Introduction to Business

Human Resources
Module Learning Outcomes

Recognize the role of human resource management in planning, recruiting, and managing a
workforce

15.1: Explain how the functions of human resource management contribute to business success
15.2: Summarize and discuss key laws affecting human resource management
15.3: Discuss how organizations can effectively recruit and hire employees
15.4: Discuss effective approaches to training, developing, and rewarding employees
15.5: Describe the different HR management options for employee termination
15.6: Discuss the challenges facing today’s HR managers
Human Resource Management
Learning Outcomes: Human Resource Management

15.1: Explain how the functions of human resource management contribute to

business success
15.1.1: Describe the core functions of human resource management
15.1.2: Explain how the functions of human resource management contribute to business
success
Understanding Human Resource Management
Human resource managers are responsible for the activities needed to recruit, hire, train,
develop, and retain a workforce at the employee level.

Core Functions of HR
• Staffing: this involved the activities of hiring new full-time and part-time employees
• Training and professional development: training, providing training opportunities, and
preparing management prospects
• Compensation: setting compensation levels, negotiating group health insurance rates,
discussing raises, ensuring compliance with legal and cultural expectations regarding
compensation
• Safety and health: understanding and implementing best safety and health practices
• Employee and labor relations: defending employee rights and coordinating with unions
Why is HR Important?

HR departments strive to offer benefits that

will appeal to workers, thus reducing the
risk of losing corporate knowledge to
employee turnover.
HR promotes diversity and inclusion as well
as using technology to advance employee
engagement.
Human Resources and Laws
Learning Outcomes: Human Resources and Laws

15.2: Summarize and discuss key laws affecting human resource management
15.2.1: Explain the function of the Equal Employment Opportunities Commission
15.2.2: Summarize key anti-discrimination legislation
15.2.3: Summarize key labor and safety legislation
15.2.4: Discuss key laws affecting human resource management
Understanding Human Resources and Laws

Federal and state legislation has been enacted to prevent discrimination, set minimum wages,
establish maximum work hours, and set standards for health and safety.
Equal Employment Opportunity Commission

The Equal Employment Opportunity Commission (EEOC) enforces employment

discrimination laws and regulations. The EEOC was established by the Civil Rights Act of
1964.

The EEOC’s missions is to stop and remedy unlawful employment discrimination.

Specifically, the EEOC is charged with “enforcing federal laws that make it illegal to
discriminate against a job applicant or an employee because of the person’s race, color, religion,
sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or
older), disability or genetic information.”[6]
Anti-Discrimination Legislation

The intent of U.S. anti-discrimination legislation is to protect workers from unfair treatment. In brief,
illegal discrimination is the practice of making employment decisions based on factors unrelated to
performance.

Over the years, amendments to the original Civil Rights Act of 1964 have expanded the scope of the law,
and today the EEOC enforces laws that prohibit discrimination based on seven protected categories
including age, disability, genetic information, national origin, pregnancy, race, color, religion, and
sex.
The Civil Rights Act of 1964

• The Civil Rights Act of 1964 prohibits

employment discrimination on the basis
of race, color, religion, sex, or national
origin.

• Title VII of the Civil Rights act

prohibits sexual harassment.
Other Anti-Discrimination Laws
• Title VII of the Civil Rights Act of 1964: prohibits sexual harassment
• Pregnancy Discrimination Act: prohibits discrimination against women based on pregnancy,
childbirth, or related condition
• Equal Pay Act (EPE) of 1963: prohibits discrimination on the basis of gender in compensation
for substantially similar work under similar conditions
• Age Discrimination in Employment Act (ADEA) of 1967: prohibits employment
discrimination against individuals 40 years of age or older based on age
• Title I of the Americans with Disabilities Act (ADA) of 1990: prohibits discrimination against
a qualified person with a disability and requires employers to make reasonable accommodations
for applicants and employees with known physical or mental limitations who are otherwise
qualified unless that accomodation would pose an “undue hardship” or material impact on an
employer’s business operations.
• Genetic Information Nondiscrimination Act of 2008: prohibits discrimination against
applicants or employees based on an individual’s genetic information or family medical history
Labor Legislation

Important US labor legislation

• National Labor Relations Act of 1935: created collective
bargaining for labor-management and limited the rights of
management interference in the right of employees to have a
collective bargaining agent.
• Fair Labor Standards Act of 1938: established a national
minimum wage, forbade “oppressive” child labor, and
provided overtime pay in designated occupations
• Occupational Safety and Health Act of 1970 (OSHA): The
OSHA act established the Occupational Safety and Health
Administration, a Department of Labor agency charged with
setting and enforcing standards for “safe and healthy working
conditions for working men and women”.
More Labor Legislation

More important US labor legislation

• Immigration Reform and Control Act of 1986: requires
employers to verify and identify the employment
authorization of all new hires whether they are citizens or
non-citizens.
• Family and Medical Leave Act of 1993: requires
businesses with fifty or more employees to provide up to
twelve weeks of unpaid leave per year upon the birth or
adoption of an employee’s child or in the event of serious
illness of a parent, spouse, or child.
The Top 5 Manager Mistakes that Cause Lawsuits

According to the EEOC, employee lawsuits have risen 425 percent since 1995, and the trend
does not appear to be diminishing. Sadly, many of these lawsuits can be avoided because
manager mistakes are at the center of many of them.

According to Business Management Daily, five of the top mistakes managers make in this area
are:
• Violating Title VII of the Civil Rights Act of 1964
• Violating the Age Discrimination in Employment Act
• Violating the Americans with Disabilities Act
• Violating the Fair Labor Standards Act
• Violating the Family and Medical Leave Act
Practice Question 1

Federal anti-discrimination legislation requires employers to:

1. Give preference to a person with a disability, regardless of his or her qualification for the job.
2. Give preference to candidates and employees under the age of 40.
3. Allows employers to terminate individuals who file a claim with the EEOC.
4. Evaluate candidates and employees on factors related to performance and not protected categories such
as color, disability or sex.
Practice Question 2

Labor and safety legislation assumes that:

1. Safety risks are the cost of having a job.
2. Workers have a right to a safe workplace.
3. Employees must choose between family and work.
4. Employees are responsible for reporting any applicants who are not citizens to an U.S.
Immigration and Customs Enforcement (ICE) officer.
Recruitment and Hiring
Learning Outcomes: Recruitment and Hiring

15.3: Discuss how organizations can effectively recruit and hire employees
15.3.1: Discuss how businesses benefit from diversity in the workplace
15.3.2: Describe common recruitment strategies
15.3.3: Describe the components of the hiring process
Benefits of a Diverse Workforce

The concepts of diversity can include age, ethnicity, ancestry, gender, physical
abilities/qualities, race, sexual orientation, educational background, geographic location,
income, marital status, military experience, religious beliefs, parental status, and work
experience.[1]

Benefits of diversity
• Innovation: diverse teams lead to more innovation.
• Localization: a company that employs a diverse workforce is better able to understand the
demographics of the various customer markets.
• Adaptability: diversity fosters creativity and improved decision making through a deeper
and more comprehensive worldview
The Role of Human Resource Management in Managing
Organizational Diversity
Human Resources should consider diversity in the following areas:
• Hiring
• Promotion
• Compensation equality
• Training
• Employee policies
• Legal regulations
• Ensuring accessibility of important documents
Challenges to Diversity

Some of the most common challenges to building a diverse workforce are the following:
• Stereotypes: individuals in the organization may have biases about other similar or
different from themselves.
• Culture: managers must understand the customs and cultural norms of employees and
ensure they don’t violate important cultural rules.
• Communication: whether via language or cultural signals, communication can be
especially challenging in the interpersonal arena. Poor cross-cultural communication can
lead to employee misunderstandings or workplace inefficiencies.
Common Recruitment Strategies

HR professionals manage the recruitment process in order to identify the pool of qualified

applicants.
Both internal and external candidates are selected based on job specifications, which are the
result of an analysis of the job/position.
Internal Recruitment

Internal recruitment is often the most cost-effective method of recruiting potential employees,
as it uses existing company resources and talent pool to fill needs and therefore may not incur
any extra costs.

This is done in two principal ways:

• Advertising job openings internally
• Using networking: employee referrals, industry contacts and membership in professional organizations
External Recruitment

The primary goal of external recruitment is to create diversity and expand the candidate pool.

External recruitment can be done in a variety of ways:

• Online recruitment
• Traditional advertising
• Job fairs and campus visits
• Headhunters and recruitment services
The Hiring Process

• Each job description should be associated with a list of critical skills, behaviors, or attitudes

that will make or break the job performance.
• When screening potential employees, managers need to select based on cultural fit and
attitude as well as on technical skills and competencies.
• HR Managers use interviews, screening tests, and background checks for screening.
• In the U.S., the selection process is subject to the Equal Employment Opportunity
guidelines, which means that companies need to be able to show their selection process is
valid, reliable, related to critical aspects of the job, and nondiscriminatory
Interviews

The best interviews follow a structured framework in which each applicant is asked the same
questions and is scored with a consistent rating process. Having a common set of information
about the applicants to compare after all the interviews have been conducted helps hiring
managers avoid prejudice and ensure that all interviewees are given a fair chance.
• Behavioral interviews ask the applicant to reflect on his or her past experiences.
• Situational interviews require the applicant to explain how he or she would handle a
series of hypothetical situations.
More Components of the Hiring Process
Selections Tests: Understanding the applicant’s personality, values, and motivation for wanting
the job can be a critical part of the hiring process. Some companies use behavioral assessments
and personality profiles to predicts how individuals will interact with their coworkers,
customers, and supervisors.

Background Checks: Background checks are a way for employers to verify the accuracy of
information provided by applicants resumes and applications. Employers must obtain written
consent from an applicant before conducting a background check.

Evaluation: Employers may choose to use just one or a combination of the screening methods
to predict future job performance. It is important for companies to use metrics to assess the
effectiveness of their selective hiring process to provide a benchmark for future performance as
well as a means for evaluating the success of a particular method.
Class Discussion: Wording Your Job Advertisement

While this advertisement is entertaining, it might create a legal problem. Why might an HR
professional advise against using this ad?
Training, Development, and Rewards
Learning Outcomes: Training, Development, and Rewards

15.4: Discuss effective approaches to training, developing, and rewarding

employees
15.4.1: Describe different approaches to employee training
15.4.2: Describe different approaches to professional development
15.4.3: Describe different approaches to performance appraisals
15.4.4: Summarize different forms of employee compensation
Approaches to Employee Training

Training is teaching or developing in oneself or others, any skills and knowledges that relate to
specific useful competencies.

A well-trained employee acquires and advantage for themselves. By participating in training,

employees can deepen or expand their existing skill set and increase their understanding of an
organization
Benefits of Training

Benefits of training include:

• Increased job satisfaction and morale
• Increased employee motivation
• Increased efficiencies in processes, resulting in financial gain
• Increased capacity to adopt new technologies
• Increased innovation in strategies and products
• Reduced employee turnover
• Enhanced company image
• Risk management
Needs for Training

The need for training exists in every business. The nature of training varies depending on the
type of business and operations involved.

A company uses a training needs assessment to determine what sort of training is needed.
Generally, training needs assessments follow three steps:

1. Identify the need

2. Perform a gap analysis
3. Assess training options
Types of Training

• On-the-job training takes place in a normal

working situation, usual actual tools, equipment,
documents, or materials that trainees will use once
they are fully trained.
• Off-the-job training takes place away from
normal work situations, so the employee is not a
directly productive worker while such training
takes place
• Advantage of allowing people to get away from work
and concentrate more thoroughly on the training itself.
Class Discussion: Training

Think about any training or professional development you have received in the past. Was the
training:
• one-on-one in the workplace?
• in a classroom or conference room?
• online through a web conference?

Discuss the positives and negatives of each of the above settings. Which was the most effective
in transferring knowledge? Which was the least effective? How would you design an effective
training program for employees?
Approaches to Professional Development
Professional development refers to skills and knowledge attained for both personal
development and career advancement.

Individuals may pursue professional development because of an interest in lifelong learning, a

sense of moral obligation, to maintain and improve professional competence, enhance career
progression, keep abreast of new technology and practice, or to comply with professional
regulatory organizations.

There are a variety of approaches to professional development including consultation,

coaching, communities of practice, lesson study, mentoring, reflective supervision, and
technical assistance.

The 21st century has seen a significant growth in online professional development partially due
to easy customization and low cost.
Approaches to Performance Appraisals

A performance appraisal (PA) or performance

evaluation is a systematic and periodic process
that assesses an individual employee’s job
performance and productivity, in relation to
certain pre-established criteria and organizational
objectives.

A PA is typically conducted annually though the

frequency and policies concerning PAs vary
widely between workplaces.
Developing an Appropriate Appraisal Process

Peter Drucker suggests using S.M.A.R.T Objectives in the appraisal process:

Specific
Measurable
Achievable
Realistic
Time-related

Employee evaluations include:

• An assessment of how well the employee is doing  
• Employee goals with deadlines
• Feedback from coworkers and supervisors
• Details about workplace standing, promotions, and pay raises
Methods of Performance Appraisal

Some of the more commonly used methods for gauging employee’s performance are:
• Graphic rating scales: assigning some form of rating system to pertinent traits. Ratings can
have numerical ranges (1-5) descriptive categories (below average, average, above average),
or scales between desirable and undesirable traits.
• Behavioral methods: these methods identify to what extent an employee displays certain
behaviors, such as asking a customer to identify the usefulness of a sales representative’s
recommendation.
• 2+2: The 2+2 feedback system demonstrates how appraisals can be used primarily for
improvement purposes. The approach suggests offering two compliments and two
suggestions for improvement focused around high-priority areas
Form of Employee Compensation

Employee compensation is the cost of

acquiring human resources for running
operations

Forms of employee compensation include:

• Salary
• Wage Systems
• Hybrid wage systems
• Benefits
• Fringe benefits
Salary

• Form of compensation paid periodically by an employer to an employee, the amount and

frequency of which may be specified in an employment contract.
• Employees work however many hours are necessary to accomplish organizational goals and
objectives.
• Calculated in terms of annual, monthly, or weekly earnings instead of hourly pay.
• Employee stock options (ESO) sometimes part of employee compensation package. The
objective is to give employees an incentive to behave in ways that will boost the company’s
stock price.
Wage Systems
Based on hours worked or some other measure of production including:
• Time rate: under this system a worker is paid by the hour for time worked. Time worked
beyond a set amount is paid as “overtime”
• Differential time rate: different hourly rates are fixed for different shifts or different
assignments
• Payment by piecework: The worker’s wages depend on his or her output and the rate of
each unit of output; it is in fact independent of the time taken by the worker. For every
“piece” a worker produces, they are paid a set amount.
Hybrid Wage Systems

Hybrid wages – most common in sales and management

• Straight commission: The employee receives not compensation from their employer unless
they close a sale or a transaction.
• Salary plus commission: Only a portion of an employee’s compensation comes from the
commission. While the employer pays the employee when they make a sale, they also pay
some level of wages every pay period.
• Salary plus bonus: When an employee is paid salary plus bonus, the bonus is not paid unless
sale-volume or production goals are met or exceeded.
Common Benefits

• Relocation assistance
• Medical, prescription, vision, and dental
• Dependent care
• Retirement benefit
• Group term life and long-term care insurance
• Legal assistance
• Child care benefits
• Transportation benefits
• Paid time off (PTO) in the form of vacation and sick pay
Fringe Benefits

The term fringe benefits was coined by the War Labor Board during World War II to describe
the various indirect benefits that industry had devised to attract and retain labor when direct
wage increases were prohibited. The term perks (from “perquisites”) is often used colloquially
to refer to those benefits of a more discretionary nature.

Perks are often given to employees who are doing notably well or have seniority or particularly
high-value skills. Common perks are hotel stays, free refreshments, leisure activities on work
time, stationery, allowances for lunch, and use of a company vehicle.

Companies that offer these types of work-life perks seek to increase employee satisfaction,
boost loyalty and minimize turnover by providing valued benefits that go beyond a base salary.
Practice Question 3

It’s your first day on the job and the Human Resource manager is walking you through the new
employee paperwork and explaining company benefits and incentives. She mentions that one of
the upsides of strong performance is a $3,000 annual training bonus that can be used to take
business courses at the local community college or attend relevant conferences or seminars.
This bonus will enable you to engage in:
A. personal development
B. professional development
C. off-the-job training
D. on-the-job training
Practice Question 4

Performance appraisal is a process of assessing an individual employee’s job performance

relative to pre-established criteria and organizational objectives. Which of the following is an
effective approach to performance appraisal?
A. Subjective evaluation by a supervisor or manager.
B. Using a personality assessment to determine role/culture fit.
C. Using a standard set of criteria for all employees.
D. Using a 2+2 (complement plus constructive feedback) method.
Practice Question 5

Employee compensation is the cost of acquiring human resources and may take the following
forms:
A. An annualized salary or hourly wage
B. Annualized salary, wage or incentive payment structures and a range of benefits.
C. An annualized salary; hourly workers are not considered employees.
D. Employee compensation consists of an annualized salary and health and retirement benefits.
Termination
Learning Outcomes: Termination

15.5: Describe the different HR management options for employee termination

15.5.1: Differentiate between and involuntary termination
15.5.2: Describe the different HR management options for employee termination
Terminations

Terminations can occur for a range of reasons, both voluntary and involuntary.
Some states allow at-will employment, which means that an employee can be dismissed by an
employer without warning and for any reason—without the employer having to establish “just
cause” for termination.
Types of Terminations
• Firing: typically understood to be the employee’s fault and considered dishonorable and as a
sign of failure.
• Layoff: this less severe form of termination isn’t strictly related to personal performance but
is instead the result of economic cycles or the company’s need to restructure itself.
• Attrition: a company doesn’t force anyone to leave, but those who depart voluntarily are not
replaced. Some companies give workers the option to resign in exchange for a fixed amount
of money.
• Mutual-agreement termination: in many cases, the employer wants the employee to quit
but decides to offer a mutual-termination agreement to soften the firing.
• Forced resignation: firms that want an employee to leave on their own accord but do not
wish to fire them may degrade the employees working conditions to force the employee to
resign
Rehiring Following Termination

Depending on the circumstances, one whose employment has been terminated may or may not be
able to be rehired by the same employer.

If the decision to terminate was the employee’s, the willingness of the employer to rehire is often
contingent upon the relationship the employee had with the employer, the amount of notice given by
the employee prior to departure, and the needs of the employer.

When an employee departed on good terms, they may be given special priority by the employer
when seeking rehire. An employee may be terminated without prejudice, meaning that the fired
employee may be rehired readily for the same or a similar job in the future
HR Challenges
Learning Outcomes: HR Challenges

15.6: Discuss the challenges facing today’s HR managers

15.6.1: Summarize the common causes of employee turnover
15.6.2: Describe HR strategies for reducing employees turnover
15.6.3: Summarize the challenges facing today’s HR managers
Turnover

Turnover is the rate at which employees leave an

organization.
• Average cost of turnover is $15,000 per employee
• According to the Bureau of Labor Statistics, many
employees stay at a company for 23 to 24 months
Main causes of turnover
• lower performance
• lack of reward contingencies for performance
• better external job opportunities
Causes of Employee Turnover

The following is a list of the top reasons why people change jobs:
● The downsizing or the restructuring of an organization (54 percent)
● New challenges or opportunities that arise (30 percent)
● Poor or ineffective leadership (25 percent)
● Having a poor relationship with a manager (22 percent)
● For better work-life balance (21 percent)
● Contributions are not being recognized (21 percent)
● For better compensation and benefits (18 percent)
● For better alignment with personal and organizational values (17 percent)
● Personal strengths and capabilities are not a good fit with an organization (16 percent)
● The financial instability of an organization (13 percent)
● An organization relocated (12 percent)
Reducing Employee Turnover

Providing a stimulating workplace environment which fosters happy, motivated and empowered
individuals lowers employee turnover and absentee rates.

Creating a work environment that supports personal and professional growth promotes harmony and
encouragement on all levels.

Continual training and reinforcement also help to develop a workforce that is

• competent
• consistent
• competitive
• efficient
Challenges in HR Management

An aging workforce, globalization, increased diversity, working from home, and advances in
technology all create an environment that brings new challenges to human resources.
Challenges Facing HR Managers Today
Increased competition for qualified workers: Economies continue to expand and the demand
for labor is increasing. Employees that possess skills that are in short supply find they can have
their pick of employers.
Changing worker demographics: Older workers are expected to make up a much larger share
of both the population and the labor force than in the past. This has a significant impact on the
labor pool and its growth.
Increased globalization of economies: Companies are finding it easier to go offshore and/or
outsource key functions within an organization.
Workplace violence: No employer is immune to workplace violence. Today’s HR managers are
tasked with informing employees about workplace violence policies and program.
Employee turnover: High turnover can be harmful to a company’s productivity.
Data-driven HR Practices: Data represents a challenge and an opportunity for HR
management.
Quick Review

• How does human resource management contribute to business success?

• What key laws affect human resource management?
• How do organizations effectively recruit and hire employees?
• What approaches to training, developing, and rewarding employees are effective?
• What are different HR management options for employee termination?
• What challenges face today’s HR managers?