Chapter 12

Managing Human Resources

Learning Objectives
12.1 Explain the importance of human resource management and the human
resource management process.
12.2 Describe the external influences that affect the human resource
management process.
12.3 Discuss the tasks associated with identifying and selecting competent
employees.
12.4 Explain how companies provide employees with skills and knowledge.
12.5 Describe strategies for retaining competent, high-performing employees.
12.6 Identify two important trends in organizational career development.
12.7 Discuss contemporary issues in managing human resources
Why is HRM important?
1. As a significant source of competitive advantage
• By creating superior employee value
• “human capital” as the key source of sustained
economic value
2. As an important strategic tool
• Achieve competitive success through people by
treating employees as partners.
3. To improve organizational performance
• High performance work practices lead to both high
individual and high organizational performance.
High-Performance Work Practices
Practices
Self-managed teams
Decentralized decision making
Training programs to develop knowledge, skills, and abilities
Flexible job assignments
Open communication
Performance-based compensation
Staffing based on person–job and person–organization fit
Extensive employee involvement
Giving employees more control over decision making
Increasing employee access to information
Functions of the HRM Process
• Ensuring that competent employees are identified and
selected.
• Providing employees with up-to-date knowledge and skills to
do their jobs.
• Ensuring that the organization retains competent and high-
performing employees.
Human Resource Management Process
External

External
External Factors that Affect the Human
Resource Management Process
• The economy: lasting impact of the Great Recession of 2008
• In downturns, management is often forced to reduce staff, cut pay,
and reorganize work activities.
• In strong economies and tight labor markets, management has to
raise wages, improve benefits, seek out retirees, provide in-house
training, and make other adaptations to attract and keep qualified
people.
Labor Unions
• Labor union: an organization that represents workers and
seeks to protect their interests through collective bargaining
• Collective bargaining agreement
• A contractual agreement between a firm and a union
elected to represent a bargaining unit of employees of
the firm in bargaining for wage, hours, and working
conditions.
Laws and Rulings
• Affirmative action: Organizational programs that enhance
the status of members of protected groups
•Governmental Laws and Regulations
• Limit managerial discretion in hiring, promoting, and
discharging employees.
• Example: Nationalization of jobs in some Arab countries
(Saudization, Kuwaitization etc.)
Major HRM Laws—Equal Employment Opportunity and
Discrimination
Law or Ruling Year Description
Equal Pay Act 1963 Prohibits pay differences for equal work
based on gender
Civil Rights Act, Title VII 1964 (amended 1972) Prohibits discrimination based on race,
color, religion, national origin, or gender

Age Discrimination in Employment Act 1967 (amended 1978) Prohibits discrimination against
employees 40 years and older

Vocational Rehabilitation Act 1973 Prohibits discrimination on the basis of

physical or mental disabilities

Americans with Disabilities Act 1990 Prohibits discrimination against

individuals who have disabilities or
chronic illnesses; also requires
reasonable accommodations for these
individuals
Major HRM Laws— Compensation/Benefits
Law or Ruling Year Description
Worker Adjustment and 1990 Requires employers with more than 100 employees to
Retraining Notification Act provide 60 days’ notice before a mass layoff or facility
closing

Family and Medical Leave Act 1993 Gives employees in organizations with 50 or more
employees up to 13 weeks of unpaid leave each year for
family or medical reasons

Health Insurance Portability and 1996 Permits portability of employees’ insurance from one
Accountability Act employer to another

Lilly Ledbetter Fair Pay Act 2009 Changes the statute of limitations on pay discrimination to
180 days from each paycheck

Patient Protection and 2010 Health care legislation that puts in place comprehensive
Affordable Care Act health insurance reforms
Major HRM Laws— Health/Safety
Law or Ruling Year Description
Occupational Safety and Health 1970 Establishes mandatory safety and health standards
Act (OSHA) in organizations

Privacy Act 1974 Gives employees the legal right to examine

personnel files and letters of reference

Consolidated Omnibus 1985 Requires continued health coverage following

Reconciliation Act (COBRA) termination (paid by employee)
Global HRM Laws and Rulings
• In most Western European countries, legislation requires
companies to practice representative participation, putting labor
on a more equal footing with the interests of management.
• Work councils: groups of nominated or elected employees who
must be consulted when management makes decisions
involving personnel
• Board representatives: employees who sit on a company’s
board of directors and represent the interests of the firm’s
employees
Demography in the US
• The oldest, most experienced workers (those born before 1946)
make up 6% of the workforce
• Baby boomers (born after WWII) make up 41.5% of the workforce
• Gen Xers (born in the 60s and 70s) make up almost 29% of the
workforce
• Gen Yers (born in the 80s and 90s) make up almost 24% of the
workforce
Demography in the US
• Work force trends in the early 21st century are notable for four
reasons:
1- Changes in racial and ethnic composition
2- An aging baby boomer generation
3- An expanding cohort of Gen Y workers
4- Skill imbalances
• Two skills in high demand, but often lacking in job applicants,
are digital literacy and soft skills such as communication, critical
thinking, and working in teams.
Demography in the Arab World
•Demographic Trends in the Arab World
• In 2020, the 15- to 24-year-old age group is around 78.3 million
• In 2020, the 25 to 64-year-old age group is around 194 million
• Such trends have an impact on current and future HRM practices.
Identifying and Selecting Competent
Employees
• This involves three tasks:
- Human resource planning,
- Recruitment,
- and Selection.
Human Resource Planning
• The process by which managers ensure that they have the right
number and kinds of people in the right places, and at the right
times, who are capable of effectively and efficiently performing
their tasks.
• Helps avoid sudden talent shortages and surpluses.
• Steps in HR planning:
 Assessing current human resources
 Assessing future needs for human resources
Current Assessment
• Job analysis: an assessment that defines jobs and the behaviors
necessary to perform them
-Requires conducting interviews, engaging in direct observation, having
employees complete a questionnaire or record daily activities in a diary, or
having job experts (usually managers) identify a job’s specific characteristics.
• Job description (position description): a written statement that
describes a job
• Job specifications: a written statement of the minimum
qualifications a person must possess to perform a given job
successfully
Meeting Future HR Needs/Increased
Scrutiny in Selection Process
• Future HR needs are determined by the organization’s
mission, goals, and strategies.
• After assessing both current capabilities and future needs,
managers can estimate areas in which the organization will be
understaffed or overstaffed.
Recruitment and Decruitment
• Recruitment: locating, identifying, and attracting capable applicants
• Decruitment: reducing an organization’s workforce
Recruiting Sources
Decruitment Options
Selection
• Selection: screening job applicants to ensure that the most
appropriate candidates are hired
•What is Selection?
An exercise in predicting which applicants, if hired, will be (or
will not be) successful in performing well on the criteria the
organization uses to evaluate performance.
 Selection Decision Outcomes

• Any selection decision can result in four possible outcomes—two correct and two errors.
Validity and Reliability
•Validity (of Prediction)
• A proven relationship between the selection device used and
some relevant criterion for successful performance in an
organization.
•Reliability (of Prediction)
• The degree of consistency with which a selection device
measures the same thing.
 Individual test scores obtained with a selection device are
consistent over multiple testing instances.
Selection Tools
Tool Characteristics
Application forms Almost universally used
Most useful for gathering information
Can predict job performance but not easy to create one that does
Written tests Must be job-related
Include intelligence, aptitude, ability, personality, and interest tests
Are popular (e.g., personality tests; aptitude tests)
Relatively good predictor for supervisory positions

Performance simulation tests Use actual job behaviors

Work sampling—test applicants on tasks associated with that job; appropriate for routine
or standardized work
Assessment center—simulate jobs; appropriate for evaluating managerial potential

Interviews Almost universally used

Must know what can and cannot be asked
Can be useful for managerial positions
Background investigations Used for verifying application data—valuable source of information
Used for verifying reference checks—not a valuable source of information
Physical examinations Are for jobs that have certain physical requirements
Mostly used for insurance purposes
Realistic Job Preview
•Realistic Job Preview (RJP)
• The process of relating to an applicant both the positive and
the negative aspects of the job.
 Encourages mismatched applicants to withdraw.
 Aligns successful applicants’ expectations with actual job
conditions, reducing turnover.
Providing Employees with Needed Skills and Knowledge
• Even the most qualified new hires need to adjust to their work
group and become acquainted with their new organization’s
culture.
• Towards that end, HRM uses:
- Orientation,
- Socialization,
- and Training programs
Orientation and Socialization
• Orientation: introducing a new employee to his or her job and the
organization
• Work unit orientation:
 familiarizes an employee with the goals of the work unit,
 clarifies how job contributes to the unit’s goals, and
 includes an introduction to his or her new coworkers.
• Organization orientation:
 informs a new employee about company’s goals, history, philosophy,
procedures, and rules.
 includes relevant HR policies and maybe a tour of the facilities.
Orientation and Socialization
• Socialization: helping new employees adapt to the organization’s culture
• The more management relies on formal, collective, fixed, and serial
socialization programs while emphasizing divestiture (stripping away
certain characteristics of the recruit), the more likely newcomers’
differences will be stripped away and replaced by standardized
predictable behaviors. These institutional practices are common in police
departments, military and other organizations that value rule following
and order.
• Programs that are informal, variable, and random while emphasizing
investiture are more likely to give new comers an innovative sense of
their roles and methods of working. Creative fields such as research and
development, advertising, and filmmaking rely on these individual
practices.
Employee Training
• Employee training is an important HRM activity.
As job demands change, employee skills have to change.
Managers are responsible for deciding
- what type of training employees need,
- when they need it, and
- what form that training should take.
• On average, U.S. companies spent $702 per employee for training.
Types of Training

The diagram above describes the major types of training that organizations provide.
Training Methods- Traditional Training
Methods
Method Characteristics

On-the-job Employees learn how to do tasks simply by performing them, usually after an initial
introduction to the task

Job rotation Employees work at different jobs in a particular area, getting exposure to a variety
of tasks

Mentoring and Employees work with an experienced worker who provides information, support,
coaching and encouragement; also called apprenticeships in certain industries

Experiential Employees participate in role-playing, simulations, or other face-to-face types of

exercises training.

Workbooks/ Employees refer to training workbooks and manuals for information.

manuals

Classroom Employees attend lectures designed to convey specific information.

lectures
Training Methods-Technology-Based Training Methods
Method Characteristics

CD-ROM/DVD/ Employees listen to or watch selected media that convey information or

videotapes/audiotapes/ demonstrate certain techniques.
podcasts

Videoconferencing/ Employees listen to or participate as information is conveyed or techniques

teleconferencing/satellite demonstrated.
TV

E-learning Internet-based learning where employees participate in multimedia

simulations or other interactive modules.

Mobile learning Learning delivered via mobile devices.

Virtual reality Using VR headsets and customized software, employees learn through
simulated practice
Retaining Competent, High-performing
Employees
• The annual review has traditionally provided feedback to
management on how well employees are doing their jobs.
• The latter annual review formed the basis for performance-based
compensation decisions, and identified areas where employees might
need additional supervision or training to improve performance.
• We should note that, even when formal annual reviews are conducted,
technology is changing how performance data is collected.
• The availability of digital employee-assessment tools and the
employment of younger workers who are accustomed to instant
gratification and desire ongoing feedback make short, constant
reviews an attractive option.
Employee Performance Management
A process of establishing performance standards and
appraising employee performance.
 Performance Evaluation Methods (1 of 2)
Method Description Advantages/Disadvantages
Written Essay Evaluator writes a description of + Simple to use
employee’s strengths and weaknesses, − May be better measure of
past performance, and potential; provides evaluator’s writing ability than of
suggestions for improvement. employee’s actual performance

Critical Incident Evaluator focuses on critical behaviors that + Rich examples, behaviorally based
separate effective and ineffective − Time-consuming, lacks quantification
performance.
Graphic Rating Popular method that lists a set of + Provides quantitative data; not time-
Scale performance factors and an incremental consuming
scale; evaluator goes down the list and − Doesn’t provide in-depth
rates employee on each factor. information on job behavior
Performance Evaluation Methods (2 of 2)
Method Description Advantages/Disadvantages
BARS (Behaviorally Popular approach that combines + Focuses on specific and measurable
Anchored Rating Scale elements from critical incident and job behaviors
graphic rating scale; evaluator uses a − Time-consuming; difficult to develop
rating scale, but items are examples of
actual job behaviors.

Multi-person Comparison Employees are rated in comparison to + Compares employees with one
others in work group. another
− Difficult with large number of
employees; legal concerns
Management by Employees are evaluated on how well + Focuses on goals; results oriented
Objectives (MBO) they accomplish specific goals. − Time-consuming

360-Degree Appraisal Utilizes feedback from supervisors, + Thorough

employees, and coworkers. − Time-consuming
Compensation and Benefits
•Benefits of a Fair, Effective, and Appropriate Compensation
System
• Helps attract and retain high-performance employees.
• Impacts the strategic performance of the firm.
•Types of Compensation
• Skill vs. variable pay
• Bonuses vs. annual pay increases
• Pay secrecy vs. transparency
• Benefit options
What Determines Pay and Benefits
Skill-Based Vs. Variable Pay
• Skill-Based pay systems reward employees for the job skills
and competencies they can demonstrate.
• Under this type of pay system, an employee’s job title doesn’t
define his or her pay category; skills do.
• In Variable pay systems, an individual's compensation is
contingent on performance.
• The traditional approach to paying people by seniority and job
level is shifting now towards a more flexible pay system
 Bonuses Vs. Annual Pay Increases
• The annual pay raise has been the norm in the US for a century.
• Some companies and pay experts expand on the variable pay
concept to propose replacing annual pay raises with one-time
bonuses for selected, high-performing individuals.
• Instead of spreading the wealth, why not give it where it will do
the most good? This may cause “some healthy turnover”
among low performers, as the service-delivery manager of one
company noted.
Pay Secrecy Vs. Transparency
• Historically, employers- especially in large corporations- made a
point to tell employees that they were not to share salary
information.
• Their thinking was: employees were likely to question the equity
of distributions, reduce their trust and loyalty to the
organization, and have lower motivation and satisfaction.
• We should expect to see more pay transparency in coming years,
especially since the secrecy taboo hasn’t set well with younger workers.
Benefit Options
• Employee compensation isn’t just about pay. A key factor in
attracting and retaining good employees is the organization’s
benefit programs.
• The benefits that appear to have the greatest impact on
employee satisfaction are (in this order):
- Health insurance
- Vacations and paid time off
- Retirement plans
• Additional benefits should reflect factors like the interests of
employees, the organization’s culture, and even a firm’s location.
Career Development
• In the past thirty years, the trend has been for career
development to be the responsibility of employees.
• While the general trend is towards pushing the responsibility for
career development onto employees, two important trends
should be noted:
- First, organizations are helping employees to keep their skills
current through supporting “life time learning”. For instance, many
firms offer tuition reimbursement for employees to take job-
related college classes.
- Second, companies are expanding and promoting their internship
programs.
Contemporary Issues in Managing Human
Resources
• Sexual Harassment
• Bullying in the Workplace
Managing Sexual Harassment
An unwanted activity of a sexual nature that explicitly or
implicitly affects an individual’s employment, performance, or
work environment.
• Unwanted sexual advances, requests for sexual favors, and other
verbal or physical conduct of a sexual nature when submission or
rejection of this conduct explicitly or implicitly affects an
individual’s employment.
An offensive or hostile environment
• An environment in which a person is affected by elements of a
sexual nature.
Managing Sexual Harassment
• What can an organization do to protect itself against harassment
claims? A program made up of seven elements has been suggested
1- A clear anti-harassment policy
2- An explicit statement of prohibited behaviors
3- A compliant procedure
4- Protections for complainants and witnesses against retaliation
5- An investigative strategy that protects privacy interests
6- Ongoing management training and employee awareness programs
7- Measures and processes to ensure prompt corrective and
disciplinary actions
Managing Bullying in the Workplace
• Workplace bullying occurs when an individual experiences a number
of negative behaviors repeatedly over a period of time that results in
physical or mental harm.
• It includes verbal abuse, offensive remarks, humiliation, intimidation,
and retaliation.
• Bullying also includes the presence of a power imbalance so that one
party is at a disadvantage or unable to protect or shield themselves
from the bullying.
Managing Bullying in the Workplace
• Bullying has multiple real negative effects on both employees and
organizations. For employees, bullying increases anxiety and panic
attacks, reduces self-esteem, and can create stress-related depression.
For organizations, bullying can lead to lower employee productivity,
increased absences, higher turnover, and increased replacement hiring
costs.
• Management has an obligation to create a workplace free from bullies.
A multifaceted approach is necessary. It starts with top management
leadership. There has to be a commitment by senior executives- both
in words and actions. This can be supported by formal policies, code of
conduct, awareness workshops, prompt investigations, and well-
publicized disciplinary actions against the abusers.
 Review Learning Objective 12.1
• Explain the importance of human resource management and
the Human Resource Management Process.
1. Competitive advantage
2. Organizational strategies
3. Impact of employee treatment on organizational performance
Review Learning Objective 12.2
• Describe the external influences that affect the human
resources management process.
– Economy
– Labor unions
– Legal environment
– Demographic trends
Review Learning Objective 12.3
• Discuss the tasks associated with identifying and selecting
competent employees.
– Planning:
• Job analysis
• Job description
• Job specification
– Recruitment/decruitment
– Selection
– Realistic job preview
Review Learning Objective 12.4
• Explain how companies provide employees with skills
and knowledge.
– Orientation
– Training:
• Profession/industry-specific training
• Management/supervisory skills
• Mandatory/compliance information
• Customer service training
– Traditional training versus technology based methods
Review Learning Objective 12.5
• Describe strategies for retaining competent, high-performing
employees.
– Performance management system
– Performance evaluation methods
-- What determines pays and benefits
– Factors influencing compensation and benefits
• Skill-based vs. variable pay system
• Bonuses vs. annual pay increases
• Pay secrecy vs. transparency
• Benefit options
Review Learning Objective 12.6
• Identify two important trends in organizational career development.
- Life time learning
- Expanding and promoting internship programs
 Review Learning Objective 12.7
• Discuss contemporary issues in managing human resources.
– Sexual harassment
– Bullying in the Workplace