“The Role of Human Resources” from Human Resource Management was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 license without attribution as requested by the work’s original creator or licensee. Chapter 1: The Role of Human Resources Human Resource Management Day to Day You have just been hired to work in the human resource department of a small company. You heard about the job through a conference you attended, put on by the Society for Human Resource Management (SHRM). Previously, the owner of the company, Jennifer, had been doing everything related to human resource management (HRM). You can tell she is a bit critical about paying a good salary for something she was able to juggle all on her own. On your first day, you meet the ten employees and spend several hours with the company owner, hoping to get a handle on which human resource processes are already set up. Shortly after the meeting begins, you see she has a completely different perspective of what HRM is, and you realize it will be your job to educate her on the value of a human resource manager. You look at it as a personal challenge—both to educate her and also to show her the value of this role in the organization. First, you tell her that HRM is a strategic process having to do with the staffing, compensation, retention, training, and employment law and policies side of the business. In other words, your job as human resources (HR) manager will be not only to write policy and procedures and to hire people (the administrative role) but also to use strategic plans to ensure the right people are hired and trained for the right job at the right time. For example, you ask her if she knows what the revenue will be in six months, and Jennifer answers, “Of course. We expect it to increase by 20 percent.” You ask, “Have you thought about how many people you will need due to this increase?” Jennifer looks a bit sheepish and says, “No, I guess I haven’t gotten that far.” Then you ask her about the training programs the company offers, the software used to allow employees to access pay information online, and the compensation policies. She responds, “It looks like we have some work to do. I didn’t know that human resources involved all of that.” You smile at her and start discussing some of the specifics of the business, so you can get started right away writing the strategic human resource management plan. Saylor URL: http://www.saylor.org/books Saylor.org 1 What Is Human Resources? LEARNING OBJECTIVES 1. Explain the role of HRM in organizations. 2. Define and discuss some of the major HRM activities. Every organization, large or small, uses a variety of capital to make the business work. Capital includes cash, valuables, or goods used to generate income for a business. For example, a retail store uses registers and inventory, while a consulting firm may have proprietary software or buildings. No matter the industry, all companies have one thing in common: they must have people to make their capital work for them. This will be our focus throughout the text: generation of revenue through the use of people’s skills and abilities. What Is HRM? Human resource management (HRM) is the process of employing people, training them, compensating them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone many changes over the last twenty years, giving it an even more important role in today’s organizations. In the past, HRM meant processing payroll, sending birthday gifts to employees, arranging company outings, and making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic role crucial to the success of the organization. Jack Welch, former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.… Remember, HR is important in good times, HR is defined in hard times.” [1] It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation, and retention of employees—making these aspects not only part of HRM but also part of management. As a result, this book is equally important to someone who wants to be an HR manager and to someone who will manage a business. Human Resource Recall Have you ever had to work with a human resource department at your job? What was the interaction like? What was the department’s role in that specific organization? Saylor URL: http://www.saylor.org/books Saylor.org 2 The Role of HRM Keep in mind that many functions of HRM are also tasks other department managers perform, which is what makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM plays in organizations. These are described in the following sections. Staffing You need people to perform tasks and get work done in the organization. Even with the most sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are four main steps: 1. Development of a staffing plan. This plan allows HRM to see how many people they should hire based on revenue expectations. 2. Development of policies to encourage multiculturalism at work.Multiculturalism in the workplace is becoming more and more important, as we have many more people from a variety of backgrounds in the workforce. 3. Recruitment. This involves finding people to fill the open positions. 4. Selection. In this stage, people will be interviewed and selected, and a proper compensation package will be negotiated. This step is followed by training, retention, and motivation. Development of Workplace Policies Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and executives are involved in the process. For example, the HRM professional will likely recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to involve all other departments in the organization. Some examples of workplace policies might be the following: • Discipline process policy • Vacation time policy • Dress code • Ethics policy Saylor URL: http://www.saylor.org/books Saylor.org 3 • Internet usage policy These topics are addressed further in Chapter 6 "Compensation and Benefits", Chapter 7 "Retention and Motivation", Chapter 8 "Training and Development", and Chapter 9 "Successful Employee Communication". Compensation and Benefits Administration HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to entice people to work for the organization.Compensation includes anything the employee receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years with the organization, years of experience, education, and similar aspects. Examples of employee compensation include the following: • Health Benefits • Pay • 401(k) (retirement plans) • Stock purchase plans • Vacation time • Sick leave • Bonuses • Tuition reimbursement Since this is not an exhaustive list, compensation is discussed further in Chapter 6 "Compensation and Benefits". Retention Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of thHRM Retention involves keeping and motivating employees to stay with the organization. Compensation is a major factor in employee retention, but there are other factors as well. Ninety percent of employees leave a company for the following reasons: 1. The job they are performing 2. Challenges with their manager 3. Poor fit with organizational culture Saylor URL: http://www.saylor.org/books Saylor.org 4 4. Poor workplace environment Despite this, 90 percent of managers think employees leave as a result of pay. [2] As a result, managers often try to change their compensation packages to keep people from leaving, when compensation isn’t the reason they are leaving at all. Chapter 7 "Retention and Motivation" and Chapter 11 "Employee Assessment" discuss some strategies to retain the best employees based on these four factors. Training and Development Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the job but also continue to grow and develop new skills in their job. This results in higher productivity for the organization. Training is also a key component in employee motivation. Employees who feel they are developing their skills tend to be happier in their jobs, which results in increased employee retention. Examples of training programs might include the following: • Job skils training, such as how to run a particular computer program • Training on communication • Team-building activities • Policy and legal training, such as sexual harassment training and ethics training We address each of these types of training and more in detail in Chapter 8 "Training and Development". Dealing with Laws Affecting Employment Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of these laws: • Discrimination laws • Health-care requirements • Compensation requirements such as the minimum wage • Worker safety laws • Labor laws The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and then communicate those changes to the entire management organization. Rather than presenting a chapter focused on HRM laws, we will address these laws in each relevant chapter. Worker Protection Saylor URL: http://www.saylor.org/books Saylor.org 5 Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal of setting federal or state standards to ensure worker safety. Unions and union contracts can also impact the requirements for worker safety in a workplace. It is up to the human resource manager to be aware of worker protection requirements and ensure the workplace is meeting both federal and union standards. Worker protection issues might include the following: • Chemical hazards • Heating and ventilation requirements • Use of “no fragrance” zones • Protection of private employee information We take a closer look at these issues in Chapter 12 "Working with Labor Unions" andChapter 13 "Safety and Health at Work". Communication Besides these major roles, good communication skills and excellent management skills are key to successful human resource management as well as general management. We discuss these issues in Chapter 9 "Successful Employee Communication". Awareness of External Factors In addition to managing internal factors, the HR manager needs to consider the outside forces at play that may affect the organization. Outside forces, orexternal factors, are those things the company has no direct control over; however, they may be things that could positively or negatively impact human resources. External factors might include the following: 1. Globalization and offshoring 2. Changes to employment law 3. Health-care costs 4. Employee expectations 5. Diversity of the workforce 6. Changing demographics of the workforce 7. A more highly educated workforce 8. Layoffs and downsizing 9. Technology used, such as HR databases Saylor URL: http://www.saylor.org/books Saylor.org 6 10. Increased use of social networking to distribute information to employees For example, the recent trend in flexible work schedules (allowing employees to set their own schedules) and telecommuting (allowing employees to work from home or a remote location for a specified period of time, such as one day per week) are external factors that have affected HR. HRM has to be aware of these outside issues, so they can develop policies that meet not only the needs of the company but also the needs of the individuals. Another example is the Patient Protection and Affordable Care Act, signed into law in 2010. Compliance with this bill has huge implications for HR. For example, a company with more than fifty employees must provide health-care coverage or pay a penalty. Currently, it is estimated that 60 percent of employers offer health-care insurance to their employees. [3] Because health-care insurance will be mandatory, cost concerns as well as using health benefits as a recruitment strategy are big external challenges. Any manager operating without considering outside forces will likely alienate employees, resulting in unmotivated, unhappy workers. Not understanding the external factors can also mean breaking the law, which has a concerning set of implications as well. Saylor URL: http://www.saylor.org/books Saylor.org 7 Figure 1.2 An understanding of key external factors is important to the successful HR professional. This allows him or her to be able to make strategic decisions based on changes in the external environment. To develop this undersnding, reading various publications is necessary. Saylor URL: http://www.saylor.org/books Saylor.org 8 One way managers can be aware of the outside forces is to attend conferences and read various articles on the web. For example, the website of the Society for Human Resource Management, SHRM Online, [4] not only has job postings in the field but discusses many contemporary human resource issues that may help the manager make better decisions when it comes to people management. In Section 1.3 "Today’s HRM Challenges", we go into more depth about some recent external issues that are affecting human resource management roles. In Section 1.1.2 "The Role of HRM", we discuss some of the skills needed to be successful in HRM. Figure 1.3 Most professionals agree that there are seven main tasks HRM professionals perform. All these need to be considered in relation to external and outside forces. KEY TAKEAWAYS Saylor URL: http://www.saylor.org/books Saylor.org 9 • Capital includes all resources a company uses to generate revenue. Human resources or the people working in the organization are the most important resource. • Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees. • There are seven main responsibilities of HRM managers: staffing, setting policies,compensation and benefits, retention, training, employment laws, and worker protection. In this book, each of these major areas will be included in a chapter or two. • In addition to being concerned with the seven internal aspects, HRM managers must keep up to date with changes in the external environment that may impact their employees. The trends toward flexible schedules and telecommuting are examples of external aspects. • To effectively understand how the external forces might affect human resources, it is important for the HR manager to read the HR literature, attend conferences, and utilize other ways to stay up to date with new laws, trends, and policies. EXERCISES 1. State arguments for and against the following statement: there are other things more valuable in an organization besides the people who work there. 2. Of the seven tasks an HR manager does, which do you think is the most challenging? Why? [1] Kristen B. Frasch, David Shadovitz, and Jared Shelly, “There’s No Whining in HR,” Human Resource Executive Online, June 30, 2009, accessed September 24, 2010,http://www.hreonline.com/HRE/story.jsp?storyId=227738167. [2] Leigh Rivenbark, “The 7 Hidden Reasons Why Employees Leave,” HR Magazine, May 2005, accessed October 10, 2010,http://findarticles.com/p/articles/mi_m3495/is_5_50/ai_n13721406. [3] Peter Cappelli, “HR Implications of Healthcare Reform,” Human Resource Executive Online,March 29, 2010, accessed August 18, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=379096509. Saylor URL: http://www.saylor.org/books Saylor.org 10 [4] Society for Human Resource Management, accessed August 18, 2011,http://www.shrm.org/Pages/default.aspx. Saylor URL: http://www.saylor.org/books Saylor.org 11 1.2 1. Skills Needed for HRM LEARNING OBJECTIVES Explain the professional and personal skills needed to be successful in HRM. 2. Be able to define human resource management and the certifications that can be achieved in this profession. One of the major factors of a successful manager or human resource (HR) manager is an array of skills to deal with a variety of situations. It simply isn’t enough to have knowledge of HR, such as knowing which forms need to be filled out. It takes multiple skills to create and manage people, as well as a cutting-edge human resource department. The first skill needed is organization. The need for this skill makes sense, given that you are managing people’s pay, benefits, and careers. Having organized files on your computer and good time-management skills are crucial for success in any job, but especially if you take on a role in human resources. Like most jobs, being able to multitask—that is, work on more than one task at a time—is important in managing human resources. A typical person managing human resources may have to deal with an employee issue one minute, then switch and deal with recruiting. Unlike many management positions, which only focus on one task or one part of the business, human resources focuses on all areas of the business, where multitasking is a must. As trite as it may sound, people skills are necessary in any type of management and perhaps might be the most important skills for achieving success at any job. Being able to manage a variety of personalities, deal with conflict, and coach others are all in the realm of people management. The ability to communicate goes along with people skills. The ability to communicate good news (hiring a new employee), bad news (layoffs), and everything in between, such as changes to policy, makes for an excellent manager and human resource management (HRM) professional. Keys to a successful career in HRM or management include understanding specific job areas, such as managing the employee database, understanding employment laws, and knowing how to write and develop a strategic plan that aligns with the business. All these skills will be discussed in this book. A strategic mind-set as an HR professional is a key skill as well. A person with a strategic mind-set can plan far in advance and look at trends that could affect the environment in which the business is Saylor URL: http://www.saylor.org/books Saylor.org 12 operating. Too often, managers focus on their own area and not enough on the business as a whole. The strategic HR professional is able to not only work within his or her area but also understand how HR fits into the bigger picture of the business. Ethics and a sense of fairness are also necessary in human resources. Ethics is a concept that examines the moral rights and wrongs of a certain situation. Consider the fact that many HR managers negotiate salary and union contracts and manage conflict. In addition, HR managers have the task of ensuring compliance with ethics standards within the organization. Many HR managers are required to work with highly confidential information, such as salary information, so a sense of ethics when managing this information is essential. We discuss ethics from the organizational perspective in Section 1.1.2 "The Role of HRM". HUMAN RESOURCE RECALL Think of your current skills. Are there personal or professional skills you would like to work on? Finally, while we can list a few skills that are important, understanding the particular business, knowing the business strategy, and being able to think critically about how HR can align itself with the strategy are ways to ensure HR departments are critical parts of the business. HR is a specialized area, much like accounting or finance. However, many individuals are placed in HR roles without having the specific knowledge to do the job. Oftentimes people with excellent skills are promoted to management and then expected (if the company is small) to perform recruiting, hiring, and compensation tasks. This is the reason we will refer to management and HR management interchangeably throughout the chapters. In addition, these skills are important for HRM professionals and managers alike. Having said that, for those of you wanting a career in HRM, there are three exams you can take to show your mastery of HRM material: 1. Professional in Human Resources (PHR). To take this exam, an HR professional must have at least two years’ experience. The exam is four hours long and consists of 225 multiple-choice questions in a variety of areas. Twelve percent of the test focuses on strategic management, 26 percent on workforce planning, 17 percent on human resource development, 16 percent on rewards, 22 percent on employee and labor relations, and 7 percent on risk management. The application process for taking the exam is given on the Human Resource Certification Institute website at http://www.hrci.org. Saylor URL: http://www.saylor.org/books Saylor.org 13 2. Senior Professional in Human Resources (SPHR). This exam is designed for HR professionals who focus on designing and planning, rather than actual implementation. It is recommended that the person taking this exam has six to eight years of experience and oversees and manages an HR department. In this test, the greater focus is on the strategic aspect of HRM. 3. Global Professional in Human Resources (GPHR). This exam is for HR professionals who perform many of their tasks on a global level and whose companies often work across borders. This exam is three hours long, with 165 multiple-choice questions. A person with two years of professional experience can take the certification test. However, because the test has the international aspect, someone who designs HRrelated programs and processes to achieve business goals would be best suited to earn this certification. The benefits of achieving certifications are great. In addition to demonstrating the abilities of the HR professional, certification allows the professional to be more marketable in a very competitive field. Most companies need a human resource department or a manager with HR skills. The industries and job titles are so varied that it is possible only to list general job titles in human resources: 1. Recruiter 2. Compensation analyst 3. Human resources assistant 4. Employee relations manager 5. Benefits manager 6. Work-life coordinator 7. Training and development manager 8. Human resources manager 9. Vice president for human resources This is not an exhaustive list, but it can be a starting point for research on this career path. KEY TAKEAWAYS • There are a number of skills crucial to human resource management. First, being able to organize and multitask is necessary. In this job, files must be managed, and an HR manager is constantly working in different areas of the business. Saylor URL: http://www.saylor.org/books Saylor.org 14 • Communication skills are necessary in HRM as well. The ability to present good and bad news, work with a variety of personalities, and coach employees is important in HRM. • Specific job skills, such as computer skills, knowledge of employment law, writing and developing strategic plans, and general critical-thinking skills are important in any type of management, but especially in human resource management. • A sense of fairness and strong ethics will make for the best HR manager. Because HR works with a variety of departments to manage conflict and negotiate union contracts and salary, the HR professional needs ethics skills and the ability to maintain confidentiality. • Since one of the major responsibilities of an HR department is to align the HR strategic plan with the business strategic plan, critical and creative thinking, as well as writing, are skills that will benefit the HR manager as well. • Many people find themselves in the role of HR manager, so we will use the termHR manager throughout this book. However, many other types of managers also perform the tasks of recruiting, selecting, and compensating, making this book and the skills listed in this section applicable to all majors. • Certification exams can be taken to make you more marketable in the field of HRM. These certifications are offered by the HR Certification Institute (HRCI). EXERCISE 1. What are your perceptions of what an HR manager does on a day-to-day basis? Research this job title and describe your findings. Is this the type of job you expected? Saylor URL: http://www.saylor.org/books Saylor.org 15 1.3 1. Today’s HRM Challenges LEARNING OBJECTIVE Identify and explain some of the challenges associated with HRM. All departments within an organization must prove their value and contributions to the overall business strategy, and the same is true with HRM. As companies are becoming more concerned with cutting costs, HRM departments must show the value they add to the organization through alignment with business objectives. Being able to add value starts with understanding some of the challenges of businesses and finding ways to reduce a negative impact on the business. This section will discuss some of the HRM challenges, and the rest of this text will dive into greater detail about how to manage these challenges. Containing Costs If you were to ask most business owners what their biggest challenges are, they will likely tell you that cost management is a major factor to the success or failure of their business. In most businesses today, the people part of the business is the most likely place for cuts when the economy isn’t doing well. Consider the expenses that involve the people part of any business: 1. Health-care benefits 2. Training costs 3. Hiring process costs 4. And many more… These costs cut into the bottom line of any business. The trick is to figure out how much, how many, or how often benefits should be offered, without sacrificing employee motivation. A company can cut costs by not offering benefits or 401(k) plans, but if its goal is to hire the best people, a hiring package without these items will most certainly not get the best people. Containment of costs, therefore, is a balancing act. An HR manager must offer as much as he or she can to attract and retain employees, but not offer too much, as this can put pressure on the company’s bottom line. We will discuss ways to alleviate this concern throughout this book. For example, there are three ways to cut costs associated with health care: 1. Shift more of the cost of health care to employees 2. Reduce the benefits offered to cut costs Saylor URL: http://www.saylor.org/books Saylor.org 16 3. Change or better negotiate the plan to reduce health-care costs Health care costs companies approximately $4,003 per year for a single employee and $9,764 for families. This equals roughly 83 percent and 73 percent of total health-care costs for single employees and employees with families, [1] respectively. One possible strategy for containment for health-care plans is to implement a cafeteria plan.Cafeteria plans started becoming popular in the 1980s and have become standard in many organizations. [2] This type of plan gives all employees a minimum level of benefits and a set amount to spend on flexible benefits, such as additional health care or vacation time. It creates more flexible benefits, allowing the employee, based on his or her family situation, to choose which benefits are right for them. For example, a mother of two may choose to spend her flexible benefits on health care for her children, while a single, childless female may opt for more vacation days. In other words, these plans offer flexibility, while saving money, too. Cost containment strategies around benefits will be discussed in Chapter 6 "Compensation and Benefits". Another way to contain costs is by offering training. While this may seem counterintuitive, as training does cost money up front, it can actually save money in the long run. Consider how expensive a sexual harassment lawsuit or wrongful termination lawsuit might be. For example, a Sonic Drive-In was investigated by the Equal Opportunity Employment Commission (EEOC) on behalf of seventy women who worked there, and it was found that a manager at one of the stores subjected the victims to inappropriate touching and comments. This lawsuit cost the organization $2 million. [3] Some simple training up front (costing less than the lawsuit) likely would have prevented this from happening. Training employees and management on how to work within the law, thereby reducing legal exposure, is a great way for HR to cut costs for the organization as a whole. In Chapter 8 "Training and Development", we will further discuss how to organize, set up, and measure the success of a training program. The hiring process and the cost of turnover in an organization can be very expensive. Turnover refers to the number of employees who leave a company in a particular period of time. By creating a recruiting and selection process with cost containment in mind, HR can contribute directly to cost-containment strategies company wide. In fact, the cost of hiring an employee or replacing an old one (turnover) can be as high as $9,777 for a position that pays $60,000. [4] By hiring smart the first time, HR managers can contain costs for their organization. This will be discussed in Chapter 4 "Recruitment"and Chapter 5 Saylor URL: http://www.saylor.org/books Saylor.org 17 "Selection". Reducing turnover includes employee motivational strategies. This will be addressed in Chapter 7 "Retention and Motivation". In a survey reported on by the Sales and Marketing Management newsletter, [5] 85 percent of managers say that ineffective communication is the cause of lost revenue. E-mail, instant messaging, text messages, and meetings are all examples of communication in business. An understanding of communication styles, personality styles, and channels of communication can help us be more effective in our communications, resulting in cost containment. In HRM, we can help ensure our people have the tools to communicate better, and contain costs and save dollars in doing so. Some of these tools for better communication will be addressed in Chapter 9 "Successful Employee Communication" One cost-containment strategy for US businesses has been offshoring. Offshoringrefers to the movement of jobs overseas to contain costs. It is estimated that 3.3 million US jobs will be moved overseas by 2015. [6] According to the US Census Bureau, most of these jobs are Information Technology (IT) jobs as well as manufacturing jobs. This issue is unique to HR, as the responsibility for developing training for new workers and laying off domestic workers will often fall under the realm of HRM. Offshoring will be discussed in Chapter 14 "International HRM", and training for new workers will be discussed in Chapter 8 "Training and Development". Of course, cost containment isn’t only up to HRM and managers, but as organizations look at various ways to contain costs, human resources can certainly provide solutions. Technology Technology has greatly impacted human resources and will continue to do so as new technology is developed. Through use of technology, many companies have virtual workforces that perform tasks from nearly all corners of the world. When employees are not located just down the hall, management of these human resources creates some unique challenges. For example, technology creates an even greater need to have multicultural or diversity understanding. Since many people will work with individuals from across the globe, cultural sensitivity and understanding is the only way to ensure the use of technology results in increased productivity rather than decreased productivity due to miscommunications. Chapter 3 "Diversity and Multiculturalism" and Chapter 14 "International HRM" will discuss some specific diversity issues surrounding a global workforce. Saylor URL: http://www.saylor.org/books Saylor.org 18 Technology also creates a workforce that expects to be mobile. Because of the ability to work from home or anywhere else, many employees may request and even demand a flexible schedule to meet their own family and personal needs. Productivity can be a concern for all managers in the area of flextime, and another challenge is the fairness to other workers when one person is offered a flexible schedule. Chapter 6 "Compensation and Benefits" and Chapter 7 "Retention and Motivation" will discuss flextime as a way to reward employees. Many companies, however, are going a step further and creating virtual organizations, which don’t have a physical location (cost containment) and allow all employees to work from home or the location of their choice. As you can imagine, this creates concerns over productivity and communication within the organization. The use of smartphones and social networking has impacted human resources, as many companies now disseminate information to employees via these methods. Of course, technology changes constantly, so the methods used today will likely be different one year or even six months from now. The large variety of databases available to perform HR tasks is mind boggling. For example, databases are used to track employee data, compensation, and training. There are also databases available to track the recruiting and hiring processes. We will discuss more about technology in HR in Chapter 4 "Recruitment" through Chapter 8 "Training and Development". Of course, the major challenge with technology is its constantly changing nature, which can impact all practices in HRM. HOW WOULD YOU HANDLE THIS? Too Many Friends You are the HR manager for a small company, consisting of twenty-three people plus the two owners, Steve and Corey. Every time you go into Steve’s office, you see he is on Facebook. Because he is Facebook friends with several people in the organization, you have also heard he constantly updates his status and uploads pictures during work time. Then, at meetings, Steve will ask employees if they saw the pictures he recently uploaded from his vacation, weekend, or backpacking trip. One employee, Sam, comes to you with a concern about this. “I am just trying to do my job, but I feel if I don’t look at his photos, he may not think I am a good employee,” she says. How would you handle this? How Would You Handle This? https://api.wistia.com/v1/medias/1371241/embed Saylor URL: http://www.saylor.org/books Saylor.org 19 The author discusses the How Would You Handle This situation in this chapter at:https://api.wistia.com/v1/medias/1371241/embed. Cyberloafing, a term used to describe lost productivity as a result of an employee using a work computer for personal reasons, is another concern created by technology. One study performed by Nucleus Research found that the average worker uses Facebook for fifteen minutes per day, which results in an [7] average loss of 1.5 percent of productivity. Some workers, in fact, use Facebook over two hours per day during working hours. Restricting or blocking access to the Internet, however, can result in angry employees and impact motivation at work. Motivational factors will be discussed in Chapter 7 "Retention and Motivation". Technology can create additional stress for workers. Increased job demands, constant change, constant emailing and texting, and the physical aspects of sitting in front of a computer can be not only stressful but also physically harmful to employees. Chapter 13 "Safety and Health at Work" will deal with some of these stress issues, as well as safety issues such as carpal tunnel, which can occur as a result of technology in the workplace. More on health and safety will be covered in Chapter 10 "Managing Employee Performance". The Economy Tough economic times in a country usually results in tough times for business, too. High unemployment and layoffs are clearly HRM and managerial issues. If a human resource manager works for a unionized company, union contracts are the guiding source when having to downsize owing to a tough economy. We will discuss union contracts in greater detail in Chapter 12 "Working with Labor Unions". Besides union restrictions, legal restrictions on who is let go and the process followed to let someone go should be on the forefront of any manager’s mind when he or she is required to lay off people because of a poor economy. Dealing with performance issues and measuring performance can be considerations when it is necessary to lay off employees. These issues will be discussed in Chapter 10 "Managing Employee Performance" and Chapter 11 "Employee Assessment". Likewise, in a growth economy, the HR manager may experience a different kind of stress. Massive hiring to meet demand might occur if the economy is doing well. For example, McDonald’s restaurants had to fill six hundred positions throughout Las Vegas and held hiring day events in 2010. [8] Imagine the process of hiring this many people in a short period of time The same recruiting and selection processes used under Saylor URL: http://www.saylor.org/books Saylor.org 20 normal circumstances will be helpful in mass hiring situations. Recruiting and selection will be discussed in Chapter 4 "Recruitment" and Chapter 5 "Selection". The Changing and Diverse Workforce Human resources should be aware that the workforce is constantly changing. For example, in the 2010 census, the national population was 308,745,538, with 99,531,000 in 2010 working full time, down from 2008 when 106,648,000 were working full time. [9] For full-time workers, the average weekly salary was higher the more educated the worker. See Figure 1.6 for details. Figure 1.6 The average weekly earnings for workers in the United States increase with more education. Source: Data from US Bureau of Labor Statistics, “Usual Weekly Earnings of Wage and Salary Workers,” Table 5, Economic News Release, July 20, 2010, accessed August 19, 2011, http://www.bls.gov/opub/ted/2010/ted_20100726_data.htm. FORTUNE 500 FOCUS Multigenerational is here to stay, and Xerox is the leader in recruiting of Generation Y talent. This age group has been moving into the labor market over the last six years, and this major demographic change, along with the retirement of baby boomers, has many companies thinking. Fortune 500 companies know they must find out where their new stars are coming from. In recruiting this new talent, Xerox isn’t looking to old methods, because they know each generation is different. For example, Xerox developed the “Express Yourself” recruiting campaign, which is geared around a core value of this generation, to develop Saylor URL: http://www.saylor.org/books Saylor.org 21 solutions and change. Joe Hammill, the director of talent acquisition, says, “Gen Y is very important. Xerox and other companies view this emerging workforce as the future of our organization.” [10] Besides the new recruiting campaign, recruiters are working at what they term “core colleges”—that is, those that produce the kind of talent they need. For example, they developed recruitment campaigns with specific institutions such as the Rochester Institute of Technology because of its strong engineering and printing science programs. On their company website, they have a specific tab for the recent college graduate, emphasizing core values of this generation, including the ability to contribute, support, and build skills. With its understanding of multicultural generations, Xerox has created a talent pool for years to come. It is expected that over the next ten years, over 40 percent of the workforce will retire, and there will not be enough younger workers to take the jobs once held by the retiring workforce. [11] In fact, the American Society of Training and Development says that in the next twenty years, seventy-six million Americans will retire, and only forty-six million will replace them. As you can imagine, this will create a unique staffing obstacle for human resources and managers alike, as they try to find talented people in a pool that doesn’t have enough people to perform necessary jobs. The reason for this increase in retirement is the aging baby boomers. Baby boomers can be defined as those born between the years 1946 and 1964, according to the Census Bureau. They are called the baby boomers because there was a large increase of babies born after soldiers came back from World War II. Baby boomers account for seventy-six million people in the United States in 2011, the same year in which the first of the baby boomers have started to retire. The impact of the baby boomer generation on our country and on human resource management is huge. First, the retirement of baby boomers results in a loss of a major part of the working population, and there are not enough people to fill those jobs that are left vacant. Second, the baby boomers’ knowledge is lost upon their retirement. Much of this knowledge isn’t formalized or written down, but it contributes to the success of business. Third, elderly people are living longer, and this results in higher health-care costs for all currently in the workforce. It is estimated that three out of five baby boomers do not have enough money saved for retirement, [12] meaning that many of them will depend on Social Security payments to meet basic needs. However, since the Social Security system is a pay-as-you-go system (i.e., those paying into the system now are paying for current retirees), there may not be enough current workers to cover Saylor URL: http://www.saylor.org/books Saylor.org 22 the current Social Security needs. In fact, in 1950 there were 16 workers to support each Social Security beneficiary, but today there are only 3.3 workers supporting each beneficiary. [13] The implications can mean that more will be paid by current workers to support retirees. As a result of the aging workforce, human resources should keep abreast of changes in Social Security legislation and health-care costs, which will be discussed in Chapter 6 "Compensation and Benefits". In addition, human resource managers should review current workers’ skill levels and monitor retirements and skills lost upon those retirements, which is part of strategic planning. This will be discussed in Chapter 2 "Developing and Implementing Strategic HRM Plans". Having knowledge about current workers and skills, as well as predicting future workforce needs, will be necessary to deal with the challenges of an aging workforce. HUMAN RESOURCE RECALL Have you ever worked in a multigenerational organization? What were some of the challenges in working with people who may have grown up in a different era? Another challenge, besides lack of workers, is the multigenerational workforce. Employees between the ages of seventeen and sixty-eight have different values and different expectations of their jobs. Any manager who tries to manage these workers from varying generations will likely have some challenges. Even compensation preferences are different among generations. For example, the traditional baby boomer built a career during a time of pensions and strongly held values of longevity and loyalty to a company. Compare the benefit needs of this person to someone who is younger and expects to save through a 401(k) plan, and it is clear that the needs and expectations are different. [14] Throughout this book, we will discuss compensation and motivational strategies for the multigenerational workforce. Awareness of the diversity of the workforce will be discussed in Chapter 3 "Diversity and Multiculturalism", but laws regarding diversity will be discussed throughout the book. Diversity refers to age, disability, race, sex, national origin, and religion. Each of these components makes up the productive workforce, and each employee has different needs, wants, and goals. This is why it is imperative for the HRM professional to understand how to motivate the workforce, while ensuring that no laws are broken. We will discuss laws regarding diversity (and the components of diversity, such as disabilities) in Chapter Saylor URL: http://www.saylor.org/books Saylor.org 23 Figure 1.8 Demographic Data for the United States by Race Source: Map courtesy of the US Census Department. 3 "Diversity and Multiculturalism", Chapter 4 "Recruitment",Chapter 5 "Selection", Chapter 6 "Compensation and Benefits", and Chapter 7 "Retention and Motivation". Ethics A discussion of ethics is necessary when considering challenges of human resources. Much of the discussion surrounding ethics happened after the early to mid-2000s, when several companies were found to have engaged in gross unethical and illegal conduct, resulting in the loss of billions of dollars from shareholders. Consider the statistics: only 25 percent of employees trusted their CEO to tell the truth, and 80 percent of people said that employers have a moral responsibility to society. [15] Based on these numbers, an ethical workplace is important not only for shareholder satisfaction but for employee satisfaction as well. Companies are seeing the value of implementing ethics codes within the business. Many human resource departments have the responsibility of designing codes of ethics and developing policies for ethical decision making. Some organizations hire ethics officers to specifically focus on this area of the business. Out of four hundred companies surveyed, 48 percent had an ethics officer, who Saylor URL: http://www.saylor.org/books Saylor.org 24 reported to either the CEO or the HR executive. [16] According to Steve Miranda, chief human resources officer for the Society for Human Resource Management (SHRM), “[the presence of an ethics officer] provides a high-level individual with positional authority who can ensure that policies, practices, and guidelines are effectively communicated across the organization.” [17] For example, the insurance company Allstate recently hired a chief ethics and compliance officer (CECO) who offers a series of workshops geared toward leaders in the organization, because they believe that maintaining high ethical standards starts at the top of an organization. In addition, the CECO monitors reports of ethics complaints within the organization and trains employees on the code of ethics or code of [18] conduct. A code of ethics is an outline that explains the expected ethical behavior of employees. For example, General Electric (GE) has a sixty-four-page code of conduct that outlines the expected ethics, defines them, and provides information on penalties for not adhering to the code. The code of conduct is presented below. Of course, simply having a written code of ethics does little to encourage positive behavior, so many organizations (such as GE) offer stiff penalties for ethics violations. Developing policies, monitoring behavior, and informing people of ethics are necessary to ensure a fair and legal business. The following is an outline of GE’s code of conduct: [19] • Obey the applicable laws and regulations governing our business conduct worldwide. • Be honest, fair, and trustworthy in all your GE activities and relationships. • Avoid all conflicts of interest between work and personal affairs. • Foster an atmosphere in which fair employment practices extend to every member of the diverse GE community. • Strive to create a safe workplace and to protect the environment. • Through leadership at all levels, sustain a culture where ethical conduct is recognized, valued, and exemplified by all employees. • KEY TAKEAWAYS One of the most important aspects to productive HRM is to ensure the department adds value to the rest of the organization, based on the organization’s strategic plan. Saylor URL: http://www.saylor.org/books Saylor.org 25 • One of the major challenges of HRM is containment of costs. This can be done in several ways, for example, in the way health care and benefits are offered. Many companies are developing cafeteria plans that satisfy the employee and help contain costs. • HRM can also contain costs by developing and managing training programs and ensuring employees are well trained to be productive in the job. • Hiring is a very expensive part of human resources, and therefore HRM should take steps to ensure they are hiring the right people for the job the first time.Turnover is a term used to describe the departure of an employee. • Poor communication results in wasting time and resources. We can communicate better by understanding communication channels, personalities, and styles. • Technology is also a challenge to be met by human resources. For example, employees may request alternative work schedules because they can use technology at home to get their work done. • Because technology is part of our work life, cyberloafing, or employees spending too much time on the Internet, creates new challenges for managers. Technology can also create challenges such as workplace stress and lack of work-life balance. • The economy is a major factor in human resource management. HR managers, no matter what the state of the economy, must plan effectively to make sure they have the right number of workers at the right time. When we deal with a down economy, the legal and union implications of layoffs must be considered, and in an up economy, hiring of workers to meet the internal demand is necessary. • The retirement of baby boomers is creating a gap in the workplace, related to not only the number of people available but also the skills people have.Multigenerational companies, or companies with workers of a variety of ages, must find ways to motivate employees, even though those employees may have different needs. HR must be aware of this and continually plan for the challenge of a changing workforce. Diversity in the workplace is an important challenge in human resource management. Diversity will be discussed in Chapter 3 "Diversity and Multiculturalism". Saylor URL: http://www.saylor.org/books Saylor.org 26 • Ethics and monitoring of ethical behavior are also challenges in HRM. Setting ethical standards and monitoring ethical behavior, including developing a code of conduct, is a must for any successful business. EXERCISES 1. Research the various generations: baby boomers, Generation X, and the Y Generation (millennials). Compare and contrast five differences between the generations. How might these differences impact HRM? 2. Review news articles on the current state of the economy. Which aspects of these articles do you think can relate to HRM? [1] “Use Three Strategies to Cut Health Care Costs,” Business Management Daily, September 9, 2010, accessed October 10, 2010,http://www.businessmanagementdaily.com/articles/23381/1/Use-3-strategies-to-cut-healthcare-costs/Page1.html. [2] Mary Allen, “Benefits, Buffet Style—Flexible Plans,” Nation’s Business, January 1997, accessed October 1, 2010, http://findarticles.com/p/articles/mi_m1154/is_v75/ai_4587731. [3] “LL Sonic Settles EEOC Lawsuit for $2 Million,” Valencia County News Bulletin, June 23, 2011. [4] James Del Monte, “Cost of Hiring and Turnover,” JDA Professional Services, Inc., 2010, accessed October 1, 2010, http://www.jdapsi.com/Client/articles/coh. [5] “The Cost of Poor Communications,” Sales and Marketing, December 22, 2006, accessed October 1, 2010, http://www.allbusiness.com/marketing-advertising/4278862-1.html. [6] Vivek Agrawal and Diana Farrell, “Who Wins in Offshoring?” in “Global Directions,” special issue, McKinsey Quarterly, (2003): 36–41,https://www.mckinseyquarterly.com/Who_wins_in_offshoring_1363. [7] “Facebook Use Cuts Productivity at Work,” Economic Times, July 25, 2009, accessed October 4, 2010, http://economictimes.indiatimes.com/tech/internet/Facebook-use-cuts-productivity-at-workStudy/articleshow/4818848.cms. [8] “McDonald’s Readies for Massive Hiring Spree,” Fox 5 News, Las Vegas, May 2010, accessed October 5, 2010, http://www.fox5vegas.com/news/23661640/detail.html (site discontinued). Saylor URL: http://www.saylor.org/books Saylor.org 27 [9] Bureau of Labor Statistics, Current Population Survey Report, accessed July 7, 2011,http://www.bls.gov/cps/earnings.htm#education. [10] Stephanie Armour, “Generation Y: They’ve Arrived at Work with a New Attitude,” USA Today, November 6, 2005. [11] Alvaro Fernandez, “Training the Aging Workforce,” SharpBrains, August 10, 2007, accessed October 6, 2010, http://www.sharpbrains.com/blog/2007/08/10/training-the-aging-workforce-and-their-brains. [12] Joe Weisenthal, “3 of 5 Baby Boomers Don’t Have Enough for Retirement,” Business Insider Magazine, August 16, 2010, http://www.businessinsider.com/boomers-cutting-back-2010-8. [13] Brenda Wenning, “Baby Boomer Retirement May Be a Bust,” Metrowest News Daily, March 21, 2010. [14] Michelle Capezza, “Employee Benefits in a Multigenerational Workplace,” EpsteinBeckerGreen, August 12, 2010, accessed October 6, 2010,http://www.ebglaw.com/showNewsletter.aspx?Show=13313. [15] Strategic Management Partners, “Unethical Statistics Announced At Business Leaders Event,” news release, http://www.consult-smp.com/archives/2005/02/unethical_stati.html, accessed August 31, 2011. [16] Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June 16, 2011, accessed July 7, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153. [17] Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June 16, 2011, accessed July 7, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153, brackets in the original. [18] Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June 16, 2011, accessed July 7, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153. [19] “The Spirit and the Letter,” General Electric Company, accessed August 10, 2011,http://files.gecompany.com/gecom/citizenship/pdfs/TheSpirit&TheLetter.pdf. Saylor URL: http://www.saylor.org/books Saylor.org 28 1.4 • Cases and Problems CHAPTER SUMMARY Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees. Three certification exams, which are offered by the Human Resource Certification Institute, can be taken to show HRM skills and become more marketable. • Human resource management involves seven main areas: (1) staffing, (2) workplace policies, (3) benefits and compensation, (4) retention, (5) training, (6) employment laws, and (7) employee protection. • Human resource managers need many different types of skills. Being able to organize, multitask, and communicate effectively, as well as having specific job skills, such as how to run a particular computer program, and a sense of fairness and ethics, is crucial to a successful career in HRM. • There are many contemporary challenges associated with HRM. First, it is up to everyone in the organization to contain costs. HR managers need to look at their individual departments and demonstrate the necessity and value of their functions to the organization. HR managers can also help contain costs in several ways, such as managing benefits plans and compensation and providing training. • The fast-changing nature of technology is also a challenge in HRM. As new technologies are developed, employees may be able to implement innovative ways of working such as flextime. HR managers are also responsible for developing policies dealing with cyberloafing and other workplace time wasters revolving around technology. Employee stress and lack of work-life balance are also greatly influenced by technology. • Awareness of the changes in the economy allows the human resource manager to adequately plan for reductions and additions to the workforce. • The aging and changing workforce is our final factor. As baby boomers retire, there likely will not be enough people to replace them, and many of the skills the baby boomers have may be lost. In addition, having to work with multiple generations at once can create challenges as different expectations and needs arise from multigenerational workforces. CHAPTER CASE Changes, Changes Saylor URL: http://www.saylor.org/books Saylor.org 29 Jennifer, the owner and manager of a company with ten employees, has hired you to take over the HRM function so she can focus on other areas of her business. During your first two weeks, you find out that the company has been greatly affected by the up economy and is expected to experience overall revenue growth by 10 percent over the next three years, with some quarters seeing growth as high as 30 percent. However, five of the ten workers are expected to retire within three years. These workers have been with the organization since the beginning and provide a unique historical perspective of the company. The other five workers are of diverse ages. In addition to these changes, Jennifer believes they may be able to save costs by allowing employees to telecommute one to two days per week. She has some concerns about productivity if she allows employees to work from home. Despite these concerns, Jennifer has even considered closing down the physical office and making her company a virtual organization, but she wonders how such a major change will affect the ability to communicate and worker motivation. Jennifer shares with you her thoughts about the costs of health care on the organization. She has considered cutting benefits entirely and having her employees work for her on a contract basis, instead of being full-time employees. She isn’t sure if this would be a good choice. Jennifer schedules a meeting with you to discuss some of her thoughts. To prepare for the meeting, you perform research so you can impress your new boss with recommendations on the challenges presented. 1. Point out which changes are occurring in the business that affect HRM. 2. What are some considerations the company and HR should be aware of when making changes related to this case study? 3. What would the initial steps be to start planning for these changes? 4. What would your role be in implementing these changes? What would Jennifer’s role be? TEAM ACTIVITIES 1. In a group of two to three people, research possible career paths in HRM and prepare a PowerPoint presentation to discuss your findings. 2. Interview an HR manager and discuss his or her career path, skills, and daily tasks. Present your findings to your class. Saylor URL: http://www.saylor.org/books Saylor.org 30 “Developing and Implementing Strategic HRM Plans” from Human Resource Management was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 license without attribution as requested by the work’s original creator or licensee. Chapter 2: Developing and Implementing Strategic HRM Plans The Value of Planning James stumbled into his position as the human resource manager. He had been working for Techno, Inc. for three years, and when the company grew, James moved from a management position into a human resource management position. Techno, Inc. is a technology and software consulting company for the music industry. James didn’t have a good handle on how to effectively run a human resources (HR) department, so for much of the time he tried to figure it out as he went. When Techno started seeing rapid growth, he hired thirty people within a one-month period to meet the demand. Proud of his ability to accomplish his task of meeting the business’s current needs, James was rather pleased with himself. He had spent numerous hours mulling over recruitment strategies, putting together excellent compensation plans, and then eventually sifting through résumés as a small part of the hiring process. Now the organization had the right number of people needed to carry out its projects. Fast forward five months, however, and it turned out the rapid growth was only temporary. James met with the executives of the business who told him the contracts they had acquired were finished, and there wasn’t enough new work coming in to make payroll next month if they didn’t let some people go. James felt frustrated because he had gone through so much effort to hire people, and now they would be laid off. Never mind the costs of hiring and training his department had taken on to make this happen. As James sat with the executives to determine who should be laid off, he felt sad for the people who had given up other jobs just five months before, only to be laid off. After the meeting, James reflected on this situation and realized that if he had spoken with the executives of the company sooner, they would have shared information on the duration of the contracts, and he likely would have hired people differently, perhaps on a contract basis rather than on a full-time basis. He also considered the fact that the organization could have hired an outsourcing company to recruit workers for him. As Jason mulled this over, he realized that he needed a strategic plan to make sure his department was meeting the needs of the organization. He vowed to work with the company executives to find out more about the company’s strategic plan and then develop a human resource management (HRM) Saylor URL: http://www.saylor.org/books Saylor.org 31 strategic plan to make sure Techno, Inc. has the right number of workers with the right skills, at the right time in the future. Saylor URL: http://www.saylor.org/books Saylor.org 32 2.1 1. Strategic Planning LEARNING OBJECTIVES Explain the differences been HRM and personnel management. 2. Be able to define the steps in HRM strategic planning. In the past, human resource management (HRM) was called the personnel department. In the past, the personnel department hired people and dealt with the hiring paperwork and processes. It is believed the first human resource department was created in 1901 by the National Cash Register Company (NCR). The company faced a major strike but eventually defeated the union after a lockout. (We address unions in Chapter 12 "Working with Labor Unions".) After this difficult battle, the company president decided to improve worker relations by organizing a personnel department to handle grievances, discharges, safety concerns, and other employee issues. The department also kept track of new legislation surrounding laws impacting the organization. Many other companies were coming to the same realization that a department was necessary to create employee satisfaction, which resulted in more productivity. In 1913, Henry Ford saw employee turnover at 380 percent and tried to ease the turnover by increasing wages from $2.50 to $5.00, even though $2.50 was fair during this time period. [1] Of course, this approach didn’t work for long, and these large companies began to understand they had to do more than hire and fire if they were going to meet customer demand. More recently, however, the personnel department has divided into human resource management and human resource development, as these functions have evolved over the century. HRM is not only crucial to an organization’s success, but it should be part of the overall company’s strategic plan, because so many businesses today depend on people to earn profits. Strategic planning plays an important role in how productive the organization is. Table 2.1 Examples of Differences between Personnel Management and HRM Personnel Management Focus Administering of policies HRM Focus Helping to achieve strategic goals through people Stand-alone programs, such as training HRM training programs that are integrated with company’s Saylor URL: http://www.saylor.org/books Saylor.org 33 Personnel Management Focus HRM Focus mission and values Personnel department responsible for managing people Line managers share joint responsibility in all areas of people hiring and management Creates a cost within an organization Contributes to the profit objectives of the organization Most people agree that the following duties normally fall under HRM. Each of these aspects has its own part within the overall strategic plan of the organization: 1. Staffing. Staffing includes the development of a strategic plan to determine how many people you might need to hire. Based on the strategic plan, HRM then performs the hiring process to recruit and select the right people for the right jobs. We discuss staffing in greater detail in Chapter 4 "Recruitment", Chapter 5 "Selection", and Chapter 6 "Compensation and Benefits". 2. Basic workplace policies. Development of policies to help reach the strategic plan’s goals is the job of HRM. After the policies have been developed, communication of these policies on safety, security, scheduling, vacation times, and flextime schedules should be developed by the HR department. Of course, the HR managers work closely with supervisors in organizations to develop these policies. Workplace policies will be addressed throughout the book. 3. Compensation and benefits. In addition to paychecks, 401(k) plans, health benefits, and other perks are usually the responsibility of an HR manager. Compensation and benefits are discussed in Chapter 6 "Compensation and Benefits" and Chapter 7 "Retention and Motivation". 4. Retention. Assessment of employees and strategizing on how to retain the best employees is a task that HR managers oversee, but other managers in the organization will also provide input. Chapter 9 "Successful Employee Communication", Chapter 10 "Managing Employee Performance", and Chapter 11 "Employee Assessment" cover different types of retention strategies, from training to assessment. 5. Training and development. Helping new employees develop skills needed for their jobs and helping current employees grow their skills are also tasks for which the HRM department is responsible. Determination of training needs and development and implementation of training programs are important tasks in any organization. Training is discussed in great detail in Chapter 9 "Successful Employee Communication"including succession planning. Succession planning includes handling the Saylor URL: http://www.saylor.org/books Saylor.org 34 departure of managers and making current employees ready to take on managerial roles when a manager does leave. 6. Regulatory issues and worker safety. Keeping up to date on new regulations relating to employment, health care, and other issues is generally a responsibility that falls on the HRM department. While various laws are discussed throughout the book, unions and safety and health laws in the workplace are covered in Chapter 12 "Working with Labor Unions" and Chapter 13 "Safety and Health at Work". In smaller organizations, the manager or owner is likely performing the HRM functions. [2] They hire people, train them, and determine how much they should be paid. Larger companies ultimately perform the same tasks, but because they have more employees, they can afford to employ specialists, or human resource managers, to handle these areas of the business. As a result, it is highly likely that you, as a manager or entrepreneur, will be performing HRM tasks, hence the value in understanding the strategic components of HRM. HRM vs. Personnel Management Human resource strategy is an elaborate and systematic plan of action developed by a human resource department. This definition tells us that an HR strategy includes detailed pathways to implement HRM strategic plans and HR plans. Think of theHRM strategic plan as the major objectives the organization wants to achieve, and the HR plan as the specific activities carried out to achieve the strategic plan. In other words, the strategic plan may include long-term goals, while the HR plan may include short-term objectives that are tied to the overall strategic plan. As mentioned at the beginning of this chapter, human resource departments in the past were called personnel departments. This term implies that the department provided “support” for the rest of the organization. Companies now understand that the human side of the business is the most important asset in any business (especially in this global economy), and therefore HR has much more importance than it did twenty years ago. While personnel management mostly involved activities surrounding the hiring process and legal compliance, human resources involves much more, including strategic planning, which is the focus of this chapter. The Ulrich HR model, a common way to look at HRM strategic planning, provides an overall view of the role of HRM in the organization. His model is said to have started the movement that changed the view of HR; no longer merely a functional area, HR became more of a partnership within the organization. While his model has changed over the years, the current model looks at alignment of HR activities with the overall Saylor URL: http://www.saylor.org/books Saylor.org 35 global business strategy to form a strategic partnership. [3] His newly revised model looks at five main areas of HR: 1. Strategic partner. Partnership with the entire organization to ensure alignment of the HR function with the needs of the organization. 2. Change agent. The skill to anticipate and respond to change within the HR function, but as a company as a whole. 3. Administrative expert and functional expert. The ability to understand and implement policies, procedures, and processes that relate to the HR strategic plan. 4. Human capital developer. Means to develop talent that is projected to be needed in the future. 5. Employee advocate. Works for employees currently within the organization. According to Ulrich, [4] implementation of this model must happen with an understanding of the overall company objectives, problems, challenges, and opportunities. For example, the HR professional must understand the dynamic nature of the HRM environment, such as changes in labor markets, company culture and values, customers, shareholders, and the economy. Once this occurs, HR can determine how best to meet the needs of the organization within these five main areas. HRM AS A STRATEGIC COMPONENT OF THE BUSINESS Keeping the Ulrich model in mind, consider these four aspects when creating a good HRM strategic plan: Saylor URL: http://www.saylor.org/books Saylor.org 36 Figure 2.1 To be successful in writing an HRM strategic plan, one must understand the dynamic external environment. 1. Make it applicable. Often people spend an inordinate amount of time developing plans, but the plans sit in a file somewhere and are never actually used. A good strategic plan should be the guiding principles for the HRM function. It should be reviewed and changed as aspects of the business change. Involvement of all members in the HR department (if it’s a larger department) and communication among everyone within the department will make the plan better. 2. Be a strategic partner. Alignment of corporate values in the HRM strategic plan should be a major objective of the plan. In addition, the HRM strategic plan should be aligned with the mission and objectives of the organization as a whole. For example, if the mission of the organization is to promote social responsibility, then the HRM strategic plan should address this in the hiring criteria. Saylor URL: http://www.saylor.org/books Saylor.org 37 3. Involve people. An HRM strategic plan cannot be written alone. The plan should involve everyone in the organization. For example, as the plan develops, the HR manager should meet with various people in departments and find out what skills the best employees have. Then the HR manager can make sure the people recruited and interviewed have similar qualities as the best people already doing the job. In addition, the HR manager will likely want to meet with the financial department and executives who do the budgeting, so they can determine human resource needs and recruit the right number of people at the right times. In addition, once the HR department determines what is needed, communicating a plan can gain positive feedback that ensures the plan is aligned with the business objectives. 4. Understand how technology can be used. Organizations oftentimes do not have the money or the inclination to research software and find budget-friendly options for implementation. People are sometimes nervous about new technology. However, the best organizations are those that embrace technology and find the right technology uses for their businesses. There are thousands of HRM software options that can make the HRM processes faster, easier, and more effective. Good strategic plans address this aspect. HR managers know the business and therefore know the needs of the business and can develop a plan to meet those needs. They also stay on top of current events, so they know what is happening globally that could affect their strategic plan. If they find out, for example, that an economic downturn is looming, they will adjust their strategic plan. In other words, the strategic plan needs to be a living document, one that changes as the business and the world changes. HUMAN RESOURCE RECALL Have you ever looked at your organization’s strategic plan? What areas does the plan address? The Steps to Strategic Plan Creation As we addressed in Section 2.1.2 "The Steps to Strategic Plan Creation", HRM strategic plans must have several elements to be successful. There should be a distinction made here: the HRM strategic plan is different from the HR plan. Think of the HRM strategic plan as the major objectives the organization wants to achieve, while the HR plan consists of the detailed plans to ensure the strategic plan is achieved. Saylor URL: http://www.saylor.org/books Saylor.org 38 Oftentimes the strategic plan is viewed as just another report that must be written. Rather than jumping in and writing it without much thought, it is best to give the plan careful consideration. The goal of Section 2 "Conduct a Strategic Analysis"is to provide you with some basic elements to consider and research before writing any HRM plans. Conduct a Strategic Analysis A strategic analysis looks at three aspects of the individual HRM department: 1. Understanding of the company mission and values. It is impossible to plan for HRM if one does not know the values and missions of the organization. As we have already addressed in this chapter, it is imperative for the HR manager to align department objectives with organizational objectives. It is worthwhile to sit down with company executives, management, and supervisors to make sure you have a good understanding of the company mission and values. Another important aspect is the understanding of the organizational life cycle. You may have learned about the life cycle in marketing or other business classes, and this applies to HRM, too. An organizational life cycle refers to the introduction, growth, maturity, and decline of the organization, which can vary over time. For example, when the organization first begins, it is in the introduction phase, and a different staffing, compensation, training, and labor/employee relations strategy may be necessary to align HRM with the organization’s goals. This might be opposed to an organization that is struggling to stay in business and is in the decline phase. That same organization, however, can create a new product, for example, which might again put the organization in the growth phase. 2. Understanding of the HRM department mission and values. HRM departments must develop their own departmental mission and values. These guiding principles for the department will change as the company’s overall mission and values change. Often the mission statement is a list of what the department does, which is less of a strategic approach. Brainstorming about HR goals, values, and priorities is a good way to start. The mission statement should express how an organization’s human resources help that organization meet the business goals. A poor mission statement might read as follows: “The human resource department at Techno, Inc. provides resources to hiring managers and develops compensation plans and other services to assist the employees of our company.” A strategic statement that expresses how human resources help the organization might read as follows: “HR’s responsibility is to ensure that our human resources are more talented and motivated than our Saylor URL: http://www.saylor.org/books Saylor.org 39 competitors’, giving us a competitive advantage. This will be achieved by monitoring our turnover rates, compensation, and company sales data and comparing that data to our competitors.” [5] When the mission statement is written in this way, it is easier to take a strategic approach with the HR planning process. 3. Understanding of the challenges facing the department. HRM managers cannot deal with change quickly if they are not able to predict changes. As a result, the HRM manager should know what upcoming challenges may be faced to make plans to deal with those challenges better when they come along. This makes the strategic plan and HRM plan much more usable. Identify Strategic HR Issues In this step, the HRM professionals will analyze the challenges addressed in the first step. For example, the department may see that it is not strategically aligned with the company’s mission and values and opt to make changes to its departmental mission and values as a result of this information. Many organizations and departments will use a strategic planning tool that identifies strengths, weaknesses, opportunities, and threats (SWOT analysis) to determine some of the issues they are facing. Once this analysis is performed for the business, HR can align itself with the needs of the business by understanding the business strategy. See Table 2.3 "Sample HR Department SWOT Analysis for Techno, Inc." for an example of how a company’s SWOT analysis can be used to develop a SWOT analysis for the HR department. Once the alignment of the company SWOT is completed, HR can develop its own SWOT analysis to determine the gaps between HR’s strategic plan and the company’s strategic plan. For example, if the HR manager finds that a department’s strength is its numerous training programs, this is something the organization should continue doing. If a weakness is the organization’s lack of consistent compensation throughout all job titles, then the opportunity to review and revise the compensation policies presents itself. In other words, the company’s SWOT analysis provides a basis to address some of the issues in the organization, but it can be whittled down to also address issues within the department. Table 2.3 Sample HR Department SWOT Analysis for Techno, Inc. Hiring talented people Strengths Company growth Saylor URL: http://www.saylor.org/books Saylor.org 40 Technology implementation for business processes Excellent relationship between HRM and management/executives No strategic plan for HRM No planning for up/down cycles No formal training processes Weaknesses Lacking of software needed to manage business processes, including go-to-market staffing strategies Development of HRM staffing plan to meet industry growth HRM software purchase to manage training, staffing, assessment needs for an unpredictable business cycle Continue development of HRM and executive relationship by attendance and participation in key meetings and decision-making processes Develop training programs and outside development opportunities to continue development of Opportunities in-house marketing expertise Economy Threats Changing technology Prioritize Issues and Actions Based on the data gathered in the last step, the HRM manager should prioritize the goals and then put action plans together to deal with these challenges. For example, if an organization identifies that they lack a comprehensive training program, plans should be developed that address this need. (Training needs are discussed in Chapter 8 "Training and Development" .) An important aspect of this step is the involvement of the management and executives in the organization. Once you have a list of issues you will address, discuss them with the management and executives, as they may see other issues or other priorities differently than you. Remember, to be effective, HRM must work with the organization and assist the organization in meeting goals. This should be considered in every aspect of HRM planning. Draw Up an HRM Plan Saylor URL: http://www.saylor.org/books Saylor.org 41 Once the HRM manager has met with executives and management, and priorities have been agreed upon, the plans are ready to be developed. Detailed development of these plans will be discussed in Section 2.2 "Writing the HRM Plan". Sometimes companies have great strategic plans, but when the development of the details occurs, it can be difficult to align the strategic plan with the more detailed plans. An HRM manager should always refer to the overall strategic plan before developing the HRM strategic plan and HR plans. Even if a company does not have an HR department, HRM strategic plans and HR plans should still be developed by management. By developing and monitoring these plans, the organization can ensure the right processes are implemented to meet the ever-changing needs of the organization. The strategic plan looks at the organization as a whole, the HRM strategic plan looks at the department as a whole, and the HR plan addresses specific issues in the human resource department. KEY TAKEAWAYS • Personnel management and HRM are different ways of looking at the job duties of human resources. Twenty years ago, personnel management focused on administrative aspects. HRM today involves a strategic process, which requires working with other departments, managers, and executives to be effective and meet the needs of the organization. • In general, HRM focuses on several main areas, which include staffing, policy development, compensation and benefits, retention issues, training and development, and regulatory issues and worker protection. • To be effective, the HR manager needs to utilize technology and involve others. • As part of strategic planning, HRM should conduct a strategic analysis, identify HR issues, determine and prioritize actions, and then draw up the HRM plan. EXERCISES 1. What is the difference between HR plans and HRM strategic plans? How are they the same? How are they different? 2. Of the areas of focus in HRM, which one do you think is the most important? Rank them and discuss the reasons for your rankings. Saylor URL: http://www.saylor.org/books Saylor.org 42 [1] Michael Losey, “HR Comes of Age,” HR Magazine, March 15, 1998, accessed July 11, 2011,http://findarticles.com/p/articles/mi_m3495/is_n3_v43/ai_20514399. [2] Jan de Kok and Lorraine M. Uhlaner, “Organization Context and Human Resource Management in the Small Firm” (Tinbergen Institute Discussion Papers 01-038/3, Tinbergen Institute, 2001), accessed August 13, 2011, http://ideas.repec.org/s/dgr/uvatin.html. [3] David Ulrich and Wayne Brockbank, The HR Value Proposition (Boston: Harvard Business Press, 2005), 9–14. [4] David Ulrich, “Evaluating the Ulrich Model,” Acerta, 2011, accessed July 11, 2011,http://www.goingforhr.be/extras/web-specials/hr-according-to-dave-ulrich#ppt_2135261. [5] Gary Kaufman, “How to Fix HR,” Harvard Business Review, September 2006, accessed July 11, 2011, http://hbr.org/2006/09/how-to-fix-hr/ar/1. Saylor URL: http://www.saylor.org/books Saylor.org 43 2.2 1. Writing the HRM Plan LEARNING OBJECTIVE Describe the steps in the development of an HRM plan. As addressed in Section 2.1 "Strategic Planning", the writing of an HRM strategic plan should be based on the strategic plans of the organization and of the department. Once the strategic plan is written, the HR professional can begin work on the HR plan. This is different from the strategic plan in that it is more detailed and more focused on the short term. The six parts described here are addressed in more detail in Chapter 4 "Recruitment", Chapter 5 "Selection", Chapter 6 "Compensation and Benefits", Chapter 7 "Retention and Motivation", Chapter 8 "Training and Development", Chapter 9 "Successful Employee Communication", Chapter 10 "Managing Employee Performance", and Chapter 11 "Employee Assessment". HOW WOULD YOU HANDLE THIS? Compensation Is a Touchy Subject As the HR manager, you have access to sensitive data, such as pay information. As you are looking at pay for each employee in the marketing department, you notice that two employees with the same job title and performing the same job are earning different amounts of money. As you dig deeper, you notice the employee who has been with the company for the least amount of time is actually getting paid more than the person with longer tenure. A brief look at the performance evaluations shows they are both star performers. You determine that two different managers hired the employees, and one manager is no longer with the organization. How would you handle this? How Would You Handle This? https://api.wistia.com/v1/medias/1371287/embed The author discusses the How Would You Handle This situation in this chapter at:https://api.wistia.com/v1/medias/1371287/embed. Saylor URL: http://www.saylor.org/books Saylor.org 44 Figure 2.3 As you can see from this figure, the company strategic plan ties into the HRM strategic plan, and from the HRM strategic plan, the HR plan can be developed. The six parts of the HRM plan include the following: Saylor URL: http://www.saylor.org/books Saylor.org 45 1. Determine human resource needs. This part is heavily involved with the strategic plan. What growth or decline is expected in the organization? How will this impact your workforce? What is the economic situation? What are your forecasted sales for next year? 2. Determine recruiting strategy. Once you have a plan in place, it’s necessary to write down a strategy addressing how you will recruit the right people at the right time. 3. Select employees. The selection process consists of the interviewing and hiring process. 4. Develop training. Based on the strategic plan, what training needs are arising? Is there new software that everyone must learn? Are there problems in handling conflict? Whatever the training topics are, the HR manager should address plans to offer training in the HRM plan. 5. Determine compensation. In this aspect of the HRM plan, the manager must determine pay scales and other compensation such as health care, bonuses, and other perks. 6. Appraise performance. Sets of standards need to be developed so you know how to rate the performance of your employees and continue with their development. Each chapter of this text addresses one area of the HR plan, but the next sections provide some basic knowledge of planning for each area. Determine Human Resource Needs The first part of an HR plan will consist of determining how many people are needed. This step involves looking at company operations over the last year and asking a lot of questions: 1. Were enough people hired? 2. Did you have to scramble to hire people at the last minute? 3. What are the skills your current employees possess? 4. What skills do your employees need to gain to keep up with technology? 5. Who is retiring soon? Do you have someone to replace them? 6. What are the sales forecasts? How might this affect your hiring? These are the questions to answer in this first step of the HR plan process. As you can imagine, this cannot be done alone. Involvement of other departments, managers, and executives should take place to obtain an accurate estimate of staffing needs for now and in the future. We discuss staffing in greater detail in Chapter 4 "Recruitment". Saylor URL: http://www.saylor.org/books Saylor.org 46 Many HR managers will prepare an inventory of all current employees, which includes their educational level and abilities. This gives the HR manager the big picture on what current employees can do. It can serve as a tool to develop employees’ skills and abilities, if you know where they are currently in their development. For example, by taking an inventory, you may find out that Richard is going to retire next year, but no one in his department has been identified or trained to take over his role. Keeping the inventory helps you know where gaps might exist and allows you to plan for these gaps. This topic is addressed further in Chapter 4 "Recruitment". HR managers will also look closely at all job components and will analyze each job. By doing this analysis, they can get a better picture of what kinds of skills are needed to perform a job successfully. Once the HR manager has performed the needs assessment and knows exactly how many people, and in what positions and time frame they need to be hired, he or she can get to work on recruiting, which is also called astaffing plan. This is addressed further in Chapter 4 "Recruitment". Recruit Recruitment is an important job of the HR manager. More detail is provided in Chapter 4 "Recruitment". Knowing how many people to hire, what skills they should possess, and hiring them when the time is right are major challenges in the area of recruiting. Hiring individuals who have not only the skills to do the job but also the attitude, personality, and fit can be the biggest challenge in recruiting. Depending on the type of job you are hiring for, you might place traditional advertisements on the web or use social networking sites as an avenue. Some companies offer bonuses to employees who refer friends. No matter where you decide to recruit, it is important to keep in mind that the recruiting process should be fair and equitable and diversity should be considered. We discuss diversity in greater detail in Chapter 3 "Diversity and Multiculturalism". Depending on availability and time, some companies may choose to outsource their recruiting processes. For some types of high-level positions, a head hunter will be used to recruit people nationally and internationally. A head hunter is a person who specializes in matching jobs with people, and they usually work only with high-level positions. Another option is to use an agency that specializes in hiring people for a variety of positions, including temporary and permanent positions. Some companies decide to hire temporary employees because they anticipate only a short-term need, and it can be less expensive to hire someone for only a specified period of time. Saylor URL: http://www.saylor.org/books Saylor.org 47 No matter how it is done, recruitment is the process of obtaining résumés of people interested in the job. In our next step, we review those résumés, interview, and select the best person for the job. Select After you have reviewed résumés for a position, now is the time to work toward selecting the right person for the job. Although we discuss selection in great detail in Chapter 6 "Compensation and Benefits", it is worth a discussion here as well. Numerous studies have been done, and while they have various results, the majority of studies say it costs an average of $45,000 to hire a new manager. [1] While this may seem exaggerated, consider the following items that contribute to the cost: 1. Time to review résumés 2. Time to interview candidates 3. Interview expenses for candidates 4. Possible travel expenses for new hire or recruiter 5. Possible relocation expenses for new hire 6. Additional bookkeeping, payroll, 401(k), and so forth 7. Additional record keeping for government agencies 8. Increased unemployment insurance costs 9. Costs related to lack of productivity while new employee gets up to speed Because it is so expensive to hire, it is important to do it right. First, résumés are reviewed and people who closely match the right skills are selected for interviews. Many organizations perform phone interviews first so they can further narrow the field. The HR manager is generally responsible for setting up the interviews and determining the interview schedule for a particular candidate. Usually, the more senior the position is, the longer the interview process takes, even up to eight weeks. [2] After the interviews are conducted, there may be reference checks, background checks, or testing that will need to be performed before an offer is made to the new employee. HR managers are generally responsible for this aspect. Once the applicant has met all criteria, the HR manager will offer the selected person the position. At this point, salary, benefits, and vacation time may be negotiated. Compensation is the next step in HR management. Determine Compensation What you decide to pay people is much more difficult than it seems. This issue is covered in greater detail in Chapter 6 "Compensation and Benefits". Pay systems must be developed that motivate employees and Saylor URL: http://www.saylor.org/books Saylor.org 48 embody fairness to everyone working at the organization. However, organizations cannot offer every benefit and perk because budgets always have constraints. Even governmental agencies need to be concerned with compensation as part of their HR plan. For example, in 2011, Illinois State University gave salary increases of 3 percent to all faculty, despite state budget cuts in other areas. They reasoned that the pay increase was needed because of the competitive nature of hiring and retaining faculty and staff. The university president said, “Our employees have had a very good year and hopefully this is a good shot in the arm that will keep our morale high.” [3] The process in determining the right pay for the right job can have many variables, in addition to keeping morale high. First, as we have already discussed, the organization life cycle can determine the pay strategy for the organization. The supply and demand of those skills in the market, economy, region, or area in which the business is located is a determining factor in compensation strategy. For example, a company operating in Seattle may pay higher for the same job than their division in Missoula, Montana, because the cost of living is higher in Seattle. The HR manager is always researching to ensure the pay is fair and at market value. In Chapter 6 "Compensation and Benefits", we get into greater detail about the variety of pay systems, perks, and bonuses that can be offered. For many organizations, training is a perk. Employees can develop their skills while getting paid for it. Training is the next step in the HR planning process. Develop Training Once we have planned our staffing, recruited people, selected employees, and then compensated them, we want to make sure our new employees are successful. Training is covered in more detail in Chapter 8. One way we can ensure success is by training our employees in three main areas: 1. Company culture. A company culture is the organization’s way of doing things. Every company does things a bit differently, and by understanding the corporate culture, the employee will be set up for success. Usually this type of training is performed at an orientation, when an employee is first hired. Topics might include how to request time off, dress codes, and processes. 2. Skills needed for the job. If you work for a retail store, your employees need to know how to use the register. If you have sales staff, they need to have product knowledge to do the job. If your company uses particular software, training is needed in this area. Saylor URL: http://www.saylor.org/books Saylor.org 49 3. Human relations skills. These are non-job-specific skills your employees need not only to do their jobs but also to make them all-around successful employees. Skills needed include communication skills and interviewing potential employees. Perform a Performance Appraisal The last thing an HR manager should plan is the performance appraisal. While we discuss performance appraisals in greater detail in Chapter 11 "Employee Assessment", it is definitely worth a mention here, since it is part of the strategic plan. Aperformance appraisal is a method by which job performance is measured. The performance appraisal can be called many different things, such as the following: 1. Employee appraisal 2. Performance review 3. 360 review 4. Career development review No matter what the name, these appraisals can be very beneficial in motivating and rewarding employees. The performance evaluation includes metrics on which the employee is measured. These metrics should be based on the job description, both of which the HR manager develops. Various types of rating systems can be used, and it’s usually up to the HR manager to develop these as well as employee evaluation forms. The HR manager also usually ensures that every manager in the organization is trained on how to fill out the evaluation forms, but more importantly, how to discuss job performance with the employee. Then the HR manager tracks the due dates of performance appraisals and sends out e-mails to those managers letting them know it is almost time to write an evaluation. HUMAN RESOURCE RECALL Have you ever been given a performance evaluation? What was the process and the outcome? KEY TAKEAWAYS • Human resource planning is a process that is part of the strategic plan. It involves addressing specific needs within the organization, based on the company’s strategic direction. • The first step in HR planning is determining current and future human resource needs. In this step, current employees, available employees in the market, and future needs are all analyzed and developed. Saylor URL: http://www.saylor.org/books Saylor.org 50 • In the second step of the process, once we know how many people we will need to hire, we can begin to determine the best methods for recruiting the people we need. Sometimes an organization will use head hunters to find the best person for the job. • After the recruiting process is finished, the HR manager will begin the selection process. This involves setting up interviews and selecting th...
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