duction to Human Resource Management Chapter 1 Frances Roberts/age fotostock/SuperStock Learning Objectives After reading this chapter, you should be able to do the following: Explain what human resource management (HRM) is and how it relates to the management process. Identify major events in the history of HRM and explain how they have shaped the current field of HRM. Describe the strategic importance of HRM activities performed in the organizational setting. Identify your own HRM responsibilities and challenges as an organizational participant and decision maker. Define the major responsibilities of a human resources (HR) department. Describe the role of the legal environment in HR operations and activities. Define each of the major HRM functions and processes of strategic HRM planning, job analysis and design, recruitment, selection, training and development, compensation and benefits, and performance appraisal. Identify major recent trends in HRM. 1 Pre-Test Chapter 1 Pre-Test 1. HR personal credibility is one of the critical competencies required in order for HR professionals to be able to carry out their duties successfully. a)\tTrue b)\tFalse 2. Human resource management has been defined as: a) managing people's skills and talents to effectively align them with organizational goals. b) all decisions made by human resource departments that improve morale for employees. c) decisions made by human resource departments that balance the needs of the management team and employee bargaining units. d) decisions made by management and by employees that help reach the organization's goals. 3. The market value per employee of publicly traded companies in the United States can indicate the effectiveness of HR practices on organizational performance. a)\tTrue b)\tFalse 4. Corporate governance refers to the relationship between managers and unions in terms of shared corporate rights and responsibilities. a)\tTrue b)\tFalse 5. Which of the following is one of the HR department's major everyday tasks? a) Sales and operations planning b) Supply chain management c) Inventory accounting d) Planning and alignment 6. Any of the following can be a reason for employees to join unions EXCEPT: a) an employee's personal need to make a difference in the work environment. b) employee dissatisfaction and discomfort with the existing work environment. c) unions' prospective advantages. d) a greater chance of joining an organization's board of directors. 7. Which of the following is one of the HRM practices? a) Union activities b) Supply chain management c) Benefits administration d) Operations management 8. Taking work that used to be done within an organization and contracting it to a third party is called: a)\tglobalization. Introduction Chapter 1 b)\toutsourcing. c) free trade. d) economic shifting. Answers 1. a) True. The correct answer can be found in Section 1.1. 2. a) managing people's skills and talents to effectively align them with organizational goals. The correct answer can be found in Section 1.2. 3. a) True. The correct answer can be found in Section 1.3. 4. b) False. The correct answer can be found in Section 1.4. 5. d) Planning and alignment. The correct answer can be found in Section 1.5. 6. d) a greater chance of joining an organization's board of directors. The correct answer can be found in Section 1.6. 7. c) Benefits administration. The correct answer can be found in Section 1.7. 8. b) outsourcing. The correct answer can be found in Section 1.8. Introduction Consider the various organizations you have been involved inas an employee, as a customer, as a volunteer, and as a member. From grocery stores and banks to sports teams and political parties, all organizations share a common theme: they have goals, and they need to accomplish these goals through people. Of course, they also need financial resources, a viable business plan, the right technology, and a market. However, an organization's success depends not only on the availability of these resources but also on the people who will organize, lead, control, and use the resources to achieve the organization's goals. Critical to an organization's success is the effective management of its people. That's why Bill Gates of Microsoft and Herb Kelleher of Southwest Airlines, along with many other well-known leaders of highly successful organizations, have often asserted that people are their most important assets. O P E N I N G C A S E S T U DY OCBC Bank Read the following article: http://www.hrmasia.com/case-studies/putting-the-person-in-personnel/144268/ Browse OCBC's website at: http://www.ocbc.com/group/Group-Home.html OCBC Bank has been recently ranked as the strongest bank in the world for two consecutive years. One of OCBC's notable strengths is its emphasis on proactive talent management and development. For example, OCBC has an extensive three-year training program for its new employees, ongoing career development plans, and a structured approach to job rotations across functions to give employees diversified exposure. Managers are evaluated and rewarded as much for their effectiveness in managing talent as for their functional roles. In this chapter and throughout this textbook, you will learn about many of these practices and how you can apply them. (continued) What Is HRM? Chapter 1 Discussion Questions 1. Describe OCBC's distinctive approach to talent management and development. 2. Compare OCBC's approach to talent management and development to other organizations you are familiar with (e.g., current or past employers, a family business). 3. To what extent do you agree that OCBC's approach to talent management and development is a primary contributing factor in its success? What can be other contributing factors? 4. To what extent does OCBC's approach to talent management and development fit other types of organizations or industries? What can be some limitations if it is applied elsewhere without modification? 5. Conduct some additional Internet research on OCBC. How has OCBC performed recently, and what has it done more of, less of, or differently in the area of human resource management? 1.1 What Is HRM? Human resource management (HRM) is the managing of human skills and talents to make sure they are used effectively and in alignment with an organization's goals. Neither the size nor type of a company affects this definition. Whether big or small, for-profit or nonprofit, all organizations perform HR functions that relate to the recruitment, selection, training, and management of their workforces. In addition, every organization is concerned with offering competitive salaries and benefits to attract, motivate, and retain talented employees. Even nonprofit organizations that rely on volunteers are often concerned with attracting, motivating, and retaining the best volunteers by providing nonfinancial incentives and designing meaningful roles for them. It is important to note that HRM activities exist throughout any organization, whether or not there is a recognized HRM department. For instance, you will find managers of various functions such as finance, production, and marketing doing such HR activities as hiring, training, and scheduling employees and appraising their performance. And HRM activities extend further. HRM also involves handling the legal issues related to hiring, training, compensating, rewarding, disciplining, promoting, demoting, and even firing people. Maurizio Gambarini/picture-alliance/dpa/AP Images Bill Gates, founder and former CEO of Microsoft, believes the success of an organization depends not on the availability of resources but on its employees' ability to organize, lead, and control the use of these resources to achieve organizational goals. HRM can provide a competitive advantage to organizations through the efficient and effective use of the tools, data, and processes provided by HRM specialists. Yet HRM should also focus on pursuing one strategic priority: helping the organization function as an exceptional employer that provides rewarding work to qualified and exceptional employees. HRM should not be seen as merely performing routine administrative activities. While these activities are important for organizational and legal purposes, human resources should, first and foremost, be looked on as an asset that plays a strategic role in giving the organization a competitive advantage in the marketplace. The University of Michigan and the Society for Human Resource Management identify a critical set of competencies that enable HR professionals to carry out their duties successfully: What Is HRM? Chapter 1 1. Strategic contribution means that HR has to be able to be a key contributor to organizational success. 2. HR professionals must attain business masterythat is, a deep understanding of their organization's business and its technological, economic, and financial aspects. 3. HR professionals must also attain HR masterythe ability to execute their practices effectively and to ensure that these practices meet employees' needs and are also aligned with organizational goals. 4. HR professionals must embrace and leverage HR technology to be able to transform HR's performance of its roles and functions. 5. And it is very important for HR professionals to acquire a fifth competency: HR personal credibility, which occurs through building and developing both internal and external relationships (Brockbank & Ulrich, 2003). Firms usually deal with four types of capital assets: physical (e.g., buildings, land, and equipment), financial (e.g., cash and financial securities), intangible (e.g., patents and information systems), and human assets (e.g., people's talents, knowledge, skills, abilities, experience, personalities, attitudes, and motives). Each of these assets has a different role in an organization. However, human assets are the only ones capable of managing all the other assets to accomplish organizational goals. For example, retail chains such as Target and Wal-Mart possess substantial physical, financial, and intangible assets. However, these assets are meaningless until they are coordinated, integrated, and offered to the customer in terms of the right products at the right prices. Decision makers at the top of the organization perform these key strategic coordination and integration functions. However, even this strategic work by those at the top can be meaningless if it is not implemented AP Photo/The Canadian Press/Dave Chidley effectively by frontline employees, who Retail chains such as Target have substantial physical and finanare often the only employees a customer cial assets that are meaningless unless they are managed, coordiwill ever meet or be directly affected by. nated, and offered to the customer by employees. For example, you may never meet or interact with the CEO of your grocery store, yet your experience (and willingness to return) is directly influenced by whether employees promptly stock the shelves with your favorite items; whether the janitor properly cleans the aisles and bathrooms; whether the customer service representative knows the answers to your questions and offers them in a friendly manner; and whether the cashier rings up your selections accurately, efficiently, and courteously. Thus, all those organizational human assets, not just those at the top, perform the roles necessary to transform other types of assets into effective means to achieve organizational goals and maintain a competitive advantage. The efficient use of the organization's human assets affects its market value. For example, an enormous gap is revealed by comparing the market value of publicly traded companies to the value of their physical, financial, and even their intangible assets. This gap can only be accounted for through the value added by the companies' human assets (Echols, 2007). The History of Human Resource Management Chapter 1 Firms in the United States seem to be aware of this truth. U.S. firms spend almost double the amount that European firms spend on salaries and benefits, and in the United States there is slightly more than a 150% return on this investment in human assets (Burton & Pollack, 2006). 1.2 The History of Human Resource Management It has only been since the late 1970s and early 1980s that the term \"human resources management\" (HRM) has come to identify what was previously known in organizations as \"personnel administration\" (PA; Liu, Combs, Ketchen, & Ireland, 2007). The function we now know as HRM has evolved over the last one hundred years in response to changes in technology, business environments, legislation, and society. To appreciate the concept of HRM, a familiarity with the path that has been traveled and the individuals who have influenced our understanding of the concept is necessary. Precursors to HRM Prior to 1900, most employment was within small businesses and professional guilds where owners or craft masters were primarily responsible for dealing with the job performance of individual employees. In larger organizations such as manufacturing plants or railroad companies, issues of employee welfare or how employee welfare might relate to efficiency and productivity were seldom a concern. During this period there was no unemployment or disability insurance for workers, so that if a worker lost a job through discharge or injury there was no safety net to prevent a fall into destitution. Thus, any discussion of human resource management was limited to a job foreman who closely monitored the efforts of individual workers and often resorted to the threat of discharge as inducement for employees to worker harder. In response, workers did attempt to gain some degree of collective protection against their employers through groups such as the Knights of Labor and the Railroad Brotherhoods. However, such groups seldom were given any legal status, and in labor disputes state and local governments most often sided with the employer and brought resources to bear against the employees. H -D Falkenstein/imagebroker.net/SuperStock Before the existence of human resources departments, employees depended on professional guilds for direction when dealing with individual employees. Pictured here is Carpenters' Hall in Philadelphia, home to the Carpenters' Company, the oldest guild in the United States. From 1900 to about 1920, employment numbers shifted away from small businesses and professional guilds toward quickly growing businesses in manufacturing, transportation, and mining. As businesses and industries grew in the United States, so did worker demands for collective protection against the power of employers. Somewhat grudgingly, state and federal government came to recognize the legal status of employee unions such as the American Federation of Labor and the United Mine Workers of America. The drive for worker rights culminated The History of Human Resource Management Chapter 1 in the National Labor Relations Act of 1935, which gave unions wide-ranging latitude to organize and bargain with management. In response, businesses in various industries established industrial relations departments, which attempted to manage human resources by formalizing a process that would acknowledge workers' rights in compliance with legal requirements. Generally, however, employees were still considered as interchangeable parts of any business. The period from 1920 through World War II saw emergence of the principles of scientific management advanced by individuals such as industrial psychologists Frank and Lillian Gilbreth, who gained notice for their study of time and motion efficiency in manufacturing plants. Perhaps the most notable use of the principles of scientific management at the time occurred at the Ford Motor Company. Traditionally, when constructing automobiles, craftsmen worked at their own pace and exercised their own judgment. Henry Ford sought to speed up automobile production, and he was influenced by the writings of a mechanical engineer, Fredrick Taylor, who believed that left to their own devices workers would try to determine just how slowly they could work without getting fired. Using Taylor's management principles, Ford broke down what had once been the domain of skilled craftsmen into simple and repetitive steps that anyone could be trained to do. Further, he established an assembly line that allowed workers to stand in one place and complete their individual, repetitive tasks while the pace of the assembly line was set by the principles of scientific management. Attempts to manage human resources were, at best, characterized by personnel administration departments in which the focus was on the creation and implementation of policies intended to maximize the operational efficiency of human labor. While Ford was noted for paying a generous wage for the time, the policies he used to implement scientific management gave little consideration to employees as important resources. For instance, workers had to ask permission to leave the assembly line to go to the restroom, guards checked the restrooms for malingerers, and job foremen could fire workers for smiling while on the assembly line in the belief that they were not taking their jobs seriously. From the end of WWII until the early 1960s, PA functions slowly began to look beyond the principles of scientific management and achieving greater financial efficiency from a firm's employees. A Harvard University professor of industrial management, Elton Mayo, and his colleague, Fritz Roethlisberger, delved deeply into the complex and sometimes confusing data generated from 1924-1932 in a study at Western Electric. Frequently referred to as the Hawthorn Effect, their analysis suggested that there is a connection between the social needs of employees in the workplace and their job performance. From their work emerged the principles of what became known as the Human Relations Movement. Influenced by these principles, Peter Drucker in 1954 first coined the term human resources in calling on managers to consider the moral and social needs of humans in the design of work. Shortly thereafter, in 1958, sociologist E. Wright Bakke identified human resources as an ignored function of general management equally as important to business success as accounting and finance. Interestingly, the concept of humans as resources critical to success was not immediately embraced by business and industry. Personnel administration departments in the 1960s were confronted with a substantial increase in labor legislation emerging from the social disruption associated with the civil rights and antiwar movements. This legislation was designed to ensure nondiscriminatory employment practices and increased worker safety. Compliance with the plethora of new legislation forced PA departments to develop more sophisticated personnel-related policies and procedures (Salvatore, Weitzman, & Halem, 2005). Because of the potential loss that might result The Strategic Value of HRM Chapter 1 from legislative noncompliance, PA departments could claim to make a demonstrable contribution to a firm's bottom line. Overwhelmed by issues of legal compliance, PA departments had little time to notice research by R. E. Miles suggesting that when managing their subordinates managers preferred using principles of human relations whereby the worker is made to feel useful and important through constant communication, but when being managed by their superiors managers preferred that their superiors use principles of human resources in which great value is placed on their knowledge and experience (Marciano, 1995). With this research, the stage was set for the appearance of HRM. From Personnel Administration to Strategic HRM During the decade between 1970 and the early 1980s, HRM gained wider acceptance in management circles. Textbooks written by authors with scholarly backgrounds all came to link HRM with activities traditionally associated with PA. However, it remained for thought leaders in the 1980s to fully develop the concept of HRM. The most influential was likely a book by Beer, Spector, Lawrence, Mills, and Walton in 1984 entitled Managing Human Assets in which the authors defined HRM as all management decisions affecting the relationship between the organization and employees. The authors further identified four areas of HRM policy: 1) choices regarding mechanisms to influence employee behavior, 2) choices regarding human resource flows, 3) choices regarding reward systems, 4) choices regarding work systems. In 1997, David Ulrich wrote the seminal work most likely responsible for the latest evolution of HRM: Strategic Human Resource Management. Abbreviated as SHRM, strategic human resource management can be defined as leveraging the linkages between human resource practices and organizational objectives to achieve a competitive edge. Based on that definition, it follows that HRM serves a critical, strategic function, and thus HR should be involved in the design and implementation of organizational plans and strategies. In HR Champions, Ulrich argued that because the operational aspects of HRM are easily outsourced, if the HRM function could not define the value it creates and could not implement metrics necessary to measure its performance, it would become irrelevant to a firm's success. Today, SHRM's transformational aspects (i.e., strategic player, administrative expert, employee champion, and change agent) are argued to be central components in any plan for organizational effectiveness. As such, HRM is now perceived as having moved beyond \"putting out fires\" to maintaining a strategic focus on issues such human capital, culture, and internal customers, all having the potential to provide a firm with a competitive edge. As mentioned earlier, day-to-day personnel administration is one of the HR department's roles or functions in an organization. However, for the past two decades, personnel administration has received less study than the relationship between applied, effective HRM practices and organizational performance. HRM practices are effective when they impact such employee factors as skills, motivation, morale, absenteeism, retention, productivity, and performance quality. These factors can be measured and related to such organizational goals and success indicators as profitability, efficiency, and effectiveness. The link between HR and organizational performance is at the core of SHRM. 1.3 The Strategic Value of HRM Every organization has its own strategic plan; it includes the organization's long- and shortterm goals, and it also includes the procedures for deciding how to allocate organizational resources to achieve these goals. Strategic HRM provides the link between strategic planning The Strategic Value of HRM Chapter 1 and HRM by incorporating HRM strategies and policies to achieve organizational goals while meeting employees' and stakeholders' needs. In addition, these practices can increase the market value of an organization by as much as 50% when they are consistently followed (McFarlin, 2006). HR practices will be discussed in detail in the following chapters. Although on the surface this sounds impressive, not everyone is convinced of the importance of HRM to organizational success. Thomas Stewart (1996) in Fortune magazine startled HR professionals by labeling HRM as the last great organizational bureaucracy and asking the question, \"Why not abolish it?\" His reasoning? Most of what HRM does can be outsourced at a significant cost savings. Philip Vernon of Mercer Human Resource Consulting (2004) observed that nearly 60% of Chief Financial Officers (CFO) viewed HRM as a cost center rather than the much desired strategic partner. He concluded that HRM is still primarily an administrative function devoting less than 15% of its time and resources to strategic value-based interventions (Vernon, 2004). Richard Vosburgh (2007), senior vice-president of HR for the Mirage Resorts, cited data suggesting that only slightly more than 50% of HRM departments report directly to the chief executive officer (CEO), and Hammonds (2005) argued that if the HR department reports to the chief financial officer rather than the CEO (which is frequently the case), there is little to suggest that the function is considered a strategic business partner. You can read Hammonds' thought-provoking arguments in the next web link. Web Links Why We Hate HR http://www.fastcompany.com/53319/why-we-hate-hr Discussion Questions 1. Is there more to HR than its predecessor, PA? Discuss the arguments for and against this notion. 2. Based on your experience, to what extent do you agree/disagree with Hammonds's arguments? Why? 3. In your opinion, who is responsible for the fact that HR has not reached its full potential in g eneral? In your organization (if applicable)? 4. Based on what you have learned so far, how can HR act as a strategic business partner in g eneral? In your organization? 5. After reading Hammonds's article, do you think your employer should increase, decrease or o utsource HR roles and functions? Why? A 2004 study by the Society for Human Resource Management found that the most frequently cited barrier to career advancement for HR professionals was the HRM function not being held in high esteem at the executive level of organizations (SHRM Global Forum, 2004). Keith Hammonds (2005) did little to raise the esteem of most HR professionals when he published in Fast Track magazine an article entitled \"Why We Hate HR\" in which he charged that most human resource professionals are not interested in business, and in business that is a problem. He went on to argue that HR professionals pursue efficiency at the expense of value. If, in the value chain, adding value to a product delights and satisfies the consumer such that he or she is willing to pay a premium for the end product, what HR activities contribute to customer delight such as to justify a premium charge? Andrew Lambert (2009), director of the Corporate Business Forum, enlarged upon this issue by observing that a primary reason HRM fails as a strategic business partner is an inability to employ HR metrics that have relevance to The Strategic Value of HRM Chapter 1 business success. So, where might the HRM professional focus in advancing the proposition of being a strategic business partner? HRM's Contribution to Motivation, Morale, Retention, Productivity, and Performance Quality Managing employee productivity is a critical factor in both for-profit and nonprofit organizations' success. Higher productivity levels enable firms to offer higher salaries and still be competitive. Effective HRM practices have been shown to reduce turnover, increase productivity, and directly contribute to corporate financial performance (Huselid, 1995). Thus, HRM is able to contribute to overall organizational competitiveness through improving employee retention and productivity. Effective HRM practices can also enhance employee motivation and morale, which can in turn positively affect organizational outcomes. For example, effective job analysis and design can balance the demands of a job with the resources provided to accomplish its tasks, and this balance has been shown to contribute to work engagement (Schaufeli & Bakker, 2004). The relationship between work engagement, job satisfaction, and business unit outcomes is supported by numerous studies (Harter, Schmidt, & Hayes, 2002). There are many other ways in which HRM can contribute to employee motivation and morale, such as providing a familyfriendly environment, sponsoring social events and activities, and offering opportunities for learning and career development (Collins & Allen, 2006; Czinege, 2009). HRM's Contribution to Profitability, Efficiency, and Effectiveness Organizational effectiveness is the degree to which an organization is able to meet its goals and objectives. Organizational efficiency, on the other hand, is the degree to which an organization is able to maximize the productivity of given resources, produce a given amount of output with minimal resources, or accomplish both tasks. HRM can contribute to an organization's efficiency and effectiveness by leveraging human assets through their selection, allocation, deployment, development, management, and retention; in turn, these contributions can improve an organization's financial performance (Kroll, 2006). Moreover, employee motivation, morale, retention, productivity, and performance all have a great influence on an organization's efficiency and effectiveness. Because HRM practices have positive effects on such factors, applying these practices will also have a significant influence on an organization's profitability. Organizational effectiveness can be measured in many ways, such as return on investment (ROI), economic value added (EVA), and balanced scorecards. Some of these approaches will be introduced in subsequent chapters. At this point, however, you should know that for each of its activities, HR should be capable of presenting financial justification. Strategic HRM Perspectives Strategic human resource management includes three schools of thought: best practice, best fit, and resource-based view (RBV; Paauwe, 2009). Best Practice As the name implies, best practice refers to the practice that results in the best possible organizational performance. Numerous best practices in HR have been demonstrated to relate to The Strategic Value of HRM Chapter 1 organizational performance as it is measured by the market value per employee of publicly traded companies in the United States. (Huselid, 1995). However, because there are numerous studies about best practices, it is hard to tell which practices are truly best (Becker & Gerhart, 1996). Based on Pfeffer's (1994) work, seven practices are claimed to be the most effective for gaining competitive advantage through the workforce and generating additional profits by considering people as a top priority: offering employment security selective hiring extensive training sharing information self-managed teams company performance-based pay overcoming status differences Best Fit Best fit can also be referred to as the contingency approach to HRM. The claim behind the concept of best fit is that HRM practices are able to enhance performance if a close fit exists between the HRM practices and the firm's strategy (Kochan & Barocci, 1985). For example, imagine that an organization seeks to develop innovative and complex products that would be best designed by cross-functional teams. An aligned HR practice would then be to design compensation and reward systems that recognize and promote creativity, teamwork, and collaboration, rather than individual productivity and competition among employees. Many theories have been developed concerning this type of vertical integration. For example, configuration models offer a two-step approach. The first step is the study and analysis of the organization's strategy, and the second step is the establishment of corresponding HR policies and activities that best fit the results of the analysis. The downside of this approach is that it assumes the organization's strategy always exists, which is not always the case for firms that are in their developmental stages (Delery & Doty, 1996). Resource-Based View (RBV) A resource-based view follows an inside-out approach by giving special attention to the strategic internal resources available to a company. In addition, this view focuses on how the application of these valuable resources contributes to competitive advantage. Tangible and intangible resources by themselves do not confer any benefit to the firm unless they are effectively used, at which point they are able to provide the firm with competencies. In order for the internal resources of a company to be of great significance, they have to be valuable, rare, and not capable of being imitated or substituted. Accordingly, the effective use of such strategic and unique resources will enable the company to acquire a sustainable competitive advantage (Prahalad & Hamel, 1990). According to the RBV school of thought, the best approach to strategic HRM is therefore to create and maintain human assets that are also valuable, rare, inimitable, and nonsubstitutable. These human assets can then serve as a sustainable source of competitive advantage. For example, an organization that buys into RBV would develop proprietary selection tools and training programs for its employees, require their employees to maintain secrecy about pay and benefits, and take extra measures to avoid knowledge sharing in their industry so that their competitors cannot imitate their practices. What Do HR Managers Do? Chapter 1 Of course, each of those three schools of thought has its merits that should be considered in conjunction with other approaches. For example, the contingency best fit approach is more compatible with industries where change is fast and unpredictable. These industries require continual reconsideration and reconfiguration of what constitutes the mix of best practices utilized by the organization. Moreover, RBV may have limited use in industries where entry and exit costs are low for competitorsfor example, where technology is readily accessible, limited up-front capital investments are needed, or skilled labor is in abundant supply. Many home-based businesses such as childcare, lawn care, bookkeeping, and housecleaning fall in that category. 1.4 What Do HR Managers Do? HR and line management have one common goal, which is to bring capable human assets into the organization who can perform the duties and responsibilities that will keep the organization functional and competitive in the market. HR management and line management must work together at all times to ensure that all their common deliverables are successfully met. However, HR management has many unique functions and tasks. These are the main roles of the HR manager: providing guidance and advice providing service creating and implementing policies advocating for employees Provide Guidance and Advice HRM directly contributes to defining and shaping the ethical culture within an organization; hence, HRM governs the behavior of executives, managers, and employees. This role is of crucial significance since organizations achieve their long-term objectives and goals through setting clear ethical standards. Owing to their extensive knowledge of the internal employment affairs of the organization, HR managers provide crucial guidance and advice to executives, managers, and supervisors in critical areas such as policies, labor agreements, past practices, ethics, corporate control, and employment requirements. HR managers also consult with other managers and executives based on their extensive knowledge of external tendencies and such market movements as economic and employment details, as well as updates in legal and regulatory issues. For instance, HR managers often provide good support and advice pertaining to vague and obscure ethical areas where it is hard for employees and other managers to determine whether an issue can safely be deemed right or wrong. Organizations with high levels of integrity are favorably recognized and respected in the market by their customers, employees, and other organizationsrecognition and respect which, in turn, translate into higher profits. More attention has been drawn lately to the importance of creating strong ethical cultures within an organization and raising its levels of integrity, especially after numerous financial scandals surfaced in the past few years in many organizations around the world (Cherenson, 2006). HR managers have the vital role of policing, monitoring, and establishing control within the organization to ensure that top executives and managers do not abuse their authority and that all employees adhere to company policies and norms. This function of HR managers What Do HR Managers Do? Chapter 1 is commonly known as corporate governance. The term describes the relationship between managers and shareholders in terms of shared corporate rights and responsibilities. Another very important task of every HR manager is to provide guidance and advice in matters of employee compensation and appraisals based on past evaluations and performance details. Provide Service The service role of HR managers is to successfully plan and execute all the activities related to employee selection, scheduled testing, training and development, and listening and responding to employees' concerns and complaints. This fundamental area of HR management involves a myriad of skills and technical expertise. HR managers must establish and build influential HR systems and programs that effectively support and serve these purposes. Brankica Tekic/iStock/Thinkstock HR managers provide crucial guidance and advice to executives and managers about policies concerning labor agreements, ethics, corporate control, and employee requirements. Other executives, managers, and supervisors must take the initiative of positively supporting the HR manager in accomplishing this service role. They should believe in the critical function of HR in increasing the ultimate productivity and efficiency of the organization, and they should act on this belief by collaborating with HR and following the policies and procedures pertinent for HRM in their organizations. In addition, they should neither create hurdles that negatively impact the organization nor circumvent the HR department by doing things their way. To help an organization's managers achieve these goals, the HR manager must have the skill to take a step back and observe problematic scenarios from the managers' points of view. An even more challenging skill that HR managers develop over time and through experience is to find tactful ways to communicate their opinions and advice to managers. Create and Implement Policies HR managers must foresee potential problems, identify recurring problems, and use past experience to create, update, modify, and enforce company policies and norms. All policy drafts and phases are proposed to executive managers for revisions and approvals before the drafts and phases can be issued or deemed active. To ensure absolute compliance and conformance, HR management must enforce established policies, norms, procedures, and practices, and then follow this enforcement with extensive monitoring and control of line managers and employees. HR managers also serve to elucidate enforced policies to managers and employees, ensuring adequate interpretation and application of all rules. Advocate for Employees HR managers are the employees' representatives within organizations in more or less the same manner that attorneys represent citizens in the courthouse. HR managers are therefore often referred to as the \"employee advocates.\" They listen to, consider, and evaluate employeesassisting them with their needs, concerns and issues. HR managers also bring employees' cases to their direct managers or to other decision makers within the organization, pleading employees' needs. In other words, HR managers are the voice of employees to What Are the Responsibilities of the HR Department? Chapter 1 executives and line managers. This advocating role serves to highlight and convey employee interests and, furthermore, align them with the interests of the organization as a whole. Effective employee relations are the backbone of a successful organization: they preserve its most valuable assetthe human assetand hence promote the organization's survival and competitiveness in the market (Mathis & Jackson, 2007). However, the role of employee advocate is not without dissenters. Edwin Lawler III, director of the University of Southern California's Center for Effective Organizations, observed that HRM professionals should abandon (at least temporarily) the employee advocate role because keeping a focus on being an employee advocate makes it difficult to be seen as a strategic business partner (Laabs, 1998). Reilly and Williams (2006) stated that as long as HR is part of the management team it cannot serve as a champion or advocate for employees. That is, although HRM professionals must be experts on what attracts people to the organization, what keeps them there, and what motivates them to be productive, being an employee advocate or champion should not be part of the role. Why? Because when all is said and done, in order to be a strategic business partner, HRM must perform a business function. Although questions may be raised about the assertion that HR must steer clear from employee advocacy in order to be a strategic business partner, this view does have some merit and warrants serious consideration. Perhaps this is the point that Lawler (2005) made in suggesting that as a business partner HRM should be providing service by designing and implementing HR systems that resolve business problems and exert influence across the organization. If HR can align its employee advocacy role with effective solutions to business problems, then this role can further enhance its contribution as a strategic business partner. Vosburgh (2007) may have given greater definition to this charge by noting that at the intersection between day-to-day HR operations and employees, employee advocacy likely is demonstrated through specialized knowledge and skill in employee relations, labor relations, employee health and safety, diversity, and EEO compliance. For example, promoting wellness and equal employment opportunities through effectively designed, implemented, and rigorously evaluated HR interventions and programs can have a demonstrable impact on the organization's strategic outcomes while serving the needs of its employees as well. Similarly, when HR utilizes valid and reliable selection tools to optimize the fit between selected job candidates and the roles they are hired to fill, it can help align the organization's strategic goals with those of its employees. 1.5 \u0007 hat Are the Responsibilities of the HR W Department? As the name indicates, the human resource department is responsible for the management of the organization's employee-related matters. The HR department attracts, hires, and retains the right employees, and it makes sure they perform according to expectations. The HR department also establishes organizational goals and plans as they relate to human assets. The HR department's major everyday tasks are planning and alignment staffing preparing compensation offers What Are the Responsibilities of the HR Department? Chapter 1 The following sections on these tasks feature detailed discussions of each of the HR department's roles, pointing out the positives and negatives as well as strategies to help increase a given department's effectiveness (Handy, 1999; Hyde, 2004). Planning and Alignment One of the HR department's most important roles is planning for the human side of the organization's operations. The department has to accurately align the number of employees the organization needs to be capable of performing its activities and operations efficiently. Having more than the required number of staff members will harm the company by drawing scarce financial resources away from other important functions and uses. On the other hand, having an insufficient number of employees means that existing staff members will be stretched beyond their limits, lose motivation due to the extended hours of work, and eventually experience burnout, which can be detrimental for productivity and well-being (Schaufeli & Bakker, 2004). It can also lead to counterproductive work behaviors and voluntary turnover. With no clear direction, employees will not be able to perform effectively. Two of the roles of the HR department are therefore to participate in planning for future organizational objectives and to act as a liaison to make sure that staff members understand these objectives. These roles enable employees to embrace a purpose-oriented approach while performing their duties. Employees and staff members who do not have a clear understanding of the organizational objectives cannot contribute effectively to organizational success. Moreover, since performance is a function of time, it is in the best interest of the HR department to actively work towards promoting and sustaining a better use of time among all other departments of the organization. In other words, time can be regarded as an asset that must be utilized efficiently to maximize the productivity of the organization and, ultimately, thereby achieve set targets and goals (Harold, 2003). The HR department can achieve these results by the active planning and proper scheduling of activities and by ensuring that information flows swiftly though proper channels, which provides better support and coordination between departments in HR-related matters. There are many ways the HR department can align the organization's strategic objectives and needs with the number, quality, goals, and time allocation of its human resources. For example, this alignment can be accomplished through proactive onboarding, training, education, and development. In onboarding, new employees receive various forms of orientation to enhance their understanding of the organization's culture and familiarize them with what the new job entails so that they can perform their duties effecSneksy/iStock/Thinkstock tively. Training emphasizes current job Onboarding helps new employees get acquainted with the orgarequirements, and it is evaluated against nization's functions. Training and development are crucial to be able these requirements. In contrast, educa- to adapt to the ever-changing work environment. tion focuses not on current job requirements but on requirements or responsibilities for positions that an employee may hold in the future. Education is evaluated against these future requirements. Finally, development involves What Are the Responsibilities of the HR Department? Chapter 1 attention to current and future job requirements that are difficult to evaluate and assess (Garavan, Costine, & Heraty, 1995; Harrison, 2005). Just because an employee has a great resume or did well in an interview does not mean he or she will be able to perform organizational activities effectively. In an ever-changing environment, training and development are very important to an organization's ability to adapt to change. Adapting to change is crucial in order to compete in the market. As illustrated by the opening case, training and development can also be used to inspire employees, improve their attitudes, and energize them when they must perform under stress. It is the responsibility of the HR department to set the timing and place of training, decide who will deliver it, and decide who will participate in it. Accountability is another very important factor that the HR department can use in its alignment activities. Accountability ensures that employees efficiently fulfill their set goals and objectives in the allocated time frame, rather than routinely reporting to work and performing some daily activities with no real sense of connection to the work they do. Designing effective performance management systems can help in these alignment activitiesmaintaining clear communication and holding employees accountable for specific, measurable outcomes. Staffing One of the critical tasks of the HR department is staffing the organization. Staffing includes recruiting and selecting the right employees and then placing them in jobs that fit their personalities, capabilities, and future potential. The HR department has to be selective while recruiting, and it must make sure that only the most qualified, skilled employees are chosen employees who are a good fit for the company's positions and are able to contribute to the company's goals. The department must then evaluate prospective employees' abilities and competencies against the company's needs. When the HR department is able to execute this task properly, the organization will be better able to achieve its goals and objectives. There is more than one way to facilitate the process of effective staffing. Conducting psychological and physical assessments of abilities, skills, and personality traits is one option. These assessments help the company choose employees with the necessary qualifications. Another option is interviewing applicants. The purpose of the interview is to ask applicants questions that reveal their decision-making skills and their reactions to specific situations. These and numerous other techniques for the effective recruitment and selection of employees are discussed in detail in Chapters 4 and 5. Preparing Compensation Offers In order for employees to be motivated, their efforts need to be adequately rewarded. Offering attractive compensation packages is one way organizations increase employee motivation. When employees know that they will be rewarded for their actions, this knowledge pushes them to go beyond their comfort zones. Compensation packages can come in the form of pay, benefits, and such incentives as days off, bonuses, equities, awards, raises, flexible working hours, or promotions and opportunities for career development. Effective compensation packages can increase retention rates by boosting employee satisfaction. This boost can also have a positive impact on employee loyalty and thus increase the firm's stability and security (Handy, 1999). Compensation packages may cause unexpected problems. For example, an organization might try to reward employees and managers by offering them financial incentives while it is suffering financial losses. Organizations have to pay out their contractual obligations to their employees. The Legal Environment Chapter 1 In a well-publicized instance, Robert L. Nardelli, former chief executive of Home Depot, was asked to resign due to his failure to improve profitability and stock prices. Yet Home Depot still had to pay him $210 million in compensation that he was contractually and legally entitled to. This is one way that compensation packages sometimes hurt organizations (Barbaro, 2007). 1.6 The Legal Environment The HRM legal environment includes numerous laws and regulations that protect against discrimination based on race, sex, color, religion, or national origin. Other laws relate to plant closures, mergers, and acquisitions. Laws and regulations have a great influence on personnel decisions. Throughout this textbook, you will learn about the many laws that govern HR processes. The number of HR-related federal lawsuits has been increasing in recent years and is expected to continue to increase. The number of Equal Employment Opportunity (EEO) laws and regulations is also expected to increase. Defending against legislative violations can require substantial organizational time, energy, and money. Unions and Labor Relations The term labor relations refers to the relationship between the organization's management and a labor union representing a set of employees in a bargaining unit. Employee relations refers to the way in which HR managers work with employees in a nonunion environment. There are three primary reasons why employees join unions. The first reason can be employee dissatisfaction and discomfort with the existing work environmentincluding working conditions, compensation systems, and management and supervision methods. Another motivation may be an employee's personal need to make a difference in the work environment or the industry as a whole. Finally, employees also join unions because they recognize unions' prospective advantages. HR managers must work hard to listen to and interpret employee complaints; HR managers must also create and develop strategies to rectify complaints in order to create cooperative, rather than antagonistic, relations with unions. Labor relations are the relationship between management and unionized workers regarding employment conditions, as discussed above. The National Labor Relations Act (NLRA) addresses issues such as employee representation rights, interfering with union affairs, and discrimination in employment. Again, HR managers must work toward employee satisfaction and claim resolution to preserve the integrity of the organization (Kochan, 1980). Health and Safety Regulations Industry-related accidents adversely impact the US economy; with more and more job-related injuries, occupational illnesses, and fatalities reported every year, it is evident that organizations must impose and strictly practice a Jim West/age fotostock/SuperStock Labor unions represent a group of employees in bargaining between the employees and their organization's management. Here, UAW President Bob King (left) shakes hands with Ford CEO Alan Mulally (right) before open contract negotiations. The HRM Process Chapter 1 stringent code for health and safety. HR managers have the role of creating programs to proactively mitigate job-related accidents. Some of the techniques that HR uses to avoid future health and safety issues include matching employee personalities with their job descriptions and environment during the hiring process, conducting on-the-job safety awareness and training programs (Budd, 1996), rewarding safe behavior with incentives (Mace, 1988), and distributing guidelines and handbooks that detail safety and regulatory policies. 1.7 The HRM Process The HRM process consists of eight practices or activities whose purposes are to attract, retain, and motivate qualified employees. Using such practices results in greater profitability, low rates of employee turnover, high-quality products, reduced production costs, and alignment of HR with an organization's strategic goals (Schuler & MacMillan, 1984). Below is a brief summary of each of these eight practices, which will be discussed in greater detail in Chapters 2 through 10. Figure 1.1 also summarizes the HRM process and serves as an outline for the book. Figure 1.1: The strategic HRM process Strategic HR planning Benefits and benefits administration Job analysis and job design Attraction and recruitment of talent Compensation Training and development Selection and job fit Perfomance appraisal/ management f01.01_OMM618.ai The HRM Process Chapter 1 Strategic HR planning To maintain business competitiveness, managers forecast future labor supply and demand. An organization has to make sure that it has access to the knowledge, skills, and abilities it needs at the times these human capacities are needed. These needs can then be fulfilled through various means such as employment, contracting out, partnerships, and other means. One of the activities of HR strategic planning is that it takes into account the risk that having an insufficient or unqualified workforce poses to the organization's competitive advantage. Another strategic HR activity is retaining a well-qualified workforce. Strategic planning considers meeting resource demands, examining and evaluating resource deployment, estimating capacity, and also recognizing and handling human talent to satisfy capacity needs. HR planning is typically tied to the recruiting function and includes such topics as projected turnover, succession planning, career planning. Strategic HR planning will be discussed in detail in Chapter 2. Job Analysis and Job Design The term job analysis refers to providing detailed job descriptions and specifications. It also includes the collection of job information and the systematic analysis of that information. The type of information gathered in a job analysis includes job context, content, and requirements. Job analysis can be used for recruitment and selection procedures, performance evaluation, training, compensation, and many other purposes. Job analysis is critical for hiring the right workforce for specific jobs (Cascio & Aguinis, 2005). The term job design refers to identifying the elements of a job and arranging its tasks and responsibilities for the purpose of creating a productive work unit. Moreover, job design involves studying what a job entails as well as how it affects employees. Job design can help alleviate many of the problems companies face, such as employee performance, job satisfaction, grievances, absenteeism, and physical and mental health (Grant, Fried, & Juillerat (2011). Job design and job analysis will be addressed in detail in Chapter 4, but due to the extensive labor laws governing job analysis, job design, and other HR functions, Chapter 3 covers the legal environment first, before delving into these HR functions. Attracting and Recruiting Talent The recruitment of talent entails three main processes: attracting, screening, and selecting qualified potential employees for further consideration. All three processes can be done either in-house or outsourced to recruitment agencies. The first step in the recruiting process is advertising job offers. Advertising is followed by screening, for which recruiters use resumes, application forms, initial interviews, tests, and other screening tools to identify qualified candidates. Then a candidate is selected for further consideration based on how well he or she did during the screening process. Attraction and recruitment of talent will be discussed in detail in Chapter 5. Selection and Job Fit Selection is the method through which organizations choose their most valuable assetpeople to fill jobs within the organization with the right, qualified individuals. Selection is one of the most crucial processes for an organization: it is only through qualified employees that The HRM Process Chapter 1 corporate goals and objectives are fulfilled, success is attained, and the organization gains a competitive edge in the market. Employees can be managed much more easily in the long term, and many problems can be avoided, if enough time, effort, and planning are initially invested in recruitment and selection. Difficulties will be eventually faced with the selected employees if the selection process is not successfully executed based on adequate planning, job analysis, and job design. These difficulties may not be possible to rectify, even with extensive training. Clearly, the selection process affects the well-being of the organization and, ultimately, its future. However, the process of employee selection is successful only if the employees' knowledge, skills, and abilities (or KSAs for short) are carefully matched with the characteristics of the jobs they are assigned to fill. Employees who are successful in their current positions are the best candidates to help identify the most significant KSA requirements for their jobs. A good fit between the nature of the job and the employee's personality, interpersonal skills, and academic and technical knowledge is critical toward sustaining the organization's prosperity. Selection and job fit will be discussed in more detail in Chapter 6. Performance Appraisal/Management Performance management is a continuous process of measuring and developing performance through linking each employee's performance to the organization's overall mission and goals (Aguinis, 2005). Performance appraisal is the practice of rating and evaluating the accomplishments of employees, relative to set goals and objectives, and rewarding the employees accordingly. Rating the individual employee is equivalent to evaluating the greater objectives of the organization as a whole. Accordingly, performance appraisal is of crucial importance to any organization since it impacts the strategic plan of the entire organization. Performance appraisals can be conducted through a variety of approaches and methodologies. These methods include employees evaluating themselves supervisors evaluating their employees employees evaluating their supervisors team members evaluating one another external specialized organizations or consultants being contracted for the purpose of rating employees In most cases, performance appraisals are conducted using a combination of these approaches in order to formulate the most informative and accurate assessments. The performance-appraisal process takes place in a series of six consecutive phases or steps: 1. Identify, highlight, and clearly define the performance levels that employees are expected to attain based both on their jobs and responsibilities and on the organizational strategic plan as a whole. 2. Communicate the defined performance metrics to employees while sustaining, encouraging, and promoting superior performance levels within the organization, in order to achieve the set objectives in the allocated time frame. The HRM Process Chapter 1 3. Measure the actual performance of each employee, and then evaluate it based on the individually set targets and goals. This measurement and evaluation determine the extent to which each of the set objectives has been accomplished. 4. Ensure that employee performance is aligned with the set goals and organizational objectives by communicating employee performance back to the employee at regular intervals. 5. Provide any assistance needed to get employees back on track and ensure that all organizational targets are met after employees have been informed where they stand relative to their set goals and objectives. Aleksandar Stojanov/iStock/Thinkstock Performance evaluation of employees is vital because it impacts an organization's strategic plan. 6. Reward employees based on the extent of their accomplishment of their set goals and objectives. Performance appraisal/management will be discussed in detail in Chapter 7. Training and Development As mentioned earlier, training and development involve four different activities: onboarding, training, education, and development. The purpose of these activities is to enhance the performance of individual employees and to enhance group performance in an organizational setting. Training and development are given many names in various organizations and industries, including learning and development, human resource development, and employee development. Training and development will be discussed in detail in Chapter 8. Compensation Employee compensation is critical for the satisfaction, motivation, and preservation of the workforce. Organizations spend a great deal of time, money, and effort every year on planning, creating, implementing, and successfully executing employee compensation strategies. Accordingly, it is vitally important for HR managers and other organizational decision makers to carefully examine the organization's targets and objectives. A number of significant decisions have to be made to create compensation and reward systems based on what the organization is attempting to accomplish. For instance, a compensation plan has to satisfy and fully comply with all legal rules and regulations, which may vary between different work locations. A compensation plan must also be cost effective for the organization; otherwise it will become a burden. Most importantly, a compensation plan must yield a considerable performance advantage for the organization through attracting, motivating, and retaining high performers, and it must align the performance of those employees with the goals and objectives of the organization. In other words, a compensation plan has The HRM Process Chapter 1 to identify, distinguish, and reward employees whose efforts and talents have successfully accomplished the goals, objectives, and performance expectations of their roles in ways that directly contribute to organizational goals, objectives, and overall competitiveness. The compensation plan should motivate these employees to remain within the organization. An organization can use many types of compensation systems to reward people for fulfilling their set targets. Compensation systems include base pay, variable pay, and incentive systems. Base pay, as the name implies, is the basic compensation that an employee receives from an organization in exchange for his or her basic servicesusually in the form of a wage or salary or a combination of the two, depending on the nature of the job. Waged employees receive compensation based on the number of hours worked over a predetermined period of time, as well as additional overtime pay for every extra hour worked. On the other hand, salaried employees receive a fixed compensation over certain periods of time regardless of the number of hours invested in work. Variable pay is compensation that varies directly with measurable aspects of employee performance. The most commonly used variable pay system in organizations is the sales commission, in which a sales person's compensation is entirely or mostly based on the number of units sold or the value of sales they generated within a previously specified period of time. Variable pay can also be used in conjunction with base pay. An incentive compensation system is compensation connected to individual, team, and organizational performance. The most common variable-pay systems are performance bonuses, stock options, and high-level executive compensation for top executive managers. Incentive systems are designed to reward employees beyond their normal expectations for their excellence