BURKS-Instructor Notes-INTRO2BUS-CHAP13-HUMAN RESOURCES

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

I. COMPONENTS OF THE HUMAN RESOURCE MANAGEMENT SYSTEM

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

II. RECRUITMENT AND SELECTION

Recruitment and selection include all of the activities involved in acquiring
human resources. Recruitment involves developing and using a company-specific set of
rules and SOPs to identify and attract the best pool of applicants. Selection is the creation
of criteria for deciding which candidate is best for the company and specific jobs.
A. Human Resources Planning
Human resources planning is the process of forecasting the type and number of
employees a company will require in the future to meet the objectives of its business
model. It begins by taking an “inventory” of the skills and abilities of the people currently
working for the company and comparing it to the needs of the company in the future.
Then HR managers can identify the types of skills and numbers of people they will need
to recruit, or perhaps they will need to layoff some employees.
1. Workflow analysis identifies what kinds of jobs will be required to allow each value
chain function to perform efficiently and effectively in the future. It tells managers how
jobs should be changed to find better ways to manage a company’s activities.
2. Job analysis is the process of obtaining detailed information about the tasks and
responsibilities involved in each job in a company. The purpose of job analysis is to
redesign jobs to increase efficiency, motivation, or ease of performance.
3. Job analysis can be performed by asking managers and employees who hold or interact
with that job about its tasks and responsibilities.
4. The Position Analysis Questionnaire (PAQ) is a written survey used for job analysis
that asks current job holders about (a) the skills and abilities used on the job, (b) the range
of job activities, and (c) the technology used to do the job.
5. A job description is based on the information from the job analysis about the tasks
and responsibilities of the job and the best way to perform them. It is a list of the tasks,
responsibilities, and duties that make up a specific job.
6. A job specification is the list of required skills, abilities, and knowledge needed to
perform that particular job.

B. EXTERNAL AND INTERNAL RECRUITING

When they know employees are needed, HRM can recruit based on job
descriptions and specifications.
1. Internal recruitment involves a policy of promotion from within the organization that
provides motivation and a career path for current employees that helps retain them.
2. Internal recruitment uses recommendations, performance appraisals, advertises on the
company Intranet, posts positions on Bulletin Boards and e-mails.
3. External recruitment brings new employees to the company, but can have a de-
motivating effect on current employees. Some companies use both internal and external
recruiting to prevent this problem.
4. External recruiting is used to fill most entry level positions. Higher-level applicants
may be reached through newspapers, employment websites, trade journals, and
magazines.
5. External recruiting is expensive and time consuming and it is difficult to identify the
“right” candidate.
C. The Selection Process
Selection is the process that starts with a pool of applicants and funnels them
down to the choice of a final candidate. Although the sequence of steps may not be the
same, the goal is to select the best candidate for the job using the established criteria.
Screening criteria should be based on the job description and specifications.
1. Screening applications and resumes starts eliminating applicants. At every stage in the
selection process, it is vital that applicants not be disqualified for any non-job related
reason because of legal and ethical concerns. The same criteria and questions should be
used for each.
2. Laws such as the Civil Rights Act (1964 and 1991), the Americans with Disabilities
Act (1991), and the Equal Employment Opportunity (EEO) laws and regulations govern
the way decisions are made. Their goal is to prevent discrimination against people and
groups because of age, gender, race, religion, and national origin.
3. Applicant testing often uses standardized tests to determine an applicant’s skill levels
and job knowledge, physical ability, intelligence, personality, or health.
4. The Interview Process is expensive and time consuming, so most companies try to
limit the number of candidates they interview.
5. Structured or non-directive interviewing may be used, or a combination of the two
forms, in more than one interview of an applicant.
6. Open-ended questions elicit he most information from an applicant.
7. All interview questions must be job-related and focus on the fit between the applicant,
the job, and the company. Interviewers must be aware of questions that are illegal and
avoid them.
8. Making the final selection is important to both candidate and company. The cost of
recruiting and training employees is very high, and gets higher the for higher level
positions. It is important to candidates to see that the process is fair and legal.

III. TRAINING AND DEVELOPMENT

The ability of people to continually learn new and improved skills and increase
their job knowledge explains why a company’s human capital is often its greatest asset.
Training and development is the process through which companies increase their
employees work skills and knowledge to help them perform their jobs in ways that lead
to superior performance. This component of HRM is very expensive, because it involves
the cost of trainers as well as lost productivity on the employee’s regular assignment.

A. Training Needs Analysis

Scarce training dollars must be invested in activities that lead to measurable
improvements in performance at the individual, group, and company levels.
1. Training needs analysis is used to identify the types of training and development that
will provide the greatest improvements in performance.
2. A training gap occurs when a need for a specific form of skills training is identified as
necessary to improve operating efficiency, product quality, customer service, learn new
processes, or meet safety requirements.
B. Types and Methods of Training and Development
Selection of a training method should be based on the need for employees to learn
and retain skills and knowledge, as well as whether it is cost-effective.
1. On-the-job training teaches employees new skills while they are doing the job.
2. Supervisors and co-workers are used to train employees and they are able to implement
what is learned right away, improving retention.
3. Other training methods include Internet based training, role playing, classroom
instruction, simulations, games and case studies, and satellite programming.

IV. PERFORMANCE APPRAISAL AND FEEDBACK

Performance appraisal is the process through which managers review and
evaluate how employees’ activities and accomplishments have contributed to functional
and company goals. Performance feedback is the process through which managers
communicate the results of this evaluation process to employees to persuade them to
maintain or improve their level of performance. Performance appraisal and feedback,
when conducted in a fair and equitable way, motivates employees in three ways:
1. Appraisals are used as a basis for decisions about distribution of rewards, such as
salaries, bonuses, and promotions or layoffs and terminations.
2. Feedback gives employees information about their strengths and weaknesses. It gives
managers information about which employees would benefit from additional training and
development.
3. Employees’ performance can be evaluated in terms of how well their activities help
achieve company goals. To build competitive advantage, it is essential for managers to tie
performance measurement directly to the measures of efficiency, quality, innovation, and
responsiveness to customers.

A. Performance Appraisal Methods

Performance appraisals may be based on the results or outcomes and employee
achieves or it may be based on the behaviors that produced the outcomes.
1. Results-based appraisals are more cost effective because they measure the outcomes
of the way an employee has done the job.
2. Behavior-based appraisals are often used for more complex jobs that have longer term
outcomes. The evaluation is based on whether the employee has performed the behaviors
that will lead to the desired outcome over time.
3. Management by Objectives, the goal setting and evaluation process discussed in
Chapter 7, is a performance appraisal method that can be used for either results or
behavior based processes.
4. Forced ranking methods, require managers to rank subordinates from top to bottom. It
is especially important to assure that such a system is administered fairly and accurately.

B. Who Appraises Performance?

Most of the time, supervisors will perform employees’ performance appraisals, as
they are in the best position to know the work and observe the behaviors and results over
time.
1. Other sources of performance feedback and appraisal information can include self-
evaluation, other managers, subordinates, customers, or co-workers.
2. 360 Degree performance appraisal collects information from many of the sources
listed to get a more objective evaluation and remove personal bias from the process.

C. Giving Performance Feedback

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

V. PAY AND BENEFITS

Employee compensation includes pay and benefits. Pay is a monetary reward
associated with a particular job in a company. Benefits are paid for employees and may
include healthcare, life insurance, sick pay, vacation time, and pension plans. Companies
are also required to pay employee taxes such as worker’s compensation, social security,
and unemployment insurance.

A. Pay Structures

1. A pay structure determines the relative compensation received by employees

performing different types of jobs or jobs at different levels in the hierarchy, from top to
bottom. It is based on the effect that job has on the achievement of company goals.
2. The pay level a company chooses refers to the average salary a company pays its
employees compared to other companies in its industry. Those who pay above average
expect to get employees with better qualifications who will work hard to improve the
company’s competitive advantage. Others pay below average because their business
model requires low costs.
3. Companies survey and benchmark themselves against other companies in their
industries when setting their pay levels because there may be a shortage or an excess of
certain types of skills available in the labor market.
B. Types of Incentive Pay
Incentive pay links the size of the rewards received by individuals and groups to
their success in achieving specific work outcomes and behaviors.
1. Individual incentive plans include piecework plans, commission systems, merit pay,
and bonus pay.
2. Group and company wide reward systems include profit sharing plans, stock
ownership plans, and organization bonus systems to provide incentives for groups and
individuals to achieve company wide goals. This encourages cooperation among the
different groups and functions to work cooperatively.

VI. LABOR RELATIONS

Labor relations is the process that establishes rules and practices between a
company and its employees that specify how human resources should be used and
rewarded. Many national laws have been passed to govern labor relations.
1. When labor and management develop good practices and working relationships, both
employees and the companies they work for benefit. Unfortunately, employees and their
companies may have difficulty agreeing on working conditions, and the level of pay and
benefits.
2. A company, because it controls large amounts of capital, has great power in the labor
market to determine its pay structure and pay level.
3. Individuals have no power to affect a company’s HRM practices, unless they join
together to form an organization to give them more leverage or bargaining power known
as a union.
4. Trade unions are organizations that represent the interests of workers who perform
similar types of jobs in a particular company or industry, such as the steelworkers or auto
workers union.
5. The goals of most unions include getting a higher share of the profits for workers and
improving their working conditions on such issues as safety and a healthy environment.
6. The different stakeholders in an organization have competing interests.

A. Union-Management Relations
Industrial conflict is the clash that occurs when workers, and the unions that
represent them, trying to secure a greater share of the profits a company creates blocks
the efforts of managers to use those profits to benefit other stakeholders.
1. Tools used by labor to bring pressure against management include working-to-rule
and strikes.
2. Management may use a lock-out to exert pressure on labor by closing operations.
3. Companies may also hire different, non-union workers known as “scabs” or get
managers to do the work of striking employees.
4. All stakeholders suffer a loss when this kind of conflict occurs.

B. Collective Bargaining: Resolving the Conflict

Collective bargaining is the process by which union representatives and
managers negotiate a binding labor agreement over work-related issues such as pay,
benefits, work rules, safety, job security, and the way grievances will be handled.
1. When an agreement is reached and approved by the union membership and
management, it becomes a contract.
2. Collective bargaining is a complex process.
3. Integrative bargaining seeks a “win-win solution” that allows both parties to benefit.
4. Attitudinal structuring is used by negotiators to influence each other and the process.
5. Mediation involves the use of a neutral party to suggest a solution after reading the
facts of the situation and hearing the views of both sides.
6. Arbitration is similar to mediation, but the arbitrator is authorized to impose a binding
solution that both parties must accept.
7. Grievance procedures establish the system of rules and procedures that will be used
to resolve disputes between a company and its employees that arise over the terms of a
contract.

REVIEW OF LEARNING OBJECTIVES

1. Describe the five components of a human resource management system and the
way they work together to help a company obtain a competitive advantage.
A company’s HRM system has five components: recruitment and selection,
training and development, performance appraisal and feedback, pay and benefits, and
labor relations. Each of the five work together to determine whether employees will work
together in an efficient way to create high quality, innovative products.

2. Appreciate the issues involved in the process of recruiting qualified people to join
a company and the steps involved in the selection process.
Recruitment involves the activities a company engages in to identify and attract a
pool of qualified applicants. It may include internal and external methods. Selection is the
process through which a company decides which applicants will be the best match for the
job and the company by comparing applicant information, testing, and interviews. These
processes have legal requirements for fairness and equity.

3. Explain how training and development activities help to build the abilities, skills,
and knowledge of a company’s employees.
Training needs analysis is used to identify the kinds of employee training that will
most directly affect performance and profitability. Companies then build employee skills
and knowledge to increase efficiency, quality, innovation, and customer responsiveness.

4. Understand why the process of appraising employees’ performance is a major

factor influencing the way they wish to contribute to achieving a company’s goals
and objectives.
Performance appraisal is the means by which employees learn how to improve
their performance. If performed equitably, it will motivate them. Appraisals are used as a
basis for decisions about distribution of rewards, such as salaries, bonuses, and
promotions or layoffs and terminations. Feedback gives employees information about
their strengths and weaknesses. It gives managers information about which employees
would benefit from additional training and development. Employees’ performance can be
evaluated in terms of how well their activities help achieve company goals. To build
competitive advantage, it is essential for managers to tie performance measurement
directly to the measures of efficiency, quality, innovation, and responsiveness to
customers.

5. Explain why linking pay to performance in a fair and equitable manner is an

important source of employee motivation and commitment to a company.
When pay and rewards are equitable, those who work hard to achieve company
goals are rewarded better than those who do not. Workers will be motivated to work
harder to achieve the rewards, achieving the company’s goals. When it is not handled
equitably, employees are de-motivated and will work less hard or leave the company,
creating turnover costs.

6. Appreciate the importance of good labor relations and the importance of

collective bargaining in aligning the goals of employees and companies.
When labor relations are good, all stakeholders should benefit. Employees have
jobs and equitable pay and benefits. The company has a workforce that is not disruptive
to productivity and motivated to help the company be profitable.