Read Chapter 9 - Attracting and Retaining the Best Employees
Read Chapter - Attracting and Retaining the Best Employees
HUMAN RESOURCES MANAGEMENT: AN OVERVIEW. Human resources management (HRM) consists of all the activities involved in acquiring, maintaining, and developing an organization’s human resources.
HRM Activities. Each of the three phases of HRM—acquiring, maintaining, and developing human resources—consists of related actions.
Acquisition includes:
Human resources planning—determining the firm’s future human resources needs
Job analysis—determining the exact nature of positions to be filled
Recruiting—attracting people to apply for positions in the firm
Selection—choosing and hiring the most qualified applicants
Orientation—acquainting new employees with the firm
Maintaining human resources consists primarily of encouraging employees to
remain with the firm and to work effectively by using a variety of HRM programs, including:
Employee relations—increasing employee job satisfaction
Compensation—rewarding employee effort through monetary payments
Benefits—providing rewards to ensure employee well-being
The development phase of HRM is concerned with improving employees’ skills and expanding their capabilities, including:
Training and development—teaching employees new skills and new jobs and more effective ways of performing their present jobs
Performance appraisal—assessing employees’ current and potential performance levels
Responsibility for HRM. In general, human resources management is a shared responsibility of line managers and staff HRM specialists.
In very small organizations, the owner handles all or most HRM activities.
As the firm grows, a human resources manager is generally hired to take over some staff responsibilities.
In large firms, HRM activities tend to be highly specialized.
Human resources planning and job analysis are usually carried out by staff specialists, with input from line managers.
Staff experts handle recruiting and selection, although line managers are involved in the actual hiring decisions.
Staff specialists devise orientation programs carried out by both staff specialists and line managers.
Compensation systems (including benefits) most often are developed and
administered by the HRM staff. However, line managers recommend pay
increases and promotions.
Training and development activities are the joint responsibility of staff and line managers.
Performance appraisal is the job of the line manager, although HRM personnel often design the firm’s appraisal system.
HUMAN RESOURCES PLANNING. Human resources planning is the development of strategies to meet the firm’s future human resources needs.
Forecasting Human Resources Demand. Planners should base human resource demand on all relevant information available.
The firm’s overall strategic plan will provide information about future business ventures, new products, and projected expansions or contractions of particular product lines.
Information on past staffing levels, evolving technologies, industry staffing practices, and projected economic trends can also be helpful.
HRM managers use forecasting information to determine both the number of
employees required and their qualifications.
Forecasting Human Resources Supply. A forecast of human resources supply must take into account both the present workforce and any changes or movements that may occur within it. Two useful techniques for forecasting human resources supply are the replacement chart and the skills inventory.
A replacement chart is a list of the key personnel, along with possible replacements within the firm.
A skills inventory is a searchable database containing information on the skills and experience of all present employees.
Matching Supply with Demand. Once they have forecasted the supply and demand for personnel, HR planners can devise a course of action for matching one with another.
When demand is predicted to be greater than supply, they must make plans to recruit new employees. The timing of recruitment efforts depends on the type of
positions to be filled.
When the supply of employees is predicted to be greater than demand, the firm must take steps to reduce the size of its workforce.
When the oversupply is expected to be temporary, some employees may be laid off—dismissed from the workforce until they are needed again.
Perhaps the most humane method for making personnel cutbacks is through attrition, the normal reduction in the workforce that occurs when employees leave the firm.
Early retirement is another option. Under early retirement, employees who are within a few years of retirement are permitted to retire ahead of schedule with full benefits. Buyouts are similar to early retirement in that employees are offered a severance package to leave their jobs.
As a last resort, unnecessary employees are sometimes simply fired.
CULTURAL DIVERSITY IN HUMAN RESOURCES. A large number of women,
minorities, and immigrants have entered the U.S. workforce in recent decades. It is estimated that women make up about 47 percent of the U.S. workforce; African Americans and Hispanics each make up about 12 and 17 percent of U.S. workers, respectively. Cultural (or workplace) diversity refers to the differences among people in a workforce due to race, ethnicity, and gender. Increasing cultural diversity is forcing managers to learn to supervise and motivate people who have a broad range of value systems. Although cultural diversity presents a challenge, managers should view it as an opportunity rather than a limitation.
When properly managed, cultural diversity can result in a stronger organization. Table 9-1 shows several competitive advantages that creative management of cultural diversity can offer. Because cultural diversity produces both challenges and advantages, it is important for an organization’s employees to understand it. To accomplish this goal, numerous U.S. firms have trained their managers to respect and manage diversity. Diversity training programs may include recruiting minorities, training minorities to be managers, training managers to view diversity positively, teaching English as a second language, and facilitating support groups for immigrants.
JOB ANALYSIS. Job analysis is a systematic procedure for studying positions to determine their various elements and requirements. The job analysis for a particular position typically consists of two parts—a job description and a job specification. A job description is a list of the elements that make up a particular job. (See Figure 9-1.) A job specification is a list of the qualifications required to perform a particular job, such as certain skills, abilities, education, and experience.
RECRUITING, SELECTION, AND ORIENTATION. In an organization with jobs waiting to be filled, HRM personnel need to: (1) find candidates and (2) match the right candidate with each position.
Recruiting is the process of attracting qualified job applicants. One goal of recruiting is to attract the “right number” of applicants, which is enough to allow a good match between applicants and open positions but not so many that matching requires a lot of time and effort. Recruiters may seek applicants outside the firm, within the firm, or both.
External Recruiting. External recruiting is the attempt to attract job applicants from outside the organization. External recruiting may include activities on college campuses and open houses, soliciting recommendations from present employees, or posting in newspapers, employment agencies, and online.
Clearly, it is best to match the recruiting means with the kind of applicant
being sought. Technology is helping the matching process.
A primary advantage of external recruiting is that it brings people into a firm who have new perspectives and varied business backgrounds.
A disadvantage of external recruiting is that it is often expensive and may also provoke resentment among present employees who wish to advance within the company.
Internal Recruiting. Internal recruiting involves considering present employees as applicants for available positions.
Generally, current employees are considered for promotion to higher-level
Employees may also be considered for transfer from one position to another at the same level.
Promoting from within provides strong motivation for current employees and helps the firm retain quality personnel.
The practice of job posting, or informing current employees of upcoming openings, may be a company policy or a union contract requirement.
The primary disadvantage of internal recruiting is that promoting a current
employee leaves another position open.
Selection is the process of gathering information about applicants for a position and using that information to choose the most appropriate applicant.
Employment Applications. An employment application is useful for collecting factual information on a candidate’s education, work experience, and personal
(See Figure 9-2.)
The data from applications are used to identify candidates who are worthy of further scrutiny and to familiarize interviewers with applicants’ backgrounds.
Many job candidates submit résumés to prospective employers, and some firms require them. A résumé is a one- or two-page summary of thecandidate’s background and qualifications.
Employment Tests. Tests administered to job candidates usually focus on aptitudes, skills, abilities, or knowledge relevant to the jobs that are to be performed.
Companies may use general intelligence or personality tests, but these are seldom helpful in predicting performance.
Many organizations use predictive behavior tests, which have become more affordable with improved technology.
The employment interview is perhaps the most widely used selection technique because it provides an opportunity for applicants and the firm to learn more about one another.
Job candidates are usually interviewed by at least one member of the HRM staff and by the person for whom they will be working.
Interviewers may pose problems to test the candidate’s abilities, probe employment history, and learn something about the candidate’s attitudes and
Unfortunately, interviewing may be the stage at which discrimination enters the selection process.
Some of these problems can be solved through better interviewer training
and using structured interviews. In a structured interview, the interviewer asks only a prepared set of job-related questions.
A job candidate is generally asked to furnish the names of references—people who can verify background information and provide personal evaluations.
Assessment Centers. An assessment center is used primarily to select current employees for promotion to higher-level positions.
Typically, a group of employees is sent to the center for a few days. While there, they participate in activities designed to simulate the management environment.
Trained observers make recommendations regarding promotion possibilities.
Once all the available information about job candidates has been collected and analyzed, a job offer is extended. If it is accepted, the candidate becomes an employee.
Orientation is the process of acquainting new employees with the organization.
The orientation itself may range widely from a half-hour informal presentation to an elaborate program involving dozens of people and lasting several days or weeks.
COMPENSATION AND BENEFITS. An effective employee reward system must:
- Enable employees to satisfy their basic needs.
- Provide rewards comparable to those offered by other firms.
- Be distributed fairly within the organization.
- Recognize that different people have different needs.
- The firm’s compensation system can be structured to meet the first three of these requirements. The fourth is more difficult; it must take into account the many differences among people.
Compensation Decisions. Compensation is the payment that employees receive in
return for their labor. The firm’s compensation system—the policies and strategies that
determine employee compensation—must be designed to provide for employee needs while keeping labor costs within reasonable limits.
Wage Level. Management must first position the firm’s general pay level relative to pay levels of comparable firms. To determine what the average is, the firm may use a wage survey, which is a collection of data on prevailing wage rates within an industry or a geographic area.
Wage Structure. Next, management must decide on relative pay levels for all the positions within the firm. The result of this set of decisions is called the firm’s wage structure.
The wage structure is almost always developed on the basis of a job evaluation, the process of determining the relative worth of the various jobs within a firm.
A number of techniques may be used to evaluate jobs.
The simplest is to rank all the jobs within the firm according to their
value to the firm.
A more frequently used method is based on a job analysis. Points are
allocated to each element and job requirement.
Individual Wages. The company must determine the specific payments individual employees will receive. Two wage decisions come into play here.
First, the employee’s initial rate must be established. It is based on experience, other qualifications, and expected performance.
Later, the employee may be given pay increases based on seniority and performance.
Comparable Worth. Comparable worth is a concept that seeks equal compensation for jobs requiring about the same level of education, training, and skills. In recent decades, many states have taken steps to ensure that all workers have equal pay for comparable worth, but the issue is contentious.
Types of Compensation
Hourly Wage. An hourly wage is a specific amount of money paid for each hour worked. People who earn wages are paid their hourly wage for the first 40 hours worked in any week. Anything in excess of 40 hours is overtime, for which they are paid one-and-one-half times their hourly wage.
Weekly or Monthly Salary. A salary is a specific amount of money paid for an employee’s work during a set calendar period, regardless of the actual number of hours worked.
Commissions. A commission is a payment that is some percentage of sales revenue.
Incentive Payments. An incentive payment is in addition to wages, salary, or commissions. Incentive payments are rewards for outstanding job performance.
Firms sometimes offer incentives to employees who exceed specific sales or production goals, a practice called gain sharing.
Some organizations reward outstanding workers individually through merit pay. This pay-for-performance approach allows management to control labor costs while encouraging employees to work more efficiently.
Lump-Sum Salary Increases. A lump-sum salary increase allows the employee the option of taking the entire pay raise in one lump sum. The employee then draws his or her “regular” pay for the rest of the year.
Profit-Sharing. Profit-sharing is the distribution of a percentage of the firm’s profit among its employees.
Employee Benefits. An employee benefit is a reward in addition to regular compensation that is provided indirectly to employees. Employee benefits consist mainly of
services (such as insurance) that are paid for partially or totally by employers and employee expenses (such as college tuition) that are reimbursed by employers.
Types of Benefits. Employee benefits take a variety of forms.
Pay for time not worked covers such absences as vacation, holidays, and sick leave.
Insurance packages may include health, life, and dental insurance for employees and their families.
The costs of pension and retirement programs may be borne entirely by the firm or shared with the employee.
Some benefits are required by law.
For example, employers must maintain workers’ compensation insurance, which pays medical bills for injuries that occur on the job and provides income for employees who are disabled by job-related injuries.
Employers must also pay for unemployment insurance and must contribute to each employee’s federal Social Security account.
Other benefits employers may provide include tuition-reimbursement plans, credit unions, child-care services, company cafeterias, various recreational
facilities, and stock-option plans.
Flexible Benefit Plans. Through a flexible benefit plan, an employee receives a predetermined amount of benefit dollars and is allowed to allocate these dollars to various categories of benefits in the way that best fits his or her individual needs.
Some flexible benefit plans offer a broad array of benefit options, including health care, dental care, life insurance, accidental death and dismemberment coverage, long-term disability, vacation benefits, retirement savings, and
dependent-care benefits.
Because employees’ needs are so diverse, flexible plans help firms to offer benefit packages that more specifically meet their employees’ needs.
Flexible plans can, in the long run, help a company to contain costs because a specified amount is allocated to cover the benefits of each employee.
TRAINING AND DEVELOPMENT. Employee training is the process of teaching operations and technical employees how to do their present jobs more effectively and efficiently. Management development is the process of preparing managers and other professionals to assume increased responsibility in both present and future positions.
Analysis of Training Needs
Managers first must determine if training is actually needed and, if so, what types of training needs exist.
Training needs can vary considerably.
Because training is expensive, it is critical that the correct training needs be
Training and Development Methods. Several methods are available for employee training and management development.
On-the-job methods—The trainee learns by doing the work under the supervision of an experienced employee.
Simulations—The work situation is simulated in a separate area so that learning takes place away from the day-to-day pressures of work.
Classroom teaching and lectures—Instructors present concepts and illustrations through a variety of techniques.
Conferences and seminars—Experts and learners come together to discuss problems and exchange ideas.
Role-playing—Participants act out others’ roles in the organization in order to better understand them (primarily a management development tool).
e-Learning—Participants train by watching videos of lectures or how-to guides, playing “games” that simulate work situations, or taking online quizzes to demonstrate their proficiency on the topic.
Evaluation of Training and Development. To ensure that training and development are as cost effective as possible, the managers responsible should evaluate the company’s efforts periodically.
Managers should develop measurable objectives before the training starts.
The results of training evaluations should be made known to all those involved in the program—including trainees and upper management.
PERFORMANCE APPRAISAL. Performance appraisal is the evaluation of employees’ current and potential levels of performance to allow managers to make unbiased human resources decisions. Performance appraisal has three main objectives. First, managers use performance appraisals to let workers know how well they are doing and how they can improve in the future. Second, it provides an effective basis for distributing rewards, such as pay raises and promotions. Third, it helps the organization monitor its employee selection, training, and development activities. (See Figure 9-3.)
Common Evaluation Techniques. The techniques and methods for appraising employee performance are either objective or judgmental in nature.
Objective Methods. Objective methods use some measurable quantity as the basis for assessing performance.
Units of output, dollar volumes of sales, number of defective products, and number of insurance claims processed are all objective, measurable quantities.
Such objective measures may require adjustment depending on the work environment to take into account circumstances that may be hidden by a purely statistical measurement.
Judgmental Methods. Judgmental appraisal methods are used much more frequently than objective methods. They require that the manager judge or estimate the employee’s performance level.
Use of rating scales is the most popular judgmental appraisal technique.
A rating scale consists of a number of statements on which each employee is rated based on the degree to which the statement applies.
The ratings on all the statements are added to obtain the employee’s total evaluation.
Avoiding Appraisal Errors. Managers must be cautious if they are to avoid making mistakes when appraising employees.
It is common to overuse one portion of an evaluation instrument, thus overemphasizing or underemphasizing issues.
A manager must guard against allowing an employee’s poor performance on one activity to influence his or her judgment of that subordinate’s work on other activities.
Similarly, putting too much weight on recent performance can distort an employee’s evaluation.
Finally, a manager must guard against discrimination on the basis of race, age, gender, religion, national origin, or sexual orientation.
Performance Feedback. No matter which appraisal technique is used, the results should be discussed with the employee soon after completion. The information provided to an employee in such discussions is called performance feedback, and the process is known as a performance feedback interview. There are three major approaches to performance feedback interviews:
In a tell-and-sell feedback interview, the superior tells the employee how good or bad the employee’s performance has been and attempts to persuade the employee to accept the evaluation. Because the employee has no input, this type of interview can result in defensiveness, resentment, and frustration on the employee’s part.
With the tell-and-listen approach, the supervisor tells the employee what the employee has done right and wrong and then gives him or her a chance to respond. The subordinate may simply be given an opportunity to react to the supervisor’s statements or may be permitted to offer a full self-appraisal.
In the problem-solving approach, employees evaluate their own performance and set their own goals for future performance. The supervisor is more a colleague than a judge and offers comments and advice in a noncritical manner. This is the
method most likely to result in employee commitment to the established goals.
Another approach that has become popular is called a 360-degree evaluation, which collects anonymous reviews about an employee from his or her peers, subordinates, and supervisors and then compiles them into a feedback report for the employee.
Many managers find it difficult to discuss the negative aspects of an appraisal, leading them to ignore performance feedback. However, it is important for employees to be informed of how they can improve. Without feedback, an employee may be unaware of his or her weaknesses and they will never be addressed.
THE LEGAL ENVIRONMENT OF HRM. The major federal laws affecting HRM are
described in Table 9-2.
National Labor Relations Act and Labor–Management Relations Act. These laws are concerned with dealings between business firms and labor unions.
Fair Labor Standards Act. This act applies primarily to wages. It established minimum wages and overtime pay rates. Many managers and other professionals, however, are exempt from this law.
Equal Pay Act. This law overlaps somewhat with Title VII of the Civil Rights Act. The Equal Pay Act specifies that men and women who are doing equal jobs must be paid the same wage.
Equal jobs are ones that demand equivalent effort, skill, and responsibility and are performed under the same conditions.
Discrepancies in pay are legal if they can be attributed to differences in seniority, qualifications, or performance.
Civil Rights Acts. Title VII of the Civil Rights Act of 1964 forbids organizations with 15 or more employees to discriminate in employee selection and retention on the basis of sex, race, color, religion, or national origin.
The purpose of Title VII is to ensure that employers make personnel decisions on the basis of employee qualifications only.
A person who believes that he or she has been discriminated against can file a complaint with the EEOC.
Age Discrimination in Employment Act. The general purpose of this act is the same as that of Title VII—to eliminate discrimination. However, it is concerned with discrimination based on age.
It outlaws personnel practices that discriminate against people aged 40 years or older.
Also outlawed are company policies that specify a mandatory retirement age.
Employers must base employment decisions on ability, not on a number.
Occupational Safety and Health Act. This act is concerned with issues of employee health and safety. The Occupational Safety and Health Administration (OSHA) was
created to enforce this act.
Employee Retirement Income Security Act. This act was passed in 1974 to protect the retirement benefits of employees.
The law does not require that firms provide a retirement plan.
It does specify that if a retirement plan is provided, it must be managed in such a way that the interests of employees are protected.
It also provides federal insurance for retirement plans that go bankrupt.
Affirmative Action. Affirmative action is not one act but a series of executive orders issued by the president of the United States.
It applies to all employers with 50 or more employees holding federal contracts in excess of $50,000. It prescribes that such employers must do the following:
Actively encourage job applications from members of minority groups.
Hire qualified employees from minority groups who are not fully represented in their organizations.
Many firms that do not hold government contracts voluntarily take part in this
affirmative action program.
Americans with Disabilities Act. The Americans with Disabilities Act (ADA) prohibits discrimination against qualified individuals with disabilities in all employment practices—including job-application procedures, hiring, firing, advancement, compensation, training, and other terms and conditions of employment.
All private employers and government agencies with 15 or more employees are covered by the ADA.
Employers are required to provide disabled employees with reasonable accommodation, which is any modification or adjustment to a job or work environment that will enable a qualified employee with a disability to perform a central job function, such as making existing facilities accessible to and usable by wheelchair-bound