Chapter

Fourteen
Managing Human
Resources in
Organizations
Slide content created by Charlie Cook, The University of West Alabama
Copyright © Houghton Mifflin Company. All rights reserved.
 Learning Objectives
After studying this chapter, you should be able to:
1. Describe the environmental context of human
resource management, including its strategic
importance and its relationship with legal and social
factors.
2. Discuss how organizations attract human
resources, including human resource planning,
recruiting, and selecting.
3. Describe how organizations develop human
resources, including training and development,
performance appraisal, and performance feedback.
4. Discuss how organizations maintain human
resources, including the determination of
compensation and benefits and career planning.
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 Learning Objectives
After studying this chapter, you should be able to:
5. Discuss labor relations, including how employees
form unions and the mechanics of collective
bargaining.
6. Describe the issues associated with managing
knowledge and contingent and temporary workers.

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The Environmental Context of
Human Resource Management
• Human Resource Management (HRM)
– The set of organizational activities directed at
attracting, developing, and maintaining an
effective work force.
• The Strategic Importance of HRM
– HRM is increasingly important as firms realize the
value of their human capital in improving
productivity.
– HRM is critical to bottom-line performance of the
firm.
– HR planning is now part of the strategic planning
process.
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The Legal Environment of HRM
• Equal Employment Opportunity
– Title VII of the Civil Rights Act of 1964
• Forbids discrimination in the employment relationship.
• Employers are not required to seek out and hire
minorities but they must treat fairly all who apply.
– Adverse impact
• When minority group members pass a selection standard
at a rate less than 80% of the rate of the majority group.
– Equal Employment Opportunity Commission
• Federal agency charged with enforcing Title VII as well
as
several other employment-related laws.

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The Legal Environment of HRM
(cont’d)
• Equal Employment Opportunity (cont’d)
– Affirmative Action
• Intentionally seeking and hiring qualified or qualifiable
employees from racial, sexual, and ethnic groups that are
underrepresented in the organization
• Several executive orders require federal contractors to
develop affirmative action plans and take affirmative
action in hiring veterans and the disabled.
– Pregnancy Discrimination Act
• Specifically outlaws discrimination on the basis of
pregnancy.
– Age Discrimination in Employment Act of 1967
• Outlaws discrimination against persons older than 40
years of age.

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The Legal Environment of HRM
(cont’d)
• Equal Employment Opportunity (cont’d)
– Americans with Disabilities Act of 1990
(ADA)
• Forbids discrimination on the basis of
disabilities and requires employers to provide
reasonable accommodations for disabled
employees.

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The Legal Environment of HRM
(cont’d)
• Equal Employment Opportunity (cont’d)
– Civil Rights Act of 1991
• Amended the original Civil Rights Act, making it
easier to bring discrimination lawsuits while
also limiting punitive damages that can be
awarded in those lawsuits.

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 The Legal Environment of HRM
(cont’d)
• Compensation and Benefits
– Fair Labor Standards Act of 1938 (FLSA)
• Sets a minimum wage and requires overtime pay for
work in excess of 40 hours per week for non-exempt
employees.
• Salaried professional, executive, and administrative
employees are exempt from the Act’s minimum wage and
overtime provisions.
– Equal Pay Act of 1963
• Requires men and women to be paid the same amount
for doing the same jobs; exceptions are permitted for
seniority and merit pay.

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 The Legal Environment of HRM
(cont’d)
• Compensation and Benefits (cont’d)
– Employee Retirement Income Security
Act of 1974 (ERISA)
• Sets standards for pension plan
management and provides federal
insurance if pension plans go bankrupt.
– Family and Medical Leave Act of 1993
(FMLA)
• Requires employers to provide up to 12
weeks of unpaid leave for family and
medical emergencies.

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 The Legal Environment of HRM
(cont’d)
• Labor Relations
– National Labor Relations Act of 1935 (Wagner Act)
• Set up procedures for employees to vote whether to have
a union; if the vote is for a union, management is
required to bargain collectively with the union.
• National Labor Relations Board (NLRB)—the federal
agency empowered to enforce provisions of the NLRA.
– Labor Management Relations Act of 1947 (Taft-
Hartley Act)
• Amended the NLRA to limit the power of unions and
increase management’s rights during organizing
campaigns.
• Allows the U.S. president to prevent or end a strike that
endangers national security.

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 The Legal Environment of HRM
(cont’d)
• Health and Safety
– Occupational Safety and Health Act of 1970
(OSHA)
• Requires that employers:
– Provide a place of employment that is free from hazards
that may cause death or serious physical harm.
– Obey the safety and health standards established by
Occupational Safety and Health Administration (OSHA).
• Emerging Legal Issues
– Sexual harassment
– Alcohol and drug dependence
– AIDS

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 Social Change and HRM
• Temporary Workers
– An increasing trend is to use more temporary
workers without the risk that the organization may
have to eliminate their jobs.
• Dual-Career Families
– Firms are increasingly having to
make accommodations for dual-
career partners by:
• delaying transfers
• offering employment to spouses
• providing more flexible
work schedules and benefits
packages
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 Change and HRM (cont’d)
• Employment-at-Will
– A traditional view of the workplace in which an
organization can fire an employee for any or no
reason.
– The new argument: an organization should be
able to fire only people who are poor performers
or who violate rules.
– Recent court cases have placed limits on an
organization’s ability to terminate employees by
requiring just cause for firing or dismissal as part
of an organization-wide cutback.

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 Attracting Human Resources
• Job Analysis
– A systematic analysis of jobs within an
organization.
• Job Description
– A listing of the job’s duties; its working conditions;
and the tools, materials, and equipment use to
perform the job.
• Job Specification
– A listing of the skills, abilities, and other
credentials the incumbent jobholder will need to
do a job.

14–15
 Attracting Human Resources
(cont’d)
• Forecasting HR Demand
and Supply
– Replacement chart
• A list of managerial positions in
the organization, the
occupants, how long they will
stay in the position, and who
will replace them.
– Employee information
system (skills inventory)
• A database of employees’
education, skills, work
experience, and career
expectations, usually
computerized.
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Figure 14.1: Human Resource
Planning

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 Recruiting Human Resources
(cont’d)
• Recruiting
– The process of attracting qualified persons to
apply for jobs that are open.
• Internal Recruiting
– Considering present employees as candidates for
openings.
• Advantage: promotion from within can help build morale
and reduce turnover of high-quality employees.
• Disadvantage: internal recruiting can create a “ripple
effect” of having to successively fill vacated positions.

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 Recruiting Human Resources
(cont’d)
• External Recruiting
– Attracting persons from outside the
organization.
– Realistic Job Preview (RJP) is considered
a successful method to ensure person-job
fit.

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 Selecting Human Resources
• Validation:
– Determining the extent to which a selection device
is really predictive of future job performance.
– Predictive validation
• Correlating previously collected test scores of employees
with the employees’ actual job performance.
– Content validation
• The use of logic and job analysis to determine that
selection techniques measure the exact skills needed for
job performance.
• Used to establish the job relatedness of a selection
device.

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 Selecting Human Resources
• Application Blanks
– Used to gather information about work history,
educational background, and other job-related
demographic data.
– Must not ask for information unrelated to the job.
• Tests
– Ability, skill, aptitude, or knowledge tests are
usually the best predictors of job success.
– Must be validated, administered, and scored
consistently.

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 Selecting Human Resources
(cont’d)
• Interviews
– Interviews can be poor predictors of job
success due to interviewer biases.
– Interview validity can be improved by
training interviewers and using structured
interviews.

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 Selecting Human Resources
(cont’d)
• Assessment Centers
– A popular method for selecting managers and are
particularly good for selecting current employees
for promotion.
• A content validation of major parts of the managerial job.
• Other Techniques
– Polygraphs have declined in popularity due to
passage of the Polygraph Protection Act.
– Employers now use physical exams, drug tests,
and credit checks to screen prospective
employees.

14–23
 Figure
14.2:
The
Training
Process

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Developing Human Resources
(cont’d)
• Training and Development
– Assessing training needs
• Determining what needs exist is the
first step in developing a training
plan.
– Common training methods
• Lectures
– Work well for factual material.
• Role play and case studies
– Good for improving interpersonal
relations skills or group decision-
making.
• On-the-job and vestibule training
– Facilitates learning physical skills
through practice and actual use of
tools
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Developing Human Resources
(cont’d)
• Performance Appraisal
– A formal assessment of how well employees do
their jobs.
– Reasons for performance appraisal
• Validates the selection process and the effects of
training.
• Aids in making decisions about pay raises, promotions,
and training.
• Provides feedback to employees to improve their
performance and plan future careers.

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Developing Human Resources
(cont’d)
• Performance Appraisal (cont’d)
– Objective measures of performance
• Actual output (units produced), scrap rate, dollar volume
of sales, and number of claims processed.
• Can become contaminated by outside factors resulting in
“opportunity bias” where some have a better chance to
perform than others.
• Special performance tests are a method in which each
employee is assessed under standardized conditions.
• Performance tests measure ability and not motivation.

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Developing Human Resources
(cont’d)
• Performance Appraisal (cont’d)
– Judgmental methods
• Ranking—compares employees directly with each other.
– Difficult to do with large numbers of employees.
– Difficult to make comparisons across work groups.
– Employees are ranked only on overall performance.
– Do not provide useful information for employee feedback.
• Rating—compares each employee with a fixed standard.
– Graphic rating scales
– Behaviorally-anchored rating scale (BARS)

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Figure 14.3: Graphic Rating
Scales for a Bank Teller

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Figure 14.4: Behaviorally
Anchored Rating Scale

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Developing Human Resources
(cont’d)
• Performance Appraisal (Cont’d)
– Performance appraisal errors
• Recency error
• Errors of leniency and strictness
• Halo error

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Developing Human Resources
(cont’d)
• Performance Feedback
– Is best given in a private meeting
between the employee and
immediate supervisor.
– Discussion should focus on the
facts:
• The assessed level of performance
• How and why the assessment was
made.
• How the employee’s performance can
be improved.

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Developing Human Resources
(cont’d)
• Performance Feedback
– Properly training managers can
help them conduct more
effective feedback interviews.
– “360 degree” feedback
• Managers are evaluated by
everyone around them.
• Provides a richer array of
performance information on which
to base an appraisal.

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Maintaining Human Resources
• Determining Compensation
– Compensation
• The financial remuneration given by the organization to
its employees in exchange for their work.
– Wages
– Salary
– Incentives
– Purposes of compensation
• Provide the means to maintain a reasonable standard of
living.
• Provide a tangible measure of the value of the individual
to the organization.

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Maintaining Human Resources
(cont’d)
• Determining Compensation (cont’d)
– Wage-level decision
• The wage-level decision is a management policy
decision to pay above, at, or below the going rate for
labor in an industry or geographic area.
• Factors that affect the wage-level decision:
– the size and current success of the firm.
– the level of unemployment in
the labor force.
– Area wage surveys
• Can provide information about the maximum, minimum,
and average wages for a particular job in a labor market.

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Maintaining Human Resources
(cont’d)
• Determining Compensation (cont’d)
– Wage-structure decision
• Job evaluations
• Wage surveys data and the wage structure
– Individual wage decision
• Factors such as seniority, initial qualifications,
individual merit, and labor market conditions
influence
wage decisions.

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Maintaining Human Resources
(cont’d)
• Determining Benefits
– Benefits (Indirect compensation)
• Things of value other than compensation that an
organization provides to its workers.
• The average company spends an amount equal to more
than one-third of its cash payroll on employee benefits.
• A good benefit plan encourages employees to stay with
the company and attracts new employees.
• Benefits do not necessarily stimulate high performance.
– Managing benefits effectively:
• Shop carefully for the best-cost providers.
• Avoid redundant coverage.
• Provide only the benefits that employees want.

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Maintaining Human Resources
(cont’d)
• Determining Benefits (cont’d)
– Types of benefits
• Pay for time not worked
• Insurance
• Employee service benefits
– Cafeteria benefit plans
• Flexible plans that provide basic coverage and allow
employees to choose the additional benefits they want
up to the cost limit set by the organization.
– Other benefits
• On-site childcare, mortgage assistance, and paid-leave
programs.

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 Managing Labor Relations
• Labor Relations
– The process of dealing with employees when they
are represented by a union.
– Organizations prefer employees remain nonunion
because unions limit management’s freedom.
– The best way to avoid unionization is to practice
good employee relations all the time by:
• Providing fair treatment with clear standards in pay,
promotions, layoffs, and discipline.
• Providing a complaint and appeal system.
• Avoiding favoritism.

14–39
Figure 14.5: The Union-
Organizing Process

14–40
 Managing Labor Relations
(cont’d)
• Collective Bargaining
– The process of agreeing on a satisfactory labor
contract between management and labor.
• The contract contains agreements about wage, hours,
and working conditions and how management will treat
employees.

• Grievance Procedure
– The step-wise means by which a labor contract is
enforced.
• Grievances are filed on behalf of an employee by the
union when it believes employees have not been treated
fairly under the contract.

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 New Challenges in the
Changing Workplace
• Managing Knowledge Workers
– Knowledge workers
• Employees whose contributions to an
organization are based on what they
know (e.g., computer scientists,
engineers, and
physical scientists).
– Tend to work in high-technology areas
– Are experts in abstract knowledge
areas.
– Like to work independently and identify
strongly with their professions.
– Have skills that require continual
updating and additional training.

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 New Challenges in the
Changing Workplace (cont’d)
• Knowledge Worker Management and Labor
Markets
– Demand is strong for knowledge workers.
• External labor market pressures
• Internal labor market pressures
• Contingent and Temporary Workers
– Trends in contingent and temporary workers
• There have been dramatic and consistent increases in
contingent workers—10% of the U.S. workforce is either
contingent or temporary.

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 New Challenges in the
Changing Workplace (cont’d)
• Contingent and Temporary Workers (cont’d)
– Managing contingent workers
• Careful planning allows for integrating contingent
workers into the organization in a coordinated fashion for
well-defined time periods.
• Understanding contingent workers and acknowledging
their advantages and disadvantages.
• Carefully assess and document the true labor-cost
savings of using contingent workers.
• Decide early on how similarly contingent employees will
be treated relative to permanent employees.

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 Key Terms
• human resource • Americans with
management Disabilities Act
• human capital • Civil Rights Act of 1991
• Title VII of the Civil • Fair Labor Standards
Rights Act of 1964 Act
• adverse impact • Equal Pay Act of 1963
• Equal Employment • Employee Retirement
Opportunity Income Security Act of
Commission 1974
• Age Discrimination in • Family and Medical
Employment Act Leave Act of 19933
• affirmative action • National Labor
Relations (Wagner) Act
14–45
 Key Terms (cont’d)
• National Labor
Relations Board (NLRB)
• Labor-Management
Relations (Taft-Hartley)
Act
• Occupational Safety
and Health Act of 1970
(OSHA)
• employment-at-will
• job analysis
• replacement chart
• employee information
system (skills inventory)
• recruiting
• internal recruiting
• external recruiting
• realistic job preview
(RJP)
• validation
• training
• development
• Behaviorally Anchored
Rating Scale (BARS)
• 360-degree feedback
• compensation
14–46
 Key Terms (cont’d)
• performance
appraisal
• job evaluation
• benefits
• labor relations
• collective bargaining
• grievance procedure
• knowledge workers

14–47