cornerstone of conflict resolution is to attack the problem, not
the personality.
• If the employee appears overly aggressive, withdraw immediately and seek professional
help before any further discussion with the employee.
• If your efforts fail to calm the employee, report the incident to your manager, security, or
human resource personnel.
Calming an Angry EmployeeFigure 12.10
Source: Adapted from professional literature on crisis management and seminars attended by the authors.
89624_ch12_hr_416-447.indd 431 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Emergency Readiness Checklist
Highlights in HRM3
Planning for Emergencies
© 2007 National Safety Council
Readiness Assessment
How Prepared Is Your Business for an Emergency?
1. Does your business know what kinds of emergencies might affect it – both internally and externally?
2. Does your business have a written, comprehensive emergency plan in place to help ensure your safety
and take care of employees until help can arrive?
3. Has your business created and practiced procedures to quickly evacuate and find shelter in case of an
emergency?
4. Has your business created a communication plan to communicate with employees in an emergency?
(Examples include set up a telephone call tree, password-protected page on the company Web
site, e-mail alert or call-in voice recording, and a contact list that includes employee emergency
contact information.)
5. Has your business talked with utility service providers about potential alternatives and identified
back-up options?
6. Has your business determined operations that need to be up and running first after an emergency and
how to resume key operations?
7. Has your business created a list of inventory and equipment, including computer hardware, software,
and peripherals (such as backed up/protected records and critical data) for business continuity and
insurance purposes?
8. Has your business met with your insurance provider to review current coverage in case of an emergency?
9. Does your business promote family and individual preparedness among co-workers (such as emergency
preparedness information during staff meetings, newsletters, company intranet, periodic employee
e-mails, and via other internal communication tools)?
10. Have emergency shutdown procedures been developed for equipment such as boilers, automatic feeds
or other operations that cannot simply be left running in an emergency evacuation?
11. Has your business worked with your community on emergency planning efforts and helped to plan for
community recovery?
Readiness Results
Count your number of “Yes” responses to calculate a score. Your score is a general reflection of how much you know about emergency
planning efforts at your business and/or how prepared your business may be for an emergency.
If you have 8-11 “Yes” responses, you are well on your way to having a comprehensive and effective plan in place.
If you have 4-7 “Yes” responses, while some aspects of your plan may be in place, you have some work to do to fill gaps.
If you have 1-3 “Yes” responses, get started immediately on developing an emergency plan for your business. This training program
is a great first step!
Yes No Unsure
Source: National Safety Council.
89624_ch12_hr_416-447.indd 432 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
433Chapter 12 Promoting Safety and Health
How are health and
safety related? If your
workplace is safe, does
that mean it is also
healthy? Why or why
not?
LO 312.3 Creating a Healthy Work Environment
Because of the dramatic impact workplace accidents have, managers and employees
sometimes pay more attention to them than health hazards. Accidents happen quickly.
The effect of health hazards show up only over time. When they do show up, though,
they adversely affect workers, their families, and their companies.
12.3a Ergonomics
One way to help eliminate health hazards in the workplace is via ergonomics. Recall
that we discussed ergonomics in Chapter 4 when we looked at job design. Ergonomics
focuses on ensuring that jobs are designed for safe and efficient work while improving
the safety, comfort, and performance of users. Ergonomics also considers the require-
ments of a diverse workforce, accommodating, for example, women who may lack the
strength to operate equipment requiring intense physical force or Asian Americans who
may lack the stature to reach equipment controls.
Ergonomics has proven cost effective at organizations such as Compaq Computer,
3M, Pratt and Whitney, and the U.S. Postal Service and has eliminated, or at least
reduced, many repetitive motion injuries, particularly those related to the back and
wrist. The key elements of successful ergonomic programs are shown in Figure 12.11.36
12.3b Health Hazards and Issues
At one time health hazards were associated primarily with jobs found in manufacturing
operations. In recent years, however, hazards in jobs outside of plants, such as in offices,
health care facilities, and airports, have been recognized, and methods to lessen these
hazards have been adopted.
Companies with award-winning ergonomics programs list the following as common ele-
ments of success:
• Provide notice and training for employees. Implement a well-publicized ergonomics policy
or present ergonomic information in safety policies or training programs. Train employees,
supervisors, and managers in basic workplace ergonomics.
• Conduct preinjury hazard assessment. Survey the workplace and work processes for poten-
tial hazards and adopt measures to lessen the exposure to ergonomic risk factors. Answer
the question: “Are certain work areas more prone to ergonomic hazards than others?”
• Involve employees. Include employees in risk assessment, recognition of MSD symptoms,
design of work-specific equipment or tools, and the setting of work performance rules
and guidelines.
• Plan and execute. Integrate ergonomic responsibilities into the performance plans for all
personnel. Demand accountability for program success.
• File injury reports. Encourage early reporting of MSD symptoms or injuries. Refer employ-
ees to the company’s medical facilities or to the employee’s personal physician for
treatment.
• Evaluate and assess the ergonomics program. Periodically review the effectiveness of the
ergonomics program. If the program appears to be ineffective, determine the underlying
causes for failure and propose corrective changes.
Key Elements for a Successful Ergonomics ProgramFigure 12.11
89624_ch12_hr_416-447.indd 433 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Job Safety and Health Protection Poster
Highlights in HRM4
89624_ch12_hr_416-447.indd 434 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
435Chapter 12 Promoting Safety and Health
Cumulative Trauma Disorders
Meat cutters, cooks, dental hygienists, textile workers, violinists, flight attendants, office
workers at computer terminals, and others whose jobs require repetitive motion of
the fingers, hands, or arms are reporting injuries in growing percentages.37 Known as
cumulative trauma disorders or repetitive motion injuries, these musculoskeletal dis-
orders are injuries of the muscles, nerves, tendons, ligaments, joints, and spinal discs
caused by repeated stresses and strains. One of the more common conditions is carpal
tunnel syndrome, which is characterized by tingling or numbness in the fingers occur-
ring when a tunnel of bones and ligaments in the wrist narrows and pinches nerves that
reach the fingers and the base of the thumb. Without proper treatment, employees with
carpal tunnel syndrome can lose complete feeling in their hands.
Ergonomics techniques are also successfully used to improve or correct workplace
conditions that cause or aggravate cumulative trauma disorders.38 Continuous develop-
ments in office furniture, video display terminals, tool design, computer keyboards, and
adjustable workstations are all attempts to make the work setting more comfortable—
and, hopefully, more productive—but also to lessen musculoskeletal disorders. Mini-
breaks involving exercise and the changing of work positions have been found helpful.
Computer Workstation Issues
Figure 12.12 provides a checklist of potential repetitive motion problem areas for
employees using computers. Video and computer screens are a particular concern. The
problems that managers have to confront in this area fall into three major groups:
1. Visual difficulties. Screen operators frequently complain of blurred vision, sore
eyes, burning and itching eyes, and glare.39
2. Muscular aches and pains. Pains in the back, neck, and shoulders are common
complaints of screen operators.
3. Job stress. Eyestrain, postural problems, insufficient training, excessive workloads,
and monotonous work are complaints reported by three-quarters of screen users.
cumulative trauma
disorders
Injuries involving ten-
dons of the fingers,
hands, and arms that
become inflamed from
repeated stresses and
strains.
An ergonomically
designed computer
workstation like this
will reduce the strain
on the worker’s eyes,
neck and shoulders,
wrists, and back.Ph
an
ie
/R
G
B
Ve
nt
ur
es
/S
up
er
St
oc
k/
A
la
m
y
89624_ch12_hr_416-447.indd 435 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
436 Part 4 Implementing Compensation and Security
To capitalize on the benefits of computer screens while safeguarding employee
health, Dr. James Sheedy, a screen and vision expert, offers these tips on how to mini-
mize the negative effects of computer use on the eyes and body:
• Place the computer screen 4 to 9 inches below eye level.
• Keep the monitor directly in front of you.
• Sit in an adjustable-height chair with lower back support and with feet flat on the
floor.
• Use shades or blinds to reduce the computer screen glare created by window
lighting.
• Keep elbows close to body and supported.
• Place wrist and hands in line with forearms.
Chemical Hazards
The OSHA Hazard Communication Standard is the most frequently cited OSHA stan-
dard for general industry as well as for the construction industry. The purpose of the law
is to ensure the testing and evaluation of chemicals by producers and the distribution of
the chemical hazard information to users of the chemical.
All hazardous chemical containers must be labeled with the identity of the contents
and must state any appropriate hazard warnings. OSHA-published hazardous chemical
Use the following list to identify potential problem areas that should receive further investiga-
tion. Any “no” response may point to a problem.
1. Does the workstation ensure proper worker posture, such as
• Thighs in the horizontal position?
• Lower legs in the vertical position?
• Feet flat on the floor or on a footrest?
• Wrists straight and relaxed?
2. Does the chair
• Adjust easily?
• Have a padded seat with a rounded front?
• Have an adjustable backrest?
• Provide lumbar support?
• Have casters?
3. Are the height and tilt of the work surface on which the keyboard is located adjustable?
4. Is the keyboard detachable?
5. Do keying actions require minimal force?
6. Is there an adjustable document holder?
7. Are armrests provided where needed?
8. Are glare and reflections minimized?
9. Does the monitor have brightness and contrast controls?
10. Is there sufficient space for knees and feet?
11. Can the workstation be used for either right- or left-handed activity?
Computer Workstation Ergonomics ChecklistFigure 12.12
Source: The National Institute for Occupational Safety and Health (NIOSH), Elements of Ergonomics Programs: A
Primer Based on Workplace Evaluations of Musculoskeletal Disorders (Washington, DC: U.S. Government Printing
Office, March 1997).
89624_ch12_hr_416-447.indd 436 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
437Chapter 12 Promoting Safety and Health
regulations known as the Hazard Communication Standard (HCS) prescribe a system
for communicating these warnings. It includes a format for Material Safety Data Sheets
(MSDSs). MSDSs must include the chemical name of a hazardous substance; all of the
risks involved in using it, including any potential health risks; safe handling practices;
personal protective equipment needed; first aid in the event of an accident; and informa-
tion identifying the manufacturer. OSHA-required chemical training includes informing
employees of the methods used to detect the presence or release of hazardous chemicals,
the physical and health problems posed by hazardous chemicals, and the ways in which
employees can protect themselves from chemical dangers.
Chemical hazards can affect the reproductive health of either women or men. In
an important case concerning women, the U.S. Supreme Court ruled in International
Union v. Johnson Controls (1991) that employers may not bar women of childbearing age
from certain jobs because of potential risk to their fetuses.40 The Court said that such
policies are a form of sex bias that is prohibited by federal civil rights law. The decision
has made it important for employers to inform and warn female workers about fetal
health risks on the job.
Smoking and Tobacco Smoke
Virtually all large organizations and even smaller ones have initiated smoking policies
specifying when and where smoking will be allowed in their organizations, if at all. In
developing smoking policies, it is advisable to have the involvement of both smokers
and nonsmokers.
Bloodborne Pathogens
You have probably noticed that when technicians clean your teeth or draw your blood,
they wear rubber gloves, eye protection, masks, and other protective devices. Exposures
to blood and other body fluids occur across a wide variety of occupations and can result
Material Safety Data
Sheets (MSDSs)
Documents that contain
vital information about
hazardous substances.
Meeting all of OSHA’s requirements can seem like a daunt-
ing task for small businesses, especially ones just setting
up shop. Fortunately, for business owners and entrepre-
neurs, OSHA has a wealth of resources and programs
designed to help small businesses. The agency estimates
that for every dollar a small business invests in safety in
health measures, it can reap as much as $4 to $5 in savings
in terms of these costs.
Michael Foods, Inc., an Elizabeth, New Jersey, food
company, scheduled an onsite consultation after receiv-
ing a letter from OSHA notifying the company that it
was a likely candidate for inspection due to its work-
place injury and illness rates. “When you want to know
if your company is doing all the right things as it relates
Small Business Application
to health and safety, who better than OSHA to tell you,”
says Damir Tutundzic, the company’s safety manager.
Michael Foods went further than just getting a consul-
tation. It followed OSHA’s recommendations and now
has the SHARP designation. Productivity is up, and at
one point the distribution center had worked over 1,500
days without any lost time incidents and over 700 days
without a reportable accident. “All of these efforts led
to a reduction in workers’ compensation costs of nearly
$250,000 and 100 percent employee engagement,” says
Tutundzic.
Source: Small Business Success Stories ( Washington, DC: Occupa-
tional Safety and Health Administration, May 25, 2011), http://www
.osha.gov.
OSHA Resources for Small Businesses
89624_ch12_hr_416-447.indd 437 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
438 Part 4 Implementing Compensation and Security
in employees contracting diseases. The pathogens of primary concern are the human
immunodeficiency virus (HIV), hepatitis B virus (HBV), and hepatitis C virus (HCV).
Workers can be exposed to blood through needlestick and other sharp-object injuries,
mucous membranes, and skin exposures.
12.3c Building Better Physical and Emotional
Health among Employees
Along with improving working conditions that are hazardous to employee health,
employers today are cognizant of the physical and emotional health of their employees
and thus provide them with programs to maintain and improve both.
Recall that we discussed EAPs in Chapter 11. As we have indicated, EAPs can help
employees with a range of problems. EAPs can also help workers with relationship, mari-
tal, and family problems; anger, depression, anxiety, and stress; and elder care demands.
Workplace issues, addiction, and self-improvement are other areas in which EAPs pro-
vide workers with help.
Wellness and Weight Issues
In Chapter 11 we mentioned wellness programs. Discovery Communication in Sil-
ver Spring, Maryland, provides a wellness center. The company employs a medical
assistant, nurse practitioner, and physician who offer health services, including stress
management, consultation and techniques, fitness programs, and podiatry care.41
Google encourages employee wellness through their “small changes” program in which
Google headquarters encourages employees to ride scooters to meetings, eat health-
ier food at their cafeteria with portion sizes in check, be active and playful with their
in-office slide and Ping-Pong tables, and take advantage of their onsite physical therapist
and chiropractor.42
We also mentioned weight-related problems and obesity in Chapter 11. As you
know, excess weight can affect the health of a worker and his or her productivity. A study
by Duke University researchers, who examined the records of nearly 12,000 university
employees, found that obese employees experienced medical costs that were more than
five times higher than those of nonobese workers. They also missed eight times the
number of workdays, which by some estimates costs companies an estimated $5.5 billion
a year in lost productivity.43 Not surprisingly, employers are launching or improving
programs specifically designed to help employees maintain or lose weight by exercising
and eating properly.44 For example, a nutritional component is part of the wellness pro-
gram of JWT, a New York advertising firm. Nutritional programs address two lifestyle
changes: (1) increasing a person’s physical exercise (via walking, jogging, bicycling, etc.);
and (2) adopting nutritional dietary programs that emphasize eating lots of fruits and
vegetables, fish, and low-fat dairy products.45 Stephanie Pronk, the chief health officer
at RedBrick Health, a Minneapolis health technology and services company, notes that
employers today are trying to create a “culture of wellness” that makes thinking about
maintaining a healthy weight second nature to employees.46
Job Stress and Burnout
It is no secret that employees today are more stressed out than they have been in years
past. A Gallup poll recently found that 66 percent of employees were dissatisfied with
the amount of stress they experience in the workplace.47 Stress is any demand on
the individual that requires coping behavior. Stress comes from two basic sources:
physical activity and mental or emotional activity. The physical reaction of the body
to both types of stress is the same. Psychologists use two separate terms to distinguish
between positive and negative forms of stress, even though reactions to the two forms
are the same, biochemically. Eustress is positive stress that accompanies achievement
and exhilaration.48 This type of stress is regarded as a beneficial force that helps us
to forge ahead against obstacles. What is harmful is distress. Stress becomes distress
when we begin to sense a loss of our feelings of security and adequacy. Helplessness,
desperation, and disappointment turn stress into distress.
Burnout is a severe stage of distress. Career burnout generally occurs when a person
begins questioning his or her own personal values. Quite simply, the person no longer feels
that what he or she is doing is important. Depression, frustration, and a loss of productivity
are all symptoms of burnout. Burnout is primarily due to a lack of personal fulfillment in
the job or a lack of positive feedback about one’s performance.49 To decrease the chance
of burnout, managers should provide role clarity, opportunities to develop, and conduct
feedback and goal development sessions with employees on a regular basis.50
The causes of workplace stress are many. However, according to a study by Lumi-
nari, a national health care company, four factors have a major influence on employee
stress (see Figure 12.13):
• High demand: having too much to do in too short a time
• High effort: having to expend too much mental or physical energy over too long
a period
• Low control: having too little influence over the way a job is done on a day-to-day
basis
• Low reward: receiving inadequate feedback on performance and no recognition
for a job well done.
Other job stressors include layoffs and organizational restructuring; disagreements with
managers or fellow employees; prejudice because of age, gender, race, or religion; inability to
voice complaints; and poor working conditions. Even minor irritations such as lack of pri-
vacy, unappealing music, and other conditions can be distressful to one person or another.
distress
Harmful stress character-
ized by a loss of feelings
of security and adequacy.
eustress
Positive stress that
accompanies achieve-
ment and exhilaration.
stress
Any adjustive demand
caused by physical, men-
tal, or emotional factors
that requires coping
behavior.
burnout
A severe stage of distress,
manifesting itself in
depression, frustration,
and loss of productivity.
How would you
describe the physical
and emotional health
of the people you work
with or have worked
with in the past? What
role do employers play
when it comes to the
emotional health of
their workers?
LO 4
89624_ch12_hr_416-447.indd 438 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
439Chapter 12 Promoting Safety and Health
the individual that requires coping behavior. Stress comes from two basic sources:
physical activity and mental or emotional activity. The physical reaction of the body
to both types of stress is the same. Psychologists use two separate terms to distinguish
between positive and negative forms of stress, even though reactions to the two forms
are the same, biochemically. Eustress is positive stress that accompanies achievement
and exhilaration.48 This type of stress is regarded as a beneficial force that helps us
to forge ahead against obstacles. What is harmful is distress. Stress becomes distress
when we begin to sense a loss of our feelings of security and adequacy. Helplessness,
desperation, and disappointment turn stress into distress.
Burnout is a severe stage of distress. Career burnout generally occurs when a person
begins questioning his or her own personal values. Quite simply, the person no longer feels
that what he or she is doing is important. Depression, frustration, and a loss of productivity
are all symptoms of burnout. Burnout is primarily due to a lack of personal fulfillment in
the job or a lack of positive feedback about one’s performance.49 To decrease the chance
of burnout, managers should provide role clarity, opportunities to develop, and conduct
feedback and goal development sessions with employees on a regular basis.50
The causes of workplace stress are many. However, according to a study by Lumi-
nari, a national health care company, four factors have a major influence on employee
stress (see Figure 12.13):
• High demand: having too much to do in too short a time
• High effort: having to expend too much mental or physical energy over too long
a period
• Low control: having too little influence over the way a job is done on a day-to-day
basis
• Low reward: receiving inadequate feedback on performance and no recognition
for a job well done.
Other job stressors include layoffs and organizational restructuring; disagreements with
managers or fellow employees; prejudice because of age, gender, race, or religion; inability to
voice complaints; and poor working conditions. Even minor irritations such as lack of pri-
vacy, unappealing music, and other conditions can be distressful to one person or another.
distress
Harmful stress character-
ized by a loss of feelings
of security and adequacy.
eustress
Positive stress that
accompanies achieve-
ment and exhilaration.
stress
Any adjustive demand
caused by physical, men-
tal, or emotional factors
that requires coping
behavior.
burnout
A severe stage of distress,
manifesting itself in
depression, frustration,
and loss of productivity.
High
effort
High
Demand
Low
reward
Low
control
Workplace
Stress!
Different Factors that Create Stress for EmployeesFigure 12.13
89624_ch12_hr_416-447.indd 439 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
440 Part 4 Implementing Compensation and Security
Job stress places both women and men at risk for fatigue, high blood pressure,
cardiovascular problems, depression, and obesity and increases employee susceptibil-
ity to infectious diseases. Studies have shown that work-related stress contributes to
injuries and illnesses. All of these contribute to higher health care costs and can lower
productivity, job satisfaction, and retention.51 Stress is also the most frequently cited
reason employees give for why they would leave a company.52
HR professionals are well aware of the negative effects of workplace stress on
employees’ health and job performance.53 In one study, the top three sources of stress
employers think negatively affect the workplace are lack of work-life balance, inadequate
staffing, and technologies that expand availability during nonworking hours.54 Armed
with this awareness, many employers have developed stress management programs to
teach employees how to minimize the negative effects of job-related stress.55 A typi-
cal program might include instruction in relaxation techniques, coping skills, listening
skills, methods of dealing with difficult people, time management, and assertiveness.
All of these techniques are designed to break the pattern of tension that accompa-
nies stressful situations and to help participants achieve greater control of their lives.
Organizational techniques, such as clarifying the employee’s work role, redesigning and
enriching jobs, correcting physical factors in the environment, and effectively handling
interpersonal factors should not be overlooked in the process of teaching employees
how to handle stress. Stress management counselors recommend several ways to resolve
job-related stress as described in Figure 12.14.
Depression
Emotional problems and personal crises become organizational problems when they
affect people’s behavior at work and interfere with their job performance.56 The most
prevalent problems among employees are personal crises involving marital, family,
financial, or legal matters.57 Most personal crises are resolved in a reasonable period of
time. Unfortunately, when a personal crisis lingers, it can lead to depression. Depression
is a decrease in functional activity accompanied by persistent symptoms of low spirits,
gloominess, and sadness. The National Institute of Mental Health estimates that nearly
7 percent of the adult population experience depression each year.58
Fortunately, with available treatment, 80 percent of depressed individuals will sig-
nificantly improve, usually within a matter of weeks. Managers are in a good position
to identify the signs of depression on the job.59 They include decreased energy on the
part of an employee, concentration and memory problems, guilt feelings, irritability,
depression
A negative emotional
state marked by feelings
of low spirits, gloomi-
ness, sadness, and loss
of pleasure in ordinary
activities.
• Build rewarding relationships with your coworkers.
• Talk openly with managers or employees about your job or personal concerns.
• Prepare for the future by keeping abreast of likely changes in your job’s demands.
• Do not greatly exceed your skills and abilities.
• Set realistic deadlines; negotiate reasonable deadlines with managers.
• Act now on problems or concerns of importance.
• Designate dedicated work periods during which time interruptions are avoided.
• When feeling stressed, find time for detachment or relaxation.
• Do not let trivial items take on importance; handle them quickly or assign them to others.
• Take short breaks from your work area as a change of pace.
Tips for Reducing Job-Related StressFigure 12.14
89624_ch12_hr_416-447.indd 440 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
441Chapter 12 Promoting Safety and Health
and chronic aches and pains that do not respond to treatment. Managers and supervi-
sors who suspect an employee is depressed are encouraged to express their concerns to
the person, actively listen to him or her, and—should the depression persist—suggest
professional help.60 Under no circumstances should managers attempt to play amateur
psychologist and try to diagnose an employee’s condition.61 Mood disorders such as
depression are complex in nature and do not lend themselves to quick diagnoses. Fur-
thermore, in reviewing such cases, the organization should pay particular attention to
workplace safety factors because there is general agreement that emotional disturbances
are primary or secondary factors in a large portion of industrial accidents and incidents
of violence.
Alcoholism
Nearly 6 million working Americans bring their alcohol problems to the workplace.62
It has been estimated that business and industry lose more than $20 billion each year
because of alcoholism. It is a disease that affects both the young and old, is prevalent
across the sexes, and affects workers in every occupational category—blue collar and
white collar.63
The first step in helping the alcoholic is to awaken the person to the reality of his or
her situation. A supervisor should carefully document evidence of the person’s declining
performance on the job and then confront the employee with unequivocal proof to that
effect. The employee should be assured that help will be made available without penalty.
Because the evaluations are made solely in terms of poor on-the-job performance, a
supervisor can avoid any mention of alcoholism and allow such employees to seek aid
as they would for any other problem.
Employers must remember that alcoholism is classified as a disability under the
Americans with Disabilities Act (ADA—see Chapter 3). Alcoholism is regarded as a
disease, similar to a mental impairment. Therefore, a person disabled by alcoholism
is entitled to the same protection from job discrimination as any other person with a
disability. However, under the ADA, employers can discipline or discharge employees
when job performance is so badly affected by alcohol usage that the employee is unable
to perform the job.64
Drug Abuse
Like alcohol abuse, the abuse of illegal drugs by employees costs businesses billions
annually in terms of safety risks, theft, reduced productivity, absenteeism, and accidents.
A wide range of employers, including federal contractors and private and public trans-
portation firms, are subject to regulations aimed at eliminating the use of illegal drugs
on the job. The federal antidrug initiatives include the following:
1. The Drug-Free Workplace Act of 1988, which requires federal contractors and
recipients of federal grants to take specific steps to ensure a drug-free work envi-
ronment. One of the main provisions of the act is the preparation and distribu-
tion of an antidrug policy statement.
2. Department of Defense (DOD) contract rules, which specify that employers enter-
ing into contracts with the DOD must agree to a clause certifying their intention to
maintain a drug-free workplace.
3. Department of Transportation (DOT) regulations, which require that employees
whose jobs include safety- or security-related duties be tested for illegal drug use
under DOT rules.
89624_ch12_hr_416-447.indd 441 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
442 Part 4 Implementing Compensation and Security
To help employers benefit from being drug-free and to further its mission to help
companies maintain safe, healthy, and productive workplaces, the U.S. Department of
Labor created the Working Partners for an Alcohol and Drug-Free Workplace. This goal
of the agency is to raise awareness about the impact of substance abuse in the workplace
and provide employers with substance abuse prevention information. Additionally, the
Department’s Drug-Free Workplace Advisor provides information to employers about
how to establish and maintain an alcohol- and drug-free environment.65
The ADA considers an individual with a serious, life-affecting drug problem to
be disabled, provided the person is enrolled in a drug treatment program and not
currently using drugs. The person’s employer therefore must make reasonable accom-
modations for his or her disability. Reasonable accommodations might include time
off from work or a modified work schedule to obtain treatment. As we noted earlier,
federal regulations require employers to test their workers for drug use under certain
specified conditions.66
The abuse of legal drugs can also pose a problem for employees.67 In fact, unlike
marijuana, cocaine, and other illegal drugs, according to Quest Diagnostics, a blood-
testing company, both employees’ prescribed use and misuse of opiates such as
hydrocodone and oxycodone have been rising sharply. Employees who abuse legal
drugs—those prescribed by physicians—often do not realize they have become
addicted or how their behavior has changed as a result of their addiction. Also, man-
agers should be aware that some employees may be taking legal sedatives or stimulants
as part of their medical treatment and that their behavior at work may be affected by
their use of these drugs.
The Occupational Safety and Health Act was
designed to assure, so far as possible, safe and health-
ful working conditions for every working person. In
general, the act extends to all employers and employ-
ees. The Occupational Safety and Health Administra-
tion (OSHA) sets health and safety standards, ensures
employers and employees comply with them, and
provides safety and health consultation and train-
ing where needed. Both employers and employees
have certain responsibilities and rights under OSHA.
Employers not only are required to provide a hazard-
free work environment but also must keep employ-
ees informed about OSHA requirements and provide
them with protective equipment when necessary and
ensure they wear it. Under the “right to know” reg-
ulations, employers are required to keep employees
informed of hazardous substances and instruct them
in avoiding the dangers presented. Employees, in
turn, are required to comply with OSHA standards,
LO 1
Summary
to report hazardous conditions, and to follow all
employer safety and health regulations.
To provide safe working conditions for their
employees, employers typically establish a formal
safety program in liaison with their HR departments.
The program may have many facets, including pro-
viding safety knowledge and motivating employees to
use it, making employees aware of the need for safety,
and rewarding them for safe behavior. Incentives such
as praise, public recognition, and awards are used to
involve employees in the safety program. Employers
also engage their workers by asking them to join safety
committees, help develop safety procedures, observe
the safety practices of their coworkers, and investigate
any accidents. The maintenance of required records
from accident investigations provides a basis for
information that can be used to create a safer work
environment.
LO 2
89624_ch12_hr_416-447.indd 442 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
443Chapter 12 Promoting Safety and Health
burnout
cumulative trauma disorders
depression
distress
emergency action plan
eustress
fitness-for-duty evaluation
Material Safety Data Sheets
(MSDSs)
recordable case
right-to-know laws
stress
Key Terms
Job conditions that are dangerous to the health of
employees are now receiving much greater attention than
in the past. There is special concern for toxic chemicals
that proliferate at a rapid rate and may lurk in the body for
years without outward symptoms. Health hazards other
than those found in manufacturing operations—such as
video display terminals and cumulative trauma disor-
ders—present special problems many firms are address-
ing with ergonomic solutions. Secondhand smoke and
bloodborne pathogens are two other health hazards that
have received greater attention in recent years.
LO 3 Along with providing safer and healthier work
environments, many employers establish programs
that encourage employees to improve their health
habits. Wellness programs that emphasize exercise,
nutrition, weight control, and avoidance of harmful
substances serve employees at all organizational levels.
Alternative medicine approaches such as relaxation
techniques and hypnosis, chiropractic care, acupunc-
ture, homeopathy, herbal therapy, special diets, mas-
sage, and so forth are also used to help employees with
a variety of health problems.
LO 4
When OSHA was enacted in 1970, it was her-
alded as the most important new source of
protection for the U.S. worker in the second
half of the twentieth century. From the infor-
mation in this chapter, what is your opinion
about the effectiveness or the ineffectiveness of
the act? Should it be expanded, or should busi-
nesses have more freedom to determine safety
standards for their workers?
What steps should management take to
increase the motivation of their employees to
operate safely?
LO 1
LO 2
An unhealthy work environment can lower
productivity, contribute to low morale, and
increase medical and workers’ compensation
costs. Consider ways to improve the work
environment.
To live a healthier life, medical professionals
say we need to identify those things we cur-
rently do that either impair or contribute to our
health. Discuss with others a way to develop a
lifetime program for a healthy lifestyle.
LO 3
LO 4
Discussion Questions
89624_ch12_hr_416-447.indd 443 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
444 Part 4 Implementing Compensation and Security
CASE STUDY Rambo Goes Violent1
The facts of the case are straightforward. A shop floor
dispute at an automobile parts manufacturing plant in
Hamilton, Iowa, ended with one worker killing another.
At about 2:00 p.m., police responded to a report of
a fight that erupted between two employees. When
members of the Hamilton Police Department’s Violent
Crime Unit arrived, they found Mark Lomas seriously
injured. Lomas, 30, died 3 hours later at Good Samari-
tan Memorial Hospital. The other employee, Thomas
Waycross, was charged with second-degree murder.
During the investigation of the incident, employ-
ees noted that Lomas and Waycross often “bickered”
when working together. One employee remarked
that Waycross liked to “act tough.” Another employee
claimed that Waycross had a “Rambo-type” personal-
ity. It was widely known that management had told
both employees to “learn to get along” or quit.
When asked about the incident, police spokes-
person Kathy Calder remarked, “Employers must be
vigilant when monitoring for signs of potential work-
place violence.” Nancy Lomas, Mark’s wife, has filed a
negligence lawsuit against the company.
Questions
1. What are some violence indicators an employee
might display?
2. What are some actions management can take to
help prevent workplace violence?
3. How can employees protect themselves against
workplace violence?
Source: Adapted from a case known to one of the authors. All names
are fictitious.
CASE STUDY Too Much Fatigue and Stress? You Decide2
Job fatigue and stress are significant problems faced by
employees and their managers. Unfortunately, when a
case of depression arises as a result, trying to resolve
the problem may be difficult—sometimes leading to
conflict—as this case illustrates.
Donald Knolls was an air traffic control super-
visor for International Gateway Airport (IGA), an
airport serving a major metropolitan area. Donald
began to experience depression-related problems
largely due to severe stress and fatigue on the job.
A few months later, he requested and was granted
a disability leave for treatment of his illness. After 8
months, his personal physician, an expert in depres-
sion treatment and a licensed consulting psychologist,
agreed that he was sufficiently improved to return to
his former position.
IGA then sent Donald to the physician it had
used when Donald first requested his disability
leave. After an extensive evaluation, the doctor con-
cluded that while Donald had made considerable
strides in overcoming his depression, he should not
be immediately returned to his former supervisory
position because the conditions of the job had not
changed and he was apt to find the stress too great.
Instead, he recommended that Donald be returned
to a nonsupervisory position on a 6-month trial
basis, with the case to be reviewed at the end of
that time. IGA followed the advice of its doctor and
did not return Donald to a supervisory position.
Donald, angered by management’s decision, filed a
grievance through IGA’s alternative dispute resolu-
tion procedure, a procedure that could end in bind-
ing arbitration.
During several meetings between Donald and
management, the employer maintained that it had the
right to rely on the medical opinion of “a fair and
impartial” doctor who had determined that Donald
should not be returned to the position that was the
cause of his original stress-related emotional prob-
lems. Additionally, management pointed out to Don-
ald that IGA’s disability leave provision states that it
“may require appropriate medical documentation if it
believes an employee is not fit to return to his or her
former position.”
89624_ch12_hr_416-447.indd 444 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
445Chapter 12 Promoting Safety and Health
Donald responded, through an attorney he
hired to represent his position, that the disability
leave provisions were clear but, nevertheless, biased
against an employee because they completely disre-
garded the opinion of his physician and psycholo-
gist. According to Donald, “Why bother to get
expert medical opinions if they are dismissed?” He
further noted, “I have never felt better. I’m really
ready to get back to my job.” Finally, Donald’s law-
yer contended that Donald was the victim of dis-
crimination based on his former state of depression:
“What happened to Donald would not have hap-
pened if his illness had been a more conventional
physical injury.”
Questions
1. When conflicting medical opinions are presented,
should the advice of a medical expert count more
heavily than the opinion of a general physician?
Explain your answer.
2. Is the charge of discrimination presented by Don-
ald’s lawyer relevant to this case? Explain your
answer.
3. If you were presented with this case, what deci-
sion would you reach? Explain.
Source: Small Business Success Stories (Washington, DC: Occupa-
tional Safety and Health Administration, May 25, 2011), http://www
.osha.gov.
ANSWERS TO HIGHLIGHTS IN HRM 2
1. True
2. True
3. True
4. False
5. Unsafe acts (85 percent of all accidents)
6. True
7. False
8. False (8 hours)
Notes and References
1. Erika Ebsworth-Goold, “Working Well by Being Well: The
Bottom Line Benefits of Corporate Wellness Programs,” The
Source (St. Louis: Washington University, August 24, 2016).
2. P.L. 91-596, 91st Congress, S. 2193, December 29, 1970.
3. OSHA publishes many pamphlets pertaining to various
aspects of the act, such as employee workplace rights and
voluntary compliance programs. All OSHA publications can
be downloaded at no cost from the agency website at http://
www.osha.gov; you may also call (800) 321-OSHA or fax a
request to (202) 693–2498.
4. All about OSHA, 14.
5. https://www.osha.gov/oshstats/commonstats.html (April 11,
2017).
6. All about OSHA, 21.
7. https://www.osha.gov/penalties/ (April 11, 2017).
8. https://www.osha.gov/dep/enforcement/top_cases.html
(April 11, 2017).
9. All about OSHA, 21.
10. Kent Mallett, “OSHA Fines Sunfield $3.4 Million for Safety
Violations,” USA Today (July 1, 2016).
11. For a comprehensive list of compliance requirements of OSHA
standards or regulations, refer to Title 29 of the Code of Fed-
eral Regulations at www.osha.gov or call (800) 321-OSHA.
12. All about OSHA, 31.
13. All about OSHA, 13.
14. Ibid., 5.
15. Roy Maurer, “Making Safety Committees Work,” Society for
Human Resource Management (August 8, 2013): 1.
16. Ibid., 2.
17. Jessica Marquez, “Creating a Culture of Safety,” Workforce
Management 86, no. 8 (April 23, 2007): 1.
18. Robert Pater, “Next Level Safety Cultures,” Occupational
Health and Safety (May 2008).
19. Oregon OSHA, “Supervisor Responsibilities,” Health and
Safety Resource Magazine 21 (December 2011): 7.
20. Carol Leaman, “The Future of Safety Training,” Occupational
Health and Safety (September 2013).
21. Ismael E. Garza, “Increasing Safety Awareness in the Work-
place: Measuring the Emotional, Cognitive and Rhetorical
Effectiveness of Informational Illustrations Used in Safety
Documents,” University of Houston-Downtown (December
2009): 80.
22. “How to Make Safety Training Fun,” Workplace Safety Experts
(June 2011).
23. Aruna Vayuvegula, “Learning Activities for Making Safety
Training Fun,” CommLab India (January 2012).
89624_ch12_hr_416-447.indd 445 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
446 Part 4 Implementing Compensation and Security
24. E. Kevin Kelloway and Cary L. Cooper, Occupational Health
and Safety for Small and Medium Sized Enterprises, (Edward
Elgar Publishing, 2011), 45.
25. OSHA considers an injury or illness to be work-related if an
event or exposure in the work environment either caused
or contributed to the resulting condition or significantly
aggravated a preexisting injury or illness. Work-relatedness
is presumed for injuries and illnesses resulting from events or
exposure occurring in the work environment. OSHA defines
the work environment as “the establishment and other loca-
tions where one or more employees are working or are present
as a condition of their employment. The work environment
includes not only physical locations, but also the equipment
or materials used by the employee during the course of his or
her work.”
26. For complete information on the recording and reporting of
illnesses and injuries, see OSHA Publication 3169, Record-
keeping, particularly Sections 1904.5 (determination of work-
relatedness) and 1904.7 (general recording criteria). See also
the OSHA website at http://www.osha.gov.
27. If employers have a “privacy concern case,” they may not
enter the employee’s name on the OSHA 300 log. Instead, they
should enter “privacy case” in the space normally used for the
employee’s name. This will protect the privacy of the injured
or ill employee when another employee, a former employee,
or an authorized employee representative is provided access
to the OSHA 300 log. Privacy cases must be recorded on a
separate confidential list. Employers must consider the fol-
lowing injuries or illnesses privacy concern cases: (i) an injury
or illness to an intimate body part of the reproductive sys-
tem; (ii) an injury or illness resulting from a sexual assault;
(iii) mental illnesses; (iv) HIV infection, hepatitis, or tuber-
culosis; (v) needlestick injuries and cuts from sharp objects
that are contaminated with another person’s blood or other
potentially infectious material; and (vi) other illnesses, if the
employee independently and voluntarily requests that his or
her name not be entered on the log.
28. Randolph P. Schmid, “Odd Work Schedules Pose Health
Risk,” ABC News (April 16, 2011), http://abcnews.go.com.
29. L.M. Sixel, “Working: Beyond Exhausted, but Still on the
Job,” Houston Chronicle (May 5, 2011), http://www.chron
.com; https://www.osha.gov/OshDoc/data_Hurricane_Facts/
faq_longhours.html (April 11, 2017).
30. Julie Ferguson, “Distracted Driving and Employer’s Policies,”
HR Web Café (November 1, 2009), http://www.hrwebcafe
.com.
31. Alev Dudek, “Workplace Bullying, A Form of Violence
Pursued Under Title VII,” The Huffington Post (February 3,
2017).
32. Roy Maurer, “Workplace-Bullying Laws on the Horizon?”
Society for Human Resource Management (July 2013): 3.
33. Deborah Temkin, “All 50 States Now Have a Bullying Law.
Now What?” Huffington Post (April 27, 2015).
34. W. Barry Nixom and Kim Kerr, Background Screening and
Investigation: Managing Hiring Risk from the HR and Securi-
ties Perspectives, (Elsevier, August 2011), 28.
35. Marcia K. Korow, “How Reflective Is Our Policy?” Nursing
Management 39, no. 1 (January 2008): 37; see also Scott R.
Gane, “Avoiding Violent Outcomes,” Security Management 51,
no. 6 (June 2007): 140.
36. John P. Baeseman and Douglas Newhand, “The Ergonomi-
cally Correct Workplace,” Document Processing Technology 15,
no. 7 (December 2007): 20.
37. Emil Jacob, “The Future of Computer Ergonomics,” Occupa-
tional Health and Safety (September 2011); see also Joshua S.
Berger and Roy Garvin, “Microcentrifuge Tube Ergonomics
and the Required Force of Opening,” Occupational Health and
Safety (July 2010).
38. Michael S. Zedalis and Keitha Kessler, “Frequently Asked
Questions: Ergonomics and Hand Protection,” Occupational
Health and Safety 76, no. 4 (April 2007): 64.
39. Reid Goldsborough, “Keeping Your Eyes Healthy in Front of
a Computer Screen,” TECH Directions 66, no. 10 (May 2007):
12.
40. The Supreme Court decision in International Union v. John-
son Controls may be found in 59 U.S. Law Week 4029.
41. Judy Ashley, “Building a Culture of Wellness the Discovery
Way,” Workspan (July 2007): 43.
42. The Greatest Team, “The 46 Healthiest Companies to Work
for in America,” Greatest (October 2013); see also Joshua
Love, “Five Reasons Corporate Wellness Is More Important
Than Ever,” Forbes (September 2013); see also Mary Lorenze,
“7 Habits of Highly Successful Corporate Wellness Programs,”
CareerBuilder (July 2010).
43. Dale Kaplan and Park Dietz, “Use Employee Assistance to
Manage Risk,” Occupational Health and Safety 76, no. 7 (July
2007): 82.
44. Josh Cable, “Shedding Pounds Good for Bottom Line,” Occu-
pational Hazards 69, no. 10 (October 2007): 18.
45. Jeremy Smerd, “Young and Unhealthy : Urgent Care
Required,” Workforce Management 86, no. 15 (September
10, 2007): 36.
46. “Obesity Programs Are Latest Wellness Focus,” HR Focus 84,
no. 7 (July 2007): 12.
47. “U.S. Workers’ Satisfaction with Job Dimensions Increases,”
Gallup (August 29, 2016), http://www.gallup.com/
poll/195143/workers-satisfied-job-dimensions.aspx.
48. Kerry Sulkowicz, “Stressed for Success,” Business Week (May
21, 2007): 18.
49. Gary M. Stern, “Employee Burnout: Around the Corner?
Already Here?” Fortune, CNN Money (May 2012).
50. “U.S. Workers’ Satisfaction with Job Dimensions Increases.”
51. http://www.watsonsyatt.com/research/reports.asp.
52. Jenna Goudreau, Gail Edmondson, and Michelle Conlin,
“Dispatches from the War on Stress: Business Begins to Recon
with the Enormous Costs of Workplace Angst,” Business Week
89624_ch12_hr_416-447.indd 446 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
447Chapter 12 Promoting Safety and Health
(August 6, 2007): 74; see also Michael R. Frone, “Are Work
Stressors Related to Employee Substance Use? The Impor-
tance of Temporal Context Assessments of Alcohol and Illicit
Drug Use,” Journal of Applied Psychology 93, no. 1 (January
2008): 199.
53. “Will Stress Be Your Next Wellness Target?” HR Focus 85, no.
1 (January 2008): 12.
54. Tower Watson, “2013/2014 Staying@Work Report: U.S.
Executive Summary,” National Business Group on Health, No.
29407 (2013): 6.
55. Ashley Weinberg, Cary L. Cooper, and Dr. Valerie J Suther-
land, Organizational Stress Management: A Strategic Approach
(Palgrave Macmillan, September 2010), 234.
56. Dale Kaplan and Park Dietz, “Use Employee Assistance to
Manage Risk,” Occupational Health and Safety 76, no. 7 (July
2007): 82.
57. Gary M. Stem, “Not Tonight, Dear,” The Conference Room
Review 44, no. 2 (March/April 2007): 38.
58. James Hunter, “Research on Depression,” National Institute
of Mental Health and PsychCentral (October 2013), https://
www.nimh.nih.gov/health/statistics/prevalence/any-anxiety-
disorder-among-adults.shtml.
59. “Treating Depression Improves Productivity,” Industrial Engi-
neer 40, no. 1 (January 2008): 11.
60. “Depression Outreach Can Boost Productivity,” HR Focus 84,
no. 12 (December 2007): 12.
61. The HR Specialist, “ADA Warning for Bosses: You’re not
Qualified to Diagnose Employees’ Mental Illness,” Discrimi-
nation and Harassment in Human Resources, Business Man-
agement Daily (November 2012).
62. Pearl Jacobs and Linda Scaain, “Alcohol Abuse in the Work-
place: Developing a Workable Plan of Action,” Research in
Business & Economics Journal (March 2010): 1.
63. Mindy Chapman, “Drugs and Alcohol Workplace Trends,”
Occupational Health and Safety 76, no. 8 (August 2007): 32.
64. The Employer’s Legal Handbook, see section on preventing
discrimination.
65. Information regarding the U.S. Department of Labor’s efforts
to create a drug-free workplace can be found at http://www.
dol.gov.
66. Kathy Gurchiek, “Employer Testing Credited for Lower Drug-
Use Rates,” HR Magazine 52, no. 6 (June 2007): 36.
67. Andrew Powell, “Prescription for a Hazardous Workplace,”
Occupational Health and Safety (September 2013).
89624_ch12_hr_416-447.indd 447 11/17/17 5:12 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
448
Establish disciplinary policies and differentiate
between the two approaches to disciplinary action.
Identify the different types of alternative dispute
resolution methods.
LO 3
LO 4
Learning Outcomes
After studying this chapter, you should be able to
Explain the concepts of employee rights and
employer responsibilities.
Identify and explain what the privacy rights of
employees are.
LO 1
LO 2
Employees Rights and Discipline
CHAPTER 13
m
ar
ek
ul
ia
sz
/S
hu
tt
er
st
oc
k
89624_ch13_hr_448-480.indd 448 11/17/17 3:25 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
449Chapter 13 Employees Rights and Discipline
I
n this chapter, we discuss the rights of employees, the privacy they can expect in the
workplace, and employee discipline. Companies without clear policies and procedures
for dealing with employee rights and discipline can end up losing lots of money and,
worst of all, ruining their reputation.
This is where HR managers play a crucial role. To be effective they must stay abreast
of current laws, agency regulations, and court rulings, establish written employment
policies based on this information, and educate the staff members in their organizations
about them.
13.1 Employee Rights and Privacy
Employee rights can be defined as the guarantees of fair treatment that workers expect
in return for their services to an employer. These expectations become rights when
they are granted to employees by the courts, legislatures, or employers. Included among
those rights are the rights of employees to protest unfair disciplinary actions, to ques-
tion genetic testing, to have access to their personal files, to challenge employer searches
and monitoring, and to be largely free from employer discipline for off-duty conduct.1
The evolution of employee rights is a natural result of the evolution of societal, busi-
ness, and employee interests.2 However, legal scholars recognize that the protection of
employee privacy rights extends only so far; federal and state courts generally view the
privacy rights of employees as minimal. As attorney Benjamin J. Cook notes, “When
employers clearly state that there is no expectation of privacy, it’s hard to argue that a
reasonable person could have such an expectation.”
For example, consider the issue of camera surveillance. Generally, it is legal to install
cameras in the workplace (except for installations in bathrooms and locker rooms), as
long as employees are informed about them. However, after pornography was discov-
ered on one of its computers, a California children’s home for abused children installed
hidden surveillance cameras in an office shared by two employees. The person who had
accessed the pornography was never caught. However, the two employees who shared
the office later discovered the camera and were upset they were being monitored. They
claimed their privacy rights had been violated, but the Supreme Court of California
ruled against them, saying that their employer had a legitimate business reason for
conducting the surveillance.3
13.1a Employee Rights versus Employer Responsibilities
Balanced against employee rights is the employer’s responsibility to provide a safe work-
place for employees while guaranteeing safe, quality goods and services to consum-
ers.4 An employee who uses drugs may exercise his or her privacy right and refuse to
submit to a drug test. But should that employee produce a faulty product as a result of
drug impairment, the employer can be held liable for any harm caused by that product.
Employers must therefore exercise reasonable care in the hiring, training, and assign-
ment of employees to jobs.5
It is here that employee rights and employer responsibilities often come into conflict
(see Figure 13.1).
employee rights
Guarantees of fair treat-
ment that become rights
when they are granted
to employees by the
courts, legislatures, or
employers.
Are the rights you
have as a citizen of the
United States the same
as the rights you have
as an employee?
LO 1
89624_ch13_hr_448-480.indd 449 11/17/17 3:25 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
450 Part 5 Enhancing Employee-Management Relations
Employee
rights
Rights
Little to No
overlap
Employer
rights
Employee Rights vs. Employer RightsFigure 13.1
When employers fail to honor the rights of employees, it can result in costly lawsuits,
damage the organization’s reputation, and hurt employee morale. But the failure to pro-
tect the safety and welfare of employees or consumer interests can invite litigation from
both groups.
13.1b Negligent Hiring
In Chapter 6, we discussed negligent hiring. In law, negligence is the failure to use
a reasonable amount of care when such failure results in injury to another person.
A general responsibility exists for employers to exercise reasonable care in prevent-
ing employees from intentionally harming other employees during the course of their
work.6
Unfortunately, when one employee commits a violent act against another employee
or an employee willfully defames another employee through email messages com-
municated at work, the employer may face a negligent-hiring lawsuit claiming that
the employer should have used more reasonable care in the hiring of its employees.7
A negligent-hiring lawsuit can seem like a “Catch-22” for an employer. In the remainder
of this section, we will discuss various rights employees have come to expect from their
employers.
13.1c Job Protection Rights
It is not surprising that employees should regard their jobs as a right that should not
be taken away without “just cause” (a good reason) for doing so. However, although
employees might believe they have a right to their jobs, there are no laws in the United
States guaranteeing them as much, as you will see shortly.
Nonetheless, workers have certain expectations about the employment relationships
they have with their employers.8 This expectation is referred to as the psychological
contract. It consists of an employer and an employee’s beliefs about the mutual obliga-
tions they have toward one another.9 For example, in exchange for their talents, energies,
and technical skills, workers expect employers to provide fair compensation, steady
work, job training, and promotions.
negligence
The failure to provide
reasonable care when
such failure results in
injury to consumers or
other employees.
psychological contract
Expectations of a fair
exchange of employ-
ment obligations
between an employee
and employer.
89624_ch13_hr_448-480.indd 450 11/17/17 3:25 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
451Chapter 13 Employees Rights and Discipline
Employment-at-Will
The employment relationship has traditionally followed the common-law doctrine of
employment-at-will. An employment-at-will relationship is created when an employee
agrees to work for an employer for an unspecified period of time. Because the duration
of the employment is indefinite, it can, in general, be terminated at the whim of either
party.10
Does the employment-at-will doctrine give managers and supervisors the unre-
stricted right of termination? No.11 First, as we have emphasized throughout this text,
federal and state laws, court decisions, and administrative rulings restrict termination
decisions. For example, as you learned in Chapter 3, people cannot be fired because of
certain characteristics such as their race, gender, and so forth. Second, in unionized
organizations, union collective bargaining agreements limit automatic discharges. These
agreements specify the kinds of infractions that can lead to termination.
Not all employers operate on the at-will principle, however. Some have written poli-
cies that require good cause to terminate an employee. In any case, despite the at-will
doctrine, in today’s litigious environment, most employers are very cautious about ter-
minating employees. Barry Roseman, employment attorney, notes, “Employers increas-
ingly need to operate under the premise that they have to ‘prove’ that an employee’s
conduct or action warrants termination, if they hope to prevail in court.”
Wrongful Discharge
Approximately 2 million workers are discharged each year.12 A substantial number of
these employees sue their former employers for wrongful discharge. A wrongful dis-
charge is one that is illegal. Wrongful discharge suits challenge an employer’s right under
the employment-at-will concept to unilaterally terminate employees.13 Various state
courts now recognize the following three important exceptions to the employment-at-
will doctrine:
1. Violation of public policy. This exception occurs when an employee is terminated
for refusing to commit a crime; for reporting criminal activity to government
authorities; for disclosing illegal, unethical, or unsafe practices of the employer;
or for exercising employment rights. See Figure 13.2 for examples of public policy
violations.
2. Implied contract. This exception occurs when employees are discharged despite the
employer’s promise (expressed or implied) of job security or contrary to established
termination procedures. An employer’s oral or written statements may constitute a
contractual obligation if they are communicated to employees and employees rely
on them as conditions of employment.14
3. Implied covenant. This exception occurs when an employer has acted with a lack of
good faith and fair dealing. For example, an employer would be doing so if it were
to terminate a salesperson simply to avoid having to pay him or her a commission.
By inflicting harm without justification, the employer violated the implied covenant
between the two parties.
The confusion and conflict between the traditional rights of employers to terminate
at will and the rights of employees to be protected from unjust discharge are far from
resolved. HR specialists recommend firms follow the suggestions given in Figure 13.3.15
Next, let’s look at some situations that can result in wrongful discharge suits.
employment-at-will
relationship
The right of an employer
to fire an employee with-
out giving a reason and
the right of an employee
to quit when he or she
chooses.
wrongful discharge
A discharge, or termina-
tion, of an employee that
is illegal.
89624_ch13_hr_448-480.indd 451 11/17/17 3:25 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
452 Part 5 Enhancing Employee-Management Relations
Whistle-Blowing
Employees engage in whistle-blowing when they report an employer’s illegal actions,
immoral conduct, or illegal practices to governmental agencies charged with uphold-
ing the law. A number of federal and state laws protect whistle-blowers from retaliation
from their employers.16
The Sarbanes–Oxley (SOX) Act protects whistle-blowers employed in publicly
traded companies.17 The law encourages whistle-blowing by motivating publicly held
companies to promote a more open culture that is sympathetic to employees who
have a “reasonable belief ” that a law has been violated. Federal employees are covered
by the federal Whistleblower Protection Act (WPA).18 The Notification and Federal
Employee Antidiscrimination and Retaliation Act (No FEAR Act) requires federal agen-
cies to be more accountable for violations of antidiscrimination and whistle-blower
protection laws. The False Claims Act (FCA) and Dodd–Frank Wall Street Reform and
Consumer Protection Act protect and financially reward whistle-blowers who expose
whistle-blowing
Complaints to govern-
mental agencies by
employees about their
employers’ illegal or
immoral acts or practices.
An employer may not terminate an employee for:
• Refusing to commit perjury in court on the employer’s behalf
• Cooperating with a government agency in the investigation of a charge or giving
testimony
• Refusing to violate a professional code of conduct
• Reporting Occupational Safety and Health Administration (OSHA) infractions
• Refusing to support a law or a political candidate favored by the employer
• Whistle-blowing, or reporting illegal conduct by the employer
• Informing a customer that the employer has stolen property from the customer
• Complying with summons to jury duty
Discharges That Violate Public PolicyFigure 13.2
Tips to Avoid Wrongful Employment Termination LawsuitsFigure 13.3
• Terminate an employee only if there is an articulated reason. An employer should have
clearly articulated, easily understandable reasons for discharging an employee. The rea-
sons should be stated as objectively as possible and should reflect company rules, poli-
cies, and practices.
• Set and follow termination rules and schedules. Make sure every termination follows a docu-
mented set of procedures. Procedures can be from an employee handbook, a supervisory
manual, or even an intraoffice memorandum. Before terminating, give employees notices
of unsatisfactory performance and improvement opportunities through a system of
warnings and suspensions.
• Document all performance problems. A lack of documented problems in an employee’s
personnel record may be used as circumstantial evidence of pretextual discharge if the
employee is “suddenly” discharged.
• Be consistent with employees in similar situations. Document reasons given for all disciplin-
ary actions, even if they do not lead to termination. Terminated employees may claim that
exception-to-the-rule cases are discriminatory. Detailed documentation will help employ-
ers explain why these “exceptions” did not warrant termination.
89624_ch13_hr_448-480.indd 452 11/17/17 3:25 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
453Chapter 13 Employees Rights and Discipline
fraud related to governmental programs and wrongdoing related to consumer financial
products or services, respectively. OSHA administers the whistle-blowing provisions
in 15 federal statutes protecting whistle-blowers in such industries as airline, nuclear
power, and public transportation.
Not only is whistle-blowing a protected right of employees, but also these cases
result in embarrassment for employers, harassment for employees, and large fines for
employers that are found guilty.19 For example, in 2016 news broke that Barney Jones,
former employee of the smart-home company Nest, exposed the company to the U.K.
government for not paying appropriate taxes. Nest, which happens to be owned by
Google, ended up paying nearly $200 million in fines and fees.20
To prevent cases such as these, HR professionals recommend companies
implement a whistle-blowing policy that encourages employees to report illegal
or immoral conduct internally rather than externally. The policy should provide
for the safeguard of employee rights, a complete and unbiased investigation of the
incident, a speedy report of findings, and an appeals procedure for employees who
are dissatisfied with company findings. You can rest assured that Nest now has a
website for employees to blow the whistle internally before they have to go outside
the company to find justice. The website also encourages employees to stop friends
from leaking important information. You could say it promotes whistle-blowing on
whistle-blowers.21
Implied Contract
Because a majority of Americans work without an employment contract, under certain
conditions these employees may be granted contractual employment rights. This can
occur when an implied promise by the employer suggests some form of job security to
the employee. Once these explicit or implicit promises of job security have been made,
courts have generally prohibited the employer from terminating the employee without
Google, owner of Nest,
set up an internal web-
site for employees to
report whistleblowers.
After paying $200 mil-
lion in fines due to one
whistle-blower at Nest,
the company now
encourages employees
to air their frustrations
by talking to manage-
ment before talking to
the press.
Ch
ris
tia
n
Sc
ie
nc
e
M
on
ito
r/
G
et
ty
Im
ag
es
89624_ch13_hr_448-480.indd 453 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
454 Part 5 Enhancing Employee-Management Relations
first exhausting the conditions of the contract. The following are some examples of how
an implied contract may become binding:
• Telling employees their jobs are secure as long as they perform satisfactorily and
are loyal to the organization.
• Stating in the employee handbook that employees will not be terminated without
the right of defense or access to an appeal procedure.
• Urging an employee to leave another organization by promising higher wages and
benefits, then reneging on those promises after the person has been hired.
Employers can lessen their vulnerability to implied contract lawsuits by prudent
managerial practices, training, and HR policies. HR experts recommend the following
approaches:
1. Training supervisors and managers not to imply contract benefits in conversa-
tions with new or present employees.
2. Including in employment offers a statement that an employee may voluntarily ter-
minate his or her employment with proper notice and may be dismissed by the
employer at any time and for a justified reason.
3. Including employment-at-will statements in all employment documents—for
example, employee handbooks, employment applications, and letters of employ-
ment22 (see Highlights in HRM 1).
4. Having written proof that employees have read and understood the employment-
at-will disclaimers provided to them.
Explicit Contracts
Explicit employment contracts are formal written (signed) agreements that grant to
employees and employers agreed-upon employment benefits and privileges. The con-
tracts normally state the period of employment, terms and conditions of employment
(e.g., salary and benefits), and severance provisions. Explicit contracts are popular with
executives, senior managers, and people with highly technical or professional skills and
abilities. When an employee has an explicit contract, he or she cannot be dismissed
at will.
In today’s highly competitive environment, before hiring employees, employers
sometimes impose certain restrictions, or provisions, in explicit contracts. The most
widely used restrictions are:
• Nondisclosure of information agreement. This provision forbids employees from
revealing proprietary information outside the company, either during or following
their employment. Courts widely enforce these agreements.
• Intellectual property agreement. This provision grants to an employer the own-
ership of an idea, invention or process, or work of authorship developed by the
employee during the time of employment. Such an agreement expressly states that
the employer retains all rights, titles, and interests in ideas that are subject to patent
laws and developed during the employee’s period of hire.
• Noncompete agreement. This provision prevents ex-employees from either becom-
ing a competitor or working for a competitor for a designated period of time, for
example, 1 or 2 years.23 Noncompete agreements are designed to protect confiden-
tial information, customer relations, and other valuable assets.24
89624_ch13_hr_448-480.indd 454 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
455Chapter 13 Employees Rights and Discipline
• Nonpiracy agreements. These agreements prohibit ex-employees from soliciting
clients or customers of former employers for a specific period of time and from
disclosing or making use of confidential employer information.
Explicit contracts are enforceable in court when either the employee or employer
violates any provisions of the agreement.
Constructive Discharge
It is increasingly common for employees to quit or resign from their jobs because the
intolerable acts of their employers left them no choice. This situation is referred to as
a constructive discharge. That is, the employees were “forced” to resign because of
intolerable working conditions purposefully placed upon them by the employer.25 In a
leading constructive discharge case, Young v. Southwestern Savings and Loan Associa-
tion, the court noted:
The general rule is that if the employer deliberately makes an employee’s work-
ing conditions so intolerable that the employee is forced into involuntary resig-
nation, then the employer has encompassed a constructive discharge and is as
liable for any illegal conduct involved therein as if he had formally discharged
the aggrieved employee.
The courts, by formulating the constructive discharge doctrine, attempt to prevent
employers from accomplishing covertly what they are prohibited by law from achiev-
ing overtly.26
Discharge as a Result of Retaliation
Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, and other employment laws prohibit employers from
retaliating against employees when they exercise their rights under these statutes
constructive discharge
An employee’s voluntary
termination of his or her
employment because
of harsh, unreasonable
employment conditions
placed on the individual
by the employer.
The Bratz-versus-
Barbie doll war isn’t
child’s play. What’s the
fight about? Mattel
says the toy’s inventor,
Carter Bryant, designed
the doll when he was
working for Mattel, so
it should be a Mattel
product. Bryant says he
invented the toy on his
own time, and when
Mattel showed no
interest in the product,
he sold the idea to rival
toymaker MGA.AP
Im
ag
es
/P
RN
ew
sF
ot
o/
M
G
A
E
nt
er
ta
in
m
en
t
89624_ch13_hr_448-480.indd 455 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
(see Chapter 3). Employees may believe retaliation occurs when managers transfer them
to lower-rated jobs, deny them salary increases or promotions, impose on them unreal-
istic job assignments, or become belligerent or uncommunicative with them after they
file discrimination complaints or receive a favorable settlement.27
To prevent retaliation charges, employers should implement a separate anti-retalia-
tion policy and train managers and supervisors in acceptable and unacceptable methods
to resolve employee complaints.28 A key component to any anti-retaliation policy is to
treat employees with dignity and respect. Other suggestions to reduce retaliation dis-
charges include the following:
• Take no adverse employment action against employees when they file complaints.
Let them know you take their complaints seriously and are looking into them.
• Keep complaints confidential.
• Be consistent and objective in your treatment of employees. Evaluate employees on
how well they perform, not on their personalities.
• Harbor no animosity toward employees when they file discrimination lawsuits.
Treat every employee the way you would want to be treated—fairly.
Discharges and the WARN Act
In 1989, Congress passed the Worker Adjustment and Retraining Notification (WARN)
Act, which requires organizations with more than 100 employees to give employees
and their communities 60 days’ notice of any closure or layoff affecting 50 or more
full-time employees.29 Notice must be given to collective bargaining representatives,
Examples of Employment-at-Will Statements
Employment handbooks frequently include an opening state-
ment that employees are employed at will; that is, there are no
duration guarantees. They also typically state that no super-
visors or managers, except specified individuals (i.e., the HR
director or company president), have the authority to promise
any employment benefit—including salaries, job positions,
and the like. All handbooks should include a disclaimer that
expressly provides that all employment policies and benefits
contained in the handbook are subject to change or removal
at the sole and exclusive discretion of the employer.
Two examples of at-will statements are as follows:
I acknowledge that if hired, I will be an at-will employee.
I will be subject to dismissal or discipline without notice
or cause, at the discretion of the employer. I understand
that no representative of the company, other than the
president, has authority to change the terms of an at-
will employment and that any such change can occur
only in a written employment contract.
I understand that my employment is not governed by
any written or oral contract and is considered an at-
will arrangement. This means that I am free, as is the
company, to terminate the employment relationship
at any time for any reason, so long as there is no viola-
tion of applicable federal or state law. In the event of
employment, I understand that my employment is not
for any definite period or succession of periods and is
considered an at-will arrangement. That means I am
free to terminate my employment at any time for any
reason, as is the company, so long as there is no viola-
tion of applicable federal or state law.
Note of Caution: Because at-will employment is governed
by state laws, in order for an employer to preserve its at-
will status, it must follow the regulations of its jurisdic-
tion. This includes the writing of employment-at-will
statements.
Highlights in HRM1
456
89624_ch13_hr_448-480.indd 456 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
457Chapter 13 Employees Rights and Discipline
unrepresented employees, the appropriate state dislocated worker agency, and the high-
est elected local official. Terminated employees must be notified individually in writing.
The act allows for several exemptions, including “unforeseeable circumstances” and
“faltering businesses.”
13.1d Privacy Rights
The right of privacy is the freedom from unwarranted government or business intru-
sion into one’s personal affairs. It involves the individual’s right to be given personal
autonomy and to be left alone.30 Not surprisingly, employees strongly defend their right
to workplace privacy. Meanwhile, employers defend their right to monitor employees’
activities when they directly affect a business, its productivity, workplace safety, and/or
morale.31 So who is right? Employers or employees? (See Figure 13.4.)
In this section, we will discuss some of the most pressing privacy issues being
debated by employees and employers today and how they are being resolved.
Substance Abuse and Drug Testing
As you learned, in the United States companies can legally test workers for drugs. But
can they do so under any and all circumstances? The answer is no. Certain restric-
tions apply. In the private sector, drug testing is largely regulated by individual states.
Pro-drug testing states generally permit testing, provided that strict testing procedures
are followed.32 By contrast, states with restrictive drug-testing laws generally prohibit
testing for drugs except in very specific circumstances and for drugs listed in state
regulations.33
Federal regulations and laws restrict drug testing as well. Recall from Chapter 3
that the Equal Employment Opportunity Commission does not allow job applicants to
be tested before they are extended offers. The Americans with Disabilities Act protects
employees who have been addicted to drugs and are recovering from them. And some
drugs that would otherwise be illegal, such as opiates and medical marijuana, are legiti-
mately prescribed for certain conditions.34
Safety Sensitive Positions. Drug testing is most prevalent among employees in sensi-
tive positions within the public sector, in organizations doing business with the federal
government, and in public and private transportation companies. Since the passage of
the Drug-Free Workplace Act of 1988, applicants and employees of federal contractors
have become subject to testing for illegal drug use. Barring state and federal laws that
restrict or prohibit drug testing, however, private employers generally have a right to
What are the privacy
settings on your Face-
book page? Do you
think your employer, or
prospective employer,
should be allowed to
look at it?
LO 2
Employee
rights of
privacy
Employer
rights
The Balance of Employee Rights to Privacy vs. Employers Wanting
to Know
Figure 13.4
89624_ch13_hr_448-480.indd 457 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
458 Part 5 Enhancing Employee-Management Relations
require employees to submit to the tests. The exception is unionized workforces. Drug-
testing programs for these employees must be negotiated by their unions.
Criticisms of Drug Testing. In Chapter 6, we explained that studies have failed to show
that drug testing makes the workplace safer and that alcohol appears to create more
problems than drugs.35 Another criticism of drug tests, including urinalysis and hair
tests, is that they do not reveal if a person is currently under the influence of a drug.
Illegal substances remain in urine for various periods of time: cocaine for approximately
72 hours, marijuana for 3 weeks or longer.36 Therefore, an employee can test positive
for a drug days or weeks after using it but not be impaired on the job. Alcohol will not
show up in a urinalysis or hair test. For that, a breathalyzer, blood, or saliva test must be
used. The question becomes, Which test should an employer use?
Organizations also have to ensure that any samples taken from employees are
properly handled and that accredited labs are used to test them. The results of the
tests must be kept confidential and provided only to those who need to know—for
example, supervisors or HR staff members—and not to other coworkers or disinter-
ested managers.
For reasons such as these, companies have become less aggressive about drug testing
than they were in decades past when the tests first found their way into the workplace.
Today, most companies only test when reasonable suspicion or probable cause exists.
Figure 13.5 shows an example of a drug-free workplace policy.
Impairment Testing
An alternative to drug testing is to evaluate an employee’s suitability for work through
impairment testing. Also called fitness-for-duty or performance-based testing, impair-
ment testing measures whether an employee is alert enough to work. One impairment
test requires an employee to keep a cursor on track during a video game-like simulation.
Test results, when compared against baseline data gathered earlier on the employee,
mimic those of a sobriety test. One advantage of impairment testing is that it focuses on
impairment testing
Also called fitness-for-
duty or performance-
based testing, it
measures whether an
employee is alert enough
to work.
1. Adopt a written zero tolerance drug-free workplace policy and provide a copy to all
employees. A signed copy should be placed in the employee’s personnel file.
2. Post “We Are a Drug-Free Workplace” signs where employees will widely observe them.
3. Provide employees with substance abuse prevention educational materials. Arrange
substance abuse awareness training for employees and managers.
4. Consider performing preemployment drug testing on all new hires.
5. Advise employees that they are subject to drug testing when “reasonable suspicion” exists.
6. Provide for follow-up testing to ensure that an employee remains drug-free after
returning from a substance abuse treatment program.
7. Provide for post-accident drug testing when justified by property loss or damage, seri-
ous injury, or death.
8. Use only federally or state-approved/certified labs for analysis.
9. Utilize the services of a medical review officer for all positive drug test results.
10. Maintain strict confidentiality of all test results. Provide information only on a
“need-to-know” basis.
11. Apply terms of a written policy strictly, fairly, and equally among employees and managers.
Recommendations for a Drug-Free Workplace Policy Figure 13.5
89624_ch13_hr_448-480.indd 458 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
459Chapter 13 Employees Rights and Discipline
workplace conduct rather than off-duty behavior. Furthermore, it identifies employees
who are impaired because of problems that a drug test cannot spot: fatigue, stress, and
alcohol use.
13.1e Digital Surveillance
Why do companies use surveillance and other technology to watch what their employ-
ees do? One reason is employee theft, such as the stealing of merchandise, supplies, or
equipment, the selling of information such as customer lists and trade secrets, embezzle-
ment, and so on.37 Monitoring quality control, ensuring the safety of employees, and
eliminating the amount of time they spend surfing the Web and doing personal business
on company time are other reasons.38 Next, let us look at some of the most common
methods of surveillance, and the employer–employee rights associated with them.
Camera Surveillance
DuPont uses long-distance cameras to watch employees on its loading docks. The
Cheesecake Factory, a restaurant chain, uses video surveillance of kitchens, dining
rooms, and hostess stations to monitor how workers treat customers and each other.
Most high-end hotels have cameras in their facilities to protect both workers and guests.
Employers also install cameras in their parking lots and remote workplace areas to
help improve safety. Few federal laws protect workers from being watched. In general,
employers can train video cameras on their employees without significant legal concerns
as long as they have a legitimate business reason for doing so and inform employees they
are doing as much. States, however, set their own regulations.
Employers are not the only ones with cameras, though. You might be surprised to
know that employees’ cameras have become a new issue firms are dealing with. In just
a few seconds, a coworker with a camera phone can take offensive pictures of his or her
coworkers in private or embarrassing situations and disseminate them around the world
via the Web.39 In 2017, a
McDonalds employee was
fired for posting a video
show ing rats r unning
around inside the fast-food
chain. The video led to
health inspectors closing
down the restaurant and the
employee losing her job.40
Small cameras and camera
phones can also be used to
quickly and efficiently con-
duct industrial espionage
and steal a company’s pat-
ents and trade secrets. As
a result, some employers
ban the use of these devices
in the workplace unless
employees are given special
permission to use them.
Workers in Apple’s testing
Many companies ban
the use of personal
recording devices to
prevent the leak of
confidential informa-
tion to the outside
world.
sa
hu
a
d/
Sh
ut
te
rs
to
ck
89624_ch13_hr_448-480.indd 459 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
460 Part 5 Enhancing Employee-Management Relations
rooms are required to cover up devices with black cloaks when they are working on
them so the company can be assured no “rogue” cameras are being used to take pictures
of the products.41
Phone Conversations and Text Communications
In general, employers have the right to monitor calls, text and direct messages sent from
their telecommunications devices, provided they do so for compelling business reasons
and employees have been informed that their communications will be monitored. How-
ever, a federal law, the Electronic Communications Privacy Act (ECPA), places some
limitations on that right.42 The ECPA restricts employers from intercepting wire, oral, or
electronic communications. For example, under the law, if an employee receives a personal
call, the employer must hang up as soon as he or she realizes the call is personal. However,
if employees are told not to make personal calls or send text messages from their business
phones, the ECPA no longer applies, and their communications may be monitored.
Email, Internet, and Computer Use
Many employees are unaware that their employers can monitor what they do online
and fire or discipline them based on that information.43 According to a recent report by
the American Management Association, more than a quarter of employers have fired
workers for misusing email, and about a third have fired workers for misusing the Inter-
net.44 Until recently, employers were allowed to monitor any and all email communica-
tions their employees sent from work computers. However, court rulings have limited
employer’s rights somewhat. For example, some courts have ruled that employers can
monitor incoming and outgoing data on their own email systems but not email sent via
outside email systems such as Yahoo, Google, and AOL systems. One firm discovered
this the hard way after monitoring an employee who was planning to go to work for a
competitor. She believed her emails sent on her employer’s computer, but via a nonwork
email system, were private. A New Jersey court agreed with her.45
Other privacy issues relate to Internet sites employees are allowed to access. More
and more companies are banning social media at work. They see the negative effects it
has on productivity and even on their own reputation. For example, when a photo of a
Taco Bell employee licking taco shells was posted on social media, the fast-food giant
naturally took a lot of heat.
As the use of Instagram, SnapChat, and other social media platforms continues
to grow, their abuse in the workplace continues to grow as well. According to one
study, more than 70 percent of businesses have had to take disciplinary action against
employees for misusing social media.46 (See Figure 13.6 for reasons employees use
social media.)
Companies can legally create electronic communication policies that limit employ-
ees’ Internet use. Blocking employees from accessing sites such as Facebook, eBay, gam-
bling, and pornographic websites has also become a common tactic for firms.
The measures employees need to take to protect their laptops and what to do if they
are stolen should also be part of an electronic policy.47 If they go missing, a mountain of
valuable corporate data can fall into the wrong hands. Likewise, policies surrounding
electronic storage devices such as USB drives are also being adopted by organizations.
Studies have shown that people own a lot of USB drives and often don’t keep good track
of them and what they contain. USB drives can also infect a company’s computers and
servers with viruses.
89624_ch13_hr_448-480.indd 460 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
461Chapter 13 Employees Rights and Discipline
Searches
Can employers search employees’ work lockers, desks, suitcases, toolboxes, and gen-
eral work areas without their knowledge? Generally speaking, yes. However, random
searches of employees’ personal belongings without probable cause should be avoided.
Even if a firm has probable cause, legal experts advise that a company should first look
at the information it has from available sources such as security cameras, timecards, and
so forth to see whether the search is truly warranted. Body searches should be done only
under emergency situations. If conducted, the searches should be made by a security
officer and a person of the same sex.
A firm that reserves the right to search employees under warranted circumstances
should have a written plan as to the privacy employees can expect.
1. The search policy should be clearly outlined in a firm’s employee handbook. The
handbook should explain that searches will not be conducted without a compel-
ling reason.
2. When possible, searches should be conducted in private.
3. The employer should attempt to obtain the employee’s consent prior to the search.
4. The search should be conducted in a humane and discreet manner to avoid inflic-
tion of emotional distress.
5. The penalty for refusing to consent to a search should be specified.
Take a mental break from work
Connect with friends and
family at work
Make or support professional
connections
Get information that helps solve
problems at work
Build or strengthen personal
relationships with coworkers
Learn about someone they
work with
Ask work-related questions of
people outside their organization
Ask work-related questions of
people inside their organization
34%
24
20
17
17
12
12
27
% of workers who ever use social media platforms to . . .
Why do employees turn to social media at work?Figure 13.6
Source: “Survey conducted Sept. 11–21, 2014. “Social Media and the Workplace.”
89624_ch13_hr_448-480.indd 461 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
462 Part 5 Enhancing Employee-Management Relations
Access to Personnel Files
Employees entrust their employers with a wealth of personal information for various
purposes, including their social security numbers, home addresses, family information,
bank account numbers so they can have their paychecks deposited directly, and so forth.
Personnel files also generally contain performance appraisal and salary information,
background and credit reports, criminal records, and test scores.
HR’s Responsibility to Safeguard Personnel Information. A firm’s HR department is
almost always responsible for maintaining this information and safeguarding its flow to
prevent, among other things, identity theft, which as you are probably aware is a grow-
ing problem.48 Privacy Rights Clearinghouse, a nonprofit privacy advocate organiza-
tion, estimates that over 50 million people have been put at risk as a result of security
breaches. For example, Adobe suffered a data breach during which hackers stole 38
million users’ credit card records and login information.49 Moreover, in 2017 Amalgam-
ated Sugar Company, out of Boise, Idaho, suffered a breach when personal information
of 2,858 employees was lost to cyberattackers.50
HR managers need to take the lead when it comes to safeguarding employee infor-
mation. Under the Privacy Act of 1974, federal agencies must safeguard the personal
information of their employees. Figure 13.7 shows the steps employers can take to safe-
guard employees’ personal information. Also, as you learned in Chapter 3, employees’
medical and genetic information must be kept confidential in a separate file from any
employee’s other personnel information.
Employee Access to Personnel Files. Legislation at the federal level and various states
laws permit employees to inspect their own personnel files. How much access is allowed
varies from state to state.51 The states that grant employees the privilege to see their
personnel files generally provide:
• The right to know of the existence of one’s personnel file
• The right to inspect one’s own personnel file
• The right to correct inaccurate data in the file
Typically, if a state law allows employees to examine their files, employers can insist
that someone from HR, or a supervisor, be present to ensure that nothing is taken,
added, or changed. Even in the absence of specific legislation, most employers give
their employees access to their personnel files. Employment professionals recommend
that organizations develop a policy on employee files that includes, as a minimum, the
points noted in Figure 13.7.
Throughout this chapter, we have emphasized how
extremely important it is for an employer to have a hand-
book. The question is, How do you begin to put one
together, and what information should it contain? To help
entrepreneurs and small business owners avoid having to
Small Business Application
create handbooks from scratch, the U.S. Small Business
Administration has developed a free template download-
able from its site. The basic Employee Handbook Template
covers multiple topics and can be customized using a
company’s specific policies.
SBA Offers Small Businesses Handbook Help
89624_ch13_hr_448-480.indd 462 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
463Chapter 13 Employees Rights and Discipline
Off-Duty Employee Conduct
Consider the following case. On Monday morning, the owner of ABC Corporation
reads in the newspaper that a company employee has been charged with robbery and
assault on a local convenience store owner. The employee has been released pending
trial. A phone call to the employee’s supervisor reveals that the employee has reported
to work. What should the owner do?
A number of states have passed laws that prohibit employers from disciplining or
firing employees for activities they pursue offsite on their own time as long as they are
legal.52 However, even when the activities are illegal, court rulings have suggested that
the conduct may not, in some circumstances, be a lawful justification for employee
discipline. Organizations that want to discipline employees for off-duty misconduct
must establish a clear relationship between the misconduct and its negative effect on
other employees or the organization.53 This might be established, for example, in cases
in which off-duty criminal misconduct (such as child molestation) creates a disruptive
impact on the workplace. Another example might be when the public nature of the
• Define exactly what information is to be kept in employee files. Do not collect information
from employees or applicants you do not need or use. Do not collect information that
could be viewed as discriminatory or could form the basis for an invasion-of-privacy suit.
• Identify the individuals allowed to view personnel files and when and why they should be
allowed to do so. Keep employee records in a locked and secured area that only qualified
personnel can access on a need-to-know basis. Maintain a log that shows who accessed
what records and when.
• Specify where, when, how, and under what circumstances employees may review or copy
their files.
• Do not use social security numbers as employee identifiers. Rather, use random identifiers
and keep the social security numbers as narrowly distributed as possible. Do not print
social security numbers on people’s paychecks or send documents to employees via mail
or e-mail that contain their social security numbers. The exception are IRS documents
mailed at year end for tax purposes.
• Use encryption software that translates personnel data into a code that can only be
accessed using a key or password.
• Do not give out information about employees over the phone. The person might claim
they are a prospective employer or banker looking to help process a loan for an employee
but in reality could be a debt collector, stalker, or person engaging in identity theft.
Instead tell the person to send you a written authorization form signed by the employee
that allows you to disclose the information. When you receive the form, verify it with the
employee.
• Audit employment records on a regular basis to remove irrelevant, outdated, or inaccu-
rate information.
• Use up-to-date digital and/or hardware-based methods, thoroughly wipe all data from
the hard drive and removable magnetic media of any obsolete computers discarded or
sold by the company, and physically destroy any data CDs or DVDs containing company
and employee information.
• Shred and securely dispose of any paper records containing sensitive company and
employee information.
Guidelines for Safeguarding Personnel FilesFigure 13.7
Source: Adapted from “Employee Rights and Identity Theft,” Texas Workforce Commission, accessed June 2, 2011,
http://www.twc.state.tx.us.
89624_ch13_hr_448-480.indd 463 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
464 Part 5 Enhancing Employee-Management Relations
employee’s job (such as police or fire department personnel) creates an image problem
for the organization. However, before banning specific off-duty behavioral conduct,
employers are advised to obtain legal advice.
Off-Duty Employee Speech
Some organizations have social networking and blogging policies that restrict employ-
ees from making disparaging remarks about their firms or its supervisors, or otherwise
casting their organizations in a bad light. The First Amendment prohibits the govern-
ment—not private employers—from telling us what we can and cannot say.
However, like off-duty conduct, state laws and courts have tried to balance the
rights of employees with those of their employers in this regard.54 The National Labor
Relations Act, which allows workers to form unions, protects the rights of employees to
talk to one another about their working conditions.
Meanwhile, employees need to realize that what they say online can put their
employers in an awkward situation to which they are going to feel compelled to respond.
Moreover, online posts that are racist, sexist, demean or harass one’s coworkers, and
reveal confidential company information are not likely to be legally protected. They can
also be career enders for employees.
Workplace Romances
Workplace romances create a dilemma for organizations. Acceptable behavior in
a consensual relationship between employees can become harassing behavior if one
party to the relationship no longer welcomes the conduct, and it may result in violence
should a scorned lover seek violent revenge at the work site. Of particular concern is an
employer’s liability if a coworker, supervisor–subordinate, or other power-differentiated
romance goes sour and leads to charges of sexual harassment.55 Furthermore, workplace
romances can lead to employee charges of favoritism against a coworker involved in a
supervisor–subordinate romance. These “reverse harassment” claims are based on pref-
erential treatment given an employee engaged in a romantic affair. Workplace romances
can also create morale problems when other employees feel unfairly treated; such situ-
ations can lead to jealousy, resentment, and hard feelings56 (see Figure 13.8).
Love + the workplace
Workplace
romance
Bad
breakup
Sexual
harassment
lawsuit
This is a
really
bad idea
When Workplace Romance Can Be a Bad IdeaFigure 13.8
89624_ch13_hr_448-480.indd 464 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
465Chapter 13 Employees Rights and Discipline
As we mentioned in Chapter 3,
although some companies have strict
anti-fraternization policies, such a pol-
icy can lead to lawsuits. However, recall
that the rights of companies to con-
trol the legal, off-duty conduct of their
employees are limited. Sexual harass-
ment policies have become the preferred
way to deal with the issue. Some employ-
ers have dating parties sign consensual
relationship agreements stating that they
will not let their relationship affect the
work environment or sue their employer
should the relationship go sour.57
Body Art, Grooming, and Attire
Tattoos and body piercings are increas-
ingly popular. Nearly half of Millennials
(47 percent) and over a third of Generation
Xers (36 percent) have one or more tattoos.
This stands in stark contrast to only 13
percent of babyboomers having a tattoo.58
However, employers have the right to establish reasonable standards for grooming,
attire, tattoos, and facial piercings and to require employees to abide by those stan-
dards.59 An at-will employee who does not do so can be let go. However, policies on
appearance should reflect the nature of the organization and its industry, the types of
safety concerns it faces, and not impinge on an employee’s religious rights.60
A relationship with
a fellow astronaut
fizzled, and Nowak
was later arrested for
attempting to kidnap
her former lover’s
new girlfriend. The
girlfriend was able
to escape unharmed
from Nowak, who was
later discovered and
arrested. NASA didn’t
institute a nonfrater-
nization policy follow-
ing the incident, but it
did beef up its screen-
ing policies to help
screen out candidates
with psychological
issues.
M
at
t S
tr
os
ha
ne
/G
et
ty
Im
ag
es
According to some, tat-
toos help Millennials
declare their identity
with conviction.
D
ea
n
D
ro
bo
t/
Sh
ut
te
rs
to
ck
89624_ch13_hr_448-480.indd 465 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
466 Part 5 Enhancing Employee-Management Relations
13.2 Disciplinary Policies and Procedures
When managers are asked to define the word discipline, their most frequent response is
that discipline means punishment (see Figure 13.9).
However, in the context of management, discipline does not mean punishment.
Rather, discipline is a tool used to correct the practices of employees to help them
perform better so they conform to acceptable standards. Many organizations, such as
Bank of America and Adobe, define discipline in their policy manuals as training that
“corrects, molds, or perfects knowledge, attitudes, behavior, or conduct.” Figure 13.10
lists the more common disciplinary problems identified by managers.
It goes without saying that disciplinary actions should be taken only for justifiable
reasons and that employees should be treated fairly and consistently. Good guidelines
will help a firm not only avoid lawsuits but also prevent creating a poisonous atmosphere
at work that can lead to low morale among employees and high turnover.
13.2a The Result of Inaction
Even when it’s justified, managers don’t generally enjoy disciplining their employees.
However, failing to do so generally aggravates a problem that eventually must be resolved.
Figure 13.11 presents a disciplinary model that illustrates the areas where provisions
should be established. The model also shows the logical sequence in which disciplinary
steps must be carried out to ensure enforceable decisions. Should discipline become
discipline
A tool, used to correct
and mold the practices of
employees to help them
perform better so they
conform to acceptable
standards.
What are the disciplin-
ary policies and proce-
dures at your school? In
what ways do you think
they might be similar
to those implemented
in the workplace? In
what ways do you
think they might be
different?
LO 3
Discipline ≠ Punishment
= Constructive Training
The True Definition of DisciplineFigure 13.9
ATTENDANCE PROBLEMS
• Unexcused absence
• Chronic absenteeism
• Unexcused or excessive tardiness
• Leaving without permission
DISHONESTY AND RELATED PROBLEMS
• Theft
• Falsifying employment application
• Willfully damaging organizational property
• Punching another employee’s time card
• Falsifying work records
WORK PERFORMANCE PROBLEMS
• Failing to complete work assignments
• Producing substandard products or
services
• Failing to meet established production
requirements
ON-THE-JOB BEHAVIOR PROBLEMS
• Bullying
• Intoxication at work
• Insubordination
• Horseplay
• Smoking in unauthorized places
• Fighting
• Gambling
• Failing to use safety devices
• Failing to report injuries
• Carelessness
• Sleeping on the job
• Using abusive or threatening language
with supervisors
• Possessing illegal narcotics or alcohol
• Possessing of firearms or other weapons
• Sexual harassment
Common Disciplinary ProblemsFigure 13.10
89624_ch13_hr_448-480.indd 466 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
467Chapter 13 Employees Rights and Discipline
necessary, the employee’s immediate supervisor is the logical person to apply the com-
pany’s disciplinary procedures and monitor the employee’s improvement, although the
HR departments should develop and ensure disciplinary policy and action conform to
current laws.
13.2b Setting Organizational Rules
Setting an organization’s rules is the foundation for an effective disciplinary system.
These rules govern the type of behavior expected of employees. The following sugges-
tions can help HR managers and their firms when they are considering the rules the
organization should adopt and how they should be implemented:
1. The rules must be reasonable and relate to the safe and efficient operation of the
organization.
2. The rules as well as the consequences for breaking them should be written down
and widely disseminated to all employees. Neglecting to communicate the rules is
a major reason disciplinary actions taken against employees are reversed.61
3. The rules should be clearly explained. Employees are more likely to accept a rule if
they understand the reason behind it.
4. Employees should sign a document stating that they have read and understood the
organizational rules.
5. The rules should be reviewed periodically—perhaps annually—especially those
rules critical to work success.
13.2c Investigating a Disciplinary Problem
Figure 13.12 lists seven questions to consider when investigating an employee offense.
Attending to each question will help ensure a full and fair investigation while providing
reliable information free from personal prejudice.
Documenting Misconduct
When a manager fails to record the misconduct of employees, it can undermine a firm’s
efforts to deal with the behavior. A manager’s records of employee misconduct are con-
sidered business documents, and as such they are admissible evidence in arbitration
hearings, administrative proceedings, and courts of law.
Organization
discipline
policy
Definition of
discipline
Violation of
organizational
rules
Investigation
of employee
offense
Disciplinary
interview
Progressive
discipline
Due process Just cause Discharge
A Disciplinary ModelFigure 13.11
89624_ch13_hr_448-480.indd 467 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
468 Part 5 Enhancing Employee-Management Relations
The most significant cause of inadequate documentation, however, is that managers
often do not know what constitutes good documentation. The documentation need not
be lengthy, but to be complete it should include the following eight items:
1. The date, time, and location of the incident(s)
2. The behavior exhibited by the employee (the problem)
3. The consequences of that action or behavior on the employee’s overall work perfor-
mance and/or the operation of the employee’s work unit
4. Prior discussion(s) with the employee about the problem
5. The disciplinary action to be taken and the improvements expected should be
documented
6. The consequences of failing to make the improvements by a certain follow-up date
7. The employee’s reaction to the supervisor’s attempt to change his or her behavior
8. The names of witnesses to the incident (if applicable)
To ensure that the documentation is as accurate as possible, a manager should
record the previous eight items immediately after an incident takes place while it is still
fresh in his or her mind.
1. In very specific terms, what is the offense charged?
• Is management sure it fully understands the charge against the employee?
• Was the employee really terminated for insubordination, or did the employee merely
refuse a request by management?
2. Did the employee know he or she was doing something wrong?
• What rule or provision was violated?
• How would the employee know of the existence of the rule?
• Was the employee warned of the consequence?
3. Is the employee guilty?
• What are the sources of facts?
• Is there direct or only indirect evidence of guilt?
• Has anyone talked to the employee to hear his or her side of the situation?
4. Are there extenuating circumstances?
• Were conflicting orders given by different supervisors?
• Does anybody have reason to want to “get” this employee?
• Was the employee provoked by a manager or another employee?
5. Has the rule been uniformly enforced?
• Have all managers applied this rule consistently?
• What punishment have previous offenders received?
• Were any other employees involved in this offense?
6. Is the offense related to the workplace?
• Is there evidence that the offense hurt the organization?
• Is management making a moral judgment or a business judgment?
7. What is the employee’s past work record?
• How many years of service has the employee given the organization?
• How many years or months has the employee held the present job?
• What is the employee’s personnel record as a whole, especially his or her disciplinary
record?
Questions to Consider during Disciplinary InvestigationsFigure 13.12
89624_ch13_hr_448-480.indd 468 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
469Chapter 13 Employees Rights and Discipline
The Investigative Interview
Before any disciplinary action is initiated, an investigative interview should be con-
ducted to make sure the employee is fully aware of the organization’s rules and that he or
she has not followed them.62 The interview should concentrate on how the offense vio-
lated the performance and behavior standards expected. Most important, the employee
must be given a full opportunity to explain his or her side of the issue.63
Employees do not have the right to have an attorney present during an investigative
interview. However, in NLRB v. Weingarten, Inc., the Supreme Court upheld a National
Labor Relations Board ruling in favor of a unionized employee’s right to have a union
representative with him or her during an investigative interview—if the employee rea-
sonably believes that discipline could result from the interview.64 Currently, nonunion
employees do not have the right to have a coworker present in an investigatory interview
that may lead to disciplinary action.
13.2d Approaches to Disciplinary Action
Assuming a thorough investigation shows that an employee has violated a rule, a firm
can take one of two approaches to disciplinary action: progressive discipline and posi-
tive discipline.
Progressive Discipline
Progressive discipline is the application of corrective measures by increasing degrees.
Progressive discipline is designed to motivate an employee to correct his or her miscon-
duct voluntarily. A number of factors must be considered in determining how severe a
disciplinary action should be. Some of the factors to consider are listed in Figure 13.12.
The typical progressive discipline procedure includes four steps. From an oral warn-
ing (or counseling), the action may progress to a written warning, to a suspension with-
out pay, and ultimately to discharge only as a last resort. When progressive discipline
is applied properly:
1. Employees always know where they stand regarding offenses.
2. Employees know what improvement is expected of them.
3. Employees understand what will happen next if improvement is not made.
Positive Discipline
Some HR professionals believe that the intimidating and adversarial nature of progres-
sive discipline keeps it from achieving the intended purpose. For these reasons, organi-
zations such as Saint Alphonsus Regional Medical Center, Ocean Spray, Banner Health,
Pennzoil, and Bay Area Rapid Transit have instead used an approach called positive,
or nonpunitive discipline. Positive discipline is based on the concept that employees
must assume responsibility for their personal conduct, job performance, and careers.65
Positive discipline requires a cooperative environment in which the employee and
the supervisor engage in a joint discussion to agree on a way to resolve the perfor-
mance issue. The employee then bears the sole responsibility of implementing the solu-
tion. Rather than reprimands, the supervisor provides the employee with reminders to
improve his or her performance.
Positive discipline is implemented in three steps. The first is the conference between
the employee and the supervisor to find a solution to the problem. If improvement does
progressive discipline
The application of cor-
rective measures by
increasing degrees.
positive, or nonpunitive
discipline
A system of discipline
that focuses on early
correction of employee
misconduct, with the
employee taking total
responsibility for correct-
ing the problem.
89624_ch13_hr_448-480.indd 469 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
470 Part 5 Enhancing Employee-Management Relations
not occur after the first step, the supervisor holds a second conference with the employee
to determine why the solution agreed to in the first conference did not work. At this
stage, however, a written reminder is given to the employee. This document states the
new or repeated solution to the problem, with an affirmation that the improvement is
the responsibility of the employee and a condition of his or her continued employment.
When both conferences fail to produce the desired results, the third step is to give
the employee a one-day decision-making leave (a paid leave). The purpose of this paid
leave is for the employee to decide whether he or she wishes to continue working for
the organization. Employees given a decision-making leave are instructed to return the
following day with a decision either to make a total commitment to improve their per-
formance or to quit the organization. If a commitment is not made, the employee is dis-
missed with the assumption that he or she lacked responsibility toward the organization.
13.2e Discharging Employees
Because discharging a worker poses serious consequences for the employee—and possi-
bly for the organization—it should be undertaken only after a deliberate and thoughtful
review of the situation.66 If an employee is fired, he or she may file a wrongful discharge
suit claiming the termination was “without just or sufficient cause,” implying a lack of
fair treatment by management.
How does an employer know if it has just cause to terminate an employee? This
question is not easily answered, but standards governing discharges do exist in the form
of rules developed in the field of labor arbitration.67 These rules consist of a set of
guidelines that are applied by arbitrators to determine if a firm had just cause for a
termination. These guidelines are normally set forth in the form of questions, pro-
vided in Figure 13.13. For example, before discharging an employee, did the manager
forewarn the person of possible disciplinary action? A no answer to any of the seven
questions in the figure generally means that just cause was not established and that the
decision to terminate was arbitrary, capricious, or discriminatory. The significance of
these guidelines is that they are being applied not only by arbitrators, but also by judges
in wrongful discharge suits. It is critical that managers at all levels understand the just
cause guidelines, including their proper application.
1. Did the organization forewarn the employee of the possible disciplinary consequences
of his or her action?
2. Were management’s requirements of the employee reasonable in relation to the orderly,
efficient, and safe operation of the organization’s business?
3. Did management, before discharging the employee, make a reasonable effort to estab-
lish that the employee’s performance was unsatisfactory?
4. Was the organization’s investigation conducted in a fair and objective manner?
5. Did the investigation produce sufficient evidence of proof of guilt as charged?
6. Has management treated this employee under its rules, orders, and penalties as it has
other employees in similar circumstances?
7. Did the discharge fit the misconduct, considering the seriousness of the proven offense,
the employee’s service record, and any mitigating circumstances?
“Just Cause” Discharge GuidelinesFigure 13.13
89624_ch13_hr_448-480.indd 470 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
471Chapter 13 Employees Rights and Discipline
Informing the Employee
Regardless of the reasons for a discharge, it should be done with personal consideration
for the employee affected. Every effort should be made to ease the trauma a discharge
creates.68 The employee must be informed honestly, yet tactfully, of the exact reasons for
the action. Doing so can help the employee face the problem and adjust to the termina-
tion in a constructive way.
To gain confidence, a supervisor might want to discuss, and even rehearse, with
his or her peers and an HR manager the upcoming termination meeting to ensure
that all important points are covered and presented in the best way possible. Although
managers agree that there is no single right way to conduct the discharge meeting, the
following guidelines will help make the discussion more effective:
1. Come to the point within the first 2 or 3 minutes, and list in a logical order all
reasons for the termination.69
2. Be straightforward and firm, yet tactful, and remain resolute in your decision.
3. Make the discussion private, businesslike, and fairly brief.
4. Do not mix the good with the bad. Trying to sugarcoat the problem sends a mixed
message to the employee.
5. Avoid making accusations against the employee and injecting your personal feelings
into the discussion.
6. Avoid bringing up any personality differences between you and the employee.
7. Provide the employee with any severance pay information, and let the person know
about the status of his or her benefits and coverage.
8. Explain how you will handle employment inquiries from future employers looking
to hire the person.70
Termination meetings should be held in a neutral location, such as a conference
room, to prevent the employee from feeling unfairly treated. The manager should never
provoke the employee. Should the employee become belligerent, agitated, or show signs
of hostility, the meeting should be stopped immediately and the firm’s HR department
and security notified.
It is common for managers or security officers to accompany employees back to
their work areas to collect their belongings and then escort them off the premises. How-
ever, this should be done as discreetly as possible to lessen any embarrassment the
employee may experience.
A manager who terminates an employee should keep the details of the termination
private and not disparage the person when talking to other people, including other man-
agers, customers, and the person’s former coworkers. It gives the terminated employee
grounds to sue the manager and firm for defamation.
Due Process
Despite the at-will employment doctrine, most people believe that employees should
not be disciplined without the protection of due process. HR managers normally define
due process as the employee’s right to be heard—the right of the employee to tell his or
her side of the story regarding the alleged infraction of organizational rules. Employ-
ers risk having their terminations overturned—even when they are justified—when
employees are denied due process.
due process
Procedures that consti-
tute fair treatment, such
as allowing an employee
to tell his or her story
about an alleged
infraction and defend
against it.
89624_ch13_hr_448-480.indd 471 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
472 Part 5 Enhancing Employee-Management Relations
What pros and cons do
you think employees
who agree to settle
their grievances via
alternative dispute
resolution methods
face?
LO 4 13.2f Alternative Dispute Resolution Procedures
In unionized workplaces, grievance procedures are stated in virtually all labor agree-
ments. In nonunion organizations, however, alternative dispute resolution (ADR)
methods are often used.71 ADR methods address employee discharges and complaints
outside of court, which is generally faster and cheaper for both parties. Employers often
ask workers to sign ADR agreements when they receive their offer letters or sign their
employee handbooks.
Although the right to require employees to sign ADR agreements is supported by
court decisions, to be enforceable—they must be fair and equitable to both employees
and employers.72 Employers can’t “stack the deck” against employees by imposing rules
on employees that clearly favor the employer. As one legal expert has noted, “As much
as possible, the agreement should provide employees with the same rights and remedies
that they would have enjoyed had their day in court been available to them.”73 Next
we will look at some of the different types of alternative dispute resolution methods
organizations use.
Step-Review Systems
A step-review system is based on a preestablished set of steps—normally four—for
the review of an employee’s complaint by successively higher levels of management.
These procedures are patterned after the union grievance systems we will discuss
in Chapter 14. For example, they normally require that the employee’s complaint
be formalized as a written statement. Managers at each step are required to pro-
vide a full response to the complaint within a specified time period, perhaps 3 to
5 working days.
An employee is sometimes allowed to bypass meeting with his or her immedi-
ate supervisor if the employee fears reprisal from this person. Unlike appeal systems
in unionized organizations, however, nonunion appeal procedures ordinarily do not
provide for a neutral third party—such as an arbitrator—to serve as the judge of
last resort. In most step-review systems, the president, chief executive officer, vice
president, or HR director acts as the final authority, and this person’s decision is not
appealable. Some organizations give employees assistance in preparing their com-
plaint cases. For example, an employee who desires it may be able to get advice and
counsel from a designated person in the HR department before discussing the issue
with management.
Peer-Review Systems
A peer-review system, also called a complaint committee, is composed of equal num-
bers of employee and management representatives. The employees on the committee
are normally elected by secret ballot by their coworkers for a rotating term, whereas the
managers are assigned, also on a rotating basis. A peer-review system functions as a jury
because its members weigh evidence, consider arguments, and, after deliberation, vote
independently to render a final decision.
The peer-review system can be used as the sole method for resolving employee
complaints, or it can be used in conjunction with a step-review system. For example, if
an employee is not satisfied with management’s action at step 1 or 2 in the step-review
system, the employee can submit the complaint to the peer-review committee for final
resolution. A benefit of the peer-review system is the sense of justice that it creates
among employees.
alternative dispute
resolution (ADR)
A term applied to differ-
ent employee complaint
or dispute resolution
methods that do not
involve going to court.
step-review system
A system for reviewing
employee complaints
and disputes by succes-
sively higher levels of
management.
peer-review system
A system for reviewing
employee complaints
that utilizes a group com-
posed of equal numbers
of employee representa-
tives and management
appointees. The group
weighs evidence, consid-
ers arguments, and, after
deliberation, votes to
render a final decision.
89624_ch13_hr_448-480.indd 472 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
473Chapter 13 Employees Rights and Discipline
Open-Door Policy
The idea behind an open-door policy is that to facilitate communication and the free
exchange of ideas, every manager’s office door should be open to every employee. The
policy is also an old standby method for settling employee complaints. In an orga-
nization that has such a policy, an employee is allowed to contact various managers
above his or her immediate supervisor for various reasons, including grievances; the
levels may extend as high as a vice president, president, or chief executive officer.
The person who acts as “the court of last resort” is the HR director or a senior staff
official.
There are some problems associated with open-door policies, however. One is that
some managers do not like to listen honestly to employee complaints. As an employee
once told the authors of this text, “My manager has an open-door policy, but the door is
only open one inch.” Because of this, employees are often reluctant to approach manag-
ers with their problems. One way to make an open-door policy work better is to ensure
employees with grievances first try to work out their problems with their immediate
supervisors before contacting higher-up managers. This way, the chain of command
isn’t violated, and the supervisor of the employee who aired the grievance does not feel
as if he or she was not given a chance to resolve the issue.
Ombudsman System
An ombudsman is a designated individual from whom employees may seek counsel for
the resolution of their complaints. The ombudsman listens to an employee’s complaint
and attempts to resolve it by seeking an equitable solution between the employee and
the supervisor. Because the ombudsman has no authority to finalize a solution to the
problem, compromises are highly possible, and all parties concerned tend to feel satis-
fied with the outcome.
To function successfully, ombudsmen must be able to operate in an atmosphere of
confidentiality that does not threaten the security of the managers or subordinates who
are involved in a complaint. It is recommended that they have access to high levels of
management to ensure that employee complaints receive fair treatment.
Mediation
Along with arbitration, mediation is fast becoming a popular way to resolve employee
complaints. During mediation, which is also discussed in Chapter 14 in conjunction
with labor agreements, a neutral person (mediator) helps employees and managers
negotiate and reach a voluntary agreement acceptable to both parties. The essence of
mediation is compromise. The mediator holds a meeting with the employee and man-
agement, listens to the position of each side, gathers facts, and then through discussion,
suggestions, and persuasion obtains an agreement that satisfies the needs and require-
ments of both sides.
A mediator serves primarily as a fact finder and as an open channel of communica-
tion between the parties. Unlike arbitrators, mediators have no power or authority to
force either side toward an agreement. They must use their communication skills and
the power of persuasion to help the parties resolve their differences (see Figure 13.14).
A cornerstone of mediation is that the parties maintain control over the settlement
outcome.74
Mediation is a flexible process that can be shaped to meet the demands of the par-
ties. Settlements fashioned through mediation are generally readily acceptable by the
parties, thus promoting a favorable working relationship.
open-door policy
A policy of settling
grievances that identi-
fies various levels of
management above the
immediate supervisor for
employee contact.
ombudsman
A designated individual
from whom employ-
ees may seek counsel
for resolution of their
complaints.
mediation
The use of an impar-
tial neutral to reach a
compromise decision in
employment disputes.
mediator
A third party in an
employment dispute
who meets with one
party and then the other
to suggest compromise
solutions or to recom-
mend concessions from
each side that will lead to
an agreement.
89624_ch13_hr_448-480.indd 473 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
474 Part 5 Enhancing Employee-Management Relations
Arbitration
Private employers may require that employees settle their disputes through arbitration.75
Arbitration, which is fully explained in Chapter 14, works like this: The employee and
employer present their cases, or arguments, to an arbiter, who is typically a retired judge.
He or she then makes a decision that the parties have agreed to be bound by. Arbitration
is used primarily to resolve discrimination suits related to age, gender, sexual harass-
ment, and race.76 Other workplace issues such as promotions, compensation, discipline,
and application of company policies can be arbitrated if an employer’s arbitration pro-
gram allows it.
While arbitration agreements normally mandate that employees arbitrate their dis-
crimination claims and may prevent workers from suing their employers in court, they
cannot prohibit employees from filing discrimination charges with the EEOC and other
government agencies in an effort to pursue their statutory rights. In EEOC v. Waffle House
Inc.,77 the U.S. Supreme Court ruled that even when an employee has signed a manda-
tory arbitration agreement, if it chooses to, the EEOC can file a suit in its own name and
recover monetary damages for the individual. Writing for the Court, Justice John Paul
Stevens noted, “The EEOC has the authority to pursue victim-specific relief regardless
of the forum that the employer and the employee have chosen to resolve their dispute.”78
Key to SuccessFigure 13.14
Employer rules + =Communication with employee
the
to successful
discipline
Discussion and com-
promise are corner-
stones of employment
mediation, which
is a highly effective
method of resolving
disputes.
N
oe
l H
en
dr
ic
ks
on
/B
le
nd
Im
ag
es
/A
la
m
y
89624_ch13_hr_448-480.indd 474 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
475Chapter 13 Employees Rights and Discipline
13.3 Managerial Ethics in Employee Relations
Beyond what is required by the law is the question of organizational ethics and the
ethical—or unethical—behavior engaged in by managers. Ethics can be defined as a
set of standards of acceptable conduct and moral judgment. Ethics provides cultural
guidelines—organizational or societal—that help us decide between proper or improper
conduct.79 How a firm treats its employees largely distinguishes an ethical organization
from an unethical one. In an ethical organization, managers are honest in their dealings
with employees, and each group has mutual respect for the other.80
As you learned earlier in the book, many organizations have their own codes of
ethics that govern how they deal with their employees and the public. These written
codes focus attention on an organization’s ethical values and provide a basis for its man-
agers to evaluate their plans and actions. HR departments have been given a greater
role in communicating an organization’s values and standards, monitoring compli-
ance with its code of ethics, and enforcing the standards throughout the organization.
Organizations now have ethics committees and ethics ombudsmen to provide train-
ing in ethics to employees. The ultimate goal of ethics training is to avoid unethical
behavior and adverse publicity; to gain a strategic advantage; and most of all, to treat
employees in a fair and equitable manner, recognizing them as productive members
of the organization.
ethics
A set of standards of
conduct and moral judg-
ments that help to deter-
mine right and wrong
behavior.
Workers have certain expectations about the
employment relationship they have with their employ-
ers, including the mutual obligations they have to one
another. Included among those expectations are a
certain degree of privacy and fair and equitable treat-
ment while on the job. Employers, however, have the
responsibility to monitor the activities of their work-
ers to provide a safe and secure workplace free from
harmful employee acts. When the perceived rights of
employees differ from the reasonable responsibilities
of management, conflict can result.
Once employed, employees expect certain pri-
vacy rights, such as the freedom from unwarranted
intrusion into their personal affairs. Laws and court
cases related to workplace privacy generally attempt to
balance employees’ legitimate expectation of privacy
against the need of employers to supervise and con-
trol the efficient operations of the organizations. Test-
ing for substance abuse and searching and monitoring
employees while on the job and off are among the many
privacy-rights issues employers and their workers face.
LO 1
LO 2
Summary
A firm’s HR professionals, in combination
with other managers, should establish disciplinary
policies, or rules, that relate to the safe and efficient
operation of the organization. The rules should be
written down, explained, widely communicated
within the organization, and consistently applied.
They should also be revised regularly as laws, regu-
lations, and court rulings change. An investigation
of an infraction begins with properly documenting
the infraction. To determine the severity of the dis-
ciplinary measure, managers need to know whether
the employee knew of the rule that was violated, any
extenuating circumstances that might justify the
employee’s conduct, the employee’s past work record,
and various other factors.
Alternative dispute resolution procedures are
ways to resolve disputes out of court while ensuring
employees receive fair treatment. The most common
forms of ADRs are step-review systems, peer-review
systems, the open-door system, the ombudsman sys-
tem, mediation, and arbitration.
LO 3
LO 4
89624_ch13_hr_448-480.indd 475 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
476 Part 5 Enhancing Employee-Management Relations
alternative dispute resolution
(ADR)
constructive discharge
discipline
due process
employee rights
employment-at-will relationship
ethics
impairment testing
mediation
mediator
negligence
ombudsman
open-door policy
peer-review system
positive, or nonpunitive discipline
progressive discipline
psychological contract
step-review system
whistle-blowing
wrongful discharge
Key Terms
Explain three areas in which employee rights
and employer responsibilities could result in
conflict. How might this conflict arise?
What are the legislative and court restrictions
on employer drug testing in both the private
and the public sectors?
Discuss why documentation is so important to
the disciplinary process. What constitutes cor-
rect documentation?
LO 1
LO 2
LO 3
What do you think would constitute an effec-
tive alternative dispute resolution system?
What benefits would you expect from such
a system? If you were asked to rule on a dis-
charge case, what facts would you analyze in
deciding whether to uphold or reverse the
employer’s action?
LO 4
Discussion Questions
CASE STUDY Discharged for Off-Duty Behavior1
In 2015, Chad Shanks, the official social media man-
ager for the Houston Rockets, tweeted at the end of a
game with the Dallas Mavericks the following:
After sending out the tweet, he got 7,600 retweets
and 5,000 favorites. The Dallas Mavericks, whose mascot
is a horse, responded by tweeting, “Not very classy, but
we still wish you guys the best of luck in the next round.”
Though responses were quite positive from Rockets
fans, the Rockets decided to fire Chad for the tweet. The
Rockets also apologized for the tweet, saying it was in
“very poor taste & not indicative of the respect we have
for the @dallasmavs & their fans.” After he was fired,
Chad followed up with a tweet from his personal account:
So
ur
ce
: T
w
itt
er
So
ur
ce
: T
w
itt
er
89624_ch13_hr_448-480.indd 476 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
477Chapter 13 Employees Rights and Discipline
In an interview later, Chad commented that
“leading up to our series with Dallas, there were some
harsh quotes about our team from Mark Cuban and
former Rocket Chandler Parsons was returning after
saying some negative things about the city, so the
rivalry between the two organizations was at an all-
time high.” He figured this was his chance to take a
jab at the Mavs. He meant it to be just a play on tak-
ing an old horse out to pasture that would get Rock-
ets fans even more pumped up. He said he was quite
confused that people would equate pretend violence
on an emoji horse with actual violence on a real horse.
Chad’s job was to stir up interest from fans and
have fun with social media. His boss told him on
numerous accounts that his job was to “take the [twit-
ter] account to subversive places” and do everything
he could to give the fans engaging content. Up until
this point, Chad was considered one of the best social
media experts out there and he had always pulled
through for the Rockets. It just didn’t seem fair to be
fired over this one incident.
Questions
1. Given the facts of this case, should Chad have
been discharged? Why or why not?
2. Should the social media manager of a company
be held to a higher standard of personal conduct
than others in the company? Explain.
3. Should management have considered Chad’s
past work record before deciding on discharge?
Explain.
Sources: Adi Joseph, “Exclusive Q&A: Rockets’ fired social media manager
explains ill-fated tweet,” SportingNews (April 29, 2015); Calvin Watkins,
“Rockets fire social media manager after tweet directed at Mavericks,”
ESPN (April 30, 2015); Mike Foss, “The Houston Rockets fire man behind
that creepy tweet to the Dallas Mavericks,” USA Today (April 30, 2015).
CASE STUDY You Can’t Fire Me! Check Your Policy2
Supervisors report that discharging an employee is
one of the toughest tasks they perform as managers.
Furthermore, termination for absenteeism can be par-
ticularly difficult due to the causes of absenteeism and,
in some cases, the past work record of the employee.
This case illustrates a typical absentee problem faced
by management.
Hattie Mae was employed by Beach Electrical Sys-
tems for 9 years. For the first 6 years of her employ-
ment, she was considered a model employee. Hattie’s
annual performance reviews were always above aver-
age or exceptional, and she was described by her man-
agers as a loyal and dedicated employee. However,
things changed rapidly in 2010 when Hattie became,
as her current manager stated, “an absentee problem.”
According to HR department records, in 2014 and
2015 Hattie was absent 12 percent and 19 percent of the
time, respectively. Her worst year was 2016, when she was
absent 27.2 percent of the time. However, unlike other
absent employees, Hattie was always absent because of
genuine and verifiable illnesses or work-related acci-
dents. Hattie’s supervisor had talked to her periodically
about her attendance problem, but she was never given
an official warning notice—oral or written—that she
would be fired if her attendance record did not improve.
The incident that caused her termination occurred
on Thursday, May 20, 2017. On that day her manager
notified all department employees (eight in total) that
they would need to work overtime on Saturday, May 22,
2017, to complete a critical order for a highly valued and
important customer. All employees agreed to work on
Saturday, except Hattie, who cited “personal reasons,”
which she refused to disclose, for her refusal to work.
On Monday, May 24, 2017, her supervisor, with
concurrence from the department manager, terminated
her employment for “unsatisfactory attendance.” Hattie
did not dispute the attendance record; however, she filed
a grievance through the company’s alternative dispute
resolution procedure alleging that management did not
discharge her according to the organization’s published
disciplinary policy. She pointed to the section in the
policy manual that states, “Employees will be warned for
absenteeism before they are terminated.” Hattie main-
tained that she was never officially warned as required.
Management replied that Hattie was well aware of her
absentee problem but that warning her would have served
no purpose since she was unable to prevent her continued
illnesses from occurring. Additionally, her refusal to work
overtime on Saturday was a further indication of her lack
of concern for her job or the welfare of the company.
89624_ch13_hr_448-480.indd 477 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
478 Part 5 Enhancing Employee-Management Relations
1. “Off-Duty Conduct Privacy,” United Employees Law Group
(March 6, 2017); “How to Get More Control Over ‘Virtual’
Workplace Devices,” HR Focus 84, no. 6 (June 2007): 9. See
also John D. Canoni, “Location Awareness Technology and
Employee Privacy Rights,” Employee Relations Law Journal
30, no. 1 (Summer 2004): 26.
2. Michael Orey, “Fear of Firing,” Business Week (April 23, 2007):
52.
3. David J. Walsh, Employment Law for Human Resource Practice
(Mason, OH: South-Western, 2007), Chapter 17.
4. Jeffery A. Mello, “Introduction: The Evolving Nature of the
Employment Relationship: Reconsidering Employee Respon-
sibilities and Rights,” Employee Responsibility and Rights Jour-
nal 15, no. 3 (September 2003): 99.
5. Mike McKee, “California Supreme Court Narrows Workplace
Privacy,” Law.com (August 5, 2009), http://www.law.com.
6. “Background Checks Are on the Rise,” HR Focus 84, no. 7
(July 2007): 51.
7. Maria Greco Danahar, “Retailer Sued over Clerk’s Conduct,”
HR Magazine 52, no. 6 (June 2007): 141.
8. Donna Scimia, “A Common Sense Approach to Reducing Lia-
bility in Today’s Workplace,” Employee Relations Law Journal
33, no. 2 (Autumn 2007): 23.
9. Rita Zeidner, “How Deep Can You Probe?” HR Magazine 52,
no. 10 (October 2007): 57. See also Jena McGregor, “Back-
ground Checks That Never End,” Business Week (March 20,
2006): 40.
10. Robert Del Campo, “Psychological Contract Violation: An
Individual Difference Perspective,” International Journal of
Management 24, no. 1 (March 2007): 43.
11. Ellen Dannin, “Why At-Will Employment Is Bad for Employ-
ers and Just Cause Is Good for Them,” Labor Law Journal 58,
no. 1 (Spring 2007): 5.
12. “Job Openings and Labor Turnover Summary,” Bureau of
Labor Statistics (March 16, 2017), https://www.bls.gov/news.
release/jolts.nr0.htm.
13. Adair v. United States, 2078 U.S. 161 (1908).
14. “How At-Will Employment Is Changing,” HR Focus 84, no.
10 (October 2007): 1.
Questions
1. What role, if any, should Hattie’s past work record
play in this case? Explain your answer.
2. Does management have a right to know
why employees refuse to work overtime? Why
or why not?
3. Evaluate the arguments of Hattie Mae and
management in this case.
4. If you were a member of the company’s peer-review
complaint committee, how would you vote in this
case? What facts would cause you to vote this way?
Source: Based on an arbitration case heard by George W. Bohlander.
Names have been changed.
Notes and References
15. Patric J. Cihon and James Ottavio Castagnera, Employment and
Labor Law, 6th ed. (Mason, OH: South-Western, 2008), 3–4.
16. Lawrence Peikes, “Employer Pays for Reneging on a Promise,”
HR Magazine 49, no. 3 (March 2004): 109.
17. Quiang Lin and Brian H. Kleiner, “New Developments Con-
cerning Termination in Violation of Public Policy,” Manage-
ment Research Review Feature Edition, no. 4 (2010): 111;
Susan H. Roos, “Fired Fendi Manager Bags over $1 Million,”
HR Magazine 52, no. 6 (June 2007): 141.
18. David C. Lindsay and Sabrina Rockoff, “State Regulations
Update: Beyond Sarbanes-Oxley: State Law Protection in the
Era of the Whistleblower,” Employment Relations Today 34,
no. 1 (Spring 2007): 69. See also Paul D. Scott, “Whistleblowers
Wanted,” Journal of Accountancy 203, no. 5 (May 2007): 86.
19. U.S.C.S. § 1514A (a) (2002). See D. Bruce Shine, “Pity the Sox
Whistleblower: Pity the Sox Lawyer Whistleblower!” Labor
Law Journal 58, no. 4 (Winter 2007): 228.
20. David Connett, “Barney Jones: Meet the Whistleblower Who
Helped Expose Google’s Tax Avoidance,” Independent (Janu-
ary 29, 2016).
21. Eugine Kim, “Google Reportedly Has an Internal Site for
Employees to Report Whistle-Blowers,” Business Insider (June
2, 2016).
22. Benisa Berry, “Organizational Culture: A Framework
and Strategies for Facilitating Employee Whistleblowing,”
Employee Responsibilities and Rights Journal 16, no. 1 (March
2004): 1.
23. “Toussaint v. Blue Cross and Blue Shield of Michigan: Employee
Rights and Wrongful Discharge, 408 Mich. 579, 292 N.W.2d
880 (1980),” Michigan Bar Journal (March 2009): 15.
24. “Employee Handbooks: Have You Updated Yours Lately?” HR
Focus 83, no. 7 (July 2006): 5.
25. Howard J. Rubin and Gregg A. Gilman, “Will Garden Leaves
Blossom in the States,” Employee Relations Law Journal 33,
no. 2 (Autumn 2007): 3. See also Brian L. Lemer and Jeffrey
K. Geldens, “Ensuring Fair Play: Using Common Law to
Protect against Unfair Competition from Former Employ-
ees,” Employee Relations Law Journal 32, no. 3 (Winter
2006): 41.
89624_ch13_hr_448-480.indd 478 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
479Chapter 13 Employees Rights and Discipline
26. Steven M. Gutierrez, Joseph D. Neguse, and Steven Collis,
“The Human Limits of Human Capital: An Overview of Non-
compete Agreements and Best Practices for Protecting Trade
Secrets from Unlawful Misappropriation,” Employee Relations
Law Journal (Summer 2010): 64.
27. Jonathan A. Segal, “I Quit! Now Pay Me,” HR Magazine 49,
no. 10 (October 2004): 129.
28. Martha Crumpacker, “The U.S. Supreme Court Clarifies
Constructive Discharge under Title VII: Responsibilities and
Opportunities for Human Resources Practitioners,” Public
Personnel Management 36, no. 1 (Spring 2007): 1.
29. Rebecca M. Archer and Stephen T. Lanctot, “Are Your Hands
Tied? A Practical Look at Employee Claims for Retaliation,”
Employee Relations Law Journal 33, no. 1 (Summer 2007): 53.
30. 29 U.S.C.A. §§ 2101–2109 (2001).
31. Janis Procter-Murphy, employment attorney, interview by
author, December 9, 2007.
32. “Balancing HR Systems with Employee Privacy,” HR Focus 83,
no. 11 (November 2006): 11.
33. Diana Cadrain, “Are Your Employee Drug Tests Accurate?”
HR Magazine 48, no. 1 (January 2003): 41. Diana Cadrain,
“Are Your Employee Drug Tests Accurate?” HR Magazine 48,
no. 1 (January 2003): 41.
34. “If You’re Asked to Take a Drug Test,” Nolo, accessed June 1,
2011, http://www.nolo.com.
35. “New Year, New Scams, New Risks—What to Watch for Now,”
Security Director’s Report 11, no. 2 (February 2011): 1.
36. “If You’re Asked to Take a Drug Test,” Nolo, accessed June 1,
2011, http://www.nolo.com.
37. “Constitution Limits Pre-employment Drug Testing by Public
Employers,” Venulex Legal Summaries (2008 Q1): 1; “Drug
Testing Is Common and Codified at Many Workplaces,” HR
Focus 83, no. 6 (June 2006): 9; “New Developments Ques-
tion the Use of Drug Tests in the Workplace,” Safety Director’s
Report 4, no. 9 (September 2004): 3–6; “Fired for Blogging,”
accessed June 3, 2011, http://www.nolo.com; Sandy Smith,
“What Every Employer Should Know about Drug Testing
in the Workplace,” Occupational Hazards 66, no. 8 (August
2004): 45–48.
38. T. L. Stanly, “Workplace Drug Testing and the Growing Prob-
lem of Methampheta-mines,” Supervision 68, no. 8 (August
2007): 3.
39. William I. Sauser Jr., “Employee Theft: Who, How, Why, and
What Can Be Done,” S.A.M. Advanced Management Journal
72, no. 3 (Summer 2007): 13.
40. Andrea Marvin, “Video Shows Rats Running Around
McDonald’s,” ABCNews (February 10, 2017).
41. Adrienne Fox, “Caught in the Web,” HR Magazine 52, no. 12
(December 2007): 35.
42. “Employee Rights and Identity Theft,” Texas Workforce Com-
mission, accessed June 2, 2011, http://www.twc.state.tx.us.
43. Brad Stone and Ashlee Vance, “Apple’s Obsession with Secrecy
Grows,” New York Times (June 22, 2009), http://www.nytimes
.com.
44. Electronic Communications Privacy Act, 18 U.S.C. §
2510–2720.
45. Rita Zeidner, “Keeping E-mail in Check,” HR Magazine 52,
no. 6 (June 2007): 70.
46. “Top Ten Reasons Companies Block Social Media at Work,”
Work Place Answers (March 29, 2016).
47. Mark Szakonyi, “Big Brother at Work,” Portfolio (February 8,
2010), http://www.portfolio.com.
48. Paul E. Paray, “N.J. Supreme Court Sides with Employee on
Email Privacy Case,” Digital Risk Strategies [blog] (April 5,
2010), http://blog.digitalriskstrategies.com.
49. “Why It’s Time to Update Your Privacy Policies,” HR Focus 84,
no. 4 (April 2007): 3.
50. Steve Bertel, “Amalgamated Sugar Suffers Cyber Security
Breach; 2,858 Workers’ Personal Info Stolen,” ABCNews (Feb-
ruary 24, 2017).
51. Dan Caterinicchia, “Safeguarding HR Information,” HR Mag-
azine 50, no. 11 (November 1, 2005): 55–59.
52. Diane Cadrain, “Setting the Records Straight,” HR Magazine
52, no. 6 (June 2007): 82.
53. “Fired for Blogging,” accessed June 3, 2011, http://www.nolo
.com.
54. Cynthia F. Cohen and Murray E. Cohen, “On-Duty and Off-
Duty: Employee Rights to Privacy and Employers Right to
Control in the Private Sector,” Employee Responsibilities and
Rights Journal 19, no. 4 (December 2007): 235.
55. Julianne Pepitone, “Facebook Firing Settled out of Court,”
CNNMoney (February 8, 2011), http://money.cnn.com.
56. Charles A. Pierce, Brandee J. Broberg, Jamie R. McClure, and
Herman Aquinis, “Responding to Sexual Harassment Com-
plaints: Effects of a Dissolved Workplace Romance on Deci-
sion Making Standards,” Organizational Behavior and Human
Decision Processes 95, no. 1 (September 2004): 83.
57. Judy Greenwald, “Employers Are the Losers in the Dating
Game,” Workforce Management, http://www.workforce.com/
section/09/feature/24/93/98/index.html.
58. “Tattoo Takeover: Three in Ten Americans Have Tattoos, and
Most Don’t Stop at Just One,” The Harris Poll (February 10, 2016).
59. Kathryn Tyler, “Sign in the Name of Love,” HR Magazine 53,
no. 2 (February 2008): 41.
60. “How Companies Are Dealing with Workplace Body Art
Issues,” HR Focus 81, no. 4 (April 2004).
61. George W. Bohlander and Donna Blancero, “A Study of
Reversal Determinants in Discipline and Discharge Arbi-
tration Awards: The Impact of Just Cause Standards,” Labor
Studies Journal 21, no. 3 (Fall 1996): 3–18.
62. Jathan W. Janove, “Private Eye 101,” HR Magazine 49, no. 7
(July 2004): 127.
63. Mollica Kelly, “Perceptions of Fairness,” HR Magazine 49,
no. 6 (June 2004): 169.
64. NLRB v. Weingarten Inc., 95 S.Ct. 959 (1975), 402 U.S. 251, 43
L.Ed.2d. 171.
65. Readers interested in the pioneering work on positive dis-
cipline should see James R. Redeker, “Discipline, Part 1:
89624_ch13_hr_448-480.indd 479 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
480 Part 5 Enhancing Employee-Management Relations
Progressive Systems Work Only by Accident,” Personnel 62,
no. 10 (October 1985): 8–12; James R. Redeker, “Discipline,
Part 2: The Nonpunitive Approach Works by Design,” Person-
nel 62, no. 11 (November 1985): 7–14.
66. Stephen P. Postalakis, “Avoiding a Sticky Situation: A Guide to
Firing an Employee,” Catalyst 2002 (March/April 2007): 22.
67. For an excellent explanation of just cause discharge guidelines, see
Frank Elkouri and Edna Asper Elkouri, How Arbitration Works,
5th ed. (Washington, DC: Bureau of National Affairs, 1997).
68. Jack and Suzy Welch, “The Right Way to Say Goodbye,” Busi-
ness Week (March 25, 2007): 144.
69. Elizabeth Agnvall, “Case Closed. Now What?” HR Magazine
53, no. 2 (February 2008): 69.
70. Nancy Hatch Woodward, “Smoother Separations,” HR Maga-
zine 52, no. 6 (June 2007): 94.
71. Michael Orey, “The Vanishing Trial: As Court Battles Become
More Rare, Some Experts Fear the Effects on the Law,” Busi-
ness Week (April 30, 2007): 38.
72. Louise Lamothe, “Avoiding Potholes in Mandatory Arbitra-
tion: A Look at Recent California Decisions,” Dispute Resolu-
tion Journal 58, no. 2 (May–June 2003): 18. See also D. Diane
Hatch, James T. Hall, Mark T. Kobata, and Marty Denis, “Law
Firm’s Arbitration Procedures Rules Unfair,” Workforce Man-
agement 86, no. 13 (July 23, 2007): 10.
73. Walsh, Employment Law for Human Resource Practice, 19.
74. Ruth D. Raisfeld, “How Mediation Works: A Guide to Effec-
tive Use of ADR,” Employee Relations Law Journal 33, no. 2
(Autumn 2007): 30.
75. Jennifer J. Froehlich, “The New Company Unions: Mandatory
Individual Employment Arbitration Agreements and Section
8 (a) (2) of the National Labor Relations Act,” Labor Law Jour-
nal 58, no. 3 (Fall 2007): 195.
76. Elizabeth F. R. Gingerich, “Enforcing Arbitration Agree-
ments in Discrimination Claims: Judicial Reconsidera-
tion,” Employee Relations Law Journal 33, no. 4 (Spring
2008): 61.
77. EEOC v. Waffle House Inc., 534 U.S. 279 (2002).
78. “EEOC May Sue Even If Arbitration Agreement Exists,” HR
Focus 79, no. 3 (March 2002): 2.
79. Betsy Stevens, “Corporate Ethical Codes: Effective Instru-
ments for Influencing Behavior,” Journal of Business Ethics
78, no. 4 (April 2008): 601.
80. Jennifer Schramm, “Perception on Ethics,” HR Magazine 49,
no. 11 (November 2004): 176.
89624_ch13_hr_448-480.indd 480 11/17/17 3:26 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
481
CHAPTER 14
The Dynamics of Labor Relations
Learning Outcomes
After studying this chapter, you should be able to
Reflect upon reasons that employees join unions.
Describe the process by which unions organize
employees and gain recognition as their bargaining
agent.
Outline the challenges faced by HR managers when
union representation is voted into a company.
LO 1
LO 2
LO 3
Discuss the bargaining process and the bargaining
goals and strategies of a union and an employer.
Describe a typical union grievance procedure and
explain the basis for arbitration awards.
LO 4
LO 5
A
to
m
az
ul
/S
hu
tt
er
st
oc
k
89624_ch14_hr_481-514.indd 481 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
482 Part 5 Enhancing Employee-Management Relations
M
ention Labor Day and most people think of
the start of the football season, shopping
Labor Day sales, mourning the unofficial
end of summer, or complaining about that one
time they needed to renew their driver’s license and
the DMV closed early. Labor Day, without all of its
modern trappings, is a federal holiday honoring the
American labor movement and its contributions to
worker health, safety, well-being, and productivity.
Mention labor movements and trade unions,
and most people will have a more polarized opin-
ion, whether considering the adversarial relation-
ship between employees and higher-ups and
strikes, or industrial democracy, fairness, oppor-
tunity, and equal representation.1 And some may
wonder if unions are still relevant today, in an era
with worker safety laws and globalization.
Unions are still at large, influencing policies and helping workers in a range of differ-
ent ways. Union-trained military veterans are helping to rebuild New York’s World Trade
Center complex. Union letter carriers save lives by alerting officials if an elderly person
hasn’t been collecting his or her mail. Even the TV shows you watch are the product of
one of America’s most unionized industries.2
14.1 The Labor Relations Process
Individually, employees may be able to exercise relatively little power in their relation-
ship with employers. If individual employees believe they are not being treated fairly,
then they may organize into unions and bargain with the employer collectively. Unions
represent an organized association of workers formed to further the interests of the
individuals working for an employer. The ability of workers to form a union and collec-
tively bargain with an employer is a legal right granted by the National Labor Relations
Board (NLRB).
When workers decide to unionize, the labor relations process begins. As Figure 14.1
illustrates, the labor relations process consists of a logical sequence of five events:
(1) workers desire collective representation, (2) the union begins its organizing cam-
paign, (3) the NLRB representation procedure begins, (4) collective negotiations lead to
a contract, and (5) the contract is administered. Laws and administrative rulings influ-
ence each of the separate events by granting special privileges to or imposing defined
constraints on workers, managers, and union officials.3
For example, when Gawker Media workers became tired of the instability of their
employment environment, they decided to start an organizing campaign. The cam-
paign was spearheaded by Hamilton Nolan, one of Gawker’s senior writers. Even though
Gawker is a digital media outlet populated by 20- and 30-something college grads who
start with a decent salary of $40,000 to $50,000 a year and great benefits, employees felt
National Labor
Relations Board (NLRB)
The agency responsible
for administering and
enforcing the Wagner
Act. It serves the public
interest by reducing inter-
ruptions in production or
service caused by labor—
management strife.
labor relations process
A logical sequence of five
events: (1) workers desire
collective representation,
(2) the union begins its
organizing campaign,
(3) the NLRB represen-
tation process begins,
(4) collective negotia-
tions lead to a contract,
and (5) the contract is
administered.
M
on
ke
y
Bu
si
ne
ss
Im
ag
es
/S
hu
tt
er
st
oc
k
89624_ch14_hr_481-514.indd 482 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
483Chapter 14 The Dynamics of Labor Relations
that a union could provide a safety net during uncertain times. Once they decided they
wanted collective representation, employees had to choose a union to help with the
organizing campaign. They chose to work with the Writers Guild of America East to
help with the campaign. When the union was finally recognized and formalized through
the NLRB representation process, Gawker employees collectively bargained and came
up with a contract between the union and the employer.
1. Workers
desire
collective
representation
2. The union
begins its
organizing
campaign
NLRB
Contract
3. The NLRB
representation
procedure
begins
4. Collective
negotiations
lead to a
contract
5. The
contract is
administered
The Labor Relations ProcessFigure 14.1
D
ar
yl
L
/S
hu
tt
er
st
oc
k
Occupy Wall Street
represented a labor
movement against
economic inequality
worldwide.
89624_ch14_hr_481-514.indd 483 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
484 Part 5 Enhancing Employee-Management Relations
The new contract didn’t necessarily impose many new demands on the employer,
rather it formalized the relationship between employees and the employer and made
it more difficult for the employer to lay people off. In fact, Gawker employees weren’t
necessarily concerned with the wages and did not make this a point of negotiation with
Gawker. The initial contract went from 2016 to the beginning of 2019. Once the contract
is over, the two parties will collectively bargain again.
14.1a Why Employees Unionize
A surge of support for unions has started up again in the United States. It started with
“Occupy Wall Street” in 2011 where many citizens became angry at the large sums of
bail out money paid to corporate America, and then moved to the “Fight for 15” where
the Service Employees International Union supported a series of protests and strikes to
get fast-food and other service employers to pay workers $15 per hour.4
While traditional unions have dramatically declined in the last few decades (from
20 percent of all U.S. workers in 1983 to 10 percent in 2016), there has been a recent
rise of alternative collective labor structures and a newfound interest in unions among
millennials.5 Roughly 66 percent of millennials approve of unions, which is much higher
than their older generational peers. Younger employees want work-life balance, a team-
oriented work culture, and transparency concerning compensation and promotion—all
values similar to those espoused by unions.6
Just because millennials share similar values as unions, however, doesn’t mean they
will easily join them. Like many corporations, unions are predisposed to nontransparent
beauracracies that play political games to negotiate higher wages for workers. However,
millennials aren’t as interested in having more pay. Rather, they are more interested in
equality and transparency. Young people tend to see the value of tackling problems from
a collective level, rather than just as individuals. In this regard, employees see unions as
a way to achieve results they cannot achieve acting individually.
While unionization
in the private sector
is declining, certain
industries, such as the
hospitality industry,
are gaining ground in
unionization. If you
were a service worker
in a hotel, what factors
would make you want
to join a union? (See
Figure 14.2 for some
hints.)
LO 1
1. Dissatisfaction with
managerial practices
2. Economic need
3. Social and status
needs
Why
employees
unionize
Why Employees UnionizeFigure 14.2
89624_ch14_hr_481-514.indd 484 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
485Chapter 14 The Dynamics of Labor Relations
• Dissatisfaction with management. Employees may seek unionization when they
perceive that managerial practices regarding promotion, transfer, shift assign-
ment, or other job-related policies are administered in an unfair or biased man-
ner. Employees cite favoritism shown by managers as a major reason for joining
unions. Furthermore, the failure of employers to give employees an opportunity to
participate in decisions affecting their welfare may encourage union membership.
• Economic needs. Dissatisfaction with wages, benefits, and working conditions
appears to provide the strongest reason to join a union. According to Union Plus, a
nonprofit for union members, benefits of union membership include: union employ-
ees make an average of 30 percent more than nonunion workers; 92 percent of union
workers have job-related health coverage versus 68 percent of nonunion workers; and
union workers are more likely to have guaranteed pensions than nonunion employees.
• Social and Status Needs. Employees whose needs for recognition and social affili-
ation are being frustrated may join unions as a means of satisfying these needs.
Through their union, they have an opportunity to fraternize with other employees
who have similar desires, interests, problems, and gripes. Such concerns often
revolve around job insecurity, broken promises, lack of autonomy, double stan-
dards, hopelessness, humiliation, and lack of recognition. Employees (especially
Millennials) may join unions to benefit in the equality and teamwork that orga-
nization membership may provide. Additionally, the union enables them to put
leadership talents to use as officers of the union and representatives of fellow
employees. One study found that employees became union stewards so that they
could be seen as “a fellow your buddies look to” and as a person who “stands up
to the boss.”
Of the factors mentioned, organizing campaigns based on social concerns (e.g.,
justice, equality, and teamwork) are more successful than campaigns based on dissatis-
faction with management or even economic issues.7 In other words, employees today
are more interested in being treated fairly and working collectively.
union steward
An employee who as a
nonpaid union official
represents the interests
of members in their rela-
tions with management.
Millennial protestors
tackle problems as
a collective which
lends way to employ-
ees using unions to
achieve results that are
otherwise unattain-
able as individuals.
Fe
rn
an
do
Po
do
ls
ki
/G
et
ty
Im
ag
es
89624_ch14_hr_481-514.indd 485 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
486 Part 5 Enhancing Employee-Management Relations
14.1b Challenges of Unions to Management
Though unions provide many potential benefits for employees, this tends not to be the
case for the employer. In fact, most employers would prefer to not have to deal with
unions. While employers have been known to exploit workers, unions have also been
known to exploit employers. For example, one union organizer named Steve told us
that as a machine operator for a small assembly plant he brought in the union to help
organize the workers. The union ended up putting so much pressure on the company
that the company had to shut down because it could not compete with other nonunion
shops.8
Unions typically attempt to achieve greater participation in management decisions
that affect their members. Specifically, these decisions may involve such issues as the
subcontracting of work, productivity standards, and job content. Employers quite natu-
rally seek to claim many of these decisions as their exclusive management prerogatives—
decisions over which management claims exclusive rights.
For example, these terms can determine what corrective action is to be taken in
directing and in disciplining employees. When disciplining employees, supervisors must
be certain they can demonstrate just cause (see Chapter 13) for their actions. Addition-
ally, specific contract language can also reduce the supervisor’s ability to manage in
such areas as scheduling, training, transfers, performance evaluation, and promotions.
Under provisions of the labor agreement, supervisors may have to promote employees
by seniority rather than by individual merit.
Finally, unions can create divisions between management and workers, making
it difficult to foster a team spirit within the organization where everyone is working
for a common organizational cause. To avoid these constraints, many organizations
try to ensure the work environment is a place where people are well compensated,
management is supportive and collaborative with workers, and all people are treated
equally.9
14.1c Union Avoidance Practices
There are things companies can do from an HRM perspective to decrease the chances
that their employees will want to form a union in the first place, thus avoiding the
union organizing campaign altogether. Specifically, there are six practices or prin-
ciples companies can adopt to decrease the chances of employees wanting to unionize
(Figure 14.3).10
The first practice has to do with pay. As discussed in Chapter 9, not only do above-
market wages and benefits potentially increase performance and decrease turnover,
they also decrease the likelihood that employees will want to unionize. For example,
very few companies that have above-market wage and benefits policies have unions.
The second practice is to promote more employees from within and to do it often.
People like to feel that they are progressing and that there is a chance for growth and
advancement. Opportunities for career advancement help to bolster hope and a sense
of equity in work environments where employees who do a good job are recognized and
given chances to better their positions in the organization.
Third, conduct cultural audits. As discussed in Chapter 2, cultural audits provide
managers with a picture of what the company needs. It tells management how employees
feel about what is going on in the organization and the quality of the working envi-
ronment. Organizations can then take this information and facilitate developmental
programs for employees, focus more on employee needs, and correct problems before
89624_ch14_hr_481-514.indd 486 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
487Chapter 14 The Dynamics of Labor Relations
they become too large. Attitude surveys also provide a way for employees to feel they
are being listened to. Management must take care with these surveys, however. Orga-
nizations that do not respond to or act upon this valuable feedback risk developing
even more discontent in their workforce, as employees feel that their suggestions are
not valued.
The fourth practice is to offer job rotations and training programs. In Chapter 7 we
talk about effective ways to manage training programs and job rotation assignments.
Specifically, job rotations help reduce burnout, which can lead to people either leaving
their jobs or feeling trapped and hopeless. Job rotations also lead to increased employee
satisfaction. If variety is the spice of life, then job rotation is the spice of work. This leads
to increased commitment to the organization.
Fifth, share information with employees about the state of the organization. Companies
that practice open book management are more likely to earn the trust and commitment
of their employees to avoid push back from unions and consumers at financial troubles.11
For example, in 2011 Delta Airlines brought back call center jobs to the United States
from Jamaica. CEO Richard Anderson said that “one of the ways to mitigate the impact
of the recession is to insource work.” In 2009, Delta also closed a call center in India,
sparking a trend among airlines and U.S. companies in general to bring back jobs.12 But
open management helps ensure employees understand the management decisions and
are less likely to turn to a union when they aren’t receiving enough transparency.
Finally, organizations should make sure they have desirable working conditions.
While it is not feasible to make the working environment pleasant in all industries, an
organization should make sure its work environment for its employees is equally desir-
able as other firms in the same industry. This means having appropriate and sufficient
lighting, ergonomic workspaces, and a nonhostile environment. It is important to recog-
nize that these strategies react to the conditions cited at the beginning of the chapter as
the main reasons why workers unionize. Because these conditions are under the direct
control of management, they can be changed to help discourage or prevent unionization.
14.1d Organizing Campaigns
Once employees desire to unionize, a formal organizing campaign may be started
either by a union organizer or by employees acting on their own behalf.14 Contrary
to popular belief, most organizing campaigns are begun by employees rather than by
1. Pay $0$
2. Promote
3. Cultural audits
4. Job rotations and training programs
5. Share important information
6. Ensure desirable working conditions
How to decrease the
chances of employee
unionization!
Union Avoidance PracticesFigure 14.3
What steps should
employees take to
unionize? What steps
can employers take in
trying to stop the union
from organizing? See
Highlights in HRM to
test your labor relations
know-how.
LO 2
89624_ch14_hr_481-514.indd 487 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
488 Part 5 Enhancing Employee-Management Relations
union organizers. Large national unions such as the United Auto Workers, the United
Brotherhood of Carpenters, the United Steelworkers, and the Teamsters, however, have
formal organizing departments whose purpose is to identify organizing opportunities
and launch organizing campaigns.
Organizing Steps
Terry Moser, former president of Teamster Local 104, once told the authors that the typ-
ical organizing campaign follows a series of progressive steps that can lead to employee
representation. The organizing process as described by Moser normally includes five
steps (Figure 14.4).
Step 1 The first step begins when employees and union officials meet up to explore the
possibility of unionization. During these discussions, employees investigate the advan-
tages of labor representation, and union officials begin to gather information on employee
needs, problems, and grievances. Labor organizers also seek specific information about the
employer’s financial health, supervisory styles, and organizational policies and practices.
To win employee support, labor organizers must build a case against the employer and
for the union. (See Highlights in HRM 2 to see how unions have evolved over the years.)
While most small businesses are not unionized and prefer
it that way, it is not uncommon for employees to unionize
even when they are small in number.
So why, then, might employees of small businesses
want to unionize? Usually when businesses are small
they are much less formal and more personal. This infor-
mality presents advantages in being able to adapt to
the environment and devote needed resources to build-
ing the business. However, as small businesses grow,
the benefits of informality decrease and the costs of
having informal relationships increase. Some employ-
ees may begin to feel singled out—or worse yet, left
out. Such situations sow seeds of discontent. To reduce
the threat of unionization among small businesses,
employers must consider when to hire an HR special-
ist to help manage the people and work culture more
effectively.
A firm with only a few employees cannot afford a
full-time HR specialist to deal with work culture issues.
Illustrated here are a few conditions to help you under-
stand when to appoint a specialist to deal with these
issues.13
However, if these practices don’t work and your
employees still decide they want to pursue organizing a
union, there are things management can do to stop the
union from organizing.
Small Business Application
Unions and Small Business—Like Water and Oil
Tim
e to
app
oin
t a
Hu
ma
n R
eso
urc
e M
ana
ger
Ove
r
100
emp
loye
es
Dif�cultyrecruiting
You
operate in
a
competitiv
e
industry
for labor
Lab
or
turn
ove
r
rate
is h
igh
or
dra
mat
ical
ly
incr
eas
ingSupervisors
+
employees
need
training Em
ploye
e
moral
e
is low
89624_ch14_hr_481-514.indd 488 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
489Chapter 14 The Dynamics of Labor Relations
Step 2 As an organizing campaign gathers momentum, the organizer schedules an ini-
tial union meeting to attract more supporters. The organizer uses the information gath-
ered in step 1 to address employee needs and explain how the union can secure these
goals. Two additional purposes of organizational meetings are (1) to identify employees
who can help the organizer direct the campaign and (2) to establish communication
chains that reach all employees.
Step 3 The third important step in the organizing drive is to form an in-house orga-
nizing committee composed of employees willing to provide leadership to the cam-
paign. The committee’s role is to interest other employees in joining the union and
in supporting its campaign. An important task of the committee is to have employ-
ees sign an authorization card indicating their willingness to be represented by a
labor union in collective bargaining with their employer. At least 30 percent of the
employees must sign authorization cards before the NLRB will hold a representation
election.16
Step 4 If a sufficient number of employees support the union drive, the orga-
nizer seeks a government-sponsored election. A representation petition is filed
with the NLRB, asking that a secret ballot election be held to determine whether
employees actually desire unionization. Before the election, a large publicity cam-
paign is directed toward employees, seeking their support and election votes. This
is a period of intense emotions for the employees, the labor organization, and the
employer.
Step 5 Union organizing is concluded when the union wins the election. The NLRB
“certifies” the union as the legal bargaining representative of the employees. Contract
negotiations now begin; these negotiations represent another struggle between the
union and employer. During negotiations, each side seeks employment conditions
favorable to its position. Members of the in-plant organizing committee and the union
organizer attempt to negotiate the employees’ first contract. In about one out of four
authorization card
A statement signed by
an employee authoriz-
ing a union to act as a
representative of the
employee for purposes
of collective bargaining.
Terry Moser
employee-representation
organizing
steps:
Employee
+
union
contact
#1
#2
#3
#4
#5
Initial
organizational
meeting
Formation
of
in-house
organizing
committee
Election
petition
+
voting
preparation
Contract
negotiations
The five steps to organizing a unionFigure 14.4
89624_ch14_hr_481-514.indd 489 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Test Your Labor Relations Know-How
1. An auto mechanic applied for a job with an automo-
tive dealership. He was denied employment because
of his union membership. Was the employer’s action
lawful?
_______________Yes _______________No
2. During a labor organizing drive, supervisors ques-
tioned individual employees about their union beliefs.
Was this questioning permissible?
_______________Yes _______________No
3. When members of a union began wearing union but-
tons at work, management ordered the buttons to be
removed. Was management within its rights?
_______________ Yes _______________ No
4. While an organizing drive was under way, an employer
agreed—as a social gesture—to furnish refreshments
at a holiday party. Was the employer acting within
the law?
_______________ Yes _______________ No
5. A company distributed to other antiunion
employers in the area a list of job applicants known
to be union supporters. Was the distribution
unlawful?
_______________ Yes _______________ No
6. During a union organizing drive, the owner of Servo
Pipe promised her employees a wage increase if they
would vote against the union. Can the owner legally
make this promise to her employees?
_______________ Yes _______________ No
7. Do employees have the right to file unfair labor prac-
tice charges against their employer even when the
organization is nonunion?
_______________ Yes _______________ No
8. The union wishes to arbitrate a member’s grievance,
which management has demonstrated is completely
groundless. Must management arbitrate the grievance?
_______________ Yes _______________ No
9. John Green, a maintenance engineer, has a poor work
record. Management wishes to terminate his employ-
ment. However, Green is a union steward, and he
is highly critical of the company. Can management
legally discharge this employee?
_______________ Yes _______________ No
10. During an organizing drive, an office manager
expressed strong antiunion beliefs and called union
officials “racketeers,” “big stinkers,” and a “bunch of
radicals.” He told employees who joined the union that
they “ought to have their heads examined.” Were the
manager’s comments legal?
_______________ Yes _______________ No
Answers are found at the end of this chapter.
Highlights in HRM1
union campaigns, unions are unable to secure a first contract after winning a representa-
tion election.17 Should the union fail to obtain an agreement within 1 year from winning
the election, the Taft-Hartley Act allows the employees to vote the union out through a
NLRB “decertification” election.
Aggressive Organizing Tactics
Without question, a strategic objective of the labor movement is to become more
aggressive and creative in its organizing tactics. Unions have been shocked into
developing these “revolutionary” organizing strategies to compensate for a decline in
membership and to counteract employer antiunion campaigns. (Both topics will be
discussed later in the chapter.) To accomplish their agenda of “vitalizing” the labor
movement, unions employ the following organizing weapons—in varying degrees—to
achieve their goals:
1. Political involvement. Unions have become more selective in their support
of public officials, giving union funds to candidates who specifically pledge
490
89624_ch14_hr_481-514.indd 490 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
What Happened to the American Labor Union?
Review this video in MindTap to learn more about the time
period from the first government-mediated settlement in 1838
when President Van Buren facilitated the negotiation of a strike
by shipyard workers, to the creation of the Federal Mediation
and Conciliation Service (FMCS) in 1947, to the Occupational
and Health Safety Act, to the Fight for $15 today.15
Highlights in HRM2
support for prolabor legislation. During the 2016 U.S. presidential election,
Donald Trump won the support of many union members who typically vote
Democrat. Exit polls revealed that 43 percent of union households voted for Mr.
Trump. For big labor, this was a harsh reminder that the political preferences
of its members are not as set in stone as the union’s leadership, which backed
Hillary Clinton. Large unions in the United States are now reconsidering their
political affiliations as a result of the actions President Trump has taken to try
to bring jobs back to America.18
2. Neutrality agreements. Neutrality agreements secure a binding commitment from
the employer to remain neutral during the organizing drive. The employer agrees
that managers will not campaign against or disparage the union and will only
provide facts about the union when questioned by employees. Furthermore, the
employer agrees to accept a card check to recognize the union if the union produces
sufficient employee-signed authorization cards.19
491
Trump wins 2016
presidential election
with help of many
unions workers.
A
ar
on
P.
B
er
ns
te
in
/G
et
ty
Im
ag
es
89624_ch14_hr_481-514.indd 491 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
492 Part 5 Enhancing Employee-Management Relations
3. Organizer training. Traditionally, organizing has been a part-time work. Today, the
AFL-CIO’s Organizing Institute is actively training a new generation of profes-
sional, highly skilled, full-time organizers. Organizers who successfully complete
the training program are usually hired by local and national unions. They work
to assist workers to gain representation. They do this by educating workers about
their rights, identify and develop leadership skills, and run campaigns for union
recognition.
4. Corporate campaigns. Unions may enlist political or community groups to boycott
the product(s) of a targeted company. Other tactics include writing newspaper
editorials chastising specific company decisions; filing charges with adminis-
trative agencies such as OSHA, the Department of Labor, and the NLRB; and
pressuring an organization’s financial institution to withhold loans or demand
payments.
5. Information technology. Social media is fast becoming an effective union organiz-
ing tool. Websites exist that link employees to union literature, union membership
applications, and individual union web pages. “Cyberunions” seek to apply com-
puter technology to all aspects of organizing activity.20 For example, some union
organizing efforts have used hashtags to bring attention to their campaigns. The
#fightfor15 and #ourwalmart are two examples of effective efforts to bring people
together for protests and rallies. Coworker.org also created a platform to gather
petitions from low-wage workers who otherwise lack the ability to collectively orga-
nize because they are scattered across multiple locations. Finally, another effort
unions can use is the Worker’s Lab. Launched in 2015, the Worker’s Lab is like a
venture capital fund for worker organizing movements. The funds are used to sup-
port innovative alt-labor movements that will lead to more innovative organized
labor unions.21
14.1e Employer Tactics Opposing Unionization
Employers use a two-pronged campaign to fight unionization. First, when possible,
employers stress the favorable employer–employee relationship they have experienced
in the past without a union. Employers may emphasize any advantages in wages,
benefits, or working conditions the employees may enjoy in comparison with those
provided by organizations that are already unionized. “While you have a right to join
a union,” the employers may remind their employees, “you also have a right not to
join one and to deal directly with the organization free from outside interference.”
Second, employers emphasize any unfavorable aspects of unionism including
strikes, the payment of union dues and special assessments, and published abuses of
members’ legal rights, along with any false promises made by the union in the course
of its campaign. Union rules on member conduct, such as being fined for crossing a
picket line, are emphasized to employees. Employers may also use government statis-
tics to show that unions commit large numbers of unfair labor practices. Employers
may initiate legal action should union members and/or their leaders engage in any
unfair labor practices (ULPs) during the organizing effort.
Within the limits permitted by the Taft-Hartley Act, employers can express their
views about the disadvantages of being represented by a union. However, when coun-
teracting a union campaign, managers must not threaten employees with loss of jobs
or loss or reduction of other employment benefits if they vote to unionize. Nor may
unfair labor practices
(ULPs)
Specific employer and
union illegal practices
that deny employees
their rights and benefits
under federal labor law.
89624_ch14_hr_481-514.indd 492 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
employers offer new or improved employee benefits or higher wages as a means of get-
ting employees to vote “no union.” Highlights in HRM 4 lists some of the activities in
which managers or supervisors should not engage.22
14.1f How Employees Become Unionized
The employees to be organized constitute the bargaining unit to be covered by the labor
agreement. The NLRB defines a bargaining unit as a group of two or more employ-
ees who have common employment interests and conditions and may reasonably be
grouped together for purposes of collective bargaining. If an employer and a union
cannot agree on who should be in the bargaining unit, an appropriate bargaining unit
will be determined by the NLRB on the basis of a similarity of interests (such as wages,
job duties, or training) among employees within the unit. For example, in hospitals,
the NLRB has designated separate units for nurses, technicians, doctors, maintenance
employees, office clerical personnel, all other nonprofessionals, and guards.
14.1g NLRB Representation Election
If it succeeds in signing up 30 percent of employees within the bargaining unit, the union
petitions for a NLRB-conducted election. The petition to hold representation elections
usually is initiated by the union, although employers, under certain circumstances,
have the right to petition for one (see Highlights in HRM 5). Prior to the election, the
NLRB holds a pre-election hearing with the employer and union, or unions, seeking
bargaining unit
A group of two or more
employees who share
common employment
interests and conditions
and may reasonably be
grouped together for
purposes of collective
bargaining.
United Food and Commercial Workers International Union Authorization Card
Highlights in HRM3
If the union wins
the vote, what does
this mean for the HR
manager?
LO 3
493
89624_ch14_hr_481-514.indd 493 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
to represent the employees. At this meeting several important issues are determined,
including verification of the authorization cards, the NLRB’s jurisdiction to hold the
election, determination of the bargaining unit (if contested by the parties), the date of
the election, and the voting choice(s) to appear on the ballot. The ballot lists the names
of the unions that are seeking recognition and also provides a choice of “no union.” See
Highlights in HRM 3 for an example of a union authorization card.
After the election is held, the winning party is determined on the basis of the
number of actual votes, not on the number of members of the bargaining unit. For
example, suppose the bargaining unit at XYZ Corporation has 100 employees, but only
27 employees voted in the election. A union receiving 14 yes votes among the 27 vot-
ing (a majority) would be declared the winner, and the union would bargain for all
100 employees. By law the union would be granted exclusive representation over all
bargaining unit employees.23 The union is certified by the NLRB as the bargaining agent
for at least a year or for the duration of the labor agreement. Once the union is certified,
the employer is obligated to begin negotiations leading toward a labor agreement. An
important statistic in labor relations is the win/loss record of unions in certification elec-
tions. In 1950, the union win rate in elections held by the NLRB was 74.5 percent. This
percentage dropped dramatically to 60.2 percent in 1965 and to 48.2 percent in 1995.
In 2016, the NLRB held 1,496 conclusive representation elections, of which 68 percent
resulted in union wins.24
Some of the different types of unions include craft unions, industrial unions, and
employee associations. Craft unions include the International Association of Machinists,
United Brotherhood of Carpenters, and United Association of Plumbers and Pipefit-
ters. Unions that represent unskilled and semiskilled workers employed along indus-
try lines are known as industrial unions (Figure 14.5). The American Union of Postal
Workers is an industrial union, as are the United Auto Workers; United Steelworkers;
American Federation of State, County, and Municipal Employees; and Office and Pro-
fessional Employees International Union. While this distinction still exists, technologi-
cal changes, union mergers, and competition among unions for members have helped
exclusive
representation
The legal right and
responsibility of the
union to represent all
bargaining unit members
equally, regardless of
whether employees join
the union or not.
craft unions
Unions that represent
skilled craft workers.
industrial unions
Unions that represent
all workers—skilled,
semiskilled, unskilled—
employed along industry
lines.
Employer “Don’ts” during Union Organizing Campaigns
Union organizing drives are emotionally charged events.
Furthermore, labor law, NLRB rulings, and court decisions
greatly affect the behavior and actions of management
and union representatives. During the drive, managers and
supervisors should avoid the following:
�� Attending union meetings, spying on employee-union
gatherings, or questioning employees about the con-
tent of union meetings
�� Questioning present or current employees about their
union sentiments, particularly about how they might
vote in a union election
�� Threatening or terminating employees for their union
support or beliefs
�� Changing the working conditions of employees
because they actively work for the union or simply
support its ideals
�� Supplying the names, addresses, and phone numbers
of employees to union representatives or other
employees sympathetic to the union
�� Promising employees improvements in working
conditions (wage increases, benefit improvements,
and so on) if they vote against the union
�� Accepting or reviewing union authorization cards or
prounion petitions because employees’ names are
listed on these documents
Highlights in HRM4
494
89624_ch14_hr_481-514.indd 494 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
495Chapter 14 The Dynamics of Labor Relations
reduce it. Today skilled and unskilled workers, white-collar and blue-collar workers, and
professional groups are being represented by both types of union. For example, the UAW
represents workers in diverse industries from auto manufacturing to agriculture, health
care to higher education.25
While technically not a union, employee associations represent various groups of
professional and white-collar employees. Examples of employee associations include
the National Education Association, Michigan State Employees Association, American
Nurses’ Association, and Air Line Pilots Association. In competing with unions, these
associations, for all purposes, may function as unions and become just as aggressive as
unions in representing members.
Public Unions
Involvement of unions for federal, state, and local government employees has been an area
of important activity since the early 1960s. Today unions represent more than 34.4 percent
of all government workers in the United States (compared with just 11 percent in 1960).26
employee associations
Labor organizations that
represent various groups
of professional and
white-collar employees
in labor–management
relations.
Craft unions:
• Represent
skilled
craft
workers
Other unions:
• Represent
all other
workers
Industrial unions:
• Represent
all workers
employed
along industry
lines
Different Types of UnionsFigure 14.5
One of the functions
of a union steward is
to discuss issues with
management as they
arise. Here, a steward
is discussing a safety
issue with the site
manager.
Im
ag
es
ou
rc
e/
Ph
ot
o
Li
br
ar
y
89624_ch14_hr_481-514.indd 495 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
NLRB Election Poster
Highlights in HRM5
89624_ch14_hr_481-514.indd 496 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
497Chapter 14 The Dynamics of Labor Relations
As unions and employee associations of teachers, police, firefighters, and state employees
have grown in size and political power, they have demanded the same rights to bargain
and strike that private-sector employees have.
While public sector and private sector collective bargaining have many features in
common, a number of factors differentiate the two sectors. For example, there are no
national boards, like the NLRB in the private sector, that govern public sector labor rela-
tions. Public sector collective bargaining falls within the separate jurisdiction of each state,
and great diversity exists among the various state laws.
14.2 The Bargaining Process
Those unfamiliar with contract negotiations often view the process as an emo-
tional conflict between labor and management, complete with marathon sessions,
fist pounding, and smoke-filled rooms. In reality, negotiating a labor agreement
entails long hours of extensive preparation combined with diplomatic maneuver-
ing and the development of bargaining strategies. Furthermore, negotiation is only
one part of the collective bargaining process. (See Figure 14.7 later in the chapter.)
Collective bargaining also may include the use of economic pressures in the form
of strikes and boycotts by a union. Lockouts, plant closures, and the replacement
of strikers are similar pressures used by an employer. In addition, either or both
parties may seek support from the general public or from the courts as a means of
pressuring the opposing side.
14.2a Preparing for Negotiations
Preparing for negotiations includes assembling data to support bargaining proposals
and forming the bargaining team. This permits collective bargaining to be conducted
on an orderly, factual, and positive basis with a greater likelihood of achieving desired
goals. Assuming that the labor agreement is not the first to be negotiated by the par-
ties, preparation for negotiations ideally start soon after the current agreement has
been signed. This practice allows negotiators to review and diagnose weaknesses and
mistakes made during the previous negotiations while the experience is still current
in their minds.
Normally, each side has four to six representatives at the negotiating table. The
chief negotiator for management is the vice president or manager for labor relations;
the chief negotiator for the union is the local union president or national union rep-
resentative. Others making up management’s team may include representatives from
accounting or finance, operations, employment, legal, or training. The local union
president is likely to be supported by the chief steward, various local union vice presi-
dents, and a representative from the national union. Importantly, it is widely accepted
that the conduct of the negotiators strongly influences individual bargaining sessions
and the outcomes reached. According to one experienced negotiator, “The conduct
of negotiations largely depends on the relationship and attitude of negotiators toward
one another. If you want conflict in your bargaining sessions, just start off attacking
the other side.”
collective bargaining
process
The process of negotiat-
ing a labor agreement,
including the use of eco-
nomic pressures by both
parties.
How do you ensure
that the bargain-
ing process does
not become highly
adversarial?
LO 4
89624_ch14_hr_481-514.indd 497 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
498 Part 5 Enhancing Employee-Management Relations
14.2b Gathering Bargaining Data
Employers gather economic data primarily in the areas of wages and benefits. How-
ever, internal data relating to grievances, disciplinary actions, transfers, promotions,
overtime, and former arbitration awards are useful in formulating and supporting the
employer’s bargaining position. The supervisors and managers, who must live with and
administer the labor agreement, can be very important sources of ideas and suggestions
concerning changes that are needed in the next agreement.
When negotiating contracts, union bargainers talk about “taking wages out of
competition.” This term refers to having similar contract provisions—particularly
concerning wages and benefits—between different companies in order to prevent one
employer from having a favorable labor cost advantage over another. For example,
the United Auto Workers representing workers at both General Motors and Ford
will seek similar contract provisions. Furthermore, this allows unions to show their
members that they are receiving wages and benefits comparable to those of other
employees doing like work. Other negotiated labor agreements, particularly at the
local and regional levels, play a significant part in settling the terms of the labor
agreement.
14.2c Developing Bargaining Strategies and Tactics
Both management and union negotiators approach bargaining with a defined strategy.
In tough economic periods, the employer’s strategy might be cost containment or spe-
cific reductions in wages or benefits such as health care or pension costs. Conversely, in
times of economic growth—when a union strike would harm sales—the employer will
be more willing to meet union demands. The employer’s strategy should also consider
proposals the union is likely to submit, goals the union is striving to achieve, and the
extent to which it may be willing to make concessions or to resort to strike action in
order to achieve these goals.
At a minimum, the employer’s bargaining strategy must address these points:
• Likely union proposals and management responses to them
• A listing of management demands, limits of concessions, and anticipated union
responses
• Development of a database to support management bargaining proposals and to
counteract union demands
• A contingency operating plan should employees strike
Certain elements of strategy are common to both the employer and the
union. Generally, the initial demands presented by each side are greater than those
it actually may hope to achieve.27 This is done to provide room for concessions.
Moreover, each party usually avoids giving up the maximum it is capable of con-
ceding to allow for further concessions that may be needed to break a bargaining
deadlock.
The negotiation of a labor agreement can have some of the characteristics
of a poker game, with each side attempting to determine its opponent’s position
while not revealing its own.28 Each party normally tries to avoid disclosing the
relative importance that it attaches to a proposal so that it will not be forced to
89624_ch14_hr_481-514.indd 498 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
499Chapter 14 The Dynamics of Labor Relations
pay a higher price than is necessary to have the proposal accepted. As in buying
a new car, the buyer and seller employ a lot of strategy to obtain the best outcome
possible.
14.2d Negotiating the Labor Agreement
While there is no “exact” way to negotiate a labor agreement, typically each side focuses
on one issue or several related issues until agreement is reached.29 For each bargain-
ing issue to be resolved satisfactorily, the point at which agreement is reached must
be within limits that the union and the employer are willing to accept. In a frequently
cited bargaining model, Ross Stagner and Hjalmar Rosen call the area within these two
limits the bargaining zone. In some bargaining situations, such as the one illustrated in
Figure 14.6, the solution desired by one party may exceed the limits of the other party.
Thus that solution is outside the bargaining zone. If that party refuses to modify its
demands sufficiently to bring them within the bargaining zone or if the opposing party
refuses to extend its limit to accommodate the demands of the other party, a bargaining
deadlock results.30 For example, when bargaining a wage increase for employees, if the
union’s lowest limit is a 4 percent increase and management’s top limit is 6 percent, an
acceptable range—the bargaining zone—is available to both parties. If management’s
top limit is only 3 percent, however, a bargaining zone is not available to either side, and
a deadlock is likely to occur. Figure 14.6 shows that as bargaining takes place, several
important variables influence the negotiators and their ability to reach agreement within
the bargaining zone.
14.2e Good-Faith Bargaining
The Taft-Hartley Act requires an employer to negotiate in good faith with the union’s
representatives over conditions of employment (the same obligation applies to the
union representatives).31 Good faith requires meetings to be held at reasonable times
and places to discuss employment conditions. It requires also that the proposals sub-
mitted by each party be realistic. In discussing the other party’s proposals, each side
must offer reasonable counterproposals for those it is unwilling to accept. Finally, both
parties must sign the written document containing the agreement reached through
negotiations.
14.2f Interest-Based Bargaining
U.S. labor–management negotiations are characterized as adversarial. With adversarial
bargaining, negotiators start with defined positions, and through deferral, persuasion,
trade, or power, the parties work toward the resolution of individual bargaining demands.
Unfortunately, as noted by one labor negotiator, “adversarial bargaining does little to
establish a long-term positive relationship based on open communications and trust. By
its nature, it leads to suspicion and compromise.”32 To overcome these negative feelings,
labor and management practitioners may use a nonadversarial approach to negotiating.
Interest-based bargaining is based on the identification and resolution of mutual
interests rather than the resolve of specific bargaining demands.33 Interest-based
bargaining is “a problem-solving process conducted in a principled way that creates
bargaining zone
An area in which the
union and the employer
are willing to concede
when bargaining.
interest-based
bargaining
Problem-solving bar-
gaining based on a
win-win philosophy
and the development
of a positive long-term
relationship.
89624_ch14_hr_481-514.indd 499 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
500 Part 5 Enhancing Employee-Management Relations
effective solutions while improving the bargaining relationship.” The focus of bargain-
ing strategy is to discover mutual bargaining interests with the intent of formulating
options and solutions for mutual gain.34 Rather than using proposals and counterpro-
posals as a means of reaching agreement (as with adversarial negotiations), participants
use brainstorming, consensus decision-making, active listening, process checking, and
matrix building to facilitate the settlement of issues. An underlying goal of interest-
based bargaining is to create a relationship for the future based on trust, understanding,
and mutual respect.
14.2g Management and Union Power
in Collective Bargaining
Fortunately, the great majority of labor–management negotiations are settled peace-
fully. However, should negotiations become deadlocked, bargaining can become highly
adversarial as each side will now employ its bargaining power to achieve its desired ends.
The party’s bargaining power consists of its economic, political, and social influence to
achieve its demands at the expense of the other side.
bargaining power
The power of labor and
management to achieve
their goals through eco-
nomic, social, or political
influence.
IN
F
L
U
E
N
C
IN
G
F
A
C
T
O
R
S
Laws and
administrative
rulings
Bargaining
history between
parties
Public
opinion
Economic
influences
Other
negotiated
outcomes
Management’s
expected range
of desired results
Management’s
top limit
Management’s
preferred
outcome
Union’s expected
range of desired
results
Union’s
preferred
outcome
Union’s
low limit
Personalities
of
negotiators
The Bargaining Zone and Negotiation InfluencesFigure 14.6
89624_ch14_hr_481-514.indd 500 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
501Chapter 14 The Dynamics of Labor Relations
Union Bargaining Power
The bargaining power of the union may be exercised by striking, picketing, or boycotting the
employer’s products or services. A strike is the refusal of a group of employees to perform
their jobs. Unions usually seek strike authorization from their members to use as a bargain-
ing ploy to gain concessions that will make a strike unnecessary. A strike vote by the mem-
bers does not mean they actually want or expect to go out on strike. Rather, it is intended
as a vote of confidence to strengthen the position of their leaders at the bargaining table.
When a union goes on strike, it pickets the employer by placing people at business
entrances to advertise the dispute and to discourage others from entering the premises.
Because unions often refuse to cross another union’s picket line, the pickets may serve to
prevent the delivery and pickup of goods or performance of other services. For example,
a Teamster truck driver may refuse to deliver produce to a food store whose employees
are out on strike with the United Food and Commercial Workers Union.
Another economic weapon of the union is the boycott, which is a refusal to patron-
ize the employer. For example, production employees on strike against a hand tool
manufacturer might picket a retail store that sells the tools made by the struck employer.
Unions will also use handbills, radio announcements, email campaigns, and newspaper
ads to discourage the purchase of the employer’s product or service.
Management Bargaining Power
When negotiations become deadlocked, the employer’s bargaining power largely rests on
being able to continue operations in the face of a strike or to shut down operations entirely.
A strike is one way
union members
can exercise their
bargaining power.
Et
ha
n
M
ill
er
/G
et
ty
Im
ag
es
89624_ch14_hr_481-514.indd 501 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
502 Part 5 Enhancing Employee-Management Relations
Should employees strike the organization (referred to as an economic strike),
employers have the legal right to hire replacement workers. With this right, employ-
ers acquire a bargaining weapon equal in force to the union’s right to strike. As one
observer noted, “The availability of a worker replacement strategy improves manage-
ment’s ability to battle a union head-on in the way that unions have battled employers
for decades.”
In extreme situations, the employer may elect to lock out its employees. The lockout
is a bargaining strategy by which the employer denies employees the opportunity to
work by closing its operations. Besides being used in bargaining impasses, lockouts may
be used by employers to combat union slowdowns, damage to their property, or violence
within the organization that may occur in connection with a labor dispute. Employers
may still be reluctant to resort to a lockout, however, because of their concern that deny-
ing work to regular employees might hurt the organization’s image.
14.2h Resolving Bargaining Deadlocks
Unions and employers in all types of industries—sports, transportation, entertainment,
manufacturing, communication, and health care—have used mediation and arbitration
to help resolve their bargaining deadlocks.35 As discussed in Chapter 13, mediation is a
voluntary process that relies on the communication and persuasive skills of a mediator
to help the parties resolve their differences. The federal government is likely to become
involved in labor disputes through the services of the FMCS.
Unlike a mediator, an arbitrator assumes the role of a decision maker and deter-
mines what the settlement between the two parties should be. In other words, arbi-
trators write a final contract that the parties must accept. Compared with mediation,
arbitration is not often used to settle private sector bargaining disputes. In the public
sector, where strikes are largely prohibited, the use of interest arbitration is a common
method to resolve bargaining deadlocks. Generally, one or both parties are reluctant to
give a third party the power to make the settlement for them. Consequently, a mediator
typically is used to break a deadlock and assist the parties in reaching an agreement.
An arbitrator generally is called on to resolve disputes arising in connection with the
administration of the agreement, called rights arbitration or grievance arbitration, which
will be discussed shortly.
14.3 The Labor Agreement
When negotiations are concluded, the labor agreement becomes a formal binding docu-
ment listing the terms, conditions, and rules under which employees and managers
agree to operate. Highlights in HRM 6 shows some of the major articles in a labor
agreement and also provides examples of some new and progressive contract clauses.
Two important items in any labor agreement pertain to the issue of management rights
and the forms of security afforded to the union.
14.3a The Issue of Management Rights
Management rights have to do with the conditions of employment over which manage-
ment is able to exercise exclusive control. Almost without exception, the labor agreement
contains a management rights clause. This clause states that “management’s authority is
arbitrator
A third-party neutral who
resolves a labor dispute
by issuing a final decision
in the disagreement.
89624_ch14_hr_481-514.indd 502 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Items in a Labor Agreement
Typical clauses will cover:
�� Wages
�� Vacations
�� Holidays
�� Work schedules
�� Management rights
�� Union security
�� Transfers
�� Discipline
�� Training
�� Grievance procedures
�� No strike/no lockout clause
�� Overtime
�� Safety procedures
�� Severance pay
�� Seniority
�� Pensions and benefits
�� Outsourcing
�� Work rules
Progressive clauses will cover:
�� Employee access to records
�� Limitations on use of performance evaluation
�� Elder care leave
�� Flexible medical spending accounts
�� Protection against hazards of technology equipment
(VDTs)
�� Limitations against electronic monitoring
�� Procedures governing drug testing
�� Bilingual stipends
�� Domestic partnership benefits
�� Employee involvement programs
Highlights in HRM6
Strikes
Legal
Requirements Lockouts
Strike
Replacements Boycotts
PREPARE FOR
NEGOTIATIONS
• Gather data
• Form bargaining terms
FORMALIZE AGREEMENT
• Clarify contract language
• Ratify agreement
DEVELOP STRATEGIES
• Develop management
proposals and limits of
concession
• Consider opponents’ goals
• Make strike plans
CONDUCT NEGOTIATIONS
• Bargain in good faith
• Analyze proposals
• Resolve proposals
• Stay within bargaining
zone
1 2
4 3
The Collective Bargaining ProcessFigure 14.7
503
89624_ch14_hr_481-514.indd 503 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
504 Part 5 Enhancing Employee-Management Relations
supreme in all matters except those it has expressly conceded in the collective agree-
ment, or in those areas where its authority is restricted by law.” Management rights might
include the right of management to determine the products to produce, to determine
the location of production or service facilities, or to select production equipment and
procedures.
14.3b Union Security Agreements
As we noted at the beginning of this chapter, unions must represent all bargaining
unit members equally regardless of whether employees join the union or not. In
exchange for this obligation, union officials will seek to negotiate some form of com-
pulsory membership as a condition of employment. This form of agreement where an
employer and the union agree on the extent to which the union may compel employ-
ees to join the union and how the dues will be collected is known as the union security
agreement.
14.4 Administration of the Labor Agreement
Negotiation of the labor agreement, as mentioned earlier, is usually the most publicized
and critical aspect of labor relations. Nevertheless, as managers in unionized organiza-
tions know, the bulk of labor relations activity comes from the day-to-day administra-
tion of the agreement because no agreement could possibly anticipate all the forms that
disputes may take. In addition, once the agreement is signed, each side will naturally
interpret ambiguous clauses to its own advantage. These differences are traditionally
resolved through the grievance procedure.
14.4a Negotiated Grievance Procedures
The grievance procedure typically provides for the union to represent the interests of
its members (and nonmembers as well) in processing a grievance. It is considered by
some authorities to be the heart of the bargaining agreement, or the safety valve that
gives flexibility to the whole system of collective bargaining.36
The grievance procedure is normally initiated by the union—or an individual
employee—when it feels management has violated some article of the labor agree-
ment. In one case, the union filed a grievance against a supervisor when it believed the
supervisor promoted an employee out of seniority order—called a bypass grievance. A
significant benefit of the grievance procedure is that it provides a formal and orderly
procedure for the union to challenge the actions of management without resort to force.
One authority has noted, “The grievance procedure fosters cooperation, not conflict,
between the employer and the union.”37
14.4b Grievance Arbitration
The function of rights arbitration is to provide the solution to a grievance that a union
and an employer have been unable to resolve by themselves. As mentioned earlier, arbi-
tration is performed by a neutral third party (an arbitrator or impartial umpire). This
third party’s decision dictates how the grievance is to be settled.38 Both parties are obli-
gated to comply with the decision.
union security
agreement
Where an employer
and the union agree
on the extent to which
the union may compel
employees to join the
union and how the dues
will be collected.
grievance procedure
A formal procedure that
provides for the union to
represent members and
nonmembers in process-
ing a grievance.
rights arbitration
Arbitration over inter-
pretation of the mean-
ing of contract terms
or employee work
grievances.
How would you resolve
a complaint about your
boss making you do
work that is not in your
contract?
LO 5
89624_ch14_hr_481-514.indd 504 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
505Chapter 14 The Dynamics of Labor Relations
Under the fair representation doctrine, unions have a legal obligation to provide
assistance to members who are pursuing grievances. Because members can bring suit
against their unions for failing to process their grievances adequately, many union offi-
cers are reluctant to refuse taking even weak grievances to arbitration.
Arbitration Hearing
In our experience, employees unfamiliar with arbitration find the process confusing
and often stressful. This is true for employees in the nonunion, as well as the union,
setting. Arbitration hearings have the appearance of a court hearing but without many
of the formalities of a court proceeding. The process begins with the swearing-in of wit-
nesses and the introduction of the submission agreement. The submission agreement is
a statement of the problem to be resolved. Such a statement might read: “Was the three-
day suspension of Alex Hayden for just cause? If not, what is the appropriate remedy?”
The parties will then make opening statements, followed by the presentation of facts
and evidence, and the oral presentation of witnesses. The hearing will conclude with
each side making summary statements that are arguments in support of its position.
In arbitrating a dispute, it is the responsibility of the arbitrator to ensure that each
side receives a fair hearing during which it may present all of the facts it considers
pertinent to the case. The primary purpose of the hearing is to assist the arbitrator in
obtaining the facts necessary to resolve a human relations problem rather than a legal
one. The arbitrator, therefore, has a right to question witnesses or to request additional
facts from either party. After conducting the hearing and receiving post-hearing briefs
(should the parties choose to submit them), the arbitrator customarily has 30 days in
which to consider the evidence and render an award. In most labor contracts, the costs
of arbitration are shared equally by the parties.
Arbitration Award
The arbitration award is a formal written document given to both sides. As in griev-
ance procedures, there is no specific format to an arbitration award, but typically the
award contains five parts: (1) submission agreement, (2) facts of the case, (3) positions
of the parties, (4) opinion of the arbitrator, and (5) decision rendered. As might be
expected, the decision of the arbitrator is of major importance to the parties. However,
the reasoning behind the decision—the opinion—is equally important since it can
provide guidance concerning the interpretation of the labor agreement and the reso-
lution of future disputes arising from its administration. In pointing out the merits of
each party’s position, the reasoning that underlies the award can help lessen the disap-
pointment and protect the self-esteem of those representing the unsuccessful party.
The opinion will also evaluate the evidence presented by each side in support of its
position and, in discipline cases, whether management had just cause for the action
taken against an employee. (See Chapter 13 for a discussion of just cause in arbitration.)
Because of the importance and magnitude of arbitration in both the union and
nonunion setting, the process by which arbitrators make decisions and the factors that
influence those decisions are of continuing interest to managers. Typically, arbitrators
use four factors when deciding cases:
1. The wording of the labor agreement (or employment policy in nonunion
organizations)
2. The submission agreement as presented to the arbitrator
fair representation
doctrine
A doctrine under which
unions have a legal
obligation to assist both
members and nonmem-
bers in labor relations
matters.
89624_ch14_hr_481-514.indd 505 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
506 Part 5 Enhancing Employee-Management Relations
3. Testimony and evidence offered during the hearing
4. Arbitration criteria or standards (similar to standards of common law) against
which cases are judged
In practice, arbitration decision-making is not an exact science. In fact, the deci-
sions of arbitrators can be rather subjective. Arbitrators can, and do, interpret contract
language differently (e.g., what “just cause discharge” actually means), they assign varying
degrees of importance to testimony and evidence, they judge the truthfulness of witnesses
differently, and they give arbitration standards greater or lesser weight as they apply
to facts of the case. Each of these influences introduces subjectivity into the decision-
making process.39
14.5 Contemporary Challenges
to Labor Organizations
We conclude our discussion of labor relations by highlighting two important issues
facing unions today: decrease of union membership and foreign competition and tech-
nological advances.
14.5a Decrease in Union Membership
A major challenge confronting organized labor is to halt the decline in union mem-
bership. The magnitude of the problem is illustrated by statistics that show how union
membership has declined in total numbers and as a percentage of the total civilian labor
force. Representing only 10 percent of American workers, the loss of union jobs reflects,
in part, the decline in U.S. manufacturing jobs, coupled with the failure of unions to
draw membership from among the white-collar and service ranks, where the labor force
is growing more rapidly.40 Other reasons for the decline in union membership include
the following:
• A shift from traditional unionized industries (manufacturing, mining) to high-
technology industries (information technology, health care)41
• Growth in the employment of part-time and temporary workers
• Growth in small businesses, in which unionization is more costly and difficult to
perform
• Globalization of the workforce particularly among low-wage employers42
What are labor organizations doing to stem the decline in union membership?
The answer, according to one union official, is “energized organizing.” First, unions
are targeting workers they have long ignored: low-wage service workers on the bot-
tom tier of the U.S. economy—for example, janitors, maids, and service workers;
food service employees; and retail clerks. Furthermore, unions see recent immi-
grants, the fastest-growing segment of working people, as a potent prospect for
union growth.43
89624_ch14_hr_481-514.indd 506 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
507Chapter 14 The Dynamics of Labor Relations
Second, the AFL-CIO has embraced an aggressive unionization strategy. Richard
Trumka, president of the AFL-CIO, argued that “Republicans, and too many demo-
crats, have rigged our economy to enrich the select few… There is a Wall Street wing
that seeks to undermine Donald Trump’s promises to workers.” Trumka pointed out
the efforts that unions are taking to organize white-collar workers such as graduate
students and technology professionals, as well as hotel and fast-food workers.44
14.5b Globalization and Technological Change
The importation of steel, consumer electronics, automobiles, clothing, textiles, and
shoes from foreign countries creates a loss of jobs in the United States for workers
who produce these products. Furthermore, foreign subsidiaries of American corpora-
tions such as Carrier, Westinghouse, and Xwerox have been accused by labor unions
of exporting the jobs of U.S. workers. As a result, unions are demanding more govern-
ment protection against imports, seeking to protect U.S. jobs from low-cost overseas
producers. To add to that, in recent years, the service sector of the U.S. economy has
witnessed the outsourcing of white-collar jobs to foreign employers in locations such
as India and Indonesia.
More and more Americans are worried about their jobs being filled by people in
other countries. Offshoring, defined as work that was previously carried out in one
country to another, has been examined with great fear and trepidation in the last
20 years. The United States is now at a critical crossroads in how we deal with offshor-
ing of American jobs. There is no question that most of the recent growth in U.S. com-
panies comes from outside of the country. Companies argue that to remain competitive
offshoring
Work that was previously
carried out in one coun-
try is moved to another
country.
Richard Trumpka takes
on both political par-
ties to question the
way politicians have
failed to address the
inability of the future
generation to earn as
much money as their
parents.
Ch
ip
S
om
od
ev
ill
a/
G
et
ty
Im
ag
es
89624_ch14_hr_481-514.indd 507 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
508 Part 5 Enhancing Employee-Management Relations
against foreign companies they must take advantage of lower cost labor in countries like
India and China—perpetuating the continual loss of union jobs in the United States.
Statistics show that between 2001 and 2013, the United States lost 3.2 million jobs to
China alone.45
To bring back jobs, President Trump started renegotiating the North Atlantic Trade
Agreement to ensure fewer jobs were going to Mexico and staying in the United States.
But using trade barriers and punishing American companies for sending jobs outside
the United States has major implications for the competitiveness of American compa-
nies, and employees as well. Such pressures could cause companies to send their head-
quarters to other countries.
Moreover, most of the job loss that occurs in the United States is a result of technol-
ogy advances rather than globalization.46
Improvements in computer technology and highly automated operating systems
have lowered the demand for certain types of employees. Decline in membership in
the auto, steel, rubber, and transportation unions illustrates this fact. As previously dis-
cussed, technological advances have also diminished the effectiveness of strikes because
highly automated organizations are capable of maintaining satisfactory levels of opera-
tion with minimum staffing levels during work stoppages. So, what does this all mean
for unions and employers?
Studies show that workers unionize for dif-
ferent economic, psychological, and social reasons.
While some employees may join unions because they
are required to do so, most belong to unions because
they are convinced that unions help them improve
their wages, benefits, and most importantly, equality.
Employee unionization is largely caused by dissatis-
faction with managerial practices and procedures.
A formal union organizing campaign is used to
solicit employee support for the union. Once employ-
ees demonstrate their desire to unionize through sign-
ing authorization cards, the union petitions the NLRB
for a secret ballot election. If 51 percent of those vot-
ing in the election vote for the union, the NLRB certi-
fies the union as the bargaining representative for all
employees in the bargaining unit.
Once a group of employees gets 30 percent of
their peers within the bargaining unit to sign a peti-
tion, then the NLRB steps in and monitors an election
to see if the employees can unionize. If the employ-
ees choose to unionize, then a particular union that
has agreed to collectively represent the employees in
negotiations will try to come to an agreement with the
company on certain changes.
LO 1
LO 2
LO 3
Summary
Negotiating a labor agreement is a detailed
process. Each side prepares a list of proposals it
wishes to achieve while additionally trying to antici-
pate proposals desired by the other side. Bargaining
teams must be selected, and all proposals must be
analyzed to determine their impact on and cost to
the organization. Both employer and union nego-
tiators are sensitive to current bargaining patterns
within the industry, general cost-of-living trends,
and geographical wage differentials. Managers estab-
lish goals that seek to retain control over operations
and to minimize costs. Union negotiators focus their
demands around improved wages, hours, and work-
ing conditions. An agreement is reached when both
sides compromise their original positions and final
terms fall within the limits of the parties’ bargaining
zone.
Traditionally, collective bargaining between
labor and management has been adversarial. Pres-
ently, there is an increased interest in nonadversarial
negotiations—negotiations based on mutual gains and
a heightened respect between the parties. What the
FMCS calls interest-based bargaining is one form of
nonadversarial negotiations.
LO 4
89624_ch14_hr_481-514.indd 508 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
509Chapter 14 The Dynamics of Labor Relations
arbitrator
authorization card
bargaining power
bargaining unit
bargaining zone
collective bargaining process
craft unions
employee associations
exclusive representation
fair representation doctrine
grievance procedure
industrial unions
interest-based bargaining
labor relations process
National Labor Relations Board
(NLRB)
offshoring
rights arbitration
unfair labor practices (ULPs)
union
union steward
union security agreement
Key Terms
Contrast the arguments concerning union mem-
bership that are likely to be presented by a union
with those likely to be presented by an employer.
Describe the steps in the traditional organiz-
ing drive.
Describe what it means for HR managers
when employees win an election to unionize.
What can HR do at this point to make sure the
employees’ and company’s interests align?
Of what significance is the bargaining zone in
the conduct of negotiations? What are some
influences affecting negotiated outcomes? The
LO 1
LO 2
LO 3
LO 4
negotiations between data services interna-
tional and its union have become deadlocked.
What form of bargaining power does each side
possess to enforce its bargaining demands?
What are the advantages and disadvantages
of each form of bargaining power for both the
employer and union?
a. What are some of the actions being taken
by unions to cope with the contemporary
challenges they face?
b. How can companies respond to the labor
changes that result from increased tech-
nology and globalization?
LO 5
Discussion Questions
When differences arise between labor and
management, they are normally resolved through the
grievance procedure. Grievance procedures are nego-
tiated and thus reflect the needs and desires of the par-
ties. The typical grievance procedure consists of three,
four, or five steps—each step having specific filing and
reply times. Higher-level managers and union officials
become involved in disputes at the higher steps of the
grievance procedure. The final step of the grievance
procedure may be arbitration. Arbitrators render a
final decision to problems not resolved at lower griev-
ance steps.
LO 5 The submission agreement is a statement of the issue
to be solved through arbitration. It is simply the prob-
lem the parties wish to have settled. The arbitrator must
answer the issue by basing the arbitration award on four
factors: contents of the labor agreement (or employment
policy), submission agreement as written, testimony and
evidence obtained at the hearing, and various arbitration
standards developed over time to assist in the resolu-
tion of different types of labor–management disputes.
Arbitration is not an exact science because arbitrators
give varying degrees of importance to the evidence and
criteria by which disputes are resolved.
89624_ch14_hr_481-514.indd 509 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Learn about Unions
�� History of the union
�� Membership size and type of employees represented
�� Mission of the union
�� Structure of the union, including its major
departments
�� National officers
�� Names of employers with whom they have an
agreement
�� Special benefits they offer members
�� Other interesting or pertinent information
The AFL-CIO website (http://www.afl-cio.org) provides a
list of all unions—and their websites—affiliated with the fed-
eration. National unions and their locals along with library
research can also provide information. Be prepared to pres-
ent your findings during a class discussion.
Unions, like businesses, are dynamic and varied. Some
unions are very large, such as the United Auto Workers (UAW)
and the American Federation of State, County and Municipal
Employees (AFSCME), and represent workers nationally or
even internationally. Others are smaller in size—for example,
the Writers Guild of America East (WGAE) or the Air Traffic
Controllers Association (ATCA)—and represent only specific
groups of employees or organize only in a designated geo-
graphic area. This exercise will help you learn more about
unions.
Assignment
Working individually or in teams, select four or five different
unions or employee associations and report on the follow-
ing. Vary your selections (large/small, public/private, and so
on) to widen your understanding of labor organizations.
CASE STUDY The New Union Battles: Public Unions vs. Rich World Governments1
While private sector unions may be rapidly declining in
the United States, public sector unions are still strong …
or at least were. In 2011, public sector unions represent-
ing teachers, prison guards, police officers, railworkers,
and civil servants were dealt a blow by their employers—
the government. At the forefront of the battle was the
issue of collective bargaining. And it began in Wisconsin.
But this is not the first time Wisconsin has been
at the forefront of collective bargaining. The Wagner
Act of 1934 did not grant public employees the right
to collective bargaining. In the 1950s and 1960s pub-
lic sector employees pushed for collective bargaining
rights. Finally, in 1959 Wisconsin became the first
state to grant this right to public employees. In a dra-
matic turn of events, Wisconsin is now the first to
repeal collective bargaining rights for its public sector
employees.
After a standoff with state Democrats and
prounion demonstrators, Wisconsin governor Scott
Walker and the state legislature decided that public
employees did not have the right to collective bar-
gaining. This set off a chain reaction in other states.
For example, in 2017 lawmakers in Iowa proposed
a bill to prohibit collective bargaining for state
employees. This crackdown on collective bargain-
ing could now act as a model for President Trump
to overhaul the federal workforce. Scott Walker said
that he spoke with Vice President Mike Pence about
“how they may take bits and pieces of what we did”
with the union law and “apply it at the national level.”
However, these are only the words of Walker; Presi-
dent Trump hasn’t said anything about it yet. Either
way, public sector employees are concerned about
their future.
510
89624_ch14_hr_481-514.indd 510 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
511Chapter 14 The Dynamics of Labor Relations
Questions
1. Why are politicians so interested in trying to
repeal collective bargaining rights for public sec-
tor employees?
2. What risks does losing their collective bargaining
rights hold for public employees?
3. As an elected politician charged with major cuts
in your state budget, how would you negotiate
with the public sector unions? As a public sector
union leader, how would you negotiate with the
state legislature?
Sources: Thomas Kochan, “Protective Bargaining: How to Prevent
the Labor Wars,” Boston Review (March 23, 2011), http://www
.bostonreview.net/BR36.2/thomas_kochan_wisconsin_labor_
wars .php; “ The Battle Ahead: The Struggle with Public-Sector
Unions Should Be about Productivity and Parity, not Just Spend-
ing Cuts,” The Economist (January 6, 2011), http://www.econo-
mist.com /node/17851305; David Morris, “ When Unions Are
Strong, Americans Enjoy the Fruits of Their Labor,” Huffington Post
(April 8, 2011), http://www.huffingtonpost.com/david-morris/
when-unions-are-strong-am _b_846802.html; Clay Masters, “Iowa
Moves to Restrict Collective Bargaining for Public Sector Work-
ers,” NPR (February 14, 2017); Associated Press, “Scott Walker ’s
Wisconsin Could Be a Model for Trump on Unions,” The Denver
Post (February 6, 2017).
President Trump and
Wisconsin Governor
Walker during a cam-
paign rally in 2016.
Ch
ip
S
om
od
ev
ill
a/
G
et
ty
Im
ag
es
CASE STUDY The Arbitration Case of Jesse Stansky2
At the arbitration hearing, both parties were adamant in
their positions. Nancy Huang, HR manager of Phoenix
Semiconductor, argued that the grievant, Jesse Stan-
sky, was justly terminated for arguing and hitting a
coworker—a direct violation of company policy and the
employee handbook. Stansky argued that he had been
a good employee during his 10 years of employment.
The submission agreement governing the case
read, “It is the employer’s position that just cause
existed for the discharge of Mr. Jesse Stansky and the
penalty was appropriate for the offense committed.”
Additionally, the employer introduced into evidence
the labor agreement, which defined just cause termi-
nation as follows:
Just cause shall serve as the basis for disciplinary
action and includes, but is not limited to: dishonesty,
inefficiency, unprofessional conduct, failure to report
absences, falsification of records, violation of com-
pany policy, destruction of property, or possession
or being under the influence of alcohol or narcotics.
89624_ch14_hr_481-514.indd 511 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
512 Part 5 Enhancing Employee-Management Relations
Answers to Highlights in HRM 1
1. No. Applicants are considered as employees
and, as such, are protected under the law.
2. No. Individual questioning of employees
about their union membership or activities is
unlawful.
3. No. Except in specific situations (e.g., to pro-
mote safety), employees have the right to wear
union insignia.
4. Yes.
5. Yes. Blacklisting of job applicants or employees
is against labor law.
Stansky was hired as a systems technician on
November 20, 2003, a position he held until his ter-
mination on October 25, 2017. According to the tes-
timony of Huang, Phoenix Semiconductor strived to
maintain a positive and cordial work environment
among its employees. Fighting on the job was strictly
prohibited. Stansky’s performance evaluation showed
him to be an average employee, although he had
received several disciplinary warnings for poor atten-
dance and one 3-day suspension for a “systems control
error.” Stansky was generally liked by his coworkers,
and several testified on his behalf at the arbitration
hearing.
The termination of Stansky concerned an alter-
cation between himself and Gary Lindekin, another
systems technician. According to witnesses to the
incident, both Stansky and Lindekin became visibly
upset over the correct way to calibrate a sensitive
piece of production equipment. The argument—one
witness called it no more than a heated disagree-
ment—lasted approximately 3 minutes and concluded
when Stansky was seen forcefully placing his hand on
Lindekin’s shoulder. Lindekin took extreme exception
to Stansky’s behavior and immediately reported the
incident to management. After interviews with both
Stansky and Lindekin and those who observed the
incident, Huang, Samantha Lowry, the employee’s
immediate supervisor, and Grant Ginn, department
manager, decided that Stansky should be terminated
for unprofessional conduct and violation of company
policy.
Questions
1. Which arguments should be given more weight:
those based on company policy, the employee
handbook, and the labor agreement or mitigating
factors given by the grievant and his witnesses?
Explain.
2. How might unprofessional conduct be defined?
Explain.
3. If you were the arbitrator, how would you rule
in this case? Explain fully the reasons for your
decision.
Source: Adapted from an arbitration heard by George W. Bohlander.
All names are fictitious.
6. No. During an organizing drive, an employer can-
not promise improvements in wages or benefits as
a means of defeating the union.
7. Yes. Both nonunion and union employers are sub-
ject to unfair labor practice charges.
8. Yes. When a grievance arbitration clause exists in a
labor agreement, management must arbitrate cases
that seem baseless.
9. Yes. Employees can be disciplined or discharged for
work-related misconduct but not solely because of
their union affiliations or union sentiments.
10. Yes. Antiunion remarks are not unlawful, provided
they are not coercive.
89624_ch14_hr_481-514.indd 512 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
513Chapter 14 The Dynamics of Labor Relations
1. Pandej Chintrakam, “Labor Unions and Income Inequal-
ity: Evidence from US States,” Journal of Applied Sciences 11,
no. 20 (2011): 3530–3533.
2. Donna Brazile, “What Have Unions Done for Us?” CNN (Sep-
tember 4, 2012), http://www.cnn.com/2012/09/04/opinion/
brazile-unions/.
3. For an expanded model of the labor relations process, see
John Dunlop, Industrial Relations Systems (New York: Henry
Holt, 1958), Chapter 1. This book is a classic in the labor
relations field. Also, those interested in labor relations may
wish to explore in greater detail the historical developments
of the U.S. labor movement. Much can be learned about the
current operations of labor organizations and the philoso-
phies of labor officials from labor’s historical context. A brief
but comprehensive history of labor unions can be found in
undergraduate labor management textbooks such as those
listed among these references.
4. Kavi Guppta, “Will Labor Unions Survive in the Era of Auto-
mation?” Forbes (October 12, 2016); Nina Foo, “Millennials
Are the Key to Saving Unions,” Organizer (February 8, 2017);
Lydia Saad, “Americans’ Support for Labor Unions Continues
to Recover,” Gallup (August 17, 2015).
5. Sara Horowitz, “Will Gawker Employees’ Decision to Organize
Make Unions Cool Again?” Fast Company (April 24, 2015).
6. Foo, “Millennials Are the Key to Saving Unions”; Saad,
“Americans’ Support for Labor Unions Continues to Recover.”
7. Foo, “Millennials Are the Key to Saving Unions”; Saad, “Amer-
icans’ Support for Labor Unions Continues to Recover”; Kate
Bronfenbrenner, “The Role of Union Strategies in NLRB Cer-
tification Elections,” Industrial and Labor Relations Review 50,
no. 2 (1997): 195–212.
8. Personal conversation (May 1, 2017).
9. “Challenges Continue for Organized Labor in 2017,” Law 360
(March 15, 2017); Selena Maranjian, “Unions: Good or Bad?”
The Motley Fool (November 22, 2014).
10. Barbara L. Rau, “The Diffusion of HR Practices in Unions,”
Human Resources Management Review 22, no. 1 (2012):
27–42.
11. Shad S. Morris, “Book Review of Offshoring of Ameri-
can Jobs,” Human Resource Management 50, no. 2 (2011):
303–306.
12. Tracey E. Schelmetic, “Delta to Shut Down Contact Center in
Jamaica; Bring Jobs to U.S.,” TMCnet (January 14, 2011).
13. Forbes Human Resources Council, “5 Reasons Your Small
Business Needs a Human Resources Professional,” Forbes
(November 3, 2016), https://www.forbes.com/sites/forbeshuma
nresourcescouncil/2016/11/03/5-reasons-your-small-business-
needs-a-human-resources-professional/#2163c28385f2.
14. William H. Holley, Kenneth M. Jennings, and Roger S. Wolters,
The Labor Relations Process (New York: Cengage Learning, 2011).
Notes and References
15. While most employers will readily negotiate with the
union once it is certified as the bargaining representative
of employees, other employers will continue to vigorously
oppose unionization. This may be accomplished by taking
a very aggressive bargaining posture against union demands.
NLRB statistics show that unions file a large number of unfair
labor practice charges [8(a)(5) violations] when they believe
employers illegally hinder the bargaining process.
16. “Union Organizing: Authorization Cards: What Steps Should
an Employer Take When Presented with Union Authorization
Cards?” Society for Human Resources Management (June 1,
2012), https://www.shrm.org/resourcesandtools/tools-and-
samples/hr-qa/pages/authorizationcardpresentation.aspx.
17. Neil King Jr., Thomas M. Burton, and Kris Maher, “Political
Fight over Unions Escalate,” Wall Street Journal (February 22,
2011), http://online.wsj.com/news/articles/SB1000142405274
8703800204576158851079665840.
18. Richard Berman, “Union Support for Donald Trump Gives
Big Labor Chance to Catch Up,” The Washington Times (Feb-
ruary 6, 2017).
19. “Organizing Institute: Three-Day Training,” AFL-CIO, http://
www.aflcio.org/Get-Involved/Become-a-UnionOrganizer/
Organizing-Institute/Three-Day-Training
20. Arthur B. Shostak, The Cyberunion Handbook: Transforming
Labor Through Computer Technology (New York: Routledge,
2015).
21. Kati Sipp, “The Internet vs. The Labor Movement: Why
Unions Are Latecomers to Digital Organizing,” New Labor
Forum (April 23, 2016).
22. Neil Bucklew, Christopher N. Ellison, and Jeffrey D. Hough-
ton, “Shared Governance and Academic Collective Bargain-
ing in American Higher Education: A Potential Model for
US Participation in the Global Experience of Works Councils
and Codetermination,” Journal of Collective Bargaining in the
Academy 4, no. 1 (2013): 1–13.
23. “Election Report for Cases Closed,” FY 2016 (May 1, 2017): 1.
24. See UAW website at www.uaw.org.
25. “Union Members Summary,” Bureau of Labor Statistics (May 1,
2017).
26. Leigh Thompson, The Mind and Heart of the Negotiator,
3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2004).
27. John Valery White, “How to Play Your Hand: Lessons for Nego-
tiators from Poker,” UNLV Gaming Law Journal 2, no. 2 (2011).
28. Joel Cutcher-Gershenfeld, Thomas Kochan, John-Paul Fergu-
son, and Betty Barrett, “Collective Bargaining in the Twenty-
First Century: A Negotiations Institution at Risk,” Negotiation
Journal 23, no. 3 (July 2007): 249.
29. Ross Stagner and Hjalmar Rosen, Psychology of Union-Manage-
ment Relations (Belmont, CA: Wadsworth, 1965), 95–97. This
is another classic in the field of labor–management relations.
89624_ch14_hr_481-514.indd 513 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
514 Part 5 Enhancing Employee-Management Relations
30. The National Labor Relations Board offers an excellent
book on the National Labor Relations Act. This book dis-
cusses good-faith bargaining as well as other important legal
issues—for example, employers covered by the law, unfair
labor practices, and election procedures. See Basic Guide to
the National Labor Relations Act (Washington, DC: U.S. Gov-
ernment Printing Office, 1997).
31. Joe Stanley, interview by author, January 5, 2008, Phoenix,
AZ.
32. The FMCS has a complete and comprehensive program to
train labor and management negotiators in the art and tech-
niques of interest-based bargaining (IBB). Information on
the IBB program can be obtained from the FMCS national
headquarters at 2100 K Street, N.W., Washington, DC 20427
or from FMCS district offices.
33. Leonard J. Marcus, Barry C. Dorn, and Eric J. McNulty, “The
Walk in the Woods: A Step-by-Step Method for Facilitating
Interest-Based Negotiation and Conflict Resolution,” Negotia-
tion Journal 28, no. 3 (2012): 337–349.
34. Roger J. Peters and Deborah Bavarnick Mastin, “To Mediate
or Not to Mediate: That Is the Question,” Dispute Resolution
Journal 62, no. 2 (May—July 2007): 14.
35. Grievance Guide, 12th ed. (Washington, DC: BNA Books,
2007); Paul J. Gollan and David Lewin, “Employee Represen-
tation in Non-Union Firms: An Overview,” Industrial Relations:
A Journal of Economy and Society, 52, no. s1 (2013): 173–193.
36. Vera Riggs, Labor-Management Relations Conference,
August 11, 2007, Phoenix, AZ.
37. Arbitration awards are not final in all cases. Arbitration
awards may be overturned through the judicial process
if it can be shown that the arbitrator was prejudiced or
failed to render an award based on the essence of the
agreement.
38. Lawrence Mishel, “Unions, Inequality, and Faltering Middle-
Class Wages,” Issue Brief, 342 (2012).
39. Lydia Dishman, “These Are the Jobs with the Most Potential
in 2017,” Fast Company (January 6, 2017); David Welch, “Twi-
light of the UAW,” Business Week (April 10, 2006): 62.
40. Matthew J. Slaughter, “Globalization and Declining
Unionization in the United States,” Industrial Relations
46, no. 2 (April 2007): 329; “Why Trade Unions Are
Declining,” The Economist (September 29, 2015), www.
e c on om i s t . c om / b l o g s / e c on om i s t – e x p l ai ns / 2 0 1 5 / 0 9 /
economist-explains-19.
41. Lance Compa, “Labor at a Crossroads: How Unions
Can Thrive in the 21st Century,” The American Pros-
pect (Januar y 27, 2015), http://prospect.org/article/
labor-crossroads-how-unions-can-thrive-21st-century.
42. Yuki Noguchi, “AFL-CIO’s Trumka Says Both Parties Have
Lost Focus on U.S. Workers,” NPR (April 4, 2017).
43. Will Kimball and Robert E. Scott, “China Trade, Outsourc-
ing and Jobs,” Economic Policy Institute (December 11,
2014), http://w w w.epi.org/publication/china-trade-
outsourcing-and-jobs/.
44. Kimberly Amadeo, “How Outsourcing Jobs Affects the U.S.
Economy,” The Balance (March 30, 2017).
89624_ch14_hr_481-514.indd 514 11/17/17 3:32 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
515
CHAPTER 15
International Human Resources
Management
Learning Outcome
After studying this chapter, you should be able to
Explain the political, economic, sociocultural, and
technological factors in different countries that HR
managers need to consider.
Identify the types of organizational forms used for
competing internationally.
LO 1
LO 2
Explain how domestic and international HRM differ.
Discuss the recruitment, selection, training, com-
pensation, and performance appraisal needs for dif-
ferent types of employees working across borders.
Explain how labor relations differ around the world.
LO 3
LO 4
H
er
o
Im
ag
es
/G
et
ty
Im
ag
es
89624_ch15_hr_515-555.indd 515 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
516 Part 6 Expanding Human Resources Management Horizons
H
ave you ever noticed that much of what you buy is not made in the United States?
The shirt you are wearing right now was probably made in Bangladesh, Vietnam,
Indonesia, or China. The brand, of course, may be American (e.g., Abercrombie &
Fitch, Hollister, American Eagle), but that just means that the company is headquartered
here. In fact, despite antiglobalization sentiments, most companies today are involved
in international business in one way or another.
Managing human resources across these international settings may help to lever-
age specialized skills, provide cheaper labor, or even bring new ideas into the company.
However, managing human resources internationally makes everything all the more
complicated.1 Such complications arise as each country possesses unique political poli-
cies, economic situations, social and cultural norms, and technological capacities. The
first part of this chapter describes some of the environmental factors that affect the
work of managers in a global setting. We show how a political, economic, sociocultural,
technological (PEST ) analysis can help you to more effectively assess the threats and
opportunities presented to HRM in a global setting. Just as with domestic operations,
the dimensions of the environment form a context in which HRM decisions in foreign
countries are made. Next, we show how companies respond to these environmental
complications. We examine the different forms companies will take to help them com-
pete in a global environment—international, multidomestic, global, and transnational. In
many respects, these organizational forms influence the kinds of managerial and human
resource issues a company faces. A major portion of this chapter deals with the various
HR activities involved in the recruitment, selection, development, and compensation
of employees working abroad. However, as we explain later in this chapter, workers
stationed all over the United States are increasingly finding themselves working virtually
with people from other cultures who speak different languages. This creates challenges
not only for them but also for firms’ HR managers.
15.1 Analyzing Your International Environment
In Chapter 1, we highlighted some of the global trends affecting human resource
management. Because political, economic, social, and technological conditions are
constantly shifting across the world, how people are managed in those changing envi-
ronments will shift as well. To systematically help companies manage in the global
environment, political, economic, sociocultural, and technological (PEST) analysis acts
as an audit of a company’s environmental influences to help it determine its strategy
and HR response.
Conducting a PEST analysis entails scanning different contextual environments
to understand the long-term trends and how they might impact a company.2 As an
HR manager, PEST analysis can help you to (1) spot business or personnel opportu-
nities, and it gives you advanced warning of threats, (2) spot trends in the business
environment so you can proactively adapt to these changes, (3) avoid implementing
What is the first thing
you think about when
you read the word
“PEST”?
LO 1
89624_ch15_hr_515-555.indd 516 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
517Chapter 15 International Human Resources Management
HR practices in a particular country where they may fail, and (4) break free of old habits
and assumptions about how people should be managed to help bring about innovative
ideas for the entire company.
We begin by showing you how to perform a PEST analysis (Figure 15.1)—some-
thing completely different from an analysis of issues you may be facing with household
insects and rodents.
15.1a Political Factors
First, political factors are assessed by examining a country’s labor laws, property rights,
and patents. For example, when the Ohio-based welding company Lincoln Electric
started operations in Brazil, they were not able to offer their yearly bonus program based
on performance because any bonuses paid for two consecutive years become a legal
entitlement.3
In many countries, particularly those in Africa, property rights are poorly protected
by governments. Whoever has the political power or authority can seize others’ prop-
erty with few or no repercussions. Civil unrest can also lead to the poor enforcement of
property rights. Companies have less incentive to locate factories or invest in countries
experiencing strife. Another issue relates to intellectual property rights—rights related
to patents, trademarks, and so forth.
15.1b Economic Factors
Economic factors consist of trends around market and trade cycles, specific industry
changes, customer preferences, and country economic growth forecasts. For example,
in 1995, the World Trade Organization
(WTO) was formalized as a coopera-
tive forum for country leaders to come
together and increase free trade across
the world. As of 2017, the WTO mem-
ber countries represent over 164 member
nations and cover 97 percent of all inter-
national trade.4 In addition, countries are
continually negotiating free trade agree-
ments with each other in hopes of increas-
ing their economic activity and power.
Since China joined the WTO in
2001, its economy has grown dramati-
cally, drastically altering its political and
trading relationships with many nations.
In a strange twist of fate, Xi Jinping,
the leader of the communist world and
China’s president, has taken to defend-
ing free trade and globalization, whereas
Donald Trump, leader of the free world
and America’s president, has taken to
attacking them.5
political factors
external factors includ-
ing labor laws, property
rights, and patent
processes.
economic factors
external factors including
the strength or weak-
ness of markets, stability
of trade cycles, specific
industry conditions, cus-
tomer preferences, and
government’s economic
policies.
In 2016 South Africa’s
parliament approved
a bill allowing the gov-
ernment to take land
from individual and
corporate owners if it
is in the public interest.
“South Africa Approves
Land Expropria-
tion Bill,” BBC News,
May 26, 2016.
89624_ch15_hr_515-555.indd 517 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
518 Part 6 Expanding Human Resources Management Horizons
Currency
�uctuations
Economic
forecasts
Trade cycles
National
culture
Human rights
Population
demographics
Political
stability
Country laws
Property
rights
Information
systems
Intellectual
property
Production
technology
Techno-
logical
Organizational
form and HR
system
Political
Economic
Socio-
cultural
PEST AnalysisFigure 15.1
15.1c Sociocultural Factors
Beyond the economic issues just mentioned, a country’s sociocultural factors (com-
munications, religion, values and ideologies, education, and social structure) also have
important implications when it comes to a company’s decision about when and how
to do business there. Because of low labor costs and language similarities, many U.S.
companies have found India an attractive place to locate their facilities, particularly
call centers. Moreover, the U.S. military’s long-term stay in Panama developed a bilin-
gual workforce that already understands the U.S. work culture. Now that the Panama
Canal has been expanded to accommodate new, larger freight ships, the United States
is looking to take advantage of these close ties and cultural similarities in the work-
force there.6
By recognizing and accommodating different ideologies, religious beliefs, commu-
nication styles, education systems, and social structures, managers stand a better chance
of understanding the culture of a host country—a country in which an international
business operates. Even in countries that have close language or cultural links, HR prac-
tices can be dramatically different. For example, night shifts may be taboo. Employers
might be expected to provide employees with meals while at work and transportation
sociocultural factors
external factors includ-
ing method and style
of communications,
religions, values and
ideologies, education
standards, and social
structure
host country
A country in which an
international corporation
operates.
89624_ch15_hr_515-555.indd 518 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
519Chapter 15 International Human Resources Management
between home and work. In most of the Islamic Middle East, it is completely acceptable
to ask coworkers very personal questions about their children, especially their sons, but
never about their wives.7
In another example, Netflix has had challenges in expanding internationally. In
2015, Netflix had about 30 employees who were initially uncomfortable with Netflix’s
culture of bluntness, so at odds with their home culture of communicating in subtler
ways. Netflix is currently working to reconcile company and national culture, both with
different communication preferences.8
15.1d Technological Factors
Related to a country’s sociocultural norms, where it stands technologically also influ-
ences the threats and opportunities that foreign companies face. Technological factors
refer to the maturity of manufacturing equipment, information systems, technology
platforms, research funding, and consumer access to technology. Even in less-developed
countries where manufacturing is typically stronger due to low cost of labor and high
cost of capital-intensive equipment, labor-saving technology is becoming more afford-
able and accessible. Take, for instance, a textile factory in Vietnam. It is more cost effec-
tive for the factory to purchase high-tech threading equipment to spin the cotton into
thread than to hire hundreds of people to thread the cotton by hand, even when the
average wage for such employees is less than $100 a month.
While advances in technology have pushed for more service-based jobs, informa-
tion systems and technology platforms have also increased the rate at which these ser-
vices can be traded across countries. Along with the creation of the WTO, 1995 also
signifies the beginning of the Internet era. America Online (AOL) went public in 1995
to mark the beginning of Integrated technology platforms that could be shared instan-
taneously across the world. Integrated technology platforms represent common operating
technological factors
external factors pertain-
ing to the technological
infrastructure and invest-
ments, information
systems, manufactur-
ing equipment, and
consumer access to
technology
In some countries, like
Malaysia, corporate
leaders fashion “per-
sonnel sharia”, which
represent human
resource rules to
ensure that employees
exhibit ethical and
moral values in their
conduct at work.
(source: Sloane-White,
P. 2011. Working in
the Islamic Economy:
Sharia-ization and the
Malaysian workplace.
Sojourn: Journal of
Social Issues in South-
east Asia,
26(2), 304-334.)
89624_ch15_hr_515-555.indd 519 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
520 Part 6 Expanding Human Resources Management Horizons
systems such as Microsoft Windows 10 that can be used across multiple computers
connected through the Internet. Through these common platforms, work becomes less
specific to particular companies and countries.
In this era, employees become empowered to compete without the need of a large
company. For example, many websites such as guru.com have developed an online
marketplace where individuals can offer various services and compete for business
throughout the world. Imagine you are interested in developing a new website for your
company. By going to the Internet you can select various individuals offering these
specific services. They may be from Manila, Mumbai, Manhattan, or Munich. In sum,
these PEST factors shift the way companies are formed and how they manage their
human resources.
15.1e Analyzing Your International Operations
International business operations can take several different forms. A large percentage
carry on their international business with only limited facilities in foreign countries. Oth-
ers, particularly Fortune 500 corporations, have extensive facilities and personnel in vari-
ous countries of the world. Dell, for example, actually employs more people outside the
United States than within it. Managing these resources effectively and integrating their
activities to achieve global advantage is a challenge to the leadership of these companies.
Figure 15.2 shows four basic types of organizations and how they differ in the
degree to which international activities are separated to respond to the local regions and
integrated to achieve global efficiencies. The international corporation is essentially
a domestic firm that builds on its existing capabilities to penetrate overseas markets.
Companies such as Honda, General Electric, and Procter & Gamble used this approach
to gain access to Europe—they essentially adapted existing products for overseas mar-
kets without changing much else about their normal operations.
international
corporation
A domestic firm that uses
its existing capabilities
to move into overseas
markets.
How might a PEST
analysis decide how
you run your business
in a foreign location?
LO 2
Guru.com helps you
connect to talent from
all over the world.
89624_ch15_hr_515-555.indd 520 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
521Chapter 15 International Human Resources Management
A multidomestic corporation (MDC) is a more complex form that usually has
fully autonomous units operating in multiple countries. Shell, Philips, and ITT are
three typical MDCs. These companies have traditionally given their foreign sub-
sidiaries a great deal of latitude to address local issues such as consumer prefer-
ences, political pressures, and economic trends in different regions of the world.
Frequently these subsidiaries are run as independent companies without much inte-
gration. The global corporation, on the other hand, can be viewed as a multina-
tional firm that maintains control of its operations worldwide from the country in
which it is headquartered. Japanese companies, such as Matsushita and NEC, tend
to treat the world market as a unified whole and try to combine their activities
in each country to maximize their efficiencies on a global scale. These companies
operate much like a domestic firm, except that they view the whole world as their
marketplace.
Finally, a transnational corporation attempts to achieve the local responsive-
ness of an MDC while also achieving the efficiencies of a global firm. To balance
this global/local dilemma, a transnational corporation uses a network structure that
coordinates specialized facilities positioned around the world. By using this flexible
structure, a transnational corporation provides autonomy to its operations in for-
eign countries but brings these separate activities together into an integrated whole.
For most companies, the transnational form represents an ideal rather than a reality.
McDonald’s is an example of a transnational corporation, especially with culture-
specific food items, like India’s vegetarian McAloo Tikki, the McKebab in Israel, or
a Hawaiian Deluxe Breakfast complete with spam, rice, eggs, and hashbrowns. With
31,000 restaurants across 119 countries serving 58 million people each day, it makes
sense that McDonald’s overseas revenue makes up nearly 65 percent of their total
revenue, and that they cater McDonalds’ core burger-fries-and-shakes menu to local
tastes.9
multidomestic corpora-
tion (MDC)
A firm with independent
business units operating
in multiple countries.
global corporation
A firm that has inte-
grated worldwide
operations through a
centralized home office.
transnational
corporation
A firm that attempts to
balance local responsive-
ness and global scale via
a network of specialized
operating units.
L
o
w
H
ig
h
G
L
O
B
A
L
E
F
F
IC
IE
N
C
Y
HighLow
LOCAL RESPONSIVENESS
INTERNATIONAL
Uses existing capabilities to
expand into foreign markets.
MULTINATIONAL
Several subsidiaries
operating as stand-alone
business units in multiple
countries.
GLOBAL
Views the world as a single
market; operations are
controlled centrally from the
corporate office.
TRANSNATIONAL
Specialized facilities permit
local responsiveness;
complex coordination
mechanisms provide global
integration.
Types of OrganizationsFigure 15.2
89624_ch15_hr_515-555.indd 521 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
522 Part 6 Expanding Human Resources Management Horizons
Although various forms of organization exist, in this chapter we will generally refer to
any company that conducts business outside its home country as an international business.
With the global environment being filled by companies originating from different coun-
tries and operating in multiple cultures, increased pressure is being placed on the HRM
function. International HRM is being seen more and more as a key source of competitive
advantage for international businesses. HR units can no longer operate as separate groups
attached only by a common brand and finances. HR managers must more effectively
manage and move people across country borders. In the next section of this chapter we
examine the different HR practices used to manage in these complex circumstances.
15.2 Managing Your International Operations
When a company expands globally, HR managers are generally responsible for ensur-
ing that operations are staffed with the right people. There are three main ways a com-
pany can staff an international operation. First, the company can send people from its
home country. These employees are often referred to as expatriates, or home-country
nationals. Second, it can hire host-country nationals, natives of the host country, to
do the managing. Third, it can hire third-country nationals, natives of a country other
than the home country or the host country. Most corporations use all three for staffing
their multinational operations.10 It is important to note, however, that host countries
sometimes restrict their choices by passing laws and regulations designed to employ
host-country individuals. Tax incentives, tariffs, and quotas are frequently implemented
by the host country to encourage local hiring.
As shown in Figure 15.3, at early stages of international expansion, organizations
often send home-country nationals to establish activities (particularly in less-devel-
oped countries) and to work with local governments. This is generally very costly.
expatriates, or home-
country nationals
Employees from the
home country who
are on international
assignment.
host-country nationals
Employees who are
natives of the host
country.
third-country nationals
Employees who are
natives of a country
other than the home
country or the host
country.
Do you think it would
be difficult to work as
an expatriate?
LO 3
McDonald’s McAloo
Tikki can only be found
in India.
89624_ch15_hr_515-555.indd 522 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
523Chapter 15 International Human Resources Management
Traditionally, expatriates have received generous salaries, automobiles, full relocation
services, private schooling for their children, trips home, and other perks. These services
frequently end up costing more than $300,000 yearly, on average, making the cost of a
typical 3-year expatriate assignment more than $1 million.
In recent years, there has also been a trend to send expatriates on shorter, project-
based assignments (1 to 6 months versus 1 to 3 years) and to shift more quickly toward
hiring host-country nationals. This has three main advantages:
1. Hiring local citizens is generally less costly than relocating expatriates. Local
citizens also know the cultural and political landscape of the country and are
often more likely to be able to gain the support of local staff members.
2. Since local governments usually want good jobs for their citizens, foreign employers
may be required to hire locally.
3. Most customers want to do business with companies (and people) they perceive to
be local versus foreign.
Because U.S. companies want to be viewed as true international citizens, there has
also been a trend away from hiring expatriates to head up operations in foreign coun-
tries, especially European countries. ABB, Eli Lilly, and PepsiCo, which have strong
regional organizations, have tended to replace their U.S. expatriate managers with local
managers as quickly as possible. In addition to hiring local managers to head their
foreign divisions and plants, more companies are using third-country nationals. Third-
country nationals are often multilingual and already acclimated to the host country’s
culture—perhaps because they live in a nearby region. Thus, they are also less costly to
relocate and sometimes better able to cope culturally with foreign environments.
Companies tend to continue to use expatriates only when a specific set of skills is
needed or when individuals in the host country require development. Typically, expatri-
ate assignments fail when the expatriate is selected because of his or her technical skills
TIME
Expatriates
Host-Country
Nationals
E
M
P
H
A
S
IS
I
N
S
T
A
F
F
IN
G
Changes in International Staffing over TimeFigure 15.3
89624_ch15_hr_515-555.indd 523 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
524 Part 6 Expanding Human Resources Management Horizons
alone, rather than the ability to adapt to the host country. For example, U.S. managers
value their time as a commodity, and therefore are more focused on productivity and
efficiency. However, this kind of manager may be frustrated by—and even frustrating
to—host-country nationals in countries like China, where quanxi, or connections, are
more important than money.11 To help their expatriates adapt in Asia and elsewhere,
firms are finding it helpful to pair them with local “buddies,” or host-country mentors,
or even complete cultural training before departing.
15.2a Recruiting Internationally
Improved telecommunications and travel have made it easier to match up employers
and employees of all kinds worldwide. For example, in 2017 we worked with Microsoft
to help them improve the recruiting and connectedness of their employees located all
over the world. The majority of their current and potential employees are located outside
the United States. This is the case for most large corporations.
HR departments must be particularly responsive to the cultural, political, and legal
environments both domestically and abroad when recruiting internationally. Compa-
nies such as Starbucks, Lockheed Martin, and Honeywell have made a special effort
to create codes of conduct for employees throughout the world to ensure that stan-
dards of ethical and legal behavior are known and understood. Lockheed Martin has
a strong international ethics program to ensure all decisions throughout the company
are made with integrity. For example, their vision statement stresses the following fac-
tors: (a) doing what is right, (b) respecting others, and (c) performing with excellence.
All employees are required to undergo business conduct and compliance training. This
training helps employees deal with difficult issues related to export control, insider trad-
ing, international business practices, kickbacks and gratuities, and the Truth in Negotia-
tions Act. The programs are offered in over 21 languages.12
The regulatory environment outside the United States often differs substantially.
The regulations range from those that cover procedures for recruiting and screening to
their working conditions, pay and incentives, and retirement provisions. In Japan, for
example, criminal background checks on candidates are not allowed. In France, employ-
ees can only work 35 hours per week until overtime and rest days start to be required.13
Virtually all countries have work permit or visa restrictions that apply to foreigners.
A work permit or visa is a document issued by a government granting authority to a
foreign individual to seek employment in that government’s country. Since 9/11, getting
skilled foreign workers into the United States has been difficult for companies. However,
since 2017 the U.S. government has made it even more difficult for workers to get a
work permit or H1B Visa. H1B Visas were created to import specialized technological
and scientific talent that we don’t have sufficiently available in the United States. This is
particularly difficult news for companies like Google, Apple, LinkedIn, and SnapChat,
who already have a difficult time finding qualified tech workers. According to one study,
the United States has a shortage of about 110,000 computer science jobs annually.14 Yet,
students who come from foreign countries to attend school in the United States are
finding it more difficult to get jobs with U.S. companies.
As a result, many Indian and Chinese living in the United States are being heavily
recruited by companies and governments to work back in their home countries. For
example, one former Microsoft employee was denied an H1B Visa and went home to
India and started his own company. It’s now valued at over $7 billion. That’s a lot of lost
tax revenue and jobs for the United States. Making matters worse, other countries have
work permit or visa
A government document
granting a foreign indi-
vidual the right to seek
employment.
89624_ch15_hr_515-555.indd 524 11/17/17 3:44 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
525Chapter 15 International Human Resources Management
become less restrictive than the United States in terms of granting foreign residents
citizenship and work permits. The United Kingdom, for example, gives graduates of
the world’s top 50 business schools an automatic right to work in the United Kingdom
for a year. In addition, the European Union is contemplating introducing a “blue card”
system designed to expedite the EU citizenship of talented employees.15 Whatever the
employee’s destination, HR managers need to ensure that work permits and visas are
applied for early in the relocation process.
In terms of recruiting at the executive level, companies use executive recruiting
firms such as Heidrick & Struggles in the United States or Spencer Stuart in the United
Kingdom. At lower levels, as Chapter 7 explained, companies recruiting abroad often
need to advertise their firms and employment “brand” to recruits who are not familiar
with it. In countries such as India and China, an employer’s reputation is extremely
important to candidates’ families—sometimes more important than pay.
Many employers have learned that the best way to find workers in these less well-devel-
oped countries is through referrals and radio announcements because many people lack
sufficient reading or writing skills. Other firms use international recruiting firms to find
skilled labor abroad. As we have explained, some countries, in fact, require the employ-
ment of locals if adequate numbers of skilled people are available. Specific exceptions are
sometimes granted (officially or unofficially) for contrary cases, as for Mexican farm work-
ers in the United States and for Italian, Spanish, Greek, and Turkish workers in Germany
and the Benelux countries (Belgium, the Netherlands, and Luxembourg). Foreign workers
invited to perform needed labor are usually referred to as guest workers. Foreign workers
with H2B Visas can come to the United States for a maximum of 9 months to perform
temporary, nonagricultural seasonal work that is one-time only. These types of visas are
often used in conjunction with recruiting workers for entry-level positions in hotels and
restaurants during peak travel seasons.
guest workers
Foreign workers invited
to perform needed labor.
A visa is issued to for-
eign individuals grant-
ing them the right to
work in that country.
A
le
x
St
oj
an
ov
/A
la
m
y
89624_ch15_hr_515-555.indd 525 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
526 Part 6 Expanding Human Resources Management Horizons
Although hiring nonnationals can result in lower direct labor costs for a company,
the indirect costs—those related to housing, language training, health services, recruit-
ment, transportation, and so on—can be substantial. Some companies competing in
industries with acute talent shortages are nonetheless finding the expenditures worth-
while. Nursing is one such industry. (See the Case Study at the end of the chapter.)16
Apprenticeships
A major source of trained labor in European nations is apprenticeship training pro-
grams (described in Chapter 7.) In Europe, a dual-track system of education directs a
large number of youths into vocational training. The German system of apprenticeship
training, one of the best in Europe, provides training for office and shop jobs under
a three-way responsibility contract between the apprentice, his or her parents, and
the organization. At the conclusion of their training, apprentices can work for any
employer but generally receive seniority credit with the training firm if they remain
in it. France has been able to draw on its “Grandes Écoles” for centuries. Created dur-
ing the Renaissance to fulfill a need that universities were not meeting at the time, the
Grandes Écoles educate prospective engineers up to the equivalent level of master of
engineering.
Staffing Transnational Teams
In addition to focusing on individuals, it is also important to note that companies are
increasingly using transnational teams to conduct international business. Transnational
teams are composed of members of multiple nationalities working virtually on projects
that span multiple countries. Aware that many products developed in developed econo-
mies will have a limited market in developing economies, companies such as P&G, GE,
and Tata Motors have turned to transnational teams to help develop low-cost but high-
quality products for the poor. For example, Tata Motors developed the Tata Nano, a car
for nearly $2,000. As the cheapest car in the world, the Tata Nano was developed by a
large transnational team, with suppliers in different countries designing specific parts
to meet a price-sensitive threshold.17
Teams such as these are especially useful for performing tasks that the firm as a
whole is not yet structured to accomplish. For example, they may be used to transcend
the existing organizational structure to customize a strategy for different geographic
regions, transfer technology from one part of the world to another, and communicate
between headquarters and subsidiaries in different countries. Sometimes companies
send employees on temporary assignments abroad as part of transnational teams last-
ing perhaps a few months. This might be done to break down cultural barriers between
international divisions or disseminate new ideas and technologies to other regions. In
other instances, employees are transferred for extended periods of time. Years ago, Fuji
sent 15 of its most experienced engineers from Tokyo to a Xerox facility in Webster,
New York. Over a 5-year period, the engineers worked with a team of U.S. engineers to
develop the “world” copier. The effort led to a joint venture that has lasted for decades.
Fuji-Xerox now employs approximately 10,000 people globally at 13 companies around
the world.18
The fundamental task in forming a transnational team is assembling the right group
of people who can work together effectively to accomplish the goals of the team. Many
companies try to build variety into their teams in order to maximize responsiveness to
the special needs of different countries. Cross-cultural training can benefit transnational
teams by helping them overcome language and cultural barriers they face.
transnational teams
Teams composed of
members of multiple
nationalities working on
projects that span mul-
tiple countries.
89624_ch15_hr_515-555.indd 526 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
527Chapter 15 International Human Resources Management
15.2b Selecting Employees Internationally
Selecting employees in a foreign country environment can be difficult. When embark-
ing on hiring employees in a new country, a firm’s international HR managers should
get to know the local market and customs in hiring. This will help the firm understand
what to look for in an employee. When GE first entered India, it did not realize that
much of the effective hiring was done through family ties and friendship networks. Not
wanting to appear biased, GE at first did not allow such practices. However, after strug-
gling to select good recruits, GE finally incorporated peer and family referral systems
into their selection practices. This led to selection of employees who stayed within the
organization much longer.
To better understand the local market, there are a few things firms can do. First,
international HR managers should get to know the universities, technical schools, and
primary schools in the area. More than ensuring qualifications, schools provide exten-
sive networks to future employees and provide insight on the type of hires managers
would want to select. This means taking time to understand how the local schools oper-
ate. In many developing countries, higher education systems are underdeveloped and
either do not provide enough future employees or employees with suitable skills. For
example, Rolls-Royce and Intel have both become involved in the development of school
curriculum for both managerial and engineering skill development. By partnering with
local universities, Rolls-Royce and Intel offer funding and curriculum design to better
prepare students for the work environment. At their own expense, these companies see
such costs as investments in future employees as well as a chance to shape the skills they
need to run their companies in those countries.
Second, international HR managers should develop networks in the business and
government communities. Because many companies’ reputations may not precede them,
they must use personal networks to develop trust in the company. An international HR
manager’s job will not be just to select the right people that come to the office but to
go out and select the right people within the community. For instance, when Unilever,
a large British–Dutch consumer products company, opens up operations in a foreign
environment it often becomes heavily involved in the local community by conducting
community feedback meetings, local education programs, and environmental studies.
The company’s heavy involvement in the local environment helps to rapidly build its
local reputation, which increases its knowledge of potential new hires.19
Finally, to effectively select employees in a local environment, international HR
managers must understand the employees of the firm’s competitors. As they map out
and get to know key employees in competing organizations, they develop a better under-
standing of what to look for in other employees while building up a new pool of appli-
cants to recruit in the future. For example, companies such as Exxon and Marriott, as
well as smaller companies, will turn to employees of competing companies because they
already know that these employees have the necessary skills and abilities to survive in
their company. This is especially important to note, as more and more domestic compa-
nies are hiring away foreign international firms’ employees, with the lure of patriotism
and staying power of a local company.
Selecting Global Managers
What if an organization cannot find the appropriate talent in the local country? What
if a firm is opening up operations in a foreign country but needs managers who know
the ins and outs of the company or who have company specific expertise? In this case,
89624_ch15_hr_515-555.indd 527 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
528 Part 6 Expanding Human Resources Management Horizons
organizations need to select managers from one country and move them to another.
Levi Strauss has identified the following six skill categories for the global manager, or
manager equipped to run an international business:
• The ability to seize strategic opportunities
• The ability to manage highly decentralized organizations
• An awareness of global issues
• Sensitivity to diversity issues
• Competence in interpersonal relations
• Community-building skills20
If a candidate for expatriation is willing to live and work in a foreign environment, an
indication of his or her tolerance of cultural differences should be obtained. On the other
hand, if local nationals have the technical competence to carry out the job successfully, they
should be carefully considered for the job before the firm hires a domestic candidate and
sends the person abroad. As we explained, most corporations realize the advantages to be
gained by staffing international operations with host-country nationals wherever possible.
Selecting home-country and third-country nationals requires that more factors be
considered than in selecting host-country nationals. While the latter must of course
possess managerial abilities and the necessary technical skills, they have the advantage
of familiarity with the physical and cultural environment and the language of the host
country. We can break the advantages and disadvantages of hiring global managers from
these three different groups.
Colgate-Palmolive, Whirlpool, and Dow Chemical have further identified a set of
core skills that they view as critical for success abroad and a set of augmented skills that
help facilitate the efforts of expatriate managers. These two types of skills are shown in
Highlights in HRM 1. Many of these skills are not significantly different from the skills
managers need to succeed domestically. Although in years past the average U.S. expatri-
ate manager was an American-born Caucasian, more companies today are seeing the
advantages of assigning expatriates depending on their ethnicity. But such a decision
needs to be considered carefully. For example, an Indian candidate applying for a posi-
tion in India may never have actually visited the country or may not relate well to the
culture. Ultimately, the candidate best qualified for the job should be sent. In the past,
women were overlooked for global managerial positions—perhaps because companies
believed they would fare poorly in foreign, male-dominated societies or because they
believed women have less desire to go abroad. Today women comprise around 25 percent
of expatriates.21 Moreover, multiple studies show that women expatriates perform just
as well as men.22
Several steps are involved in selecting individuals for an international assignment,
and the sequencing of these activities can make a big difference:
Step 1: Begin with self-selection. Employees should begin the process years in advance by
thinking about their career goals and how interested they are in working abroad. Com-
panies such as EDS and Deloitte give their employees self-selection instruments to help
them consider the pros and cons of international assignments. Performance Program
Inc.’s Overseas Assignment Inventory and the International Mobility Assessment test,
developed by Tucker International, are two such tests.
Step 2: Create a candidate pool. After employees have self-selected, organizations can
build a database of candidates for international assignments. Information in the data-
base might include availability, languages, country preferences, and skills.
global manager
A manager equipped
to run an international
business.
cultural environment
The communications,
religion, values and
ideologies, education,
and social structure of a
country.
core skills
Skills considered critical
to an employee’s success
abroad.
augmented skills
Skills helpful in facilitat-
ing the efforts of expatri-
ate managers.
89624_ch15_hr_515-555.indd 528 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Step 3: Assess candidates’ core skills. From the short list of potential candidates, managers
can assess each candidate in terms of their technical and managerial readiness relative
to the needs of the assignment.
Step 4: Assess candidates’ augmented skills and attributes. As Figure 15.4 shows, expatriate
selection decisions are typically made based upon the technical competence of candi-
dates as well as their professional and international experience. In addition, organiza-
tions are beginning to pay more attention to an individual’s ability to adapt to different
environments. How well a person adjusts depends on his or her flexibility, emotional
maturity and stability, empathy for the culture, language and communication skills,
resourcefulness and initiative, prior international experience, exposure to different cul-
tures, and diplomatic skills. If these skills are lacking, no amount of technical compe-
tency is likely to result in a successful assignment.23
Skills of Expatriate Managers
Core Skills
Experience
Decision making
Resourcefulness
Adaptability
Cultural sensitivity
Team building
Maturity
Augmented Skills
Technical skills
Negotiation skills
Strategic thinking
Delegation skills
Change management
Highlights in HRM1
International
experience
Technical
competence
Language
skills
Interpersonal
skills
Country
experience
Professional
experience
Family
flexibility
Expatriate Selection CriteriaFigure 15.4
529
89624_ch15_hr_515-555.indd 529 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
530 Part 6 Expanding Human Resources Management Horizons
Even companies that believe they have selected the best candidates frequently expe-
rience high expatriate failure rates. Figure 15.5 shows the major causes of assignment
failure. Poor cultural fit is a major reason why assignments fail. For example, although
China is among the easiest countries to which to attract Western expatriates, it is also
one of the hardest places for them to succeed because the country’s culture is so different.
A lack of expatriate support from headquarters is another major cause. Expatriates
often describe themselves as “out of sight and out of mind.” This highlights the impor-
tance of headquarters maintaining close contact with them to see how they are faring.
Yet another big factor is a spouse’s inability to adjust to his or her new surroundings.
Today, more companies are preparing families by offering them cultural and language
training. ARAMCO, a Saudi Arabian corporation, has such a program. The program
includes practical information such as how to deal with Saudi Arabia’s transportation
systems, where to shop, day-to-day finances, and an explanation of the differences
between the beliefs and customs of Saudis and people from other cultures.24
There are number of ways to improve the success of expatriate assignments. Ulti-
mately the expatriate must find a way to adjust to the demands of their company, the
country environment, and their family needs. Employees who share a common vision
with the company are willing to undergo difficulties for the organization. Employees
who take time to understand the culture and market in which they are operating will
be better able to cope with unexpected changes and demands. Finally, employees who
have family members that are supportive and interested in an overseas assignment are
much more successful in their international assignments. As a result, expatriates stand
a greater chance of being able to successfully adjust to their international positions.
See Figure 15.6 to examine how these three factors must be aligned to ensure expatri-
ate adjustment. In addition, training and development for both expatriates and their
spouses can have a big impact.
15.2c Training and Development
Although companies try to recruit and select the very best people to send abroad, once
they are selected, it is critical to their success to provide them with training. Not only
is this type of training important for expatriate managers, it is also important for the
foreign employees they will ultimately supervise. For example, to know and understand
how the Japanese or Chinese negotiate contracts or how business people from Latin
America view the enforcement of meeting times can help expatriate managers and their
employees deal with each other more successfully. The biggest mistake managers can
make is to assume that people are the same everywhere.
Apart from developing talent for overseas assignments, most companies have found
that good training programs also help them attract the employees they need from host
countries.
failure rates
The percentage of expa-
triates who do not per-
form satisfactorily.
• Family adjustment
• Lifestyle issues
• Work adjustment
• Bad selection
• Poor performance
• Other opportunities arise
• Business reasons
• Repatriation issues
Causes of Expatriate Assignment FailureFigure 15.5
89624_ch15_hr_515-555.indd 530 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
531Chapter 15 International Human Resources Management
15.2d Content of Training Programs
Lack of training is one of the principal causes of failure among employees working
internationally. Those working internationally need to know as much as possible about
(1) the country where they are going, (2) that country’s culture, and (3) the history,
values, and dynamics of their own organizations. Figure 15.7 gives an overview of what
one needs to study for an international assignment. In many cases, the employee and
his or her family can obtain a great deal of general information about the host country,
including its culture, geography, social and political history, climate, food, and so on,
via the Internet, books, and podcasts.
Family
Alignment
Country
Alignment
Expatriate
Adjustment
Company
Alignment
Expatriate Adjustment FactorsFigure 15.6
To prepare for an international assignment, one should become acquainted with the follow-
ing aspects of the host country:
1. Social and business etiquette
2. History and folklore
3. Current affairs, including relations between the host country and the United States
4. Cultural values and priorities
5. Geography, especially its major cities
6. Sources of pride and great achievements of the culture
7. Religion and the role of religion in daily life
8. Political structure and current players
9. Practical matters such as currency, transportation, time zones, and hours of business
10. The language
Preparing for an International AssignmentFigure 15.7
89624_ch15_hr_515-555.indd 531 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
532 Part 6 Expanding Human Resources Management Horizons
However, at least five essential elements of training and development programs pre-
pare employees for working internationally: (1) language training, (2) cultural training,
(3) assessing and tracking career development, (4) managing personal and family life,
and (5) repatriation—a final, but critical, step.25
Language Training
Communication with individuals who have a different language and a different cul-
tural orientation is extremely difficult. Most executives agree that it is among the
biggest problems for the foreign business traveler. Unfortunately, only a small percent-
age of Americans are skilled in a language other than English. But this is changing.
Students who plan careers in international business should start instruction in one
or more foreign languages as early as possible. Some companies do their own lan-
guage training. When ARCO Products, a U.S. firm, began exploring potential busi-
ness opportunities in China, its HR department set up a language training class (with
the help of Berlitz International) in conversational Mandarin Chinese. Multinational
companies as well as businesses that outsource work abroad stand to benefit from
this type of training.
Fortunately for most Americans, English is almost universally accepted as the pri-
mary language for international business. Particularly when many people from different
countries are working together, English is usually the designated language for meetings
and formal discourse. Many companies provide instruction in English for those who
are required to use English in their jobs. Dow Chemical requires that all employees
across the globe be fluent in English so that they can communicate more easily with
one another. Even with an interpreter, much is missed. The following list illustrates the
complexities of the communication process in international business.
1. In England, to “table” a subject means to put it on the table for present discus-
sion. In the United States, it means to postpone discussion of a subject, perhaps
indefinitely.
2. In the United States, information flows to a manager. In cultures in which author-
ity is centralized (such as Europe and South America), the manager must take the
initiative to seek out the information.
3. Getting straight to the point is uniquely American. Many Europeans, Arabs, Asians,
and others resent the directness of American-style communication.
4. In Japan, there are 16 ways to avoid saying “no.”
5. When something is “inconvenient” to the Chinese, it is most likely downright
impossible.
6. In most foreign countries, expressions of anger are unacceptable; in some places,
public display of anger is taboo.
7. The typical American must learn to treat silences as “communication spaces” and
not interrupt them.
8. In general, Americans must learn to avoid gesturing with the hand. A couple of
cases in point: When former President Richard Nixon traveled to Brazil in the
1950s, he waved and gave the “A-OK” sign to the country’s citizens. But in Brazil,
the gesture is considered obscene and insulting. Nonverbal communication train-
ing can help businesspeople avoid some of these communication pitfalls. High-
lights in HRM 2 illustrates that some of our everyday gestures have very different
meanings in other cultures.26
89624_ch15_hr_515-555.indd 532 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Cultural Training
Cross-cultural differences represent one of the most elusive aspects of international busi-
ness, but successfully done, it tends to improve the satisfaction and success of expatriates
and their employers.27 Brazilians tend to perceive Americans as always in a hurry, serious,
reserved, and methodical, whereas the Japanese view Americans as relaxed, friendly, and
impulsive. Why do these different perceptions exist, and how do they affect the way we do
business across borders? People’s attitudes and behaviors are influenced, in large part, by
the culture and society in which they have been educated and trained. Each culture has its
expectations for the roles of managers and employees. An American manager in Asia once
complained that meetings held in his foreign place of employment accomplished nothing.
He was used to arriving at a final decision during meetings. But to his Asian coworkers,
meetings were solely a place in which to share ideas. Decisions were to be made before
or after the meeting. Being successful abroad depends on a person’s ability to understand
the way things are normally done and to recognize that changes cannot be made abruptly
without considerable resistance, and possibly antagonism, on the part of local nationals.
Nonverbal Communications in Different Cultures
Calling a Waiter
In the United States, a common way to call a waiter is to
point upward with the forefinger. In Asia, a raised forefinger
is used to call a dog or other animal. To get the attention of
a Japanese waiter, extend the arm upward, palm down, and
flutter the fingers. In Africa, knock on the table. In the Middle
East, clap your hands.
Insults
In Arab countries, showing the soles of your shoes is an
insult. Also, an Arab may insult a person by holding a hand
in front of the person’s face.
A-Okay Gesture
In the United States, using the index finger and the thumb to
form an “o” while extending the rest of the fingers is a gesture
meaning okay or fine. In Japan, however, the same gesture
means money. Nodding your head in agreement if a Japanese
uses this sign during your discussion could mean you are
expected to give him some cash. In Brazil the same gesture is
considered a seductive sign to a woman and an insult to a man.
Eye Contact
In Western and Arab cultures, prolonged eye contact with a
person is acceptable. In Japan, on the other hand, holding
the gaze of another is considered rude. The Japanese gener-
ally focus on a person’s neck or tie knot.
Handshake and Touching
In most countries, the handshake is an acceptable form of
greeting. In the Middle East and other Islamic countries, how-
ever, the left hand is considered the toilet hand and is thought
to be unclean. Only the right hand should be used for touching.
Scratching the Head
In most Western countries, scratching the head is interpreted
as lack of understanding or confusion. To the Japanese, it
indicates anger.
Indicating “No”
In most parts of the world, shaking the head left and right
is the most common way to say no. But among the Arabs,
in parts of Greece, Yugoslavia, Bulgaria, and Turkey, a per-
son says no by tossing the head up, sometimes clicking the
tongue at the same time. In Japan, no can also be said by
moving the right hand back and forth.
Agreement
In addition to saying yes, Africans will hold an open palm
perpendicular to the ground and pound it with the other fist
to emphasize “agreed.” Arabs will clasp their hands together,
forefingers pointed outward, to indicate agreement.
Source: S. Hawkins, International Management 38, no. 9 (September
1983): 49. Copyright 1983 by Reed Business Information Ltd. Reprinted
with permission.
Highlights in HRM2
533
89624_ch15_hr_515-555.indd 533 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
534 Part 6 Expanding Human Resources Management Horizons
A wealth of data from cross-cultural studies reveals that nations tend to cluster
along certain cultural dimensions such as their work goals, values, needs, and attitudes
toward work. Using data from eight comprehensive studies of cultural differences,
Simcha Ronen and Oded Shenkar have grouped countries into the clusters shown
in Figure 15.8. Ronen and Shenkar point out that while evidence for the grouping of
countries into Anglo, Germanic, Nordic, Latin European, and Latin American clusters
appears to be quite strong, clusters encompassing the Far Eastern and Arab countries
are ill-defined and require further research, as do clusters of countries classified as inde-
pendent. Many areas, such as Africa, have not been studied much at all. It should also
ANGLO
• United States
• Australia
• New Zealand
• United Kingdom
• Ireland
• South Africa
• Canada
GERMANIC
• Germany
• Austria
• Switzerland
NORDIC
• Finland
• Norway
• Denmark
• Sweden
LATIN EUROPEAN
• France
• Belgium
• Italy
• Spain
• Portugal
LATIN AMERICAN
• Argentina
• Venezuela
• Mexico
• Chile
• Colombia
• Peru
FAR EASTERN
• Singapore
• Malaysia
• Hong Kong
• South Vietnam
• Philippines
• Indonesia
• Taiwan
• Thailand
NEAR EASTERN
• Turkey
• Iran
• Greece
INDEPENDENT
• Brazil
• India
• Japan
• Israel
ARAB
• Abu Dhabi
• Bahrain
• United Arab Emirates
• Kuwait
• Oman
• Saudi Arabia
A Synthesis of Country ClustersFigure 15.8
89624_ch15_hr_515-555.indd 534 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
535Chapter 15 International Human Resources Management
be noted that the clusters presented in Figure 15.8 do not include Russia and the former
satellites of the Soviet Union. Those countries, if added to the figure, would likely fall
between the Near Eastern and Nordic categories.
Studying cultural differences can help managers identify and understand work atti-
tudes and motivation in other cultures. When compared with the Japanese, for example,
Americans may feel little loyalty to their organizations. In Japan, employees are more
likely to feel a strong loyalty to their company, although this has been changing. Japanese
companies no longer universally guarantee an employee a job for life, and layoff deci-
sions are increasingly being made based on merit, not seniority—a practice unthinkable
in the country in the past. Latin Americans tend to view themselves as working not only
for a particular company, but also for an individual manager. Thus managers in Latin
American countries can encourage performance only by using personal influence and
working through individual members of a group. In the United States, competition has
been the name of the game; in Japan, Taiwan, and other Asian countries, cooperation is
more the underlying philosophy.28
One of the important dimensions of leadership, whether in international or domes-
tic situations, is the degree to which managers invite employee participation in decision
making. While it is difficult to find hard data on employee participation across different
countries, careful observers report that American managers are about in the middle
on a continuum of autocratic to democratic decision-making styles. Scandinavian and
Australian managers also appear to be in the middle. South American and European
managers, especially those from France, Germany, and Italy, are toward the autocratic
end of the continuum. Japanese managers are at the most participatory end. Because
Far Eastern cultures and religions tend to emphasize harmony, group decision-making
predominates there.29
Assessing and Tracking Career Development
International assignments provide some definite developmental and career advantages.
For example, working abroad tends to increase a person’s responsibilities and influence
within the corporation. In addition, it provides a person with a set of experiences that
are uniquely beneficial to both the individual and the firm. In this way, international
assignments enhance a person’s understanding of the global marketplace and offer the
opportunity to work on a project important to the organization.30 Furthermore, research
shows that international assignments increase a person’s creative problem-solving skills
and receptivity to new ideas.31
In recent years, U.S. companies have become a melting pot of CEOs. Increas-
ingly, foreign-born CEOs are making up the Fortune 500 top slots. Executive
recruiters say corporate boards are asking for leaders with experience outside of
the United States. Foreign-born expatriates tend to be greater risk takers and harder
workers. They are people who have left their home countries and communities to
set off on their own.32
To maximize the career benefits of a managerial assignment, a candidate should ask
two key questions before accepting a foreign post.
1. Do the organization’s senior executives view the firm’s international business as
a critical part of their operation?
2. Within top management, how many executives have a foreign-service assign-
ment in their background, and do they feel it important for one to have overseas
experience?
89624_ch15_hr_515-555.indd 535 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
536 Part 6 Expanding Human Resources Management Horizons
Managing Personal and Family Life
As noted previously, one of the most frequent causes of an employee’s failure to complete
an international assignment is personal and family stress. Culture shock—a disorien-
tation that causes perpetual stress—is experienced by people who settle overseas for
extended periods. The stress is caused by hundreds of jarring and disorienting incidents
such as being unable to communicate, having trouble getting the telephone to work,
being unable to read the street signs, and a myriad of other everyday matters that are
no problem at home. Soon minor frustrations become catastrophic events, and one feels
helpless and drained, emotionally and physically.
In Chapter 5, we explained that more and more employers are assisting two-career
couples in terms of finding suitable employment in the same location. To accommodate
dual-career partnerships, some employers offer spouses career and life planning coun-
seling, continuing education, intercompany networks to identify job openings in other
companies, job-hunting or fact-finding trips, and help securing work permits abroad.
Repatriation
An increasing number of companies such as Monsanto, 3M, EDS, and Verizon are
developing programs specifically designed to facilitate repatriation—that is, helping
employees make the transition back home. Repatriation programs are designed to pre-
pare employees for adjusting to life at home (which at times can be more difficult than
adjusting to a foreign assignment).
Unfortunately, not all companies have career development programs designed for
repatriating employees or do not do an effective job of it. Employees often lament that
their organizations are vague about repatriation, their new roles within the company,
and their career progression. In many cases, employees abroad have learned how to run
an entire international operation—or at least significant parts of it. When they return
home however, their responsibilities are often significantly diminished. Some surveys
have found that up to 60 percent of expatriates believed their careers had not advanced
culture shock
Perpetual stress expe-
rienced by people who
settle overseas.
repatriation
The process of transition
for an employee home
from an international
assignment.
A foreign assignment
can be an excellent
step in a person’s
career. But to be suc-
cessful, expatriates
often need extensive
training on their host
countries’ languages,
cultural differences,
business practices, and
other related issues.
Vi
ew
S
to
ck
/A
la
m
y
89624_ch15_hr_515-555.indd 536 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Repatriation Checklist
Before they go:
�� Make sure there is a clear need for the international
assignment. Develop a clear set of objectives and
expectations and time frames in which they should be
met.
�� Make sure that your selection procedures are valid.
Select the employee and also look at and involve the
employee’s family.
�� Provide (or fund) language and cultural training for
the employee and the employee’s family.
�� Offer counseling and career assistance for the
spouse.
�� Establish career planning systems that reward interna-
tional assignments and lead to promotion and knowl-
edge sharing.
�� Jointly establish a developmental plan that focuses on
the goal to be achieved.
�� Tie performance objectives to the achievement of the
goal.
�� Identify mentors who can be a liaison and support
person from home.
�� Keep communications open so that the expatriate is
aware of job openings and opportunities.
�� Arrange for frequent visits back home (for the
employee and the family). Make certain they do not
lose touch with friends and relatives.
When they come back home:
�� Throw a “welcome home” party and arrange for a
meeting with other former expatriates.
�� Offer counseling to ease the transition.
�� Arrange conferences and presentations to make cer-
tain that knowledge and skills acquired away from
home are identified and disseminated.
�� Set up an expatriate database to help other employ-
ees who go abroad later.
�� Get feedback from the employee and the family about
how well the organization handled the repatriation
process.
Sources: Adapted from Bennet & Associates, Price Waterhouse, and
Charlene Marmer Solomon, “Repatriation Planning Checklist,” Personnel
Journal 14, no. 1 (January 1995): 32; Yamasaki, Yukiko. “Why Do Some
Employees Readjust to Their Home Organizations Better Than Others?
Job Demands-Resources Model of Repatriation Adjustment” (2016);
Charlene Marmer Solomon, “Global HR: Repatriation Planning,” Workforce
(2001), special supplement: 22–23.
Highlights in HRM3
after returning home.33 It is also not at all uncommon for employees to return home
after a few years to find that there is no position for them in the firm and that they no
longer know anyone who can help them—their longtime colleagues have moved to
different departments or even different companies. This frequently leaves the repatri-
ated employee feeling alienated. Wondering about their future also creates stress for
them and their families while they are abroad.
Even when employees are successfully repatriated, their companies often do not
fully utilize the knowledge, understanding, and skills developed on their assignments.
This hurts the employee, of course, but it also hurts the firm’s chances of utilizing the
employee’s expertise to gain a competitive advantage. Not surprisingly, expatriates fre-
quently leave their companies within a year or two of coming home. Monsanto’s repa-
triation program is designed not only to smooth the employee’s return to the home
organization but to ensure that the expatriate’s knowledge and experience are fully used.
To do so, returning expatriates get the chance to showcase their new knowledge in
debriefing sessions. Some companies also create databases of expatriates to help other
employees who go abroad later.34 Of course, if a firm is able to retain its current repatri-
ates, it will have better success recruiting future expatriates. A repatriation checklist is
shown in Highlights in HRM 3.
537
89624_ch15_hr_515-555.indd 537 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
538 Part 6 Expanding Human Resources Management Horizons
15.3 Compensation
One of the most complex areas of international HRM is compensation. Different coun-
tries have different norms for employee compensation. For Americans, while nonfi-
nancial incentives such as prestige, independence, and influence may be motivators,
money is likely to be the driving force. Other cultures are more likely to emphasize
respect, family, job security, a satisfying personal life, social acceptance, advancement,
or power. Since there are many alternatives to money, the rule is to match the reward
with the values of the culture. In individualistic cultures, such as the United States, pay
plans often focus on individual performance and achievement. However, in collectively
oriented cultures such as Japan and Taiwan, pay plans focus more on internal equity
and personal needs.35
In general, a guiding philosophy for designing pay systems might be “think glob-
ally and act locally.” That is, executives should normally try to create a pay plan that
supports the overall strategic intent of the organization but provides enough flex-
ibility to customize particular policies and programs to meet the needs of employees
in specific locations. After a brief discussion of compensation practices for host-
country employees and managers, we will focus on the problems of compensating
expatriates.
15.3a Compensation of Host-Country Employees
As shown in Figure 15.9, minimum wages vary dramatically from country to country.
Minimum wage workers in manufacturing positions in Luxembourg make over $22,000
per year. By contrast, in Mexico, minimum wage workers earn less than $2,000 per year,
on average. Host-country employees are generally paid on the basis of productivity, time
spent on the job, or a combination of these factors. In industrialized countries, pay is
generally by the hour; in developing countries, pay is generally by the day. The piece-rate
method is quite common. In some countries, including Japan, seniority is an important
element in determining employees’ pay rates. In Italy, Japan, and some other countries,
it is customary to add semiannual or annual lump sum payments equal to 1 or 2 months’
pay. These payments are not considered profit sharing but an integral part of the basic
pay package. Profit sharing is legally required for certain industry categories in Mexico,
Peru, Pakistan, India, and Egypt among the developing countries and in France among
the industrialized countries.
Employee benefits can range dramatically from country to country as well. In
France, for example, benefits comprise a much higher proportion of people’s pay than
they do in the United States. In contrast to 10 vacation days in the United States, work-
ers in the United Kingdom, France, and the Netherlands receive about 25 days of paid
vacation. Workers in Sweden and Austria receive 30 days. Whereas in the United States
most benefits are awarded to employees by employers, in other industrialized countries
most of them are legislated or ordered by governments.36
Because the largest cost for most companies is labor, it plays a prime role in interna-
tional HR decision making. However, some people believe that companies are overcapi-
talizing on worldwide compensation differences. Many firms have generated bad press
for charging hundreds of dollars for their individual products while the people who
make them earned only a few cents on the dollar. This has led to international political
protests, as was mentioned in Chapter 1, and pressure on firms to exercise greater global
social responsibility.
89624_ch15_hr_515-555.indd 538 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
539Chapter 15 International Human Resources Management
Dataset: Real minimum wages
Pay period Annual
Unit Dollar
Time 2016
Country
Luxembourg 22,836.1
Netherlands 22,209.8
Australia 21,967.2
Belgium 21,170.2
Germany 20,847.4
France 20,413.6
New Zealand 19,346.4
Ireland 18,942.8
United Kingdom 17,568.3
Canada 16,792.4
Japan 15,292.1
United States 14,892.1
Slovenia 14,520.8
Korea 14,440.9
Israel 13,059.7
Spain 12,317.4
Turkey 12,074.8
Poland 11,977.5
Greece 11,492.1
Portugal 10,941.1
Costa Rica 10,859.7
Hungary 9,155.1
Slovak Republic 8,980.0
Estonia 8,595.0
Czech Republic 8,399.1
Lithuania 8,319.6
Latvia 7,829.6
Chile 6,998.3
Colombia 6,950.2
Brazil 4,753.6
Russian Federation 3,199.2
Mexico 1,895.7
Data extracted on 03 May 2017 00:00 UTC (GMT)
Source: OECD.stat (Data are calculated in terms of purchasing power parity [PPP].)
Hourly Wages in Different CountriesFigure 15.9
89624_ch15_hr_515-555.indd 539 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
540 Part 6 Expanding Human Resources Management Horizons
Nike is just one example of a company that has experienced the pressure from
protesting groups first hand. They soon realized they couldn’t afford to ignore the
problem any longer. The bad press finally took a toll on Nike’s bottom line. As a
result, Nike now monitors all its partner factories to ensure that workers are not
underage, that pay is competitive, and that working conditions are compliant with
international standards. Over 100 full-time staff are dedicated to monitoring these
partner factories. While this costs Nike around $11 million per year, they have unex-
pectedly realized additional cost savings as their monitoring staff are also able to help
the factories with streamlining the work processes, training managers, and decreas-
ing corrupt practices by the factories.37
15.3b Compensation of Host-Country Managers
In the past, the compensation of host-country managers has been based on local salary
levels. Today, however, more companies are offering their host-country employees a full
range of training programs, benefits, and pay comparable with their domestic employ-
ees back in the country of origin but adjusted for local differences. These programs are
known as global compensation system.
According to a survey by the HR consulting firm Watson Wyatt, companies are split
evenly as to whether they have central (global) compensation systems or decentralized
(local) systems. Companies with centralized systems report having higher effectiveness
and satisfaction levels with their compensation systems, and more companies are say-
ing they are moving toward centralized systems. Unilever, for example, used to leave
the compensation arrangements largely to the boss of a region or a big country. Now
brand managers in different countries increasingly compare notes so they see potential
discrepancies based on market differences and expatriate assignments. So, the company
moved from a narrow grading structure to five global work levels.38
global compensation
system
A centralized pay system
whereby host-country
employees are offered
a full range of training
programs, benefits, and
pay comparable with a
firm’s domestic employ-
ees but adjusted for local
differences.
Student protesters
put pressure on Uni-
versity of Southern
California to stop using
sweatshop labor in the
manufacturing of USC
school apparel.
A
P
Im
ag
es
/L
ee
J
in
-m
an
89624_ch15_hr_515-555.indd 540 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
541Chapter 15 International Human Resources Management
15.3c Compensation of Expatriate Managers
If the assignment is going to be successful, the expatriate’s compensation plan must be
competitive, cost-effective, motivating, fair, easy to understand, consistent with interna-
tional financial management, relatively easy to administer, and simple to communicate.
To be effective, an international compensation program must:
1. Provide an incentive to leave the United States
2. Allow for maintaining an American standard of living
3. Provide for security in countries that are politically unstable or present personal
dangers
4. Include provisions for good health care
5. Reimburse the foreign taxes the employee is likely to have to pay (in addition to
having to pay domestic taxes) and help him or her with tax forms and filing
6. Provide for the education of the employee’s children abroad, if necessary
7. Allow for maintaining relationships with family, friends, and business associates via
trips home and other communication technologies
8. Facilitate the expatriate’s reentry back home when the assignment is finished.
9. Be in writing39
For short-term assignments, usually those that are project based, expatriates are
frequently given per diem (per day) compensation. These managers might reside in
hotels and service apartments instead of leasing houses. They are also less likely to bring
their family members with them. The assignment becomes more like a commuting
assignment in which the expatriate spends the week in the host country and returns
home on the weekend.
For longer-term assignments, there are two basic types of compensation systems.
The first is home-based pay, based on the balance sheet approach, a system designed
to equalize the purchasing power of employees at comparable positions living over-
seas and in the home country and to provide incentives to offset qualitative differences
between assignment locations.40 The balance sheet approach generally comprises the
following steps:
Step 1: Calculate base pay. Begin with the home-based gross income, including bonuses.
Deduct taxes, Social Security, and pension contributions.
Step 2: Figure cost-of-living adjustment (COLA). Add a cost-of-living adjustment to the
base pay. Typically, companies do not subtract when the international assignment has a
lower cost of living. Instead, they allow the expatriate to benefit from the negative dif-
ferential. Often a housing allowance is added in here as well.
Step 3: Add incentive premiums. General mobility premiums and hardship premiums
compensate expatriates for separation from family, friends, and domestic support
systems; usually 15 percent of base salary, although in recent years, some companies
have reduced this amount. Oftentimes incentive premiums are paid for hazardous
duty or harsh conditions the expatriate might experience while abroad. Expatriates
who locate to war zones, for example, can sometimes earn three times their base
salary.
Step 4: Add assistance programs. These additions are often used to cover added costs
such as moving and storage, automobile, and education expenses.
home-based pay
Pay based on an expatri-
ate’s home country’s
compensation practices.
balance sheet approach
A compensation system
designed to match the
purchasing power in a
person’s home country.
89624_ch15_hr_515-555.indd 541 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
542 Part 6 Expanding Human Resources Management Horizons
The differentials element is intended to correct for the higher costs of overseas
goods and services so that in relation to their domestic peers expatriates neither gain
purchasing power nor lose it. It involves a myriad of calculations to arrive at a total dif-
ferential figure, but in general, as we have said, the cost typically runs between three and
five times the home-country salary. Fortunately, employers do not have to do extensive
research to find comparative data. They typically rely on data published quarterly by
the U.S. State Department for use in establishing allowances to compensate U.S. civilian
employees for costs and hardships related to assignments abroad.
Recently, split pay plans have become popular among companies. Under a split pay
system, expatriates are given a portion of their pay in the local currency to cover their
day-to-day expenses. The rest of their pay is distributed in their home currency to safeguard
their earnings should changes in foreign exchange rates or inflation adversely affect their pay.
Another type of compensation system is host-based pay. Companies are under
pressure to move expatriates to host-based pay because it is generally less costly. Host-
based pay is compensation that is equivalent to that earned by employees in the country
where the expatriate is assigned. This process is called localization. When an employee is
localized, his or her compensation is set on par with local standards and practices. Incen-
tive premiums are generally phased out, and the employee pays only local taxes and falls
under the social benefit programs established by the government of the host country.
Usually the decision to localize an employee depends on whether he or she will
ultimately remain abroad or return home. In many companies, the decision depends
on whether the employee or the employer is the driving force behind the localization.
An expatriate employee with a strong desire to remain in the host country beyond the
planned length of assignment (perhaps because he or she married a local or has simply
fallen in love with the country) is likely to be more amenable to localization.
15.3d Performance Appraisal
As we noted earlier, individuals frequently accept international assignments because
they know that they can acquire skills and experiences that will make them more valu-
able to their companies. Frequently, however, it can be difficult for the home office to
evaluate the performance of employees working abroad. Even the notion of performance
evaluation is indicative of a U.S. management style that focuses on the individual, which
can cause problems in Asian countries such as China, Japan, and Korea and Eastern
European countries such as Hungary and the Czech Republic. Performance appraisal
problems can contribute to failure rates among expatriates and actually derail an indi-
vidual’s career rather than enhance it.41
Who Should Appraise Performance?
In many cases, an individual working internationally has at least two allegiances: one to
his or her home country (the office that made the assignment) and the other to the host
country in which the employee is currently working. Superiors in each location frequently
have different information about the employee’s performance and may also have very
different expectations about what constitutes good performance. For these reasons, the
multirater (360-degree) appraisal discussed in Chapter 8 is popular among global firms.
There are exceptions, however. For example, Thai workers do not see it as their business
to evaluate their bosses, and Thai managers do not think subordinates are in any way
qualified to assess them. Before implementing a different appraisal process, HR managers
need to understand how the process is likely to be received in the host country.42
split pay
A system whereby
expatriates are given a
portion of their pay in
the local currency to
cover their day-to-day
expenses and a portion
of their pay in their home
currency to safeguard
their earnings from
changes in inflation or
foreign exchange rates.
host-based pay
Expatriate pay compa-
rable to that earned by
employees in a host
country.
localization
Adapting pay and other
compensation benefits
to match that of a par-
ticular country.
89624_ch15_hr_515-555.indd 542 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
543Chapter 15 International Human Resources Management
The notion of indi-
vidual performance
evaluation reflects
a U.S. management
style divergent from
the norms of Eastern
European and Asian
countries.
©
Ro
b
M
ar
m
io
n/
Sh
ut
te
rs
to
ck
.c
om
Home versus Host-Country Evaluations
Domestic managers who have not worked abroad are frequently unable to understand
an expatriate’s or host-country manager’s experiences, value these employees, or accu-
rately measure their contribution to the organization. Geographical distances create
communication problems for expatriates and home-country managers, although e-mail,
instant messaging, and other HR information systems technologies have begun to close
the gap.43 Still, local managers with daily contact with the person are more likely to have
an accurate picture of his or her performance. Host-country evaluations can sometimes
be problematic.
Even if the formal appraisal is conducted in the home office and promotion, and
pay and other administrative decisions are made there, most HR experts agree that per-
formance evaluations should try to balance the two sources of appraisal information. If
there is much concern about cultural bias, it may be possible to have people of the same
nationality as the expatriate conduct the appraisal.
Performance Criteria
Because expatriate assignments are so costly, many HR managers are increasingly
under pressure to calculate the return on investment of these assignments. What
did the firm get for the million dollars it spent to send an expatriate abroad? Has
the expatriate achieved the goals set forth in the assignment in the appropriate time
frame? Obviously, the goals and responsibilities inherent in the job assignment are
among the most important criteria used to evaluate an individual’s performance,
and different goals necessitate measuring different criteria. The criteria are tied to
89624_ch15_hr_515-555.indd 543 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
544 Part 6 Expanding Human Resources Management Horizons
the various reasons employees were sent abroad in the first place—whether it was
part of a goal to transfer technical skills or best practices, as a result of a merger or
new division, to improve a division’s financial performance, or to develop manage-
rial talent.
There are five steps related to calculating the ROI of an assignment:
1. Defining the assignment’s objectives
2. Agreeing on the quantifiable measurements for the assignment
3. Developing an equation that converts qualitative behavior into quantifiable
measurements
4. Evaluating the expatriate’s performance against these measurements
5. Calculating the ROI (This can be a complex cost accounting or a simple calculation
to see if the expatriate covered the cost of keeping them on assignment.)
Companies also look at how well the total cost of the assignment was managed,
taking into account any tax efficiencies and whether the right mix of expatriates, third-
country nationals, and locals were used to minimize the assignment’s costs.44 The danger
with ROI calculations, however, is that there is a temptation to resort to using “easy”
criteria such as productivity, profits, and market share to measure an expatriate’s per-
formance. These criteria may be valid, but they are still deficient if they do not capture
the full range of an expatriate’s responsibility. Other, more subtle factors should be con-
sidered as well. Leadership development, for example, involves a much longer-term
value proposition. In many cases, an expatriate is an ambassador for the company, and
a significant part of the job is cultivating relationships with citizens of the host country.
Providing Feedback
Performance feedback in an international setting is clearly a two-way street. Although
the home-country and host-country superiors may tell an expatriate how well he or
she is doing, it is also important for expatriates to provide feedback regarding the sup-
port they are receiving, the obstacles they face, and the suggestions they have about the
assignment. More than in almost any other job situation, expatriates are in the very best
position to evaluate their own performance.
In addition to ongoing feedback, an expatriate should have a debriefing interview
immediately on returning home from an international assignment. These repatriation
interviews serve several purposes.
1. They help expatriates reestablish old ties with the home organization and may
prove to be important for setting new career paths.
2. The interview can address technical issues related to the job assignment itself.
3. The interview can address general issues regarding the company’s overseas com-
mitments, such as how relationships between the home and host countries should
be handled.
4. The interview can be very useful for documenting insights an individual has about
the region. These insights can then be incorporated into training programs for
future expatriates. However, if the learning is not shared, then each new expatriate
to a region may have to go through the same cycle of adjustment.45
See Figure 15.10 to understand the pros and cons of using expatriates, host-county
nationals, or third-country nationals to manage your overseas operations.
89624_ch15_hr_515-555.indd 544 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
545Chapter 15 International Human Resources Management
Do you think there
should be some inter-
national standard for
labor rights? If so, what
should that standard
be and how should it
be enforced?
LO 4
HOST-COUNTRY NATIONALS
• Less costly
• Preferred by host-country
governments
• Intimate knowledge of
environment and culture
• Language facility
HOME-COUNTRY NATIONALS
(EXPATRIATES)
• Talent available within company
• Greater control
• Company experience
• Mobility
• Experience provided to corporate
THIRD-COUNTRY NATIONALS
• Broad experience
• International outlook
• Multilingualism
Comparison of Advantages in Sources of Overseas ManagersFigure 15.10
15.4 Analyzing the International Labor
Environment
A country’s labor environment plays a large role in international business and HR deci-
sions. As we have said, wages and benefits vary dramatically across the world as do
safety, child, and other legal regulations. In many countries, the regulation of labor
contracts is profound and extensive. Labor unions around the world differ significantly
as well. Differences exist not only in the collective bargaining process, but also in the
political-legal conditions.
For example, the EU prohibits discrimination against workers in unions, but in
many other countries, including countries in Central America and Asia, labor unions are
illegal. China has only one union, the All-China Federation of Trade Unions (ACFTU),
a Communist Party institution that for decades has aligned itself more closely with
89624_ch15_hr_515-555.indd 545 11/17/17 3:45 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
546 Part 6 Expanding Human Resources Management Horizons
management than workers. As Walmart discovered, Western firms that want to do busi-
ness in China have to reach collective bargaining agreements with the ACFTU. In some
countries, only workers at larger firms are allowed to organize.46
Union strength depends on many factors, such as the level of employee participa-
tion, per capita labor income, mobility between management and labor, homogeneity
of labor (racial, religious, social class), and unemployment levels. Nearly all of Sweden’s
workers are organized, giving the unions in this country considerable strength and
autonomy. By contrast, in countries with relatively high unemployment, low pay levels,
and no union funds with which to support social welfare systems, unions are driven
into alliance with other organizations: political parties, churches, or governments. This
is in marked contrast to the United States, where the union selected by the majority of
employees bargains only with the employer, not with other institutions. By contrast,
the unions in many European countries (such as Sweden) have a great deal of political
power and are often allied with a particular political party. When employers in these
countries deal with unions, they are, in effect, dealing indirectly with governments.
In a number of countries, however, including Japan, Germany, New Zealand, and
the United Kingdom, unions have been losing some of their power. Ironically, the power
of the unions to gain high wages and enforce rigid labor rules has been blamed for hurt-
ing competitiveness, particularly in European countries. Laws make it difficult to fire
European employees, so workers are hired only sparingly. Unemployment benefits are
very generous, so people tend to remain unemployed for longer rather than seek work.
15.4a Collective Bargaining in Other Countries
We saw in Chapter 14 how the collective bargaining process is typically carried out in
companies operating in the United States. When we look at other countries, we find
that the process can vary widely, especially with regard to the role of government.
While employees at
Walmart and Sam’s
Club in China have
little bargaining
power, being part of
the ACFTU gives them
a collective sense of
identity.
89624_ch15_hr_515-555.indd 546 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
547Chapter 15 International Human Resources Management
Collective bargaining can take place at the firm, local, or national levels. In Australia and
New Zealand for most of the twentieth century, labor courts had the authority to impose
wages and other employment conditions on a broad range of firms (many of which
were not even privy to the suits brought before the courts). In the United Kingdom and
France, the government intervenes in all aspects of collective bargaining. Government
involvement is only natural where parts of industry are nationalized.
In developing countries, the governments commonly have representatives present
during bargaining sessions to ensure that unions with relatively uneducated leaders are
not disadvantaged in bargaining with skilled management representatives. Still, in these
countries a union may do little more than attempt to increase wages and leave the rest
of the employment contract unchanged. In more-developed countries, goals related to
other aspects of the employment relationship, such as workweek lengths, safety require-
ments, and grievance procedures, are more likely to be pursued.
15.4b International Labor Organizations
The most active of the international union organizations has been the International
Trade Union Confederation (ITUC), which has its headquarters in Brussels. The ITUC
is a confederation of 311 national trade union centers, representing 176 million trade
union members in 162 countries and territories. The ITUC’s mission is to promote
worker rights and interests through international cooperation between trade unions,
campaigning, and advocacy with governments and global institutions.47
Another active and influential organization is the International Labour Organiza-
tion (ILO), a specialized agency of the United Nations created in 1919. The ILO perhaps
has had the greatest impact on the rights of workers throughout the world. It promotes
the rights of workers to organize, the eradication of forced and child labor, and the
elimination of discrimination. The organization has been effective because it involves
nation-states as well as workers and their employers. Agenda 2030 for Sustainable Devel-
opment places decent work for all at the heart of the ILO’s current initiative.48
Around the world,
collective bargaining
processes vary widely.
The ILO and other
international labor
organizations promote
the rights of workers to
organize.AP
Im
ag
es
/L
ee
J
in
-m
an
89624_ch15_hr_515-555.indd 547 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
548 Part 6 Expanding Human Resources Management Horizons
15.4c Labor Participation in Management
In many European countries, provisions for employee representation are established
by law. An employer may be legally required to provide for employee representation
on safety and hygiene committees, worker councils, or even boards of directors. While
their responsibilities vary from country to country, worker councils basically provide a
communication channel between employers and workers. The legal codes that set forth
the functions of worker councils in France are very detailed. Councils are generally
concerned with grievances, problems of individual employees, internal regulations, and
matters affecting employee welfare.
A higher form of worker participation in management is found in Germany, where
representation of labor on the board of directors of a company is required by law. This
arrangement is known as codetermination and often referred to by its German word,
Mitbestimmung. While sometimes puzzling to outsiders, the system is fairly simple.
Company shareholders and employees are required to be represented in equal num-
bers on the supervisory boards of large corporations. Power is generally left with the
shareholders, and shareholders are generally assured the chairmanship. Other European
countries and Japan either have or are considering minority board participation.49
Each of these differences makes managing human resources in an international con-
text more challenging. But the crux of the issue in designing HR systems is not choosing
one approach that will meet all the demands of international business. Instead, organiza-
tions facing global competition must balance multiple approaches and make their poli-
cies flexible enough to accommodate differences across national borders. Throughout
this book we have noted that different situations call for different approaches to manag-
ing people, and nowhere is this point more clearly evident than in international HRM.
codetermination
Representation of labor
on the board of directors
of a company.
Analyzing the political, economic, socio-
cultural, and technological factors affecting your
company can help to (1) spot business or personnel
opportunities, (2) spot trends in the business envi-
ronment (3) avoid inappropriate HR practices, and
(4) break free of old habits.
There are four basic ways to organize for global
competition: (1) the international corporation is essen-
tially a domestic firm that has leveraged its existing
capabilities to penetrate overseas markets; (2) the mul-
tidomestic corporation has fully autonomous units
operating in multiple countries in order to address
local issues; (3) the global corporation has a worldview
but controls all international operations from its home
office; and (4) the transnational corporation uses a net-
work structure to balance global and local concerns.
International HRM consists of managing three
different types of employees—home-country nationals
LO 1
LO 2
LO 3
Summary
(expatriates), host-country nationals, and third-coun-
try nationals. Managing each set of employees requires
different approaches to recruitment, selection, train-
ing, and compensation.
In many European countries—Germany, for
one—employee representation is established by law.
Organizations typically negotiate the agreement with
the union at a national level, frequently with govern-
ment intervention. In other countries, union activ-
ity is prohibited or limited to only large companies.
European unions have much more political power
than many other unions around the world, although
their power has declined somewhat due to globaliza-
tion forces. The International Confederation of Free
Trade Unions (ICFTU) and International Labour
Organization (ILO) are among the major worldwide
organizations endeavoring to improve the conditions
of workers.
LO 4
89624_ch15_hr_515-555.indd 548 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
549Chapter 15 International Human Resources Management
augmented skills
balance sheet approach
codetermination
core skills
cultural environment
culture shock
economic factors
expatriates, or home-country
nationals
failure rates
global compensation system
global corporation
global manager
guest workers
home-based pay
host country
host-based pay
host-country nationals
international corporation
localization
multidomestic corporation (MDC)
political factors
repatriation
sociocultural factors
split pay
technological factors
third-country nationals
transnational corporation
transnational teams
work permit or visa
Key Terms
In recent years, we have observed an increase
in foreign production throughout the world.
What PEST factors would you consider to be
most relevant to H&M’s HR managers when
trying to figure out if they should open up a
plant in Vietnam to make clothes?
What major HR issues must be addressed as
an organization moves from an international
form to a multinational, global, and transna-
tional form?
a. Starbucks is opening new stores abroad
every day, it seems. If you were in charge,
would you use expatriate managers or
host-country nationals to staff the new
facilities? Explain your thinking.
b. This chapter places considerable empha-
sis on the role spouses play in terms of the
success of an overseas manager. What other
steps should companies take to increase the
likelihood of a successful experience for all
parties involved?
LO 1
LO 2
LO 3
c. Talk with a foreign student on your cam-
pus; ask about his or her experience with
culture shock on first arriving in the United
States. What did you learn from your dis-
cussion? If the cost of living is lower in a
foreign country than in the United States,
should expatriates be paid less than they
would be at home? Explain your position.
Who should ultimately decide whether
an employee should be localized or not?
If grooming a talented individual for a
leadership role is an important outcome
of a foreign assignment, how can this be
worked into a performance appraisal sys-
tem? How would a manager assess leader-
ship accomplishments?
a. What are the major differences between
labor–management relations in Europe and
those in the United States?
b. Do you believe that codetermination will
ever become popular in the United States?
Explain your position.
LO 4
Discussion Questions
89624_ch15_hr_515-555.indd 549 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
An American (Expatriate) in Paris
while still maintaining his present lifestyle (his current annual
salary is $160,000 plus incentives). Address at least the fol-
lowing issues:
1. Visas and permits
2. Relocation allowance and housing
3. Language and culture training
4. Spousal employment concerns
5. Health/medical/insurance issues
6. Compensation and incentives
7. Education for the children
The following websites may be helpful to you, but other
resources may prove valuable as well:
�� U.S. embassy in Paris (https://fr.usembassy.gov/)
�� French consulates in the United States (https://france
.visahq.com/)
�� Expatica.com (http://www.expatica.com/fr/main.html)
�� Americans in Paris (http://www.americansinfrance.net)
�� Easy Expat (http://www.easyexpat.com/paris_en.htm)
�� Centers for Disease Control and Prevention (http://
wwwn.cdc.gov/travel/default.aspx)
�� American School in Paris (http://www.asparis.org
/about)
�� Medibroker (insurance) (http://www.medibroker.com)
�� Travlang (currency calculator) (http://www.travlang
.com/money/)
There is often a great deal of work involved in setting up
expatriate assignments. The administrative requirements
can be far ranging and extend beyond the employee to also
include family issues. Suppose you were faced with the fol-
lowing scenario. What would be the most pressing consid-
erations that you would need to address?
The Scenario
You are the head of HR for Sarip International, a consulting
firm specializing in hotel and restaurant management. Your
firm is opening an office in Paris, France, and Jim Verioti,
director of sales and marketing, has been asked to assume
responsibilities for the expansion. Jim understands that the
expatriate assignment will last 2 to 3 years, and although he
has traveled to Europe for work on several occasions, this is his
first long-term assignment overseas. He has a lot of questions
about what he can expect and also some personal constraints.
Jim and his wife Betty have just moved into their new
home (their mortgage is around $1,750 per month). In addi-
tion, Betty is an elementary school teacher and doesn’t really
know how the move will affect her job security. Their three
children, Veronica (14), Reggie (12), and Archie (10), are of
an age at which school considerations are very important. A
friend told them about the American School in Paris, and this
is a consideration. None of the Veriotis speak French.
Assignment
Working in teams of four to six individuals, put together the
package that would allow Jim to move his family to Paris
CASE STUDY How about a 900 Percent Raise?1
Registered nurse Carmen Lopez wants a raise—so
she’s leaving Mexico and moving to California to take
a job at Desert Valley Medical, a hospital near Los
Angeles, where her income will increase tenfold. “I
was making US$500 a month in Mexico, and in the
U.S. I will be making between $25 and $28 an hour,”
Lopez says. Lopez, upon finishing her U.S. nursing
exam, will be joining nine other Mexican nurses at
Desert Valley Medical.
As U.S. baby boomers age, the number of regis-
tered nurses in the United States is not keeping up.
The U.S. government forecasts that 1.2 million nurs-
ing vacancies will emerge by 2022. Lopez and her
colleagues were recruited by MDS Global Medical
Staffing in Los Angeles. Roger Viera, cofounder of
MDS Global Staffing, says he and his business partner
have invested $1 million, and the Mexican government
added another $1 million, to open a nurse residency
550
89624_ch15_hr_515-555.indd 550 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
551Chapter 15 International Human Resources Management
program in Mexico that trains and certifies nurses to
work in the United States. “We only recruit qualified
nurses. They must have a four-year bachelor of sci-
ence degree and four years of work experience,” Viera
says. MDS expects to recruit from Mexico’s 12 nursing
schools and from Costa Rica in the near future.
MDS has also recruited Maria de la Cruz
Gonzalez, who says she’s excited about this opportu-
nity to emigrate with her husband and work as a nurse
in the United States. “The hospitals offer us a two-year
contract where our nuclear family can come along to
live with us in the U.S.,” she says. MDS gives the nurses
3 months of paid rent and transportation, provides
placement with client hospitals, and provides training
in technology and language. They will be able to work
in U.S. hospitals for 2 years under a North American
Free Trade Agreement visa.
Donna Smith, chief nursing officer at Desert Val-
ley Medical, says she is happy to have the Mexican
nurses join her staff and believes that they are as quali-
fied as U.S. nurses. But, she says, they will need more
technical experience before they can go to work, since
technology is different in the hospitals of Mexico. “We
will provide them with extra training once they get
here,” she says.
Questions
1. Is recruiting nurses abroad a good idea for U.S.
hospitals facing worker shortages?
2. Can you think of any cultural problems U.S. hos-
pitals might encounter as a result?
3. What long-term recruiting measures should U.S.
hospitals strive for?
Sources: Condensed from Aisha Belone, “How About a 900 Percent
Raise? Mexican Nurses Head North to Cure the Ballooning U.S. Health
Care Labor Shortage,” Latin Trade 12 no. 7 (July 2004): 30; Rebecca Grant,
“The U.S. Is Running Out of Nurses,” The Atlantic (February 3, 2016).
CASE STUDY A “Turnaround” Repatriate Plan: U.S. Company Moves Indian
Workers Back Home
2
In an unusual move, a seriously ailing Dallas software
company, i2 Technologies, resettled 209 Indian engi-
neers, programmers, and managers in their South Asian
homeland on a voluntary basis to help stem losses as it
laid off thousands of other employees. A series of cor-
porate crises led to the mass repatriation back to India.
Many returnees had worked in Texas, Massachusetts,
and California for 5 to 7 years on H1B Visas designed
for temporary, highly skilled workers, although about 10
percent had acquired permanent residency green cards
or U.S. citizenship. They found the company’s Move to
India Program too good to turn down—even if it meant
a pay cut of 50 percent or more. None was pressured by
management to return, said Gunaranjan “Guna” Pem-
maraju, a 30-year-old engineer, who returned home.
The returnees, many graduates of India’s top technical
universities, were confident of finding other U.S. jobs if
i2 laid them off and were prepared to “change industries
if need be,” he asserted.
“When I left America, I actually kissed the ground,”
Pemmaraju said. “It helped me grow as an individual,
and it enriched my thought process.” Significantly,
though, Pemmaraju says the quality of life in his
middle-class Bangalore neighborhood is comparable—
with a few minor downsides that he and his wife are
willing to accept. Although their pay shrank in dollar
terms, the repatriates are relatively better off in India.
“If we were in the top 25 percent in the United
States, we’re in the top 5 percent here,” said one
repatriate.
“We may not have 54-inch TV sets, but we have
more of a sense of community and belonging here,”
another added.
Pemmaraju relies on DSL Internet access, fields
morning calls from Dallas colleagues on a cell phone,
and watches satellite TV while pedaling his new exer-
cise bike. Instead of a Honda Accord, he drives a much
smaller Suzuki Zen sedan.
For i2, the wage and benefit savings are helping it
edge toward profitability. The company says the sav-
ings have been substantial. At its peak, i2 employed
6,349 people, with about 800 in India. It has since
scaled down to 2,500 workers, 1,100 of whom are
based in Bangalore.
Pemmaraju’s family expresses no regrets about
returning, yet they retain fond memories of the United
89624_ch15_hr_515-555.indd 551 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
552 Part 6 Expanding Human Resources Management Horizons
States, a country of “milk and honey”—not to men-
tion seven-layer Taco Bell burritos and Krispy Kreme
doughnuts. Pemmaraju was tickled by a recent call to
a fast-food restaurant in Bangalore. “A guy answered
the phone saying, ‘Thank you for calling Pizza Hut.
Would that be for delivery or carry out?’ he said. It’s
just what they said in Arlington [Texas]!”
Questions
1. Does repatriation represent a good financial strat-
egy for firms with international employees?
2. Besides cost savings, does i2 have anything to gain
by repatriating its Indian employees?
3. What type of repatriation preparation training
do you think i2’s repatriates should receive before
going home?
Source: Condensed from Barry Shlachter, “Software Firm Resettles
Indian Workers in Turnaround Plan,” Fort Worth (Texas) Star-Telegram
(via Knight-Ridder/Tribune Business News), June 24, 2004.
Notes and References
1. Shad S. Morris, Daniel Chng, Jian Han, Bi-Juan Zhong, and
Oded Shenkar, “Leveraging Local Talent for Global Learning
in Multinational Enterprises’ Foreign Subsidiaries,” Working
Paper (2017).
2. PESTLE analysis factsheet, Chartered Institute of Personnel
and Development (CIPD) (October 15, 2015), https://www.
cipd.co.uk/knowledge/strategy/organisational-development
/pestle-analysis-factsheet.
3. Jordan Siegel and Barbara Zepp Larson, “Labor Market
Institutions and Global Strategic Adaptation: Evidence from
Lincoln Electric,” Management Science 55, no. 9 (2009):
1527–1546.
4. See www.wto.org for more information on the World Trade
Organization.
5. Larry Elliott and Graeme Wearden, “Xi Jinping Signals China
Will Champion Free Trade if Trump Builds Barriers,” Guard-
ian (January 17, 2017).
6. “The Panama Canal Expansion: Changes Beyond the
Waterway,” Knowledge@Wharton (June 3, 2016), http://
knowledge.whar ton.upenn.edu/ar ticle/panama-canal
-expansion-changes-beyond-waterway/; Steven Mufson, “An
Expanded Panama Canal Opens for Giant Ships,” Washington
Post (June 26, 2016).
7. S. Vollmer, “How to Mind Your Manners in the Middle East:
CPAs Who Do Business in the Region Need to Know the
Cultural Rules,” Journal of Accountancy 219, no. 1 (2015):
42; Ruchika Tulshyan, “Quirkiest Cultural Practices from
Around the World,” Forbes (March 18, 2010).
8. Caroline Fairchild, “Netflix Redefined American Company
Culture. Will It Do the Same Abroad?” CNBC (June 20, 2016),
www.cnbc.com/2016/06/20/netflix-redefined-american
-company-culture-will-it-do-the-same-abroad.html.
9. Robert Johnson, “17 Awesome McDonald’s Dishes You Can’t
Buy in America,” Business Insider (June 16, 2011), http://www.
businessinsider.com/mcdonalds-meals-around-the-world
-2011-6?op51/#donalds-hawaiian-deluxe-breakfast-12.
10. Carla Joinson, “No Returns,” HRMagazine 47, no. 11
(November 2002): 70–77; Frank Jossi, “Successful Handoff,”
HRMagazine 47, no. 10 (October 2002): 48–52; Steve Bates,
“Study Discovers Patterns in Global Executive Mobility,”
HRMagazine 47, no 10 (October 2002): 14; Morgan McCall
and George Hollenbeck, “Global Fatalities: When Inter-
national Executives Derail,” Ivey Business Journal 66, no. 5
(May/June 2002): 74–78; Leslie Gross Klass, “Fed Up with
High Costs, Companies Thin the Ranks of Career Expats,”
Workforce Management 83, no. 10 (October 1, 2004): 84.
11. Valerie Berset-Price, “Training: The Solution to the
Expat Challenge,” Training Magazine (May 4, 2012), https://
trainingmag.com/content/training-solution-expat-challenge.
12. Readers interested in codes of conduct and other ethical issues
pertaining to international business might read Nadar Asgary
and Mark Mitschow, “Toward a Model for International Busi-
ness Ethics,” Journal of Business Ethics 36, no. 3 (March 2002):
238–246; Diana Winstanley and Jean Woodall, “The Adoles-
cence of Ethics in Human Resource Management,” Human
Resource Management Journal 10, no. 4 (2000): 45; J. Brooke
Hamilton and Stephen Knouse, “Multinational Enterprise
Decision Principles for Dealing with Cross-Cultural Ethi-
cal Conflicts,” Journal of Business Ethics 31, no.1 (May 2001):
77–94; Michael Maynard, “Policing Transnational Com-
merce: Global Awareness in the Margins of Morality,” Journal
of Business Ethics 30, no. 1 (March 2001): 17–27.
13. Adam Chandler, “Au Revoir to France’s 35-Hour Workweek?”
The Atlantic (March 10, 2016).
14. Michael Solomon, “H1B Visas: Why They’re Broken and
What We Can Do,” Huffington Post (March 20, 2017).
15. Ben Wildavsky, “Reverse Brain Drain: How Much Should the
U.S. Worry?” The Chronicle of Higher Education (March 28,
2011); “Keeping Out the Wrong People: Tightened Visa Rules
Are Slowing the Vital Flow of Professionals into the U.S.,”
Business Week no. 3902 (October 4, 2004): 90; “Security
Delays Hurt U.S. Business,” Legal Times (August 23, 2004);
89624_ch15_hr_515-555.indd 552 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
553Chapter 15 International Human Resources Management
“Skilled Workers Leave in Reverse Brain Drain,” Fort Worth
Star Telegram (August 25, 2007): 9A.
16. “Society: Affirmative Action? Oui! At Long Last, France Takes
a Page from America in Order to Manage Diversity—and
Bring Minorities into Elite Schools,” Newsweek International
(April 12, 2004): 30; Leo D’Angelo Fisher, “The Hunt for a
New Work Order,” BRW 30, no. 9 (May 15, 2008): 46–52.
17. Martin Aschmoneit and Dijana Janevska, “Closing the Gap
between Frugal and Reverse Innovation: Lessons Learned
from the Case of the Tata Nano,” Linköping University
Department of Management and Engineering (2013).
18. https://www.linkedin.com/company-beta/163911/ (May 2,
2017); see Fuji Xerox website for detailed information about
the company, http://www.fujixerox.com/eng/; Andrea Poe,
“Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83;
“Exploiting Opportunity: Executives Trade Stories on Chal-
lenges of Doing Business in Global Economy,” Business Mex-
ico 15, no. 2 (February 2005): 54–58.
19. https://www.unilever.com/careers/ (May 2, 2017).
20. Sheree R. Curry, “Offshoring Swells Ranks of ‘Returnees’
Working Back in Their Native Countries,” Workforce Manage-
ment 84, no. 2 (February 1, 2005): 59; Yochanan Altman and
Susan Shortland, “Women and International Assignments:
Taking Stock—a 25-Year Review,” Human Resource Man-
agement 47, no. 2 (Summer 2008): 199–216; Handan Kepir
Sinangil and Deniz S. Ones, “Gender Differences in Expatri-
ate Job Performance,” Applied Psychology: An International
Review 52, no. 3 (July 2003): 461–475; “More Women Sent
on International Assignment,” Compensation & Benefits 39,
no. 2 (March–April 2007): 14–15.
21. BGRS Global Mobility Trends Report (2016), http://global-
mobilitytrends.bgrs.com/#/data-highlights.
22. Nina Cole and Yvonne McNulty, “Why Do Female Expa-
triates ‘Fit-in’ Better Than Males?” Cross Cultural Manage-
ment, 18, no. 2 (2011); Robert O’Connor, “Plug the Expat
Knowledge Drain,” HRMagazine 47, no. 10 (October 2002):
101–107; Andrea Graf and Lynn K. Harland, “Expatriate
Selection: Evaluating the Discriminant, Convergent, and Pre-
dictive Validity of Five Measures of Interpersonal and Inter-
cultural Competence,” Journal of Leadership & Organizational
Studies 11, no. 2 (Winter 2005): 46–63.
23. Paula Caligiuri, Cultural Agility: Building a Pipeline of Success-
ful Global Professionals (New York: John Wiley & Sons, 2013);
Paula Caligiuri, Ibraiz Tarique, and Rick Jacobs, “Selection
for International Assignments,” Human Resource Manage-
ment Review 19, no. 3 (2009): 251–262; Riki Takeuchi, “A
Critical Review of Expatriate Adjustment Research through
a Multiple Stakeholder View: Progress, Emerging Trends,
and Prospects,” Journal of Management 36, no. 4 (2010):
1040–1064; Riki Takeuchi, Seokhwa Yun, and Paul Tesluk,
“An Examination of Crossover and Spillover Effects of Spou-
sal and Expatriate Cross-Cultural Adjustment on Expatriate
Outcomes,” Journal of Applied Psychology 87, no. 4 (August
2002): 655–666; Andrea Poe, Iris I. Varner, and Teresa M.
Palmer, “Role of Cultural Self-Knowledge in Successful Expa-
triation,” Singapore Management Review 27, no. 1 (January–
June 2005): 1–25; Semere Haile, Marcus D. Jones, and Tsegai
Emmanuel, “Challenges Facing Expatriate Performance
Abroad,” International Journal of Business Research 7, no. 5
(2007): 100–105; Margery Weinsten, “China a Double-Edged
Sword for Ex-Pats,” Training 43, no. 11 (November 2006): 12.
24. “Motorola to Increase Operations in China,” The New York
Times (November 8, 2001), C4; Peter J. Buckley, Jeremy Clegg,
and Hui Tan, “Knowledge Transfer to China: Policy Lessons
from Foreign Affiliates,” Transnational Corporations 13, no. 1
(April 2004): 31–73; Neeraj Kataria and Shweta Sethi, “Mak-
ing Successful Expatriates in Multinational Corporations,”
Asian Journal of Business and Economics 3, no. 3.4 (2013):
1–12.
25. Managers who are interested in setting up a language train-
ing program or who wish to evaluate commercially available
language training programs should consult the “Standard
Guide for Use-Oriented Foreign Language Instruction.” The
seven-page guide is put out by the American Society for
Testing and Materials (ASTM), (610) 832-9585, http://www
.astm.org. See also “Why Top Executives Are Participating
in CEIBS and IESE’s Joint Global Management Programme,”
PR Newswire (July 19, 2004); John Okpara and Jean Kabongo,
“Cross-Cultural Training and Expatriate Adjustment: A Study
of Western Expatriates in Nigeria,” Journal of World Business
46, no. 1 (2011): 22–30.
26. Jared Wade, “The Pitfalls of Cross-Cultural Business,” Risk
Management 51, no. 3 (March 2004): 38–43; Semere Haile,
Marcus D. Jones, and Tsegai Emmanuel, “Challenges Facing
Expatriate Performance Abroad,” International Journal of
Business Research 7, no. 5 (2007): 100–105.
27. Vipin Gupta, Paul Hanges, and Peter Dorman, “Cultural Clus-
ters: Methodology and Findings,” Journal of World Business
37, no. 1 (Spring 2002): 11–15; Jane Terpstra-Yong and David
Ralston, “Moving Toward a Global Understanding of Upward
Influence Strategies: An Asian Perspective with Directions for
Cross-Cultural Research,” Asia Pacific Journal of Management
19, no. 2 (August 2002): 373–404; Hsiu-Ching Ko and Mu-Li
Yang, “The Effects of Cross-Cultural Training on Expatriate
Assignments,” Intercultural Communication Studies 1 (2011):
158–174.
28. David C. Thomas and Mark F. Peterson, Cross-Cultural
Management: Essential Concepts (Thousand Oaks, CA:
Sage Publications, 2014); Ping Ping Fu et al., “The Impact
of Societal Cultural Values and Individual Social Beliefs on
the Perceived Effectiveness of Managerial Influence Strate-
gies: A Meso Approach,” Journal of International Business
Studies 35, no. 4 (July 2004): 33; Geert Hofstede, Culture’s
Consequences: Comparing Values, Behaviors, Institutions,
and Organizations across Nations (Thousand Oaks, CA:
Sage, 2001).
89624_ch15_hr_515-555.indd 553 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
554 Part 6 Expanding Human Resources Management Horizons
29. Justin Martin, “The Global CEO: Overseas Experience Is
Becoming a Must on Top Executives’ Resumes, Accord-
ing to This Year’s Route to the Top,” Chief Executive 195
(January–February 2004): 24–31; Alizee B. Avril and Vincent
P. Magnini, “A Holistic Approach to Expatriate Success,” Inter-
national Journal of Contemporary Hospitality Management 19,
no. 1 (2007): 53–64; David C. Thomas and Mark F. Peterson,
“The Manager as Decision Maker: Cross-Cultural Dimen-
sions of Decision-Making,” in Cross-Cultural Management:
Essential Concepts (Thousand Oaks, CA: Sage Publications,
2014).
30. David Lipschultz, “Bosses from Abroad,” Chief Executive 174
(January 2002): 18–21; Denis Lyons and Spencer Stuart, “Inter-
national CEOs on the Rise,” Chief Executive 152 (February
2000): 51–53; “U.S. Companies with Foreign-Born Executives,”
Workforce Management 83, no. 7 (July 1, 2004): 23;
31. Leung and C. Chiu, “Multicultural Experience, Idea Recep-
tiveness, and Creativity,” Journal of Cross-Cultural Psychology
41, no. 5–6 (2010): 723–741; W. Maddux and A. Galinsky,
“Cultural Borders and Mental Barriers: The Relationship
Between Living Abroad and Creativity,” Journal of Personal-
ity and Social Psychology 96, no. 5 (2009): 1047–1061
32. Sharon Gillenwater, “Immigrant CEOs: What Global Citizens
Bring to American Business,” Boardroom Insiders (March 23,
2016).
33. Charles M. Vance, Yvonne McNulty, Yongsun Paik, and Jason
D’Mello, “The Expat-preneur: Conceptualizing a Grow-
ing International Career Phenomenon,” Journal of Global
Mobility 4, no. 2 (2016): 202–224; Daomi Lin, Jiangyong
Lu, Xiaohui Liu, and Xiru Zhang, “International Knowledge
Brokerage and Returnees’ Entrepreneurial Decisions,” Journal
of International Business Studies 47, no. 3 (2016): 295–318;
Phyllis Tharenou and Natasha Caulfield, “Will I Stay or Will
I Go? Explaining Repatriation by Self-Initiated Expatriates,”
Academy of Management Journal 53, no. 5 (2010): 1009–1028.
Mark C. Bolino, “Expatriate Assignments and Intra-Organi-
zational Career Success: Implications for Individuals and
Organizations,” Journal of International Business Studies 38,
no. 5 (September 2007): 819–835.
34. M. Kraimer, M. Bolino, and B. Mead, Themes in Expatriate and
Repatriate Research over Four Decades: What Do We Know
and What Do We Still Need to Learn? Annual Review of Orga-
nizational Psychology and Organizational Behavior 3 (2016);
83–109; Lynette Clemetson, “Special Report on Globaliza-
tion: The Globe Trotters,” Workforce Management (December
2010); Calvin Reynolds, Guide to Global Compensation and
Benefits (New York: Harcourt, 2001); Gary Parker, “Establish-
ing Remuneration Practices across Culturally Diverse Envi-
ronments,” Compensation & Benefits Management 17, no. 2
(Spring 2001): 23–27; Timothy Dwyer, “Localization’s Hidden
Costs,” HRMagazine 49, no. 6 (June 2004): 135–141.
35. Caroline Fisher, “Reward Strategy Linked to Financial Suc-
cess: Europe,” Benefits & Compensation International 32, no. 2
(September 2002): 34–35; “Comparative Analysis of Remu-
neration: Europe,” Benefits & Compensation International 31,
no. 10 (June 2002): 27–28; Fay Hansen, “Currents in Compen-
sation and Benefits: International Trends,” Compensation and
Benefits Review 34, no. 2 (March–April 2002): 20–21.
36. Donald C. Dowling Jr., “Avoid These Global Compensa-
tion and Global Benefits Plan Obstacles,” Society for Human
Resource Management (April 22, 2014), https://www.shrm.
org/resourcesandtools/hr-topics/global-hr/pages/global-
compensation-benefits-plans.aspx; Chao Chen, Jaepil Choi,
and Shu-Cheng Chi, “Making Justice Sense of Local-Expa-
triate Compensation Disparity: Mitigation by Local Refer-
ents, Ideological Explanations, and Interpersonal Sensitivity
in China-Foreign Joint Ventures,” Academy of Management
Journal 45, no. 4 (August 2002): 807–817.
37. Richard Locke, “Does Monitoring Improve Labor Standards?
Lessons from Nike,” Industrial and Labor Relations Review
61, no. 1 (2007): 3–31; Greg Distelhorst, Jens Hainmueller,
and Richard M. Locke, “Does Lean Improve Labor Standards?
Management and Social Performance in the Nike Supply
Chain,” Management Science (2016); Ashley Lutz, “How Nike
Shed Its Sweatshop Image to Dominate the Shoe Industry,”
Business Insider (June 6, 2015), http://www.businessinsider
.com/how-nike-fixed-its-sweatshop-image-2015-6.
38. Patricia Zingheim and Jay Schuster, “How You Pay Is What
You Get,” Across the Board 38, no. 5 (September–October
2001): 41–44; “Benefits for Expatriate Employees: Interna-
tional,” Benefits & Compensation International 31, no. 10
(June 2002): 26–27; Steven P. Nurney, “The Long and Short
of It: When Transitioning from a Short-Term to a Long-Term
Expatriate Assignment, Consider the Financial Implications,”
HRMagazine 50, no. 3 (March 2005): 91–95.
39. “Designing Global Compensation Systems,” Society for
Human Resource Management (April 3, 2017), https://www.
shrm.org/resourcesandtools/tools-and-samples/toolkits
/pages/designingglobalcompensation.aspx; Stephan Kolbe,
“Putting Together an Expat Package: As More and More
Companies Adopt an International Outlook, They Are
Increasingly Sending Staff on Overseas Assignments—Usu-
ally Involving a Complex Relocation Package,” International
Money Marketing (September 2004): 33.
40. Nick Royle, “Three Expatriate Compensation Approaches,”
The Global Talent Mobility Company (May 5, 2011),
http://msigbs.com/blog/global-compensation-payroll-
administration/three-expatriate-compensation-approaches/;
the U.S. State Department Index of Living Costs Abroad can
be found on the Web at http://www.state.gov/travel.
41. “International Assignment: Performance Management:
How Can a Company Manage an Expatriate Employee’s
Performance?” Society for Human Resource Management
(November 30, 2012), https://www.shrm.org/resource-
sandtools/tools-and-samples/hr-qa/pages/expatriateper-
formance.aspx.
89624_ch15_hr_515-555.indd 554 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
555Chapter 15 International Human Resources Management
42. Paula Caligiuri, “The Big Five Personality Characteristics as
Predictors of Expatriate’s Desire to Terminate the Assignment
and Supervisor-Rated Performance,” Personnel Psychology 53,
no. 1 (Spring 2000): 67–88; Calvin Reynolds, “Global Com-
pensation and Benefits in Transition,” Compensation and
Benefits Review 32, no. 1 (January–February 2000): 28–38;
Charlene Marmer Solomon, “The World Stops Shrink-
ing,” Workforce 79, no. 1 (January 2000): 48–51; Stephenie
Overman, “Mentors without Borders: Global Mentors Can
Give Employees a Different Perspective on Business Matters,”
HRMagazine 49, no. 3 (March 2004): 83–87; Agneš Slavic,
Nemanja Berber, and Bojan Lekovic, “Performance Manage-
ment in International Human Resource Management: Evi-
dence from the Cee Region,” Serbian Journal of Management
9, no. 1 (2014): 45–58.
43. Frank Jossi, “Successful Handoff,” HRMagazine 47, no. 10
(October 2002): 48–52; Paula Caligiuri, David Day, and Shirley
Puccino, “Worldwide Practices and Trends in Expatriate Com-
pensation and Benefits,” Benefits & Compensation Digest 44,
no. 1 (January 2007): 34–38; Eric Krell, “Evaluating Returns
on Expatriates,” HRMagazine 50, no. 3 (March 2005): 60–65.
44. B. Sebastian Reiche, Günter K. Stahl, Mark E. Mendenhall,
and Gary R. Oddou, Reading and Cases in International
Human Resources Management, 6th ed. (New York: Rout-
ledge, 2016).
45. Bernhard Ebbinghaus and Jelle Visser, The Societies of
Europe: Trade Unions in Western Europe since 1945 (London,
England: Palgrave Macmillan, 2000); John Pencavel, “Union-
ism Viewed Internationally,” Journal of Labor Research
26, no. 1 (Winter 2005): 65–98; “Membership Required,”
Economist 87, no. 8591 (August 2, 2008): 66; Jeremy Smerd,
“Unions Reverse Decline,” Workforce Management 87, no. 2
(February 4, 2008): 1–3.
46. Randall S. Schuler, Susan E. Jackson, and Ibraiz Tarique,
“Global Talent Management and Global Talent Chal-
lenges: Strategic Opportunities for IHRM,” Journal of
World Business 46 (2011): 506–516; Christopher Rhoads,
“Germany Faces Storm over Tech Staffing—Labor Groups
Are Enraged by Proposal to Import Badly Needed Work-
ers,” The Wall Street Journal (March 7, 2000): A23; “Euro-
pean Workplaces Tighten Policies as Countries Struggle
to Compete Worldwide,” Pittsburgh (Pennsylvania) Post-
Gazette (via Knight-Ridder/Tribune Business News)
(November 28, 2004).
47. http://www.ituc-csi.org/ (May 2, 2017).
48. http://www.ilo.org/wcmsp5/groups/public/—dgreports/—
dcomm/documents/publication/wcms_374809 (May 2,
2017).
49. Herbert Spiro, “Co-Determination in Germany,” The American
Political Science Review 48, no. 4 (December 1954): 1114–1127;
Yuko Nishimura, “Reconstructing Minority Identities in 21st
Century Japan,” Global Ethnographic Journal for Ethnographic
Research (January 23, 2012), http://oicd.net/ge/index.php/
reconstructing-minority-identities_yukonishimura/.
89624_ch15_hr_515-555.indd 555 11/17/17 3:46 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
556
CHAPTER 16
Implementing HR Strategy:
High-Performance Work Systems
Learning Outcomes
After studying this chapter, you should be able to
Discuss how a firm’s strategy can be achieved with a
high-performance work system and what its funda-
mental principles are.
Describe how a high-performance work system is
designed, and explain how its components must
align horizontally and vertically to support one
another and a firm’s strategy.
LO 1
LO 2
Recommend processes for implementing and evalu-
ating a high-performance work system.
Discuss a high-performance work system’s potential
outcomes for both employees and the organization.
LO 3
LO 4
so
nd
em
/S
hu
tt
er
st
oc
k
89624_ch16_hr_556-584.indd 556 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
557Chapter 16 Implementing HR Strategy: High-Performance Work Systems
S
o you have finished reading 15 chapters on HRM. Congratulations—textbooks do
not always make for the most gripping reading. But before you close this book,
think about the following question: What is more difficult—designing effective
HR practices or implementing them as one system?
Most HR textbooks simply end after each individual aspect of HRM is introduced and
explained. But in today’s competitive environment, many organizations are discovering
that it is how the pieces are combined together and put into practice that makes all
the difference. After all, managers typically do not focus on staffing, training, and com-
pensation practices in isolation from one another. These HR practices are implemented
into an overall system to enhance employee involvement and performance. So now
that we have talked about the individual pieces, let’s talk about how they fit together
into a high-performance work system. Understand that this is not a piece of software.
Rather, a high-performance work system (HPWS) is the combination of HR practices,
work structures, and processes specific to a firm that maximizes the knowledge, skills,
commitment, flexibility, and resilience of employees, which in turn enhances a firm’s
competitiveness.
An HPWS can take an organization from being good to great. Consider the Dallas
Cowboys. The Cowboys have recruited top talent and paid them top dollar. The owner
of the Cowboys, Jerry Jones, has also replaced the Cowboys’ coaches multiple times.
Although the team has won its division a number of times in recent years, it hasn’t (at
least at the time of this writing), won a Super Bowl since 1996. Even making the playoffs
has been a rare occurrence for the Cowboys. As one HR professional and writer puts
it: “Talent might be the fuel of a business’s performance, but it’s the organization that
makes it over the finish line first that really counts.”1 Put another way, it’s not enough
for organizations to improve just their various HR practices—employee recruitment,
rewards, and retention, and so forth. They have to improve their “people processes” as
an entire system aligned with their strategies. If some of the “pieces of the puzzle” don’t
fit, the firm is bound to lose the game.
high-performance work
system (HPWS)
A specific combination of
HR practices, work struc-
tures, and processes that
maximizes knowledge,
skill, commitment, flex-
ibility, and resilience of a
firm’s employees.
System Design
• Work�ow
• HR practices
• Support tech-
nologies
Alignment
Linkages to strategy
Principles of high involvement
• Vertical �t
• Horizontal �t
Implementation
• Case for change
• Communication
• Evaluation
Outcomes
• Employee
• Organization
Implementing HR Strategy: High-Performance Work SystemsFigure 16.1
89624_ch16_hr_556-584.indd 557 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
558 Part 6 Expanding Human Resources Management Horizons
In this chapter, we will look at how the various pieces of the HR puzzle fit together to
implement a firm’s strategy. We will start by discussing the fundamental principles that
guide the development of high-performance work systems and the potential benefits
that can occur as a result. Then we will outline the various components of the system,
the work-flow design, HR practices, management processes, and supporting technolo-
gies. (See Figure 16.1.) We will also describe the ways in which an organization tries to
tie together, or align, all the pieces of the system and link them with its strategy. We end
the chapter with a discussion of the processes organizations use to implement high-
performance work systems as well as the outcomes that benefit both employees and
the organization as a whole.
16.1 Fundamental Principles
In Chapter 1, we noted that organizations face a number of important strategic and
competitive challenges such as adapting to global competition, harnessing technol-
ogy, improving productivity, and containing costs. We also noted some very important
employee concerns that must be addressed, such as managing a diverse workforce with
different educational skills, recognizing employee rights, and adjusting to the new work
attitudes of employees and their desire for work-life balance. We now know that the best
organizations go beyond simply balancing these sometimes competing demands; they
create work environments that blend these concerns to simultaneously get the most
from their employees and meet their needs while reaching the short-term and long-term
goals of the organization.
The four simple but fundamental principles that underlie a high-performance work
system are as follows and illustrated in Figure 16.2:
• Egalitarianism and engagement
• Shared information and trust
• Knowledge development
• Performance-reward linkage2
These principles are the building blocks for managers who want to create high-
performance work systems. We will use the principles as a framework for the rest of
the chapter. In addition, it should be noted that in a review and statistical analysis
of 92 studies involving more than 19,000 organizations, researchers James Combs,
Yongmei Liu, Angela Hall, and David Ketchen identified a number of major findings
related to high-performance work systems. First, the systems have a larger influence on
the performance of organizations than other highly visible governance practices, such
as the independence of a firm’s board of directors. Second, because of their synergistic
effects, the elements of the systems have a larger impact when they are implemented
as a bundle. Third, the systems have a significant effect regardless of whether the
performance of firms is measured in operational terms or financial terms. Finally,
high-performance work systems can be successfully implemented in all types of orga-
nizations, including both manufacturing and service organizations, and in organiza-
tions of different sizes.
As an employee, how
do you think a high-
performance work
system might benefit
you personally? What
drawbacks might you
experience because of
such a system?
LO 1
89624_ch16_hr_556-584.indd 558 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
559Chapter 16 Implementing HR Strategy: High-Performance Work Systems
16.1a Egalitarianism and Engagement
People want a sense that they are members, not just workers, in an organization. Status
and power differences tend to separate people and magnify whatever disparities exist
between them. The “us versus them” battles that have traditionally raged between man-
agers, employees, and labor unions are increasingly being replaced by more cooperative
approaches to managing work. More egalitarian work environments lessen status and
power differences and, in the process, increase collaboration and teamwork. When this
happens, productivity can improve if people who once worked in isolation from (or in
opposition to) one another begin to work together.
Nucor Steel has an egalitarian work environment and remarkable loyalty and pro-
ductivity of its employees, each of whom is listed alphabetically on the company’s annual
report. Upper-level managers at Nucor do not enjoy better insurance programs, vacation
schedules, holidays, or have corporate cars, jets, executive dining rooms, or designated
parking places. In fact, benefits such as Nucor’s profit sharing plan, scholarship program,
employee stock purchase plan, bonus plan, and service awards program are not available
to Nucor’s officers at all. At the Swedish-based company IKEA, hierarchical differences
aren’t prominent, in part because egalitarianism is a Swedish value. Employees are on a
first-name basis and sit side-by-side at IKEA desks in an open-floor arrangement with
their managers. Few managers even have business cards.3
Moving power downward in organizations—that is, empowering employees—
frequently requires structural changes that involve more than rearranging the furniture
Egalitarianism
and Engagement
Knowledge
Development
HP
W
S
HP
W
SHPW
S
HPW
S
Performance-
Reward
Linkage
Shared
Information and Trust
Underlying Principles of High-Performance Work SystemsFigure 16.2
89624_ch16_hr_556-584.indd 559 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
560 Part 6 Expanding Human Resources Management Horizons
and getting rid of executive parking spaces. Recall from Chapter 2 how the online shoe
retailer Zappos had to radically restructure its entire operation when it eliminated man-
agerial positions at the company. Managers often use employee surveys, suggestion
systems, quality assurance teams, employee involvement groups, or union-management
committees that work in parallel with existing organizational structures. Simply asking
employees what processes they think work or don’t work can work wonders. That’s what
Chip Conley, the founder Joie de Vivre Hotels, a California chain that was teetering on
failure, discovered. When Conley began asking the company’s employees for advice and
implementing their suggestions, they began working harder, and the business made a
turnaround. “The more you give people a voice, the more they step up,” Conley says.4
In addition, workflows can be redesigned to give employees more control and influ-
ence over decision making. At the cultured dairy product manufacturer Old Home
Foods in St. Paul, Minnesota, all employees are involved in the decision-making process
of the business. Says one of the founders of the company, Peter Arthur: “To be a suc-
cessful independent, you need to empower your employees and let them know they are
critical to success.”5 Job enlargement, enrichment, and self-managing work teams are
typical methods for increasing the power of employees to influence decisions, suggest
changes, or act on their own.
Involving employees in decision making and giving them the power to act also
tends to increase employee engagement. Recall that engaged employees are employees
who consistently perform at high levels, are enthusiastic about what they do, and look
for better, more efficient ways of doing things. Surveys on engagement statistics vary.
Recently in a large survey conducted by the HR consulting firm Aon Hewitt, only 24
percent of U.S. employees said they were highly engaged on the job; worse yet, 63 per-
cent said they were not engaged.
Disengaged employees and employees who are only semiengaged can cost a com-
pany dearly. The French bank Société Générale found this out when a junior-level
trader lost billions of the bank’s money making illicit trades. Some experts believe
that a number of Société Générale employees were perhaps aware that there was a
problem but did not report it, possibly because of poor employee engagement. “There’s
plenty of evidence that suggests that strategic human resources management and high-
performance work systems are foundational in driving employee engagement,” says
Ellie Maggio, the managing director of Emend Management Consultants in Toronto,
Canada. “If an organization is strategic about human resources, they’re going to have
higher engagement.”6
16.1b Shared Information and Trust
The principle of shared information is critical to the success of employee empowerment
and involvement initiatives in organizations. In the past, employees were hired to do
narrowly defined jobs and not given a great deal of information about their firms. One
of the underlying ideas of high-performance work systems is that workers are intimately
acquainted with the nature of their own work and are therefore in the best position
to recognize problems and devise solutions to them. Only individuals and teams can
transform an organization. Organizations, cultures, and processes cannot; they can only
support or stifle the efforts of individuals and teams that do.7 However, without timely
and accurate information about the business, employees can do little more than simply
carry out orders rather than understand the overall direction of the business or con-
tribute fully to its success.
89624_ch16_hr_556-584.indd 560 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
561Chapter 16 Implementing HR Strategy: High-Performance Work Systems
When employees are given timely information about business performance, plans,
and strategies, they are more likely to make good suggestions for improving the business
and to cooperate in major organizational changes. They are also likely to feel more com-
mitted to new courses of action if they take part in the decision making, and happier,
which seems to be at least one key to high-performance work systems, research shows.8
They will “know more, do more, and contribute more.”9
Shared information shifts organizations away from command and control toward
employee commitment. It also shifts the relationship between employers and employ-
ees—from one that is merely transactional to one that is more relational. A study of
Chinese hospitals found that HPWSs don’t work as well when employees and employ-
ers view their relationship as merely an exchange of labor for money (transactional).
Employees just end up exhausted by the extra demands put on them.
By contrast, when employees and employers have a more relational view—they see
that the firm’s commitment to its employees and vice versa as long term—an HPWS is
more likely to succeed.10 Sharing key information with employees indicates you trust
them and that your commitment to them is long term. So does having a certain amount
of job security, which in turn gives employees confidence to experiment with new ideas
and products without having to worry about getting fired if they fail. Thus, trust can make
the difference between firms like Apple that are able to innovate and adapt to change
versus firms that are merely able to improve their productivity, quality, or cost savings.11
16.1c Knowledge Development
Knowledge development is the twin sister of information sharing. As a former CEO
of Harley-Davidson, noted, “The only thing you get when you empower dummies is
bad decisions faster.” High-performance work systems depend on the shift from touch
labor to knowledge work. Employees today need a broad range of technical, problem-
solving, and interpersonal skills to work either individually or in teams on cutting-edge
projects. Because of the speed of change, knowledge and skill requirements must also
change rapidly. In today’s work environment, employees must learn continuously. Stop-
gap training programs may not be enough. Companies have found that employees in
high-performance work systems need to learn in “real time,” on the job, using innovative
new approaches to solve novel problems. At Ocean Spray’s Henderson, Nevada, plant,
making employees aware of the plant’s progress has been a major focus. A real-time
scoreboard on the Henderson plant floor provides workers with streaming updates of
the plant’s vital stats, including average cost per case, case volumes filled, filling speeds,
and injuries to date. When people are better informed, they do better work. “We oper-
ate in real time, and we need real-time information to be able to know what we have
achieved and what we are working towards,” says an Ocean Spray manager.
16.1d Performance-Reward Linkage
It is not uncommon for employees to intentionally or unintentionally pursue outcomes
that are beneficial to them but not necessarily to the organization as a whole. A corol-
lary of this idea, however, is that things tend to go more smoothly when there is some
way to align the interests of an organization and its employees. When companies reward
their employees based on their performance, workers naturally pursue outcomes that
are mutually beneficial to themselves and the organization. When this happens, some
amazing things can result. For example, supervisors do not have to constantly watch to
89624_ch16_hr_556-584.indd 561 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
562 Part 6 Expanding Human Resources Management Horizons
make sure that employees do the right thing. Instead, employees are more likely to go out
of their way—above and beyond the call of duty—to make certain that their coworkers
are getting the help they need, systems and processes are functioning efficiently, and
the firms’ customers are happy.
As Case Study 2 at the end of the chapter explains, every 4 weeks, the natural foods
grocer Whole Foods calculates the profit per labor hour for every team in every store.
Teams that exceed a certain threshold get a bonus in their next paycheck. Performance-
based rewards such as these ensure that employees share in the gains that result from
any performance improvement. This also ensures fairness and tends to focus employees
on the organization.
16.2 Designing High-Performance
Work Systems
No two firms, even those that compete against one another, are exactly the same. Con-
sequently, their best practices have to be different as well. However, some clear trends in
work design, HR practices, leadership roles, and information technologies tell us what
high-performance work systems look like.12 Some of these are summarized in Figure 16.3.
16.2a Work-Flow Design and Teamwork
High-performance work systems frequently begin with the way work is designed. Total
quality management (TQM), reengineering, Six Sigma, and the like have driven many
organizations to redesign their work flows. Firms are focusing on the key business pro-
cesses that drive customer value—and then create teams responsible for those processes.
Recall that this is the idea behind self-directed work teams. Federal Express redesigned
its delivery process to give truck drivers responsibility for scheduling their own routes
and for making necessary changes quickly. FedEx drivers work together as a team to
identify bottlenecks and solve problems that slow delivery. To facilitate this, advanced
communications equipment was installed in the delivery trucks to help teams of drivers
balance routes among those with larger or lighter loads.13 By redesigning the work flow
around key business processes, companies such as Federal Express have been able to
establish a work environment that facilitates teamwork, takes advantage of its employees’
skills and knowledge, empowers employees to make decisions, and provides them with
more meaningful work.14
In most cases, a “homegrown” process and procedures developed by a firm’s manag-
ers and employees work better than one adopted from elsewhere. Each organization has
unique circumstances, and parties are more likely to commit to procedures they create
and own. Homegrown processes can also give a firm a competitive advantage because
they are harder for competitors to imitate.
A common mistake organizations often make is focusing on either top-down
changes driven by executives or bottom-up changes cultivated by the employees. Firms
such as Champion International, now a part of International Paper, and ASDA, a low-
cost British retailer, are among the many companies that have found that the best results
occur when managers and employees work together.15 At MTS, a telecommunications
company based in the Canadian province of Manitoba, unions and company managers
design, select, and implement new procedures together.
Have you ever moved
a piece of furniture in
your house or dorm
room and noticed that
once you did, every-
thing else needed to
be moved, too? How
do you think this same
principle might work
when it comes to high-
performance work
systems?
LO 2
89624_ch16_hr_556-584.indd 562 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
563Chapter 16 Implementing HR Strategy: High-Performance Work Systems
• Self-managed teams
• Empowerment
Work �ow
Shared
Information
Knowledge
Development
Performance-
Reward
LinkageEgalitarianism
• Selective recruiting
• Team decision making
Staf�ng
• Few layers
• Coaches/facilitators
Leadership
• Broad skills
• Cross-training
• Problem solving
• Team training
Training
• Incentives
• Gainsharing
• Profit sharing
• Skill-based pay
Compensation
• HRIS
• Communications
Technologies
Design Aspects of High-Performance Work SystemsFigure 16.3
HR personnel need to be intimately involved with the development of new procedures
too. Most HR managers have a good idea of what works in a particular firm and what does
not. Thus, the recruiting, evaluation, and reward systems devised by a firm’s HR department
can have a huge impact on how well high-performance work systems are implemented.
16.2b Complementary Human Resources Policies
and Practices
Work redesign, in and of itself, does not result in a high-performance work system.
Neither does total quality management or reengineering. Other supporting elements
of HRM are needed. For example, several studies suggest that both the performance of
employees and their satisfaction are much higher when organizations combine their
changes in work-flow design with HR practices that encourage skill development and
employee involvement.16 Next, let’s look at some of these key HR practices.
Staffing Practices
Many high-performance work systems begin with highly directive recruitment and
selection practices. The recruitment tends to be both broad and intensive in order
to get the best pool of candidates from which to choose. Human resources informa-
tion systems have made it easier for firms to compile an inventory of their talent and
89624_ch16_hr_556-584.indd 563 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
564 Part 6 Expanding Human Resources Management Horizons
search for employees with the specific skills they need. Talented employees “come up
to speed” more quickly and take less time to develop. At Whole Foods Market, Zappos,
and W.L. Gore, team members select their teammates. This practice gives employees
more control over decisions about who their coworkers will be and forges relationships
more quickly than if new members were simply assigned to a team.17
Too often, however, organizations try to save money by doing a superficial job of
hiring. As a consequence, they run the risk of hiring the wrong people and spending
more on training them or on outplacement and severance programs if they are let go
or quit, followed by additional recruiting costs to hire their replacements. Other hiring
pitfalls include simply looking for skills and experience in candidates and not looking
for cues to see if they are truly engaged employees capable of contributing adequately
to a high-performance work system. Says Jennifer Anderson, the VP of recruiting for
the bank Capital One: “We seek candidates with an entrepreneurial mindset who have
the courage to challenge the status quo.”18
How can you tell if candidates have the “right stuff ”? Kris Dunn, an HR executive
and writer, suggests asking candidates behavioral questions such as the following: “Tell
me about a time in a past job that you got really excited about something you were work-
ing on. Now tell me about a situation at work in which you got bored.” If a candidate
struggles to come up with relevant examples, there is no reason to think the person will
be a fully engaged employee in your company.19
Training and Development
Like recruitment and selection, training focuses on ensuring employees have the skills
they need to assume greater responsibility in a high-performance work environment.
At the grocery chain Publix, managers are responsible for developing succession plans
for employees to help them reach their full potential. Employees submit information
about Publix jobs they are interested in. They then log onto computers in the breakroom
High-performance
work systems have
helped many auto
manufacturers
improve production
and quality.
Fa
br
iz
io
C
os
ta
nt
in
i/
G
et
ty
Im
ag
es
89624_ch16_hr_556-584.indd 564 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
565Chapter 16 Implementing HR Strategy: High-Performance Work Systems
and elsewhere to take training courses related to them and are matched with job open-
ings as they occur. Virtually all of Publix’s managers began their careers as entry-level
employees with the company. Todd Jones, the company’s CEO, started his career with
the company as a bagger.20
Schindler Elevator, the world’s second-largest manufacturer of elevators, provides
a 60-hour prehire training program of instruction and testing in such subjects as ori-
entation/company history, safety, plant policies and procedures, just-in-time (JIT)
techniques, and basic shop math. The company also has an apprenticeship program.
Schindler’s emphasis on teamwork, engagement, and continuous improvement requires
employees to develop a broader understanding of work processes performed by others
around them rather than rely on just knowing their own jobs.
Recall that cross-training involves training employees in jobs in areas closely related
to their own. Cross-training is very important for a HPWS. Nurses in the perinatal unit
of Cincinnati-based TriHealth implemented cross-training to facilitate teamwork and
cooperation across units; the training also helps nurses identify trouble spots that can
occur in several of the jobs and allows them to suggest areas for improvement.
Compensation and Benefits
Another important piece of a high-performance work system is the compensation pack-
age. Because high-performance work systems ask many different things from employees,
it is difficult to isolate one single approach to pay that works for everyone. As a conse-
quence, many companies are experimenting with alternative compensation plans. In
order to link pay and performance, high-performance work systems often include some
type of employee incentives. Pushing decision making down to front-line roles usually
requires higher compensation for two reasons: Leaders often need to pay more to attract
highly skilled people, and the higher pay can be used to reward high performance, says
Alec Levenson, senior research scientist at the Center for Effective Organizations at the
University of Southern California in Los Angeles.21 At Henry Ford Health System, a
Detroit-area hospital network, employees’ monetary performance incentives are tied to
the system’s strategic plan. If the system exceeds its financial targets, and if a business
unit also achieves its targets and budget, then employees are awarded commensurately.22
In 2010, Hilcorp Energy, a Houston firm, awarded every employee either a new car or
$50,000 for meeting a 5-year challenge for doubling the firm’s value, production rate,
and oil and gas reserves. When employees doubled Hilcorp’s numbers again in 2015,
each one of them received $100,000.23
Other organizational incentives such as gain sharing, profit sharing, and employee
stock ownership plans focus employee efforts on outcomes that benefit both themselves
and the organization as a whole. The Scanlon Plan, Rucker Plan, and Improshare, three
systems discussed in Chapter 10, have been used by companies to elicit employee sug-
gestions and reward them for contributions to productivity.
High-performance work systems can also incorporate skill-based pay plans. By
paying employees based on the number of different job skills they have, organizations
such as Shell Canada and Honeywell have created both a broader skill base among
employees and a more flexible pool of people to rotate among interrelated jobs. Both
of these qualities are beneficial in a high-performance work environment and may
justify the extra compensation. Honeywell has even experimented with what it calls
“intracapital”—a pool of money employees can spend on capital improvements if the
company meets its profitability goals.24 Lastly, more companies are connecting their
firm’s corporate responsibility goals with their compensation systems. Whole Foods, the
89624_ch16_hr_556-584.indd 565 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
566 Part 6 Expanding Human Resources Management Horizons
retailer Marks & Spencer, and Tesco, a global grocer and merchandiser, are among the
companies that incorporate sustainability targets into their performance goals. Whole
Foods and Tesco’s goals include community-involvement initiatives as well.25
Recall that in addition to linking pay and performance, high-performance work
systems are also based on the principle of egalitarianism. This encourages employees to
be more involved and committed.26 At Henry Ford Health System each staff member
within a business unit—including physicians—gets the same incentive reward if the
unit’s goals are met, which in a recent year averaged about $800.27 At Tesco, the bonuses
staff members and executives receive are tied to meeting the company’s corporate social
responsibility goals as is the pay for the firm’s board of directors.28 Open pay plans that
allow employees to know what everyone else makes is a compensation system used to
create a more egalitarian environment.
Of course, not every company can afford to offer its employees incentive pay or profit
sharing, let alone a car or a $100,000. As we have explained, every company has to develop
its own practices. To better match their HR practices with their workforces and retain hourly
and lower wage workers in high-turnover industries, some firms utilize programs that moti-
vate employees by offering them more flexibility and other work-life benefits. Kaiser Perma-
nente and Marriott have implemented a range of practices, such as giving employees flexible
start and end times to their work shifts and the ability to take paid time off for a few hours to
take care of their personal business rather than having to take an entire day off if they don’t
need it.29 Lyft and other companies are utilizing ATM-like systems that allow workers to cash
out their pay as soon as they earn it, rather than waiting for a paycheck.30
Management Processes and Leadership
Organizations such as Motorola, Doubletree Hotels, American Express, and Reebok
International found that the success of any high-performance work system depends on
first changing the roles of managers and team leaders. With fewer layers of manage-
ment and a focus on team-based organization, the role of managers and supervisors is
substantially different in an environment of high-performance work systems. Managers
and supervisors are seen more as coaches, facilitators, and integrators of team efforts.31
Rather than autocratically imposing their demands on employees and closely monitor-
ing workers, managers share responsibility for decision making with employees, help
them become better decision makers, and troubleshoot and innovate on their own.
Typically, the term manager is replaced by the term team leader. In a growing num-
ber of cases, leadership is shared among team members. It’s not uncommon to rotate
team leaders at various stages in team development. That way, different individuals
can assume functional leadership roles when their particular expertise is needed most.
16.2c Supportive Information Technologies
Communication and information technologies are yet one more piece that has to be
added to the framework of high-performance work systems. Technologies of various
kinds create an infrastructure vital for communicating and sharing information. Sally
Corporation is a Florida-based company that makes robotic human and animal crea-
tures for movies and theme parks. The firm uses information technology to assign
employees to various project teams and to budget and track their time spent on them.
GE is attempting to use machine learning, HR data, and LinkedIn information to cor-
relate the career paths of successful executives and candidates who might one day take
their places to sustain the company’s performance.
89624_ch16_hr_556-584.indd 566 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
567Chapter 16 Implementing HR Strategy: High-Performance Work Systems
But information technologies need not be high tech. The richest communication
occurs face to face. The important point is that high-performance work systems cannot
succeed without timely and accurate communications. (Recall the principle of shared
information.) Typically the information needs to be about business plans and goals, unit
and corporate operating results, incipient problems and opportunities, and competitive
threats.32
16.3 Strategic Alignment
Each of these practices we have discussed highlights the individual pieces of a high-
performance work system. As we discussed in Chapter 2, careful planning helps ensure
that the pieces fit together and are linked with the overall strategic goals of the organi-
zation. Figure 16.4 summarizes the internal and external linkages needed to fit high-
performance work systems together.
16.3a Ensuring Horizontal Fit
Chapter 2 noted that horizontal fit, or alignment, occurs when all internal elements of a
work system—HR practices, work designs, management processes, and technologies—
reinforce one another. The synergy achieved through overlapping work and HR practices
is at the heart of what makes a high-performance system effective.
horizontal fit
The situation in which
all the internal elements
of the work system rein-
force one another.
StrategyC
o
m
p
et
iti
ve
Com
p
an
y
Values
C
h
a
lle
ng
es
Concerns
Employee
VERTICAL FIT
HORIZONTAL FIT
HIGH-PERFORMANCE
WORK SYSTEMS
Work-flow
Design
HR
Practices
Technologies Leadership
Achieving Strategic AlignmentFigure 16.4
89624_ch16_hr_556-584.indd 567 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
568 Part 6 Expanding Human Resources Management Horizons
For example, an improved selection system may be of no use if it is not working
in conjunction with a firm’s training and development activities. The two components
would be working at cross purposes. Moreover, changes in one component will affect
all of the other components because the pieces are interdependent.
16.3b Establishing Vertical Fit
To achieve vertical fit, or vertical alignment, high-performance work systems must sup-
port the organization’s strategies given its external competitive challenges, organiza-
tional values, and the concerns of employees.33
Xerox uses a planning process known as “Managing for Results,” which begins with
a statement of corporate values and priorities and establishes clear goals for the orga-
nization. Each business unit establishes annual objectives based on these goals, and the
process cascades down through every level of management. Ultimately, each employee
within Xerox has a clear “line of sight” to the values and goals of the organization, so he
or she can see how individual effort makes a difference.34
Efforts such as these help focus the design of high-performance work systems on
a firm’s strategic priorities. Objectives such as innovation, faster speed to market, cost
containment, quality enhancement, and better customer service directly influence what
is expected of employees and the skills they need to be successful. High-performance
work systems are designed to link employee initiatives to those strategies.
16.3c Assessing Strategic Alignment: The HR Scorecard
Chapter 2 introduced the balanced scorecard, which helps managers link strategic goals
and operational activities. An adapted version of it, the HR Scorecard, helps managers
assess the strategic alignment of their work systems.35 First, managers diagnose hori-
zontal fit by assessing whether particular HR practices reinforce or conflict with one
another (see Highlights in HRM 1A). Second, managers assess the extent to which their
HR practices result in employment stability and teamwork (see Highlights in HRM 1B).
Third, the degree of vertical fit is evaluated by assessing the degree to which the results
the workforce delivers are actually connected with the elements that help the firm excel
(see Highlights in HRM 1C).
16.4 Implementing the System
So far we have talked about the principles, practices, and goals of high-performance
work systems. Unfortunately, these design issues pose probably less than half of the
challenges that must be met to ensure an HPWS is successful. Much of what looks
good in the planning stage gets messy during implementation. The American Society
for Training and Development (ASTD) asked managers and consultants to identify the
critical factors that can make or break a high-performance work system. The respon-
dents identified the following actions as necessary for success (see Figure 16.5):
• Make a compelling case for change linked to the company’s business strategy.
• Ensure that change is “owned” by senior and line managers.
• Allocate sufficient resources and support for the change effort.
• Ensure early and broad communication of the effort.
vertical fit
The situation in which
the work system sup-
ports the organization’s
goals and strategies.
What obstacles do you
think managers might
face when implement-
ing a high-performance
work system?
LO 3
89624_ch16_hr_556-584.indd 568 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Diagnosing Horizontal Fit
This chart estimates the degree to which the various HR
management subsystems work together. Think of the degree
of fit and internal consistency as a continuum from –100 to
1100, and assign a value in that range to each relationship.
Examples of the extremes and midpoints on that continuum
are as follows:
Highlights in HRM1A
HR
Plan-
ning
Recruit-
ing and
Selection
Training
and Devel-
opment
Performance
Management
and Appraisal
Compensa-
tion and
Benefits
Work Organi-
zation (e.g.,
Teams)
Commu-
nication
Systems
HR Performance
Measurement
Cost Value
Creation
HR planning — 230 0 220 0 0 0 0 0
Recruiting and
selection
— 0 210 220 230 0 30 240
Training and
development
— 0 0 0 0 30 210
Performance
management
and appraisal
— 0 230 20 0 220
Compensation
and benefits
— 250 0 40 0
Work organiza-
tion (e.g., teams)
— 0 0 0
Communication
systems
— 0 0
HR performance
measurement
Source: Brian Becker, Mark Huselid, and Dave Ulrich, The HR Scorecard (Cambridge, MA: Harvard University Press, 2001).
2100: The two subsystems work at cross purposes.
0: The two subsystems have little or no effect on one
another.
1100: Each subsystem is mutually reinforcing and
internally consistent.
DNK: Don’t know or have no opinion.
• Ensure that teams are implemented in a systemic way.
• Establish methods for measuring the results of the change.
• Ensure continuity of leadership and appoint “champions” of the initiative.36
16.4a Building a Business Case for Change and Engaging
Stakeholders
Change can be threatening because it asks people to abandon the old ways of doing
things and accept new approaches that, to them at least, are untested. Figure 16.6 shows
how to “build a bridge” with the firm’s stakeholders such as its employees, the unions it
569
89624_ch16_hr_556-584.indd 569 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Testing the Alignment of the HR System with HR Deliverables
Indicate on a scale of 2100 to 1100 the degree to which the
following HR system elements facilitate the HR deliverables
shown. Examples of the extremes and midpoints on that
continuum are as follows:
2100: This dimension is counterproductive for
enabling this deliverable.
Highlights in HRM1B
HR
Planning
Recruiting and
Selection
Training and
Development
Management
and Appraisal
Compensation
and Benefits
Work Organiza-
tion (e.g., Teams)
Communication
Systems
Employment
stability
0 0 0 0 250 220 0
Team-based
behaviors
0 0 230 220 240 0 0
Strategy-focused
behaviors
0 0 0 0 40 0 0
High-talent
staffing level
0 250 0 250 0 0 0
0: This dimension has little or no effect on this
deliverable.
1100: This dimension significantly enables this
deliverable.
DNK: Don’t now or have no opinion.
Testing the Alignment of HR Deliverables
Indicate on a scale of 2100 to 1100 the degree to which
each HR deliverable in the following chart enables each stra-
tegic driver. Empty cells indicate this is not a key deliverable
for a particular driver. Examples of the extremes and mid-
points on that continuum are as follows:
Highlights in HRM1C
HR Deliverable
Strategic Performance Drivers
Employment Stability
among Senior R&D Staff Team-Based Behaviors
Strategy-Focused
Performance
High-Talent Staffing
Level
1. Shorten product
development times
280 230 30
2. Enhance customer focus
and responsiveness
220 220
3. Enhance productivity 210 250 240
4. Develop and successfully
manage joint ventures
210 250
2100: This deliverable is counterproductive for
enabling this driver.
0: This deliverable has little or no effect on this driver.
1100: This deliverable significantly enables this driver.
DNK: Don’t know or have no opinion.
570
89624_ch16_hr_556-584.indd 570 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
571Chapter 16 Implementing HR Strategy: High-Performance Work Systems
works with, and other groups when implementing a high-performance work systems.37
One way is to show the groups where the business is today—its current performance and
capabilities. Then show them where the organization needs to be in the future. The gap
between today and the future represents a starting point for discussion. When execu-
tives at TRW wanted to make a case for change to high-performance work systems, they
used employee attitude surveys and data on turnover costs. The data provided enough
• Sr. managers
• Unions
• HR as business partner
Step Two:
Engage stakeholders
• Process audit
• Achieving goals
• Organization outcomes
• Employee outcomes
Step Four:
Evaluate/Sustain
• Strategy
• Vision of
the future
• Tie to
performance
Step One:
Build a case for change
• Allocate resources
• Empower others
• Cultivate mutual gains
Step Three:
Communication
Implementing High-Performance Work SystemsFigure 16.5
• Cultivate mutual gains
• Establish commitment
• Foster support
• Adhere to procedures
• Values
• Interests
• Goals
Building Cooperation with StakeholdersFigure 16.6
Source: Adapted from the Conference Board of Canada.
89624_ch16_hr_556-584.indd 571 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
572 Part 6 Expanding Human Resources Management Horizons
ammunition to get a conversation going about needed changes and sparked some sug-
gestions about how they could be implemented.
Some research studies have found that unions can be a barrier to high-performance
work systems, perhaps because unions are concerned that the efficiencies achieved
might be so great that workers can be eliminated.38 To help get unions on board, man-
agers should try to create “win-win” situations in which all stakeholders, including
unions, gain from the implementation of high-performance work systems. Organiza-
tions such as Shell and Novartis have found that “interest-based” (win-win) approaches
work best.
16.4b Establishing a Communications Plan
Building support for an HPWS and implementing it will be more readily accomplished if
a top manager champions or promotes the system. The person should spend a substan-
tial amount of time communicating with employees about the change and the reasons
for it, and then, along with other top managers, work closely with middle managers to
make it happen. Because middle managers operate in the trenches of an organization
amid both its people and processes, they can have a big impact on a firm’s performance
and how fast changes take place.39
Nonetheless, major transformations should not be shouldered by middle manag-
ers. It needs to be clear to employees that the CEO and senior managers are intimately
involved with and committed to the change. When Harley-Davidson tried to institute
employee involvement groups without first demonstrating their own personal com-
mitment to the program, employees were apathetic about it. They concluded that the
changes were just “another program” put in place by HR. Similarly, the CEO of a business
consulting company was adamant that his vice presidents understand a new initiative
and give a short speech about it at an introductory session. On the day of the program’s
launch, however, the CEO himself did not show up. The message to the vice presidents
was clear. The CEO did not think the change was important enough to become an active
participant. Not surprisingly, the change was never implemented.40
Although we have emphasized the importance of executive commitment, top-down
communication is not enough. Two-way communication not only can result in better
decisions, it may help to diminish the fears and concerns of employees when facing
changes. For example, prior to being purchased by a competitor, Solectron Corporation,
a winner of the Baldrige National Quality Award, tried to implement high- performance
work systems to capitalize on the knowledge and experience of its employees. A pilot
program showed immediate gains in productivity of almost 20 percent after the switch
to self-managed teams and team-based compensation. Although Solectron’s rapid
growth of more than 50 percent per year made it unlikely that middle managers would
be laid off, the loss of control to empowered teams made many of them reluctant to
implement a high-performance work system.
If the managers had participated in discussions about operational and financial
aspects of the business, they might not have felt so threatened by the change. Open
exchange and communication at an early stage pay off later as the system unfolds.
Ongoing dialogue at all levels helps reaffirm commitment, answer questions that come
up, and identify areas for improvement throughout implementation. Recall that one
of the principles of high-performance work systems is sharing information. This prin-
ciple is instrumental to success both during implementation and once the system is
in place.
89624_ch16_hr_556-584.indd 572 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
573Chapter 16 Implementing HR Strategy: High-Performance Work Systems
Navigating the Transition to High-Performance Work Systems
Different organizations implement high-performance work systems in different ways. In
start-up firms, managers have the advantage of being able to put everything in place at
once. However, when organizations have to be retrofitted, the process can be a bit more
cumbersome. For example, when Honeywell switched to a high-performance work sys-
tem in one of its plants, employees attended training programs and participated in the
redesign of their jobs while the plant was shut down and being reequipped with new
technology. When the new plant was reopened, self-managing teams were put in place,
and a new pay system was implemented for the high-performance workforce.41
Not every organization has the luxury of suspending operations while changes are
put in place. For example, in already existing organizations, the pieces of the system
often have to be changed incrementally rather than as a total program. Establishing an
implementation plan that provides a timetable for redesigning the work flow and train-
ing employees can keep the effort from bogging down.
Adhering to New Procedures
Following the new procedures required to implement an HPWS is often the hardest
part of the job. As one HR executive puts it, “Procedure is the ‘rug’ on which alliances
[a firm’s stakeholders] stand. Pull it out by making a unilateral management determina-
tion or otherwise changing the rules of the game, and the initiative will falter. Procedure
keeps the parties focused.”42
HR managers are in a good position to help employees in transition handle what they
are going through in terms of changes. When the old ways of doing things are abandoned,
many experienced employees begin to feel like beginners again on the job. This can be
stressful and sometimes polarizes employees. To cope, many people, including managers,
are likely to revert to older routines. Ford and Texas Instruments created special units
to facilitate their transitions to high-performance work systems. The consumer-goods
maker Unilever created a team of senior line and HR managers to help prevent relapses.43
16.4c Evaluating and Sustaining the Success of the System
Once high-performance work systems are in place, they need to be monitored and
evaluated over time. First, there should be a process audit to determine whether the
system has been implemented as it was designed and whether the principles of high-
performance work systems are being reinforced. Employee-related questions such as the
following might be included in the audit:
• Are employees actually working together, or is the term “team” just a label?
• Are employees getting the information they need to make empowered decisions,
and are they engaged?
• Are training programs helping employees develop the knowledge and skills they need?
• Are employees being rewarded for good performance and useful suggestions?
• Are employees treated fairly so that power differences are minimal?
• Are quality-of-life goals being achieved for employees?
To determine whether the HPWS is succeeding, managers should look at metrics
such as the following:
• Are the behaviors the organization desires being exhibited on the job?
process audit
Determining whether the
high-performance work
system has been imple-
mented as designed.
89624_ch16_hr_556-584.indd 573 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
574 Part 6 Expanding Human Resources Management Horizons
• Are quality, productivity, flexibility, and customer service objectives being met?
• Is the organization more competitive than in the past?
Implementing an HPWS is one thing. Sustaining it is another. As with any change
activity, there will be missteps during the system’s implementation for any number of
reasons. Xerox Corporation found that when it implemented teams without also chang-
ing its compensation system to support teamwork, it got caught in a bad transition. The
teams actually performed worse than employees working alone. In other words, building
and fostering high-performance work systems can’t be a piecemeal approach.
Because the work teams in an HPWS are performing at their peak, burnout can be
a problem. If there aren’t enough staff members to manage the volume of work, stress is
almost guaranteed. Employee poaching by competitors can occur, too. Motorola’s Indian
division strategically recruited its employees and put together a high-performance work
system, only to have them hired away by a competitor. Consequently, Motorola had to
look for new ways to motivate and retain the division’s workforce.
Companies with disengaged workforces suffer from prob-
lems that do not seem to get better, including excessive
employee turnover, lower productivity, and profits. When
employees are engaged, however, the results can be much
different. One Gallup study reported that firms with top
engagement scores had 18 percent higher productivity
and 16 percent higher profitability. Another study found
that engaged employees outperform other employees
and are far less likely to leave their organizations. In a small
business, engagement can have an even bigger impact
because the margin for error when it comes to success or
failure is so thin.
As a small-business owner, how do you know if your
employees are engaged or not? One way would be to
survey them. Gallup has come up with a 12-question
survey designed to gauge employee engagement that
includes:
• Do you have the materials and equipment you need
to do your work right?
• At work, do you have the opportunity to do what
you do best every day?
• In the last seven days, have you received recogni-
tion or praise for doing good work?
• Does your supervisor, or someone at work, seem to
care about you as a person?
• Is there someone at work who encourages your
development?
• At work, do your opinions seem to count?
Small Business Application
Business author Barb Taylor Krantz has another idea
about how to measure engagement: Just talk to your
employees. A CEO of a large company can’t talk to all of the
firm’s employees, but a small-business person can. What
motivates them to achieve, which aspects of their jobs
are most satisfying, and how they can contribute more in
those areas? What challenging goals can they set for their
own development? If your employees can’t answer these
questions, chances are good they are not engaged.
So how can you increase the engagement of employ-
ees other than by asking them to work harder than they
already are? Simply looking for a quick fix to engage-
ment won’t work, says HR blogger Gautam Ghosh. “For
world-class companies like Southwest Airlines, employee
engagement is a way of life that’s taken them years to
build into their cultures. It’s not a strategy or program to
them. It’s just part of their corporate DNA.”
Instead you may have to look at your firm’s culture,
rethink how you operate, and implement the concepts in
this chapter. Two other good publications that can help a
small business implement an HPWS are The HR Scorecard:
Linking People, Strategy, and Performance and The Power of
Full Engagement: Managing Energy, Not Time, Is the Key to
High Performance and Personal Renewal.
Sources: Duckjung Shin and Alison M. Konrad, “Causality between High-
Performance Work Systems and Organizational Performance,” Journal of
Management 43, no. 4 (April 2017): 973; Barb Krantz Taylor, “Are Employ-
ees Going Above and Beyond?” The Bailey Group (July 10, 2009), http://
www.thebaileygroup.com; “The Backlash against Employee Engage-
ment,” RiseSmart (April 2, 2010), http://www.risesmart.com.
Are Your Employees Engaged, or Do You Need an HPWS?
89624_ch16_hr_556-584.indd 574 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
575Chapter 16 Implementing HR Strategy: High-Performance Work Systems
Finally, high-performance work systems should be periodically reevaluated in terms
of new organizational priorities and initiatives. Because a high-performance work sys-
tem is built to deliver value to customers and thereby increase a firm’s strength, as their
needs change, so too should the system. When change occurs, it should be guided by a
clear understanding of the business needs and exhibit a close alignment with strategy.
16.5 Outcomes of High-Performance
Work Systems
Organizations achieve a wide variety of outcomes from high-performance work systems
and effective HR management. We have categorized these outcomes in terms of either
employee concerns such as quality-of-work-life issues and job security or competitive
challenges such as the firm’s performance, productivity, and profitability. Throughout
the text, we have emphasized that the best organizations find ways to achieve a balance
between these two sets of outcomes and pursue activities that improve both.
16.5a Employee Outcomes and Quality of Work Life
Properly implemented, managed, and monitored, high-performance work systems offer
employees many potential benefits. Because the systems emphasize learning, people can
take more risks, generate new ideas, and make mistakes, which in turn can actually lead to
new products, services, and markets. As Richard Carlton, a former executive of 3M, put it,
“You can’t stumble if you’re not in motion.”44 Because employees are more informed and
have more latitude to decide how to achieve their goals, they are likely to feel they have a
bigger role to play and that their opinions and expertise are valued more. As a result, they
are more likely to be satisfied on the job and find their career-growth needs are being met.
In addition, workers are likely to have more job security because their skills are higher
and their potential to contribute to the organization is greater. This makes them more
marketable to other organizations.
Conversely, when employees are underutilized, the performance of an organiza-
tion suffers, and employees develop poor work attitudes and habits. Some years ago,
the British Land Rover Company, a manufacturer of four-wheel-drive vehicles, found
itself saddled with a notorious reputation for poor quality and productivity. Then it
underwent a fundamental transformation. The company instituted extensive training
(including giving every employee a personal training fund to be used on any subject),
implemented more team-based production methods, reduced the number of separate
job classifications, developed more cooperative relations with organized labor, and
began a total quality program. As a result of these changes, productivity, quality, and the
company’s sales soared. However, despite massive evidence documenting the effective-
ness of the new system, BMW, which later bought the company, began to dictate changes
after taking over Land Rover—changes that ultimately undid its transformation.45
16.5b Organizational Outcomes and Competitive Advantage
Several organizational outcomes can also result from using high-performance work sys-
tems. These outcomes include greater innovation for a firm, greater flexibility, higher pro-
ductivity, lower costs, better responsiveness to customers, and higher revenues and profits.
Is having a high-
performance work
system enough to give
a firm a competitive
advantage?
LO 4
89624_ch16_hr_556-584.indd 575 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
576 Part 6 Expanding Human Resources Management Horizons
For example, a study of 962 firms in multiple industries showed that high-performance
work systems resulted in an annual increase in profits of more than $3,800 per employee.
Another study of 62 automobile plants showed that those implementing high- performance
work systems had 47 percent better quality and 43 percent better productivity.46
However, although benchmarks such as these are indicative of success, they may not
be enough to sustain an organization’s competitive advantage. Recall that in Chapter 2 we
said that organizations can create a sustainable competitive advantage through people if
they focus on four criteria. The same criteria hold for high-performance work systems:
• Valuable: High-performance work systems increase value by establishing ways to
increase innovation and efficiency, decrease costs, improve processes, and provide
something unique to customers.
• Rare: High-performance work systems help organizations develop and harness
skills, knowledge, and abilities that are not equally available to all organizations.
• Difficult to imitate: High-performance work systems are designed around team pro-
cesses and capabilities that cannot be transported, duplicated, or copied by rival firms.
• Organized: High-performance work systems combine the talents of employees and
rapidly deploy them in new assignments with maximum flexibility.47
These criteria clearly show how high-performance work systems, in particular, and
human resources management, in general, are instrumental in achieving competitive
advantage through people.
However, for all their potential, implementing high-performance work systems is not
an easy task. The systems are complex and require close partnering among all of a firm’s
stakeholders. Ironically, this very complexity can lead to a competitive advantage. The abil-
ity to integrate business and employee concerns is indeed rare, and doing it in a way that
adds value to customers is especially noteworthy. Organizations such as Google and South-
west Airlines have been able to do it, and as a result they enjoy a competitive advantage.
Land Rover vehicles
were notoriously
known for their
poor quality until a
company-wide trans-
formation resulted
in better quality and
productivity.
D
an
ie
l J
on
es
/A
la
m
y
89624_ch16_hr_556-584.indd 576 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
577Chapter 16 Implementing HR Strategy: High-Performance Work Systems
High-performance work systems are specific
combinations of HR practices, work structures, and
processes that maximize the knowledge, skills, com-
mitment, and flexibility of employees. The systems are
based on the principles of shared information and trust,
knowledge development, performance-reward link-
ages, and egalitarianism and employee engagement.
High-performance work systems are composed
of several interrelated components. Team members
are carefully selected and undergo extensive training,
including cross training, and often share leadership
duties. Integrated information technology systems
can help ensure that employees have the information
they need to make timely and productive decisions. To
align the interests of employees with those of the orga-
nization, the reward systems associated with high-per-
formance work systems are performance-based and
often include group and organizational incentive pay
and sometimes skill-based pay. When all the pieces
of the system support and complement one another,
high-performance work systems achieve horizontal
fit. When the system is aligned with the competitive
LO 1
LO 2
Summary
priorities of the organization as a whole, it achieves
vertical fit as well.
Implementing high-performance work sys-
tems within existing organizations often has to be
done in stages. The implementation is much more
likely to go smoothly if a business case is first made
for the HPWS and fully communicated to employees.
Gaining the support of the firm’s various stakehold-
ers is essential. A company’s HR department can be
an invaluable partner when it comes to implement-
ing an HPWS. HR personnel can also help establish a
transition structure to shepherd the implementation
through its various stages and reassure employees they
will be successful working in the new system. Once
the system is in place, it should be evaluated in terms
of its processes, outcomes, sustainability, and ongoing
fit with strategic objectives of the organization.
When implemented effectively, high-perfor-
mance work systems benefit both employees and their
organizations and can provide a company with a sus-
tainable competitive advantage.
LO 3
LO 4
high-performance work system
(HPWS)
horizontal fit
process audit
vertical fit
Key Terms
Do you think the fundamental principles of
getting employees highly involved with their
work provides an adequate context for design-
ing high-performance work systems? What
other concerns or guidelines for developing
high-performance work systems would you
suggest?
Although achieving both horizontal and ver-
tical fit are important for high-performance
LO 1
LO 2
work systems, which do you consider more
critical and why?
This chapter emphasizes the processes
required to implement a high-performance
work system. What are the most critical steps
to successfully implementing one?
Do high-performance work systems always
result in a win-win situation for employers and
their employees? Why or why not?
LO 3
LO 4
Discussion Questions
89624_ch16_hr_556-584.indd 577 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
HRM Experience
Assessing the Strategic Fit of High-Performance Work Systems
supports the principle or is counterproductive. The
scale runs from –5 (strongly counterproductive) to 5
(very supportive). Zero indicates neither support nor
detriment.
2. When you are done filling in each cell, add the num-
bers across each row to determine how supportive
each HR practice is of all of the principles. Which HR
practice is the most supportive? Which HR practice is
the least supportive?
3. Add each column to see how the overall set of HR
practices supports each principle. Which principle is
most strongly supported? Which principle is the big-
gest concern?
4. Add the rows and/or columns to see how well the
HPWS is supported overall. What changes would you
recommend to improve the system?
Note: This figure corresponds to the integrative case on Egan
Clothiers, Ltd., in the back of the text. The exercise can be
used in conjunction with the case, or you may simply refer
to the case as background reading.
High-performance work systems are potentially power-
ful tools. However, ensuring all HR practices support one
another and the principles of an HPWS is not always easy.
Some HR practices might support the HPWS while others
work against it. It takes only one misaligned practice to crash
the whole system. Recall that the HPWS principles include
the following:
�� Egalitarianism and engagement
�� Shared information and trust
�� Knowledge development
�� Performance-reward linkage
Assignment
The following figure lists the main HR practices used at Egan
Clothiers, Ltd. Working in teams of four to six, assess the
extent to which you believe each HR practice supports (or
works against) each of the HPWS principles.
1. For each cell in the matrix, insert a number indicat-
ing the extent to which you believe the HR practice
EGAN CLOTHIERS, LTD.
H
R
P
R
A
C
T
IC
E
S
HPWS PRINCIPLES
Egalitarianism
Shared
Information
Knowledge
Development
Performance-
Reward Linkage
Column 1 Column 2 Column 3 Column 4 TOTAL
STRUCTURE
• Cross-functional team
• Department rotation
STAFFING
• Select for experience
• Promote from within
TRAINING
• Retail selling skills
• Customer service
REWARDS
• Results appraisal
• Forced distribution
• Individual incentives
TECHNOLOGY
• HR information system
• Post performance
SCORING KEY
5 = strongly supports the principle
0 = neutral
– 5 = strongly counterproductive
Row 1
Row 2
89624_ch16_hr_556-584.indd 578 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
579Chapter 16 Implementing HR Strategy: High-Performance Work Systems
CASE STUDY How Implementing an HPWS Fortified the Snack-Food Maker
Snyder’s-Lance
1
When Greg Flickinger became the director of manu-
facturing for the snack-food maker Snyder’s-Lance’s
Charlotte, North Carolina, facility, he was determined
to build from scratch the kind of high-performance
workforce he led when he worked for a competing
firm. Many organizations take piecemeal approaches
to improving their firms. But Flickinger knew that
one-off plans for improvement would not result in
sustained improvements for the plant—especially
given the fact that nearly 1,000 employees worked at
the Charlotte site producing more than 500 types of
products. What the Charlotte plant needed was an all-
encompassing high-performance work system.
The first step in developing the HPWS was to cre-
ate a vision for it that could be defined succinctly and
communicated easily to all staff members. Ultimately
the vision was defined as follows: “To nurture a transi-
tion from a traditional work system to an employee-
centric high-performance work system (HPWS) with
a cultural foundation rooted in total employee involve-
ment and focused on continuous improvement.”
The details inherent in the vision then shaped the
foundation of a formal but very simple and direct mis-
sion: “Take care of your people and deliver your num-
bers.” This statement was front and center in every
meeting, every communication, and every initiative
that was undertaken. It provided the rallying cry and
aligned everyone across the site with a concept that
was easily translated into something real that people
could get their minds around, says Flickinger.
To implement the HPWS, the company com-
pletely restructured the way the plant was led. The
hierarchical structure of supervisors, department
managers, and superintendents were eliminated.
Team leaders, line leaders, and technical support
leaders were put in place instead. The line leadership
concept was the most critical role in the development
of the plant’s culture of accountability. A line leader
was assigned to each line and was responsible for all
of its output—from raw materials and ingredients in
the door through to the finished product out the door.
In essence, each line leader owned the success of all
aspects of his or her line 24 hours a day. This created
a single point of accountability. The technical support
leaders became the support group for line leaders by
providing them expertise in areas such as reliability
engineering, system engineering, line changeovers,
and sanitation.
Another milestone in the development of the HPWS
was cross-training everyone, including salaried employ-
ees. Employees had one month to learn all the jobs and
determine who would work what job. They had to learn
to work together as a team in a very different way than
they had ever worked before. This gave everyone on the
line an opportunity to walk in the shoes of everyone else
and take another step forward toward building trust and
respect among salaried and hourly employees.
After the HPWS was completely implemented,
the Charlotte plant experienced financial results no
one thought possible:
• A 40 percent reduction in waste
• A 41 percent reduction in accidents
• A 52 percent reduction in consumer complaints
These metrics signaled that the HPWS had been
effective. Moreover, the improvements were sustained in
following years. What made these gains even more sig-
nificant was that the performance improvements were
made with negligible capital investment. The results
were driven through a focus on people and processes.
Implementing an HPWS isn’t an easy process,
though, says Flickinger. Sustained results do not come
overnight. Above all, empowering an organization at
the individual level doesn’t mean that a firm’s managers
can walk away from their guidance, prioritization, and,
above all, support roles, he says. “As a leader, you have to
make sure the effort touches every employee individu-
ally and in a real way. Make the tough decisions to ensure
you are taking care of your people, and remember, above
all else, sustained success begins and ends with them.”
Questions
1. Identify how Synder’s-Lance engages its employees.
2. Why might it be more effective to implement
an entire new system like an HPWS rather than
make incremental changes at a production facility
like the one in Charlotte? Couldn’t the large-scale
changes create chaos in a plant its size?
Sources: Adapted from Greg Flickinger, “How Snyder’s-Lance Trans-
formed Its Plant into a High Performance Work System,” Food Process-
ing (2011): http://www.foodprocessing.com.
89624_ch16_hr_556-584.indd 579 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
580 Part 6 Expanding Human Resources Management Horizons
CASE STUDY Whole Foods Market Faces Whole New Challenge2
In this chapter we talked about how hierarchical, com-
mand-and-control types of organizational structures
are giving way to high-performing work systems—
systems characterized by egalitarianism, knowledge
and information sharing, employee empowerment,
and reward and performance linkages. Such a system
has pretty well summed up Whole Foods Market,
the world’s leading natural and organic foods gro-
cer. Whole Foods started out in 1980 with one small
store in Austin, Texas. Today it employs nearly 19,000
employees in more than 450 stores in North America
and the United Kingdom.
The company’s HR practices have been a big part
of its success. Whole Food isn’t “run” by executives
and store managers but by in-store teams. Each team
is responsible for one area of the store, such as baked
goods, meat, poultry, and so forth, and is empowered
to make product, pricing, and staffing decisions. This
high degree of decentralization allows the stores to
better tailor their offerings and services to meet the
needs of the communities, which helps them be more
competitive.
The decentralized approach begins with hiring.
The company found that centralized, online recruit-
ing left local stores awash with resumes but not much
knowledge about applicants. Applicants can still sub-
mit resumes online, but now each store has its own
human resources department that aids in hiring and
recruiting and in-store kiosks where applicants can
apply.
Many interviews at Whole Foods Market are con-
ducted by teams of employees. Once an applicant is
hired, he or she is assigned to one of the store’s teams
for a trial period, after which the team members vote
to determine if the person deserves a full-time spot on
the team. The same process is used at the corporate
level for employees who want to join the firm’s market-
ing, human resources, finance, and IT departments.
The voting is crucial in part because it affects
workers’ paychecks. The teams are treated as separate
profit centers and rewarded with monthly bonuses
if their labor costs are under budget. Consequently,
nobody wants to vote in a slacker. Not surprisingly,
the company does not do a lot of monitoring of its
employees. They do it themselves. “We don’t have lots
of rules handed down from headquarters in Austin,”
John Mackey, the founder of the company and CEO,
has said. “Peer pressure enlists loyalty in ways that
bureaucracy doesn’t.”
Speaking of bureaucracy, in many companies
CEOs earn literally hundreds of times what the aver-
age worker does. Not at Whole Foods. Mackey’s salary
and those of other executives are capped at 19 times
the average annual salary of a full-time employee.
Employees also vote on company-wide initiatives, and
full-timers get 100 percent of their health care costs
paid for.
Nearly 8 out of 10 employees say that the training
Whole Foods offers helps them advance profession-
ally. Employees are encouraged to pursue continu-
ing education through the company’s online training
portal or certifications such as the American Cheese
Society Certified Cheese Professional exam, green
recycling classes, cooking seminars, and work-related
field trips. Invariably, Whole Foods lands on Fortune’s
100 Best Companies to Work For list each year. “I love
working at Whole Foods, and I hope to grow with this
company for years and years to come,” says one of its
employees. “This company empowers me and makes
me feel valued and valuable.”
The current challenge for Whole Foods is sus-
taining that environment—and the firm’s success.
Recently the company has been facing greater compe-
tition from lower-priced grocers like Trader Joe’s and
regional grocers that sell organic food, and the com-
pany’s earnings and stock value have fallen. Whole
Foods has responded by lowering its prices, creating
a customer loyalty program, and rolling out a chain
of smaller, lower priced stores called 365 to attract
younger and less-affluent consumers. The company
has also laid off workers, reduced the number of full-
time employees, and lowered some wages. (Whole
Foods’ labor costs are reportedly equal to about
20 percent of its sales—twice the industry standard.)
However, some industry analysts think the
changes aren’t enough and that Whole Foods has
been too slow to reposition itself in the marketplace.
“What’s happened in the natural food sector is that
the world has changed very fast around it,” says Joe
Dobrow, a health food writer and book author. “Now
there isn’t very much that is unique to Whole Foods
anymore.”
89624_ch16_hr_556-584.indd 580 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
581Chapter 16 Implementing HR Strategy: High-Performance Work Systems
2. Do you think Whole Foods will have to change its
HR practices to better compete? Are the practices
no longer vertically or horizontally aligned with
the firm’s strategy? Or does the firm’s strategy
need to change?
Sources: Alexandra Stevenson, “Whole Foods Pressured by Activist
Investor Jana Partners,” New York Times (April 10, 2017); Tom Philpott
“Employees Are Bitter as Whole Foods Chops Jobs and Wages,”
Mother Jones (October 3, 2015), http://www.motherjones.com; “Cele-
brating Great Workplace Cultures,” Great Place to Work Institute (2013),
http://www.greatplacetowork.com; “Whole Foods Market Named to
2013 ‘World’s Most Ethical Companies’ List,” MarketWatch (March 6,
2013), http://www.marketwatch.com; Gary Hael and Bill Breen, “Cre-
ating a Community of Purpose: Management Innovation in Action,”
Harvard Business School Press, 2007; “Whole Foods Market’s Unique
Work Culture and Practices,” ICMR (2006), http://www.icmrindia.org;
Frank Roche, “HR Lessons from Whole Foods,” KnowHR, http://www.
knowhr.com.
In 2017 a hedge fund purchased about 8 percent of
the Whole Foods stock and began pressuring the com-
pany to operate more like big-box grocers such as Costco
and Walmart to boost its revenues and share price. The
changes would likely include offering fewer product
choices to customers, implementing a central distribu-
tion system, and centralized operations—or even sell-
ing the company outright to make as much money as
possible for investors. Later in the year, Amazon.com
bought Whole Foods Market for $13.7 billion.
Questions
1. Why don’t all companies treat their employees
like Whole Foods does? Are there downsides of
doing so?
Notes and References
1. Diane Landsman, “Talent Management at the Best Work-
places,” Talent Management (April 4, 2007), http://talentmgt
.com.
2. Rebecca R. Kehoe and Patrick M. Wright, “The Impact of
High-Performance Human Resource Practices on Employees’
Attitudes and Behaviors,” Journal of Management 39, no. 2
(2013): 366–391; D. A. Nadler and M. S. Gerstein, “Design-
ing High-Performance Work Systems: Organizing People,
Work, Technology, and Information,” Organizational Archi-
tecture (San Francisco: Jossey-Bass, 1992), 195–208; E. Lawler
III, Susan Albers Mohrman, and Gerald E. Ledford, Creat-
ing High Performance Organizations: Practices and Results
of Employee Involvement and Total Quality Management in
Fortune 1000 Companies (San Francisco: Jossey-Bass, 1995);
Edward Lawler III, Susan Albers Mohrman, and George
Benson, Organizing for High Performance: Employee Involve-
ment, TQM, Reengineering, and Knowledge Management in
the Fortune 1000: The CEO Report (San Francisco: Jossey-
Bass, 2001). See also David Nadler, Michael Tushman, and
Mark Nadler, Competing by Design: The Power of Organiza-
tional Architecture (New York: Oxford University Press, 1997);
Jody Gitell Hoffer, “Relationships and Resilience,” Journal of
Applied Behavioral Science 44, no. 1 (March 2008): 25–47.
3. Beth Kowitt, “At Ikea, No Ranks, No Rancor,” Fortune
(March 15, 2016): 202.
4. Verne Harnish, “Five Ways to Keep Employees Excited,”
Fortune (December 3, 2012), 40.
5. Tae-Youn Park and Jason D. Shaw, “Turnover Rates and
Organizational Performance: A Meta-Analysis” (2013): 268;
J. B. Arthur, “Effects of Human Resource Systems on Manu-
facturing Performance and Turnover,” Academy of Manage-
ment Journal 37 (1994): 670–687; M. Huselid, “The Impact
of Human Resource Management Practices on Turnover,
Productivity, and Corporate Financial Performance,” Acad-
emy of Management Journal 38 (1995): 635–672; Mark A.
Youndt, Scott A. Snell, James W. Dean, Jr., and David P. Lepak,
“Human Resource Management, Manufacturing Strategy, and
Firm Performance,” Academy of Management Journal 39,
no. 4 (August 1996): 836–866; John F. Tomer, “Understanding
High-Performance Work Systems: The Joint Contribution of
Economics and Human Resource Management,” The Journal
of Socio-Economics 30, no. 1 (January 2001): 63; Kris Dunn,
“Rules of Engagement,” Workforce Management Online (July
2008).
6. Arnold B. Bakker, Evangelia Demerouti, and Ana Isabel
Sanz-Vergel, “Burnout and Work Engagement: The JD–R
Approach,” Annual Review Organizational Psychology, Organ.
Behavior 1, no. 1 (2014): 389–411; Rasha Mourtada, “Bosses
Fan the Flames of Burnout,” Globe and Mail (June 8, 2011),
http://www.theglobeandmail.com.
7. “Developing and Sustaining High-Performance Work Teams,”
SHRM (July 23, 2017), https://www.shrm.org.
8. Linda Anderson, “A Little Something for the Weekend,”
Financial Times (June 3, 2011), http://www.ft.com.
9. Carlton P. McNamara, “Making Human Capital Productive,”
Business and Economic Review 46, no. 1 (October–December
1999): 10–13; Meagan Stovel and Nick Bontis, “Voluntary
Turnover: Knowledge Management—Friend or Foe?” Journal
of Intellectual Capital 3, no. 3 (2002): 303–322.
10. M. Zhang, C. Zhu, P. Dowling, and T Bartram, “Exploring the
Effects of High-Performance Work Systems (HPWS) on the
Work-Related Well-Being of Chinese Hospital Employees,”
International Journal of Human Resource Management 24,
no. 16 (December 2013): 3196–3212.
89624_ch16_hr_556-584.indd 581 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
582 Part 6 Expanding Human Resources Management Horizons
11. Hui Zhang and Lanyun Wang, “The Description and Evalua-
tion on the Modern Mechanism of High-Performance Work
Systems,” Modern Management 3, no. 5 (October 2013):
135–140.
12. Steven D. Silver, “Designing Technology for Managing the
Information Exchange of Decision Making Teams,” Decision
Support Systems 61 (2014): 136–146; Martin Eppler and
Oliver Sukowski, “Managing Team Knowledge: Core Pro-
cesses, Tools and Enabling Factors,” European Management
Journal 18, no. 3 (June 2000): 334–341; Andrea Foote, “One
in a Million: Ocean Spray Henderson Has Parlayed Hard
Work and Dedication into a Remarkable Operations Mile-
stone,” BeverageWorld 122, no. 8 (August 15, 2003): 22–29;
Rick Frattali, “The Company That Teaches Together Performs
Together,” T1D 61, no. 7 (July 2007), http://www.astd.org.
13. Sheng Wang, Raymond A. Noe, and Zhong-Ming Wang,
“Motivating Knowledge Sharing in Knowledge Management
Systems: A Quasi–Field Experiment,” Journal of Management
40, no. 4 (2014): 978–1009; Jeffrey Kling, “High Performance
Work Systems and Firm Performance,” Monthly Labor Review
(May 1995): 29–36; Chad Kaydo, “Top of the Charts: FedEx,”
Sales and Marketing Management 150, no. 7 (July 1998): 46, 48;
Michael Trachtman, “Roving Internet Appliances,” Web Tech-
niques 6, no. 10 (October 2001): 55–57; Richard Shulman,
“Just Say the Word,” Supermarket Business 56, no. 6 (June 15,
2001): 19–20; “Customer Service Excellence: Continuously
Delighting Your Customers,” PR Newswire ( February 24,
2005), http://www.prnewswire.com
14. Mark Chen, “Applying the High-Performance Work Teams
to EPC,” AACE International Transactions (2002): PM61-
PM67; Valerie Sessa, “Supporting Work Team Effectiveness:
Best Management Practices for Fostering High Performance,”
Personnel Psychology 53, no. 2 (Summer 2000): 457–460.
15. Amina Malik, Laxmikant Manroop, and Pankaj C. Patel, “An
Empirical Examination of the Relationship between HPWS
and Firm Performance,” Academy of Management Proceedings
2016, no. 1 (2016); Martha Gephart and Mark Van Buren,
“Power of High Performance Work Systems,” Training &
Development 50, no. 10 (October 1996): 21–36; Michael
Beer, “How to Develop an Organization Capable of Sustained
High Performance: Embrace the Drive for Results-Capability
Development Paradox,” Organizational Dynamics 29, no. 4
(Spring 2001): 233–247.
16. Karina Van De Voorde and Susanne Beijer, “The Role of
Employee HR Attributions in the Relationship between
High-Performance Work Systems and Employee Outcomes,”
Human Resource Management Journal 25 no. 1 (2015): 62–78;
Lawler, Mohrman, and Ledford, Creating High Performance
Organizations; Eileen Appelbaum, Thomas Bailey, Peter
Berg, and Narne Kalleberg, Manufacturing Advantage: Why
High-Performance Work Systems Pay Off (Ithaca, NY: Cornell
University Press, 2000); Gil Preuss and Brenda Lautsch, “The
Effect of Formal versus Informal Job Security on Employee
Involvement Programs,” Relations Industrielles 57, no. 3
(Summer 2002): 517–539; Wendy S. Becker, “Manufacturing
Advantage: Why High-Performance Work Systems Pay Off,”
Personnel Psychology 56, no. 2 (Summer 2003): 549–553.
17. Liang-Chih Huang et al., “High Performance Work Systems,
Employee Well-being, and Job Involvement: An Empirical Study,”
Personnel Review 45, no. 2 (2016): 296–314; Laurie J. Bassi and
Mark E. Van Buren, “Sustaining High Performance in Bad Times,”
Training & Development 51, no. 6 (June 1997): 32–42; Michael J.
Stevens and Michael A. Campion, “Staffing Work Teams: Devel-
opment and Validation of a Selection Test for Teamwork Settings,”
Journal of Management 25, no. 2 (1999): 207–228.
18. Christopher Tkacyz, “Tips from Recruiters at the 100 Best
Companies,” Fortune (March 15, 2016): 90.
19. Carolee Coleter, “To Build a Productive Team, Interview
Effectively,” Natural Foods Merchandiser 25, no. 12 (December
2004): 27; Kris Dunn, “Rules of Engagement,” Workforce
Management Online (July 2008).
20. Christopher Tkaczyk, “My Five Days of ‘Bleeding Green,’”
Fortune (March 15, 2016), http://www.fortune.com.
21. Alec Levenson, “The Value of High Performance Work
Design,” Talent Economy (November 7, 2017), http://www
.talenteconomy.io.
22. Douglas McCarthy, Kimberly Mueller, and Jennifer Wrenn,
“Henry Ford Health System: A Framework for System Inte-
gration, Coordination, Collaboration, and Innovation,”
Commonwealth Fund (August 2009), http://www.common
-wealthfund.org.
23. Chris Matthews, “This Company Gave Every One of Its
Employees a $100K Christmas Bonus,” Fortune (December 11,
2015), http://fortune.com; Erica Frey, “Hilcorp Energy,” Fortune
(August 12, 2013), 14.
24. Rosemary Batt and Lisa Moynihan, “The Viability of Alternative
Call Centre Production Models,” Human Resource Management
Journal 12, no. 4 (2002): 14. For more information on the poten-
tial application of “intracapital,” see Gifford Pinchot, “Free Intra-
prise,” Executive Excellence 18, no. 1 (January 2001): 10; Frank
Giancola, “Skill-Based Pay—Issues for Consideration,” Benefits
& Compensation Digest 44, no. 5 (May 2007): 1–15.
25. Rod Newing, “Targets Are Linked to Pay by Early Adopters,”
Financial Times (June 7, 2011), http://www.ft.com.
26. David Paper, James Rodger, and Parag Pendharker, “A BPR
Case Study at Honeywell,” Business Process Management
Journal 7, no. 2 (2001): 85–93. See also Robert McNabb
and Keith Whitfield, “Job Evaluation and High Perfor-
mance Work Practices: Compatible or Conflictual?” Journal
of Management Studies 38, no. 2 (March 2001): 293–312;
Leslie A. Weatherly, “Performance Management: Getting It
Right from the Start,” HRMagazine 49, no. 3 (March 2004):
S1–S11.
27. Douglas McCarthy, Kimberly Mueller, and Jennifer Wrenn,
“Henry Ford Health System: A Framework for System Inte-
gration, Coordination, Collaboration, and Innovation,”
Commonwealth Fund (August 2009), http://www.common
-wealthfund.org.
89624_ch16_hr_556-584.indd 582 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
583Chapter 16 Implementing HR Strategy: High-Performance Work Systems
28. Rod Newing, “Targets Are Linked to Pay by Early Adopters,”
Financial Times (June 7, 2011), http://www.ft.com.
29. Rachel Emma Silverman, “For Hourly Jobs, White-Collar
Perks,” Wall Street Journal (October 8, 2011), B8.
30. Stacy Cowley, “New Payday Options for Making Ends Meet,”
New York Times (July 4, 2016), https://www.nytimes.com.
31. Warren Bennis, “The Future Has No Shelf Life,” Executive
Excellence 17, no. 8 (August 2000): 5–6; Peggy Holman, “Cul-
ture Change,” Executive Excellence 17, no. 7 (July 2000): 16;
Clinton Longenecker, “Building High Performance Manage-
ment Teams,” Industrial Management 43, no. 6 (November–
December 2001): 21–26; Wendy S. Becker, “Manufacturing
Advantage: Why High-Performance Work Systems Pay Off,”
Personnel Psychology 56, no. 2 (Summer 2003): 549; Srivastava
Pallavi and Jyotsna Bhatnagar, “Turnaround at Motorola India—
Mobile Devices Business through the HR Lever,” The Journal for
Decision Makers 33, no. 1 (January–March 2008): 119–129.
32. W. Randy Evans and Walter D. Davis, “High-Performance
Work Systems as an Initiator of Employee Proactivity and
Flexible Work Processes,” Organization Management Journal
12, no. 2 (2015): 64–74; Keith Newton, “The High Perfor-
mance Workplace: HR-Based Management Innovations in
Canada,” International Journal of Technology Management
16, no. 1–3 (1998): 177–192; Georg Von Krogh, Kazuo
Ichijo, and Ikujiro Nonaka, Enabling Knowledge Creation:
How to Unlock the Mystery of Tacit Knowledge and Release
the Power of Innovation (New York: Oxford University Press,
2000); Lawler, Mohrman, and Benson, Organizing for High
Performance.
33. Patrick M. Wright and Scott A. Snell, “Toward a Unifying
Framework for Exploring Fit and Flexibility in Strategic
Human Resource Management,” Academy of Management
Review 23, no. 4 (October 1998): 756–772; Clair Brown and
Michael Reich, “Micro-Macro Linkages in High-Performance
Employment Systems,” Organization Studies 18, no. 5 (1997):
765–781; S. A. Snell, M. Shadur, and P. M. Wright, “Human
Resources Strategy: The Era of Our Ways,” in M. A. Hitt, R. E.
Freeman, and J. S. Harrison (eds.), Handbook of Strategic
Management (London: Blackwell, 2002), 627–649.
34. Björn Michaelis, Joachim D. Wagner, and Lars Schweizer,
“Knowledge as a Key in the Relationship between High-Per-
formance Work Systems and Workforce Productivity,” Journal
of Business Research 69, no. 5 (2015): 1035–1044; Van Buren
and Werner, “High Performance Work Systems,” 15–23;
Gilbert Probst, Steffen Raub, and Kai Romhardt, Managing
Knowledge—Building Blocks for Success (New York: Wiley,
2000). For a similar example of horizontal fit within European
firms, see Sue Hutchinson, John Purcell, and Nick Kinnie,
“Evolving High Commitment Management and the Experi-
ence of the RAC Call Center,” Human Resource Management
Journal 10, no. 1 (2000): 63–78.
35. Brian Becker, Mark Huselid, and Dave Ulrich, The HR Score-
card: Linking People, Strategy, and Performance (Cambridge,
MA: Harvard Business School Press, 2001).
36. Jongwook Pak and Seongsu Kim, “Team Manager’s Imple-
mentation, High Performance Work Systems Intensity, and
Performance: A Multilevel Investigation,” Journal of Man-
agement (2016): 0149206316646829; Arup Varma, Richard
W. Beatty, Craig Eric Schneier, and David O. Ulrich, “High
Performance Work Systems: Exciting Discovery or Passing
Fad?” Human Resource Planning 22, no. 1 (1999): 26–37;
Martha Gephart and Mark Van Buren, “Power of High Per-
formance Work Systems,” Training & Development 50, no. 10
(October 1996): 21–36; Foote, “One in a Million: Ocean Spray
Henderson,” 22–29.
37. Takao Katom, Hideaki Miyajima, and Hideo Owan, Does
Employee Stock Ownership Work? Research Institute of
Economy, Trade and Industry (RIETI; 2016); Louise Clarke
and Larry Haiven, “Workplace Change and Continuous
Bargaining,” Relations Industrielles 54, no. 1 (Winter 1999):
168–191; Ruth Wright, “Forging Sustainable Alliances in a
New Economy,” Canadian Business Review (Summer 1995):
20–24; Sukanya Sengupta, “The Impact of Employee-Share-
Ownership Schemes on Performance in Unionised and Non-
Unionised Workplaces,” Industrial Relations Journal 39, no. 3
(May 2008): 170–190.
38. Akhtar Mahmood, Muhammad Kashif Khurshid, and
Usman Ali, “The Impact of High Performance Work Sys-
tem on Employees Attitude: The Mediating Role of Human
Resource Flexibility,” Journal of Contemporary Management
Sciences 2, no. 1 (2017): 83–124; Wenchuan Liu, James P.
Guthrie, Patrick C. Flood, and Sarah Maccurtain, “Unions
and the Adoption of High Performance Work Systems: Does
Employment Security Play a Role?” Industrial & Labor Rela-
tions Review 63, no. 1 (October 2009): 109.
39. Ethan R. Mollick, “People and Process, Suits and Innovators:
The Role of Individuals in Firm Performance,” Social Science
Research Network (June 27, 2010), http://papers.ssrn.com.
40. Karina Van De Voorde and Susanne Beijer, “The Role of
Employee HR Attributions in the Relationship between
High-Performance Work Systems and Employee Outcomes,”
Human Resource Management Journal 25, no. 1 (2015): 62–78;
Varma, Beatty, Schneier, and Ulrich, “High Performance
Work Systems,” 26–37; Gephart and Van Buren, “Power of
High Performance Work Systems”; “Making Change Work—
for Real,” HRFocus 80, no. 1 (January 2003): S1.
41. Judith A. Neal, Cheryl L. Tromley, Ernie Lopez, and Jeanne
Russell. “From Incremental Change to Retrofit,” The Academy
of Management Executive 9, no. 1 (February 1995): 42–54.
42. Wright, “Forging Sustainable Alliances,” 20–24; Hannele
Rubin, “How CEOs Get Results,” Chief Executive (February
2001): 8.
43. Randa A. Wilbur, “Making Changes the Right Way,” Work-
force (March 1999): S12–S13; Gephart and Van Buren, “Power
of High Performance Work Systems”; Irena St. John-Brooks,
“CEOs See HR as Helping to Lead Organizational Efforts:
USA,” Benefits & Compensation International 32, no. 1 (July/
August 2002): 73–74; “Human Resources Role Transformed
89624_ch16_hr_556-584.indd 583 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
584 Part 6 Expanding Human Resources Management Horizons
at Deutsche Bank,” Human Resource Management Interna-
tional Digest 10, no. 5 (2002): 12–14; Michael Svoboda and
Silke Schroder, “Transforming Human Resources in the New
Economy: Developing the Next Generation of Global HR
Managers at Deutsche Bank AG,” Human Resource Manage-
ment 40, no. 3 (Fall 2001): 261–273; “HR Advice: Manage
Transition—Not Just Change,” HR Briefing (November 15,
2002): 1–2; “HR Must Seize Major Role over Change Man-
agement,” Personnel Today (May 20, 2003): 8.
44. Liang-Chih Huang et al., “High Performance Work Systems,
Employee Well-Being, and Job Involvement: An Empirical
Study,” Personnel Review 45, no. 2 (2016): 296–314; “How to
Take the ‘Non’ out of Your Non-Performers,” Human Resource
Department Management Report (February 2005): 1–5; Paul
Lukas and Maggie Overfelt, “3M, a Mining Company Built on
a Mistake, Stuck It Out until a Young Man Came Along with
Ideas about How to Tape Those Blunders Together as Inno-
vations—Leading to Decades of Growth,” Fortune (April 1,
2003), http://money.cnn.com/smallbusiness.
45. Jeffrey Pfeffer, “When It Comes to ‘Best Practices’—Why
Do Smart Organizations Occasionally Do Dumb Things?”
reprinted from Organizational Dynamics, Summer 1996 with
permission from Elsevier; Cordelia Brabbs, “Rover’s White
Knight,” Marketing (May 18, 2000): 28; Georg Auer, “Burela
to Instill Quality Culture at Land Rover,” Automotive News 75,
no. 5902 (November 6, 2000): 32x–32z; Ronald W. Pant, “Land
Rover History Lesson,” Truck Trend 8, no. 3 (May–June 2005):
12; Bradford Wernle, “Solihull Must Do ‘a Halewood’ to Survive;
Jaguar Plant Is the Example Land Rover Factory Must Follow,”
Automotive News Europe 9, no. 19 (September 20, 2004): 39.
46. P. Kumar, AMUDHA, “High Performance Work Systems and
Organizational Success,” Journal of Human Resource 2, no. 6
(2014): 1–14; Martha A. Gephart and Mark E. Van Buren,
“The Power of High Performance Work Systems,” Training &
Development 50, no. 10 (October 1996): 21–36.
47. John Purcell, “Best Practice and Best Fit: Chimera or
Cul- de-Sac?” Human Resource Management Journal 9,
no. 3 (1999): 26–41; Snell, Shadur, and Wright, “Human
Resources Strategy: The Era of Our Ways,” 627–649; Patrick
M. Wright, Benjamin Dunford, and Scott A. Snell, “Human
Resources and the Resource-Based View of the Firm,” Jour-
nal of Management 27, no. 6 (2001): 701–721.
89624_ch16_hr_556-584.indd 584 10/20/17 12:07 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
585
Integrative Cases
Like many companies, Microsoft has been faced with
the challenge of finding ways to accelerate the careers
of new hires. The tech firm’s executives found that its
fast-track program was not especially helpful when it
came to onboarding millennial employees. As Leigh
Cresswell, a millennial education business manager
for Microsoft, put it, too often millennials aren’t given
challenging work when they are first hired, which can
be frustrating for them and lead to turnover. That is
what happened to Cresswell at her previous employer,
a multinational maker of office equipment. Their
onboarding program was “just training; they didn’t
understand what we wanted, which was to have an
impact and a voice straight away.”
Microsoft did not want to make the same mistake.
To deal with this issue, attract top graduates, and begin
utilizing their skills quickly, the company launched the
“Microsoft Academy for College Hires,” or MACH for
short. The 2-year program is designed to provide top
new university graduates hired into the company’s
Evangelism, Finance, IT, Marketing, Operations, and
Sales and Services organizations with onboarding
courses, hands-on training, coaching, and networking
opportunities. The main objective of MACH [https://
careers.microsoft.com/students/mach] is not only
to onboard new graduates so they can start adding
value to their teams quickly, but also to more fully ori-
ent them to efficiently navigate the corporate culture
and politics. MACH pushes new hires to make a more
valuable contribution earlier in their career. So it’s not
just an onboarding program about helping people
understand how they can fit into the Microsoft culture.
Rather, it’s about orienting people within Microsoft to
drive innovation and change early in their career.
Thousands of individuals have gone through
MACH since its inception. One of them, Francesco
Esposito, noted that because new grads have small or
nonexistent professional networks and are typically
entering a large corporation for the first time, they
can have a hard time launching their careers. Grad-
uates of the MACH noted that the program not
only helped them network with senior employees,
but also connect with other Microsoft employees
around the world. MACH has expanded to include
participants in 70 countries who attend global and
regional conferences with each other. This has given
participants a worldwide group of peers who can
provide them with support as they transition from
school to the working environment. The global
aspect also had the added benefit of exposing them
to vastly different opportunities and parts of the
company.
According to Maryann Baumgarten, who man-
aged the development of the curriculum for the MACH
program, Microsoft learned that the program needs to
follow several key steps to have maximum impact. In
the first year, MACH students focus on moving from
the academic world to Microsoft’s corporate environ-
ment. “It’s a critical first step in employee retention as
we help them to understand our culture, strategy, and
customers,” Baumgarten explains. In the second year,
the participants go through career coaching and peer
reviews to help them determine which career paths in
the company will best suit their needs. Once a path is
determined, they can choose mentors whom they can
job shadow to learn more about the job’s duties and
responsibilities.
To facilitate the job-shadowing process, senior
employees fill out an online form to make themselves
available for the MACH program, but they can opt
out as needed for specific time periods. The form
identifies the mentor’s top three skill sets, languages,
and geographical location. This makes it easier for a
junior employee to find a suitable match. The form
also allows junior employees to search for available
mentors and request career-shadowing time. To help
Microsoft’s MACH Program
Designed to Help Millennial Grads
Make a Difference—Fast
CASE 1
89624_em_case_hr_585-610.indd 585 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
586 Case 1 Microsoft’s MACH Program Designed to Help Millennial Grads Make a Difference—Fast
senior employees become good mentors who can help
develop and retain young workers, Microsoft offers
them classes on generational milestones and charac-
teristics as well as scenario training.
Since its start, the MACH program seems to be
speeding up the contributions of millennials and
improving their job satisfaction at Microsoft. “We
believe that betting on young talent means bringing in
new ideas to continue empowering people and organi-
zations around the world, a key aspect in an industry
that does not respect tradition, only innovation,” said
Elizabeth Arredon, a university recruiter for Microsoft.
Joseph Ibarra, a MACH grad, is also a supporter of the
program. “I’ve seen alumni at the MACH events, peo-
ple who have accelerated quickly throughout the com-
pany and won some of Microsoft’s most prestigious
awards. It’s really inspirational to see people come to
the company and have a huge influence. It shows it
can be done, even at a company with so many people.”
Questions
1. How does orientation differ from onboarding?
2. Why do you think Microsoft implemented the
MACH program? Can you see any drawbacks of
doing so?
3. How might the program improve Microsoft’s
employer brand and help it attract talent?
Sources: Elliot Bullman, “Microsoft Seeks Mexican Millennials to
Change the World,” The Yucatan Times (January 22, 2017), http://
www.theyucatantimes.com/2017/01/microsoft-seeks-mexican-
millennials-to-change-the-world/; Microsoft Careers. https://careers.
microsoft.com/students/mach (Accessed May 18, 2017); Andrew
Weiss, “What Microsoft Wants Its New Grads to Know,” IT World (July
2, 2012), http:www.itworld.com; Jennifer J. Salopek, “Onboarding
Program Indoctrinates New Workers at MACH Speed,” Workforce
Management (June 2011), http://www.workforce.com; Randy
Woods, “Grooming New Hires with Microsoft’s MACH Program,”
NWjobs (March 13, 2010), http://blog.nwjobs.com; “Case Study: A
Customized Office and SharePoint Solution for Microsoft’s Internal
Career Shadowing Program,” 3sharp.com (July 7, 2011), http://
www.3sharp.com.
89624_em_case_hr_585-610.indd 586 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
587
CASE 2 Trains and Training at BNSF Railway
By its nature, the railroad industry can be a dan-
gerous one in which to work. Consequently, rail-
way workers must be equipped with the knowledge,
tools, focus, and skills to work safely. At BNSF
Railway, safety is of the upmost importance. As
new hires come on board, BNSF provides training
through multiple methods, including on-the-job
training in the field with input from experienced
employee mentors and safety assistants or safety
coordinators. Formal training is provided for many
positions at the company’s Technical Training Cen-
ter (TTC) in Overland Park, Kansas, as well as in
the field.
Newly hired conductors at BNSF, for example,
have an interim period before they are officially
hired. Candidates must successfully respond to a
panel interview. During the interview, BNSF’s inter-
viewers communicate the challenges of working for a
railroad along with BNSF’s safety vision. Candidates
also must pass safety and rules exams, and complete
either a 13- or 15-week intensive training program
(depending on the location), which includes class-
room and on-the-job training. The program culmi-
nates in a final exam which, when passed, qualifies
students as conductors.
United Transportation Union (UTU) training
coordinators help with the first week of training and
pair students with experienced conductors who men-
tor students during the on-the-job training segment.
Once the new hires are paired, the experienced con-
ductors play a significant role in conductor training,
teaching 9 to 10 weeks of the 13- to 15-week program.
“I particularly focus on deadly decisions—and conse-
quences of at-risk behaviors,” says one of the UTU’s
training coordinators.
To further integrate a new conductor, a divi-
sion’s UTU training coordinators provide enhanced
safety training specific to the conductor’s location.
This includes an overview of the local terrain and
environmental extremes that a potential employee
is likely to encounter. In Montana, for example,
trainers help employees understand the challenges
of operating through the mountains and in winter
conditions.
Of course, the training at BNSF isn’t just for new
hires. For those on a managerial track, the company
offers mentoring, safety leadership training, and an
annual company-wide initiative called “People Leader
Training.” It is designed to develop the leadership
capabilities of employees via a competitive railroad
simulation and a 12-week online program that uti-
lizes case studies, social learning, and gamification
principles. BNSF also cross-trains its Transportation
trainers. They become qualified to train locomotive
engineers and conductors, as well as provide train-
ing on simulators and rules and remote train-control.
This effectively increases BNSF’s training capacity
while also expanding individual trainers’ areas of
specialty.
Questions
1. What methods does BNSF use as part of its com-
prehensive training system for new hires? How
do the methods differ for employees on a mana-
gerial track?
2. Explain the company’s team approach to training.
How does cross-training the company’s trainers
benefit BNSF?
3. What is the purpose of explaining during inter-
views BNSF’s safety practices and on-the-job
working challenges?
Sources: Excerpted/adapted from “Trainers Carry Forward BNSF’s
Safety Vision to New Hires,” Railway (Spring 2011): 16–17; “Additional
2016 Best Award Winners,” Association for Training and Development
(October 5, 2016), https://www.td.org.
587
89624_em_case_hr_585-610.indd 587 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
588
Job Analysis and Hiring Decisions
at Ovania Chemical Company
CASE 3
Background
Ovania Chemical Corporation is a specialty chemicals
producer of polyethylene terephthalate (PET) thermo-
plastic resins primarily used to make containers for
soft drinks and bottled water, as well as packaging
for food and pharmaceutical products. Although it’s
smaller than other chemical producers that produce
globally, Ovania has competed successfully in the spe-
cialty chemical business. Its main plant is located in
Steubenville, Ohio, which is positioned along the Ohio
River midway between Pittsburgh, Pennsylvania, and
Wheeling, West Virginia. Over the years, advances in
technology have altered the nature of chemical pro-
duction, and like other firms in the industry, Ovania
Chemical is constantly taking steps to stay abreast of
them. Not surprisingly, these technological changes
have been accompanied by redesign in employee jobs.
In fact, over the last 3 years, there have been dras-
tic changes in both the number and the kinds of jobs
being performed by employees. The latest change at
the Steubenville plant involves the job transformation
of the system analyzer position.
The System Analyzer
Because chemical production involves highly inte-
grated process technologies, someone is needed who
can monitor all of the individual components simul-
taneously. The system analyzer is primarily respon-
sible for this monitoring function. It is one of the most
prestigious nonmanagerial jobs in the entire plant,
and its importance is likely to grow.
Formerly, the position was classified as that of a
semiskilled maintenance technician, but as the plant
has become more automated, the requirements for the
system analyzer job have become much more extensive.
Knowledge of pneumatics, hydraulics, information
technology, programming, scheduling, and electrical
wiring are all increasingly critical aspects of this job.
The three men who currently hold the position admit
that they will be incapable of performing adequately
in the future. It is estimated that within 2 years, the
tasks, duties, and responsibilities of the system analyzer
will have changed by more than 70 percent. For these
reasons, the decision was made to recruit and select
three new people for the rapidly transforming position.
Job Analysis and New
Position Analysis
Forming a selection committee were Ovania’s Steu-
benville plant manager, Ravi Sarabe; the HR manager,
Emily Claire; and two senior engineers, Dave Packley
and Mary Young. With the help of two consultants,
they first conducted a job analysis for the new position
of system analyzer. Although they had to make some
predictions about what the nature of the job would be
in the future, they collectively felt they had created an
accurate depiction of the requirements for someone
who would occupy the position. Figure 3.1 shows a
list of the major performance dimensions of the job
and a subsample of specific tasks characteristic of each
dimension.
From this list of tasks, the selection committee
then delineated a set of 12 KSAOs required for any-
one in the system analyzer position (as shown in
Figure 3.2). The numbers beside each ability indicate
the tasks (see Figure 3.1) to which it is related. The
abilities marked with an asterisk (*) were considered
by the committee to be “critical.” Any applicant not
scoring well on each of the critical dimensions would
be considered unqualified for the job.
Anticipated Selection Process
The committee hoped to find the best available tal-
ent for the job and therefore wanted to recruit exter-
nally for it. However, Ovania’s top managers were
89624_em_case_hr_585-610.indd 588 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
589Case 3 Job Analysis and Hiring Decisions at Ovania Chemical Company
Maintaining Spares and Supplies
1. Anticipates future need for parts and supplies and orders them.
2. Stocks parts and supplies in an orderly fashion.
3. Maintains and calibrates test equipment.
Troubleshooting
4. Applies calibration standards to verify operation by subjecting the system to known standards.
5. Decides whether the problem is in the sensor, in the processor, in the process stream, and/or in the sample system.
6. Uses troubleshooting guides in system manuals to determine the problem area.
7. Uses test equipment to diagnose the problem.
8. Makes a general visual inspection of the analyzer system as a first troubleshooting step.
9. Replaces components such as printed circuit boards and sensors to see if the problem can be alleviated.
Handling Revisions and New Installations
10. Makes minor piping changes such as size, routing, and additional filers.
11. Makes minor electrical changes such as installing switches and wires and making terminal changes.
12. Uses common pipefitting tools.
13. Uses common electrical tools.
14. Reads installation drawings.
Record-Keeping
15. Maintains system files showing historical record of work on each system.
16. Maintains loop files that show the application of the system.
17. Updates piping and instrument drawings if any changes are made.
18. Maintains Environmental Protection Agency records and logbooks.
19. Disassembles analyzers to perform repairs onsite or back in the shop.
20. Replaces damaged parts such as filters, electronic components, light source, lenses, sensors, and values.
21. Uses diagnostic equipment such as oscilloscopes, ohmmeters, and decade boxes.
22. Tests and calibrates repaired equipment to ensure that it works properly.
23. Reads and follows written procedures from manuals.
Routine Maintenance
24. Observes indicators on systems to ensure that there is proper operation.
25. Adds reagents to systems.
26. Decides whether the lab results or the system is correct regarding results (i.e., resolves discrepancies between lab
and analyzer results).
27. Performs calibrations.
Performance Dimensions (Duties and Tasks)Figure 3.1
89624_em_case_hr_585-610.indd 589 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
590 Case 3 Job Analysis and Hiring Decisions at Ovania Chemical Company
Numbers represent tasks cited in Figure 3.1. Asterisks indicate abilities considered critical by
the committee.
Skills Task Numbers
*Finger dexterity 3, 4, 7, 9, 10, 11, 12, 13, 19, 20, 21, 22, 25, 27
*Mechanical comprehension 3, 5, 6, 8, 9, 10, 12, 13, 7, 14, 19, 20, 22, 23, 24, 27, 11, 17
*Numerical ability 11, 3, 4, 24, 10, 21, 12, 13, 14, 27
*Spatial ability 2, 4, 5, 9, 10, 11, 14, 19, 20
*Visual pursuit 3, 4, 5, 6, 7, 8, 9, 10, 11, 14, 16, 17, 19, 20, 21, 22, 27
*Detection 2, 3, 5, 6, 8, 9, 10, 14, 19, 20, 23, 7
Oral comprehension 1, 2, 5, 6, 26, 7, 8, 9, 19, 21, 25
Written comprehension 1, 15, 16, 17, 18
Deductive reasoning 1, 5, 3, 6, 7, 8, 9, 10, 11, 19, 21, 20, 22, 2, 26, 27
Inductive reasoning 1, 3, 5, 6, 7, 8, 9, 10, 11, 19, 21, 20, 22, 2, 26, 27
Reading comprehension 3, 6, 14, 7, 22, 23, 21, 9, 27
Reading scales and tables 3, 4, 7, 8, 9, 21, 23, 24, 27, 2, 6, 14
Abilities and TasksFigure 3.2
also deeply committed to promoting from within.
Ultimately the committee decided to recruit both
internally and externally for the new position. The
committee also decided to encourage the firm’s cur-
rent system analyzers to reapply for the job.
Because there was a 2-year lead time before the
newly transformed position would be put in place,
the committee was very careful not to include in the
selection battery any skills or knowledge that could
reasonably be trained for within that 2-year period.
Only aptitude or ability factors were incorporated
into the selection process rather than achievement
tests.
The three present system analyzers were white
males. However, since Ovania Chemical had a rather
unenviable history of employment discrimination
charges, the decision was made to have applicants
undergo a battery of tests but not look at their previ-
ous experience. The committee believed this would
encourage minorities and women to apply for the
new position regardless of their prior experience in
the field.
However, there was some concern about preju-
dice if a woman or minority member were to get
the job. Several employees at the company said they
wondered if a woman would be willing to get into the
treatment tanks to check gauge readings. All of these
factors, taken together, made for a very sensitive selec-
tion process. Ovania’s managers, however, were dedi-
cated to making the procedures and decisions fair and
objective.
Fifty-six employees applied for the new position
of system analyzer. Twenty-one were female; fifteen
were African American. Only two of the three current
system analyzers reapplied for the new position. The
company decided that an overall total score of 800
on the 12 tests would be the cutoff score in order for
an applicant to be seriously considered for the sys-
tem analyzer position. This criterion resulted in the
primary pool of 20 candidates shown in Figure 3.3.
It should be noted that although each of the aptitude
tests has been published, standardized (100 points
possible for each test), and validated for other jobs,
the same is not true of the system analyzer job
because it’s a new position. Therefore, whether the
tests are predictive depends upon content validity
judgments made by the managers of the company.
The final cutoff scores and methods for combining
the multiple predictors are problematic for the selec-
tion committee as well.
89624_em_case_hr_585-610.indd 590 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
591Case 3 Job Analysis and Hiring Decisions at Ovania Chemical Company
Questions
1. How would you go about conducting a job anal-
ysis for a job that does not yet exist?
2. What reasons did the selection committee have
for selecting only those factors that could not be
acquired in a 2-year training program?
Primary Pool of CandidatesFigure 3.3
Name Race Sex
External/
Internal Test Scores
Fi
ng
er
D
ex
te
ri
ty
M
ec
ha
ni
ca
l C
om
pr
eh
en
si
on
N
um
er
ic
al
A
bi
lit
y
Sp
at
ia
l A
bi
lit
y
Vi
su
al
P
ur
su
it
De
te
ct
io
n
Or
al
C
om
pr
eh
en
si
on
W
ri
tt
en
C
om
pr
eh
en
si
on
De
du
ct
iv
e
Re
as
on
in
g
In
du
ct
iv
e
Re
as
on
in
g
Re
ad
in
g
Co
m
pr
eh
en
si
on
Re
ad
in
g
Sc
al
es
a
nd
Ta
bl
es
Baldwin, T. W M I 83 76 78 76 69 71 90 70 74 72 88 92 5 941
Bittner, D. W M E 92 62 88 89 96 85 90 94 93 89 97 87 5 1062
Bohlander, G. W M E 67 78 74 70 76 62 80 69 71 76 78 82 5 883
Buffett, J. B M E 87 97 89 61 94 93 75 90 85 96 85 80 5 1032
Denny, A. B F I 92 88 72 72 78 79 69 76 81 83 81 78 5 949
Egan, M. W F E 93 80 76 98 76 88 93 92 93 78 81 92 5 884
Granger, D. W F I 82 82 79 75 77 73 72 80 81 77 70 80 5 856
Haney, H. W M E 82 76 76 71 69 80 62 76 75 74 78 67 5 810
Kight, G. W F E 65 75 72 67 80 74 62 47 66 67 60 80 5 815
Kovach, S. W M E 82 87 85 85 83 88 81 80 80 83 84 80 5 998
Laukitis, T. B F E 87 97 63 89 93 90 91 85 86 96 88 89 5 1054
Lesko, B.J. B F I 83 84 89 91 80 82 86 88 85 84 90 89 5 1031
Rom, D. B M I 80 60 67 66 67 62 74 80 67 72 75 66 5 835
Sara, E. W F I 89 91 77 93 90 91 88 78 98 80 80 76 5 1021
Sauder, C. W F E 76 72 78 81 80 72 73 77 75 79 82 82 5 927
Sherman, A. W F I 91 82 78 93 92 94 89 77 95 77 81 92 5 1041
Snell, J. W M E 80 85 84 81 81 80 89 88 84 86 81 82 5 1001
Timothy, S. W F E 82 78 76 71 69 80 62 76 76 70 71 67 5 878
Whitney, J. W M I 67 71 70 76 76 62 81 69 71 76 78 82 5 815
Wright, P. W M I 80 60 57 56 57 62 74 80 69 72 75 65 5 887
3. Should the concern for women getting down into
the dirty treatment tanks have been a selection
issue?
4. Would the test battery and selection procedure
decided on be defensible in court?
89624_em_case_hr_585-610.indd 591 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
592
Juanita Hernandez-Canton never imagined she
would lose her job at Centrex Electronics Corpora-
tion (CEC). Unfortunately, after 6 years of employ-
ment, the last 2 as a senior product engineer in CEC’s
military/space division in Atlanta, Hernandez-Canton
made a mistake: she fell in love.
CEC is highly regarded as a quality employer
in the electronics industry. It is a multinational cor-
poration with engineering services and production
facilities in Spain, Canada, Hong Kong, Mexico, and
Germany. With more than 12,000 employees in the
United States, the firm has been named as one of the
country’s top 100 organizations to work for by several
studies. The firm is known as a top-paying corpora-
tion with proactive employee relations policies.
Kathryn Garner, the vice president of human
resources for CEC, is credited with establishing many
positive employee rights policies, including those
covering electronic communications, drug testing,
search and surveillance, access to employee records,
same-sex partner benefits, and off-duty conduct. The
corporation allows employees to marry except in cases
where one employee is in a direct reporting relation-
ship with the other.
Hernandez-Canton joined Centrex Electronics
shortly after graduating from Georgia State Univer-
sity in 2012. At that time she was married to Tom
Canton, her college sweetheart. In 2015, Canton died
suddenly. As a single parent, his widow then became
dependent upon her job for the majority of her fam-
ily’s support.
Hernandez-Canton enjoyed rapid promotions
through various engineering positions. She also had
been awarded the firm’s Engineering Distinction
Award for her research and development work in met-
allography. But in January 2017, a week after receiv-
ing a significant raise, she was called into the firm’s
human resources department. The question from the
military/space division manager was clear and direct:
“Are you dating Mike Domzalski?” Domzalski was a
former CEC senior engineer who in 2015 had gone to
work for International Technologies, a direct competi-
tor of CEC. There was no denying the romance. The
two had dated while Domzalski was with CEC, and he
still remained friends with other Centrex Electronics
Engineers. It was widely known among Hernandez-
Canton’s friends that she was “extremely fond” of
Domzalski.
Now, chastised for her involvement, Hernandez-
Canton was ordered to forget about Domzalski or be
demoted. After the meeting she told a friend, “I was
so socialized in CEC culture and so devoted to my job
that I thought seriously about breaking up with Mike.”
As she later testified in court, however, she never got
the chance because she was dismissed the day after the
meeting with her manager.
At the root of Hernandez-Canton’s dismissal was
a corporate policy regarding the leakage of confiden-
tial product information. The policy seeks to avoid
situations where an employee of CEC might be com-
promised into providing sensitive or confidential
information to an employee of a competing organiza-
tion. Hernandez-Canton’s work in research and devel-
opment made her subject to the following CEC policy:
Employees performing jobs where they have
access to sensitive or confidential information
which could benefit competitors are prohibited
from being married to or from having a romantic
relationship with individuals employed by com-
peting organizations.
Since Domzalski’s work at International Tech-
nologies was similar to Hernandez-Canton’s at
CEC, the corporation felt their “romantic rela-
tionship” made her discharge appropriate. Feeling
aggrieved, Hernandez-Canton engaged the ser-
vices of an attorney specializing in employee rights
claims. In preparing her wrongful discharge suit,
CASE 4 Ill-Fated Love at
Centrex Electronics
89624_em_case_hr_585-610.indd 592 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
593Case 4 Ill-Fated Love at Centrex Electronics
the attorney told her that given the nature of her
case, he believed she could win the lawsuit. Fur-
thermore, while gathering background information
for the trial, the attorney discovered something that
her former division manager did not know. Shortly
before her discharge, the chairman of CEC had
declared that “CEC employees are responsible for
their own off-the-job behavior. We are concerned
with an employee’s off-the-job conduct only when
it reduces the employee’s ability to perform normal
job assignments.”
A jury trial in state court upheld the wrongful dis-
charge suit and awarded Hernandez-Canton $425,000
in back pay and punitive damages. Like other trials,
however, this one took its toll on the parties involved.
“I couldn’t function for 4 or 5 months after the trial,
I was so emotionally upset and drained,” Hernandez-
Canton said. She is now employed as an engineer for
a medical-device maker; she and Domzalski are no
longer dating. “It was a bad experience all around,” she
says. “There was a real sense of belonging and a feeling
of personal job worth at CEC. If I had my way, I’d take
my old job back today.”
Questions
1. What exceptions to the employment-at-will
doctrine would the attorney have used to file
the lawsuit?
2. Comment on the confidential information policy
adopted by Centrex Electronics. Do you agree
with the way it is used? Explain.
3. Is dating a “romantic relationship”? Explain.
Source: This case is adapted from an actual situation known to the
authors. All names are fictitious.
89624_em_case_hr_585-610.indd 593 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
594
CASE 5 Pepper Construction Group: Change
in Safety Leads to Decline in Injuries
and Illnesses
Dave Pepper, the third-generation owner of Pepper
Construction, met with his insurance group to review
the group’s annual summary of safety performance. To
his surprise, Pepper Construction’s experience modi-
fication rate (EMR) placed them in the bottom third
of the group. The EMR compares the frequency and
severity of workers’ compensation claims between
companies of similar size operating in the same type
of business and reflects the degree to which a particu-
lar company’s experience is better or worse than the
industry as a whole. At the time, Pepper Construc-
tion Group’s EMR was 0.71, nearly 30 percent better
than the national average for general contractors, but
two-thirds of the insurance group members were even
better. Safety performance was good, but not good
enough.
The Solution
Pepper Construction had begun to develop a long-
range strategic planning initiative. The initial goals
set by the company’s leaders were related to business
growth—profit, efficiency, information technology,
and production—but not one mentioned safety. Pep-
per reminded his team members that the company’s
most valuable asset has always been its people, and
he encouraged them to shift their focus. It was as
if a light went on within his management group.
They fully embraced the commitment to safety and
saw that it would protect the company’s greatest
asset—their people. The strategic plan shifted, and
safety became the first priority. Their initial goals
remained, but safety was now the foundation on
which profit, growth, and productivity would be
built.
Senior management, along with a newly formed
safety committee, developed the following TEAM
safety mission statement to communicate the com-
pany’s commitment to an accident free workplace:
• Training for all employees.
• Empowerment where everyone has the authority
to say “no” to unsafe conditions.
• Action—the commitment to taking the steps
necessary to protect employees and continuously
strive to improve the safety program.
• Motivation—making sure the safety of the com-
pany’s people is the top priority, above all else.
The challenge was to communicate the safety
mission through the entire company, from the hourly
craftsmen through the executive level. Previous
annual safety seminars included every craftsman in
the company, often more than 600 people in the same
lecture hall listening to lectures and generic training
topics. To emphasize their commitment to safety, Pep-
per and Ken Egidi, the president of Pepper Construc-
tion Company, held much smaller meetings limited to
no more than 40 people. They took the time to shake
every employee’s hand and made it very clear that
everyone had the right, and responsibility, to work
safely.
Pepper and his team worked hard to ensure all
employees knew the company was serious about
safety. They put in place additional resources to sup-
port this goal. For example, the company hired a new
corporate safety director, increased training opportu-
nities, and formed trades safety committees.
Pepper Construction now offers safety training
in Spanish, including an OSHA-developed training
program that consists of a 10-hour course and first-
aid training. The company also provides comprehen-
sive safety orientations on every job site. In addition,
the company provides safety seminars for the trades.
89624_em_case_hr_585-610.indd 594 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
595Case 5 Pepper Construction Group: Change in Safety Leads to Decline in Injuries and Illnesses
These seminars include up to 4 hours of training spe-
cific to the skills needed by the craftspeople, such as
powered lift training, fall protection, and emergency
response. Almost 90 percent of the company’s current
craftspeople have completed OSHA’s 30-hour con-
struction safety course.
Pepper Construction has also worked through
OSHA’s cooperative programs to improve its safety
performance. The company is a gold level partici-
pant in OSHA Region V’s Strategic Partnership with
the Builders Association. The goals of this strategic
partnership include reducing injuries, illnesses, and
fatalities in construction by addressing key indus-
try hazards, promoting recognition for construction
safety excellence, and sharing best practices. Gold
level participants must meet a number of require-
ments, including the implementation of a compre-
hensive safety and health management program and
maintaining an injury/illness rate at least 10 percent
lower than the Bureau of Labor Statistics (BLS) rate
for their industries.
Pepper Construction is also a participant in the
OSHA Challenge Program, a three-stage process to
implement an effective system to prevent fatalities,
injuries, and illnesses. An electronic tool that breaks
down the actions, documentation, and results desired
is provided by OSHA to participating companies as
well. Pepper Construction is also applying for recog-
nition under OSHA’s Voluntary Protection Programs
(see Chapter 12).
The Impact
Since the strategic planning initiative and subsequent
restructuring of the safety and health program, Pepper
Construction Company has seen a dramatic decrease
in OSHA-recordable injury and illness rates. The firm
is now well below the national average incidence rate
in the construction industry.
When asked about the return on investment,
Pepper has said the biggest benefit he has seen is the
improved company culture: “Our workers are look-
ing after each other, watching out for hazards and
eliminating them—and really caring for their fel-
low employees.” Pepper’s improved safety culture
has also spread to its subcontractors. When Pepper
Construction bids out jobs, it reviews each subcon-
tractor’s safety and health records. All subcontractors
are prequalified, and no bids are awarded to subcon-
tractors that do not meet the company’s safety perfor-
mance standards.
As a result of Pepper Construction’s increased
scrutiny of its subcontractors’ safety records, it has
removed contractors from its list of prequalified
contractors because of poor safety performance.
For example, several years ago an iron worker was
observed standing on the rail of an aerial lift without
proper fall protection. Because the steel erecting com-
pany officials did not consider this a serious safety
problem, they were removed from the job site and
did not work on another Pepper Construction site
for 4 years. After this contractor initiated an inten-
sive safety management program, their performance
improved; they are currently applying for reinstate-
ment to Pepper Construction’s prequalified contrac-
tors list.
Questions
1. How does the Pepper Construction’s “TEAM”
mission help keep the company on track toward
better safety?
2. Why should Pepper Construction be concerned
about the safety of its subcontractors?
Source: Paul Flentge, “Change in Safety Culture at Pepper Construc-
tion Group Leads to Dramatic Decline in Injuries and Illnesses,” Success
Stories and Case Studies (Washington, D.C.: Occupational Safety and
Health Administration), (July 2010), http://www.osha.gov/.
89624_em_case_hr_585-610.indd 595 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
596
At the end of fiscal year 2017, revenues at Egan’s
Clothiers, Inc. had increased 12 percent over 2016
and had increased at a compounded rate of 14 per-
cent over the past 5 years. That is the good news. The
bad news is that costs have risen at an even more rapid
rate, thereby shrinking the company’s gross margins.
As a consequence, Egan’s profitability (measured as
return on sales and return on net assets) has actually
fallen by 6 percent over the past 3 years.
The drop in profitability at Egan’s is particu-
larly worrisome. In fact, according to Egan’s chief
financial officer, Richard Coyle, if something is not
done immediately to control material and labor
costs, as well as administrative expenses, the com-
pany may need to restructure its operations. In the
short run, Coyle, company president Karen Egan,
and vice president of HR Pam McCaskey have put an
indefinite freeze on all hiring. They are also contem-
plating laying off nearly one-quarter of Egan’s sales
staff and are weighing the benefits of cutting back
on HR-related expenses such as training. Compared
to others in the industry, the firm’s labor costs are
very high.
Company Background
Gene Egan and Pat Pollock opened their first store
in Baldwin, New York, in 1958. The company grew
rapidly and now operates a chain of 34 medium-
sized stores located throughout Connecticut, New
York, Pennsylvania, and New Jersey. Since the
beginning, Egan’s customers have been primarily
middle-class and upper middle-class families pur-
chasing sportswear, dresswear, and fashion acces-
sories. The company has established a longstanding
tradition of quality and customer service. In addi-
tion to its 34 stores, the company also maintains 2
distribution centers and its administrative offices
in Stamford, Connecticut. The total employment
currently stands at approximately 2,400 people: 15
executives, 40 staff specialists, 40 store managers,
215 sales managers, 250 administrative personnel,
1,600 salespeople, and 240 distribution workers.
Except for the employees at the distribution centers,
the company is not presently unionized. However, it
is no secret that Egan’s management has been trying
very hard recently to keep current labor organizing
activities to a minimum, viewing it as a threat to the
company’s success.
Egan’s HR department has been called upon to
conduct a program audit of various personnel prac-
tices utilized at Egan’s. The purpose of this audit is to
assess the impact of Egan’s HR policies and practices
on employee outcomes (e.g., performance, employee
satisfaction, absenteeism, and turnover). The objective
of the audit is to identify specific problem areas where
policy adjustments may be necessary. The final report
to the executive staff will include the HR department’s
evaluation of any current problems and the changes it
recommends.
Human Resources Management
History
Over the past 5 years, Egan’s has made several
changes in order to implement the best HR prac-
tices possible. Partially, this has been to circumvent
unionization efforts, but primarily it is indicative
of Egan’s longstanding belief that success in retail-
ing depends on the competencies and efforts of its
employees.
The commitment to HR is demonstrated by
the fact that in 2017 the company spent $1.3 mil-
lion on a new human resources information system
(HRIS). Also, Egan’s has maintained an ongoing
CASE 6 Realigning HR Practices
at Egan’s Clothiers
89624_em_case_hr_585-610.indd 596 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
597Case 6 Realigning HR Practices at Egan’s Clothiers
training program for the past 5 years to help sales-
people improve their retail selling skills (RSS) and cus-
tomer service. The annual cost of this program has
been roughly $750,000.
To ensure its employees provide customers with
top-notch service, the company’s selection standards
are substantially higher than its competitors. Whereas
other retail companies typically hire inexperienced
high school students, Egan’s generally requires some
retailing or sales experience before considering an
applicant for employment. Although this policy
increases Egan’s overall labor costs, managers are con-
fident that the added expense is well justified over the
long run. However, recently even the strongest pro-
ponents of HR have been wondering if it might be a
good idea to cut back on training, given the company’s
current financial picture.
By far the most problematic and volatile HR
issues at Egan’s have revolved around promotions
and salary increases. Because the company promotes
from within and distributes raises on a company-
wide basis, comparisons generally have to be made
across employees in different jobs and departments.
To help prevent subjectivity and bias when making
these decisions, Egan’s links these rewards to objective
measures of performance. Specifically, rather than uti-
lizing subjective managerial evaluations of employee
performance, ongoing sales results are maintained for
each employee through the HRIS. On the basis of this
information, each department manager assigns each
employee one of five categories:
Superior—top 10 percent
Very good—next 20 percent
Good—middle 40 percent
Fair—lower 20 percent
Poor—lowest 10 percent
Administrative decisions are then made across
departments utilizing these standardized distribu-
tions. To provide constant feedback to each employee
about his or her relative performance, data are updated
and posted daily. Eagan’s managers believe the feed-
back motivates employees. There are also no surprises
when the time comes for semiannual performance
appraisal interviews. Since the changes have been
made in the performance appraisal system, there has
not been one formal complaint by employees about
salary or promotion decisions. However, the com-
pany’s sales managers have mentioned occasionally
that they do not feel as comfortable now that they are
required to assign employees to the “fair” and “poor”
categories.
HR Outcomes
Despite the concerted efforts of Egan’s management
to create a first-rate system of human resources man-
agement, there are several troubling issues facing
the company. The HR practices are not having their
desired effects. For example, there have been recent
complaints that employees have not been as patient
or courteous with customers as they should be. This
was best summarized by Paul Kelly, a store manager
in White Plains, New York, who noted, “My people are
beating up the clientele in order to make a sale—the
very opposite of what the RSS program trains them
to do.” This lapse in customer service is frustrating to
management since the RSS training has proven effec-
tive in the past. Additionally, there seems to be a great
deal of competition within departments that is hurting
a team effort. Although intergroup rivalries between
departments have always been viewed as normal and
healthy, the lack of intragroup cohesiveness is seen as a
problem. The company is also facing greater competi-
tion from retailers that sell clothing strictly online and
can keep their prices lower because they don’t have to
maintain brick-and-mortar stores.
Additionally, Egan’s has been plagued with
increases in lost and damaged merchandise. Manage-
ment attributes this to the fact that storage rooms are
disorganized. This is in sharp contrast to the selling
floors, which have remained fairly well ordered and
uncluttered. Nevertheless, inventory costs have been
increasing at an alarming rate.
Everyone notices that something is wrong. But
the behavior patterns are perplexing. Absenteeism has
decreased by 23 percent, but employee turnover has
actually increased from 13 percent to over 29 percent,
thereby increasing labor costs overall. Unfortunately,
many of those who left the company (43 percent) were
rated as very good to superior employees.
As executives in the company look at these trends,
they are understandably concerned. The success of the
company and its reputation for quality and service
depend on solid investments in HR to ensure the best
89624_em_case_hr_585-610.indd 597 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
598 Case 6 Realigning HR Practices at Egan’s Clothiers
possible workforce. However, the expenses are erod-
ing the company’s profits, and worse, it now looks like
these investments are not paying off.
Questions
1. What overall changes could you recommend to the
executive team at Egan’s about its HR practices?
2. What are the pros and cons of Egan’s per-
formance appraisal system? Do you think it
identifies the best employees? Do you think it
helps develop employees to perform the best
they can?
3. Can increased sales be linked directly and/or indi-
rectly to the appraisal system? How about some of
the other performance effects? How would you
change the system?
4. How do you account for the fact that absentee-
ism has decreased at Egan’s while turnover has
increased?
89624_em_case_hr_585-610.indd 598 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
599
Research has shown that the performance appraisal
process, particularly the interaction between employ-
ees and managers, is a key determinant affecting
employee motivation and productivity. Understand-
ably, managers can view the appraisal of employee
performance as a “Catch-22”: The slightest mistake
can cause employee resentment, as this case illustrates.
Marcus Singh, a naturalized U.S. citizen from
India, is a research economist in the Office of Research
and Evaluation in the city of Newport, Oregon. He is
40 years old and has worked for the city of Newport
for the past 10 years. During that time, Singh has been
perceived by his supervisors as an above-average per-
former. However, due to the small size of the depart-
ment and the close working relationship between
employees and management, a formal evaluation of
employees was considered unnecessary. Instead, feed-
back and coaching were used. About 10 months ago,
Singh was transferred from the department’s indus-
trial development unit to the newly formed Office of
Research and Evaluation. Other employees were also
transferred as part of an overall reorganization.
Victoria Popelmill, the department’s director,
issued a directive to all unit heads to formally evalu-
ate the performance of their subordinates. Attached to
her memorandum was a copy of a new performance
appraisal form to be used in conducting the evalua-
tions. Garth Fryer, the head of the Office of Research
and Evaluation, decided to allow his subordinates
some input in the appraisal process. (In addition to
Garth Fryer, the Office of Research and Evaluation
comprised Marcus Singh, five other research econo-
mists—Jason Taft, Susan Mussman, Richard Gels,
Marsha Fetzer, and Juan Ortiz—and one administra-
tive assistant, Connie Millar.) Fryer told each of the
researchers to complete both a self-appraisal and a
peer appraisal. After reviewing these appraisals, Fryer
completed the final and official appraisal of each
researcher. Before sending the forms to Popelmill’s
office, Fryer met with each researcher individually
to review and explain his ratings. Each researcher
signed the appraisal and indicated agreement with
the ratings.
About a week after submitting the appraisals to
the director, Fryer received a memorandum from
Popelmill stating that his evaluations were unaccept-
able. Fryer was not the only unit head to receive this
memorandum; in fact, they all received the same note.
On examination of the completed appraisal forms from
the various departments, the director had noticed that
not one employee was appraised in either the “fair” or
“satisfactory” category. In fact, most employees were
rated as “outstanding” in every category. Popelmill felt
that the unit heads were too lenient and asked them
to redo the evaluations in a more objective and criti-
cal manner. Furthermore, because the department’s
compensation budget for salary increases was largely
based on a distribution of employee ratings, evaluat-
ing all employees as outstanding would result in raises
that exceeded the city’s budget limits.
Garth Fryer explained the director’s request to his
subordinates and asked them to redo their apprais-
als with the idea of being more objective this time.
However, the new appraisals were not much different
from the first ones. Believing he had no choice in the
matter, Fryer unilaterally formulated his own ratings
and discussed them with each employee.
Marcus Singh was not pleased when he found out
that his supervisor had rated him one level lower on
each category (compare Figure 7.1 and Figure 7.2).
Although he signed the second appraisal form, he
indicated on the form that he did not agree with the
evaluation. Jason Taft, another researcher in the Office
of Research and Evaluation, continued to receive all
“outstanding” ratings on his second evaluation.
Like Singh, Taft has a master’s degree in econom-
ics, but he has been working for the city of Newport
for less than 2 years and is only 24 years old. Taft had
CASE 7 A Performance Appraisal Snafu
89624_em_case_hr_585-610.indd 599 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
600 Case 7 A Performance Appraisal Snafu
Employee Name: Marcus Singh Date: October 4, 2017
Job Title: Economist/Researcher
Please indicate your evaluation of the employee in each category by placing a check mark (✓) in the appropriate block.
Employee Appraisal FormFigure 7.1
Outstanding Good Satisfactory Fair Unsatisfactory
KNOWLEDGE OF JOB
Assess overall knowledge of duties
and responsibilities of current job.
u✓ u u u u
QUANTITY OF WORK
Assess the volume of work under
normal conditions.
u u✓ u u u
QUALITY OF WORK
Assess the neatness, accuracy, and
effectiveness of work.
u u✓ u u u
COOPERATION
Assess ability and willingness to
work with peers, superiors, and
subordinates.
u u✓ u u u
INITIATIVE
Assess willingness to seek greater
responsibilities and knowledge.
Self-starting.
u u✓ u u u
ATTENDANCE
Assess reliability with respect to
attendance habits.
u✓ u u u u
ATTITUDE
Assess disposition and level of enthu-
siasm. Desire to excel.
u✓ u u u u
JUDGMENT
Assess ability to make logical
decisions.
u u✓ u u u
Comments on ratings: Valuable employee!
Supervisor’s signature: Garth Fryer
Department: Office of Research and Evaluation Date: October 4, 2017
Employee’s signature: Marcus Singh
Does the employee agree with this evaluation? X Yes _______________ No
also worked closely with Garth Fryer before being
transferred to his new assignment 10 months ago.
Recently, the mayor of the city had received a letter
from the regional director of a major government
agency praising Jason Taft’s and Garth Fryer’s out-
standing research. Marcus Singh’s working relation-
ship with Garth Fryer and Jason Taft and with others
in the department has been good. On some occasions,
though, he has found himself in awkward disagree-
ments with his coworkers in certain areas.
After Singh and Taft had signed the appraisals,
Garth Fryer forwarded them to Popelmill’s office,
where they were eventually added to the employ-
ees’ permanent files. When pay raises were awarded
89624_em_case_hr_585-610.indd 600 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
601Case 7 A Performance Appraisal Snafu
Employee Name: Marcus Singh Date: October 18, 2017
Job Title: Economist/Researcher
Please indicate your evaluation of the employee in each category by placing a check mark (✓) in the appropriate block.
Employee Appraisal FormFigure 7.2
Outstanding Good Satisfactory Fair Unsatisfactory
KNOWLEDGE OF JOB
Assess overall knowledge of duties
and responsibilities of current job.
u u✓ u u u
QUANTITY OF WORK
Assess the volume of work under nor-
mal conditions.
u u u✓ u u
QUALITY OF WORK
Assess the neatness, accuracy, and
effectiveness of work.
u u u✓ u u
COOPERATION
Assess ability and willingness to
work with peers, superiors, and
subordinates.
u u u✓ u u
INITIATIVE
Assess willingness to seek greater
responsibilities and knowledge.
Self-starting.
u u u✓ u u
ATTENDANCE
Assess reliability with respect to atten-
dance habits.
u u✓ u u u
ATTITUDE
Assess disposition and level of enthu-
siasm. Desire to excel.
u u✓ u u u
JUDGMENT
Assess ability to make logical
decisions.
u u u✓ u u
Comments on ratings: Marcus needs to increase the quantity of his work to receive higher ratings. Also, he should take a
greater initiative in his job.
Supervisor’s signature: Garth Fryer
Department: Office of Research and Evaluation Date: October 18, 2017
Employee’s signature: Marcus Singh
Does the employee agree with this evaluation? _______________ Yes X No
in the department 3 weeks later, Marcus Singh did
not receive a merit raise. He was told that it was due to
his less-than-outstanding appraisal. He did, however,
receive the general increase of $2,500 given to all
employees regardless of their performance apprais-
als. This increase matched the increase in inflation
for the Newport, Oregon, area.
Singh has refused to speak one word to Garth
Fryer since they discussed the appraisal, commu-
nicating only through Connie Millar or in writing.
Singh has lost all motivation and complains bitterly
to his colleagues about his unfair ratings. While he
reports to work at 8 A.M. sharp and does not leave
until 5 P.M. each day, he has been observed to spend
89624_em_case_hr_585-610.indd 601 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
602 Case 7 A Performance Appraisal Snafu
a lot of time on Facebook and surfing the Internet
while at work.
Questions
1. What do you see as the problems in this case?
Explain.
2. Could these problems have been avoided? How?
3. Comment on the advantages and disadvan-
tages of using peer evaluations in the appraisal
process.
4. What can be done to resolve the problem with
Marcus Singh?
Source: This case was adapted from a case prepared by James G.
Pesek and Joseph P. Gronenwald of Clarion University in Pennsylvania.
89624_em_case_hr_585-610.indd 602 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
603
The meeting lasted only 10 minutes, since all those
present quickly agreed that Tom Kinder should be
fired. According to management, Kinder had caused
the company numerous problems over the last 18
months, and the incident on Saturday was “the straw
that broke the camel’s back.” Plant managers believed
they had rid themselves of a poor employee, one
the company had offered many opportunities for
improvement. It seemed like an airtight case, one the
union could not win if taken to arbitration.
Tom Kinder had worked for the Aero Engine
Company for 14 years prior to being terminated. He
was initially employed as an engine mechanic servic-
ing heavy-duty diesel engines. For his first 9 years with
Aero Engine, he was considered a model employee by
his supervisors and plant management. Kinder was
also well liked by his fellow employees. His perfor-
mance appraisals were always marked “exceptional,”
and his personnel folder contained many commen-
dation letters from customers and supervisors alike.
Supervisor Chen Lee described Kinder as “devoted to
his job of building and repairing engines.” Through
company-sponsored training classes and courses
taken at a local trade school, Kinder had acquired the
knowledge and experience to build and repair spe-
cialty engines used in arctic oil exploration.
The Aero Engine Company, with headquarters in
the Midwest, was engaged primarily in the production
and maintenance of specialty engines used in drill-
ing, heavy manufacturing, and diesel transportation.
The company had experienced very rapid growth
in sales volume, number of products produced, and
the size of its workforce since 2015. (At the time of
Kinder’s termination, the company employed about
1,700 employees.) Aero Engine avoided hiring new
personnel and then laying them off when they were
no longer needed. Company policy stated that layoffs
were to be avoided except in extreme circumstances.
When heavy workloads arose, the natural solution to
the problem was to schedule large amounts of over-
time and to hire temporary employees through one of
the local temporary help services.
Kinder’s work problems had begun approximately
5 years prior to his discharge when he went through a
very emotional and difficult divorce. He was a devoted
family man, and the divorce was a shock to his values
and his way of life. The loss of custody of his children
was particularly devastating to his mental well-being.
He became sullen, withdrawn, and argumentative
with his supervisors. Several of his close friends said
they thought he was depressed. Aero Engine has a
comprehensive employee assistance program (EAP)
for employees experiencing personal and family prob-
lems. Kinder’s supervisor, Gordon Thompson, had
recommended the services of the EAP to him, but it
was unknown if he had used counseling since the EAP
program is voluntary and confidential. Management
professes that it took a very proactive and humanistic
approach toward Kinder, an employee the company
valued and respected. However, regardless of the com-
pany’s concern for Kinder, his work performance had
become problematic.
An absenteeism problem developed and contin-
ued until his discharge. Over the 18 months prior to
this termination, Tom was absent 27 complete days
and 9 partial days and was tardy 19 times. Twelve
months before termination, he had been given a writ-
ten warning that his attendance must improve or he
would face further disciplinary action, including pos-
sible discharge. Unfortunately, his attendance did not
improve; however, he received no further disciplinary
action until his discharge on Monday, June 9, 2016.
Management had experienced problems other
than absenteeism with Kinder. The quantity and qual-
ity of his work had decreased to only an acceptable level
of performance. His supervisor had discussed this with
him on two occasions, but no disciplinary action was
ever instituted. Furthermore, during heavy production
CASE 8 The Last Straw for Aero Engine
89624_em_case_hr_585-610.indd 603 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
604 Case 8 The Last Straw for Aero Engine
periods Kinder would either refuse to work overtime
assignments or, once assigned, would often fail to
report for work. It was an incident that occurred dur-
ing a Saturday overtime shift that caused his discharge.
On Saturday, June 7, Kinder was assigned to a
high-priority project that required him to build a spe-
cialty engine for a large and loyal customer. The big
new engine was needed to replace a smaller engine
that had exploded on an Alaskan drilling rig. The
engine was being built in a newly constructed plant
building located one-half mile from the company’s
main production facilities. At approximately 9:15
A.M. that Saturday, Gordon Thompson had walked
over to the new building to check on the progress
of the engine. As Thompson passed by a window,
he noticed Kinder sitting at a desk with his feet
up, reading a magazine. The supervisor decided to
observe him from outside the building. After about
25 minutes, Kinder had not moved, and Thompson
returned to the plant to report the incident to Glenn
Navarro, the plant production manager. Neither the
supervisor nor the production manager confronted
Kinder about the incident.
At 8:15 the next Monday morning, supervi-
sor Thompson and production manager Navarro
met with the director of human resources to review
Kinder’s total work performance. After this short
meeting, all those present decided he should be fired.
His discharge notice read, “Terminated for poor work
performance, excessive absenteeism, and loafing.” At
10:15 that morning Kinder was called into Navarro’s
office and discharged. Navarro then handed him his
final paycheck, which included 8 hours of work for
Monday.
Questions
1. Comment on the handling of this case by the
supervisor, production manager, and director of
human resources.
2. How much concern should organizations show
employees before taking disciplinary action for
personal family problems? Explain.
3. To what extent were consistent discipline and due
process applied prior to the discharge?
4. If Kinder’s discharge went to arbitration, how
would you decide the case? Why? What argu-
ments would labor and management present to
support their respective positions?
Source: This case is based on an actual arbitration. All names are
fictitious.
89624_em_case_hr_585-610.indd 604 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
605
Meadowbrook Golf, headquartered in Champions-
gate, Florida, is a leader in golf course management,
maintenance, and supplies in the United States. Today
the organization is composed of four companies that
meet the demands of the market: Meadowbrook Golf
provides the management, International Golf Main-
tenance provides the maintenance, and Golf Ventures
East and West are the golf supply arms of the business.
Ron Jackson is the CEO of Meadowbrook. The
turf business is a highly specialized, tight-knit indus-
try. The company’s strong reputation was built on its
expertise in providing superior products and services
to golf courses and municipalities. Jackson knew the
only way he could take the company to the next level
was to not only find the right people with the specific
experience they needed but to find a way to keep them
happy and motivated so they would stay.
Jackson learned about a behavioral assessment
tool called Predictive Index, produced by the Welles-
ley, Massachusetts—based management consulting
company PI Worldwide, and brought it into Meadow-
brook as a way to help the managers understand what
motivated their employees to come to work every day.
Meadowbrook also realized that their top perform-
ers possessed very similar behavioral characteristics.
Using this information, Meadowbrook was able to
incorporate this information into its hiring process.
Golf Ventures West (GVW), the supply division
of Meadowbrook in the western United States, offers
equipment that ranges from a string trimmer to a
$70,000 rotary motor, along with fertilizer, seed, and
specialty products. Mike Eastwood, the president of
GVW, had the best talent in the industry, long-time
clients, and very low turnover. While it all seemed ide-
alistic, Eastwood had a problem. He needed his team to
sell more. The challenge was how to identify what they
needed in sales training to help them grow their sales.
When sharing his concerns with Jackson, East-
wood learned that the publishers of the Predictive
Index also offered a selling training tool that identi-
fied the strengths of salespeople and areas for their
development as well as offered customer-focused
sales (CFS) training. To explore the tool further, he
and his senior management team took the assess-
ment themselves. The results accurately identified
Eastwood’s selling style. His general managers, most
with over 30 years in the industry, scored in the mid
to high range.
Next, Eastwood gave his sales team members the
assessment. However, their overall scores were in the
mid-to-low range. Eastwood quickly realized that
despite the talent of his sales team, 80 percent of them
did not know how to sell. The results of the assess-
ment showed most of them were not asking enough
investigative questions when speaking with their
clients. This was a huge breakthrough. Eastwood’s
team members then took the CFS workshop to learn
how to think like customers do and investigate and
uncover their needs.
The results? “My most senior and successful sales-
person followed the CFS process and closed a $40,000
deal with a customer that had only purchased from
our competitor for the last 10 years,” says Eastwood.
In another instance, Eastwood had a salesperson who
was underperforming but knew he had the poten-
tial to be successful. This salesperson went through
the sales training and was moved to a new territory.
“In 4 months he has sold more in his new territory
than he had in a year in his original territory,” says
Eastwood. Apparently, the training is paying off. Even
though golf courses, in general, have been struggling
in recent years, Golf Ventures West has expanded its
operations to a number of new locations across the
country.
CASE 9 Employee Selection and Training
at Meadowbrook Golf and Golf
Ventures West
89624_em_case_hr_585-610.indd 605 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
606 Case 9 Employee Selection and Training at Meadowbrook Golf and Golf Ventures West
Questions
1. Why did Eastwood and his general managers
take PI’s competency assessment prior to admin-
istering it to the company’s other salespeople?
2. How did the assessment help uncover the skills gap
handicapping Golf Ventures West’s salespeople?
3. What does the case indicate about the training
“readiness” of the company’s salespeople?
Source: Adapted from “Hire Smart, Develop Selling Skills and Manage
for Individual and Team Success” PI Worldwide, http://www.piworld-
wide.com.
89624_em_case_hr_585-610.indd 606 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
607
A particular issue in business ethics is: “What exactly
does the term ethics mean?” Various writers have
described ethics as rules that govern behavior, desired
societal values such as respect for justice, or accepted
principles of right or wrong. One author noted, “While
laws concern what we must do, ethics concerns what
we should do.”1
In the practice of HR, managers and supervisors
are continually faced with ethical dilemmas regarding
the fair and equitable treatment of employees. Ethi-
cal choices abound in areas such as recruitment and
selection, employee privacy, whistle-blowing, sexual
harassment, and diversity or affirmative action. An
important ethical dilemma faced by managers today
is the fair and correct way to downsize organizations.
The decisions involved in downsizing a workforce are
complex and, as one manager stated, “gut-wrenching.”
The Need to Downsize
Newell Corporation is a medium-sized manufacturer
of navigational systems for commuter and larger air-
planes. The company operates two plants—one in
Atlanta, Georgia, and the other in Norwood, Cali-
fornia. In 2016, the Norwood plant employed 273
employees, most of them engaged in the manufacture
and technical support of company products.
Newell is regarded as an excellent place to work by
its employees and within the surrounding communi-
ties. Employee morale and loyalty have always been
high, and job satisfaction studies conducted by the
company consistently rate the organization as a fair and
equitable place to work. The company’s HR policies
can be described as proactive and progressive. With its
positive reputation, Newell has been able to select new
employees from a large pool of job applicants.
One cornerstone of HR policy has been to use the
principle of seniority when training, assigning, trans-
ferring, and promoting employees. Additionally, with
Newell’s emphasis on employee retention, employees
have experienced and come to expect long and steady
employment. Prior to 2014, Newell has never down-
sized its workforce. Employment growth at the Nor-
wood facility had been moderate and steady.
The racial composition of the company has been
predominately Caucasian, for two reasons. First, the
racial composition of the company’s local labor mar-
ket has historically been Caucasian. Second, the skill
levels needed for the company’s technical jobs have
come primarily from a trained Caucasian labor force.
A review of the company’s federally required EEO-1
report showed that Newell had few employees in each
of the minority categories listed. This is true for both
hourly and managerial positions. However, since then,
the demographic characteristics of the local labor
market have changed dramatically to include more
Hispanics, African Americans, and Asian Americans.
In 2010, Newell experienced a large increase in the
demand for its products. To meet customer orders, the
Norwood plant hired 27 new manufacturing assem-
blers and 14 new technical support technicians. With
the increased diversity of the external labor force,
plus the desire to increase the minority composition
of its internal workforce, 34 of the 41 new hires were
minorities. It is noteworthy that Newell welcomed
the opportunity to rapidly increase the diversity of
its workforce for both business and ethical reasons.
The following is an excerpt from Newell’s statement
of vision and values published in July 2015:
Newell Corporation believes that a work envi-
ronment that reflects a diverse workforce, values
diversity, and honors the worth of its employ-
ees benefits the company, its customers, and
its employees. Employment decisions will be
1. Terry Halbert and Elaine Ingulli, Law and Ethics in the Business
Environment, 7th ed. (Mason, OH: Cengage Learning, 2011).
CASE 10 Newell’s Decision to Downsize:
An Ethical Dilemma
89624_em_case_hr_585-610.indd 607 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
608 Case 10 Newell’s Decision to Downsize: An Ethical Dilemma
made on these principles while also consider-
ing the efficient and effective operation of the
organization.
Because many of the minority employees needed
to be trained to do the company’s manufacturing and
technical jobs, the firm spent approximately $1.7 mil-
lion on entry-level skills training. The integration of
minorities into the Norwood facility was seamless and
without racial tension.
In 2015, sales for Newell’s products once again
followed historical patterns. Unfortunately, sales then
unexpectedly took a sharp downturn: a 12 percent
decline in 2016 and a 23 percent decline in 2017. The
causes for the decline in sales were attributed to two
new low-wage foreign competitors that had entered
the market, a decline in the market demand for the
products made by Newell and its competitors, and
higher-than-average production costs due to Newell’s
older, less efficient manufacturing equipment. Future
demand for company products was projected to be
moderate for 2018, 2019, and 2020.
In February 2017, Tom Malcom, Norwood’s direc-
tor of HR; Steven L. Davis, corporate vice president
for manufacturing; and Mary Umali, Norwood’s plant
manager, decided to downsize the workforce at the
Norwood facility. Specifically, they decided to lay off
37 manufacturing employees and 11 technical sup-
port personnel. The difficult question faced by senior
management was how to lay off employees in a man-
ner that would be fair and equitable to individuals
and legally defensible while maintaining the integrity
of Newell’s HR policies and the productivity of the
Norwood plant.
Questions
1. What is the ethical dilemma faced by manage-
ment in this case? Explain.
2. What specific problems might Newell face in its
downsizing decision?
3. What options might Newell employ in its down-
sizing decision? Explain.
4. How would you downsize the Norwood facility?
Explain.
Source: This case was adapted from an actual case known to the
authors. All names are fictitious.
89624_em_case_hr_585-610.indd 608 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
609
Located in the Los Angeles area, Aero Performance,
with 27 employees, is a sales and maintenance com-
pany that provides equipment upgrades and general
aircraft maintenance to regional airlines, corporate
aircraft, and small international carriers. When Aero
Performance was created 2 years ago, the company
faced little competition, and the robust airline mar-
ket seemed to present unlimited potential for growth.
Unfortunately, industry economics coupled with
cost-cutting measures by airlines and new competi-
tion from similar airline service companies meant
that Aero’s business performance was stabilized, and
the company experienced losses in certain special-
ized areas. Airline companies as well as the owners of
corporate jets delayed the purchase and installation of
Aero’s advanced electronic equipment.
Mike Martinez, manager of the technology
upgrade unit, faces a tough decision. With a signifi-
cant downturn in his unit’s work, he must lay off one
employee. The decision is made particularly difficult
because all employees of the unit are qualified employ-
ees with average or better work records. Additionally,
each employee has a unique personal background
directly affecting his or her work life. A summary of
the background and work record of each of the four
employees follows.
Gary Meadors is married and has two children
in high school. He lives modestly in order to send his
kids to college. His wife works evenings at a conve-
nience store to assist with family expenses. Meadors
has worked 9 years with Aero Performance, 6 years
in airline maintenance, and 3 years in the technol-
ogy upgrade unit. He has learned airline technology
largely through technical articles, trade journals, and
on-the-job experience. His performance evaluations
are average, and he is considered a consistent and
reliable employee. His attendance and company loy-
alty are exceptional.
Brenda Baldwin is the only woman in the tech-
nology upgrade unit. She is a single mother with
a child in elementary school. Brenda has 3 years
of service with Aero Performance, all in Martinez’s
unit. She joined the company after obtaining an
airline technology degree from a well-respected
4-year university. Brenda continues to take evening
classes in her field and seems to have, according
to Martinez, “the most potential for growth in the
company.” However, her performance has slipped
the past year, and she has been counseled for an
attendance problem. She has felt somewhat resented
as a female in a traditionally male-dominated
industry.
Udit Chopra is a dedicated employee. In fact,
everyone says he is “married to his job.” He will work
long hours to complete technical installations and is
regarded as a perfectionist. Udit has a college degree in
marketing but has found his home in airline technol-
ogy. He possesses an excellent ability to persuade Aero
Performance customers to upgrade their technology
systems. Udit drives a new BMW and is believed to
come from a wealthy family.
Craig Cottrell joined Aero Performance 3 years
ago, having been hired away from a competitor. He
has a total of 12 years of experience in the airline ser-
vice industry. Craig has a complete understanding of
airline technology. Cottrell’s work performance the
first 2 years with Aero Performance was barely aver-
age; however, his work record the past year was evalu-
ated as very high. Currently, he is the top performer in
the unit. There has been work friction between him,
Baldwin, and Chopra over the selection and installa-
tion of cockpit instruments.
CASE 11 Someone Has to Go: A Tough
Layoff Decision
89624_em_case_hr_585-610.indd 609 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
610 Case 11 Someone Has to Go: A Tough Layoff Decision
Performance
Seniority
( Years) Salary 2014 2015 2016 2017
Gary Meadors 9 $74,250 Avg Good Avg Avg
Brenda Baldwin 3 $81,190 High Good Avg
Udit Chopra 5 $78,500 Avg Good Good Good
Craig Cottrell 3 $75,960 Avg Avg High
Mike Martinez must make his decision by this
Friday. Aero Performance will grant the laid-off
employee a severance package to assist in transition
to other employment. Martinez is committed to aid-
ing his employee in finding another job in the airline
service industry.
Questions
1. What criteria should be used to determine
potential layoff candidates? What emphasis, if
any, should be given to non-job-related factors
such as personal problems or a spouse’s need to
work? Explain your answer.
2. What should be included in a severance package
for laid-off employees? How long should the sev-
erance package last?
3. Are there any potential legal implications in Mar-
tinez’s decision?
4. How would you handle the termination
interview?
89624_em_case_hr_585-610.indd 610 10/20/17 11:28 AM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
611
A
360-degree evaluation A performance evaluation done by
different people who interact with the employee, gener-
ally on forms compiled into a single document for use
in the evaluation meeting conducted by the employee’s
manager.
Acceptance rate The percentage of applicants who accept
a firm’s jobs after being offered them.
Adventure-based learning The use of adventures, such
as games, trust activities, and problem-solving ini-
tiatives, for the personal and social development of
participants.
Adverse impact A concept that refers to the rejection of a
significantly higher percentage of a protected class for
employment, placement, or promotion when compared
with the successful, nonprotected class.
Affirmative action A policy that goes beyond equal
employment opportunity by requiring organizations to
comply with the law and correct any past discrimina-
tory practices by increasing the numbers of minorities
and women in specific positions.
Agility A firm’s ability make quick changes to gain a
competitive advantage.
Alternative dispute resolution (ADR) A term applied
to different employee complaint or dispute resolution
methods that do not involve going to court.
Applicant tracking system (ATS) A system recruiters
use to post job openings, screen résumés and uploaded
profiles, contact via email potential candidates for
interviews, and track the time, costs, and other metrics
related to hiring people.
Apprenticeship training A system of training in which
a worker entering the skilled trades is given thorough
instruction and experience, both on and off the job, in
the practical and theoretical aspects of the work.
Arbitrator A third-party neutral who resolves a labor dis-
pute by issuing a final decision in the disagreement.
Assessment center test A process by which managerial
candidates are evaluated at an assessment center as
they participate in a series of situations that resemble
what they might need to handle on the job.
Augmented skills Skills helpful in facilitating the efforts
of expatriate managers.
Authorization card A statement signed by an employee
authorizing a union to act as a representative of the
employee for purposes of collective bargaining.
B
Backup care program A benefit program whereby an
employer provides or subsidizes temporary care for its
employee’s elders or children when their regular arrange-
ments fall through.
Balance sheet approach A compensation system designed to
match the purchasing power in a person’s home country.
Balanced scorecard (BSC) A measurement framework
that helps managers translate strategic goals into opera-
tional objectives.
Bargaining power The power of labor and management to
achieve their goals through economic, social, or political
influence.
Bargaining unit A group of two or more employees who
share common employment interests and conditions
and may reasonably be grouped together for purposes
of collective bargaining.
Bargaining zone An area in which the union and the
employer are willing to concede when bargaining.
Behavior modeling A learning approach in which work
behaviors are modeled, or demonstrated, and trainees
are asked to mimic them.
Behavior modification A technique that operates on the
principle that behavior that is rewarded, or positively rein-
forced, will be exhibited more frequently in the future,
whereas behavior that is penalized or unrewarded will
decrease in frequency.
Glossary
89624_glos_hr_611-621.indd 611 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
612 Glossary
Behavior observation scale (BOS) A behavioral approach
to performance rating that measures the frequency of
observed behavior.
Behavioral description interview (BDI) An interview in
which an applicant is asked questions about what he or
she actually did in a given situation.
Behaviorally anchored rating scale (BARS) A behavioral
approach to performance rating that consists of a series
of vertical scales, one for each important dimension of
job performance.
Benchmarking The process of looking at your practices
and performance in a given area and then comparing
them with those of other companies.
Blended learning The use of both in-person classroom
learning and online learning.
Bona fide occupational qualification (BFOQ) A suitable
defense against a discrimination charge only when age,
religion, sex, or national origin is an actual qualification
for performing the job.
Bonus An incentive payment that is supplemental to the
base wage.
Branding A company’s efforts to help existing and pro-
spective workers understand why it is a desirable place
to work.
Broadbanding Collapses many traditional salary grades
into a few wide salary bands.
Burnout A severe stage of distress, manifesting itself in
depression, frustration, and loss of productivity.
Business environment Factors in the external environ-
ment that a firm cannot directly control but that can
affect its strategy and performance.
Business necessity A work-related practice that is neces-
sary to the safe and efficient operation of an organization.
C
Calibration A process whereby managers meet to discuss
the performance of individual employees to ensure
their employee reviews are in line with one another.
Career paths Lines of advancement in an occupational
field within an organization.
Career plateau A situation in which for either organiza-
tional or personal reasons the probability of moving up
the career ladder is low.
Charge form A discrimination complaint filed with the
EEOC by employees or job applicants.
Chief diversity officer (CDO) A top executive responsi-
ble for implementing a firm’s diversity efforts.
Chief ethics officers A high-ranking manager directly
responsible for fostering the ethical climate within the firm.
Chief learning officers A high-ranking executive respon-
sible for fostering employee learning and development
within the firm.
Codetermination Representation of labor on the board
of directors of a company.
Collective bargaining process The process of negotiating
a labor agreement, including the use of economic pres-
sures by both parties.
Combined salary and commission plan A compensation
plan that includes a straight salary and a commission.
Compensation scorecard Displays the results for all the
measures that a company uses to monitor and compare
compensation among internal departments or units.
Compensatory model A selection decision model in which
a high score in one area can make up for a low score in
another area.
Competence-based pay Pay based on an employee’s
skill level, variety of skills possessed, or increased job
knowledge.
Competency assessment An analysis of the sets of skills
and knowledge needed for decision-oriented and
knowledge-intensive jobs.
Competitive environment Consists of a firm’s specific
industry, including the industry’s customers, rival
firms, new entrants, substitutes, and suppliers.
Computer-administered (automated) interview Inter-
views in which the questions are administered to appli-
cants via computers. The interviews can be conducted
at a firm’s facilities, using kiosks, online, or via phone.
Concurrent validity The extent to which the test scores of
current employees correlate with their job performance.
Construct validity The extent to which a selection tool
measures a theoretical construct or trait.
Constructive discharge An employee’s voluntary termina-
tion of his or her employment because of harsh, unrea-
sonable employment conditions placed on the individual
by the employer.
Consumer price index (CPI) A measure of the average
change in prices over time in a fixed “market basket” of
goods and services.
Content validity The extent to which a selection instru-
ment, such as a test, adequately samples the knowledge
and skills needed to do a particular job.
Contrast error A performance rating error in which an
employee’s review is biased either upward or downward
because of comparison with another employee just pre-
viously evaluated.
89624_glos_hr_611-621.indd 612 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
613Glossary
Contributory plan A pension plan in which contribu-
tions are made jointly by employees and employers.
Cooperative training A training program that combines
practical on-the-job experience with formal educational
classes.
Core capabilities Integrated knowledge sets within an
organization that distinguish it from its competitors and
deliver value to customers.
Core skills Skills considered critical to an employee’s
success abroad.
Core values The strong and enduring beliefs and princi-
ples that guide a firm’s decisions and are the foundation
of its corporate culture.
Corporate social responsibility The responsibility of the
firm to act in the best interests of the people and com-
munities affected by its activities.
Craft unions Unions that represent skilled craft workers.
Criterion-related validity The extent to which a selection
tool predicts, or significantly correlates with, important
work behaviors.
Critical incident method A job analysis method used to
identify both desirable and undesirable behaviors that
resulted in either a very good outcome or a very bad
outcome on the job.
Cross-training The process of training employees to do
multiple jobs within an organization.
Cross-validation Verifying the results obtained from a
validation study by administering a test or test battery
to a different sample (drawn from the same population).
Cultural audits Audits of the culture and quality of work
life in an organization.
Cultural environment The communications, religion,
values and ideologies, education, and social structure of
a country.
Culture shock Perpetual stress experienced by people
who settle overseas.
Cumulative trauma disorders Injuries involving tendons
of the fingers, hands, and arms that become inflamed
from repeated stresses and strains.
Customer evaluation A performance evaluation that
includes evaluations from both a firm’s external and
internal customers.
D
Defined benefit plan A pension plan in which the
amount an employee is to receive on retirement is spe-
cifically set forth.
Defined contribution plan A pension plan that estab-
lishes the basis on which an employer will contribute to
the pension fund.
Dejobbing Refers to a process of structuring organizations
not around jobs but around projects that are constantly
changing.
Demotion A downward transfer that moves an individ-
ual into a lower-level job that can provide developmen-
tal opportunities.
Depression A negative emotional state marked by feelings
of low spirits, gloominess, sadness, and loss of pleasure
in ordinary activities.
Differential piece rate A compensation rate under which
employees whose production exceeds the standard
amount of output receive a higher rate for all of their work
than the rate paid to those who do not exceed the standard
amount.
Disabled individual Any person who (1) has a physical or
mental impairment that substantially limits one or more
of the person’s major life activities, (2) has a record of
such impairment, or (3) is regarded as having such an
impairment.
Discipline A tool, used to correct and mold the practices
of employees to help them perform better so they con-
form to acceptable standards.
Disease management programs Programs that pro-
vide patients and their caregivers with information on
monitoring and treating medical conditions, while coor-
dinating communication between them, their health care
providers, employers, and insurers.
Disparate treatment A situation in which protected class
members receive unequal treatment or are evaluated by
different standards.
Distress Harmful stress characterized by a loss of feelings
of security and adequacy.
Downsizing The planned elimination of jobs.
Due process Procedures that constitute fair treatment,
such as allowing an employee to tell his or her story
about an alleged infraction and defend against it.
E
E-learning Learning that takes place via electronic
media.
Economic factors external factors including the strength
or weakness of markets, stability of trade cycles, spe-
cific industry conditions, customer preferences, and
government’s economic policies.
89624_glos_hr_611-621.indd 613 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
614 Glossary
Elder care Care provided to an elderly relative by an
employee who remains actively at work.
Emergency action plans A plan an organization develops
that contains step-by-step procedures for dealing with
various emergency situations.
Employee assistance programs (EAPs) Services provided
by employers to help workers cope with a wide variety
of problems that interfere with the way they perform
their jobs.
Employee associations Labor organizations that repre-
sent various groups of professional and white-collar
employees in labor–management relations.
Employee empowerment Giving employees the power
to initiate change, thereby encouraging them to take
charge of what they do.
Employee engagement A situation in which workers are
enthusiastic and immersed in their work to the degree
that it improves the performance of their companies.
Employee leasing The process of dismissing employees
who are then hired by a leasing company (which han-
dles all HR-related activities) and contracting with that
company to lease back the employees.
Employee profiles A profile of a worker developed by
studying an organization’s top performers to recruit
similar types of people.
Employee rights Guarantees of fair treatment that become
rights when they are granted to employees by the courts,
legislatures, or employers.
Employee stock ownership plans (ESOPs) Stock plans in
which an organization contributes shares of its stock to
an established trust for the purpose of stock purchases
by its employees.
Employee team A group of employees working together
toward a common purpose, in which members have
complementary skills, members’ work is mutually
dependent, and the group has discretion over tasks
performed.
Employment-at-will relationship The right of an employer
to fire an employee without giving a reason and the right
of an employee to quit when he or she chooses.
Entrepreneur One who starts, organizes, manages, and
assumes responsibility for a business or other enterprise.
Environmental scanning Systematic monitoring of the
major external forces influencing the organization.
Equal employment opportunity (EEO) The treatment
of individuals in all aspects of employment— hiring,
promotion, training, etc.—in a fair and nonbiased
manner.
Equal Employment Opportunity Commission (EEOC)
The EEOC’s work consists of formulating EEO policy
and approving all litigation involved in maintaining
equal employment opportunity. The EEOC’s guidelines
are not federal law but administrative rules and regula-
tions published in the Federal Register.
Ergonomics The process of studying and designing easy-
to-use equipment and systems so the physical well-
being of employees isn’t compromised and work gets
done more efficiently.
Error of central tendency A performance rating error in
which all employees are rated about average.
Escalator clauses Clauses in labor agreements that pro-
vide for quarterly cost-of-living adjustments in wages,
basing the adjustments on changes in the consumer
price index.
Essay method A trait approach to performance rating
that requires the rater to write a statement describing
an employee’s behavior.
Ethics A set of standards of conduct and moral judgments
that help to determine right and wrong behavior.
Eustress Positive stress that accompanies achievement
and exhilaration.
Exclusive representation The legal right and responsibil-
ity of the union to represent all bargaining unit members
equally, regardless of whether employees join the union
or not.
Exempt employees Employees not covered by the over-
time provisions of the Fair Labor Standards Act.
Expatriates, or home-country nationals Employees from
the home country who are on international assignment.
Experiential learning The process of learning by “doing,”
reflecting on it, critically analyzing it, and applying it in
new situations or settings.
F
Failure rates The percentage of expatriates who do not
perform satisfactorily.
Fair employment practices (FEPs) State and local laws
governing equal employment opportunity that are often
more comprehensive than federal laws and apply to
small-business employers.
Fair representation doctrine A doctrine under which
unions have a legal obligation to assist both members
and nonmembers in labor relations matters.
Fitness-for-duty evaluations Evaluations randomly con-
ducted to determine an employee’s physical, mental,
and emotional fitness for a job.
89624_glos_hr_611-621.indd 614 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
615Glossary
Flexible benefits plans (cafeteria plans) Benefit plans
that enable individual employees to choose the benefits
that are best suited to their particular needs.
Flextime Flexible working hours that give employees the
option of choosing daily starting and quitting times,
provided that they work a set number of hours per day
or week.
Forced distribution A performance ranking system
whereby raters are required to place a certain percent-
age of employees into various performance categories.
Forced-choice method A trait approach to performance
rating that requires the rater to choose from statements
designed to distinguish between successful and unsuc-
cessful performance.
Four-fifths rule A rule of thumb followed by the EEOC
in determining adverse impact for use in enforcement
proceedings.
Functional job analysis (FJA) A job analysis approach
that utilizes an inventory of the various types of work
activities that can constitute any job.
Furloughing A situation in which an organization asks or
requires employees to take time off for either no pay or
reduced pay.
G
Gainsharing plans Programs under which both employ-
ees and the organization share financial gains accord-
ing to a predetermined formula that reflects improved
productivity and profitability.
Global compensation system A centralized pay system
whereby host-country employees are offered a full range
of training programs, benefits, and pay comparable
with a firm’s domestic employees but adjusted for local
differences.
Global corporation A firm that has integrated worldwide
operations through a centralized home office.
Global manager A manager equipped to run an interna-
tional business.
Graphic rating scale method A trait approach to perfor-
mance rating whereby each employee is rated according
to a scale of characteristics.
Grievance procedure A formal procedure that provides
for the union to represent members and nonmembers
in processing a grievance.
Guest workers Foreign workers invited to perform needed
labor.
H
Hay profile method A job evaluation technique using three
factors—knowledge, mental activity, and accountability—
to evaluate executive and managerial positions.
Health maintenance organizations (HMOs) Organiza-
tions of physicians and health care professionals that
provide a wide range of services to subscribers and
dependents on a prepaid basis.
High-deductible health insurance plan (HDHP) A med-
ical insurance plan characterized by high deductibles
but lower premiums for workers and a health spending
account to which employers contribute funds employ-
ees can keep should they leave the organization.
High-performance work system (HPWS) A specific
combination of HR practices, work structures, and pro-
cesses that maximizes knowledge, skill, commitment,
flexibility, and resilience of a firm’s employees.
Home-based pay Pay based on an expatriate’s home
country’s compensation practices.
Homeshoring The practice of outsourcing work to
domestic workers who work out of their homes.
Horizontal fit A situation in which all the internal ele-
ments of the work system reinforce one another.
Host country A country in which an international corpo-
ration operates.
Host-country nationals Employees who are natives of
the host country.
Host-based pay Expatriate pay comparable to that earned
by employees in a host country.
Hourly work Work paid on an hourly basis.
Human capital The knowledge, skills, and capabili-
ties of individuals that have economic value to an
organization.
Human capital readiness The process of evaluating the
availability of critical talent in a company and compar-
ing it to the firm’s supply.
H uman resources information system (HRIS) A
computerized system that provides current and accurate
HR-related data for the purposes of control and
decision-making.
Human resources management (HRM) The process of
managing human talent to achieve an organization’s
objectives.
Human resources planning (HRP) The process of antici-
pating and providing for the movement of people into,
within, and out of an organization.
89624_glos_hr_611-621.indd 615 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
616 Glossary
I
Impairment testing Also called fitness-for-duty or perfor-
mance-based testing, it measures whether an employee
is alert enough to work.
Improshare A gainsharing program under which bonuses
are based on the overall productivity of the work team.
Independent contractors Workers who are self-employed
and do project work on a contract basis for different
organizations.
Industrial engineering A field of study concerned with
analyzing work methods and establishing time standards.
Industrial unions Unions that represent all workers—
skilled, semiskilled, unskilled—employed along industry
lines.
Informational interview A conversation you have with
someone in a career you are interested in to gather infor-
mation about it.
Instructional objectives The desired outcomes of a train-
ing program.
Interest-based bargaining Problem-solving bargaining
based on a win–win philosophy and the development
of a positive long-term relationship.
Internal labor markets Labor markets in which workers
are hired into entry-level jobs and higher-level jobs are
filled from within.
International corporation A domestic firm that uses its
existing capabilities to move into overseas markets.
J
Job An activity people do for which they get paid, particu-
larly as part of the trade or occupation they occupy.
Job analysis The process of obtaining information about
a job by determining its duties, tasks, or activities.
Job characteristics model A job design theory that pur-
ports that three psychological states (experiencing
meaningfulness of the work performed, responsibility
for work outcomes, and knowing the results of the work
performed) result in a jobholder’s improved work per-
formance, internal motivation, and lower absenteeism
and turnover.
Job classification system A system of job evaluation in
which jobs are classified and grouped according to a
series of predetermined wage grades.
Job crafting A naturally occurring phenomenon whereby
employees mold their tasks to fit their individual
strengths, passions, and motives better.
Job description A statement of the tasks, duties, and
responsibilities of a job to be performed.
Job design An outgrowth of job analysis that improves
jobs through technological and human considerations in
order to enhance organization efficiency and employee
job satisfaction.
Job enlargement The process of adding a greater variety
of tasks to a job.
Job enrichment Enhancing a job by adding more mean-
ingful tasks and duties to make the work more reward-
ing or satisfying.
Job evaluation A systematic process of determining the
relative worth of jobs to establish which jobs should be
paid more than others within an organization.
Job progressions The hierarchy of jobs a new employee
might experience, ranging from a starting job to
jobs that successively require more knowledge and/or
skill.
Job ranking system The simplest and oldest system of
job evaluation by which jobs are arrayed on the basis of
their relative worth.
Job rotation The process whereby employees rotate in
and out of different jobs.
Job shadowing The process of observing someone in his
or her work environment to see if the job is of interest
to you.
Job sharing An arrangement whereby two part-time
employees do a job normally held by one full-time
employee.
Job specifications A statement of the specific knowledge,
skills, and abilities of a person who is to perform a job
needs.
Just-in-time training Electronic training delivered to
trainees when and where they need it to do their jobs.
K
Knowledge workers Workers whose responsibilities
extend beyond the physical execution of work to include
planning, decision-making, and problem-solving.
L
Labor relations process A logical sequence of five
events: (1) workers desire collective representation,
(2) the union begins its organizing campaign, (3) the
NLRB representation process begins, (4) collective
negotiations lead to a contract, and (5) the contract is
administered.
89624_glos_hr_611-621.indd 616 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
617Glossary
Learning management system (LMS) Online system
that provides a variety of assessment, communication,
teaching, and learning opportunities.
Leniency or strictness error A performance rating error
in which the appraiser tends to give employees either
unusually high or unusually low ratings.
Line managers Non-HR managers who are responsible
for overseeing the work of other employees.
Localization Adapting pay and other compensation ben-
efits to match that of a particular country.
M
Management by objectives (MBO) A philosophy of
management that rates the performance of employees
based on their achievement of goals set mutually by them
and their managers.
Management forecasts The opinions (judgments) of
supervisors, department managers, experts, or others
knowledgeable about the organization’s future employ-
ment needs.
Manager and/or supervisor evaluation A performance
evaluation done by an employee’s manager and often
reviewed by a manager one level higher.
Markov analysis A method for tracking the pattern of
employee movements through various jobs in a firm.
Material Safety Data Sheets (MSDSs) Documents
that contain vital information about hazardous
substances.
Mediation The use of an impartial neutral to reach a
compromise decision in employment disputes.
Mediator A third party in an employment dispute who
meets with one party and then the other to suggest
compromise solutions or to recommend concessions
from each side that will lead to an agreement.
Mentors Individuals who coach, advise, and encourage
employees of a lesser rank.
Merit guidelines Guidelines for awarding merit raises
that are tied to performance objectives.
Microlearning Training sessions that take place in a very
short timeframe, usually 5 minutes or less.
Mission The basic purpose of the organization as well as
its scope of operations.
Mixed-standard scale method A trait approach to per-
formance rating similar to other scale methods but
based on a comparison with (better than, equal to, or
worse than) a standard.
Mobile recruiting The process of recruiting candidates
via their mobile devices.
M u l t i d o m e s t i c c o r p o r a t i o n ( M D C ) A f i r m w i t h
independent business units operating in multiple
countries.
Multiple cutoff model A selection decision model that
requires an applicant to achieve some minimum level
of proficiency on all selection dimensions.
Multiple hurdle model A selection decision model in
which only the applicants with the highest scores at an
initial test stage go on to subsequent stages.
N
National Labor Relations Board (NLRB) The agency
responsible for administering and enforcing the Wag-
ner Act. It serves the public interest by reducing
interruptions in production or service caused by labor—
management strife.
Nearshoring Occurs when a firm relocates jobs abroad to
nations closer to its domestic market.
Negligence The failure to provide reasonable care when
such failure results in injury to consumers or other
employees.
Negligent hiring The failure of an organization to dis-
cover, via due diligence, that an employee it hired had
the propensity to do harm to others.
Nepotism A preference for hiring the relatives of current
employees.
Nine-box grid A comparative diagram that includes
appraisal and assessment data to allow managers to easily
see an employee’s actual and potential performance.
Noncontributory plan A pension plan in which contri-
butions are made solely by the employer.
Nondirective interview An interview in which the appli-
cant is allowed the maximum amount of freedom in
determining the course of the discussion, while the
interviewer carefully refrains from influencing the
applicant’s remarks.
Nonexempt employees Employees covered by the over-
time provisions of the Fair Labor Standards Act.
O
Offshoring The business practice of sending jobs to other
countries; work that was previously carried out in one
country is moved to another country.
89624_glos_hr_611-621.indd 617 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
618 Glossary
Ombudsman A designated individual from whom
employees may seek counsel for resolution of their
complaints.
Onboarding The process of systematically socializing
new employees to help them get “on board” with an
organization.
On-the-job training (OJT) A method by which employ-
ees are given hands-on experience with instructions
from their supervisor or other trainer.
Open-door policy A policy of settling grievances that
identifies various levels of management above the
immediate supervisor for employee contact.
Organization analysis An examination of an organiza-
tion’s environment, goals, strategies, performance, and
resources so as to determine what training it should do.
Organizational culture The shared values, beliefs, and
assumptions people in an organization have.
Orientation The formal process of familiarizing new
employees with the organization, their jobs, and their
work units.
Outplacement services Services provided by organiza-
tions to help terminated employees find a new job.
Outsourcing Contracting outside the organization to
have work done that formerly was done by internal
employees.
P
Panel interview An interview in which a board of inter-
viewers questions and observes a single candidate.
Passive jobseekers People who are not looking for jobs
but could be persuaded to take new ones given the right
opportunity.
Pay equity An employee’s perception that compen-
sation received is equal to the value of the work
performed.
Pay grades Groups of jobs within a particular class that
are paid the same rate.
Pay rate compression Compression of pay between new
and experienced employees caused by the higher start-
ing salaries of new employees; also the differential
between hourly workers and their managers.
Pay-for-performance standard A standard by which
managers tie compensation to employee effort and
performance.
Peer evaluation A performance evaluation done by one’s
fellow employees, generally on forms compiled into
a single profile for use in the evaluation meeting con-
ducted by the employee’s manager.
Peer-review system A system for reviewing employee com-
plaints that utilizes a group composed of equal numbers
of employee representatives and management appoin-
tees. The group weighs evidence, considers arguments,
and, after deliberation, votes to render a final decision.
Performance management The process of creating a
work environment in which people can perform to the
best of their abilities.
Performance reviews A process in which a manager
evaluates an employee’s performance relative to the
requirements of his or her job and uses the information
to show the person where improvements can be made
and how.
Perquisites Special nonmonetary benefits given to execu-
tives; often referred to as perks.
Person analysis The process of determining the specific
individuals who need training in an organization.
Phased retirement A program that allows its employees
to gradually cut their hours before retiring.
Piecework Work paid according to the number of units
produced.
Point system A quantitative job evaluation procedure
that determines the relative value of a job by the total
points assigned to it.
Political factors To come
Position analysis questionnaire (PAQ) A questionnaire
that identifies approximately 300 different tasks to deter-
mine the degree to which each is involved in doing a job.
Positive, or nonpunitive discipline A system of discipline
that focuses on early correction of employee miscon-
duct, with the employee taking total responsibility for
correcting the problem.
Predictive validity The extent to which candidates’ test
scores match criterion data obtained from them after
they have been hired and on the job for a period of time.
Preemployment test An objective and standardized test
used to gauge a person’s knowledge, skills, abilities,
and other characteristics (KSAOs) relative to other
individuals.
Preferred provider organization (PPO) A network of
physicians who establish an organization that guar-
antees lower health care costs to employers and their
employees.
Process audit Determining whether a high-performance
work system has been implemented as designed.
Profit sharing Any procedure by which an employer
pays, or makes available to all regular employees, spe-
cial current or deferred sums based on the organiza-
tion’s profits.
89624_glos_hr_611-621.indd 618 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
619Glossary
Progressive discipline The application of corrective
measures by increasing degrees.
Promotion A change of assignment to a job at a higher
level in the organization.
Protected classes Individuals of a minority race, women,
older people, and those with disabilities who are cov-
ered by federal laws on equal employment opportunity.
Psychological contract Expectations of a fair exchange
of employment obligations between an employee and
employer.
Q
Quality of fill A metric designed to measure how well
new hires that fill positions are performing on the job.
R
Real wages Wage increases larger than rises in the consumer
price index, that is, the real earning power of wages.
Realistic job preview (RJP) Informing applicants about
all aspects of the job, including both its desirable and
undesirable facets.
Reasonable accommodation An attempt by employers to
adjust, without undue hardship, the working conditions
or schedules of employees with disabilities or religious
preferences.
Recency error A performance rating error in which the
evaluation is based largely on the employee’s most
recent behavior rather than on behavior throughout
the evaluation period.
Recordable case Any occupational death, illness, or
injury to be recorded in the log (OSHA Form 300).
Recruiting process outsourcing (RPO) The practice of
outsourcing an organization’s recruiting function to an
outside firm.
Red circle rates Payment rates above the maximum of the
pay range.
Reliability The degree to which an interview, test, or
other selection procedures result in consistent informa-
tion about a candidate.
Repatriation The process of transition for an employee
home from an international assignment.
Replacement charts Listings of current jobholders and
people who are potential replacements if an opening
occurs.
Re-recruiting The process of keeping track of and main-
taining relationships with former employees to see if
they would be willing to return to the firm.
Reverse discrimination The act of giving preference
to members of protected classes to the extent that
unprotected individuals believe they are suffering
discrimination.
R e v e r s e m e n t o r i n g A p r o g r a m w h e r e b y y o u n g e r
employees are called on to mentor older employees and
executives about social media trends, new technology,
and marketplace trends.
Rights arbitration Arbitration over interpretation of the
meaning of contract terms or employee work grievances.
Right-to-know laws Laws that require employers to
advise employees about the hazardous chemicals they
handle.
S
Sabbatical An extended period of time in which an
employee leaves an organization to pursue other activi-
ties and later returns to his or her job.
Salary plus bonus plan A compensation plan that pays a sal-
ary plus a bonus achieved by reaching targeted sales goals.
Scanlon plan A bonus incentive plan using employee
and management committees to gain cost-reduction
improvements.
Selection The process of choosing individuals who are
qualified to fill existing or projected job openings.
Selection ratio The number of applicants compared with
the number of people to be hired.
Self-evaluation A performance evaluation done by the
employee being evaluated, generally on an evaluation
form completed by the employee prior to the evaluation
meeting.
Sequential interview A format in which a candidate is
interviewed by multiple people, one right after another.
Severance pay A one-time payment sometimes given to
an employee who is being involuntarily terminated.
Sexual harassment Unwelcome advances, requests for
sexual favors, and other verbal or physical conduct of a
sexual nature in the working environment.
Similar-to-me error A performance rating error in which
an appraiser inflates the review of an employee because
of a mutual personal connection.
Situational interview An interview in which an applicant
is given a hypothetical incident and asked how he or
she would respond to it.
Skill inventories Files of personnel education, experience,
interests, skills, and so on that allow managers to quickly
match job openings with employee backgrounds.
89624_glos_hr_611-621.indd 619 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
620 Glossary
SMART goals Goals that are specific, measurable, achiev-
able, realistic, and time-based.
Sociocultural factors external factors including method
and style of communications, religions, values and ide-
ologies, education standards, and social structure.
Split pay A system whereby expatriates are given a por-
tion of their pay in the local currency to cover their day-
to-day expenses and a portion of their pay in their home
currency to safeguard their earnings from changes in
inflation or foreign exchange rates.
Spot bonus An unplanned bonus given for employee’s
effort unrelated to an established performance measure.
Spot rewards Programs that award employees on the spot
when they do something particularly well during train-
ing or on the job.
Staffing table A table that shows a firm’s jobs, along
with the numbers of employees currently occupying
those jobs and future (monthly or yearly) employment
requirements.
Stakeholders Key people and groups that have an interest
in a firm’s activities and that can either affect them or
be affected by them.
Standard hour plan An incentive plan that sets rates
based on the completion of a job in a predetermined
standard time.
Step-review system A system for reviewing employee
complaints and disputes by successively higher levels of
management.
Straight commission plan A compensation plan based
on a percentage of sales.
S t r a i g h t p i e c e w o r k A n i n c e n t i v e p l a n u n d e r
which employees receive a certain rate for each unit
produced.
Straight salary plan A compensation plan that permits
salespeople to be paid for performing various duties
that are not reflected immediately in their sales volume.
Strategic human resources management The pattern
of human resources deployments and activities that
enable an organization to achieve its strategic goals.
Strategic planning Procedures for making decisions
about the organization’s long-term goals and strategies.
Strategic vision A statement about where the company is
going and what it can become in the future.
Stress Any adjustive demand caused by physical, mental,
or emotional factors that requires coping behavior.
Structured interview An interview in which a set of
standardized questions having an established set of
answers is used.
Subordinate evaluation A performance evaluation of a
superior by an employee, which is often used for devel-
opmental rather than for administrative purposes.
Succession planning The process of identifying, develop-
ing, and tracking key individuals for executive positions.
Supplemental unemployment benefit (SUB) A plan that
enables an employee who is laid off to draw weekly
benefits from the employer, which draws from a fund
created for this purpose, in addition to state unemploy-
ment compensation.
Sustainability Doing business in a way that does as little
harm to the environment and depletes as few natural
resources as possible.
SWOT analysis A comparison of one’s strengths, weak-
nesses, opportunities, and threats for strategy formulation
purposes.
T
Talent reviews strategic meetings to determine if a com-
pany has the human resources it needs to compete in
the future.
Task analysis The process of determining a training pro-
gram’s content by studying the tasks and duties a job
involves.
Task inventory analysis An organization-specific list of
tasks and their descriptions used as a basis to identify
components of jobs.
Team evaluation A performance evaluation that recog-
nizes team accomplishments rather than individual
performance.
Team incentive plan A compensation plan in which
all team members receive an incentive bonus pay-
ment when production or service standards are met or
exceeded.
Technological factors External factors pertaining to the
technological infrastructure and investments, informa-
tion systems, manufacturing equipment, and consumer
access to technology.
Telecommuting The use of personal computers, net-
works, and other communications technology to
do work in the home that is traditionally done in the
workplace.
Third-country nationals Employees who are natives
of a country other than the home country or the host
country.
Time-to-fill Metrics that refer to the number of days from
when a job opening is approved to the date a person
accepts the job and begins it.
89624_glos_hr_611-621.indd 620 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
621Glossary
Transfer of training The effective application of princi-
ples learned to what is required on the job.
Transfer The placement of an employee in another job
for which the duties, responsibilities, status, and pay
and benefits are approximately equal to those of the
previous job the person held.
Transnational corporation A firm that attempts to bal-
ance local responsiveness and global scale via a network
of specialized operating units.
Transnational teams Teams composed of members of
multiple nationalities working on projects that span
multiple countries.
Trend analysis A quantitative approach to forecasting
labor demand based on a factor such as sales.
U
Unfair labor practices (ULPs) Specific employer and
union illegal practices that deny employees their rights
and benefits under federal labor law.
Uniform Guidelines on Employee Selection Procedures
A procedural document published in the Federal Reg-
ister to help employers comply with federal regulations
against discriminatory actions.
Union security agreement Where an employer and the
union agree on the extent to which the union may
compel employees to join the union and how the dues
will be collected.
Union steward An employee who as a nonpaid union
official represents the interests of members in their rela-
tions with management.
V
Validity The degree to which a test or selection procedure
actually measures or predicts a person’s ability to do a
job.
Value creation What a firm adds to a product or service
by virtue of making it; the amount of benefits provided
by the product or service once the costs of making it are
subtracted.
Variable pay Tying pay to some measure of individual,
group, or organizational performance.
Vertical fit The situation in which the work system sup-
ports the organization’s goals and strategies.
Vesting A guarantee of accrued pension benefits to partic-
ipants at retirement age, regardless of their employment
status at that time.
Video interviews Interviews conducted via videoconfer-
encing or over the Web.
Video résumés Short video clips that highlight appli-
cants’ qualifications beyond what they can communi-
cate on their résumés.
Virtual job fair Job fairs conducted online.
Virtual teams Teams that utilize telecommunications
technology to link team members who are geographi-
cally dispersed—often worldwide across cultures and
across time zones.
W
Wage and salary survey A survey of the wages paid to
employees of other employers in the surveying organi-
zation’s relevant labor market.
Wage curve A curve in a scattergram representing the
relationship between the relative worth of jobs and pay
rates.
Wellness programs Employer-sponsored programs
designed to encourage employees to maintain and
improve their health and well-being by getting regular
checkups, eating properly, exercising, and managing
their stress levels so as to prevent costly and protracted
illnesses.
Whistle-blowing Complaints to governmental agencies
by employees about their employers’ illegal or immoral
acts or practices.
Work permit or visa A government document granting
a foreign individual the right to seek employment.
Work valuation A job evaluation system that seeks
to measure a job’s worth through its value to the
organization.
Workers’ compensation insurance State-mandated insur-
ance provided to workers to defray the loss of income
and cost of treatment due to work-related injuries or
illness.
Workforce (HR) analytics The process of gathering and
analyzing data to improve a firm’s human resources
management.
Workforce utilization analysis A process of classifying
protected-class members by number and by the type of
jobs they hold within the organization.
Wrongful discharge A discharge, or termination, of an
employee that is illegal.
Y
Yield ratio The percentage of applicants from a particu-
lar source that make it to the next stage in the selection
process.
89624_glos_hr_611-621.indd 621 10/26/17 5:57 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
622
Name Index
A
Anderson, Richard, 487
Arthur, Peter, 560
B
Baldwin, Brenda, 609
Balkin, George, 352
Barnes, Mike, 182
Barra, Mary, 188, 195
Bascomb, Sobadia, 75
Batista, Juan, 412
Baumgarten, Maryann, 585
Beane, Billy, 66, 313
Bezos, Jeff, 180, 181
Bidwell, Matthew, 169
Black, Suzy, 34
Blancero, Janis, 412
Booth, Elizabeth, 115
Bossidy, Larry, 68
Boswell, Greg, 366
Bowerman, Bill, 75
Brandon, David, 77
Buzachero, Victor, 194
C
Callahan, Big Tom, 311
Callahan, Tommy, Jr., 311
Cameron, Kim, 55
Cappelli, Peter, 66, 237
Carell, Conner, 382
Carlton, Richard, 575
Cecere, Rob, 77
Chanin, Robert, 283
Chopra, Udit, 609
Claire, Emily, 588
Clawson, James, 55
Cleaver, Walt, 40
Collins, Rockwell, 184
Combs, James, 558
Conger, Douglas, 41
Conley, Chip, 560
Cook, Benjamin J., 449
Cottrell, Craig, 609
Coyle, Richard, 596
Crawford, James, 274
Cresswell, Leigh, 585
Cuban, Mark, 477
Cummings, Rebecca, 216
Czeisler, Charles, 428
H
Hackman, Richard, 136, 140, 143
Hall, Angela, 558
Hawk, Elizabeth, 321
Hayden, Alex, 505
Hay, Edward N., 335
Heathfield, Susan M., 142
Hernandez-Canton, Juanita, 592
Herzberg, Frederick, 135
Hodge, Roger, 148
Hsieh, Tony, 148, 322
Huang, Nancy, 511
Huselid, Mark, 50
I
Ibarra, Joseph, 586
J
Jackson, Ron, 605
Jacobson, Rick, 381
Jacowski, Tony, 182
Jenkins, Janet, 381
Jesuthasan, Ravin, 320
Jobs, Steve, 39
Johnson, Rick, 142
Jones, Todd, 565
K
Kanter, Rosabeth Moss, 6
Kaplan, Robert, 71
Kelly, Paul, 597
Kennedy, Douglas, 275
Ketchen, David, 558
Kinder, Tom, 603
Knight, Phil, 75
Knolls, Donald, 444
Krantz, Barb Taylor, 574
L
Ledford, Gerald, 321
Lee, Chen, 603
Lewiston, Peter, 116
Lincoln, J. F., 372
Lingle, Kathie, 144
Liu, Yongmei, 558
Lomas, Mark, 444
Lopez, Carmen, 550
Lowry, Samantha, 512
D
Daily, Brent, 280
Damon, Matt, 8
Davidson, Martin, 112
Davis, Steven L., 608
de la Cruz Gonzalez, Maria, 551
Delich, Diane, 154
Ding, Bill, 75
Dobrow, Joe, 580
Domzalski, Mike, 592
Doyle, J. Patrick, 77
Duff, Calvin, 75
Duggan, Kris, 365
Dunn, Kris, 564
E
Eastwood, Mike, 605
Edmondson, David, 211
Egan, Gene, 596
Egan, Karen, 596
F
Fettig, Jeff, 274
Fetzer, Marsha, 599
Flickinger, Greg, 579
Ford, Henry, 64, 122
Foster, Gary, 285
Franklin, Benjamin, 251
Fryer, Garth, 599–601
G
Galvez, Dorothy, 138
Gardner, Nathan, 352
Gardner, Sarah, 352
Garner, Kathryn, 592
Gels, Richard, 599
Ghosh, Gautam, 574
Gilbury, Beverly, 116
Gore, Bill, 55
Gore, Vivien, 55
Greschner, Nicholas, 306
Gretsky, Wayne, 68
Griggs, Willie, 105
Griswold, Clark, 311
Gross, Barrie, 283
Gross, Ronald, 303
Gulati, Ranjay, 61
89624_em_name_indx_hr_622-623.indd 622 11/6/17 1:48 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
623Name Index
T
Taft, Jason, 599
Tanner, O. C., 366
Taylor, Frederick Winslow, 122
Thompson, Gordon, 603, 604
Tikki, McAloo, 521
Tisch, Jon, 274
Trumka, Richard, 507
Trump, Donald, 102, 274, 359, 379, 399,
491, 517
U
Ulrich, Dave, 4
Umali, Mary, 608
V
Velazquez, Eustasio, 123
Vitale, Susan, 161
W
Wagganer, Craig, 142
Walker, James, 41
Walker, Scott, 510
Watson, Thomas J., 3
Watts, Russell, 381
Waycross, Thomas, 444
West, Delise, 17
Wheatly, Teresa, 412
Winning, Ethan, 115
Woolf, Susan, 412
Wrzesniewski, Amy, 138
Wyatt, Watson, 364
X
Xi Jinping, 517
Y
Young, Mary, 588
Z
Zucker, Bailey, 382
Patel, Mehul, 211
Pence, Mike, 510
Pepper, Dave, 594
Perkins, Jack, 381
Perkins, Katie, 352
Pollak, Lindsey, 182
Pollock, Pat, 596
Polzer, Jeffrey, 143
Popelmill, Victoria, 599
Porter, Latice, 92
Pronk, Stephanie, 444
Q
Quinn, Robert, 55
R
Radjou, Navi, 141
Ready, Jeff, 41
Rochette, Tonya, 17
Ronen, Simcha, 534
Roosevelt, Franklin D., 87
Roseman, Barry, 451
Rosen, Hjalmar, 499
S
Sammer, Joanne, 360
Sarabe, Ravi, 588
Sejen, Lauren, 364
Shanahan, Timothy, 264
Shanks, Chad, 476
Shatner, William, 10
Sheedy, James, 436
Shenkar, Oded, 534
Shirley, Frank, 311
Singh, Chandra, 75
Singh, Marcus, 599, 601
Singh, Navjot, 34
Snowden, Edward, 168
Spackler, Carl, 311
Stagner, Ross, 499
Stansky, Jesse, 511
Stephanie Pronk, 438
Stockton, John, 368
Strauss, Levi, 528
Strong E. K., Jr., 200
Stuart, Mary Kaye, 144
Sullivan, John, 16
M
Mackey, John, 580
Mae, Hattie, 477
Maggio, Ellie, 560
Mahate, Ashraf, 61
Malcom, Tom, 608
Marcus, Neiman, 66
Marks, Eric A., 87
Marriott, J. W., 156
Martinez, Mike, 609, 610
Martin, Lockheed, 189
Mayer, Marissa, 149
Maynard, Karyn, 177
Mazor, Art, 6
McCaskey, Pam, 596
McLean, Lindsey, 267
McShee, Dorothy, 412
Meadors, Gary, 609
Meisinger, Sue, 195
Mercuri, Kevin, 238
Merrill, Paula, 381
Merritt, Carolyn, 425
Michael, Chad, 265
Monahan, Tom, 71, 76
Morris, Donna, 312
Morris, Shad, 358
Moser, Terry, 488
Mulally, Alan, 381–382
Mussman, Susan, 599
N
Navarro, Glenn, 604
Nel, Andre, 123
Nixon, Richard, 532
Noel, Derek, 149
Norton, David, 71
O
Oldham, Greg, 136, 140
Oldroyd, James, 358
O’Leary, George, 211
Ortiz, Juan, 599
Osborn, Spencer, 184
P
Packley, Dave, 588
Parsons, Chandler, 477
89624_em_name_indx_hr_622-623.indd 623 11/6/17 1:48 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
624
Organization Index
A
AARP, 192
ABB, 523
Abbott Labs, 188
ABC Corporation, 189, 463
Abercrombie & Fitch, 92
About.com, 201
Accenture, 49, 60
Adaptable Software, 412
Adecco, 167
Adobe, 339
Adobe Consulting Services, 412
AdVenture Games, 265
Aetna Life and Casualty, 26, 175
AFLAC, 188
AGCO, 12
AirBnB, 3
Alcoa, 256
Altera, 339
Amazon.com, 12, 40, 48, 51, 123, 157, 159,
180, 181, 191, 237, 307, 426
Amazon Lab126, 338
American Airlines, 65
American Association for the Advancement
of Science, 190
American Clothing, 153
American Eagle, 516
American Express, 145, 402, 566
American Management Association,
189, 261
AMFMJobs, 161
AOL, 460
Aon Hewitt, 560
Appcast, 161
Apple Inc., 8, 16, 26, 39, 45, 122, 277, 373,
410, 459, 524, 561
ARAMCO, 530
ARCO Products, 532
ASDA, 562
A.T. Kearney, 338
Atlassian, 366
AT&T, 65, 137, 191, 264
B
Bank of America, 26, 259, 466
Bank One Corporation, 393
Banner Health, 133, 469
Baptist Hospital of Miami, 402
Barnes & Noble, 40, 70
Barney’s outlet, 196
Bath & Body Works, 57
Clif Bar & Company, 402
Cloudera, 339
CNA Financial, 39
CNNMoney.com, 202
Coca-Cola, 7, 265, 266, 373
Colgate-Palmolive, 528
Columbia Forest Products, 373
Compaq Computer, 433
Conference Board, 261
Container Store, 176, 177
Corning Inc., 13
Costa Vida, 352–353
Costco, 66, 426
Coursera, 259
Cray, Inc., 256
CVS, 279
CyPHY Works, 302
D
Daimler-Benz, 65
Dalian Wanda Group, 8
Dallas software company, 551
Danaher, 15, 32
Darden Restaurants, 16, 245
Dell Computer, 66, 97, 265, 520
Deloitte, 6, 39, 155, 164, 183, 528
Delta Air Lines, 16, 331, 333, 409, 487
Desert Valley Medical, 550
Detroit, 48
Deutsche Bank, 11
Dial Corp., 226
Dick’s Sporting Goods, 137
Digital Equipment Company, 334
Discovery Communication, 438
Disney, 52
Diversity Inc., 190
Dollar Tree, 44
Domino’s, 71, 76–78
Done-Deal Paper, Inc., 382
Doubletree Hotels, 566
Dow Chemical, 428, 528, 532
Dropbox, 110
Duke Power Company, 105
Duolingo, 259
DuPont, 459
E
Earnest, 307
eBay, 402, 460
EDS, 528, 536
edX, 259
Bay Area Rapid Transit, 469
Beach Electrical Systems, 477
BeautyArmy, 227
Ben & Jerry’s, 402
Best Buy, 57, 145
BetterWorks, 365
Beyond Meat, 224
Bing, 304
Birchbox, 225–227
Birdwell, 276
BizMiner, 289
Blimpie’s, 321
Bloomingdales, 257
Blue Prism, 11
BMW, 8, 575
BNSF Railway, 10, 183, 187
Boeing, 163, 172
Boston Consulting Group, 338
Box, 339
BP, 422
Brigham and Women’s Hospital, 428
Bristol-Myers Squibb, 188
Broadcom, 339
Burbn, 204
Bureau of Labor Statistics (BLS), 48,
336, 337
Bureau of National Affairs, 373
Burger King, 256, 321
C
Cadence Design Systems, 339
Calvin Klein, 139
Campbell’s Soup Company, 243
Capital One, 191
CareerBuilder.com, 160, 161, 191, 199
CareerPath, 201
Caterpillar, 261
CBS, 189
Center for Creative Leadership, 261
CenturyLink, 144
Cerner Corp., 27, 392–394
Champion International, 256, 562
Charles Schwab & Co., 71
Cheesecake Factory, 259, 459
Chicago Tribune, 189
Chrysler, 65, 409
Circle K Corporation, 431
Cisco, 12, 184
Citigroup, 163
City of Atlanta, 331
Cleaver Consulting Group, 40
89624_em_company_indx_hr_624-626.indd 624 11/16/17 9:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
625Organization Index
Lowe’s, 168, 191
Lucasfilm, 139
Lufthansa, 168
Lyft, 566
M
3M, 40, 256, 433, 536, 575
Macy’s, 2, 158, 262
ManpowerGroup, 12, 167
Marks Paneth & Shron, 87
Marks & Spencer, 566
Marriott, 4, 155, 156, 169, 256, 527, 566
Martin Agency, 4
Matawan, 161
Matsushita, 521
Maytag, 137
McDonald’s, 77, 242, 405, 459, 521
McGraw-Edison, 368
McKinsey & Company, 338
MDS Global Medical Staffing, 550
Medzilla, 161
Merck, 12, 207, 245, 402
Met Life, 334
Michael Foods, Inc., 437
Microsoft, 3, 19, 48, 65, 110, 141, 168, 182,
259, 280, 339, 387
Milicruit.com, 191
MoneyDesktop (MX), 323
Monsanto, 536
Monster, 161, 163, 199
Morgan Stanley, 207
Motorola, 97, 257, 264, 431, 566, 574
MTS, 562
MyPlan.com, 201
N
NASCAR, 134
NASDAQ, 283
National Association of Professional
Employer Organizations (NAPEO), 168
National City Bank, 236
National Football League, 92
National Organization on Disability
(NOD), 162
NBC, 189
NEC, 521
Netflix, 46, 386, 519
New York Mets, 394
N2Growth, 164
Nike, 75–76, 216, 373, 540
Nokia, 141
Nordstrom, 4, 67, 169, 252
Nortel Networks, 343
Novartis, 170, 572
Nucor Steel, 15, 32, 169, 559
nuTonomy, 302–303
O
Oakland A’s, 66, 67, 410
Ocean Spray, 469, 561
O. C. Tanner, 366
Ogilvy & Mather, 184
Old Home Foods, 560
Olive Garden, 16
Hilton hotel, 167
Hollister, 516
Home Depot, 192, 277, 278, 393, 403
Honda, 520, 551
Honeywell, 68, 256, 343, 524, 565, 573
Hoovers, 289
Hoovers.com, 202
HR Consulting, 87, 408
HSBC, 170
Hudson Group, 145
Hy-Vee, 373
I
IBM, 3, 11, 12, 52, 65, 135, 137, 145, 184,
187, 188, 190
IBM Global Services, 48–49
IKEA, 389, 559
InBev, 8
Indeed, 161, 199
Independent Pharmacy Cooperative (IPC),
279
In-N-Out Burger, 353
Instagram, 10, 460
Intel, 6, 65, 97, 527
Intercounty Appliance, 279
International Labor Organizations, 547
International Paper, 562
i2 Technologies, 551
ITT, 521
J
JetBlue, 430
JobsInLogistics, 161
Johnson Controls, 437
Johnson Wax, 334
JPMorganChase, 402
Juniper Networks, 338
K
Kaiser Permanente, 145, 566
Kelly Services, 12, 167
Kessler Foundation, 162
KeyBank, 236
Khan Academy, 259
KLM Royal Dutch Airlines, 254
Knack, 237
Korn Ferry International, 164
KPMG, 188
Krispy Kreme, 552
L
Land Rover Company, 575
Legendary, 8
Lenovo, 65, 122
Levi Strauss, 394, 410
Lincoln Electric, 372, 517
LinkedIn, 10, 12, 50, 154, 155, 158, 160, 162,
164, 172, 189, 199, 259, 323, 339, 524
LiveCareer, 201
Lloyd’s of London, 34
Lobster, 155
Lockheed Martin, 524
Loews Hotels, 274–275
Egan Clothiers, Ltd., 578
Electronic Arts, 6
Eli Lilly, 523
Emend Management Consultants, 560
Emma L. Bowen Foundation, 189
Enron, 324
Enterprise Rent-A-Car, 430
Epic Systems Corporation, 405
Esmark Steel, 5
Essentium Materials, 274–276
Etsy, 303, 305
Executive Pursuits, 154
Exxon, 26, 527
F
Facebook, 3, 10, 20, 50, 52, 110, 144, 154,
155, 162, 164, 189, 259, 265, 321, 322,
339, 460
Family Dollar, 44
Fannie Mae, 256
FBI, 260
Federal Express (FedEx), 51, 139, 168, 220,
224, 227, 269, 562
Fel-Pro, 402
Fiat and Chrysler, 65
FirstJob, 161
Fitbit Inc., 135
F5 Networks, 339
Ford, 6, 65, 138, 163, 223, 245, 264, 275, 381,
382, 498, 573
Founder2Be, 318
Four Seasons Hotels, 52
Fox networks, 189
Frito-Lay, 343
Fundbox, 306–308
G
Gannett Company, 410
Garden Fresh, 430
Gawker Media, 482
General Dynamics, 97
General Electric (GE), 5, 6, 40, 52, 65, 170,
182–183, 189, 242, 520, 526, 527, 566
General Mills, 256
General Motors (GM), 5, 176, 188, 195–196,
256, 328, 409, 498
Genpact, 157
Giant Eagle, 216
GlassDoor, 161, 172
GlaxoSmithKline, 394
Golden State Container, 331
Goldman Sachs, 55, 328
Google, 17, 42, 50, 55, 110, 161, 175, 265,
305, 321, 323, 328, 338, 373, 438, 460,
524, 576
Guidewire, 339
H
Halton Co., 182
Harley-Davidson, 133, 561, 572
Heidrick & Struggles, 164, 525
Herff Jones, 373
Hewlett-Packard (HP), 10, 184, 264
Hilcorp Energy, 565
89624_em_company_indx_hr_624-626.indd 625 11/16/17 9:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
626 Organization Index
U
Uber, 42
Udacity, 259
Unicruit, 163
Unilever, 527, 540
United National Foods, 295
United Technologies, 6, 264
UNUM, 256
Upstart, 307
USAA, 394
U.S. Airways, 65
U.S. Postal Service, 433
U.S. Steel, 409
U.S. Sugar, 373
V
Vault.com, 202
Verizon, 183, 536
Veteranrecruiting.com, 191
Veterans4Hire, 191
Viacom, 410
Vimeo, 155
Virgin America, 46, 52, 183
Virtualjobshadow.com, 201
Visa, 339
Visteon Corporation, 64
VMware, 338
Volkswagen, 6
W
Waffle House, 474
Walgreens, 16, 279
Walmart, 26, 45, 46, 66, 78, 157, 187, 209,
279, 339, 546
Warner Bros., 410
Watson Wyatt, 364, 408, 540
Wegmans, 295
Wells Fargo, 348
Westinghouse, 507
Weyerhaeuser Company, 214
Whirlpool, 255, 273–274, 528
Whole Foods, 26, 42, 169, 252, 295, 326,
562, 564, 565, 580–581
Williams-Sonoma, 158
Wise Acre Frozen Treats, 294, 295
W.L. Gore & Associates, 55, 138, 373, 564
Woodsmith Corporation, 331
World Trade Organization (WTO), 517, 519
Wynn Las Vegas, 3
X
Xerox Corporation, 48, 269, 526, 568, 574
Xwerox, 507
Y
Yahoo, 145, 304, 460
Yammer, 10, 259
Yelp, 26
YouTube, 10, 155, 172, 211
Z
Zappos, 6, 141, 162, 207, 321, 322, 560, 564
Zoho, 308
ZoomInfo, 162
Shaker Consulting Group, 236
Shell, 34–35, 521, 572
Shell Canada, 565
Sherwin Williams, 236, 343
Shopify, 304–305
Silicon Graphics, 410
SkipTheDishes, 161
Skype, 215
Small Business Administration, 352
Smartsheet, 323
Smith & Wesson, 264
SnapChat, 331, 460, 524
Snyder’s-Lance, 579
Social Intelligence, 10
Société Générale, 560
Society for Human Resources Management
(SHRM), 4, 219
SoFi, 307
Solectron Corporation, 572
Souplantation, 58
Southwest Airlines, 6, 15, 32, 52, 207, 256,
263, 278, 576
Spencer Stuart, 525
Spirit Airlines, 66
Sprint, 145
Sprouts, 312
Squarespace, 304
Stanford University, 410
Staples, 192
Starbucks, 6, 52, 55, 67, 72, 191, 207, 236,
322, 331, 373, 524
Steelcase, 362
Strategy&, 338
SumTotal Systems, 262
SunTrust Banks, 172, 188, 236, 237
Suzuki, 551
Synopsys, 339
Syntex, 402
T
Taco Bell, 321, 552
TalentBin, 162
Target, 2, 46, 57, 78, 135, 312
Tata Motors, 526
TechStars, 316
Tesco, 566
Tesla Motors, 157
Texas Instruments, 573
Thrivent Financial for
Lutherans, 370
TimeWarner, 65
TOMS, 321, 325
Toptal, 334
Towers Perrin, 320
Toyota, 236
Toys “R” Us, 192
TransAmerica, 334
Trek Bikes, 139
Tribune Co., 373
TriHealth, 565
Tri Star Performance and Preventive Health
Care, 328
TRW, 571
Tumblr, 155
Twitter, 10, 50, 110, 155, 161, 162, 184,
323, 339
Oracle, 170, 323
OrangeHRM, 13
P
Pace Worldwide, 266
Pennzoil, 469
PepsiCo, 263, 523
P&G, 526
Philip Morris, 402
Philips, 521
Phoenix Semiconductor, 511, 512
Pinkerton Security, 216
Pinterest, 110, 155
Pizza Hut, 77
Plantir, 163
Polaroid, 264, 407
Pratt and Whitney, 433
Prescient InfoTech, 217
PricewaterhouseCoopers, 144, 183
Procter & Gamble (P&G), 12, 52, 163,
170, 520
Profiles International, 236
Progress Energy, 331
Propheta Communications, 238
Prudential Financial, 334
Publix Super Markets, 4, 373, 564
PwC, 49
Q
Quaker Oats, 188, 373
Qualcomm, 259
Quicken Loans, 48
QuickTrip, 186
R
RedBrick Health, 438
Red Lobster, 16
Reebok International,
265, 566
REI, 52
Ritz Carlton, 242, 430
Robert Half International, 157
Rockefeller Foundation, 163
Rockwell Collins, 184
Rolls-Royce, 527
Round House Workwear, 153
S
Safeway Cigna Insurance, 216
Saint Alphonsus Regional Medical
Center, 469
Salary.com, 202
Salesforce.com, 110, 207, 339
Sally Corporation, 566
Sam’s Club, 66
Samsung, 389
SAP, 170, 339
Sara Lee, 373
Sarip International, 550
Saudi Aramco, 69
Scheels All Sports, 373
Schindler Elevator, 565
Scripps Health, 180, 194
89624_em_company_indx_hr_624-626.indd 626 11/16/17 9:03 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
627
Subject Index
A
AAF. See African-American Forum
(AAF)
Absenteeism rates
costs of, 83
employee, 80–81
and HR planning, 83
Acceptance rate, 174
Accident investigation and recording,
426–427
Accommodation, reasonable, 95
ACFTU. See All-China Federation of
Trade Unions (ACFTU)
Acquisitions, 65
ADA. See Americans with Disabilities
Act (ADA)
ADAA. See Americans with Disabilities
Amendments Act (ADAA)
ADEA. See Age Discrimination in
Employment Act (ADEA)
Adventure-based learning, 265
Adverse impact, 105–106
Advertisements, for recruiting, 159–160
Advocacy, employee, 28
Affirmative action
court decisions on, 110–111
definition of, 109
diversity management and, 109–113
reasons for, 110
steps in program development for, 110
AFL-CIO. See American Federation of
Labor and Congress of Industrial
Organizations (AFL-CIO)
African-American Forum (AAF), 189
Age, as diversity factor, 191–192
Age Discrimination in Employment
Act (ADEA), 91, 94, 455
Age distribution, of workforce, 20–21
Agencies, staffing, 167
Agreement, 533
AIDS, 98
Alcoholism, 441
Alignment
compensation, 320
horizontal, 71
measurement of, 71–73
vertical, 71
Autonomous work groups, 139
Awards, incentive, 365–366
B
Background checks, 218–220
Backup care program, 403
Balanced Scorecard (BSC),
71, 301–302
Balance, of work and family, 26–27
Balance sheet approach, 541
Bank of America, 466
Bargaining
case study, 510–511
data, 498
deadlocks, 502
good faith, 499
Internet-based, 499–500
in other countries, 546–547
power, 500–502
process, 497–502
strategies, 498–499
tactics, 498–499
zone, 499
Bargaining unit, 493
BARS. See Behaviorally anchored
rating scale (BARS)
Basic skills training, 264
BDI. See Behavioral description
interview (BDI)
Behavioral checklist, 299
Behavioral description interview
(BDI), 214
Behaviorally anchored rating scale
(BARS), 299, 300
Behavior modeling, in training,
259–260
Behavior modification, 252
Behavior observation scale
(BOS), 299
Benchmarking, 73, 270–271
Benefits
administration of, 388
backup care program, 403
cafeteria plans, 387
case study, 412
child and elder care, 402–403
All-China Federation of Trade Unions
(ACFTU), 545
Alternative dispute resolution (ADR),
472–474
Alumni networks, 164
American Federation of Labor and
Congress of Industrial Organiza-
tions (AFL-CIO), 492, 507, 510
American Society for Training and
Development (ASTD), 568
Americans with Disabilities Act
(ADA), 95–96, 131, 224, 441, 455
Americans with Disabilities Amend-
ments Act (ADAA), 96
Applicant tracking system (ATS), 174
Application forms, in selection, 211
Apprenticeship training, 254, 526
Arbitration, 474
award, 505–506
case study, 511–512
compulsory binding, 504
fair representation doctrine, 505
hearing, 505
labor agreements and, 504–506
rights, 504
Assessment
center tests, 222
competency, 247
needs (See Needs assessment)
ASTD. See American Society for
Training and Development
(ASTD)
ATS. See Applicant tracking system
(ATS)
Attire, 465
Attitudes, changing, toward work,
25–26
Attraction–selection–attrition (ASA)
model, 231
Attractiveness, discrimination and, 103
Audits
cultural, 54
glass ceiling, 187
process, 573
Authorization card, 489
Automated (computer-administered)
interviews, 216
89624_em_sub_indx_hr_627-640.indd 627 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
628 Subject Index
CDO. See Chief diversity officer
(CDO)
Central tendency, error of, 292
Change
demographic, 44–45
ecological, 44
economic, 44
legal, 45
management, 6–7
reactive, 6
regulatory, 45
social, 44–45
technological, 44
Charge form, 106
Checklist, succession planning, 62
Chemical hazards, 436–437
Chief diversity officer (CDO), 110
Chief ethics officer, 267
Chief executive officers (CEOs),
recruitment of, 164
Chief learning officer, 243
Child and elder care benefits, 402–403
Child labor, 346, 348
Civil Rights Act, 87, 90–94, 100,
131, 455
Classroom instruction, 261
Coaching, and training, 260
COBRA insurance, 398
Code of Ethical and Professional
Standards, 29–31
Codetermination, 548
Cognitive ability tests, 222–223
COLA. See Cost-of-living adjustments
(COLA)
Collective bargaining, 332, 546–547
Collective bargaining process, 497,
500–502
Combined salary and commission
plan, 369
Commission, 369
Compensable factor, 334
Compensation. See also Incentive plans
ability to pay and, 329–330
alignment, 320
area pay rates and, 331
assessment, 348–349
bases for, 326
broadbanding and, 343
case study, 352–353
collective bargaining and, 332
components of, 319
cost of living and, 332
design, 326–332
direct, 319
employee worth and, 329
escalator clauses and, 332
executive, 378–379
expectancy theory and, 324–325
external factors and, 330–332
Branding
definition of, 154
recruitment and, 154–155
Broadbanding, 343
Bureau of Labor Statistics National
Compensation Survey, 337
Burnout, 438–440
Business environment, 44–45
Business necessity, 92
Business strategy, 6–7
C
Cafeteria plans, 387
Calibration, in performance
appraisals, 286
Camera surveillance, 24, 459–460
Candidate evaluation form, 230
Capability(ies)
core, 51
internal analysis and, 51–52
organizational, 73
Career choosing, 199
Career counseling, 183
Career development initiatives,
183–186
Career management, 176–186
boundaryless career and, 202
career paths in, 176, 179–181
career plateaus and, 185–186
career stages in, 181–183
competency analysis in, 178–179
counseling in, 183
dual career paths in, 182
employee in, 176–177
goal blending in, 177–178
goal of, 176–178
job progressions in, 179–181
mentoring programs, 183–184
opportunity identification in,
178–183
organization role in, 177
outplacement services in, 180
promotions in, 179
relocation services in, 180
sabbaticals, 186
stages of, 181
steps in, 177
transfers in, 179
tuition assistance programs, 185
Career paths, 176, 179–183
Career plateau, 185–186
Career stages, 181–182
Caregivers, discrimination and,
103–104
Carpal tunnel syndrome, 435
Case studies, and training, 260–261
Cash balance pension plans, 409
CBT. See Computer-based training (CBT)
Benefits (Continued)
communication of information on,
388–394
cost containment strategies for, 389
costs of, 386–387
counseling services, 394
credit unions, 406
disability, Social Security, 396, 397
disease management programs,
393–394
domestic partner, 410
educational assistance, 406
elements of successful program,
386–394
employee assistance programs, 394
executive, 377
401(k) savings plans, 408–409
in Family and Medical Leave Act,
399–401
flexible, 387–388
health care, 388–394
health maintenance organizations,
391
high-deductible health insurance
plan, 390
holiday pay, 403–404
life insurance, 405
management, 16–17
medical, 388–394
payment for time not worked,
403–405
pension plans, 407–409
preferred provider organizations,
391
required by law, 394–401
retirement programs, 406
retirement, Social Security, 396
sabbaticals, 405
selection of, 387–388
severance pay, 405
sick leave, 404–405
in small business, 404
supplemental unemployment, 405
survivors, Social Security, 396
unemployment, 397–398
vacation, 403
value-based health initiatives,
392–393
wellness programs, 393
work-life discretionary, 402–410
Biodata tests, 223
Black, Suzy, 34
Blended learning, 262
Bloodborne pathogens, 437–438
Body art, 465
Bona fide occupational qualification
(BFOQ), 91–92
Bonuses, 363–364
Boundaryless career, 202
89624_em_sub_indx_hr_627-640.indd 628 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
629Subject Index
Cultural audits, 54
and corporate culture, 54–56
Cultural environment, 528
Cultural training, 533–535
Culture, safety, 425–426
Culture shock, 536
Cumulative trauma disorders, 435
Customer evaluations, 290
Customers, competitive environment
and, 45
D
Dating, between employees, 464–465
Decision-making, in selection, 229–234
Decision-making leave, 470
Defined benefit pension plan, 407
Defined-contribution pension plan, 408
Dejobbing, 140
Demand, employee
forecasting, 56–58
reconciliation with supply, 69–70
Demographic challenges, 18–23
Demographic changes, 44–45
Demotion, 180
Depression, 440–441
Development
career, 535
high-performance work systems, 557
international, 530
job analysis and, 124
knowledge, 561
leadership, 544
of minorities, 189
performance management and,
280–281
planning, 199
training vs., 242
of women, 187–189
Differential piece rate, 362
Differentiation strategy, 66–67
Direct compensation, 319
Disability, 95–96
Disability benefits, Social Security,
396, 397
Disabled individual
definition of, 98
recruitment of, 189–190
Discharge
case study, 476–477
constructive, 455
as discipline, 470–471
due process and, 471
informing employee of, 471
just cause, 470
retaliation and, 455–456
Workers’ Adjustment Retraining and
Notification Act and, 456–457
wrongful, 451, 452
Construct validity, 229
Consumer-driven plans, 391
Consumer price index (CPI), 332
Content plateau, 185
Content validity, 228–229
Contract
explicit, 454–455
implied, 451, 453–454
psychological, 450
Contractors, independent, 167–168
Contrast error, 293–294
Contributory pension plan, 407
Cooperative training, 255–256
Coordination flexibility, 69
Core capabilities, 51–52
Core employees, 54
Core skills, 528
Core values
definition of, 42
strategic planning and, 42
Corporate social responsibility
achieving goals in, 9–10
definition of, 9–10
Corporate strategy, 64–65
Corporation
global, 521
international, 520
transnational, 521
Cost containment. See Cost
management
Cost management, 15–17
in health care benefits, 392
managing pay and benefits, 16–17
managing size of workforce, 15–16
maximizing productivity, 15
Cost of living, 332
Cost-of-living adjustments (COLA),
332, 541
Costs
of benefits, 386–387
of employee absenteeism rates, 83
of recruitment, 174–175
Counseling
career, 183
services, as benefit, 394
Country, host, 518
Covenant, implied, 451
Cover letters, 208–210
CPI. See Consumer price index (CPI)
Craft unions, 494
Credibility, 29
Credit checks, 220
Credit unions, 406
Crisis management teams, 431
Criterion-related validity, 227–228
Critical incident method, 129, 298
Cross-training, 266–267
Cross-validation, 227
Crowdsourcing, 293
government regulation of, 344–348
high-performance work systems, 557
of host-country employees, 538–540
implementation, 336–343
indirect, 319
internal factors in, 327–330
job analysis and, 124
and job classification system,
333–334
job evaluation systems and, 332–336
job ranking system and, 333
job worth and, 328–329
labor market conditions and, 330
motivation and, 324
nonfinancial, 319
organizational objectives and,
321–323
pay compression and, 334–346
pay equity and, 324
pay-for-performance standard and,
323–326
pay grades and, 340–341
and piecework, 326
rate ranges and, 341–342
scorecard, 349
secrecy, 325–326
in small business, 331
strategic, 320–326
strategy, 328, 330
wage and salary survey for, 336–339
wage curve and, 340
work evaluation and, 335
Compensatory model, 232
Competence-based pay, 343
Competency analysis, in career man-
agement, 178–179
Competency assessment, 246
Competency-based analysis, 130, 131
Competition, globalization and, 7–8
Competitive environment, 45–47
Compliance
job analysis and, 124–125
performance management and,
287–288
small business and, 87
Composition, 52–54
Compressed workweek, 144
Computer-administered (automated)
interviews, 216
Computer-based training (CBT), 257
Computer workstation issues, 435–436
Concurrent validity, 227
Conduct, off-duty, 463–464
Conferences and seminars,
in training, 261
Conflicts of interest, 31
Consolidated Omnibus Budget Recon-
ciliation Act, 398
Constructive discharge, 455
89624_em_sub_indx_hr_627-640.indd 629 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
630 Subject Index
Employer responsibilities, employee
rights vs., 449–450
Employment agencies, 166–167
Employment-at-will, 451, 454
Employment interviews, 212–217
Engagement, in high-performance
work systems, 559–560
Enterprise incentive plans, 372–375
Entrepreneur, 202
Environment
business, 44–45
competitive, 45–47
cultural, 528
global, 433–442
healthy work, 433–442
remote, 43
Environmental analysis, 43–50
Environmental scanning, definition
of, 43
Equal employment opportunity (EEO)
affirmative action and, 109–113
Age Discrimination in Employment
Act, 94
Americans with Disabilities Act
(ADA), 95–96
attractiveness and, 103
bona fide occupational qualification,
91–92
caregivers and, 103–104
changing values and, 86–87
Civil Rights Act of 1964 and, 90–94
Civil Rights Act of 1991 and, 93
definition of, 85
discrimination charge preventing
and, 109
disparate treatment and, 105
Don’t Ask, Don’t Tell Repeal Act
and, 98
early legal developments, 87
enforcement, 106–109
Equal Pay Act and, 89–90
Executive Order 11246 and, 98
fair employment practices and, 98
four-fifths rule and, 105
Genetic Information Nondiscrimi-
nation Act and, 96–97
Glass Ceiling Act and, 93
government regulation of, 88–98
historical perspective on legislation
on, 86–87
immigration and, 102
Lily Ledbetter Fair Pay Act and, 94
Older Workers Benefit Protection
Act and, 94
Pregnancy Discrimination Act and,
91, 94
protected classes and, 89
record-keeping and, 106
religious preference and, 92–93
EEOC. See Equal Employment
Opportunity Commission
(EEOC)
EEOC v. Waffle House, 474
Egalitarianism, in high-performance
work systems, 559–560
Elder care benefits, 402–403
E-learning, 257–258
Electronic communications policy, 460
Electronic Communications Privacy
Act (ECPA), 24
Electronic surveillance, 459–465
Emergencies, workplace, 430–431
Emergency action plan, 430
Emergency readiness checklist, 432
Emma L. Bowen Foundation, 189
Employee(s)
absenteeism rates, 80–81
advocacy, 28
associations, 495
challenges, 18–27
core, 54
empowerment, 137
engagement, 139
exempt, 326
nonexempt, 326
Employee assistance programs
(EAPs), 394
Employee conduct, off-duty, 463–464
Employee demand
forecasting, 56–58
reconciliation with supply, 69–70
Employee leasing
definition, 16, 168
recruitment and, 168
Employee Polygraph Protection
Act, 224
Employee privacy, cultural shifts and,
24–27
Employee profiles, 172
Employee recognition, 365–366
Employee referrals, 163
Employee relations, managerial ethics
and, 475
Employee Retirement Income Security
Act (ERISA), 388
Employee rights, cultural shifts and, 24
Employee selection guidelines,
104–106
Employee stock option plans, 373–375
Employee stock ownership plans
(ESOP), 373–375
Employee supply
forecasting, 58–61
reconciliation with supply, 69–70
Employee team, 139–141
Employee turnover rates, 80–81
Employee worth, 329
Employer choosing, 202
Discipline
approaches to, 469–470
common problems requiring, 466
definition of, 466
discharge as, 470–471
documentation of misconduct and,
467–468
investigation for, 467–469
model, 466
nonpunitive, 469
positive, 469–470
results of inaction on, 466–467
rules and, 467
Disclaimers, on application forms, 212
Discrimination, 88, 103
reverse, 110
Discrimination charge preventing, 109
Disease management programs,
393–394
Distracted driving, 429
Distress, 439
Distributed learning, 251
Distributional errors, 292–293
Distribution fairness, 324
Diversification, strategy and, 64–65
Diversity
challenges, 18–23
interviews and, 217
leveraging, 112
management, 109–113
of talent pool, 186–192
training, 267–268
Dodd-Frank Wall Street Reform and
Consumer Protection Act,
379, 452
Domestic partner benefits, 410
Don’t Ask, Don’t Tell Repeal Act, 91, 98
Downsizing, definition of, 6
Driving, distracted, 429
Drug abuse, 441–442
Drug Free Workplace Act, 441, 442
Drug tests, 226–227, 457–458
Dual career paths, 182
E
EAPs. See Employee assistance
programs (EAPs)
Ecological changes, 44
Economic changes, 44
Economic factors, 517
ECPA. See Electronic Communications
Privacy Act (ECPA)
Educational assistance, 406
Educational institutions, recruiting
and, 164–165
Educational shifts, 23
EEO. See Equal employment
opportunity (EEO)
89624_em_sub_indx_hr_627-640.indd 630 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
631Subject Index
Functional strategy, 69
Furloughing, definition, 16
G
Gainsharing incentive plans, 370–372
Gap analysis, 61–63
GATT. See General Agreement on
Tariffs and Trade (GATT)
Gays, 98, 100. See also Don’t Ask, Don’t
Tell Repeal Act
Gender distribution, of workforce,
22–23
General Agreement on Tariffs and
Trade (GATT), 8
Generation X, 20
Generation Y, 20
Genetic Information Nondiscrimina-
tion Act (GINA), 96–97
Glass Ceiling Act, 93
Glass ceiling audits, 187
Global compensation systems, 540
Global corporation, 548
Global environment, 516–522
Globalization
and competition, 7–8
unions and, 507–508
Globalization and
human resources management and, 9
Global manager, 527–530
Global Positioning System (GPS), 24
Global recruiting markets, 157
GMAT. See Graduate Management
Aptitude Test (GMAT)
Goal setting
learning and, 250
in performance appraisals, 306
Good faith bargaining, 499
Governmental training, 255–256
Government regulation
of compensation, 344–348
of equal employment opportunity,
88–98
GPS. See Global Positioning System
(GPS)
Graduate Management Aptitude Test
(GMAT), 222
Graphic rating scales, 296
Grievances
alternative dispute resolution for,
472–474
arbitration for, 474
labor agreement, 504
mediation for, 473, 474
ombudsman system for, 473
open-door policy for, 473
peer-review systems for, 472
procedure, 504
step-review systems for, 472
F
Facebook, 162
Facilitating teams, 142–143
Failure rate, 530
Fair employment practices (FEPs), 98
Fair Labor Standards Act (FLSA), 144,
326, 347
Fairness and justice, 31
Fair representation doctrine, 505
False Claims Act (FCA), 452
Families, accommodating, 188–189
Family and Medical Leave Act
(FMLA), 399–401
Family/work balance, 26–27, 188–189
FASB. See Financial Accounting
Standards Board (FASB)
Fatigue, 428–429
FCA. See False Claims Act (FCA)
Federal Mediation and Conciliation
Service (FMCS), 491
Feedback
learning and, 252
training, 295
FEPs. See Fair employment practices
(FEPs)
Financial Accounting Standards Board
(FASB), 379
Fit
horizontal, 71, 567
vertical, 71, 568
Fitness-for-duty evaluations, 425, 458
FJA. See Functional job analysis (FJA)
Flexible benefits plans, 387
Flexible spending account (FSA), 391
Flexible work schedules, 143–145
Flextime, 143–144
FLSA. See Fair Labor Standards Act
(FLSA)
FMCS. See Federal Mediation and
Conciliation Service (FMCS)
FMLA. See Family and Medical Leave
Act (FMLA)
Forced-choice method, 297
Forced distribution, 292
Forced ranking, 292
Forecasting
employee demand, 56–58
employee supply, 58–61
qualitative approaches to, 58
quantitative approaches to, 57
Four-fifths rule, 105, 120
401(k) savings plans, 408–409
Free trade, 517
Free-trade agreements, 8
FSA. See Flexible spending account
(FSA)
Functional job analysis (FJA), 128. See
also Job analysis
sexual harassment and, 98–99
sexual orientation and, 100–102
in small businesses, 87
Uniformed Services Employment
and Reemployment Rights Act
and, 97
Vocational Rehabilitation Act and, 98
weight discrimination and, 102–103
Equal Employment Opportunity Act,
91, 93
Equal Employment Opportunity
Commission (EEOC), 106
Equal Pay Act, 89–90
Ergonomics, 134–135, 433
Error
of central tendency, 292
contrast, 293–294
distributional, 292–293
leniency, 292
rating, 292–295
recency, 293
similar-to-me, 294–295
strictness, 292
Escalator clauses, 332
Essays, for performance appraisals, 298
Essential functions, 131
Ethical leadership, 30–31
Ethics
definition of, 475
managerial, 475
training, 267
Ethnic diversity, 19–20
Eustress, 439
e-Verify system, 219
Exclusive representation, 494
Executive base salaries, 376
Executive benefits, 377
Executive compensation, 378–379
Executive incentive plans, 376–379
Executive Order 8802, 87
Executive Order 11246, 98
Executive perks, 377–378
Executive search firms, 164
Exempt employees, 326
Expatriates, 522, 523, 528, 530, 544
Expectancy theory, 324–325
Experiential learning, 251
Explicit contracts, 454–455
External analysis, 43–50
business environment, 44–45
competitive environment, 45–47
and human resources, 48–50
remote environment, 43
External partners, 54
External recruiting, 159–168
advertisements, 159–160
vs. internal recruiting, 156–157
walk-ins, 160–161
Eye contact, 533
89624_em_sub_indx_hr_627-640.indd 631 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
632 Subject Index
HR planning, and employee absentee-
ism rates, 83
HR Scorecard, 568
HSA. See Health care spending account
(HSA)
Human capital
definition of, 3
human resources management
and, 3–5
readiness, 61–63
Human resources information system
(HRIS), 12
Human resources management (HRM)
definition of, 2
domestic vs. international, 520–521
employee challenges, 18–27
experience, 351
framework, 5
globalization and, 9
human capital and, 3–5
importance of, 2–5
and line managers, 27–29
managing pay and benefits, 16–17
managing size of workforce, 15–16
productivity and cost challenges,
15–17
strategic and global challenges, 5–10
technology challenges, 10–15
Human resources managers
competencies of, 29
responsibilities of, 28
Human resources planning (HRP), 39
I
ILO. See International Labour
Organization (ILO)
Immigration, 102
Immigration Reform and Control Act
(IRCA), 102
Impairment testing, 458–459
Implementation, strategy, 67–70
Implied contract, 453–454
Implied covenant, 451
Improshare incentive plans, 372
Incentive awards, 365–366
Incentive plans. See also Compensation
administration of, 361–362
advantages of, 359
bonuses, 363–364
case study, 381–382
employee recognition and, 365–366
employee stock ownership plans,
373–375
enterprise, 372–375
for executives, 376–379
gainsharing, 370–372
group, 369–372
Improshare, 372
implementation of, 568–569
information technologies in,
566–567
internal fit in, 567
knowledge development in, 561
leadership in, 566
management processes in, 566
organizational outcomes in, 575–576
outcomes of, 575–576
performance-reward linkage in,
561–562
process audits and, 573
quality of work life and, 575
shared information in, 560–561
in small business, 574
staffing practices and, 563–564
strategic alignment assessment
in, 568
teamwork in, 562–563
training in, 564–565
transition to, 573
trust, 560–561
unions and, 569
vertical fit in, 568
workflow design in, 562–563
HIPAA. See Health Insurance
Portability and Accountability Act
(HIPAA)
Hiring
negligent, 218, 450
HIV, 98
HMOs. See Health maintenance
organizations (HMOs)
Holidays, paid, 403–404
Home-based pay, 541
Home-country national, 522
Homeshoring, definition, 16
Honesty tests, 225
Horizontal alignment, 71, 72
Horizontal fit, 71, 72
measuring, 72
Host-based pay, 541
Host country, 518
compensation, 538–540
of expatriate managers, 541–542
of host-country managers, 540
international, 538
Hourly wages, international, 539
Hourly work, 326
HPWS. See High-performance work
system (HPWS)
HRA. See Health reimbursement
account (HRA)
HRIS. See Human resources
information system (HRIS)
HRM. See Human resources
management (HRM)
HRP. See Human resources planning
(HRP)
Griggs v. Duke Power Company, 105
Grooming, 465
Group incentive plan, 369–372
Growth, strategy and, 64–65
Guest workers, 525
H
Handshake, 533
Harassment, sexual, 98–99
Hay profile method, 335
Hazards
chemical, 436–437
health, 433–438
safety, 427–432
Hazelwood School District v. United
States, 105
HDHPs. See High-deductible health
insurance plans (HDHPs)
Headhunters, 164
Head scratching, 533
Health Care and Education Reconcilia-
tion Act, 399
Health care benefits, 388–394. See also
COBRA insurance; Medicare;
Patient Protection and Affordable
Care Act (PPACA)
Health care spending account (HSA),
390, 391
Health hazards, 433–438
Health Insurance Portability and
Accountability Act (HIPAA), 24
Health maintenance organizations
(HMOs), 391
Health reimbursement account
(HRA), 391
Healthy work environment, 433–442
High-deductible health insurance plans
(HDHPs), 390
communications plan for, 572–573
High-performance teams, 139
High-performance work system
(HPWS)
benefits, 565–566
case for, 579–581
compensation in, 565–566
competitive advantages from,
575–576
complementary human resources
policies and practices in, 563–566
definition of, 557
designing of, 562–567
development in, 564–565
development of, 561
egalitarianism in, 559–560
employee outcomes with, 575
engagement in, 559–560
engaging stakeholders, 569, 571–572
fundamental principles of, 558–562
89624_em_sub_indx_hr_627-640.indd 632 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
633Subject Index
compensation and, 124
competency-based, 130, 131
compliance and, 124–125
critical incident method in, 129
definition of, 123
development and, 124
functional, 128
functions affected by, 123–125
information sources, 126–133
interview, 126, 127
job design and, 124
job title and, 130–131
major parts of, 125
performance appraisal and, 124
position analysis questionnaire
for, 129
recruitment and, 124
selection and, 124, 207
strategic planning and, 123–124
task inventory analysis in, 130
training and, 124
workflow analysis and, 124
Job characteristics model, 136
Job classification system, 333–334
Job crafting, 138
Job description
clear, 133
definition of, 125
duties in, 131
ergonomics in, 134–135
essential functions in, 131
job identification, 131
job identification section in, 131
job specifications in, 133
job title in, 130–131
parts of, 130–133
problems with, 133
specific, 133
Job design
compressed workweek in, 144
definition of, 133
for employee teams, 139–141
flexible work schedules and,
143–145
industrial engineering in, 134
and job analysis, 124
job characteristics model and, 136
job sharing and, 144–145
motivation and, 136
telecommuting and, 145, 149–150
top-down vs. bottom-up approaches,
134
Job duties, 131
Job enlargement, 137
Job enrichment, 135
Job evaluation, 333–336
Job fairs, 162–163
Job identification section, 131
Job knowledge tests, 221
political factors, 517
sociocultural factors, 518–519
technological factors, 519–520
International labor organizations, 547
International Labour Organization
(ILO), 547
International operations, managing,
522–537
International performance appraisal,
542–545
International performance criteria,
543–544
International recruiting, 525
International staffing, 523
International Trade Union
Confederation (ITUC), 547
International training, 531–537
International Union v. Johnson
Controls, 437
Internet
in labor bargaining, 499–500
in recruiting, 161
in selection, 210
Internship programs, 166
Internships, 201
for minorities, 189
in training, 255–256
Interview(s)
behavioral description, 214
computer, 216
disciplinary investigative, 469
diversity and legal issues with, 217
employment, 212–217
and job analysis, 126, 127
nondirective, 213
panel, 214
phone, 215–216
screening after, 217–220
sequential, 214
situational, 214
structured, 214
Inventories
management, 59
skill, 59
Investigations
accident, 426–427
disciplinary, 467–469
Investment, in training, 243
IRAs. See Individual retirement
accounts (IRAs)
IRCA. See Immigration Reform and
Control Act (IRCA)
ITUC. See International Trade Union
Confederation (ITUC)
J
Job, 122
Job analysis
individual, 362–369
long-term, 377
merit pay, 364–365
organizational objectives and,
358–359
performance measures and, 360–361
piecework and, 362–363
for professional employees, 375
profit sharing, 372–373
requirements for successful, 359–360
sales incentives, 368–369
Scanlon plan, 371, 372
in small business, 362
standard hour plan and, 363
stock options, 373
team, 370, 375, 382
types of, 357
variable pay and, 357
Independent contractors, 167–168
Indirect compensation, 319
Individual incentive plans, 362–369
Individual retirement accounts
(IRAs), 408
Industrial engineering, definition
of, 134
Industrial unions, 494
Informational interviews, 201
Information sources, of job analysis,
126–133
Information use, 31
Innovation, 138
Instructional objectives, 247–248
Insurance
COBRA, 398
life, 405
long-term care, 406
Social Security, 394–397
unemployment, 397–398
workers’ compensation, 398
Integrated technology platforms, 519
Integrity tests, 225
Intellectual property agreement, 454
Interest inventories, 200–201, 224
Internal analysis, 50–63
and composition, 52–54
core capabilities, 51–52
corporate culture, 54–56
forecasting, 56–61
and resources, 52
Internal job postings, 170
Internal labor markets, 156
Internal recruiting, 168–171
vs. external recruiting, 156–157
International apprenticeships, 526
International compensation, 540
International corporation, 520
International environment
analytic thinking, 520–522
economic factors, 517
89624_em_sub_indx_hr_627-640.indd 633 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
634 Subject Index
Manager/supervisor evaluations, 289
Marital and/or family life balancing, 203
Marketplace changes, strategic
responses to, 5–7
Markov analysis, 57, 59
Material Safety Data Sheets
(MSDSs), 437
Maximizing productivity, 15
MBO. See Management by objectives
(MBO)
Meaningfulness of presentation, 250
Mediation
federal, Taft-Hartley Act and, 490,
492, 499
grievances and, 473, 474
Medical benefits, 388–394. See also
COBRA insurance
Medical examinations, 226
Medical review officer (MRO), 458
Medical tourism, 392
Medicare, 396–397
Mental Health Parity and Addiction
Equity Act, 392
Mentoring, 183–184
Mergers, 65
Merit guidelines, 365
Merit pay, 364–365
Microlearning, 258–259
Microsoft, 387
Millennial generation, 20
Minimum wage, 344–346
Minorities
advancing to management, 189–190
internships for, 189
recruitment of, 189
Misconduct, documentation of,
467–468
Mission, definition of, 42
Mixed-standard scales, 296
Mobile recruiting, 162
Motivation
and compensation, 324
and job design, 136
pay equity and, 324
in training, 248–249
MRO. See Medical review officer
(MRO)
MSDSs. See Material Safety Data Sheets
(MSDSs)
Multiple cutoff model, 232
Multiple hurdle model, 232
N
NAFTA. See North American Free
Trade Agreement (NAFTA)
National Association of Profes-
sional Employer Organizations
(NAPEO), 168
political involvement and, 490–491
recruitment and, 165–166
security agreements, 504
shop, 482
Language training, 532
Leadership, 566
ethical, 30–31
Learning
behavior modeling in, 259–260
blended, 262
distributed, 251
E-learning, 257–258
experiential, 251
and feedback, 252
and goal setting, 250
individual differences in, 250
just-in-time, 258
massed-vs.-distributed, 251
meaningfulness of presentation
and, 250
modeling and, 250
practice in, 250–251
principles of, 249–252
reinforcement and, 252
repetition in, 250–251
role-playing in, 260
whole-vs.-part, 251
Learning management system
(LMS), 258
Leasing, employee, 168
Ledbetter v. Goodyear Tire & Rubber,
325
Legal changes, 45
Leniency error, 292
Lesbians, 98, 100. See also Don’t Ask,
Don’t Tell Repeal Act
Leveraging diversity, 112
Lie detector tests, 224
Life insurance benefits, 405
Lily Ledbetter Fair Pay Act, 94
Line manager
definition of, 27
human resources departments and,
27–29
LMS. See Learning management
system (LMS)
Localization, 542
Long-term care insurance, 406
Long-term executive incentives, 377
Long-term incentive plans, 377
Low-cost strategy, 66
M
Management bargaining power, 501–502
Management by objectives (MBO),
300–301
Management forecasts, 58
Managerial ethics, 475
Job postings, internal, 170
Job previews, 171–172
Job progressions, 179–181
Job protection rights, 450–457
Job ranking system, 333
Job rotation, 137
Job sample tests, 222
Job shadowing, 201
Job sharing, 144–145
Job specification
definition of, 125
in job description, 133
Job stress, 438–440
Job title, job analysis and, 130–131
Job worth, 328–329
Joint ventures, 65
Justice and fairness, 31
Just-in-time training, 258
K
Knowledge development, 561
Knowledge workers, 11, 53–54
L
Labor agreement, 502–504
Labor markets, 156, 330
Labor relations
bargaining process, 482–484
case study, 510–511
know-how, 490
negotiations preparation in, 497–498
process, 482–496
small business and, 488
Labor union(s)
administration of, 504–506
aggressive organizing tactics for,
490, 492
authorization card, 489
avoidance practices, 486–487
bargaining power of, 500–502
bargaining with, 497–502
case study, 510–512
contemporary challenges to,
506–508
craft, 494
decrease in membership of, 506–507
employer opposition to, 492–493
exclusive representation and, 494
globalization and, 507–508
high-performance work systems
and, 559
information technology and, 492
National Labor Relations Board rep-
resentation election, 489, 493–496
neutrality agreements and, 491
organizing campaigns, 487–492
other countries, 546–547
participation, in management, 548
89624_em_sub_indx_hr_627-640.indd 634 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
635Subject Index
Pension plans, 407–409
PEOs. See Professional employer
organizations (PEOs)
Performance appraisal. See also
Performance management
appreciation in, 305
Balanced Scorecard for, 301–302
behavioral checklist method for, 299
behaviorally anchored rating scale
for, 299, 300
behavior methods for, 298–299
behavior observation scale for, 299
case study, 311–313
critical incident method for, 298
criticism in, 305–306
definition of, 280
360 degree, 290–291
essay method for, 298
follow up for, 306–307
forced-choice method for, 297
goal setting in, 306
graphic rating scales for, 296
improvement from, 307–309
international, 542–545
management by objectives and,
300–301
meetings and feedback sessions,
304–307
methods, 295–303
mixed-standard scales, 296
participation in, 305
performance diagnosis in,
308–309, 311
problem-solving, 304
productivity methods for, 299–300
recruitment and, 170
results methods for, 299–302
supportiveness in, 305
tell-and-listen, 304
tell-and-sell, 304
trait methods for, 296–298
Performance diagnosis, 308–309, 311
Performance, job analysis and, 124
Performance management. See also
Performance appraisal
for administrative purposes,
281–282
calibration in, 286
case study, 311–313
compliance and, 287–288
criterion contamination, 286
criterion deficiency, 286
customer evaluations, 290
definition of, 280
for developmental purposes,
280–281
failures in, 282–284
individuals performing, 289–290
by manager, 289
standards, 417–418, 420
strategic partnership programs, 423
voluntary protection programs, 423
workplace inspections, 420
OFCCP. See Office of Federal Contract
Compliance Programs (OFCCP)
Off-duty employee conduct, 463–464
Off-duty employee speech, 464
Office of Federal Contract Compliance
Programs (OFCCP), 109
Offshoring
definition of, 6
unions and, 507
Off-the-job interests, 203
OJT. See On-the-job training (OJT)
Old Age, Survivors, and Disability
Insurance (OASDI), 394
Older Workers Benefit Protection
Act, 94
Older workforce, 191–192
Ombudsman system, 473
Onboarding, 262–263
O*Net system, 131
Online applications, 210
On-the-job training (OJT), 254–255
Open-door policy, 473
Operation Enterprise, 189
Organization analysis, 245–246
Orientation training, 262–263
OSHA. See Occupational Safety and
Health Act (OSHA)
Outplacement services, 180
Outsourcing
definition of, 6
of recruiting, 158
P
Paid holidays, 403–404
Panel interviews, 214
PAQ. See Position analysis
questionnaire (PAQ)
Passive job seekers, 162
Patient Protection and Affordable Care
Act (PPACA), 399
Pay equity, 324, 348
Pay-for-performance standard,
323–326
Pay grades, 340–341
Pay management, 16–17
Pay mix, 326–332
Pay rate compression, 344
Pay secrecy, 325–326
PBGC. See Pension Benefit Guaranty
Corporation (PBGC)
Peer evaluations, 289–290
Peer-review systems, 472
Pension Benefit Guaranty Corporation
(PBGC), 409
National Defense Authorization Act, 400
National Institute for Occupational
Safety and Health (NIOSH), 418
National Labor Relations Act, 464
National Labor Relations Board
(NLRB), 482, 489
representation election, 493–496
Nearshoring, definition, 16
Needs assessment
competency assessment in, 246
organization analysis in, 245–246
person analysis in, 247
task analysis in, 246–247
in training, 244–247
Negligence, 450
Negligent hiring, 218, 450
Nepotism, 163
New entrants, competitive
environment and, 46
Nine-box grid, 170
NIOSH. See National Institute for
Occupational Safety and Health
(NIOSH)
NLRB. See National Labor Relations
Board (NLRB)
NLRB v. Weingarten, Inc., 469
Noncompete agreement, 454
Noncontributory pension plan, 407
Nondirective interview, 213
Nondisclosure agreement, 454
Nonexempt employees, 326
Nonfinancial compensation, 319
Nonpiracy agreement, 455
Nonpunitive discipline, 469
North American Free Trade Agreement
(NAFTA), 8
O
OASDI. See Old Age, Survivors, and
Disability Insurance (OASDI)
Obesity, 102, 438
Occupational Safety and Health Act
(OSHA). See also Safety
alliances, 423
citations, 421–422
consultation assistance, 422
cooperative programs, 422
coverage, 417
employee in, 423
enforcement, 420–422
history of, 417
law and, 417–424
mission of, 417
penalties, 421–422
responsibilities under, 422–424
rights under, 422–424
Safety and Health Achievement
Recognition Program, 423
89624_em_sub_indx_hr_627-640.indd 635 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
636 Subject Index
Recency error, 293
Recognition, employee, 365–366
Recordable case, 427
Record-keeping, equal employment
opportunity and, 106
Recruiting
advertisements for, 159–160
applicant tracking systems and, 174
and branding, 154–155
costs of, 174–175
of disabled individuals, 189–190
for diversity, 189
educational institutions and,
164–165
employee leasing and, 168
employment agencies and, 166–167
external methods, 159–168
globalization and, 7–8
global recruiting, 157
improving effectiveness of, 171–175
individuals performing, 158
internal methods, 168–171
international, 524–526
Internet in, 161
job analysis and, 124
job fairs and, 162–163
labor markets, 156
labor unions and, 165–166
metrics, 172–175
minorities, 189
mobile, 162
nepotism and, 163
outsourcing of, 158
performance appraisals and, 170
professional associations and,
165–166
public employment agencies and,
166–167
realistic job previews and, 171–172
referrals and, 163
replacement charts and, 170–171
skills inventories and, 170–171
social media, 161–162
strategic, 153–158
surveys, 172
timing, 157–158
veterans, 191
walk-in applicants and, 160–161
of women, 187–189
Recruiting process outsourcing
(RPO), 158
Red circle rates, 342
Reference checks, 217
Referrals, 163, 164
Regulation
of compensation, 344–348
of equal employment opportunity,
88–98
Regulatory changes, 45
Practice
in learning, 250–251
Predictive validity, 227
Preemployment tests, 220–229
Preferred provider organization
(PPO), 391
Pregnancy Discrimination Act, 94
Preretirement programs, 406–407
Primary-care physician, 391
Privacy
cultural shifts and, 24–27
drug testing and, 457–458
employee rights and, 449–465
personnel files and, 462, 463
rights, 457–459
searches and, 461
Privacy Act of 1974, 24, 462
Private employment agencies, 166–167
Problem-solving evaluation meeting/
feedback session, 304
Process audit, 573
Productivity
and cost challenges, 15–17
definition, 15
low-cost strategy and, 66
maximizing, 15
Professional associations, recruiting
and, 165–166
Professional development, 30
Professional employees, incentives
for, 375
Professional employer organizations
(PEOs), 16, 168
Professional responsibility, 30
Profile, employee, 172
Profit sharing plans, 372–373
Programmed instruction, 251
Progressive discipline, 469
Promotion, 179
Protected classes, 89
Psychological contract, 450
Public employment agencies, 166–167
Public policy violation, 451, 452
Public sector, labor relations in, 495
Q
Quality of fill, 59, 173
R
Racial diversity, 19–20
Reactive changes, 6
Readiness
human capital, 61–63
trainee, 248–249
Realistic job preview (RJP), 171–172
Real wages, 332
Reasonable accommodation, 95
Reasonable care, 449
Performance management (Continued)
manager/supervisor evaluations, 289
by peers, 289–290
of performance appraisers, 291
plan establishment, 291
program development, 284–295
purposes of, 280–282
rating error in, 292–295
reliability, 286
self, 289, 304
in small business, 283
standards in, 284–287
strategic relevance of, 285–286
by subordinates, 289
team evaluations, 290
training for, 291–295
Performance measures, 360–361
Performance review, 280. See also
Performance appraisal
Performance-reward linkage, 561–562
Performance shares, 377
Performance units, 377
Perks, executive, 377–378
Personal and family life, 536
Personal credibility, 29
Personality tests, 224
Personal skills development, 199
Person analysis, 247
Personnel file access, 462, 463
Phantom stock, 377
Phased retirement programs, 407
Phone interviews, 215–216
Phone screening, in selection, 210–211
Physical ability tests, 225–226
Piecework
compensation and, 326
computing piece rate in, 363
drawbacks of, 363
incentive plans and, 362–363
straight, 362
Piercing, 465
Planning
forecasting and, 56–61
strategic, definition of, 39
succession, 60–61
Planning for retirement, 204
Plateau, 251
Point manual, 334–335
Point system, 334–335
Political factors, 517
Polygraph tests, 224
Position analysis questionnaire
(PAQ), 129
Positive discipline, 469–470
Post-interview screening, 217–220
PPACA. See Patient Protection and
Affordable Care Act (PPACA)
PPO. See Preferred provider
organization (PPO)
89624_em_sub_indx_hr_627-640.indd 636 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
637Subject Index
information in, 207–208
information summarization in,
229–231
Internet in, 210
interviews in, 212–217
and job analysis, 207
job analysis and, 124
multiple cutoff model in, 232
multiple hurdle model in, 232
overview of, 206–208
phone screening in, 210–211
ratio, 233
reaching decision in, 229–234
and reliability, 207–208
résumés in, 208–210
screening in, 208–212
in small businesses, 221
statistical approach to, 231–233
steps in, 207, 208
validity in, 208
Self-evaluation, 199–201, 289, 304
Self-managed teams, 139
Self-paced learning, 251
Seminars and conferences,
in training, 261
Sequential interview, 214
Severance pay, 405
Sexual harassment, 98–99
Sexual orientation, 100–102
SHARP. See Safety and Health
Recognition Program (SHARP)
Short-term executive incentives, 376
SHRM. See Strategic human resources
management (SHRM)
Sick leave, 404–405
Similar-to-me error, 294–295
Simulations, in training, 256–257
Situational interview, 214
Skill(s)
augmented, 528
core, 528
inventories, 59, 170–171
Small business
benefits in, 404
benefits of, 182
compensation in, 331
compliance and, 87
equal employment opportunity
and, 87
handbook, 462
helping, 17
high-performance work systems
in, 574
incentive plans in, 362
OSHA and, 437
performance management in, 283
selection in, 221
succession planning in, 61
task analysis in, 246–247
RJP. See Realistic job preview (RJP)
ROI. See Return on investment (ROI),
in training
Role-playing, 260
Romances, workplace, employee rights
and, 464–465
RPO. See Recruiting process outsourc-
ing (RPO)
Rules, discipline and, 467
S
Sabbaticals, 186, 405
Safety
case study, 444–445
of culture, 425–426
driving, 429
emergencies and, 430–431
enforcement, 426
fatigue and, 428–429
fitness-for-duty evaluations for, 425
hazards, 427–432
investigating and recording acci-
dents, 426–427
issues, 427–432
Occupational Safety and Health Act
and, 417–424
promotion of, 425–431
supervisors and, 425
training, 425–426
violence and, 429–430
Safety and Health Recognition
Program (SHARP), 423
Salary plus bonus plan, 369
Salary surveys, 337–339
Sales incentives, 368–369
Same-sex couples, 410
Sarbanes-Oxley Act (SOX), 452
SARs. See Stock appreciation rights
(SARs)
Scanlon plan, 371, 372, 377
Scanning, environmental, definition
of, 43
Schedules, flexible, 143–145
Scorecard, compensation, 349
Screening
initial, in selection, 208–212
post-interview, 217–220
Searches, 461
Secrecy, pay, 325–326
Security agreements, union, 504
Selection
application forms in, 211
clinical approach to, 231
compensatory model in, 232
criteria design, 236
decision-making, 229–234
definition of, 206
final decision in, 233–234
Reinforcement, learning and, 252
Relative worth, 329
Reliability
in performance appraisals, 286
and selection, 207–208
Religion, 92–93
Relocation services, 180
Remote environment, 43
Repatriation, 536–537
Repetition, in learning, 250–251
Repetitive motion injury, 435
Replacement charts, 60–61, 170–171
Rerecruiting, 164
Resources, 52
Responsibilities, employer, employee
rights vs., 449–450
Restricted stock, 377
Résumés
case study, 236–238
in selection, 208–210
video, 210
Retaliation
and discharge, 455–456
for equal employment opportunity
charges, 108
Retirement benefits, Social
Security, 431
Retirement, planning for, 204
Retirement programs, 406
Return on investment (ROI),
in training, 270
Reverse discrimination, 110
Reverse mentoring, 184
Rights, employee
attire and, 465
body art and, 465
case study, 476–477
constructive discharge and, 455
cultural shifts and, 24
definition of, 449
drug testing and, 457–458
employer responsibilities vs.,
449–450
employment-at-will, 451, 454
grooming and, 465
job protection, 450–457
negligent hiring and, 450
off-duty conduct and, 463–464
personnel file access and, 462, 463
privacy, 457–459
retaliation and, 455–456
romances in workplace and, 464–465
searches and, 461
surveillance and, 459–460
whistle-blowing and, 452–453
wrongful discharge and, 451, 452
Right-to-know laws, 423
Rival firms, competitive environment
and, 46
89624_em_sub_indx_hr_627-640.indd 637 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
638 Subject Index
facilitating, 142–143
forms of, 139–140
functions, 140
process improvement, 140
project, 140
self-directed, 140
in small business environment, 142
synergistic characteristics, 140
task force, 140
transnational, 526
virtual, 141–142, 146
Team training, 264–266
Technological changes, 44
Technological factors, 519–520
Technology platforms, integrated, 519
Telecommuting, 145, 149–150
Tell-and-listen evaluation meeting/
feedback session, 304
Tell-and-sell evaluation meeting/
feedback session, 304
Temporary positions, 167
Termination
case study, 477
constructive, 504
as discipline, 470–471
due process and, 471
informing employee of, 471
retaliation and, 455–456
wrongful, 451, 452
Tests
assessment center, 222
biodata, 223
case study, 236–238
cognitive ability, 222–223
drug, 226–227, 457–458
honesty, 225
impairment, 458–459
integrity, 225
job knowledge, 221
lie detector, 224
personality, 224
physical ability, 225–226
polygraph, 224
preemployment, 220–229
sobriety, 458
types of, 221–227
validity of, 227–229
work sample, 222
Texting while driving, 429
Text messages, 162
Third-country nationals, 522
360-degree evaluation, 290–291
Time-to-fill, 172–173
Timing, of recruiting, 157–158
Tobacco, 437
Total quality management (TQM), 562
Touching, 533
TQM. See Total quality management
(TQM)
implementation, 67–70
joint ventures, 65
low-cost, 66
mergers and, 65
Strengths, weaknesses, opportunities,
and threats (SWOT) analysis, 64
Stress and burnout, 438–440
Strictness error, 292
Structural plateau, 185
Structured interviews, 214
Submission agreement, 505
Subordinate evaluations, 289
SUBs. See Supplemental unemploy-
ment benefits (SUBs)
Substance abuse, 442, 457–458
Substitutes, competitive environment
and, 46
Succession planning, 60–61
in small business, 61
Succession planning checklist, 62
Supervisor/manager evaluations, 289
Supplemental unemployment benefits
(SUBs), 405
Suppliers, competitive environment
and, 47
Supply and demand reconciliation,
69–70
Supply, employee
forecasting, 58–61
reconciliation with supply, 69–70
Supporting workers, 54
Surveillance
camera, 24, 459–460
computer use, 460, 461
e-mail, 460, 461
Internet, 460, 461
phone, 460
text message, 460
Survey, wage and salary, 336–339
Survivor’s benefits, 396
Sustainability, 10
SWOT. See Strengths, weaknesses,
opportunities, and threats
(SWOT) analysis
T
Tables, staffing, 59
Talent pool diversity, 186–192
Talent types, 52–54
Task analysis, 246–247
Task inventory analysis, 130
Tattoos, 465
Team compensation, 370
Team evaluations, 290
Team incentive plan, 370, 382
Teams
cross-functional, 140
definition of, 139
Small business (Continued)
teams in, 142
training in, 246
unions and, 488
SMART goals, 284–285
Smoking, 437
Sobriety test, 458
Social changes, 44–45
Social media networking, 10
Social media recruiting, 161–162
Social Security Act, 394, 397
Social Security Insurance, 394–397
Société Générale, 560
Sociocultural factors, 518–519
SOX. See Sarbanes-Oxley Act (SOX)
Special assignments, for training, 255
Speech, off-duty, 464
Split pay, 542
Spot bonus, 364
Spot rewards programs, 252
SPPs. See Strategic partnership
programs (SPPs)
Staffing agencies, 167
Staffing, globalization and, 7–8
Staffing tables, 59
Standard hour plan, 363
Step-review systems, 472
Steward, union, 485
Stock appreciation rights (SARs), 377
Stock options, 373, 377
Stock purchase, 377
Straight commission plan, 369
Straight piecework, 362
Straight salary plan, 369
Strategic alliances, 65
Strategic and global challenges, human
resources management and, 5–10
Strategic compensation, 320–326
Strategic human resources
management (SHRM), 39
Strategic knowledge workers, 53–54
Strategic partnership programs
(SPPs), 423
Strategic planning
definition, 39
human resources and, 39–41
Strategic recruiting, 153–158
Strategic responses, to marketplace
changes, 5–7
Strategic vision, definition of, 42
Strategy
acquisitions and, 65
business, 6–7, 66–67
corporate, 64–65
differentiation, 66–67
and diversification, 64–65
diversification and, 64–65
formulation, 64–67
and growth, 64–65
89624_em_sub_indx_hr_627-640.indd 638 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
639Subject Index
V
Vacation pay, 403
Validity
coefficient, 228
concurrent, 227
construct, 229
content, 228–229
criterion-related, 227–228
predictive, 227
of selection information, 208
of tests, 227–229
Value-based health initiatives, 392–393
Value creation, 51
Values
core, definition of, 42
strategic planning and, 42
Variable pay, 357
Vertical alignment, 71
Vertical fit, 71, 568
Vesting, 409
Veterans Benefits Improvement Act, 97
Veterans recruitment, 191
Video interviews, 215–216
Video résumés, 210
Violence, workplace, 429–430
“Virtual classrooms,” 258
Virtual job fair, 162
Virtual teams, 141–142, 146
Visa, 524–526
Vision, strategic, definition of, 42
Vocational Rehabilitation Act, 98
Voluntary protection programs
(VPPs), 423
VPPs. See Voluntary protection
programs (VPPs)
W
Wage
curve, 340
and hour provisions, 344
and salary survey, 336–339
Wagner Act, 482, 510
Walk-in applicants, 160–161
WARN. See Workers’ Adjustment
Retraining and Notification Act
(WARN)
Weight discrimination, 102–103
Weight issues, 438
Wellness programs, 393
Whistleblower Protection Act
(WPA), 452
Whistle-blowing, 452–453
Women, 22–23
advancing to management, 187–188
barriers to advancement of, 187–188
development of, 187–189
equal employment opportunity
and, 93
Transfer, 179
Transfer of training, 269
Transnational corporation, 521
Transnational teams, 526
Trend analysis, 57
Tuition assistance programs, 185
Turnover rates, employee, 80–81
U
ULPs. See Unfair labor practices (ULPs)
Unemployment benefits, supplemental,
405
Unemployment insurance, 397–398
Unemployment Relief Act, 87
Unfair labor practices (ULPs), 492
Uniformed Services Employment
and Reemployment Rights Act
(USERRA), 91, 97
Uniform Guidelines on Employee
Selection Procedures, 104
Union(s). See also Labor relations
administration of, 504–506
aggressive organizing tactics for,
490, 492
authorization card, 489
avoidance practices, 486–487
bargaining power of, 501
bargaining with, 497–502
case study, 510–512
contemporary challenges to,
506–508
craft, 494
decrease in membership of,
506–507
employer opposition to, 492–493
exclusive representation and, 494
globalization and, 507–508
industrial, 494
international, 545
neutrality agreements and, 491
organizing campaigns, 487–492
other countries, 546–547
political involvement and, 490–491
recruitment and, 165–166
security agreements, 504
shop, 482
steward, 485
technology and, 507–508
United States Steelworkers of America v.
Webber, 110
University of California Regents v.
Bakke, 110
Unmarried couples, 410
Unsolicited applications, 160–161
Use of information, 31
USERRA. See Uniformed Services
Employment and Reemployment
Rights Act (USERRA)
Trade, free, 517
Training. See also Learning
apprenticeship, 254, 526
basic skills, 264
behavior modeling in, 259–260
benchmarking and, 270–271
blended learning, 262
case studies, 260–261, 273–275
classroom instruction in, 261
coaching and, 260
competency assessment in, 246
cooperative, 255–256
cross-training, 266–267
cultural, 533–535
definition of, 242
delivery methods, 253–262
vs. development, 242
diversity, 267–268
E-learning, 257–258
ethics, 267
feedback, 295
goal setting and, 250
governmental, 255–256
in high-performance work systems,
564–565
instructional objectives in, 247–248
instructor characteristics in, 252–253
international, 531–537
internships in, 255–256
investments in, 243
job analysis and, 124
just-in-time, 258
language, 532
meaningfulness of presentation in, 250
motivation in, 248–249
needs assessment in, 244–247
onboarding, 262–263
on-the-job, 254–255
organization analysis in, 245–246
orientation, 262–263
person analysis in, 247
principles of learning in, 249–252
program design, 247–253
program evaluation, 268–270
program implementation, 253–262
programmed instruction in, 251
reactions to, 269
readiness for, 248–249
return on investment in, 270
role-playing in, 260
scope of, 242–244
seminars and conferences in, 261
simulations in, 256–257
in small business, 246
safety, 425–426
special assignments for, 255
strategic approach to, 243–244
team, 264–266
transfer of, 269
89624_em_sub_indx_hr_627-640.indd 639 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
640 Subject Index
Work sample tests, 222
WPA. See Whistleblower Protection
Act (WPA)
Wrongful discharge, 451, 452
WRP. See Workforce Recruitment
Program for College Students
with Disabilities (WRP)
Y
Yield ratios, 173–174
Young v. Southwestern Savings and
Loan Association, 455
gender distribution of, 22–23
managing size of, 15–16
utilization analysis, 106
Workforce Recruitment Program for
College Students with Disabilities
(WRP), 190
Work groups, autonomous, 139
Work-life discretionary benefits,
402–410
Work permit, 524–526
Workplace emergencies, 430–431
Workplace romances, employee rights
and, 464–465
Workplace violence, 429–430
Women (Continued)
family accommodation and,
188–189
recruitment of, 187–189
Workers’ Adjustment Retraining
and Notification Act (WARN),
456–457
Workers’ compensation insurance, 398
Workers, supporting, 54
Work evaluation, 335
Work/family balance, 26–27
Workforce
age distribution of, 20–21
ethnic and racial diversity in, 19–20
89624_em_sub_indx_hr_627-640.indd 640 11/6/17 2:08 PM
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Contents
Preface
About the Authors
Part 1 Human Resources Management in Perspective�������������������������������������������������������
Chapter 1 The Rewards and Challenges of Human Resources Management
1.1 Why Should You Study Human Resources Management? Will It Pay Off?����������������������������������������������������������������������������
1.1a Human Capital and Organizational Culture
1.2 Strategic and Global Challenges������������������������������������������
1.2a Responding Strategically to Changes and Disruptions
in the Marketplace
1.2b Competing, Recruiting, and Staffing Globally
1.2c Setting and Achieving Corporate Social Responsibility
and Sustainability Goals
1.3 Technology Challenges��������������������������������
Highlights in HRM 1: Factors to Consider When Evaluating a Human Resources Information System����������������������������������������������������������������������������������������������������
1.4 Productivity and Cost Challenges�������������������������������������������
1.4a Maximizing Productivity�����������������������������������
1.4b Managing the Size of the Workforce����������������������������������������������
1.4c Managing Pay and Benefits�������������������������������������
1.5 Employee Challenges������������������������������
1.5a Responding to the Demographic and Diversity Challenges of the Workforce������������������������������������������������������������������������������������
1.5b Educational Shifts Affecting the Workforce������������������������������������������������������
1.5c Adapting to Cultural and Societal Changes Affecting the Workforce�����������������������������������������������������������������������������
1.6 The Role HR Managers Play and Their Partnership with Other Managers������������������������������������������������������������������������������
1.6a Responsibilities of Human Resource Managers�������������������������������������������������������
1.6b Competencies Human Resource Managers Require��������������������������������������������������������
Highlights in HRM 2: SHRM Code of Ethical and Professional Standards in Human Resource Management��������������������������������������������������������������������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
Case Study 1: New HR Strategy Makes Lloyd’s a “Best Company”�������������������������������������������������������������������
Case Study 2: Shell’s Top Recruiter Takes His Cues from Marketing������������������������������������������������������������������������
Notes and References���������������������������
Chapter 2 Strategy and Human Resources Planning
2.1 Strategic Planning and Human Resources Planning����������������������������������������������������������
2.1a Strategic Planning and HR Planning: Linking the Processes���������������������������������������������������������������������
2.2 Step One: Mission, Vision, and Values������������������������������������������������
2.2a Developing a Mission Statement������������������������������������������
2.2b HR’s Role in Establishing and Reinforcing a Firm’s Mission, Vision, and Values�������������������������������������������������������������������������������������������
2.3 Step Two: External Analysis��������������������������������������
2.3a The Business Environment������������������������������������
2.3b The Competitive Environment���������������������������������������
2.3c HR’s External Analysis����������������������������������
Highlights in HRM 1: HRM Metrics���������������������������������������
2.4 Step Three: Internal Analysis����������������������������������������
2.4a Core Capabilities�����������������������������
2.4b Sustaining a Competitive Advantage Through People�������������������������������������������������������������
2.4c Types of Talent and Their Composition in the Workforce������������������������������������������������������������������
2.4d Corporate Culture�����������������������������
2.4e Forecasting�����������������������
Highlights in HRM 2: HR Planning and Strategy Questions to Ask Business Managers���������������������������������������������������������������������������������������
2.4f Assessing a Firm’s Human Capital Readiness: Gap Analysis��������������������������������������������������������������������
Highlights in HRM 3: Succession-Planning Checklist���������������������������������������������������������
2.5 Step Four: Formulating a Strategy��������������������������������������������
2.5a Corporate Strategy������������������������������
2.5b Business Strategy�����������������������������
2.5c HR Strategy�����������������������
2.6 Step Five: Executing a Firm’s Strategy�������������������������������������������������
2.6a HR’s Role in Strategy Execution
2.7 Step Six: Evaluation�������������������������������
2.7a Evaluating a Firm’s Strategic Alignment
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Customizing HR for Different Types of Human Capital��������������������������������������������������������������������������
Case Study 1: How a Strategy Change Led to Nike’s Formation������������������������������������������������������������������
Case Study 2: Domino’s Tries to Get Its Strategic Recipe Right���������������������������������������������������������������������
Notes and References���������������������������
Appendix: Calculating Employee Turnover and Absenteeism
A.1 Employee Turnover Rates����������������������������������
A.1a Computing the Turnover Rate���������������������������������������
A.1b Determining the Costs of Turnover���������������������������������������������
A.2 Employee Absenteeism Rates�������������������������������������
A.2a�����������
Highlights in HRM 4: Costs Associated with the Turnover of One Computer Programmer�����������������������������������������������������������������������������������������
A.2b�����������
A.2c�����������
A.2d�����������
Part 2�������������
Chapter 3 Equal Employment Opportunity and Human Resources Management
3.1 Historical Perspective of EEO Legislation����������������������������������������������������
3.1a Changing National Values������������������������������������
3.1b Early Legal Developments������������������������������������
3.2 Government Regulation of Equal Employment Opportunity�����������������������������������������������������������������
Highlights in HRM 1: Test Your Knowledge of Equal Employment Opportunity Law�����������������������������������������������������������������������������������
3.2a Major Federal Laws������������������������������
3.2b Other Federal Laws and Executive Orders���������������������������������������������������
3.2c Fair Employment Practice Laws�����������������������������������������
3.3 Other Equal Employment Opportunity Issues����������������������������������������������������
3.3a Sexual Harassment�����������������������������
Highlights in HRM 2: Questions Used to Audit Sexual Harassment in the Workplace��������������������������������������������������������������������������������������
3.3b Sexual Orientation������������������������������
3.3c Immigration Reform and Control������������������������������������������
3.3d Emerging Employment Discrimination Issues�����������������������������������������������������
3.4 Uniform Guidelines on Employee Selection Procedures���������������������������������������������������������������
3.5 Enforcing Equal Employment Opportunity Legislation�������������������������������������������������������������
3.5a Record-Keeping and Posting Requirements���������������������������������������������������
3.5b Processing Discrimination Charges���������������������������������������������
Highlights in HRM 3: EEOC Poster Supplement for 20.6 107���������������������������������������������������������������
3.5c Preventing Discrimination Charges���������������������������������������������
3.6 Affirmative Action and Diversity Management������������������������������������������������������
3.6a Court Decisions���������������������������
Highlights in HRM 4: Basic Steps in Developing an Effective Affirmative Action Program���������������������������������������������������������������������������������������������
3.6b Beyond Affirmative Action: Leveraging Diversity�����������������������������������������������������������
Highlights in HRM 5: Embracing Diversity and Leveraging Employee Differences�����������������������������������������������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
Case Study 1: Going to the Dogs��������������������������������������
HRM Experience: Sexual Harassment: A Frank Discussion������������������������������������������������������������
Case Study 2: Misplaced Affections: Discharge for Sexual Harassment��������������������������������������������������������������������������
Notes and References���������������������������
Appendix: Determining Adverse Impact
A.1 The Four-Fifths Rule�������������������������������
Chapter 4 Job Analysis and Job Design
4.1 What Is a Job Analysis and How Does It Affect Human Resources Management?������������������������������������������������������������������������������������
4.1a Major Parts of the Job Analysis�������������������������������������������
4.2 Sources of Job Analysis Information����������������������������������������������
4.2a Controlling the Accuracy of the Job Data Collected��������������������������������������������������������������
4.2b Other Sources of Job Analysis Information�����������������������������������������������������
Highlights in HRM 1: Job Analysis Interview Questions������������������������������������������������������������
4.2c Parts of a Job Description��������������������������������������
Highlights in HRM 2: An Example of a Job Description�����������������������������������������������������������
4.2d Writing Clear and Specific Job Descriptions�������������������������������������������������������
4.3 Job Design���������������������
4.3a Ergonomics����������������������
4.3b Enrichment����������������������
Highlights in HRM 3: Empowered Employees Achieve Results���������������������������������������������������������������
4.4 Employee Teams and Flexible Work Schedules�����������������������������������������������������
4.4a Employee Teams
4.4b Flexible Work Schedules
Summary��������������
Key Terms����������������
HRM Experience: Establishing Ground Rules for a Team’s Success���������������������������������������������������������������������
Discussion Questions���������������������������
Case Study 1: The Zappos Experiment������������������������������������������
Case Study 2: Are Firms Moving Away from Telecommuting?��������������������������������������������������������������
Notes and References���������������������������
Part 3�������������
Chapter 5 Expanding the Talent Pool: Recruitment and Careers
5.1 Business Strategies and Their Link to Strategic Recruiting����������������������������������������������������������������������
5.1a Elements of a Recruiting Strategy���������������������������������������������
Highlights in HRM 1: Marriott’s Recruitment Principles: Living Up to the Employment Brand������������������������������������������������������������������������������������������������
5.2 External and Internal Recruiting Methods���������������������������������������������������
5.2a External Recruiting Methods���������������������������������������
Highlights in HRM 2: Making Employee Referral Programs Work������������������������������������������������������������������
Highlights in HRM 3: Making Your Internship Program a Success��������������������������������������������������������������������
5.2b Internal Recruiting Methods���������������������������������������
Highlights in HRM 4: Is a Worker an Independent Contractor—or Not?�������������������������������������������������������������������������
5.3 Improving the Effectiveness of Recruiting����������������������������������������������������
5.3a Using Realistic Job Previews����������������������������������������
5.3b Surveys and Employee Profiles�����������������������������������������
5.3c Recruiting Metrics������������������������������
5.3d Retention: How Do We Keep Our Talent?�������������������������������������������������
5.4 Career Management: Developing Talent over Time����������������������������������������������������������
5.4a The Goal: Matching the Needs of the Organization to the Needs of Employees��������������������������������������������������������������������������������������
5.4b Identifying Career Opportunities and Requirements�������������������������������������������������������������
Highlights in HRM Box 5: Career Path of Jeff Bezos, Founder of Amazon.com��������������������������������������������������������������������������������
5.4c Career Development Initiatives������������������������������������������
Highlights in HRM 6: Myths about Mentors�����������������������������������������������
Highlights in HRM 7: Establishing a Relationship with a Mentor���������������������������������������������������������������������
5.5 Developing a Diverse Talent Pool�������������������������������������������
5.5a Women�����������������
5.5b Minorities����������������������
5.5c People Who Are Disabled�����������������������������������
Highlights in HRM 8: Tips for Enhancing a Firm’s Diversity�����������������������������������������������������������������
5.5d Veterans��������������������
5.5e Older Employees���������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Career Management����������������������������������������
Case Study 1: A Lifecycle Approach to Talent���������������������������������������������������
Case Study 2: Homegrown Talent: Mary Barra Rises to GM’s Top Post������������������������������������������������������������������������
Notes and References���������������������������
Appendix: Personal Career Development
A.1 Developing Personal Skills and Competencies������������������������������������������������������
A.2 Choosing a Career����������������������������
A.3 Self-Evaluation��������������������������
Highlights in HRM 9: “Must Have” Career Competencies�����������������������������������������������������������
A.3a Interest Inventories��������������������������������
A.3b Informational Interviews, Job Shadowing, and Internships��������������������������������������������������������������������
A.4 Choosing an Employer
A.5 Consider the Boundaryless Career
A.6 Keeping Your Career in Perspective
Highlights in HRM 10: Questions to Ask Yourself Before You Accept a Job������������������������������������������������������������������������������
A.6a Developing Off-the-Job Interests��������������������������������������������
A.6b Balancing Marital and/or Family Life������������������������������������������������
A.6c Planning for Retirement�����������������������������������
Key Terms����������������
Notes and References���������������������������
Chapter 6: Employee Selection
6.1 Overview of the Selection Process��������������������������������������������
6.1a Begin with a Job Analysis�������������������������������������
6.1b Steps in the Selection Process������������������������������������������
6.1c Obtaining Reliable and Valid Information����������������������������������������������������
6.2 Initial Screening����������������������������
6.2a Initial Screening Methods�������������������������������������
Highlights in HRM 1: What to Include—and Not to Include—on a Job Application Form����������������������������������������������������������������������������������������
6.3 Employment Interviews��������������������������������
6.3a Types of Interviews�������������������������������
6.3b Methods for Administering Interviews������������������������������������������������
Highlights in HRM 2: Sample Situational Interview Question�����������������������������������������������������������������
Highlights in HRM 3: Hiring Managers Reveal Mistakes Candidates Make during Job Interviews�������������������������������������������������������������������������������������������������
6.3c Diversity Management: Could Your Questions Get You into Legal Trouble?����������������������������������������������������������������������������������
6.4 Post-Interview Screening�����������������������������������
6.4a Reference Checks����������������������������
Highlights in HRM 4: Appropriate and Inappropriate Interview Questions�����������������������������������������������������������������������������
6.4b Background Checks�����������������������������
Highlights in HRM 5: Sample Reference-Checking Questions���������������������������������������������������������������
6.5 Preemployment Tests������������������������������
6.5a Types of Tests��������������������������
6.5b Determining the Validity of Tests���������������������������������������������
6.6 Reaching a Selection Decision����������������������������������������
6.6a Summarizing Information about Applicants����������������������������������������������������
6.6b Decision-Making Strategy������������������������������������
6.6c Final Decision��������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Designing Selection Criteria and Methods���������������������������������������������������������������
Case Study 1: Job Candidate Assessment Tests Go Virtual��������������������������������������������������������������
Case Study 2: Pros and Cons of Cleaning Up the “Resu-mess”�����������������������������������������������������������������
Notes and References���������������������������
Chapter 7 Training and Development
7.1 The Scope of Training��������������������������������
7.1a A Strategic Approach to Training��������������������������������������������
7.2 Phase 1: Conducting the Needs Assessment���������������������������������������������������
7.2a Organization Analysis���������������������������������
7.2b Task Analysis�������������������������
7.2c Person Analysis���������������������������
7.3 Phase 2: Designing the Training Program��������������������������������������������������
7.3a Developing Instructional Objectives�����������������������������������������������
Highlights in HRM 1: A Competency Assessment for a Managerial Position�����������������������������������������������������������������������������
7.3b Assessing the Readiness and Motivation of Trainees��������������������������������������������������������������
7.3c Incorporating the Principles of Learning����������������������������������������������������
7.3d Characteristics of Instructors������������������������������������������
7.4 Phase 3: Implementing the Training Program—Training Delivery Methods��������������������������������������������������������������������������������
7.5 Additional Training and Development Programs�������������������������������������������������������
7.5a Orientation and Onboarding
Highlights in HRM 2: Checklist for Orienting New Employees�����������������������������������������������������������������
7.5b Basic Skills Training���������������������������������
7.5c Team Training�������������������������
7.5d Cross-Training��������������������������
7.5e Ethics Training���������������������������
7.5f Diversity and Inclusion Training��������������������������������������������
7.6 Phase 4: Evaluating the Training Program���������������������������������������������������
7.6a Criterion 1: Reactions����������������������������������
7.6b Criterion 2: Learning���������������������������������
7.6c Criterion 3: Behavior���������������������������������
7.6d Criterion 4: Results, or Return on Investment (ROI)���������������������������������������������������������������
Highlights in HRM 3: Benchmarking HR Training����������������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Training and Learning Principles�������������������������������������������������������
Case Study 1: Whirlpool Mixes Up Its Managerial Training: Closed-Looped Method Brings Learning Full Circle������������������������������������������������������������������������������������������������������������������
Case Study 2: Loews Hotels: Training for Four-Diamond Service and More�����������������������������������������������������������������������������
Notes and References���������������������������
Chapter 8 Performance Management
8.1 Performance Management Systems�����������������������������������������
8.1a The Purposes of Performance Management��������������������������������������������������
8.1b Why Performance Management Systems Sometimes Fail�������������������������������������������������������������
8.2 Developing an Effective Performance Management System����������������������������������������������������������������
8.2a What Are the Performance Standards?�����������������������������������������������
8.2b Do Your Performance Reviews Comply with the Law?������������������������������������������������������������
8.2c Sources of Performance Review Information�����������������������������������������������������
8.2d Putting It All Together: 360-Degree Evaluations�����������������������������������������������������������
8.2e Training Appraisers�������������������������������
8.3 Performance Review Methods�������������������������������������
Highlights in HRM 1: Supervisor’s Checklist for a Formal Performance Review Meeting������������������������������������������������������������������������������������������
8.3a Trait Methods�������������������������
Highlights in HRM 2: A Graphic Rating Scale with Comments����������������������������������������������������������������
Highlights in HRM 3: Example of a Mixed-Standard Scale�������������������������������������������������������������
8.3b Behavioral Methods������������������������������
8.3c Results Methods���������������������������
Highlights in HRM 4: BARS and BOS Examples�������������������������������������������������
Highlights in HRM 5: A Balanced Scorecard that Translates to a Personal Scorecard����������������������������������������������������������������������������������������
8.3d Which Performance Review Method Should You Use?�����������������������������������������������������������
8.4 Performance Review Meetings and Feedback Sessions�������������������������������������������������������������
8.4a Types of Performance Review Meetings and Feedback Sessions����������������������������������������������������������������������
8.4b Conducting the Performance Review Meeting or Feedback Session�������������������������������������������������������������������������
8.4c Improving Performance���������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Performance Diagnosis��������������������������������������������
Case Study 1: Adobe Ditches Formal Performance Reviews—And Wants to Help Other Companies Do So Too���������������������������������������������������������������������������������������������������������
Case Study 2: “Project Oxygen” Resuscitates Google’s Poor-Performing Bosses����������������������������������������������������������������������������������
Notes and References���������������������������
Part 4�������������
Chapter 9 Managing Compensation
9.1 What Is Compensation?��������������������������������
9.2 Strategic Compensation���������������������������������
9.2a Linking Compensation to Organizational Objectives�������������������������������������������������������������
9.2b The Pay-for-Performance Standard��������������������������������������������
9.2c The Bases for Compensation��������������������������������������
9.3 Compensation Design—The Pay Mix������������������������������������������
9.3a Internal Factors����������������������������
Highlights in HRM 1: Comparison of Compensation Strategies�����������������������������������������������������������������
9.3b External Factors����������������������������
9.4 Job Evaluation Systems���������������������������������
9.4a Job Ranking System������������������������������
9.4b Job Classification System�������������������������������������
9.4c Point System������������������������
9.4d Work Valuation��������������������������
9.4e Job Evaluation for Management Positions���������������������������������������������������
9.5 Compensation Implementation—Pay Tools������������������������������������������������
9.5a Wage and Salary Surveys�����������������������������������
Highlights in HRM 2: Bureau of Labor Statistics National Compensation Survey�����������������������������������������������������������������������������������
9.5b The Wage Curve��������������������������
9.5c Pay Grades����������������������
9.5d Rate Ranges�����������������������
9.5e Competence-Based Pay��������������������������������
9.6 Government Regulation of Compensation������������������������������������������������
Highlights in HRM 3: Minimum Wage Laws in the States�����������������������������������������������������������
Highlights in HRM 4: Worldwide Minimum Wages���������������������������������������������������
Highlights in HRM 5: The Federal Wage Poster���������������������������������������������������
9.7 Compensation Assessment����������������������������������
Summary��������������
Key Terms����������������
HRM Experience: Why This Salary?���������������������������������������
Discussion Questions���������������������������
Case Study 1: Pay Decisions at Performance Sports��������������������������������������������������������
Case Study 2: An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay���������������������������������������������������������������������������������
Notes and References���������������������������
Chapter 10 Pay-for-Performance: Incentive Rewards
10.1 Strategic Reasons for Incentive Plans�������������������������������������������������
10.1a Incentive Plans as Links to Organizational Objectives������������������������������������������������������������������
10.1b Requirements for a Successful Incentive Plan���������������������������������������������������������
10.2 Setting Performance Measures����������������������������������������
Highlights in HRM 1: Setting Performance Measures—The Keys�����������������������������������������������������������������
10.3 Administering Incentive Plans�����������������������������������������
10.4 Individual Incentive Plans��������������������������������������
10.4a Piecework����������������������
10.4b Standard Hour Plan�������������������������������
10.4c Bonuses��������������������
10.4d Merit Pay����������������������
10.4e Incentive Awards and Recognition���������������������������������������������
Highlights in HRM 2: Lessons Learned: Designing Effective Team Incentives��������������������������������������������������������������������������������
10.4f Sales Incentives�����������������������������
10.5 Group Incentive Plans���������������������������������
10.5a Team Compensation������������������������������
10.5b Gainsharing Incentive Plans����������������������������������������
10.6 Enterprise Incentive Plans��������������������������������������
10.6a Profit Sharing Plans���������������������������������
10.6b Stock Options��������������������������
10.6c Employee Stock Ownership Plans�������������������������������������������
Highlights in HRM 3: How Stock Option Plans Work�������������������������������������������������������
10.7 Incentives for Professional Employees�������������������������������������������������
10.8 Incentives for Executives�������������������������������������
10.8a The Executive Pay Package��������������������������������������
10.8b Executive Compensation: Ethics and Accountability��������������������������������������������������������������
10.8c Executive Compensation Reform������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Awarding Salary Increases������������������������������������������������
Case Study 1: United States Auto Industry Back on Top … of CEO Pay�������������������������������������������������������������������������
Case Study 2: Team-Based Incentives: Not Your Usual Office�����������������������������������������������������������������
Notes and References���������������������������
Chapter 11 Employee Benefits
11.1 Elements of a Successful Benefits Program�����������������������������������������������������
11.1a Selecting Benefits�������������������������������
11.1b Administering Benefits�����������������������������������
11.1c Communicating Employee Benefits��������������������������������������������
11.2 Employee Benefits Required by Law���������������������������������������������
11.2a Social Security Insurance��������������������������������������
Highlights in HRM 1: A Personalized Statement of Benefits Costs����������������������������������������������������������������������
Highlights in HRM 2: Who Is Eligible to Collect Disability Payments under the Social Security Act?���������������������������������������������������������������������������������������������������������
11.2b Unemployment Insurance�����������������������������������
11.2c Workers’ Compensation Insurance��������������������������������������������
11.2d COBRA Insurance����������������������������
11.2e Benefits Provided by the Patient Protection and Affordable Care Act��������������������������������������������������������������������������������
11.2f Benefits Provided under the Family and Medical Leave Act���������������������������������������������������������������������
Highlights in HRM 3: Your Rights under the Family and Medical Leave Act������������������������������������������������������������������������������
11.3 Work-Life Discretionary Benefits��������������������������������������������
11.3a Child and Elder Care���������������������������������
11.3b Payment for Time Not Worked����������������������������������������
11.3c Life Insurance���������������������������
11.3d Long-Term Care Insurance�������������������������������������
11.3e Other Benefits and Services����������������������������������������
11.3f Pension Plans��������������������������
11.3g Domestic Partner Benefits��������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Understanding Employer Benefit Programs��������������������������������������������������������������
Case Study 1: Adobe’s Family-Friendly Benefits: An Unexpected Backlash�����������������������������������������������������������������������������
Case Study 2: Evaluate the Work-Life Climate in Your Company�������������������������������������������������������������������
Notes and References���������������������������
Chapter 12 Promoting Safety and Health
12.1 Safety and Health: It’s the Law�������������������������������������������
12.1a OSHA’s Coverage����������������������������
12.1b OSHA Standards���������������������������
12.1c Enforcing OSHA Standards�������������������������������������
12.1d OSHA Consultation Assistance�����������������������������������������
12.1e Responsibilities and Rights under OSHA���������������������������������������������������
Highlights in HRM 1: What Are My Responsibilities under the OSH Act?���������������������������������������������������������������������������
12.2 Promoting a Safe Work Environment���������������������������������������������
12.2a Creating a Culture of Safety�����������������������������������������
12.2b Enforcing Safety Rules�����������������������������������
12.2c Investigating and Recording Accidents��������������������������������������������������
Highlights in HRM 2: Test Your Safety Smarts���������������������������������������������������
12.2d Safety Hazards and Issues
Highlights in HRM 3: Emergency Readiness Checklist���������������������������������������������������������
12.3 Creating a Healthy Work Environment�����������������������������������������������
12.3a Ergonomics�����������������������
12.3b Health Hazards and Issues��������������������������������������
Highlights in HRM 4: Job Safety and Health Protection Poster�������������������������������������������������������������������
12.3c Building Better Physical and Emotional
Health among Employees
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
Case Study 1: Rambo Goes Violent���������������������������������������
Case Study 2: Too Much Fatigue and Stress? You Decide������������������������������������������������������������
Notes and References���������������������������
Part 5�������������
Chapter 13 Employees Rights and Discipline
13.1 Employee Rights and Privacy���������������������������������������
13.1a Employee Rights versus Employer Responsibilities�������������������������������������������������������������
13.1b Negligent Hiring�����������������������������
13.1c Job Protection Rights����������������������������������
Highlights in HRM 1: Examples of Employment-at-Will Statements���������������������������������������������������������������������
13.1d Privacy Rights���������������������������
13.1e Digital Surveillance���������������������������������
13.2 Disciplinary Policies and Procedures������������������������������������������������
13.2a The Result of Inaction�����������������������������������
13.2b Setting Organizational Rules�����������������������������������������
13.2c Investigating a Disciplinary Problem�������������������������������������������������
13.2d Approaches to Disciplinary Action����������������������������������������������
13.2e Discharging Employees����������������������������������
13.3 Managerial Ethics in Employee Relations���������������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
Case Study 1: Discharged for Off-Duty Behavior�����������������������������������������������������
Case Study 2: You Can’t Fire Me! Check Your Policy���������������������������������������������������������
Notes and References���������������������������
Chapter 14 The Dynamics of Labor Relations
14.1 The Labor Relations Process���������������������������������������
14.1a Why Employees Unionize�����������������������������������
14.1b Challenges of Unions to Management�����������������������������������������������
14.1c Union Avoidance Practices��������������������������������������
14.1d Organizing Campaigns���������������������������������
Highlights in HRM 1: Test Your Labor Relations Know-How��������������������������������������������������������������
Highlights in HRM 2: What Happened to the American Labor Union?����������������������������������������������������������������������
14.1e Employer Tactics Opposing Unionization���������������������������������������������������
Highlights in HRM 3: United Food and Commercial Workers International Union Authorization Card������������������������������������������������������������������������������������������������������
14.1f How Employees Become Unionized�������������������������������������������
14.1g NLRB Representation Election�����������������������������������������
Highlights in HRM 4: Employer “Don’ts” during Union Organizing Campaigns�������������������������������������������������������������������������������
Highlights in HRM 5: NLRB Election Poster������������������������������������������������
14.2 The Bargaining Process����������������������������������
14.2a Preparing for Negotiations���������������������������������������
14.2b Gathering Bargaining Data��������������������������������������
14.2c Developing Bargaining Strategies and Tactics���������������������������������������������������������
14.2d Negotiating the Labor Agreement��������������������������������������������
14.2e Good-Faith Bargaining����������������������������������
14.2f Interest-Based Bargaining��������������������������������������
14.2g Management and Union Power in Collective Bargaining����������������������������������������������������������������
14.2h Resolving Bargaining Deadlocks�������������������������������������������
14.3 The Labor Agreement�������������������������������
14.3a The Issue of Management Rights�������������������������������������������
Highlights in HRM 6: Items in a Labor Agreement������������������������������������������������������
14.3b Union Security Agreements��������������������������������������
14.4 Administration of the Labor Agreement�������������������������������������������������
14.4a Negotiated Grievance Procedures��������������������������������������������
14.4b Grievance Arbitration����������������������������������
14.5 Contemporary Challenges to Labor Organizations����������������������������������������������������������
14.5a Decrease in Union Membership�����������������������������������������
14.5b Globalization and Technological Change���������������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Learn about Unions�����������������������������������������
Case Study 1: The New Union Battles: Public Unions vs. Rich World Governments������������������������������������������������������������������������������������
Case Study 2: The Arbitration Case of Jesse Stansky����������������������������������������������������������
Notes and References���������������������������
Part 6�������������
Chapter 15 International Human Resources Management
15.1 Analyzing Your International Environment����������������������������������������������������
15.1a Political Factors������������������������������
15.1b Economic Factors�����������������������������
15.1c Sociocultural Factors����������������������������������
15.1d Technological Factors����������������������������������
15.1e Analyzing Your International Operations����������������������������������������������������
15.2 Managing Your International Operations��������������������������������������������������
15.2a Recruiting Internationally���������������������������������������
15.2b Selecting Employees Internationally������������������������������������������������
Highlights in HRM 1: Skills of Expatriate Managers���������������������������������������������������������
15.2c Training and Development�������������������������������������
15.2d Content of Training Programs�����������������������������������������
Highlights in HRM 2: Nonverbal Communications in Different Cultures��������������������������������������������������������������������������
Highlights in HRM 3: Repatriation Checklist��������������������������������������������������
15.3 Compensation������������������������
15.3a Compensation of Host-Country Employees���������������������������������������������������
15.3b Compensation of Host-Country Managers��������������������������������������������������
15.3c Compensation of Expatriate Managers������������������������������������������������
15.3d Performance Appraisal����������������������������������
15.4 Analyzing the International Labor Environment���������������������������������������������������������
15.4a Collective Bargaining in Other Countries�����������������������������������������������������
15.4b International Labor Organizations����������������������������������������������
15.4c Labor Participation in Management����������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: An American (Expatriate) in Paris��������������������������������������������������������
Case Study 1: How about a 900 Percent Raise?���������������������������������������������������
Case Study 2: A “Turnaround” Repatriate Plan: U.S. Company Moves Indian Workers Back Home������������������������������������������������������������������������������������������������
Notes and References���������������������������
Chapter 16 Implementing HR Strategy: High-Performance Work Systems
16.1 Fundamental Principles����������������������������������
16.1a Egalitarianism and Engagement������������������������������������������
16.1b Shared Information and Trust�����������������������������������������
16.1c Knowledge Development����������������������������������
16.1d Performance-Reward Linkage���������������������������������������
16.2 Designing High-Performance Work Systems���������������������������������������������������
16.2a Work-Flow Design and Teamwork������������������������������������������
16.2b Complementary Human Resources Policies and Practices�����������������������������������������������������������������
16.2c Supportive Information Technologies������������������������������������������������
16.3 Strategic Alignment�������������������������������
16.3a Ensuring Horizontal Fit������������������������������������
16.3b Establishing Vertical Fit��������������������������������������
16.3c Assessing Strategic Alignment: The HR Scorecard������������������������������������������������������������
16.4 Implementing the System�����������������������������������
Highlights in HRM 1A: Diagnosing Horizontal Fit������������������������������������������������������
16.4a Building a Business Case for Change and Engaging Stakeholders��������������������������������������������������������������������������
Highlights in HRM 1B: Testing the Alignment of the HR System with HR Deliverables����������������������������������������������������������������������������������������
Highlights in HRM 1C: Testing the Alignment of HR Deliverables���������������������������������������������������������������������
16.4b Establishing a Communications Plan�����������������������������������������������
16.4c Evaluating and Sustaining the Success of the System����������������������������������������������������������������
16.5 Outcomes of High-Performance Work Systems�����������������������������������������������������
16.5a Employee Outcomes and Quality of Work Life�������������������������������������������������������
16.5b Organizational Outcomes and Competitive Advantage��������������������������������������������������������������
Summary��������������
Key Terms����������������
Discussion Questions���������������������������
HRM Experience: Assessing the Strategic Fit of High-Performance Work Systems�����������������������������������������������������������������������������������
Case Study 1: How Implementing an HPWS Fortified the Snack-Food Maker Snyder’s-Lance�������������������������������������������������������������������������������������������
Case Study 2: Whole Foods Market Faces Whole New Challenge�����������������������������������������������������������������
Notes and References���������������������������
Integrative Cases������������������������
Glossary���������������
Name Index�����������������
Organization Index�������������������������
Subject Index��������������������
2018-10-09T07:44:33+0000
Preflight Ticket Signature
