Unit 01: Introduction to Human

Resource Management
 NEED TO KNOW
Definition of HRM and how HRM contributes to an organization’s
performance.
Responsibilities of HR departments.

Types of skills needed HRM.

Role of supervisors.

Ethical issues in HRM.

Typical careers HRM.

1-2
1. Introduction to HRM

The policies, practices,

and systems that
influence employees’:
behavior

attitudes

performance

1-3
HRM PRACTICES

1-4
2. Human Resources and Company
Performance
Employees and customers tend to be more satisfied.

The companies tend to:

be more innovative

have greater productivity

develop a more favorable reputation in the community

1-5
HUMAN CAPITAL
Human Capital – an The concept of HRM
organization’s employees implies that
described in terms of employees are
their: resources of the
training employer.
experience
judgment
intelligence
relationships
insight

1-6
Impact of HRM

1-7
HRM and Sustainable Competitive
Advantage

An organization can succeed if it has sustainable

competitive advantage.

HR have the necessary qualities to help give

organizations this advantage:

HR are valuable, cannot be imitated, have no good

substitutes and with needed skills and and knowledge
are sometimes rare.

1-8
At Southwest Airlines, the
company’s focus is on keeping
employees loyal, motivated,
trained, and compensated. In
turn, there is a low turnover
rate and a high rate of
customer satisfaction
High-Performance Work
System

An organization in which technology,

organizational structure, people, and
processes all work together to give
an organization a competitive
advantage.
3. Responsibilities
of HR
Departments
Analyzing and Designing Jobs

Job Analysis Job Design

Process of getting Process of defining the

detailed information way work will be
about jobs. performed and the tasks
that a given job requires.

1-12
Recruiting and Hiring Employees

Recruitment Selection

The process through which The process by which the

the organization seeks organization attempts to
applicants for potential identify applicants with the
employment. necessary knowledge, skills,
abilities, and other
characteristics that will help
the organization achieve its
goals.

1-13
Qualities of • Which of the following qualities were
in the top 5 as reported by
Job employers?
Candidates A. Technical skills
B. Intelligence
C. Interpersonal skills
D. Computer skills
Top Qualities Employers Seek in Job
Candidates
Training and Developing Employees

Training Development

A planned effort to Acquisition of knowledge,

enable employees to skills, and behaviors that
learn job-related improve an employee’s
knowledge, skills, and ability to meet changes in
behavior. job requirements and in
customer demands.

1-16
Managing
Performance

Performance Management – The

process of ensuring that
employees’ activities and
outputs match the organization’s
goals.
HR department may be
responsible for developing or
obtaining questionnaires and
other devices for measuring
performance.
Planning & Administering Pay &
Benefits
Administering
Planning Pay & Benefits
Pay & Benefits

 How much salary, wages  Systems for keeping

bonuses, commissions, track of employees’
and other performance - earnings and benefits
related pay to offer. are needed.
 Which benefits to offer  Employees need

and how much of the cost information about their

will be shared by benefits plan.
employees.  Extensive record keeping
and reporting is needed.
1-18
 Preparing and distributing:

• employee handbooks and policies

Maintaining • company publications and newsletters

Dealing with and responding to

Positive communications from employees
Employee questions:
• about benefits and company policy, possible
Relations discrimination or harassment, safety hazards
etc.

Collective bargaining and contract

administration.
Establishing and Administering
Personnel Policies

Organizations depend on hiring

their HR department to help discipline
establish and communicate promotions
policies related to: benefits

All aspects of HRM require careful and discreet

record keeping.

1-20
 Government requirements
include:

Ensuring • filing reports and displaying posters

• avoiding unlawful behavior
Compliance Managers depend on HR
with Labor professionals to help them keep
track of these requirements.
Laws
Lawsuits will continue to
influence HRM practices
concern job security.
 One reason W.L. Gore &
Associates is repeatedly
named one of the 100 Best
Companies to Work for in
America is their unusual
corporate culture where all
employees are known as
associates and bosses are not
found.

1-22
Supporting the Organization’s
Strategy
HR planning – identifying the numbers and types of
employees the organization will require to meet its
objectives.

The organization may turn to its HR department for help

in managing the change process.

Skilled HR professionals can apply knowledge of human

behavior, along with performance management tools, to
help the organization manage change constructively.
1-23
Supporting the Organization’s
Strategy

Evidence-based HR – Collecting and using data to show that human

resource practices have a positive influence on the company’s
bottom line or key stakeholders.
Supporting the Organization’s
Strategy
Corporate Social Responsibility Stakeholders

A company’s The parties with an

commitment to meeting interest in the company’s
the needs of its success (typically,
stakeholders. shareholders, the
community, customers,
and employees).

1-25
4. Skills of HRM Professionals

1-26
 • In an organization, who should be
Who is concerned with human resource
management?
Responsible A. Only HR departments
for HR? B. Only Managers
C. Managers and HR departments
5. HR Responsibilities of Supervisors

1-28
 ETHICS IN HRM

Ethics – fundamental
principles of right and
wrong.
Ethical behavior is
behavior that is
consistent with those
principles.
Many ethical issues in the
workplace involve HRM.
Employee Rights

1-30
Ethical companies act according to
four principles:
In their relationships with customers, vendors, and clients, ethical
companies emphasize mutual benefits.

Employees assume responsibility for the actions of the company.

The company has a sense of purpose or vision that employees

value and use in their day-to-day work.

They emphasize fairness.

1-31
Standards for Identifying Ethical Practices

1-32
STANDARDS FOR IDENTIFYING ETHICAL
HRM PRACTICES

HRM practices must result in the greatest good for

the largest number of people.

Employment practices must respect basic human

rights of privacy, due process, consent, and free
speech.

Managers must treat employees and customers

equitably and fairly.

1-33
Median Salaries for HRM Positions

1-34
 Test Your Knowledge
• Which HR functions are primarily concerned
with 1) ensuring employees are capable of
doing their current job , 2) ensuring that
employees are satisfied with their rewards.
A. 1) Development; 2) Employee
Relations
B. 1) Training; 2) Legal
Compliance
C. 1) Selection; 2) Pay &
Benefits
D. 1) Training; 2) Pay & Benefits
Summary

HRM consists of an organization’s “people practices”

 policies, practices, and systems that influence employees’
behavior, attitudes, and performance.
 HRM influences who works for the organization and how those
people work.

HR departments have responsibility for a variety of

functions related to acquiring and managing
employees.

1-36
Summary (continued)

HRM requires human relations skills, including skill in:

 communicating
 negotiating
 team development
HR professionals also need to :
 understand the language of business
 be a credible with line managers and executives
 be strategic partners

1-37
Summary (continued)

Non-HR managers must be familiar with the basics

of HRM and their own role with regard to managing
human resources.
 Supervisors typically have responsibilities related to all the HR
functions.
HR professionals should make decisions consistent
with sound ethical principles.

1-38
Summary (continued)

Decisions of HR professionals should:

 result in the greatest good for the largest number of
people.
 respect basic rights of privacy, due process, consent,
and free speech.
 treat employees and customers equitably and fairly.

Careers in HRM may involve specialized work in fields

such as recruiting, training, or compensation

1-39
 UNIT 2 TRENDS IN
HUMAN RESOURCE
MANAGEMENT
Dai Le

McGraw-Hill/Irwin Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved.
NEED TO KNOW



 The Labor Force
Internal Labor Force External Labor Market

 An organization’s • Individuals who are

workers actively seeking
 Its employees employment.
 People who have • Number and kinds of

contracts to work at people in external labor

the organization
 Internal labor force has
been drawn from the
external labor market.
market determine kinds
of human resources
available to an
organization.
1. Change in the Labor Force
Aging Workforce

Diverse Workforce

Skill Deficiencies
 Generations
Today’s
workforce

Baby boomers Generation Y

Generation X or
Silent Generation
Millennials
AGE DISTRIBUTION OF U.S LABOR FORCE, 2010 AND
2020
 HR professionals spend much time on
concerns related to retirement planning,
retraining older workers, and motivating
workers whose careers have reached a
plateau.
Organizations struggle to control rising costs
of health care and other benefits.
HRM
Implications
of an Aging Managers will supervise employees much
older than themselves.
Workforce
Organizations must find ways to attract,
retain, and prepare youth labor force.
 As more of the
workforce reaches
retirement age, some
companies have set up
mentoring programs
between older and
younger workers so that
knowledge is not lost but
passed on.
 Projected
Racial/Ethnic
Makeup of
the U.S.
Workforce,
2018
HRM Practices That Support
Diversity Management
 Skill Deficiencies of the Workforce

• Employers are looking • Gap between needed

for skills: and available skills has
 mathematical decreased companies
 verbal ability to compete.
 interpersonal • Sometimes lack the

 computer capacity to upgrade

technology, reorganize
work, and empower
employees.
 Organizations have best fit
between their:
• social system (people and how
2. High- they interact); and
• technical system (equipment and
Performance processes).

Work Key trends in high-

performance work systems:
Systems
• reliance on knowledge workers
• empowerment of employees to
make decisions
• teamwork
HRM Applications for Social Networking
Top 10 Occupations for Job Growth
 Knowledge Workers

• Employees whose They are especially

•

contribution to the needed for jobs in:

organization is • health services
specialized knowledge • business services
of: • social services
• Customers
• engineering
• Processes
• management
• Profession
Test Your Knowledge

• Ensuring that knowledge workers will share

information and store it so that it is easily
retrieved by others is the concern of which of the
following HR activities.
A. Turnover
B. Employee Empowerment
C. Knowledge Management
D. Employee Selection
 Employee Empowerment
Employee Empowerment Employee Engagement

Giving employees
 Full involvement in one’s
responsibility and work and commitment to
authority to make one’s job and company.
decisions regarding all This is associated with:
aspects of product  higher productivity
development or  better customer
customer service. service
 lower employee
turnover
 Teamwork

•The assignment of work Work teams often

•

to groups of employees assume many of the

with various skills who activities traditionally
interact to assemble a reserved for managers:
product or provide a • selecting new team
service. members
• scheduling work
• coordinating work
with customers and
other units of the
organization
  Sharon is a very smart and
conscientious worker. Lately,
she has felt that her ideas were
disregarded and she was
denied autonomy in completing
Test Your her work. This situation is
Knowledge probably caused by a lack of
 Employee Empowerment
 Knowledge Management

 Turnover

 Teamwork
3. Focus
on
strategy
Total Quality Management (TQM)

TQM is a companywide effort to

continuously improve the ways people,
machines, and systems accomplish work.

TQM approach provides guidelines for

all the organization’s activities,
including HRM.
TQM Core Values
Methods and processes are designed to meet the needs of internal and external
customers.

Every employee receives training in quality.

Quality is designed into a product or service so that errors are prevented from
occurring.

Organization promotes cooperation with vendors, suppliers, and customers to

improve quality and hold down costs.

Managers measure progress with feedback based on data.

Number of Employees Laid Off During the Past Decade
Mergers and Acquisitions
HRM should have a significant role in carrying out a
merger or acquisition.
 Differences between businesses involved in the deal
make conflict inevitable.
 Training should include conflict resolution skills.

 There is a need to sort out differences in the two

companies’ practices regarding compensation,
performance appraisal, and other HR systems.
Reengineering
 A complete review of the organization’s major
work processes to make them more efficient and
able to deliver higher quality, including HRM.
 Reengineering affects HRM in two ways:
 How HR accomplishes its goals may change.
 Change requires HR to help design and implement
change so that alll employees will be committed to
the reengineered organization’s success.
 Outsourcing – the practice of
having another company (a
vendor, third-party provider, or
consultant) provide services.
Outsourcing gives the company
access to in-depth
Outsourcing expertise and is often
more economical as well.
HR helps with a transition to
outsourcing.
 Expanding into Global Markets
Offshoring International Labor Pool
• Moving operations from • Hiring at home may may
the country where a involve selection of
company is employees from other
headquartered to a countries.
country where pay rates • Immigration.
are lower but the
necessary skills are
available.
Where
Immigrants to
U.S. Came from
in 2010
HR Information System (HRIS)

A computer system used to acquire, store,

manipulate, analyze, retrieve, and distribute
information related to an organization’s human
resources. HRIS can:
 support strategic decision making
 help the organization avoid lawsuits
 provide data for evaluating programs or policies
 support day-to-day HR decisions
 Internet Portal

Shared Service Centers

4.Technologic
Cloud computing, such as
al Change in application service providers
HRM
Business Intelligence

Data mining
Electronic Human Resource
Management (e-HRM)

e-HRM: processing and transmission of digitized HR

information especially using computer networking
and Internet.

e-HRM has potential to change all traditional HRM

functions.
Self-Service: System in which employees have online
access to information about HR issues and go online
to enroll themselves in programs and provide
feedback through surveys
5. CHANGE IN THE
EMPLOYMENT RELATIONSHIP
The employment relationship
takes the form of a
“psychological contract” that
describes what employees
and employers expect from
the employment relationship.
In the traditional version,
organizations expected
employees to contribute time,
effort, skills, abilities, and
loyalty in exchange for job
security and opportunities for
promotion.
CHANGE IN EMPLOYMENT RELATIONSHIP

A New
Psychological Flexibility
Contract

Flexible Staffing Flexible Work

Levels Schedules
Nature of the Employment Relationship
is Changing

Organizations are requiring top performance and longer work hours

but cannot provide job security.

Instead, employees are looking for:

• flexible work schedules
• comfortable working conditions
• greater autonomy
• opportunities for training and development
• performance-related financial incentives

This requires planning for flexible staffing levels.

 Flexibility: A
Family-
Friendly
Work
Arrangement
Need for Flexibility Affects HRM

 Organizations seek flexibility in staffing

levels through alternatives to traditional
employment relationship:
 outsourcing,temporary, and contract workers
 flexible work schedules – including shortened
work weeks
 allowing employees to adjust work hours to
meet personal and family needs
 moving employees to different jobs to meet
changes in demand
Summary
• An organization’s internal labor force comes from
its external labor market
• U.S. labor market is aging and becoming more
racially and ethnically diverse.
• Organizations must recruit from a diverse
population, establish bias-free HR systems, and
help employees understand and appreciate
cultural differences.
• HRM can help organizations find and keep the best
possible fit between their social system and
technical system.
Summary (continued)

• Job design and appropriate systems for

assessment and rewards have a central role in
supporting employee empowerment and
teamwork.
• Employee empowerment means giving employees
responsibility and authority to make decisions
regarding all aspects of product development or
customer service.
• HRM must design jobs to give employees latitude
for decision-making and interpersonal skills.
Summary (continued)

HR professionals should be familiar with the

organization’s strategy and may even play a role in
developing the strategy.
Specific HR practices vary according to type of
strategy.
Organizations with international operations hire
employees in foreign countries where they operate,
so they need knowledge of differences in culture
and business practices.
 UNIT 3: ANALYZING
WORK AND DESIGNING JOBS
Dai Le

McGraw-Hill/Irwin Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved.
Need to Know

Elements of work flow analysis and how work flow is related to an

organization’s structure.

How to obtain information for a job analysis.

Elements and trends in job analysis and their significance in HRM.

Methods for designing a job so that it can be done efficiently and

motivating.

How organizations apply ergonomics to design safe jobs and plan for
mental demands of a job.
1-80
 1. Work Flow In Organizations

Work Flow Design Position Job

Process of analyzing tasks Set of job duties performed Set of related duties.
necessary for production of a by a particular person.
product or service.

1-81
Figure:
Developing a Work
Flow Analysis

1-82
Work Flow Design and
Organization’s Structure
Within an organization, units and
individuals must cooperate to create
outputs.
The organization’s structure brings
together people who must collaborate
to efficiently produce desired outputs.
 Centralized
 Decentralized
 Functional
 Product or Customer

1-83
Firefighters work as a
team.

They and their equipment

are the inputs and the
output is an extinguished
fire and the rescue of
people and pets.

In any organization or
team, workers need to be
cross- trained in several
skills to create an
effective team.
1-84
2. Job Analysis
Job Analysis

Process of getting
detailed information Job
about jobs.
Descriptions

Job
Specifications
Job Descriptions

 Job Description: a list of tasks, duties, and responsibilities

(TDRs) that a particular job entails.
 Key components:
 Job Title

 Brief description of the TDRs

 List of the essential duties with detailed specifications of

the tasks involved in carrying out each duty

1-86
Figure 4.2:
Sample Job
Description

1-87
Job Specifications

Job Specification: list of knowledge, skills, abilities, and other

characteristics (KSAO needed to perform a particular job).
 Knowledge: factual or procedural information necessary
for successfully performing a task.
 Skill: an individual’s level of proficiency at performing a
particular task.
 Ability: a general enduring capability that an individual
possesses.
 Other Characteristics: job-related licensing,
certifications, or personality traits.

1-88
 Figure 4.3:
Sample Job
Specifications

1-89
Sources of Job Information

The incumbents – people who currently hold

the position in the organization.

Dictionary of Occupational Titles (DOT) –

published by the U.S. Department of Labor

Occupational Information Network (O*NET)

– an online job description database
developed by the Labor Department

1-90
4-90
1-91
Position Analysis Questionnaire (PAQ)

What is it? Key sections:

 A standardized job 1. Information input

analysis questionnaire 2. Mental processes
containing 194 questions 3. Work output
about work behaviors,
work conditions, and job 4. Relationships with
characteristics that apply other persons
to a wide variety of jobs. 5. Job context
6. Other characteristics

1-92
Fleishman Job Analysis System
What is it? Categories of abilities:

 Job analysis technique Written comprehension

that asks subject-matter
experts to evaluate a job Deductive reasoning
in terms of the abilities
required to perform the Manual dexterity
job.
Stamina

Originality

1-93
4-93
 Figure 4.4:
Example of an
Ability from
Fleishman Job
Analysis
System
Importance of Job Analysis
Job analysis is so important to • Work redesign
HR managers that it has been • HR planning
called the building block of all
HRM functions. • Selection
Almost every HRM program • Training
requires some type of information • Performance appraisal
determined by job analysis. • Career planning
• Job evaluation

1-95
Table 4.1: competency model
Project Manager Competencies Proficiency Ratings
Organizational & Planning Skills 1—Below Expectations
Ability to establish priorities on projects and schedule 2—Meets Expectations
activities to achieve results 3—Exceeds Expectations

Communications 1—Below Expectations

Ability to build credibility and trust through open and 2—Meets Expectations
direct communications with internal and external 3—Exceeds Expectations
customers.

Financial & Quantitative Skills 1—Below Expectations

Ability to analyze financial information accurately and 2—Meets Expectations
set financial goals that have a positive impact on 3—Exceeds Expectations
company’s bottom line and fiscal objective

1-96
Trends in Job Analysis

Organizations are being viewed as a field of work needing to

be done, rather than as a set series of jobs held by individuals.
“Dejobbing” – designing work by project rather than jobs.

1-97
3. Job Design
 Job Design: the process of defining how work will be
performed and what tasks will be required in a
given job.
 Job Redesign: a similar process that involves
changing an existing job design.
 To design jobs effectively, a person must thoroughly
understand:
 job itself (through job analysis) and
 its place in the units work flow (work flow analysis)

1-98
Figure 4.5: Approaches to Job Design

1-99
Designing Efficient Jobs
 Industrial Engineering: study of jobs to find simplest way to structure work to
maximize efficiency.
 Reduces complexity of work.
 Allows almost anyone to be trained quickly and easily perform the
job.
 Used for highly specialized and repetitive jobs.

1-100
Designing Jobs That Motivate: The
Job Characteristics Model
Skill variety – extent to which a job requires a variety
of skills to carry out tasks involved.

Task identity – degree to which a job requires

completing a “whole” piece of work from beginning to
end.

Task significance – extent to which the job has an

important impact on lives of other people.

1-101
Designing Jobs that Motivate: Job
Characteristics Model

Autonomy – degree to which the job allows

an individual to make decisions about the
way work will be carried out.

Feedback - extent to which a person

receives clear information about
performance effectiveness from the work
itself.

1-102
Figure 4.6: Characteristics of a Motivating
Job

1-103
Designing Jobs That Motivate
Job Enlargement

Job Enlargement - Broadening types of tasks

performed in a job.

Job Extension - Enlarging Job Rotation - Enlarging

jobs by combining several jobs by moving employees
relatively simple jobs to among several different
form a job with a wider jobs.
range of tasks.

1-104
4-104
Designing Jobs That Motivate

Job Enrichment Self-Managing Work Teams

Empowering workers by Have authority for an

adding more decision- entire work process or
making authority to jobs.
segment
Team members
motivated by
Based on Herzberg’s
theory of motivation. autonomy, skill variety,
and task identity.

Individuals motivated
more by intrinsic aspects
of work.

1-105
Test Your Knowledge

 Adding more tasks to an existing job is called

____________, while adding more decision-
making authority to jobs is called _________.
A. Job extension; job rotation
B. Job rotation; job enrichment
C. Job enlargement; job enrichment
D. Job enlargement; job rotation

1-106
Designing Jobs That Motivate Flexible
Work Schedules
Flextime
•A scheduling policy in
which full-time employees
may choose starting and
ending times within
guidelines specified by the
organization.
•A work schedule that
allows time for community
and family interests can
be extremely motivating.
Job Sharing
•A work option in which
two part-time employees
carry out the tasks
associated with a single
job.
•Enables an organization
to attract or retain valued
employees who want more
time to attend school or
take care of family
matters.
1-107
Figure 4.7:
Alternatives
to 8-to-5
Job
Designing Jobs That Motivate Telework

Telework – the broad term for doing one’s work away from a
centrally located office.
• Advantages to employers include:
 less need for office space
 greater flexibility to employees with special needs

• Easiest to implement for managerial, professional, or sales

jobs.
• Difficult to set up for manufacturing workers.

1-109
Designing Ergonomic Jobs

Ergonomics – study of interface between

individuals’ physiology and characteristics of
physical work environment.
• Goal is to minimize physical strain on the worker
by structuring physical work environment around
the way the human body works.
• Redesigning work to make it more worker- friendly
can lead to increased efficiencies.

1-110
 Although employers in all
industries are supposed to
protect workers under the
OSHA “general duty” clause,
nursing homes, grocery stores,
and poultry- processing plants
are the only three industries
for which OSHA has published
ergonomic standards.

1-111
Designing Jobs That Meet Mental
Capabilities and Limitations
• Work is designed to reduce information- processing requirements of
the job.
• Workers may be less likely to make mistakes or have accidents.
• Simpler jobs may be less motivating.
• Technology tools may be distracting employees from their primary task
resulting in increased mistakes and accidents.

1-112
Ways to Simplify a Job’s Mental
Demands
Limit amount of information and
memorization that the job requires.

Organizations can provide:

• adequate lighting
• easy-to-read gauges and displays
• simple-to-operate equipment
• clear instructions

1-113
Summary
Work flow analysis identifies:
 amount and quality of a work unit’s outputs
 work processes required to produce these outputs
 inputs used to carry out processes and produce outputs

• Within an organization, units and individuals must cooperate to create

outputs, and organization’s structure brings people together for this
purpose.
• Job analysis is the process of getting detailed information about jobs.

1-114
Summary

Job analysis includes preparation of

• Job descriptions
• Job specifications
Information for analyzing an existing job often comes
from incumbents and their supervisors.

The U.S. Department of Labor provides information:

• Dictionary of Occupational Titles
• Occupational Information Network (O*NET)

1-115
Summary

The nature of work and job design is

changing.
• Viewing organizations in terms of a field of work
needing to be done instead of specific job descriptions
• Organizations are adopting project-based structures
and teamwork, which also require flexibility and ability
to handle broad responsibilities.
The basic technique for designing efficient
jobs is industrial engineering.

1-116
Summary
 According to the Job Characteristics Model, jobs are more motivating if they
have greater skill variety, task identity, task significance, autonomy, and
feedback.
 Ways to create such jobs include:
 Job Enlargement
 Job Rotation
 Job Enrichment
 Self-managing work teams offer greater skill variety and task identity
 Flexible work schedules and telework offer greater autonomy

1-117
Summary
 Goal of ergonomics is to minimize physical strain on the worker by
structuring the physical work environment around the way the human body
works
Employers may seek to reduce the mental as well as physical strain and
reduce errors and accidents.
 Job design may limit amount of information and memorization
involved.
 Technology tools may actually cause more distractions, errors, and
accidents.

1-118
Unit 4: PLANNING FOR
AND RECRUITING HUMAN RESOURCES

Dai le
Need to Know

1. How to plan for HR needed to carry out organization’s

strategy.
2. Labor demand for workers in various job categories.
3. Advantages and disadvantages of ways to eliminate a
labor surplus and avoid a labor shortage.
4. Recruitment policies organizations use to make job
vacancies more attractive.
5. Sources of job applicants.
6. Recruiter’s role in recruitment process- limits and
opportunities.
1. The Process of Human
Resource Planning

• Organizations should carry out HR planning so as to meet

business objectives and gain a competitive advantage over
competitors.
• HR planning compares the present state of the organization
with its future goals
• Then identifies what changes it must make in its HR to meet
those goals
Figure
5.1:
Overview
of HR
Planning
Process
Forecasting

Forecasting: attempts to Forecasting steps:

determine supply and 1. Forecast labor demand
demand for various types Determine labor supply
of HR to predict areas
within the organization 2. Determine labor surplus
where there will be labor or shortage
shortages or surpluses.
Forecasting Labor Demand

Trend Analysis Leading Indicators

•Constructing and •Objective measures that
applying statistical accurately predict future
models that predict labor demand.
labor demand for next
year, given relatively
objective statistics from
previous year.
Determine Labor Supply

•Transitional matrix: a  It answers two

chart that lists job questions:
categories held in one 1. “Where did people in
period and shows each job category go?”
proportion of employees
in each of those job 2. “Where did people
categories in a future now in each job
period. category come from?”
 Table 5.1: Transitional Matrix –
Auto Parts Manufacturer Example
Determine Labor Surplus or
Shortage

Based on forecasts for labor

Determining expected
demand and supply, planner
shortages and surpluses
can compare figures to
allows the organization to
determine whether there will
plan how to address these
be a shortage or surplus of
challenges.
labor for each job category.
 Goal Setting and Strategic
Planning

Purpose of setting specific numerical goals is to focus attention on the problem and provide a
basis for measuring the organization’s success in addressing labor shortages and surpluses.

Goals should come directly from analysis of supply and demand.

For each goal, organization must choose one or more HR strategies.

Organizations should retain and attract employees who provide a core competency (what
makes it better than competitors)
Options for Reducing a Surplus

Pay
Downsizing Demotions
reductions

Work Hiring
Transfers
sharing freeze

Natural Early
Retraining
attrition retirement
• As the average age of many workers in skilled
trades grows, the coming demand for workers in
many trades is expected to outstrip supply in the
United States. There is a potential for employers
in some areas to experience a labor shortage
because of this.
Options for Avoiding a Shortage

Temporary Retrained
Overtime Outsourcing
employees transfers

Turnover New external Technological

reductions hires innovation
Table 5.2: HR Strategies for Addressing
a Labor Shortage or Surplus
Test Your Knowledge

• A public accounting firm of 250 employees realizes they have

a surplus of 15 support personnel (not auditors). What should
they do?
A. Hire temporary workers
B. Offer early retirement
C. Downsize people in those positions
D. Wait for attrition and implement a hiring freeze for
those positions
Implement and Evaluate HR Plan

• When implementing the HR strategy, organizations must hold

individuals accountable for achieving goals.
• They must also have authority and resources needed to
accomplish those goals.
• Regular progress reports should be issued.
• Evaluation of results should look at tactual numbers and
identify which parts of planning process contributed to success
or failure.
Apply HR •Workforce Utilization •Organization must
Review: comparison assess current
Planning to of employees in utilization patterns,
protected groups then forecast how
Affirmative with proportion that they are likely to
Action each group change in near
represents in relevant future.
labor market. •If analyses forecast
•Steps in a workforce underutilization of
utilization review are certain groups, then
identical to steps in goals and a plan will
HR planning process. be established.
2. Recruiting Human Resources

Recruiting: any activity

Role of HR recruitment is to
carried on by the
build a supply of potential
organization with the
new hires that the
primary purpose of
organization can draw on if
identifying and attracting
need arises.
potential employees.
Figure 5.2: Three Aspects of Recruiting
 Internal versus
external recruiting
3. Personnel Policies
Several personnel policies Lead-the-market pay
are especially relevant to strategies
recruitment:

Employment-at-will
policies

Image advertising
Image advertising,
such as in this
campaign to recruit
nurses, promotes a
whole profession or
organization as
opposed to a specific
job opening.
This ad is designed to
create a positive
impression of the
profession, which is
now facing a shortage
of workers.

5-139
4. Recruitment Sources:
Internal Sources

Job Posting: process of communicating information about a job

vacancy:
– On company bulletin boards
– In employee publications
– On corporate intranets
– Anywhere else organization communicates with employees
 It generates applicants who are well
known to the organization.

These applicants are relatively

Advantages knowledgeable about the organization’s
of Internal vacancies, which minimizes the
Sources possibility of unrealistic job expectations.

Filling vacancies through internal

recruiting is generally cheaper and faster
than looking outside the organization.
 4 in 10
Positions
Are Filled
with
Insiders
External Sources

Direct applicants Public employment

agencies

Referrals
Private employment
agencies
Advertisements in
newspapers and
magazines
Colleges and
universities
Electronic recruiting
 Figure 5.3:
External
Recruiting
Sources –
Percentage of
Employees
Hired
Evaluating the Quality of a Source
Yield Ratios
•A ratio that expresses
percentage of applicants
who successfully move from
one stage of the recruitment
and selection process to the
next.
•By comparing yield ratios of
different recruitment
sources, we can determine
which source is best or most
efficient for type of vacancy.
Cost Per Hire
•Find cost of using a
particular recruitment source
for a particular type of
vacancy.
•Divide that cost by number
of people hired to fill that
type of vacancy.
•A low cost per hire means
the recruitment source is
efficient.
Table 5.3: Results of a Hypothetical
Recruiting Effort

most effective

most efficient
 5.Recruiter Traits and Behaviors

Characteristics of Recruiter

Behavior of Recruiter

Enhancing Recruiter’s Impact

Recruiter Characteristics and Behavior

• True = A False = B
• Applicants respond more positively when the recruiter is
an HR specialist than line managers or incumbents.
• Applicants respond positively to recruiters whom are
warm and informative
• Personnel policies are more important than the recruiter
when deciding whether or not to take a job.
• Realistic job previews should highlight the positive
characteristics of the job rather than the negative.
Figure 5.4: Recruits Who Were
Offended by Recruiters
Enhance Recruiter’s
Impact
• Recruiters should provide timely feedback and
avoid offensive behavior.
• They should avoid behaving in ways that might
convey the wrong impression about the
organization.
• Organization can recruit with teams rather than
individual recruiters.
Summary

• First step in HR planning is personnel forecasting.

Through trend analysis and good judgment, planner
determines supply and demand for HR.
• Next step - determine labor demand for workers in
various job categories.
• Analysis of a transitional matrix helps identify which
job categories can be filled internally and where
high turnover is likely.
Summary

To reduce a surplus, downsizing, pay reductions, and

demotions deliver fast results but at a high cost in
human suffering that may hurt surviving employees’
motivation and future recruiting.
To avoid a labor shortage, requiring overtime is
easiest and fastest strategy.
Internal recruiting generally makes job vacancies
more attractive because candidates see
opportunities for growth and advancement.
Summary

Lead-the-market pay strategies make jobs

economically desirable.
Internal sources are usually not sufficient for
all of an organization’s labor needs.
Through their behavior and other
characteristics, recruiters influence the
nature of the job vacancy and kinds of
applicants generated.
SELECTING EMPLOYEES AND
PLACING THEM IN JOBS
Dai le
Need to Know
1. Elements of selection process.
2. Ways to measure success of selection method.
3. Government’s requirements for employee selection.
4. Common methods used for selecting HR.
5. Major types of employment tests.
6. How to conduct effective interviews.
7. How employers selection decisions.
Personnel Selection
• Personnel Selection: process through
which organizations make decisions
about who will
or will not be allowed to join the
organization.
• Selection begins with candidates
identified through recruitment.
• It attempts to reduce number to
individuals best qualified to perform
available jobs.
• It ends with selected individuals placed
in jobs with the organization.
1. Selection Process
Strategic Approach to Personnel
Selection
• Organizations should create a selection process in
support of its job descriptions.
• Selection process should be set up in a way that it
lets the organization identify people who have
necessary KASOs.
• This strategic selection approach requires ways to
measure effectiveness of selection tools.
Criteria for Measuring the Effectiveness
of Selection Tools and Methods

Method provides reliable information.

Method provides valid information.

Information can be generalized to apply to candidates.

Method offers high utility.

The selection criteria are legal.

Reliability
 Reliability: extent to which a measurement is free from random error.
A reliable measurement generates consistent results.
Organizations use statistical tests to compare results over time.
 Correlation coefficients
 A higher correlation coefficient signifies a greater degree
of reliability.
Validity Validity: extent to Federal
which performance government’s
on a measure (such Uniform Guidelines
as a test score) is on Employee
related to what the Selection
measure is designed Procedures accept
to assess (such as three ways of
job performance). measuring validity:
1. Criterion-
related
2. Content
3. Construct
Criterion-Related Validity

Criterion-related validity: a measure of validity based

on showing a substantial correlation between test
scores and job performance scores.

Two kinds of research are Predictive Validation

possible for arriving at Concurrent Validation
criterion-related validity:
Criterion-Related Validity
Predictive Validation
Research that uses test
scores of all applicants and
looks for a relationship
between scores and future
performance of applicants
who were hired.
Concurrent Validation
Research that consists of
administering a test to
people who currently hold
a job, and then comparing
their scores to existing
measures of job
performance.
Figure 6.2: Criterion-Related Measurements of a Student’s Aptitude
Content and Construct Validity

Content Validity Construct Validity

Consistency between Consistency between a
test items or problems high score on a test and
and kinds of situations or high level of a construct
problems that occur on (i.e., intelligence or
the job. leadership ability) as well
as between mastery of
this construct and
successful performance of
the job.
 A generalizable selection method
applies not only to the conditions in
which the method was originally
developed – job, organization,
people, time period, etc.

Ability to
Generalize

It also applies to other

organizations, jobs, applicants, etc.
NFL teams have been using cognitive tests to select
players assuming that intelligence can be
generalized to the job requirements of football
teams, especially on teams that compete using
complex offensive and defensive schemes.

6-167
 Being valid, reliable, and
generalizable adds value to a
selection method.
Another consideration is the cost
Practical of using the selection method.
Value and
Utility Selection methods should cost
significantly less than the benefits
of hiring new employees.
Methods that provide economic
value greater than the cost of
using them are said to have utility.
 All selection methods must
conform to existing laws
and legal precedents.

Legal Three acts have formed the

Standards basis for a majority of suits
filed by job applicants:
for Selection
• Civil Rights Act of 1964 and 1991
• Age Discrimination in
Employment Act of 1967
• Americans with Disabilities Act of
1991
 Table 6.1:
Permissible and
Impermissible
Questions for
Applications
and Interviews
  Which of the following questions is
permissible?
A. Will child care demands
affect your ability to get to
work?
Test Your B. Do you have a car so that
Knowledge you will be able to get here
on time?
C. This job requires you to be
here from 8:00am to
5:00pm. Can you meet that
job requirement?
 Information gathered during
selection process may include
information that employees
consider confidential.
Legal
This is a particular concern when
Standards: job applicants provide
Candidates’ information online.
Privacy
Rights
Employers should collect data
only at secure Web sites.
 Fair Credit Reporting Act requires
employers to obtain a
candidate’s consent before using
a third party to check candidate’s
Legal
credit history or references.
Standards:
Candidates’
Privacy If the employer decides not to
hire based on the report,
Rights employer must give applicant a
copy of the report and summary
of applicant’s rights before taking
action.
 Immigration Reform and Control Act
(1986): Federal law requiring employers
to verify and maintain records on
applicants’ legal rights to work in U.S.
Legal
Standards:
Immigration Applicants fill out Form I-9 and present
documents showing their identity and
Reform and eligibility to work.
Control Act
(1986) Law prohibits employer from
discriminating against the person on
basis of national origin or citizenship
status.
 • The usual ways of
2. Job gathering background
Applications information are by
and asking applicants to fill
Resumes out application forms
and provide resumes
Gathering Background Information

Application Forms Résumés

Reference Checks Background Checks

 Low-cost way to gather basic
data from applicants.

Ensures that the organization

Application has certain standard
categories of information:
Forms • Contact information
• Work experience
• Educational background
• Technical experience
• Memberships in professional or trade
groups
 The usual way that applicants introduce
themselves to a potential employer

Applicants control the content of the

information as well as the way it is
presented.

Résumés Information is biased in favor of the

applicant and (although this is unethical)
may not even be accurate

Organizations typically use resumes as a

basis for deciding which candidates to
investigate further

HR staff member or automated system

reviews the resumes to identify candidates
reporting essential skills and/or credentials
 8 out of 10 large companies and
2/3rds of smaller orgs report
conducting background checks

Internet allows for faster and easier

Background searching for convictions (60% of
males have been arrested at some
Checks point)

Requests for expunging police records

has been on the rise so background
checks may not be as complete as
employers would prefer
 Aptitude tests: assess
how well a person can
learn or acquire skills
3. Employment and abilities.
Tests and Work
Samples
Achievement tests:
measure a person’s
existing knowledge
and skills.
Table 6.2: Sources of Information About Employment Tests
Employment Tests and Work Samples

Physical
Ability
Medical Tests Cognitive
Examinati Ability
ons Tests

Employment Job
Drug Tests Tests & Work Performance
Samples Tests

Honesty Work
Tests Samples
Personality
Inventories
Table 6.3: Five Major Personality Dimensions
Measured by Personality Inventories
Rules for Administering
Drug Tests
• Administer tests systematically to all applicants for the same job.

• Use drug testing for jobs that involve safety hazards.

• Have a report of results sent to applicant, along with information

about how to appeal results and be retested if appropriate.

• Respect applicants’ privacy by conducting tests in an

environment that is not intrusive and keeping results confidential.
4. Interviews

Nondirective
Interview

Behavior
Description Interviewing Structured
Techniques Interview
Interview

Situational
Interview
When interviewing candidates, it’s valid to
ask about willingness to travel if that is part
of the job.

Interviewers might ask questions about

previous business travel experiences and/or
how interviewees handled situations
requiring flexibility and self- motivation.
Interviewing Effectively

1. Be prepared
2. Put applicant at ease
3. Ask about past behaviors
4. Listen – let candidate do most of the talking
5. Take notes – write down notes during and
immediately after interview
6. At the end of the interview, make sure candidate
knows what to expect next
5. Selection Decisions
How Organizations Select Employees?
Multiple-Hurdle Model Compensatory Model
Process of arriving at a Process of arriving at a
selection decision by selection decision in
eliminating some which a very high score on
candidates at each stage one type of assessment
of the selection process. can make up for a low
score on another.
Selection Decisions
 When a candidate has been selected, the organization should
communicate the the offer to the candidate. The offer should
include:
 Job responsibilities
 Work schedule
 Rate of pay
 Starting date
 Other relevant details
Summary
• Selection typically begins with a review
of candidates’ applications and
résumés.
• The organization administers tests to
candidates who meet basic
requirements, and qualified candidates
undergo one or more interviews.
• Organizations check references and
conduct background checks.
• A candidate is selected to fill each
vacant position.
Summary
 Organizations need to measure success of
selection methods. Criteria used include:
 Validity
 Reliability
 Utility
 Legality
 Generalizable
Summary • An important principle of
selection is to combine several
sources of information about
candidates, rather than relying
solely on interviews or a single
type of testing.
• Sources should be chosen
carefully to relate to
characteristics identified in job
description to increase validity of
decision criteria.
• Organizations are more likely to
make decisions that are fair and
unbiased and choose the best
candidate.
Summary
• Selection process must be conducted in a way that avoids discrimination
and provides access to persons with disabilities.
• Selection methods must be valid for job performance, and scores may
not be adjusted to discriminate against or give preference to any group.
• Focus on finding the person who will be best fit with job and organization.
This includes an assessment of ability and motivation.
Unit 06: Training and
Developing Employees
Dai le
Link training programs to organizational needs.

Assess the need for training.

Assess employees’ readiness for training.

Need to
Plan an effective training program.
Know HOW
Compare widely used training methods.
TO
Implement and evaluate a successful training
program.

Describe training methods for employee

orientation and diversity management.
1.Training

Training - an organization’s planned

efforts to help employees acquire job-
related knowledge, skills, abilities, and
behaviors, with the goal of applying these
on the job.
•Training can benefit the organization
when it is linked to organizational needs
and motivates employees.
Training versus Development
Test Your Knowledge

 Significant Developments: True (A) or False (B)?

 There are more horizontal “ladders” in middle
management than upward moves.
 Companies focus on employee’s career steps rather
than their core competencies.
 Careers are now more a series of projects, rather than
upward steps in an organization
 Career development primarily applies to managers.
 Organization manages employee’s careers more so than
the individual.
 Average 32-year old has already worked for 7 different
firms.
2. Training Linked to Organizational
Needs

 Nature of today’s business

environment makes training important.
 Rapid change requires that employees
continually learn new skills.
 Growing reliance on teamwork creates
a demand for the ability to solve
problems in teams, an ability that
often requires formal training.
Instructional Design

 An effective training •Instructional design: a

program is designed process of
to teach skills and systematically
behaviors that will developing training to
help the organization meet specified needs.
achieve its goals.
 HR professionals
approach training
through instructional
design.
 Figure 7.1:
Stages of
Instructional
Design/Training
process
Learning Management System
 Learning management system (LMS): a computer application that
automates the administration, development, and delivery of
training programs.

• LMS is used to carry out instructional design process more

efficiently and effectively.
Learning Management System
(LMS)
The system can be linked to the organization’s performance
management system to plan for and manage:
• training needs
• training outcomes
• associated rewards
 Needs assessment: process of
evaluating the organization,
individual employees, and
employees’ tasks to determine
what kinds of training, if any, are
necessary.
• Needs assessment answers three
Needs questions:
Assessment 1. Organization – What is the context in
which training will occur?
2. Person – Who needs training?
3. Task – What subjects should training
cover?
• Pfizer employees go through a representative training
phase which teaches them about different Pfizer
products and how to market them.
• Workers typically need to be trained in several
processes to work in flexible manufacturing.

7-205
 Organization analysis: process for
determining appropriateness of training by
evaluating characteristics of the
Needs organization.

Assessment: Organization analysis looks at training

needs in light of:
Organization • the organization’s strategy,
• resources available for training,
Analysis and
• management’s support for
training activities.
 Person analysis: process of determining
individuals’ needs and readiness for
Needs training.
It involves answering three questions:
Assessment: 1. Do performance deficiencies result
Person from a lack of knowledge, skill, or
ability?
Analysis 2. Who needs training?
3. Are these employees ready for
training?
 Task analysis: process of identifying and
analyzing tasks to be trained.
Needs To carry out task analysis
• Job’s equipment and environment
Assessment: • Time constraints
Task Analysis • Safety considerations
• Performance standards
Sample Items from a Task Analysis
Questionnaire
Test Your
Knowledge
 An examination of causes
of performance
deficiencies in a group or
individual is called:
A. Organizational
analysis
B. Task analysis
C. Person analysis
D. Needs analysis
Test Your
Knowledge
 Training most effectively
addresses:
A. Motivation
problems
B. Skill and ability
deficiencies
C. Lack of
performance
feedback
D. Lack of resources
to do job
 Readiness for training: a combination of
employee characteristics and positive
work environment that permit training.
Readiness
for Training
Necessary employee characteristics:
Ability to learn Favorable attitudes
Motivation to learn
subject matter toward training

A positive work environment

encourages learning and avoids
interfering with training.
 Which of the following comments from
a manager would support training?
Test Your • “You can attend the course but you’ll have to
Knowledge make up the work you missed on your own
time.”
• “I’m glad you were trained on ‘X’ but I need you
to keep working on ‘Y’ for the next few months.”
• Good luck with your training next week, what is
it about again?
• “Your performance has improved, especially
with regard to the aspects you have been
trained on.”
3. Planning the Training
Program

 Planning begins with establishing objectives for the training

program.
 Based on those objectives, planner decides:
 Who will provide the training
 What topics the training will cover
 What training methods to use
 How to evaluate the training
Characteristics  They include a statement of:
of Effective 1. Expectations
2. Quality or level of acceptable
Training performance
Objectives 3. Conditions under which the
employee is to apply what he
or she learned.
4. Measurable performance
standards.
5. Resources needed to carry
out desired performance or
outcome.
In-House or Contracted Out?
Your Experience
 What types of training have you taken?
A. Classroom/Presentation
B. Hands-on
C. Team training
D. Combination
Table 7.2: Categories of Training Methods
 4. Training Methods

Classroom
Action Instruction Audiovisual
Learning Training

Computer-
Team
Based
Training
Training
Training
Methods
Experiential On-the-Job
Programs Training

Behavior
Modeling Business Simulations
Games &
Case Studies
Figure 7.2: Use of Instructional Methods
• Mobile technology is useful for employees who travel
and need to be in touch with the office.
• iPods and tablet computers also give employees the
ability to listen to and participate in training programs
at their own leisure.

7-221
computer-
based  E-learning: involves receiving training
training via Internet or Intranet.
• E-learning uses electronic networks for
delivering and sharing information,
offers tools, links and information for
helping trainees improve performance.
computer-
based  Electronic Performance Support
Systems (EPSS): provide access to
training skills training, information, and expert
advice when a problem occurs on the
job.
 As employees need to learn new skills,
they can use EPSS to access needed
information and detailed instructions.
Table 7.3: Typical Jobs for Apprentices and Interns
Characteristics of On-the-Job
Training (OJT)
• Issue a policy statement describing purpose of OJT emphasizing
organization’s support for it.
• Specify who is accountable for conducting OJT and should review OJT
practices at similar companies.
• Train managers and peers in OJT principles.
• Provide employees access to lesson plans, checklists, procedure manuals,
training manuals, learning contracts, and progress report forms.
• Assess employee’s level of basic skills, before conducting OJT with an
employee.
Other Training Methods
• Simulations: Training
method that represents
a real-life situation, with
trainees making
decisions resulting in
outcomes that mirror
what would occur on the
job. Uses:
 Avatars
 Virtual Reality
• Business Games and
Case Studies:
 Case studies- detailed
descriptions of a
situation that trainees
study and discuss
 Business games require
trainees to gather and
analyze information and
make decisions that
influence the outcome.
Other Training Methods

• Experiential programs: • Adventure Learning: a

Participants learn teamwork and
concepts and apply leadership training
them by simulating program based on use
behaviors involved and of challenging,
analyzing the activity structured outdoor
and connecting it with activities
real-life situations
One of the most important features of
organizations today is teamwork. Experiential
programs include team-building exercises like
wall climbing and rafting to help build trust and
cooperation among employees.

7-228
5. Implementing the Training
Program: Principles of Learning
Employees are most likely to learn when training is linked to
their current job experiences and tasks.
Employees need a chance to demonstrate and practice what
they have learned.
Trainees need to understand whether or not they are
succeeding.
Well-designed training helps people remember content.

Written materials should have an appropriate reading level.

Table 7.4:
Ways That
Training
Helps
Employees
Learn
6.Measures
of Training
Success
Evaluation Methods: Transfer of
Training
Transfer of training: on-the-job use of knowledge,
skills, and behaviors learned in training.
• Can be measured by asking employees three
questions about specific training tasks:
1. Do you perform the task?
2. How many times do you perform the task?
3. To what extent do you perform difficult and challenging
learned tasks?
Evaluation Methods: Training
Outcomes
Information such as facts, techniques, and procedures that trainees can
recall after training.

Skills that trainees can demonstrate in tests or on the job.

Trainee and supervisor satisfaction with training program.

Changes in attitude related to training content.

Improvements in individual, group, or company performance.

communities • Communities of practice — groups of
of practice employees work together, learn from
each other, and develop a common
understanding of how to get work
accomplished. It also may assign
experienced employees to act as
mentors who provide advice and
support to trainees.
Test Your Knowledge
 The most effective way to measure employee satisfaction with training is
_______ and learning acquired is _______.
A. Survey; pre-post test with control group
B. Post-test; survey
C. Cost-benefit analysis; pre-post test
D. Interview managers; cost-benefit analysis
 Training outcomes
• Related to organization’s goals for training and its
overall performance such as:
• Information such as facts, techniques, and procedures that
trainees can recall.
• Skills that trainees can demonstrate.
• Satisfaction with the training program.
• Changes in attitude related to training content
• Improvements in individual, group, or company performance
Applications of Training

Orientation of New Employees

Diversity Training
Orientation of New Employees

• Orientation - training Objective is to familiarize

designed to prepare new employees with the
employees to organization’s rules,
 perform their jobs policies, and procedures.
effectively,
 learn about their
organization, and
 establish work
relationships.
Table 7.5: Content of a Typical Orientation Program
Your Experience

Have you ever participated in Diversity Training?

A=Yes B=No

What was it like?

Why did the organization offer it?
What were the goals of the program?
Characteristics of Effective
Diversity Training Programs
 Training should be tied to business objectives
 Top management involvement and support, and involvement of
managers at all levels are important.
 The program should be:
 emphasize learning behaviors and skills, not blaming
employees.
 be well structured
 deliver rewards for performance
 measure the success of the training
Test Your Knowledge
What type of diversity training tends to bring about better business
results?
A. Training focused on awareness and changing attitudes
B. Training focused on behaviors and skills
C. It doesn’t matter, research shows all diversity training is good
for the organization
7. Approaches to Employee Development (self-reading)
Approaches to Employee Development

Formal Education Assessment

•These may include: •Collecting information
– Workshops and providing feedback to
– Short courses employees about heir
– Lectures behavior, communication
– Simulations style, or skills.
– Business games •Information for
– Experiential programs assessment may come
•Many companies operate from the employees, their
training and development peers, managers, and
centers. customers.
One way to develop employees is to begin with an
assessment which may consist of assigning an
activity to a team and seeing who brings what skills
and strengths to the team.

9-245
 Assessment Tools
Myers-Briggs Type Indicator (MBTI)®

Assessment Centers

Benchmarks Assessment

Performance Appraisal

360-Degree Feedback
Assessment Tools:
Myers-Briggs Type Indicator (MBTI)®
Psychological test that •Most popular test for
identifies individuals’ employee development.
preferences for source of •Assessment consists of
energy, means of 100 + questions about
information gathering, how the person feels or
way of decision making, prefers to behave in
and lifestyle, providing different situations.
information for team
building and leadership
development.
Assessment Tools
Assessment Centers
An assessment process
in which multiple raters or
evaluators (assessors)
evaluate employees’
performance on a number
of exercises, usually as
they work in a group at an
offsite location.
Benchmarks
A measurement tool
that gathers ratings of a
manager’s use of skills
associated with success in
managing.
Table 9.2: Skills Related to Success as a
Manager
Assessment Tools

Performance appraisals can be useful for employee

development under certain conditions:
1. Appraisal system must tell employees specifically about
their performance problems and ways to improve their
performance.
2. Employees must gain a clear understanding of differences
between current and expected performance.
3. Appraisal process must identify causes of performance
discrepancy and develop plans for improving
performance.
Assessment Tools

360-degree feedback can be used for development

purposes:
1. Raters identify an area of behavior as a strength of the
employee or an area requiring further development.
2. Results presented to employee show how rating on each
item and how self-evaluations differ from other raters’
evaluations.
3. Individual reviews results, seeks clarification from raters,
and sets specific development goals based on strengths
and weaknesses identified.
Test Your Knowledge

• Sarah participated in leaderless group discussions

and in-basket exercises and was observed by a
number of raters. Which assessment method was
used for Sarah?
A. Interview
B. Performance appraisal
C. Assessment Center
D. Coaching
Approaches to Employee Development

Job experiences: •Key job experience

combination of tasks, events include:
relationships, problems, – Job assignments
demands and other – Interpersonal
relationships
features of an employee’s – Types of transitions
jobs.
•Through these
•Most employee experiences, managers
development occurs learn how to handle
through job experiences. common challenges, and
prove themselves.
Figure 9.2: How Job Experiences Are
Used for Employee Development
Working outside one’s home country is the most
important job experience that can develop an
employee for a career in the global economy.

9-255
Approaches to Employee Development

• Interpersonal relationships: employees can also

develop skills and increase their knowledge about
the organization and its customers by interacting
with a more experienced member:
– Mentoring
– Coaching
Figure 9.3: Steps and Responsibilities in the Career
Management Process
Test Your Knowledge

• Phyllis is in the process of understanding what

possibilities exist for her within the organization
based on her strengths and developmental areas.
Which phase of the career management process is
she in?
A. Self Assessment
B. Reality Check
C. Goal Setting
D. Action Planning
8. Systems for Career Management
(self-reading)
Data Gathering:
Self-Assessment Feedback
•Use of information by Information employers
employees to determine give employees about
career interests, values, their skills and knowledge
aptitudes, behavioral and where these assets fit
tendencies, and into the organization’s
development needs. plans.
• MBTI
• Strong-Campbell Interest
Inventory
• Self-Directed Search
Figure 9.4: Sample Self-Assessment
Exercise
Career Management System
Goal Setting
•Based on information
from self-assessment and
reality check, employee
sets short- and long-term
career objectives.
– Desired positions
– Level of skill to apply
– Work setting
– Skill acquisition
Action Planning & Follow-Up
•Employees prepare an
action plan for how they
will achieve their short-
and long-term career
goals.
•Any one or a combination
of development methods
may be used, depending
on development need and
career objectives.
Figure 9.5: Career Development Plan
Summary

• Organizations need to establish training programs

that are effective, teach what they are designed to
teach and skills and behaviors that will help the
organization achieve its goals.
• Organizations create such programs through
instructional design which begins with a needs
assessment.
• The organization then ensures readiness for training.
Summary

• Next the organization plans and implements a

training program and evaluates the results.
• Needs assessment consists of an organization,
person and task analysis.
• Readiness for training is a combination of employee
characteristics and positive work environment that
permit training.
• Planning begins with establishing objectives for the
program.
Summary (

Based on the objectives, the planner decides:

 Who will provide the training
 What topics the training will cover
 What training methods to use
 How to evaluate the training
Training methods selected should be related to the
objectives and content of the training program.
Training methods may include presentation methods,
hands-on methods, or group-building methods.
Summary

• Implementation should apply principles of learning.

• Effective training communicates learning objectives,
presents information in distinctive and memorable
ways, and helps trainees link subject matter to jobs.
• Evaluation of training should look for transfer of
training by measuring whether employees are
performing tasks taught in training.
• Assessment of training also should evaluate training
outcomes.
Summary

• Organizations should provide for orientation

because no matter how realistic the information
provided during employment interviews and site
visits, people feel shock and surprise when they
start a new job, and they need to learn the details of
how to perform the job.
• Diversity training is designed to change employee
attitudes about diversity and/or develop skills
needed to work with a diverse workforce.
Unit 7: CREATING AND MAINTAINING
HIGH-PERFORMANCE ORGANIZATIONS
Dai Le
Need to Know

1. High-performance work systems and their elements and

outcomes.
2. Conditions that create a high-performance work system.
3. How HRM can contribute to high performance.
4. Role of HRM technology in high-performance work systems.
5. Ways to measure the effectiveness of HRM.
1. High-
Performance • High-performance work system – right
Work combination of people, technology, and
Systems organizational structure that makes full
use of the organization’s resources and
opportunities in achieving its goals.
• Each of these elements must fit well
with the others in a smoothly
functioning whole.
Figure 16.1: Elements of a High-
Performance Work System
5 Elements of a High-Performance
Work System

1. Organizational structure: way organization groups its people into useful

divisions, departments, and reporting relationships.

2. Task design: determines how details of the organization’s necessary

activities will be grouped, whether into jobs or team responsibilities.

3. People: well suited and well prepared for their jobs.

4. Reward systems: encourages people to strive for objectives that support

organization’s overall goals.

5. Information systems: enables sharing information widely.

 In a high-performance work system, all
the elements – people, technology, and
organizational structure – work together
for success.

16-273
Outcomes of a High-Performance
Work System
Outcomes of a high-performance work system include:
 higher productivity and efficiency that contribute to higher profits
 high product quality
 great customer satisfaction
 low employee turnover
Figure 16.2: Outcomes of a High-
Performance Work System
Outcomes of a High-Performance
Work System
 Outcomes of each employee and work group contribute to the
system’s overall high performance.
 Organization’s individuals and groups work efficiently, provide
high-quality goods and services, etc., and contribute to meeting
the organization’s goals.
 When the organization adds or changes goals, people are
flexible and make changes to as needed to meet the new goals.
2. Ten conditions that
Contribute to
High Performance
1. Teams perform work.
2. Employees participate in selection.
3. Employees receive formal performance
feedback and are involved in performance
improvement process.
4. Ongoing training is emphasized and
rewarded.
5. Employees’ rewards and compensation
relate to company’s financial performance.
6. Equipment, work processes and technology
encourage maximum flexibility and
interaction among employees
Ten Conditions that
Contribute to
High Performance
7. Employees participate in planning
changes in equipment, layout, and work
methods.
8. Work design allows employees to use
variety of skills.
9. Employees understand how their jobs
contribute to finished product or
service.
10. Ethical behavior is encouraged.
 Learning organization – an
organization that supports lifelong
learning by enabling all employees
to acquire and share knowledge.

Employees have resources for

Learning training, and they are encouraged
Organizations to share their knowledge with
colleagues.

Managers take an active role in

identifying training needs and
encouraging the sharing of ideas.
 Continuous learning – each employee’s
and each group’s ongoing efforts to
gather information and apply the
information to their decisions.

5 Key Knowledge is shared – one challenge is

to shift the focus of training away from
Features of teaching skills and toward a broader
Learning focus on generating and sharing
Organizations knowledge.
Critical, systematic thinking – is
widespread and occurs when employees
are encouraged to see relationships
among ideas and think in new ways.
 Learning culture – a culture in
which learning is rewarded,
promoted, and supported by
managers and organizational
objectives.
5 Key
Features of
Learning Employees are valued – the
Organizations organization recognizes that
employees are the source of its
knowledge. It therefore focuses on
ensuring the development and
well-being of each employee.
 Passionate people are fully engaged
with something so that it becomes
part of their sense of who they are.

Passion and Feeling this way about one’s work

occupational has been called occupational
intimacy intimacy.

HR has a significant role in creating

these conditions
Test Your Knowledge
Charlotte is a manager overseeing the work of a team. Which of the following
behaviors would empower the team the least?
a) Opening lines of communication between the team and other
groups within the organization.
b) Directing the team and monitoring their day-to-day activities.
c) Ensure the team has the resources they need.
d) Keep the team informed as new, relevant information becomes
available.
Test Your Knowledge
 Kamran has worked for the same company for 3 years, is enthusiastic and
passionate about his work, hasn’t missed a day in two years, and has
several close friends he enjoys working with. Which of the following best
describes Kamran?
a) He is satisfied with his job.
b) He is empowered.
c) He is experiencing occupational intimacy.
d) He is probably going to quit soon.
ETHICS

Organizational systems can promote ethical behavior, including

• a written code of ethics
• performance measures that include ethical standards
• swift discipline for misdeeds
• channels for employees to seek help
• training in ethical decision making
3. HRM Practices that Help Organizations Achieve High Performance
Performance
Management

 Each aspect of performance management should be related to the organization’s goals.

 Business goals should influence the:
 kinds of employees selected and their training
 requirements of each job
 measures used for evaluating results
 The organization:
 identifies what each department must do to achieve the desired results
 defines how individual employees should contribute to their department’s
goals
Figure 16.3: Employee Performance as a Process
Performance
Management

Guidelines to make the performance management system

support organizational goals:
1.Define and measure performance in precise terms.
2.Link performance measures to meeting customer needs.
3.Measure and correct for the effect of situational constraints.
HRM NEW
Technologies
• Transaction Processing: Computations and calculations used to
review and document HRM decisions and practices, including
documenting employee relocation, payroll expenses, and training
course enrollments.
• Decision Support Systems: Systems designed to help managers
solve problems that usually include a "what if" feature.
• Expert Systems: Computer systems incorporating decision rules
of people deemed to have expertise in a certain area.
• Relational Databases: Stores data in separate files that can be
linked by common elements.
HRM Online: E-
HRM

• Improving HRM effectiveness through online technology.

• Speed requirements of business force HRM managers to explore
how to leverage technology for delivery of HRM activities.
• With Internet technology, organizations use E-HRM to let all
employees help themselves to HR information whenever needed.
• E-HRM uses social media applications.
• Cloud computing enables access to information that’s delivered on
demand from any device 24/7.
 Customer-oriented
approach to HRM

4. Effectiveness
of Human HRM audit
Resource
Management

Analyzing the effect

of HRM programs
Customer-Oriented Perspective of
HRM

Who Are Our What Do Our How Do We Meet

Customers? Customers Need? Customer Needs?

Line managers Committed employees Qualified staffing

Strategic planners Competent employees Performance
Employees Management
Rewards
Training and
Development
Table 16.3: Key
Measures of
Success for an
HRM Audit
 • HR should be able to improve their
Analyzing performance through some combination
of greater efficiency and greater
the Effect effectiveness.
of HRM • Greater efficiency – HR uses fewer and
Programs less-costly resources to perform its
functions.
• Greater effectiveness – what HR does
has a more beneficial effect on
employees and the organization’s
performance.
• HR analytics measure HRM efficiency
and effectiveness.
Test Your Knowledge
• The HR director of a medium-sized corporation spends 90% of his time
meeting and working with fellow HR staff. He is primarily concerned with
ensuring the company meets all legal requirements with regard to HR
activities. This HR director:
a) Is a major contributor to a high-performance organization
b) Has a strategic focus
c) Is concerned with customer satisfaction
d) Has limited the utility and value he could bring to the organization
Summary

 A high-performance work system is the right combination of

people, technology, and organizational structure that makes
full use of the organization’s resources and opportunities in
achieving its goals.

 A high-performance work system achieves the

organization’s goals, typically including growth, productivity,
and high profits.
Summary

• By taking a customer-oriented approach, HRM can

improve quality by defining internal customers who use its
services and determining whether it is meeting those
customers’ needs.
• Auditing HRM and measuring HRM effectiveness to
analyze specific programs or activities can determine if a
program met its objectives and whether it delivered value
in an economic sense.
UNIT 8
MANAGING EMPLOYEES’ PERFORMANCE

Dai Le
Need to Know
1. Activities involved in performance
management.
2. Purposes and criteria and methods for
measuring effectiveness of performance
management systems.
3. Sources of performance information in
terms of their advantages and
disadvantages.
4. Types of rating errors and how to
minimize them.
 Need to Know
5. How to provide performance feedback effectively.
6. Ways to produce improvement in unsatisfactory
performance.
7. Legal and ethical issues that affect performance
management.
1. Nature of performance management

 Performance management: process through which managers ensure

that employees’ activities and outputs contribute to the organization’s
goals.
 This process requires:
 Knowing what activities and outputs are desired
 Observing whether they occur
 Providing feedback to help employees meet expectations
Test Your Knowledge

If the performance management system created competition

among team members, I would
A. Make collaboration a criterion to be evaluated.
B. Nothing, competition is good.
C. Increase the specificity of the feedback.
D. Focus on personal traits rather than behaviors.
Performance Management Process
Purposes of Performance
Management
• Strategic Purpose - effective performance management
helps the organization achieve its business objectives.
• Administrative Purpose - ways in which organizations use
the system to provide information for day-to-day
decisions about salary, benefits, and recognition
programs.
• Developmental Purpose - serves as a basis for developing
employees’ knowledge and skills.
 Fit with strategy

Validity
Criteria for
Effective
Reliability
Performance
Management
Acceptability

Specific feedback
Figure 8.2: Contamination and Deficiency of a Job
Performance Measure
Test Your Knowledge

Sarah is a computer programmer whose job mainly consists of

independently coding software. Interpersonal and teamwork skills are
included on performance appraisal. Measuring these skills most closely
represents:
A. Criterion contamination
B. Criterion deficiency
C. Unreliability
2. Methods for Measuring Performance

Comparative

Quality Attribute
METHOD

Results Behavior
 Table 8.1:
Basic Approaches to Performance Measurement
 Simple Ranking
• Requires managers to rank employees
in their group from the highest
performer to the poorest performer.
Measuring
Performance: Forced Distribution
Making • Assigns a certain percentage of
Comparisons employees to each category in a set
of categories.

Paired Comparison
• Compares each employee with each
other employee to establish rankings.
Measuring Performance:
Rating Individuals - Attributes
Graphic Rating Scale Mixed-Standard Scale
Lists traits and provides a Uses several statements
rating scale for each trait. describing each trait to
produce a final score for
that trait.
Employer uses the scale to
indicate extent to which
an employee displays each
trait.
Figure 8.3:
Example of a Graphic Rating
Scale
Figure 8.4:
Example of
a Mixed-
Standard
Scale
 An employee’s performance measurement differs
from job to job. For example, a car dealer’s
performance is measured by the dollar amount of
sales, the number of new customers, and customer
satisfaction surveys.
8-315
 Measuring Performance:
Rating Individuals - Behaviors
Behaviorally Anchored Rating
Critical-Incident Method Scale (BARS)
Based on managers’ •Rates behavior in terms of a
records of specific examples scale showing specific
of employees acting in ways statements of behavior that
that are either effective or describe different levels of
ineffective. performance.
Employees receive
feedback about what they do
well and what they do poorly
and how they are helping
the organization achieve its
goals.
 Figure 8.5:
Task- BARS
Rating
Dimension for
a Patrol Officer
Measuring Performance:
Rating Individuals – Behaviors
Behavioral Observation Scale Organizational Behavior
(BOS) Modification (OBM)
A variation of a BARS which A plan for managing behavior
uses all behaviors necessary of employees through a formal
for effective performance to system of feedback and
rate performance at a task. reinforcement.
A BOS also asks the manager
to rate frequency with which
the employee has exhibited
the behavior during rating
period.
Figure 8.6: Example of a Behavioral Observation Scale (BOS)
 Management by Objectives (MBO):
people at each level of the
organization set goals in a process
that flows from top to bottom, so
that all levels are contributing to
Measuring the organization’s overall goals.
Performance:
Measuring These goals become the standards
Results for evaluating each employee’s
performance.
Table 8.2: Management by Objectives: Two Objectives for a Bank
Test Your The performance management
Knowledge system at XYZ company currently is
perceived as unfair and is time-
consuming for managers. Which of
the following systems is the most
likely and least likely used,
respectively.
A. Paired comparisons; Results
B. Results; Forced distribution
C. Behavioral; Attributes
D. Attributes; Comparative
Measuring Performance:
Measuring Quality

The principles of total quality

management (TQM), provide methods for
performance measurement and
management.
With TQM, performance measurement
combines measurements of attributes
and results.
 Subjective feedback
 Statistical quality control
 Coaches provide Feedback is important so
feedback to their team that individuals know
just as managers provide what they are doing well
feedback to their and what areas they may
employees. need to work on.
8-324
3. Sources of Performance
Information

 360-Degree Performance Appraisal: performance

measurement that combines information from the
employees’:
 Managers
 Peers
 Subordinates
 Self
 Customers
 Performance management is critical for
executing a talent management system and
involves one-on-one contact with managers
to ensure that proper training and
development are taking place.
8-326
Types of Performance Measurement
Rating Errors

Contrast errors: rater compares an individual, not against an

objective standard, but against other employees.
Distributional errors: rater tends to use only one part of a rating
scale.
 Leniency: the reviewer rates everyone near the top
 Strictness: the rater favors lower rankings
 Central tendency: the rater puts everyone near the middle
of the scale
Types of Performance Measurement
Rating Errors

 Rater bias: raters often let their opinion of one quality color their
opinion of others.
 Halo error: when bias is in a favorable direction. This can
mistakenly tell employees they don’t need to improve in any
area.
 Horns error: when bias involves negative ratings. This can
cause employees to feel frustrated and defensive.
 Bill rates all of his employees very low
except for Jan. Jan gets above average
ratings because she consistently comes
to work on time. The rating errors Bill
makes are _______ and _______,
respectively.
Test Your A. Leniency; Horn
B. Strictness; Halo
Knowledge C. Similar-to-me; Central
Tendency
D. Horn; Strictness
Political Behavior in
Performance Appraisals

• Distorting a performance evaluation to advance one’s personal

goals
• A technique to minimize appraisal politics is a calibration
meeting:
• Meeting at which managers discuss employee
performance ratings and provide evidence supporting
their ratings with the goal of eliminating influence of
rating errors
8.5. Giving Performance and Feedback
Solutions to Performance Problems
Scheduling Performance Feedback
 Performance feedback should be a regular, expected management
activity.
 Annual feedback is not enough.
 Employees should receive feedback so often that they know what
the manager will say during their annual performance review.
Preparing for a Feedback Session
 Managers should be prepared for each formal feedback session.
When giving
performance
feedback, do it in
an appropriate
meeting place.

Meet in a setting
that is neutral
and free of
distractions.
Giving Performance Feedback

 Conducting the Feedback Session

 During feedback sessions, managers can take any of
three approaches:
1.“Tell-and-Sell” – managers tell employees their ratings
and then justify those ratings.
2.“Tell-and-Listen” – managers tell employees their
ratings and then let employees explain view.
3.“Problem-Solving” – managers and employees work
together to solve performance problems.
6 Ways to Structure
communication
Listen as well
as talk.

Be honest.
Focus on
goals.
Prevent surprises.

Use specific,
Treat employees
concrete
with respect.
examples.
Finding Solutions to Performance Problems-Improving Performance
Questions for
Diagnosing
Remedies to
Performance
Problems
Legal and Ethical Issues in
Performance Management

Legal
 Performance management processes are often
scrutinized in cases of discrimination or dismissal.
Ethical
 Employee monitoring via electronic devices and
computers may raise concerns over employee privacy.
Legal Requirements for
Performance Management

Lawsuits related to performance management usually involve

charges of:
 Discrimination
 Unjust dismissal
To protect against both kinds of lawsuits, it is important to have a
legally defensible performance management system.
Legal Requirements for
Performance Management

A legally defensible performance management system:

 Based on valid job analyses, with requirements for job
success clearly communicated to employees.
 Evaluates behaviors or results, rather than traits.
 Multiple raters (including self-appraisals) used.
 All performance ratings reviewed by upper-level
managers.
 Appeals mechanism for employees.
Summary
 Performance management is the process through which managers
ensure that employees’ activities and outputs contribute to the
organization’s goals.
 Organizations establish performance management systems to meet
three broad purposes:
1. Strategic purpose
2. Administrative purpose
3. Developmental purpose
 Performance measures should fit with the organization’s strategy
by supporting its goals and culture.
Summary
• Performance information may come from an
employee’s self-appraisal and from appraisals
by the employee’s supervisor, employees, peers,
and customers.
• Using only one source makes the appraisal
more subjective.
• Organizations may combine many sources into
a 360- degree performance appraisal.
Summary
• Organizations can minimize appraisal politics by
establishing a fair appraisal system, involving managers
and employees in developing the system, allowing
employees to challenge evaluations, communicating
expectations, and having open discussion.
• Performance feedback should be a regular, scheduled
management activity, so that employees can correct
problems as soon as they occur.
Summary
• Performance feedback discussions should focus on
behavior and results rather than on personalities.
• Managers must make sure that performance
management systems and decisions treat employees
equally, without regard to race, sex, or other protected
status.
• A system is more likely to be legally defensible if it is
based on behaviors and results, rather than on traits, and
if multiple raters evaluate each person’s performance.
Unit 09: Separating
and Retaining
Employees
Dai le
Need to Know
1. Difference between involuntary and voluntary
turnover, and their effects on an organization.
2. How employees determine whether the
organization treats them fairly.
3. Legal requirements for employee discipline.
4. Ways to fairly discipline employees.
5. How dissatisfaction affects employee
behavior.
6. How organizations contribute to employees’
job satisfaction and retain key employees.
Introduction
• Every organization recognizes that it needs
satisfied, loyal customers.
• In addition, success requires satisfied, loyal
employees.
• Retaining employees helps retain customers and
increase sales.
• Organizations with low turnover and satisfied
employees tend to perform better.
Managing Turnover

 What was the primary reason you’ve ever quit a job?

a) I Didn’t like my boss or coworkers
b) I wasn’t a fit with the company culture
c) Better pay somewhere else
d) More interesting or challenging work somewhere else
e) I was fired or laid off
f) Other
1. Managing Voluntary and Involuntary Turnover

Involuntary Turnover Voluntary Turnover

•Turnover initiated by an •Turnover initiated by
employer. employees.
•Often with employees •Often when the
who would prefer to stay. organization would prefer
to keep them.
Table 10.1: Costs Associated with Turnover
Test Your Knowledge

True (A) or False (B)

1. A manager who decides to fire an employee should quietly
take action alone and then let others know afterwards.
2. Separating employees has financial and personal risks.
2. Employee Separation
• Organizations must develop a standardized, systematic approach to
discipline and discharge.
• These decisions should not be left solely to the discretion of individual
managers or supervisors.
• Policies should be based on principles of justice and law.
• Policies should allow for various ways to intervene.
Principles of Justice

Outcome • A judgment that the consequences

Fairness given to employees are just.

Procedural • A judgment that fair methods were used

to determine the consequences an
Justice employee receives.

Interactional • A judgment that the organization

carried out its actions in a way that took
Justice the employee’s feelings into account.

10-352
Figure 10.1: Principles of Justice
Test Your Knowledge
 A company whose earnings are very low has to reduce the amount given in
raises to avoid laying people off. The amount of the raise for each
employee is determined objectively based on their performance. An
employee working for this company will most likely feel ____________ and
_________________.
a) High outcome fairness; high interactional injustice
b) Low outcome fairness; high procedural justice
c) Low interactional justice, high outcome fairness
d) Low outcome fairness, low procedural justice
Legal Requirements
Wrongful Discharge
•Discharge may not violate
an implied agreement.
– e.g., employer had
promised job security
– e.g. action inconsistent with
company rules
•Discharge may not violate
public policy.
– e.g., terminating employee
for refusing to do
something illegal or unsafe.
Discrimination
• Employers must make
discipline decisions
without regard to a
person’s age, sex, race,
or other protected
status.
• Evenhanded, carefully
documented discipline
can avoid such claims.
 Legal Requirements
Employees’ Privacy:
• Employers need to ensure that the information
they gather and use for discipline is relevant.
• Privacy issues also concern the employer’s wish to
search or monitor employees.
• Employers must be prudent in deciding who will
see the information.
Table 10.2: Measures for Protecting Employees’
Privacy
Test Your Knowledge

Pam Jones worked for 41 years at the same company and had
positive performance ratings and personnel records. She
needed a calculator for work which she purchased with her
own money but was not reimbursed because she lost the
receipt. Later, a security guard stopped her as she was leaving
work and discovered the calculator in her belongings. After a
brief internal investigation, she was fired and it was announced
through internal notices that she had committed a theft. The
employee sued for libel, saying the company used her as an
example to prevent other thefts.
Legal Requirements
 Notification of Layoffs:
• Organizations that plan broad-scale layoffs may be subject to the Workers’
Adjustment, Retraining and Notification Act (WARN).
• Employers covered by the law are required to give notice before any
closing or layoff.
Test Your Knowledge
After hiring Bob for a newly created marketing
specialist position, his boss assures him that he will
be secure in the job until he retires. A year later,
that department is eliminated. Bob complains he
was guaranteed employment until retirement. Is
he right?
a) No, an employer can hire or fire someone whenever
they want.
b) No, there was no written contract.
c) Yes, he was given a verbal contract.
Progressive Discipline
Hot-Stove Rule
•Principle of discipline
that says discipline should
be like a hot stove, giving
clear warning and
following up with
consistent, objective, and
immediate consequences.
Progressive Discipline
•A formal discipline
process in which the
consequences become
more serious if the
employee repeats the
offense.
10-361
Figure 10.2: Progressive Discipline Responses
Progressive Discipline

Rules of behavior should • Coming to work

cover disciplinary impaired by alcohol or
problems such as: drugs
•Tardiness • Theft of company
•Absenteeism property
•Unsafe work practices • Cyberslacking
•Poor quantity or quality
of work
•Sexual harassment
Guidelines to Respond
to Misconduct
1. Be clear about performance standards.
2. Be consistent.
3. Don’t ignore the problem behavior.
4. Investigate complaints ASAP.
5. Record statements in writing, with signatures &
dates.
6. Focus on behaviors not personalities
7. Documentation should be clear and complete.
8. Be honest.
Figure 10.3: Options for Alternative Dispute Resolution
Alternative Dispute Resolution

Open-Door Policy Peer Review

An organization’s policy •Process for resolving
of making managers disputes by taking them to
available to hear a panel composed of
complaints. representatives from the
organization at same
levels as the people in the
dispute.
Alternative Dispute Resolution

Mediation
•Nonbinding process in
which a neutral party from
outside the organization
hears the case and tries to
help the people in a
conflict arrive at a
settlement.
Arbitration
•Binding process in which
a professional arbitrator
from outside the
organization (usually a
lawyer or judge) hears the
case and resolves it by
making a decision.
Employee Assistance Programs

Employee assistance program

(EAP) – a referral service that Many EAPs are fully
employees can use to seek
integrated into employers’
professional treatment for
emotional problems or overall health benefits plans.
substance abuse.
Outplacement Counseling

 Outplacement counseling – a service in which professionals try to

help dismissed employees manage the transition from one job to
another.
• Goals for outplacement counseling are to help former employee
address psychological issues associated with losing a job while
helping them find a new job.
Job Withdrawal

 Job Withdrawal – a set of behaviors with which employees try to

avoid the work situation physically, mentally, or emotionally.
• Job withdrawal results when circumstances such as the nature of
the job, supervisors and coworkers, pay levels, or the
employee’s own disposition cause the employee to become
dissatisfied with the job.
 3. Employee Engagement
Employee engagement is the degree to which
employees are fully involved in their work and the
strength of their commitment to their job and
company.
•Employees who are engaged and provide a clear
competitive advantage to that firm, including higher
productivity, better customer service, and lower
turnover.
4. Job Withdrawal Process
 Causes of Job Dissatisfaction

Personal • Negative affectivity

Dispositions • Core self-evaluations
• Role
• Role ambiguity
Tasks and Roles • Role conflict
• Role overload
Supervisors & • Negative behavior by managers
Coworkers • Conflicts between employees

• Pay is an indicator of status .

Pay and Benefits • Pay & benefits contribute to self-worth
Military reservists who
are sent overseas often
experience role conflict
among three roles:
• soldier
• family member
• civilian employee
Overseas assignments
often intensify role
conflicts.
10-374
Actions Employees Take
When Dissatisfied
• Behavior changes
– Change the condition
– Whistle-blowing
– Bring a lawsuit
– Lodge complaints
• Physical job withdrawal
• Psychological withdrawal
– Decrease in job involvement
– Decrease in organizational commitment
Office Workers Appreciate Help Balancing Roles and Learning New Skills
5. Job Satisfaction
 Job satisfaction – a pleasant feeling resulting from the perception that
one’s job fulfills or allows for the fulfillment of one’s important job
values.
 3 components of job satisfaction are:
1. Values
2. Perceptions
3. Ideas of what is important
 People will be satisfied with their jobs as long as they perceive that their
jobs meet their important values.
Figure 10.5: Increasing Job Satisfaction
 Figure
10.6 Steps
in the Role
Analysis
Technique
 Job Satisfaction:
Supervisors and Co-workers
Co-workers and supervisors affect job satisfaction.
• A person may be satisfied with them because they
1. share same values, attitudes, and philosophies.
2. provide social support, meaning they are sympathetic
and caring.
3. help the person attain some valued outcome.
Co-worker relationships can contribute to job
satisfaction, and organizations therefore try
to provide opportunities to build positive
relationships.
10-381
Test Your Knowledge

• Serena feels her job processing payroll checks is boring and

uninteresting. Which intervention would be most
appropriate to retain Serena?
a) Communicating the companies values
b) Increasing her pay
c) Expanding her job
d) Hiring someone she can chat with during the day
Monitoring Job Satisfaction
Employers can better retain employees if they are
aware of satisfaction levels, so they can make changes
if employees are dissatisfied.

Usual way to measure job satisfaction is to survey.

A systematic, ongoing program of employee surveys

should be part of the organization’s HR strategy to
monitor trends and prevent voluntary turnover.
Figure 10.7: Example of Job Descriptive Index (JDI)
Figure 10.8: Example of a Simplified, Nonverbal
Measure of Job Satisfaction
 • Exit interview: a meeting of a
departing employee with the
Exit employee’s supervisor and/or a
human resource specialist to discuss
Interview the employee’s reasons for leaving.
• A well-conducted exit interview can
uncover reasons why employees
leave.
• When several exiting employees give
similar reasons for leaving,
management should consider
whether this indicates a need for
change.
Summary
• Involuntary turnover occurs when the organization
requires employees to leave, often when they
would prefer to stay.
• Voluntary turnover occurs when employees
initiate the turnover, often when the organization
would prefer to keep them.
 • Employees draw conclusions based on
outcomes of decisions regarding them,
procedures applied, and way managers
treat employees when carrying out those
procedures.

Summary • Employee discipline should not result in

wrongful discharge, such as a termination
that violates an implied contract or public
policy.
• Discipline should be administered
evenhandedly, without discrimination.
 • Discipline should follow principles of the
hot-stove rule, meaning discipline should
give warning and have consequences that
are consistent, objective, and immediate.
• A system that can meet these

Summary requirements is progressive discipline, in

which rules are established and
communicated, and increasingly severe
consequences follow each violation of the
rules.
• Organizations may also resolve problems
through alternative dispute resolution.
 • Circumstances involving the nature of a
job, supervisors and coworkers, pay
levels, or employee’s own disposition
may produce job dissatisfaction. When
employees become dissatisfied, they
may engage in job withdrawal.
Summary • To prevent job withdrawal, organizations
need to promote job satisfaction which
is related to a person’s values and based
on perception.
 Different employees have
different views of which values
are important.
 Unit 10: Compensation
System and Establishing a
Pay Structure
Dai Le
Need to Know
1. Kinds of decisions involved in establishing a pay structure.
2. Legal requirements for pay policies.
3. How economic forces influence decisions about pay.
4. How employees evaluate the fairness of a pay structure.
5. How organizations design pay structures related to jobs.
6. Alternatives to job-based pay.
7. How to ensure that pay is in line with the pay structure.
8. Issues related to paying employees serving in the military
and paying executives.
Your Opinion
1-Strongly Disagree, 3-Neutral, 5- Strongly Agree
1. Pay decisions should be based on performance,
not seniority.
2. I would like to know what my coworkers get paid.
3. I would not mind if others knew my salary.
4. Pay secrecy helps a company stay competitive.
 Pay is a powerful tool for meeting the
organization’s goals and a major cost.

Pay has a large impact on employee

attitudes and behaviors.

Introduction
It influences the kinds of people who
are attracted to (or remain with) the
organization.

Employees attach great importance to

pay decisions when they evaluate their
relationship with their employer.
The Importance of Compensation
• Impacts an employer’s ability to attract and retain employees.
• Ensure optimal levels of employee performance in meeting the
organization’s strategic objectives.
• Compensation’s components
• Direct compensation in the form of wages or salary
• Base pay (hourly, weekly, and monthly)
• Incentives (sales bonuses and or commissions)
• Indirect compensation in the form of benefits
• Legally required benefits (e.g., Social Security)
• Optional (e.g., group health benefits)
1 Compensation System
Equity Theory
Internal equity

• Fairness of pay differentials between

different jobs in the organization can be
established by job ranking, job
classification, point systems and factor
comparisons.

External equity

• Fairness of organizational compensation

levels relative to external compensation is
assessed by collecting wage and salary
information to guide in setting the
organization’s pay strategy to lead, meet or
lag labor market wages.
Equity Theory (cont’d)
• Individual Equity
• Fairness about pay differentials among individuals who hold the same
job in the organization is established by using:
• Seniority-based pay systems that reward longevity with the
organization.
• Merit-based pay systems that reward employee performance.
• Incentive plans that allow employees to receive part of their
compensation based on their job performance.
• Skills-based pay systems where compensation is based on
employees possessing skills that the firm values.
• Team-based pay plans that encourage cooperation and flexibility in
employees.
Equity
Theory
Equity Theory (cont’d)
2. Decisions About Pay

Job Structure Pay Level Pay Structure

Relative pay for Average amount Pay policy resulting
different jobs the organization from job structure
within the pays for a and pay-level
organization particular job. decisions.
Figure 11.1: Issues in Developing a Pay Structure
3. Legal Requirements for Pay

Equal employment opportunity

Minimum wages

Overtime pay

Prevailing wages for federal contractors

Legal Requirements for Pay:
Equal Employment Opportunity
Employers must not base differences in pay on an
employee’s age, sex, race, or other protected status.

Any differences in pay must be tied to such business-

related considerations as job responsibilities or
performance.

The goal is for employers to provide equal pay for

equal work.
Two employees who do the
same job cannot be paid
different wages because of
gender, race, or age.

It would be illegal to pay

these two employees
differently because one is
male and the other is female.

Only if there are differences

in their experience, skills,
seniority, or job performance
are there legal reasons why
their pay might be different.
Legal Requirements for Pay:
Minimum Wage
• Minimum wage – • Fair Labor Standards Act
lowest amount that (FLSA) – federal law that
employers may pay establishes a minimum
under federal or state wage and requirements
law, stated as an for overtime pay and
amount of pay per child labor.
hour.
Minimum Wage

FLSA establishes a minimum wage of:

• $7.25 per hour as of July 2014

FLSA also permits a lower “training wage”

• paid to workers under age of 20 for up to 90 days

• approximately 85 % of minimum wage
Legal Requirements for Pay:
Overtime Pay

Overtime rate under FLSA is 1½ times employee’s

usual hourly rate, including any bonuses, and piece-
rate payments.
Exempt employees – managers, outside salespeople,
and other employees not covered by FLSA
requirement for overtime pay.

Nonexempt employees – employees covered by FLSA

requirements for overtime pay.
Figure 11.2: Computing Overtime Pay
 Overtime pay is required,
whether or not the employer
specifically asked or expected
the employee to work more
than 40 hours.

Overtime
Pay
If the employer knows the
employee is working overtime
but does not pay time and a
half, the employer may be
violating the FLSA.
 Children aged 16 and 17 may not be
employed in hazardous occupations defined
by U.S. Department of Labor.

Legal Children aged 14 and 15 may work only

outside school hours, in jobs defined as
Requirements nonhazardous, and for limited time periods.

for Pay: A child under age 14 may not be employed

in any work associated with interstate
Child Labor commerce.

Exemptions include baby-sitting, acting, and

delivering newspapers.
Legal Requirements for Pay:
Prevailing Wages

Two federal laws govern pay policies of federal contractors:

 Davis-Bacon Act of 1931
 Walsh-Healy Public Contracts Act of 1936
Under these laws, federal contractors must pay their employees at rates at
least equal to the prevailing wages in the area.
4. Economic Influences on Pay
Product Markets
•Organization’s product
market includes organizations
that offer competing goods
and services.
•Organizations compete on
quality, service, and price.
•Cost of labor is a significant
part of an organization’s costs.
Labor Markets
•Organizations must compete
to obtain human resources in
labor markets.
•Competing for labor
establishes minimum an
organization must pay to hire
an employee for a particular
job.
There is currently a strong demand for
nurses in the labor market. Hospitals will
have to pay competitive wages and other
perks to attract and retain staff.

11-414
Occupational Employment and Wage Estimates
Pay Level: Deciding What to Pay
Pay at rate set by market

Pay at a rate above market

Pay at a rate below market

Gathering Information About Market
Pay
• Benchmarking – a • Bureau of Labor
procedure in which an Statistics (BLS)
organization compares • Society for Human
its own practices Resource Management
against those of (SHRM)
successful competitors
• Pay surveys • World at Work
• Trade and industry groups
• Professional groups
Employee Judgments About Pay
Fairness

Employees compare their pay and contributions against three yardsticks:

1. What they think employees in other organizations earn for doing
the same job.
2. What they think other employees holding different jobs within
the organization earn for doing work at the same or different
levels.
3. What they think other employees in the organization earn for
doing the same job as theirs.
Figure 11.3: Opinions About Fairness –
Pay Equity
Pay Equity

 If employees conclude that they are under-rewarded, they are likely to

make up the difference in one of three ways:
1. They might put forth less effort (reducing their inputs).
2. They might find a way to increase their outcomes (e.g., stealing).
3. They might withdraw (by leaving the organization or refusing to
cooperate).
• Employees’ beliefs about fairness also influence their willingness to
accept transfers or promotions.
Test Your Knowledge

 Mariah found out that a friend of hers with a similar job in the same
town makes significantly more money than she does. Which of the
following is probably not the cause of this?
a) Different cost-of-living
b) The companies are in different product markets with different
pay strategies
c) Mariah is a poor performer
d) Mariah’s job is non-exempt
5. Job Structure: Relative Value of Jobs

Job Evaluation Compensable Factors

Administrative 5 characteristics of a job
procedure for measuring that the organization
relative internal worth of values and chooses to pay
the organization’s jobs. for.
1. Experience
2. Education
3. Complexity
4. Working conditions
5. Responsibility
Table 11.1: Job Evaluation of Three
Jobs with Three Compensable Factors
Job Structure: Defining Key
Jobs

Key Jobs – jobs that have relatively stable content and are common
among many organizations.
•Organizations can make the process of creating the job and pay
structures more practical by defining key jobs.
•Research for creating the pay structure is limited to key jobs that play a
significant role in the organization.
6. Pay Structure: Putting It All Together

Job Job Define

Evaluation Structure Key Jobs

Pay Policy Pay

Pay Rates
Line Survey

Pay Pay Pay

Grades Ranges Structure
 Organization obtains
pay survey data for
its key jobs.

Pay Rates Pay policy line is

established.

Pay rates for non-key

jobs are then
determined.
Figure 11.4:
Pay Policy
Lines
• Pay policy line –
graphed line showing
the mathematical
relationship between
job evaluation points
and pay rate.
Figure 11.5:
Sample Pay Grade
Structure

• Pay grades –
sets of jobs having
similar worth or
content, grouped
together to
establish rates of
pay.
Pay Ranges

Pay ranges – a set of Red-circle rate – pay at

possible pay rates defined a rate that falls above pay
by a minimum, maximum, range for the job.
and midpoint of pay for Green-circle rate – pay
employees holding a at a rate that falls below
particular job or a job pay range for the job.
within a particular pay
grade.
  To correct a Red-circled
employee, I would…

Test Your a) Give them a raise

b) Demote them

Knowledge c) Give them a bonus, but no

raise
d) Move them to a job with a
higher pay range
  Pay differential – adjustment to a
pay rate to reflect differences in
working conditions or labor
markets.
Pay • Many businesses in the U.S.
provide pay differentials based on
Differentials geographic location.
• The most common approach is to
move an employee higher in the
pay structure to compensate for
higher living costs.
Night hours are less desirable for most
workers so some companies pay a
differential for night work to compensate
them.

11-432
Alternatives to Job-Based Pay

Delayering Skill-Based Pay Systems

• Reducing number of levels • Pay structures that set pay
in organization’s job according to employees’
structure. levels of skill or knowledge
• More assignments are and what they are capable
combined into a single of doing.
layer called broad bands. • Appropriate where
• More emphasis on changing technology
acquiring experience, requires employees to
rather than promotions. continually widen and
deepen their knowledge.
Figure 11.6: IBM’s Job Evaluation Approach
7. Pay Structure and
Actual Pay
• Pay structure represents organization’s policy.
• However, what the organization actually does
may be different.
• HR should compare actual pay to pay structure,
making sure that policies and practices match.
• Compa-ratio is the common way to do this.
Figure 11.7: Finding a Compa-Ratio

 Compa-Ratio (CR) – the

ratio of average pay to
midpoint of pay range.
• If average equals midpoint,
CR is 1.
• If CR is greater than 1,
average pay is above midpoint.
• IF CR is less than 1, average
pay is below midpoint.
Current Issues in Pay

Pay • How should companies handle

employees who are called for active
During duty in the military for extended time
periods?
Military • Uniformed Services Employment and
Duty Reemployment Rights Act (USERRA)

Pay for • Based on equity theory, how does

executive compensation affect
Executives employees?
Figure 11.8: Average CEO Pay at 100 Large U.S. Companies
Summary

Organizations make decisions to define a job structure, or relative

pay for different jobs within the organization. Organizations also
must establish pay levels, or the average paid for the different
jobs.

These decisions are based on the organization’s goals, market

data, legal requirements, and principles of fairness.
Summary

• To meet the standard of equal employment opportunity, employers

must provide equal pay for equal work, regardless of an employee’s
age, race, sex, or other protected status.
• Differences in pay must relate to factors such as a person’s
qualifications or market levels of pay.
• Under the Fair Labor Standards Act (FLSA):
• Employer must pay at least minimum wage established by
law.
• Overtime pay for hours worked beyond 40 in each week
must be paid.
Summary

 To remain competitive, employers must meet product and labor market

demands.
• Limit costs as much as possible.
• Pay at least going rate in their labor markets.
 According to equity theory, employees think of their pay relative to their
inputs – training, experience, and effort.
 To decide whether their pay is equitable, they compare their outcome
(pay)/input ratio with other people’s outcome/input ratios.
Summary

• The traditional approach to building a pay structure is to use a job-

based approach.
• Alternatives to the traditional approach include broad banding and
skill-based pay.
• The Uniformed Services Employment and Reemployment Rights Act
(USERRA) requires employers to make jobs available to any of their
employees who leave to fulfill military duties for up to five years.
Summary

• Executive pay has drawn public scrutiny

because top executive pay is much
higher than average workers’ pay.
• Employees’ opinions about equity of
executive pay can have a large effect on
the organization’s performance.
 Unit 11: Recognizing
Employee
Contributions with Pay
Dai Le
Need to Know
1. Connection between incentive pay and employee
performance.
2. How organizations recognize individual
performance.
3. Ways to recognize group performance.
4. How organizations link pay to overall
performance.
5. How organizations combine incentive plans in a
“balanced scorecard.”
6. Processes that can contribute to the success of
incentive programs.
7. issues related to performance-based pay for
executives.
1. Incentive Pay
 Incentive pay – forms of pay linked to
an employee’s performance as an
individual, group member, or
organization member.
• Incentive pay is influential because the
amount paid is linked to certain
predefined behaviors or outcomes.
• For incentive pay to motivate
employees to contribute to the
organization’s success, pay plans must
be well designed.
Effective incentive pay plans meet the
following requirements:
Performance measures are Employees believe they can
linked to the organization’s meet performance
goals. standards.

Organization gives
employees the resources Employees value the rewards
they need to meet their given.
goals.

Pay plan takes into account

Employees believe the that employees may ignore
reward system is fair. any goals that are not
rewarded.
2. Pay for Individual Performance

Piecework rates

Standard hour plans

Merit pay

Individual bonuses

Sales commissions
 Piecework Rate

• A wage based on the amount

workers produce.

Straight Piecework Plan

Pay for
Individual • Incentive pay in which the
Performance: employer pays the same rate
per piece, no matter how much
Piecework the worker produces.
Rates
Differential Piece Rates

• Incentive pay in which the piece

rate is higher when a greater
amount is produced.
Figure 12.1: How Incentives Sometimes “Work”

SOURCE: DILBERT (c) 1995 Scott Adams. Used by permission of UNIVERSAL UCLICK. All rights reserved.
Pay for Individual Performance:
Standard Hour Plans and Merit Pay
Standard Hour Plan Merit Pay
• An incentive plan that • A system of linking pay
pays workers extra for increases to ratings on a
work done in less than a performance scale.
preset “standard time.” • They make use of a merit
• These plans are much like increase grid.
piecework plans. • The system gives lowest
• They encourage paid best performers the
employees to work as fast biggest pay increases.
as they can, but not
necessarily to care about
quality or service.
Table 12.1: Sample Merit Increase Grid
Figure 12.2: Ratings and Raises –
Underrewarding the Best
Pay for Individual Performance:
Performance Bonuses

• Performance bonuses are not rolled

into base pay.
• The employee must re-earn them
during each performance period.
• Sometimes the bonus is a one-time
reward.
• Bonuses may also be linked to
objective performance measures,
rather than subjective ratings.
Pay for Individual Performance:
Sales Commissions

 Commissions – incentive pay

calculated as a percentage of sales.
Some earn a commission in
addition to a base salary.
 Straight commission plan – some earn
only commissions.
Some earn no commissions at
all, but a straight salary.
Many car salespeople earn a straight
commission, meaning that 100% of their
pay comes from commission instead of
salary.

12-456
Test Your Knowledge
• John works twisting pretzels in a pretzel factory. Pablo works on IT systems
integration at a credit card company. The best pay plans for these
individuals would be ________ and _______, respectively.
a) Merit pay, individual bonus
b) Sales commissions; merit pay
c) Piecework, Merit pay
d) Individual bonus, sales commissions
3. Pay for Group Performance

Gainsharing

Bonuses

Team Awards
Pay for Group Performance:
Gainsharing
Gainsharing – group • Addresses challenge of
incentive program that identifying appropriate
measures improvements performance measures
in productivity and for complex jobs.
effectiveness and • Frees employees to
distributes a portion of determine how to
each to employees. improve their own and
their group’s
performance.
 Management commitment.

Need for change or strong commitment to

continuous improvement.
10
Conditions Management acceptance and encouragement
of employee input.

Necessary High levels of cooperation and interaction.

for
Gainsharing Employment security.

to Succeed Information sharing on productivity and costs.

Goal setting.
10 Conditions Necessary for
Gainsharing to Succeed

Commitment of all involved parties to the process of

change and improvement.

Performance standard and calculation that

employees understand and consider fair and that is
closely related to managerial objectives.

Employees who value working in groups.

Figure 12.3:
Finding the
Gain in
a Scanlon Plan

• Scanlon Plan – a
gainsharing program
in which employees
receive a bonus if
the ratio of labor
costs to the sales
value of production
is below a set
standard.
Pay for Group Performance:
Group Bonuses and Team Awards

Group Bonuses Team Awards

• Bonuses for group • Similar to group
performance tend to be bonuses, but more likely
for smaller work to use a broad range of
groups. performance measures:
• These bonuses reward – Cost savings
the members of a – Successful completion of
a project
group for attaining a
– Meeting deadlines
specific goal, usually
measured in terms of
physical output.
Group members that meet a sales goal or a
product development team that meets a
deadline or successfully launches a product
may be rewarded with a bonus for group
performance.

12-464
Figure 12.4: Types of Pay for Organizational Performance
4. Pay for Organizational
Performance:
Profit Sharing

 Profit sharing – incentive pay in which

payments are a percentage of the
organization’s profits and do not
become part of the employees’ base
salary.
• Profit sharing may encourage
employees to think like owners.
• Evidence is not clear whether profit
sharing helps organizations perform
better.
Considerations for Setting Up a
Profit-Sharing Plan

1. Get supervisors on board with the

plan.
2. Make sure employees understand
how the plan works.
3. Identify behaviors and results that
contribute to greater profits.
4. Make sure managers understand
that they contribute to profit-
sharing goals by encouraging their
employees and keeping them
focused on their goals.
Considerations for Setting Up a
Profit-Sharing Plan

5. Consider linking rewards to the

department’s or division’s
performance, if profits can be
assigned to the group.
6. Make rewards big enough to matter.
7. Time the profit-sharing payments
for maximum effect.
Pay for Organizational Performance:
Stock Ownership

Stock Options ESOPs

• Rights to buy a certain • (ESOP) – an
number of shares of arrangement in which
stock at a specified the organization
price. distributes shares of
• Traditionally, stock stock to all its
options have been employees by placing it
granted to executives. in a trust.
• Most common form of
employee ownership.
Figure 12.5: Number of ESOPs

SOURCE: National Center for Employee Ownership, “A Statistical Profile of Employee Ownership,” NCEO website,
updated February 2012, www.nceo.org.
Test Your Knowledge
 For each of the following jobs, identify the best type of incentive (e.g.,
individual, group, organizational). Be prepared to explain your answer.
1. Director of Marketing, Pepsi
2. Recruiter, Verizon
3. Cashier, CVS (drugstore)
4. Salesperson, Macy’s
a) Individual
b) Group
c) Organizational
Balanced Scorecard

• Balanced scorecard – a Four categories of a

combination of balanced scorecard
performance measures include:
directed toward the 1. financial
company’s long- and 2. customer
short-term goals and 3. internal
used as the basis for 4. learning and growth
awarding incentive pay.
Tellabs uses a
balanced scorecard.
- Conducts quarterly
meetings at which
employees learn how
their performance will
be evaluated according
to the scorecard.
- Makes this information
available on the their
intranet.
Table 12.2: Sample Balanced Scorecard for an Electric Cooperative
Processes That Make Incentives Work

Participation in Decisions Communication

•Employee participation in •Communication
pay-related decisions can demonstrates that the
be part of a general move pay plan is fair.
toward employee •When employees
empowerment. understand the incentive
•Employee participation pay plan’s requirements,
the plan is more likely to
can contribute to the
influence their behavior
incentive plan’s success. as desired.
• Important when
changing the pay plan.
Incentive Pay for Executives

Short-Term Incentives Long-Term Incentives

• Bonuses based on ROI, • Include stock options and
year’s profits, or other stock purchase plans.
measures related to the • Rationale is that
organization’s goals. executives will want to
• Actual payment of bonus do what is best for the
may be delayed to gain organization because
tax advantages. that will cause the value
of their stock to grow.
Table 12.3: Balanced Scorecard for Whirlpool
Executives
 Incentive Pay for Executives:
Ethical Issues

When an organization links pay to its

stock performance, executives need
Incentive pay for executives lays the the courage to be honest about their
groundwork for significant ethical company’s performance even when
issues. dishonesty or clever shading of the
truth offers the tempting potential for
large earnings.
Summary
• Incentive pay is pay tied to individual performance, profits, or other
measures of success. Organizations select forms of incentive pay to
energize, direct, or control employees’ behavior.
• To be effective, incentive pay should encourage the kinds of behaviors
most needed, and employees must believe they have the ability to meet
the performance standards.
• Employees must value the rewards, have the resources they need to meet
the standards, and believe the pay plan is fair.
Summary
• Organizations may recognize individual performance through such
incentives as piecework rates, standard hour plans, merit pay, sales
commissions, and bonuses for meeting individual performance objectives.
• Common group incentives include gainsharing, bonuses, and team awards.
• Incentives for meeting organizational objectives include profit sharing and
stock ownership.
Summary
• Communication is especially important when the organization is changing
its pay plan.
• Because executives have such a strong influence over the organization’s
performance, incentive pay for them receives special attention.
• Performance measures should encourage behavior that is in the
organization’s best interests, including ethical behavior.
Summary
• A balanced scorecard can be used as the basis for awarding incentive pay.
It helps employees to understand and care about the organization’s goals.
• Mix of pay programs is intended to balance disadvantages of one type of
incentive with advantages of another type.