Based on human resource management course lectures, our discussions, and your own opinion, answer the following discussions questions: 1. Why is it crucial that H.R managers be fully aware of their company’s vision, mission, and strategy? Include some examples. 2. To which extent do believe that all HRM activities are tied to job analysis? Why? 3. Discuss at least two advantages and disadvantages of promoting from within. 4. Discuss how the intangible assets can be equally or even more valuable than the other types of assets. Support your argument by a proper example. 5. How does outsourcing differ from offshoring? Include some examples. Chapter 9 Employee Development ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives 1 of 2 LO9-1 Explain how employee development contributes to strategies related to employee retention, development of intellectual capital, and business growth. LO9-2 Discuss the steps in the development planning process. LO9-3 Explain the employees’ and company’s responsibilities in planning development. LO9-4 Discuss current trends in using formal education for development. LO9-5 Relate how assessment of personality type, work behaviors, and job performance can be used for employee development. ©McGraw-Hill Education Learning Objectives 2 of 2 LO9-6 Explain how job experiences can be used for skill development. LO9-7 Develop successful mentoring programs. LO9-8 Describe how to train managers to coach employees. LO9-9 Discuss what companies are doing to melt the glass ceiling. LO9-10 Use the 9-box grid for identifying where employees fit in a succession plan and construct appropriate development plans for them. ©McGraw-Hill Education The Relationship among Development, Training, and Careers 1 of 2 Development and Training • Critical for talent management • Prepares Millennials to replace Baby Boomers • Provides opportunities for employees to grow their skills • Contributes to high levels of engagement and satisfaction LO 9-1 ©McGraw-Hill Education The Relationship among Development, Training, and Careers 2 of 2 Development and Careers • Protean career • Employees take responsibility for managing their own careers • Psychological success • Career patterns provide opportunities for employees to • Determine their interests, skills strengths and weaknesses • Seek development experiences ©McGraw-Hill Education Figure 9.1 Steps and Responsibilities in the Development Planning Process LO 9-2 Jump to long description in appendix ©McGraw-Hill Education Development Planning Systems 1 of 2 Self-Assessment • Psychological tests • Development needs are identified • May determine skill needs or interests Reality Check • Usually comes from a performance appraisal • 360 degree feedback LO 9-3 ©McGraw-Hill Education Development Planning Systems 2 of 2 Goal Setting • Desired positions • Level of skill application • Work setting • Skill acquisition Action Planning • Depends on needs and developmental goal ©McGraw-Hill Education Table 9.2 Design Features of Effective Development Systems 1 of 2 1. System is positioned as a response to a business need or supports the business strategy. 2. Employees and managers participate in development of the system. 3. Employees are encouraged to take an active role in career management and development. 4. Evaluation is ongoing and used to improve the system. 5. Business units can customize the system for their own purposes (with some constraints). SOURCE: Based on B. Kaye and C. Smith, “Career Development: Shifting from Nicety to Necessity,” T+D, January 2012, pp. 52–55; M. Weinstein, “Paths to Success: Responsibility vs. Promotion,” Training, July/August 2014, pp. 52–54; D. Hall, Careers in and out of Organizations (Thousand Oaks, CA: Sage, 2002) ©McGraw-Hill Education Table 9.2 Design Features of Effective Development Systems 2 of 2 6. Employees have access to development and career information sources (including advisors and positions available). 7. Senior management and the company culture support the development system. 8. The development system is linked to other human resource practices such as performance management, training, and recruiting systems. 9. A large, diverse talent pool is created. 10. Development plans and talent evaluation information are available and accessible to all managers. ©McGraw-Hill Education Figure 9.3 Frequency of Use of Employee Development Practices Jump to long description in appendix ©McGraw-Hill Education SOURCE: EFMD, Network of Corporate Academies, Society for Human Resource Management, “Leadership Development: The Path to Greater Effectiveness,” 2016, www.shrm.org. Approaches to Employee Development 1 of 12 Formal Education • Off-site or on-site • Lecture, business games and simulations, adventure learning, meeting with customers • Custom programs • Tuition reimbursement programs LO 9-4 ©McGraw-Hill Education Approaches to Employee Development 2 of 12 Assessment • Identify employees with managerial potential and measure current managers’ strengths and weaknesses. • Used with work teams to identify the strengths and weaknesses of individual team members and the decision processes or communication styles that inhibit the team’s productivity. • Can help employees understand their tendencies, their needs, the type of work environment they prefer, and the type of work they might prefer to do. LO 9-5 ©McGraw-Hill Education Approaches to Employee Development 3 of 12 Assessment continued • Personality Tests and Inventories • Myers-Briggs Type Inventory (MBTI) • Measures 16 personality types • Each type has implications for work habits and interpersonal relationships • DiSC assessment • Measures personality and behavioral style ©McGraw-Hill Education Approaches to Employee Development 4 of 12 Assessment continued • Assessment center • Leaderless group discussion • Interview • In-basket • Role-play ©McGraw-Hill Education Approaches to Employee Development 5 of 12 Assessment continued • Performance Appraisals and 360-Degree Feedback Systems • Must tell employees specifically about their performance problems and how they can improve their performance. • Managers must be trained in frequent performance feedback. • Upward feedback • 360-degree feedback ©McGraw-Hill Education Table 9.6 Activities Involved in Using 360-Degree Feedback for Development 1. Understand strengths and weaknesses Review ratings for strengths and weaknesses Identify skills or behaviors where self and others’ (manager’s, peers’, customers’) ratings agree and disagree 2. Identify a development goal Choose a skill or behavior to develop Set a clear, specific goal with a specified outcome 3. Identify a process for recognizing goal accomplishment 4. Identify strategies for reaching the development goal Establish strategies such as reading, job experiences, courses, and relationships Establish strategies for receiving feedback on progress Establish strategies for reinforcing the new skill or behavior ©McGraw-Hill Education Approaches to Employee Development 6 of 12 Job Experiences • Stretch assignments • May be positive or negative stressors • May include enlarging the current job, job rotation, transfers, promotions, downward moves, and temporary assignments. LO 9-6 ©McGraw-Hill Education Figure 9.4 How Job Experiences Are Used for Employee Development ©McGraw-Hill Education Approaches to Employee Development 7 of 12 Job Experiences continued • Job enlargement • Special project assignments, switching roles within a work team, or researching new ways to serve clients and customers • Job rotation and lateral moves • Helps employees gain an overall appreciation of the company’s goals, increases their understanding of different company functions, develops a network of contacts, and increases employees’ skills • May affect employee satisfaction and motivation ©McGraw-Hill Education Approaches to Employee Development 8 of 12 Job Experiences continued • Transfers, promotions, and downward moves • Employees are more willing to accept promotions than lateral or downward moves. • May involve relocation within the United States or to another country; can provoke anxiety. ©McGraw-Hill Education Approaches to Employee Development 9 of 12 Job Experiences continued • Temporary assignments, projects, volunteer work, and sabbaticals • Employee exchange • Volunteer assignments ©McGraw-Hill Education Approaches to Employee Development 10 of 12 Interpersonal Relationships • Mentoring • Usually start informally, but may be part of a formal mentoring program. • Developing successful mentor programs LO 9-7 ©McGraw-Hill Education Table 9.9 Characteristics of Successful Formal Mentoring Programs 1 of 2 1. Mentor and protégé participation is voluntary. Relationship can be ended at any time without fear of punishment. 2. The mentor–protégé matching process does not limit the ability of informal relationships to develop. For example, a mentor pool can be established to allow protégés to choose from a variety of qualified mentors. 3. Mentors are chosen on the basis of their past record in developing employees, willingness to serve as a mentor, and evidence of positive coaching, communication, and listening skills. 4. Mentor–protégé matching is based on how the mentor’s skills can help meet the protégé’s needs. 5. The purpose of the program is clearly understood. Projects and activities that the mentor and protégé are expected to complete are specified. ©McGraw-Hill Education Table 9.9 Characteristics of Successful Formal Mentoring Programs 2 of 2 6. The length of the program is specified. Mentor and protégé are encouraged to pursue the relationship beyond the formal period. 7. A minimum level of contact between the mentor and protégé is specified. Mentors and protégés need to determine when they will meet, how often, and how they will communicate outside the meetings. 8. Protégés are encouraged to contact one another to discuss problems and share successes. 9. The mentor program is evaluated. Interviews with mentors and protégés give immediate feedback regarding specific areas of dissatisfaction. Surveys gather more detailed information regarding benefits received from participating in the program. 10. Employee development is rewarded, which signals to managers that mentoring and other development activities are worth their time and effort. ©McGraw-Hill Education Approaches to Employee Development 11 of 12 Interpersonal Relationships continued • Mentoring continued • Benefits of mentoring relationships • Career support • Psychosocial support • Reverse mentoring ©McGraw-Hill Education Approaches to Employee Development 12 of 12 Interpersonal Relationships continued • Coaching • One-on-one or help employees learn for themselves • Provide resources LO 9-8 ©McGraw-Hill Education Special Issues in Employee Development 1 of 2 Melting the Glass Ceiling • Women are underrepresented in all levels of management. • May be due to stereotypes, lack of access to training programs, appropriate developmental job experiences, and developmental relationships LO 9-9 ©McGraw-Hill Education Table 9.10 Recommendations for Melting the Glass Ceiling • Make sure senior management supports and is involved in the program. • Make a business case for change. • Make the change public. • Gather data on problems causing the glass ceiling using task forces, focus groups, and questionnaires. • Create awareness of how gender attitudes affect the work environment. • Force accountability through reviews of promotion rates and assignment decisions. • Promote development for all employees. ©McGraw-Hill Education Special Issues in Employee Development 2 of 2 Succession Planning • Requires senior management to systematically review leadership talent in the company • Ensures that top-level managerial talent is available • Provides a set of development experiences that managers must complete to be considered for top management positions • Helps attract and retain managerial employees by providing them with development opportunities • Dependent on other human resource systems, including compensation, training and development, and staffing LO 9-10 ©McGraw-Hill Education Table 9.11 The Process of Developing a Succession Plan 1. Identify what positions are included in the plan. 2. Identify the employees who are included in the plan. 3. Develop standards to evaluate positions (e.g., competencies, desired experiences, desired knowledge, developmental value). 4. Determine how employee potential will be measured (e.g., current performance and potential performance). 5. Develop the succession planning review. 6. Link the succession planning system with other human resource systems, including training and development, compensation, performance management, and staffing systems. 7. Determine what feedback is provided to employees. 8. Measure the effectiveness of the succession plan. ©McGraw-Hill Education Figure 9.5 Example of a 9-Box Grid Jump to long description in appendix ©McGraw-Hill Education Appendix of Image Long Descriptions ©McGraw-Hill Education Appendix 1 Figure 9.1 Steps and Responsibilities in the Development Planning Process Four boxes are connected by one way arrows: Self-assessment, reality check, goal setting, and action planning. Employee responsibility for self-assessment is Identify opportunities and needs to improve; for reality check is Identify what needs are realistic to develop; for goal setting is Identify goal and method to determine goal progress; and for action planning is Identify steps and timetable to reach goal. Company responsibility for self-assessment is Provide assessment information to identify strengths, weaknesses, interests, and values; for reality check is Communicate performance evaluation, where employee fits in long-range plans of the company, changes in industry, profession, and workplace; for goal setting is Ensure that goal is SMART (specific, measurable, attainable, relevant, and timely); commit to help employee reach the goal, and for action planning is Identify resources employee needs to reach goal, including additional assessment, courses, work experiences, and relationships. Return to original slide ©McGraw-Hill Education Appendix 2 Figure 9.3 Frequency of Use of Employee Development Practices Percentage of Specific Practices Used Classroom courses 80% Coaching 79% Mentoring 68% Leadership forums 56% High-visibility assignments 42% Matching employees with “stretch” opportunities 35% Job rotation 30% Return to original slide ©McGraw-Hill Education Appendix 3 Figure 9.5 Example of a 9-Box Grid A 9-box grid is a three-by-three matrix, with the Y axis performance and the x-axis labeled potential or promotability. The boxes are labeled, from left to right and bottom to top: 1. poor employee, 2. inconsistent employee, 3. potential or may be replaced, 4. strong contributor, 5. core employee, 6. rising star, 7. technical or subject expert, 8. agile nonperformer, and 9. star. Return to original slide ©McGraw-Hill Education Chapter 10 Employee Separation and Retention ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives LO10-1 Distinguish between involuntary and voluntary turnover, and discuss how each of these forms of turnover can be leveraged for competitive advantage. LO10-2 List the major elements that contribute to perceptions of justice and how to apply these in organizational contexts involving discipline and dismissal. LO10-3 Specify the relationship between job satisfaction and various forms of job withdrawal, and identify the major sources of job satisfaction in work contexts. LO10-4 Design a survey feedback intervention program, and use this to promote retention of key organizational personnel. ©McGraw-Hill Education Managing Involuntary Turnover 1 of 6 Employment-at-Will Doctrine • Either the employer or the employee could sever the employment relationship at any time • Wrongful discharge suit • Can be filed as a civil rights infringement if the person discharged is a member of a protected group • Paper trail • Initiating punitive actions short of termination, in an effort to get the employee to quit on his or her own • Paying off the employee in excess severance pay in return for waiving the right to sue for wrongful dismissal LO 10-1 ©McGraw-Hill Education Managing Involuntary Turnover 2 of 6 Principles of Justice • Outcome fairness • Noncompete clauses • Procedural justice • Lack of bias and informational accuracy are the most critical determinants. • Interactional justice LO 10-2 ©McGraw-Hill Education Table 10.1 Six Determinants of Procedural Justice 1. Consistency. The procedures are applied consistently across time and other persons. 2. Bias suppression. The procedures are applied by a person who has no vested interest in the outcome and no prior prejudices regarding the individual. 3. Information accuracy. The procedure is based on information that is perceived to be true. 4. Correctability. The procedure has built-in safeguards that allow one to appeal mistakes or bad decisions. 5. Representativeness. The procedure is informed by the concerns of all groups or stakeholders (co-workers, customers, owners) affected by the decision, including the individual being dismissed. 6. Ethicality. The procedure is consistent with prevailing moral standards as they pertain to issues like invasion of privacy or deception. ©McGraw-Hill Education Table 10.2 Four Determinants of Interactional Justice 1. Explanation. Emphasize aspects of procedural fairness that justify the decision. 2. Social sensitivity. Treat the person with dignity and respect. 3. Consideration. Listen to the person's concerns. 4. Empathy. Identify with the person's feelings. ©McGraw-Hill Education Managing Involuntary Turnover 3 of 6 Progressive Discipline and Alternative Dispute Resolution • Termination should come about at the end of a systematic discipline program. • Documentation • Punitive measures • Alternative dispute resolution (ADR) ©McGraw-Hill Education Table 10.3 An Example of a Progressive Discipline Program OFFENSE FREQUENCY ORGANIZATIONAL RESPONSE DOCUMENTATION First offense Unofficial verbal warning Witness present Second offense Official written warning Document filed Third offense Second official warning, with threat of temporary suspension Document filed Fourth offense Temporary suspension and “last chance notification” Document filed Fifth offense Termination (with right to go Document filed to arbitration) ©McGraw-Hill Education Table 10.4 Stages in Alternative Dispute Resolution Stage 1: Open-door policy The two people in conflict (e.g., supervisor and subordinate) attempt to arrive at a settlement together. If none can be reached, they proceed to Stage 2: Peer review A panel composed of representatives from the organization that are at the same level of those people in the dispute hears the case and attempts to help the parties arrive at a settlement. If none can be reached, they proceed to Stage 3: Mediation A neutral third party from outside the organization hears the case and, via a nonbinding process, tries to help the disputants arrive at a settlement. If none can be reached, the parties proceed to Stage 4: Arbitration A professional arbitrator from outside the organization hears the case and resolves it unilaterally by rendering a specific decision or award. Most arbitrators are experienced employment attorneys or retired judges. ©McGraw-Hill Education Managing Involuntary Turnover 4 of 6 Employee Assistance and Wellness Programs • Employee assistance program (EAP) • Usually identified in official documents published by the employer (such as employee handbooks). • Supervisors (and union representatives, where relevant) are trained to use the referral service for employees whom they suspect of having health-related problems. • Employees are also trained to use the system to make selfreferrals when necessary. ©McGraw-Hill Education Managing Involuntary Turnover 5 of 6 Employee Assistance and Wellness Programs continued • Employee wellness programs • Focus on trying to prevent health-related problems • Some companies take a punitive approach. • How important is an employee’s health to the performance of the job? ©McGraw-Hill Education Managing Involuntary Turnover 6 of 6 Outplacement Counseling • Helps dismissed employees manage the transition from one job to another. • Includes career counseling, job search support, résumé critiques, job interviewing training, and provision of networking opportunities • Reduces likelihood of litigation by former employees ©McGraw-Hill Education Managing Voluntary Turnover 1 of 8 Voluntary Turnover • Support former employees’ transition into alternative employment • Preventing employees who are highly valued by the organization from leaving • Drivers of retention • Pay and job security • Benefits • Work environment • Opportunities for development ©McGraw-Hill Education Figure 10.1 An Overall Model of the Job Dissatisfaction–Job Withdrawal Process Jump to long description in appendix ©McGraw-Hill Education Managing Voluntary Turnover 2 of 8 Process of Job Withdrawal • Behavior change • Can lead to supervisor–subordinate confrontation • Whistle-blowing • Physical Job Withdrawal • Psychological Withdrawal • Low level of job involvement • Low level of organizational commitment ©McGraw-Hill Education Managing Voluntary Turnover 3 of 8 Job Satisfaction and Job Withdrawal • Job satisfaction • Function of values • Different employees have different views of which values are important • Perception • Influenced by frame of reference LO 10-3 ©McGraw-Hill Education Managing Voluntary Turnover 4 of 8 Sources of Job Dissatisfaction • Unsafe working conditions • Occupational Safety and Health Act of 1970 (OSHA) • The nature of the work in a job makes managing safetyrelated perceptions critical. • Protecting workers and ensuring their safety is particularly challenging when trying to manage overseas operations. ©McGraw-Hill Education Managing Voluntary Turnover 5 of 8 Sources of Job Dissatisfaction continued • Personal Dispositions • Negative affectivity • Tasks and roles • Strong positive relationship between task complexity and job satisfaction • Job rotation ©McGraw-Hill Education Managing Voluntary Turnover 6 of 8 Sources of Job Dissatisfaction continued • Prosocial motivation • Supervisors and co-workers • Pay and benefits ©McGraw-Hill Education Managing Voluntary Turnover 7 of 8 Measuring and Monitoring Job Satisfaction • Workers’ self-reports • Job Descriptive Index (JDI) • Pay Satisfaction Questionnaire (PSQ) • Pulse surveys ©McGraw-Hill Education Managing Voluntary Turnover 8 of 8 Survey Feedback Interventions • Employee survey research • Employee satisfaction surveys • Allow company to monitor trend over time • Provide a means of empirically assessing the impact of changes in policy or personnel • Allow company to compare itself with others in the same industry along these dimensions • Allow company to check for differences between units and benchmark “best practices” that might be generalized across units • Tool for uncovering systematic concerns that are driving retention problems LO 10-4 ©McGraw-Hill Education Appendix of Image Long Descriptions ©McGraw-Hill Education Figure 10.1 An Overall Model of the Job Dissatisfaction–Job Withdrawal Process Causes of job dissatisfaction include personal disposition, tasks and roles, supervisors and co-workers, and pay and benefits. Manifestations of job withdrawal include behavior change, physical job withdrawal, and psychological job withdrawal. Return to original slide ©McGraw-Hill Education Chapter 11 Pay Structure Decisions ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives 1 of 2 LO11-1 List the main decision areas and concepts in employee compensation management. LO11-2 Describe the major administrative tools used to manage employee compensation. LO11-3 Explain the importance of competitive labor market and product market forces in compensation decisions. LO11-4 Discuss the significance of process issues such as communication in compensation management. ©McGraw-Hill Education Learning Objectives 2 of 2 LO11-5 Describe new developments in the design of pay structures. LO11-6 Explain where the United States stands on pay issues from an international perspective. LO11-7 Explain the reasons for the controversy over executive pay. LO11-8 Describe the regulatory framework for employee compensation. ©McGraw-Hill Education Introduction Employer’s View • Pay is critical in attaining strategic goals. • Pay impacts employee attitudes & behaviors. • Employee compensation is significant organizational cost. Employee’s View • Policies regarding wages, salaries & other earnings affect their overall income and standard of living. • Both level of pay & fairness compared with others’pay are important. LO 11-1 ©McGraw-Hill Education Equity Theory and Fairness 1 of 2 People evaluate the fairness of their situations by comparing them with those of other people. ©McGraw-Hill Education People compare their own ratio of perceived outcomes (pay, benefits, working conditions) to perceived inputs (effort, ability, experience) to the ratio of a comparison other. Equity Theory and Fairness 2 of 2 A person (p) compares her own ratio of perceived outcomes O (pay, benefits, working conditions) to perceived inputs I (effort, ability, experience) to the ratio of a comparison other (o). 𝑂𝑜 𝑂𝑝 , 𝑜𝑟 = ? 𝐼𝑜 𝐼𝑝 If p’s ratio (𝑂𝑝/𝐼𝑝) is smaller than the comparison other’s ratio (𝑂𝑜/𝐼𝑜), then underreward inequity results. If p’s ratio is larger, then overreward inequity results. ©McGraw-Hill Education Table 11.2 Pay Structure Concepts and Consequences PAY STRUCTURE DECISION AREA ADMINISTRATIVE TOOL FOCUS OF EMPLOYEE PAY COMPARISONS CONSEQUENCES OF EQUITY PERCEPTIONS Pay level Market pay surveys External Equity External employee movement; labor costs; employee attitudes Job structure Job evaluation Internal Equity Internal employee movement; cooperation among employees; employee attitudes ©McGraw-Hill Education Developing Pay Levels 1 of 14 Market Pressures • LO 11-2 ©McGraw-Hill Education Product Market Competition • Organizations must be able to sell their goods and services at a quantity and price that will bring a sufficient return on their investment. • Product market competition places an upper bound on labor costs and compensation. Developing Pay Levels 2 of 14 Market Pressures continued • ©McGraw-Hill Education Labor Market Competition • Reflects the number of workers available relative to the number of jobs available. • If an organization is not competitive in the labor market, it will fail to attract and retain employees of sufficient numbers and quality. Developing Pay Levels 3 of 14 Employees as a Resource • Pay policies and programs matter. • ©McGraw-Hill Education Need to evaluate in terms of cost and the returns they generate – how they attract, retain, and motivate a high-quality workforce. Developing Pay Levels 4 of 14 Deciding What to Pay • Efficiency wage theory • Employees who are paid more than they would be paid elsewhere will wish to retain their good jobs. ©McGraw-Hill Education Developing Pay Levels 5 of 14 Market Pay Surveys • Benchmarking – comparing an organization’s practices against those of the competition • Pay surveys require answers 1. Which employers should be included in the survey? 2. Which jobs are included in the survey? 3. If multiple surveys are used, how are all the rates of pay weighted and combined? ©McGraw-Hill Education Developing Pay Levels 6 of 14 Market Pay Surveys continued • Rate ranges • Permit a company to recognize differences in employee performance, seniority, training, and so forth in setting individual pay • For some jobs, there may be a single rate of pay for all employees within the job. ©McGraw-Hill Education Developing Pay Levels 7 of 14 Market Pay Surveys continued • Key jobs and nonkey jobs • Key jobs are benchmark jobs. • Have stable content and are common • Nonkey jobs are unique to organizations. • Cannot be directly valued or compared through market surveys ©McGraw-Hill Education Developing Pay Levels 8 of 14 Developing a Job Structure • ©McGraw-Hill Education Job Evaluation • Composed of compensable factors and a weighting scheme • Typically includes input from a number of people Developing Pay Levels 9 of 14 Developing a Job Structure continued • ©McGraw-Hill Education The point-factor system • First, a priori weights can be assigned. • Second, weights can be derived empirically based on how important each factor seems in determining pay in the labor market. Developing Pay Levels 10 of 14 Developing a Pay Structure • Market survey data • Has the greatest emphasis on external comparisons. • Pay policy line • Combines information from external and internal comparisons is to use the pay policy line to derive pay rates for both key and nonkey jobs. • Does not use actual market rates. ©McGraw-Hill Education Developing Pay Levels 11 of 14 Developing a Pay Structure continued • Pay grades • Grouping jobs into pay classes • Each job within a grade has the same rate range • Permits greater flexibility in moving employees from job to job • Range spread is larger at higher levels ©McGraw-Hill Education Developing Pay Levels 12 of 14 Conflicts Between Market Pay Surveys and Job Evaluation • LO 11-3 ©McGraw-Hill Education Sometimes average pay for a job falls significantly above or below the policy line. • Supply and demand • Which positions are most central to dealing with critical environmental challenges and opportunities in reaching the organization’s goals? • Most organizations now emphasize external comparisons/market pricing Developing Pay Levels 13 of 14 Monitoring Compensation Costs • Pay structure represents the organization’s intended policy, but actual practice may not coincide with it. • Grade compa-ratio = Actual average pay for grade/Pay midpoint for grade ©McGraw-Hill Education Developing Pay Levels 14 of 14 Globalization, Geographic Region, and Pay Structures • Market pay structures can differ substantially across countries both in terms of their level and in terms of the relative worth of jobs. • Expatriate pay ©McGraw-Hill Education Figure 11.3 Net Earnings (after Taxes and Social Security Contributions) in Selected Occupations, Six World Cities Jump to long description in appendix ©McGraw-Hill Education The Importance of Process: Participation and Communication Participation • Employee participation in pay decisions tends to be rare. • Line managers should be involved. Communication • Has a large, independent effect on employees’ attitudes and behaviors. • Employees use different comparison standards. • Managers must explain pay structure to employees. LO 11-4 ©McGraw-Hill Education Challenges 1 of 8 Problems with Job-Based Pay Structures • May encourage bureaucracy • Reinforces a top-down decision making and information flow as well as status differentials • The bureaucracy may become a barrier to change • May not reward desired behaviors • Encourages promotion-seeking behavior but may discourage lateral employee movement LO 11-5 ©McGraw-Hill Education Challenges 2 of 8 Responses to Problems with Job-Based Pay Structures • ©McGraw-Hill Education Delayering and Banding • Delayering and banding offer fewer opportunities for promotion • Broad bands can lead to weaker budgetary control and rising labor cost Challenges 3 of 8 Responses to Problems with Job-Based Pay Structures continued • ©McGraw-Hill Education Paying the person: Pay for skill, knowledge, and competency • Competency-based pay - if you want employees to learn more skills and become more flexible in the jobs they perform, you should pay them to do it • Skill-based pay • Increases workforce flexibility • Facilitates the decentralization of decision making to those who are most knowledgeable • Contributes to a climate of learning and adaptability and give employees a broader view of organization functions Challenges 4 of 8 Can the U.S. Labor Force Compete? • Instability of country differences in labor costs • Relative labor costs are very unstable over time • Influenced by currency rates, currency exchange hedging, and proximity to the U.S. market LO 11-6 ©McGraw-Hill Education Challenges 5 of 8 Can the U.S. Labor Force Compete? continued • Skill levels • Quality and productivity of national labor forces can vary dramatically • Lower labor costs may reflect the lower average skill level of the workforce ©McGraw-Hill Education Challenges 6 of 8 Can the U.S. Labor Force Compete? continued • Productivity • Labor cost per hour divided by productivity per hour worked • Gross domestic product ©McGraw-Hill Education Figure 11.4 Gross Domestic Product (GDP) per Person, Adjusted for Purchasing Power Differences, U.S. dollars Jump to long description in appendix ©McGraw-Hill Education SOURCE: OECD, OECD Statistics, http://stats.oecd.org, accessed April 19, 2017. Challenges 7 of 8 Can the U.S. Labor Force Compete? continued • Considerations other than labor cost • Location • Product development speed • Quick response to customers • Inventory levels ©McGraw-Hill Education Challenges 8 of 8 Executive Pay • Influence the organization’s performance • Set the culture of the organization • Long-term compensation is usually stock plans • The ratio of top-executive pay to that of an average worker is 280. • LO 11-7 ©McGraw-Hill Education Trust gap Table 11.11 Highest-Paid Executives Blank TOTAL COMPENSATION Sundar Pichai, Alphabet, Inc. (Google) $100.5 million Thomas M. Rutledge, Charter Comm., Inc. $98.5 million Dara Khosrowshahi, Expedia, Inc. Leslie Moonves, CBS $94.6 million ©McGraw-Hill Education $69.6 million SOURCE: R. Lightner and T. Francis, “How Much Do Top CEOs Make?” Wall Street Journal, April 20, 2017 Government Regulation of Employee Compensation 1 of 3 Equal Employment Opportunity • Title VII of the Civil Rights Act • Prohibits sex- and race-based differences in employment outcomes such as pay, unless justified by business necessity • Percent of women and non-whites in workforce is increasing LO 11-8 ©McGraw-Hill Education • Significant differences in pay • Comparable worth – no legal mandate Government Regulation of Employee Compensation 2 of 3 Equal Employment Opportunity continued ©McGraw-Hill Education • Executive Order 11246 prohibits race- or sexbased “systemic compensation discrimination” • 2009 Lilly Ledbetter Fair Pay Act Government Regulation of Employee Compensation 3 of 3 Minimum Wage, Overtime, and Prevailing Wage Laws • 1938 Fair Labor Standards Act (FLSA) establishes a minimum wage • Requires paying overtime after 40 hours in a week • The sharing economy • Exempt and nonexempt employees • Davis-Bacon Act of 1931 and the Walsh-Healey Public Contracts Act of 1936—require federal contractors to pay employees no less than the prevailing wages in the area ©McGraw-Hill Education Appendix of Image Long Descriptions ©McGraw-Hill Education Appendix 1 Figure 11.3 Net Earnings (after Taxes and Social Security Contributions) in Selected Occupations, Six World Cities BLANK Department Manager, Industrial Sector, Metalworking Industry Skilled Worker, Industrial Sector, Metalworking Industry Beijing $19,107 $6,197 Copenhagen $72,099 $45,202 Mexico City $14,581 $8,856 Mumbai $16,200 $5,045 Munich $87,211 $36,324 New York City $142,500 $47,000 Return to original slide ©McGraw-Hill Education Appendix 2 Figure 11.4 Gross Domestic Product (GDP) per Person, Adjusted for Purchasing Power Differences, U.S. dollars United States $56,066 Germany $48,908 Japan $40,737 Czech Republic $35,014 Korea $34,569 Mexico $17,894 China $14,388 Return to original slide ©McGraw-Hill Education Chapter 12 Recognizing Employee Contributions with Pay ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives LO12-1 Discuss how pay influences individual employees, and describe three theories that explain the effect of compensation on individuals. LO12-2 Describe the fundamental pay programs for recognizing employees’ contributions to the organization’s success. LO12-3 List the advantages and disadvantages of the pay programs. LO12-4 Describe how organizations combine incentive plans in a balanced scorecard. LO12-5 Discuss issues related to performance-based pay for executives. LO12-6 Explain the importance of process issues such as communication in compensation management. LO12-7 List the major factors to consider in matching the pay strategy to the organization’s strategy. ©McGraw-Hill Education How Does Pay Influence Individual Employees? 1 of 6 Reinforcement Theory • A response followed by a reward is more likely to recur in the future • High employee performance followed by a monetary reward will make future high performance more likely LO 12-1 ©McGraw-Hill Education How Does Pay Influence Individual Employees? 2 of 6 Expectancy Theory ©McGraw-Hill Education • Emphasizes expected rewards • Focuses on the effects of incentives • The main influence of compensation is on instrumentality: the perceived link between behaviors and pay. How Does Pay Influence Individual Employees? 3 of 6 Expectancy Theory continued • ©McGraw-Hill Education Intrinsic and extrinsic motivation • Extrinsic motivation depends on rewards (such as pay and benefits) controlled by an external source • Intrinsic motivation depends on rewards that flow naturally from work itself How Does Pay Influence Individual Employees? 4 of 6 Agency Theory ©McGraw-Hill Education • The divergent interests and goals of the organization’s stakeholders (principles and agents) • The ways that employee compensation can be used to align these interests and goals • Goal congruence and incongruence How Does Pay Influence Individual Employees? 5 of 6 Agency Theory continued • ©McGraw-Hill Education The principal must choose a contracting scheme that helps align the interests of the agent with the principal’s own interests • Outcome-oriented contracts • Behavior-based contracts How Does Pay Influence Individual Employees? 6 of 6 Agency Theory continued • ©McGraw-Hill Education What type of contract an organization should use depends on • Risk aversion • Outcome uncertainty • Job programmability • Measurable job outcomes • Ability to pay • Tradition How Do Pay Sorting Effects Influence Labor Force Composition? Sorting Effect • Individual pay programs may affect the nature and composition of an organization’s workforce • Linking pay to performance may attract retain more high performers • Personality traits and values ©McGraw-Hill Education Pay-for-Performance Programs 1 of 10 Differentiation in Performance and Pay • Important to pay high performers an amount they feel is equitable Differentiation Strength/Incentive Intensity: Promise and Peril • Incentive intensity • LO 12-2 ©McGraw-Hill Education Strengthens motivation but also unintended consequences Pay-for-Performance Programs 2 of 10 Types of Pay for Performance • Pay programs differ • Whether payouts become part of base pay, are a fixed cost, or are variable. • Some programs measure performance using primarily subjective measures, whereas others rely on more objective performance measures. • Performance can be measured at the individual level or at the unit or organization level. • Combination of programs may work best. ©McGraw-Hill Education Table 12.1 Programs for Recognizing Employee Contributions Design Features MERIT PAY MERIT BONUS INCENTIVE PAY PROFIT SHARING STOCK OWNERSHIP/ STOCK OPTIONS GAINSHARING SKILL BASED Fixed (becomes part of base salary) or variable Fixed Variable (bonus) Variable (bonus) Variable (bonus) Variable (equity changes) Variable (bonus) Fixed Performance measure (subjective or objective) Subjective (usually supervisor rating) Subjective (usually supervisor rating), but higher-level jobs may include objective components also Objective (e.g., productivity) Objective (profit) Objective (stock price/returns) Objective (productivity, safety, rework, customer satisfaction) Objective and/or subjective (certifying which skills are acquired) Performance measure (individual or collective) Individual Individual, but higherlevel jobs may include unit and/or organization outcomes. Individual Collective (organization) Collective (organization) Collective (unit) Objective and/or subjective (certifying which skills are acquired) ©McGraw-Hill Education Pay-for-Performance Programs 3 of 10 Merit Pay and Merit Bonuses • With merit pay, programs, annual base pay increases are usually linked to performance appraisal ratings. • Merit bonuses may define and reward various performance dimensions. • Merit increase grid based on LO 12-3 ©McGraw-Hill Education • Performance rating • Compa-ratio • Distribution of performance ratings Table 12.2 Performance Dimensions for Lower to Mid-level Managers, Arrow Electronics 1. Exercises good business judgment 2. Inspires enthusiasm, energy, understanding, loyalty for company goals 3. Attracts, grows, and retains outstanding talent 4. Shows initiative 5. Has position-specific knowledge 6. Delivers results 7. Builds internal good will ©McGraw-Hill Education SOURCE: R. Riphahn, “Evidence on Incentive Effects of Subjective Performance Evaluations,” Industrial and Labor Relations Review 64 (2011). Table 12.3 Merit Increase Grid RECOMMENDED SALARY INCREASES BY PERFORMANCE RATING AND COMPA-RATIO Compa-ratio Compa-ratio Compa-ratio 80-90% 91-110% 111-120% Performance rating Blank Blank Blank Exceeds expectations 7% 5% 3% Meets expectations 4% 3% 2% Below expectations 2% 0% 0% ©McGraw-Hill Education Table 12.4 Performance Ratings and Compa-Ratio Targets PERFORMANCE RATING Exceeds expectations Meets expectations Below expectations ©McGraw-Hill Education COMPA-RATIO TARGET 111–120 91–110 Below 91 Pay-for-Performance Programs 4 of 10 Merit Pay and Merit Bonuses continued • Characteristics of Traditional Merit Pay Programs • They identify individual differences in performance, which are assumed to reflect differences in ability or motivation. • The majority of information on individual performance is collected from the immediate supervisor. • There is a policy of linking pay increases to performance appraisal results. • Feedback under such systems tends to occur infrequently, often once per year at the formal performance review session. • The flow of feedback tends to be largely unidirectional, from supervisor to subordinate. ©McGraw-Hill Education Pay-for-Performance Programs 5 of 10 Merit Pay and Merit Bonuses continued • Criticisms of Merit Pay Programs • It is unfair to rate individual performance because “apparent differences between people arise almost entirely from the system that they work in, not from the people themselves.” • The individual focus of merit pay discourages teamwork. • If the performance measure is not perceived as being fair and accurate, the entire merit pay program can break down. • Merit pay does not really exist. ©McGraw-Hill Education Table 12.5 Examples of Procedural Justice in Merit Pay Decisions Employees’ Belief That in Evaluating Their Performance, Their Supervisor... • Was honest and ethical and tried to be fair • Considered your input • Used consistent standards • Provided feedback • Took the time to become familiar with your role and performance, including factors beyond your control • After a merit pay decision was made, was receptive to discussion of how the decision was made (and/or an appeal) and working together to develop an action plan going forward ©McGraw-Hill Education Pay-for-Performance Programs 6 of 10 Merit Pay and Merit Bonuses continued • ©McGraw-Hill Education Individual Incentives • Payments not rolled into base pay. • Performance is usually measured as physical output rather than by subjective ratings. • Rare because • Most jobs have no physical output measure. • Administrative problems • Employees only do what they are paid for. • Don’t fit with a team approach • May be inconsistent with learning new skills • May reward output volume at the expense of quality or customer service • May undermine motivation Pay-for-Performance Programs 7 of 10 Merit Pay and Merit Bonuses continued • Profit sharing and ownership • Advantages of profit sharing • Employees think more like owners, taking a broad view of what needs to be done to make the organization more effective • Labor costs are automatically reduced during difficult economic times, and wealth is shared during good times • Disadvantages • Most employees are unlikely to see a strong connection between what they do and what they earn under profit sharing. • Most plans are deferred. ©McGraw-Hill Education Pay-for-Performance Programs 8 of 10 Merit Pay and Merit Bonuses continued • Profit sharing and ownership • Employee ownership • Encourages employees to focus on the success of the organization as a whole • May not motivate in large organizations • Employees may not realize any financial gain until they actually sell their stock • Stock options • Employee stock ownership plans (ESOPs) ©McGraw-Hill Education Pay-for-Performance Programs 9 of 10 Gainsharing, Group Incentives, and Team Awards • • ©McGraw-Hill Education Gainsharing • Measures group or plant performance • Payouts are not deferred • More motivating to employees Group incentives and team awards • Typically pertain to a smaller work group • May use a broader range of performance measures • May demotivate top performers Pay-for-Performance Programs 10 of 10 Balanced Scorecard • Use a mix of pay programs • Balanced scorecard • Balances multiple objectives LO 12-4 ©McGraw-Hill Education Managerial and Executive Pay Agency theory perspective • The goal of owners (shareholders) is to encourage the agents (managers and executives) to act in the best interests of the owners. • More emphasis on outcome-oriented “contracts” that make some portion of executive pay contingent on the organization’s profitability or stock performance • Balanced scorecard is necessary LO 12-5 ©McGraw-Hill Education Process and Context Issues 1 of 2 Employee Participation in Decision Making • Linked to higher pay satisfaction and job satisfaction • Delegation of decision making can be costly LO 12-6 ©McGraw-Hill Education Process and Context Issues 2 of 2 Communication • Deal with employee concerns Pay and Process: Intertwined Effects • Gainsharing can positively affect productivity ©McGraw-Hill Education Organization Strategy and Compensation Strategy: A Question of Fit Pay Strategy • Important to consider how it will match the organization’s overall strategies • Best practices LO 12-7 ©McGraw-Hill Education • Choosing a pay level that balances the ability to compete in the product market and in the labor market • Paying for performance to obtain positive incentive and sorting effects • Paying attention to both distributive (e.g., equity theory) and procedural justice issues • Complying with regulatory requirements Chapter 13 Employee Benefits ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives LO 13-1 Discuss the growth in benefits costs and the underlying reasons for that growth. LO 13-2 Explain the major provisions of employee benefits programs. LO 13-3 Discuss how employee benefits in the United States compare with those in other countries. LO 13-4 Describe the effects of benefits management on cost and workforce quality. LO 13-5 Explain the importance of effectively communicating the nature and value of benefits to employees. LO 13-6 Describe the regulatory constraints that affect the way employee benefits are designed and administered. ©McGraw-Hill Education Introduction Average cost of benefits is about 46.3% for every payroll dollar and about 31.6% of total compensation package. Benefits are unique because: • More regulation of benefits than direct pay • Almost obligatory for employers to provide • Complex for employees to understand • Employees may not even be aware of benefits available to them ©McGraw-Hill Education Figure 13.1 Growth of Employee Benefits, Percentage of Wages and Salaries and of Total Compensation, 1929– 2017, Civilian Workers Jump to long description in appendix ©McGraw-Hill Education Reasons for Benefits Growth 1 of 2 Factors Contributing to Growth • The Social Security Act and other legislation • Wage and price controls instituted during World War II • Tax treatment of benefits programs • Marginal tax rate • No employer taxes on most employee benefits LO 13-1 ©McGraw-Hill Education Reasons for Benefits Growth 2 of 2 Factors Contributing to Growth continued • Cost advantage that groups typically realize over individuals • Growth of organized labor from the 1930s through the 1950s • Unique benefits are a means of differentiating employers in the eyes of current or prospective employees ©McGraw-Hill Education Benefits Programs 1 of 13 Social Insurance (Legally Required) • LO 13-2 ©McGraw-Hill Education Social Security • Unemployment insurance • Survivor’s insurance (1939) • Disability insurance (1956) • Hospital insurance (Medicare Part A, 1965) • Supplementary medical insurance (Medicare Part B, 1965) for the elderly Benefits Programs 2 of 13 Social Insurance (Legally Required) continued • ©McGraw-Hill Education Social Security continued • Covers more than 90% of U.S. employees • Begins at age 65 years and 6 months (full benefits) or age 62 (reduced benefits) • May be free from state and federal taxes • Paid for with payroll tax Benefits Programs 3 of 13 Social Insurance (Legally Required) continued • Unemployment insurance • To offset lost income during involuntary unemployment • To help unemployed workers find new jobs • To provide an incentive for employers to stabilize employment • To preserve investments in worker skills by providing income during short-term layoffs • Financed through taxes on employers • ©McGraw-Hill Education Size of tax depends on the employer’s experience rating Benefits Programs 4 of 13 Social Insurance (Legally Required) continued • ©McGraw-Hill Education Unemployment insurance continued • Must have a prior attachment to the workforce • Must be available for work • Must be actively seeking work (including registering at the local unemployment office) • Were not discharged for cause (such as willful misconduct), did not quit voluntarily, and are not out of work because of a labor dispute Benefits Programs 5 of 13 Social Insurance (Legally Required) continued • ©McGraw-Hill Education Worker’s Compensation • Job-related injuries and death • No-fault liability • Employers immune from lawsuits • 90% of U.S. workers covered Benefits Programs 6 of 13 Social Insurance (Legally Required) continued • ©McGraw-Hill Education Worker’s Compensation continued • Disability income • Medical care • Death benefits • Rehabilitative services Benefits Programs 7 of 13 Private Group Insurance • Medical insurance • Consolidated Omnibus Budget Reconciliation Act (COBRA) • Disability insurance • Short term • Long term ©McGraw-Hill Education Benefits Programs 8 of 13 Retirement • Defined benefit • Pension Benefit Guaranty Corporation (PBGC) • Employee Retirement Income Security Act (ERISA) ©McGraw-Hill Education Benefits Programs 9 of 13 Retirement continued • Defined contribution • Individual account set up for each employee with a guaranteed size of contribution • Shift investment risk to employees • Money purchase plan • Profit- sharing plans • Employee stock ownership plans • Section 401(k) plans • Pension Protection Act (PPA) of 2006 ©McGraw-Hill Education Figure 13.2 The Relationship of Retirement Savings to Age When Savings Begins and Type of Investment Portfolio Jump to long description in appendix ©McGraw-Hill Education SOURCE: A. Damodaran, “Annual Returns on Stock, T. Bonds and T. Bills: 1928–Current,” http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/histretSP Benefits Programs 10 of 13 Retirement continued • Cash balance plans • All contributions come from the employer • Rate guaranteed in a defined benefit plan ©McGraw-Hill Education Benefits Programs 11 of 13 Retirement continued • Funding, communication, and vesting requirements • Employers are required to make yearly contributions that are sufficient to cover future obligations • Summary plan description • Vesting rights ©McGraw-Hill Education Benefits Programs 12 of 13 Pay for Time Not Worked • Includes paid vacation, holidays, sick leave • No legal minimum in the U.S. LO 13-3 ©McGraw-Hill Education Figure 13.3 Normal Annual Hours Worked Relative to United States SOURCE: Organization for Economic Cooperation and Development. Data for 2015. http://stats.oecd.org/Index.aspx? Section on Labour, Subsection on Labour Force Statistics. Accessed April 15, 2017. Jump to long description in appendix ©McGraw-Hill Education Benefits Programs 13 of 13 Family-Friendly Policies • Family leave • • ©McGraw-Hill Education Family and Medical Leave Act Child care • Vouchers or discounts • Child care near worksites Managing Benefits: Employer Objectives and Strategies 1 of 10 Surveys and Benchmarking • Private consultants • U.S. Chamber of Commerce • Bureau of Labor Statistics LO 13-4 ©McGraw-Hill Education Table 13.5 The Five Most Highly Ranked Benefits Objectives for Employers 1. Increase employee productivity 2. Increase employee satisfaction 3. Increase employee loyalty 4. Attract employees 5. Help employees make better financial decisions ©McGraw-Hill Education Figure 13.4 Employee Benefits Cost by Category, Private-Sector Workers Jump to long description in appendix ©McGraw-Hill Education SOURCE: U.S. Department of Labor, “Employer Costs for Employee Compensation—December 2016,” March 17, 2017, News Release USDL-17-0321. Managing Benefits: Employer Objectives and Strategies 2 of 10 Cost Control ©McGraw-Hill Education • Cost of a benefit category • Growth trajectory of the benefit category • Cost of legally required benefits • Medical and other insurance are targets for cost control Managing Benefits: Employer Objectives and Strategies 3 of 10 Cost Control continued • ©McGraw-Hill Education Health care: controlling costs and improving quality • U.S. spends more on health care than any other country in the world, most through employers • Employers can shift costs to employees through deductibles, coinsurance, exclusions and limitations, and maximum benefits. • Cost reductions • HMOs and PPOs Managing Benefits: Employer Objectives and Strategies 4 of 10 Cost Control continued • Health care: controlling costs and improving quality continued • ©McGraw-Hill Education Employee wellness programs • Focus on changing behaviors both on and off work time that could eventually lead to future health problems • Preventive in nature • Passive or active Managing Benefits: Employer Objectives and Strategies 5 of 10 Cost Control continued • Health care: controlling costs and improving quality continued • ©McGraw-Hill Education Health care costs and quality: Ongoing challenges • Average annual premium for family coverage $18,142 • Piecemeal programs may not work • Pareto group Managing Benefits: Employer Objectives and Strategies 6 of 10 Cost Control continued • ©McGraw-Hill Education Staffing responses to control benefits cost growth • Benefits cost per hour can be reduced by having employees work more hours • Classify employees as exempt • Temporary workers • Independent contractors Managing Benefits: Employer Objectives and Strategies 7 of 10 Nature of the Workforce ©McGraw-Hill Education • Demographic factors impact types of benefits desired • Marketing research • What benefits are most important to you? • If you could choose one new benefit, what would it be? • If you were given x dollars for benefits, how would you spend it? Managing Benefits: Employer Objectives and Strategies 8 of 10 Communicating With Employees and Maximizing Benefits Value • Employees and job applicants typically underestimate the value of their benefits • Organizations spend little time communicating about benefits and costs LO 13-5 ©McGraw-Hill Education • Written information • Online tools Managing Benefits: Employer Objectives and Strategies 9 of 10 Communicating With Employees and Maximizing Benefits Value continued • Flexible Benefits Plans • Permit employees to choose the types and amounts of benefits they want • Employees can gain a greater awareness and appreciation • Should be a better match • Overall cost reductions in benefits programs • May have high administrative costs • Adverse selection ©McGraw-Hill Education Managing Benefits: Employer Objectives and Strategies 10 of 10 Communicating With Employees and Maximizing Benefits Value continued • Flexible Spending Accounts • ©McGraw-Hill Education Permits pretax contributions of up to $2,600 to an employee account that can be drawn on to pay for uncovered health care expenses General Regulatory Issues 1 of 4 Affordable Care Act • Does not require employers to provide health benefits, does impose penalties in some cases on larger employers that do not provide insurance to their workers or that provide coverage that is unaffordable • Increases the Medicare Hospital Insurance (Part A) payroll tax on earnings for higher-income taxpayers • New tax on so-called “Cadillac“ insurance plans provided by employers • Dependent coverage until age 26 • Wellness programs LO 13-6 ©McGraw-Hill Education General Regulatory Issues 2 of 4 Nondiscrimination Rules, Qualified Plans, and Tax Treatment • ©McGraw-Hill Education Qualified plan • Receives more favorable tax treatment • Each benefit area has different rules General Regulatory Issues 3 of 4 Sex, Age, and Disability • The Supreme Court declared it illegal for employers to require women to contribute more to a defined benefit plan than men • Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA) • Americans with Disabilities Act (ADA) ©McGraw-Hill Education General Regulatory Issues 4 of 4 Monitoring Future Benefits Obligations • Financial Accounting Statement (FAS) 106 • Some companies are charging insurance premiums to employees and retirees or ending retiree benefits • Pension Benefit Guaranty Corporation ©McGraw-Hill Education Appendix of Image Long Descriptions ©McGraw-Hill Education Appendix 1 Figure 13.1 Growth of Employee Benefits, Percentage of Wages and Salaries and of Total Compensation, 1929–2017, Civilian Workers Benefits as percentage of wages and salaries Benefits as percentage of total compensation 1929 1955 1965 1975 1990 1995 2000 2005 2010 2015 2017 3.0 17.0 21.5 30.0 37.9 40.4 37.7 42.2 43.5 46.2 46.3 2.9 14.5 17.7 23.1 27.5 29.2 27.4 29.7 30.3 31.6 31.6 Return to original slide ©McGraw-Hill Education Appendix 2 Figure 13.2 The Relationship of Retirement Savings to Age When Savings Begins and Type of Investment Portfolio A bar graph shows an annual investment of $3,000 made between ages 21 and 29 will be worth much more at age 65 than a similar investment made between ages 31 and 39. Second, different investments have different historical rates of return. Between 1928 and 2016 the average annual return was 9.53% for stocks, 5.18% for bonds, and 3.46% for cash (e.g., short-term Treasury bills or bank savings accounts). If historical rates of return were to continue, an investment in a mix of 60% stock, 30% bonds, and 10% cash between the ages of 21 and 29 would be worth about four times as much at age 65 as would the same amount kept in the form of cash. Return to original slide ©McGraw-Hill Education Appendix 3 Figure 13.3 Normal Annual Hours Worked Relative to United States Mexico 2,246 hours, 456 more hours annually than the U.S. Korea 2,113 hours, 323 more hours annually than the U.S. United States 1,790 hours Japan 1,719 hours, 71 hours fewer than the U.S. France 1,482 hours, 308 hours fewer than the U.S. Germany 1,371 hours, 419 hours fewer than the U.S. Return to original slide ©McGraw-Hill Education Appendix 4 Figure 13.4 Employee Benefits Cost by Category, Private-Sector Workers As a percent of total compensation: legally required: 7.8 percent% retirement and savings plans: 4.0 percent medical and other insurance: 8.0 percent payments for time not worked: 7.0 percent supplemental pay: 3.5 percent Total benefits = $9.93, 30.3 percent of total compensation ($32.76) Return to original slide ©McGraw-Hill Education Chapter 15 Managing Human Resources Globally ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives LO 15-1 Identify the recent changes that have caused companies to expand into international markets. LO 15-2 Discuss the four factors that most strongly influence HRM in international markets. LO 15-3 List the different categories of international employees. LO 15-4 Identify the four levels of global participation and the HRM issues faced within each level. LO 15-5 Discuss the ways companies attempt to select, train, compensate, and reintegrate expatriate managers. ©McGraw-Hill Education Introduction Trend in Global Expansion • New markets = new customers • Moving production facilities may lower labor costs • Information technology ©McGraw-Hill Education Current Global Changes 1 of 4 European Union • European Economic Community (EEC) 1992 • Confederation of most of the European nations that agree to engage in free trade with one another, with commerce regulated by an overseeing body called the European Commission (EC) • Shared currency (Euro) LO 15-1 ©McGraw-Hill Education Current Global Changes 2 of 4 North American Free Trade Agreement (NAFTA) • Canada, United States, and Mexico • Increased U.S. investment in Mexico • Many low-skilled jobs went south • Increased employment opportunities for Americans with higher-level skills ©McGraw-Hill Education Current Global Changes 3 of 4 The Growth of Asia • Singapore, Hong Kong, Malaysia have become significant economic forces • China • Population of more than 1 billion • Opening markets to foreign investors • Predicted to have larger economy than U.S. ©McGraw-Hill Education Current Global Changes 4 of 4 General Agreement on Tariffs and Trade • Reduce trade barriers globally • More than 100 member-nations • World Trade Organization (WTO) ©McGraw-Hill Education Figure 15.1 Factors Affecting Human Resource Management in International Markets ©McGraw-Hill Education Factors Affecting HRM in Global Markets 1 of 6 Culture • Most important factor • Often determines the other three factors affecting HRM in global markets • Often determines the effectiveness of various HRM practices LO 15-2 ©McGraw-Hill Education Factors Affecting HRM in Global Markets 2 of 6 Culture continued • ©McGraw-Hill Education Hofstede’s Cultural Dimensions • Individualism-collectivism • Power distance • Uncertainty avoidance • Masculinity-femininity • Long-term – short-term Factors Affecting HRM in Global Markets 3 of 6 Culture continued • ©McGraw-Hill Education Implications of Culture for HRM • Has a profound impact on a country’s economic health by promoting certain values that either aid or inhibit economic growth • Influences the ways managers behave in relation to subordinates • May influence the appropriateness of HRM practices • Influences how employees value certain aspects of their work environment • Influences compensation systems and communication processes Factors Affecting HRM in Global Markets 4 of 6 Education-Human Capital ©McGraw-Hill Education • Educational opportunities • Countries with low human capital attract facilities that require low skills and low wage levels • Countries with high human capital are attractive sites for direct foreign investment that creates high-skill jobs Factors Affecting HRM in Global Markets 5 of 6 Political-Legal System • Often dictates the requirements for certain HRM practices, such as training, compensation, hiring, firing, and layoffs • Outgrowth of the culture/societal norms of a country ©McGraw-Hill Education Factors Affecting HRM in Global Markets 6 of 6 Economic System • • • Socialist system • Education is free, but little economic incentive • Higher taxes Capitalist system • Cost to develop human capital is higher • Can reap monetary rewards Developing countries • ©McGraw-Hill Education Low labor costs Figure 15.2 Hourly Compensation Costs in Manufacturing, U.S. Dollars, 2012 Jump to long description in appendix ©McGraw-Hill Education Managing Employees in a Global Context 1 of 9 Types of International Employees • Types of countries • Parent countries • Host countries • Third countries LO 15-3 ©McGraw-Hill Education Managing Employees in a Global Context 2 of 9 Types of International Employees continued • Types of employees • Expatriate • Parent-country nationals • Host country nationals • Third-country nationals ©McGraw-Hill Education Managing Employees in a Global Context 3 of 9 Levels of Global Participation • Domestic • International • Multinational • Global LO 15-4 ©McGraw-Hill Education Managing Employees in a Global Context 4 of 9 Levels of Global Participation continued • ©McGraw-Hill Education Transnational HRM • Transnational scope • Transnational representation • Transnational process Managing Employees in a Global Context 5 of 9 Managing Expatriates in Global Markets • Average one-time cost for relocating an expatriate is $60,000 • Average compensation package is approximately $250,000 • Cost of an unsuccessful expatriate assignment (that is, a manager returning early) is approximately $100,000 LO 15-5 ©McGraw-Hill Education Managing Employees in a Global Context 6 of 9 Managing Expatriates in Global Markets continued • Selection of expatriate managers • Technical competence in area of operations • Adaptability • Cultural sensitivity • Self dimension • Relationship dimension • Perception dimension • Cultural intelligence ©McGraw-Hill Education Table 15.3 Select Topics for Assessing Candidates for Overseas Assignments 1 of 7 Motivation • What are the candidate’s reasons and degree of interest in wanting an overseas assignment? • Does the candidate have a realistic understanding of what is required in working and living overseas? • What is the spouse’s attitude toward an overseas assignment? ©McGraw-Hill Education Table 15.3 Select Topics for Assessing Candidates for Overseas Assignments 2 of 7 Health • Are there any health issues with the candidate or family members that might impact the success of the overseas assignment? Language ability • Does the candidate have the potential to learn a new language? • Does the candidate’s spouse have the ability to learn a new language? ©McGraw-Hill Education Table 15.3 Select Topics for Assessing Candidates for Overseas Assignments 3 of 7 Family considerations • • • • • ©McGraw-Hill Education How many moves has the family made among different cities or parts of the United States? What problems were encountered? What is the spouse’s goal in this move overseas? How many children are in the family, and what are their ages? Will all the children move as part of the overseas assignment? Has divorce or its potential, or the death of a family member, had a negative effect on the family’s cohesiveness? Are there any adjustment problems the candidate would expect, should the family move overseas? Table 15.3 Select Topics for Assessing Candidates for Overseas Assignments 4 of 7 Resourcefulness and initiative ©McGraw-Hill Education • Is the candidate independent and capable of standing by his or her decisions? • Is the candidate able to meet objectives and produce positive results with whatever human resources and facilities are available regardless of challenges that might arise in a foreign business environment? • Can the candidate operate without a clear definition of responsibility and authority? • Will the candidate be able to explain the goals of the company and its mission to local managers and workers? • Does the candidate possess sufficient self-discipline and selfconfidence to handle complex problems? • Can the candidate operate effectively in a foreign country without normal communications and supporting services? Table 15.3 Select Topics for Assessing Candidates for Overseas Assignments 5 of 7 Adaptability • • • • • ©McGraw-Hill Education Is the candidate cooperative, open to the opinions of others, and able to compromise? How does the candidate react to new situations and efforts to understand and appreciate cultural differences? How does the candidate react to criticism, constructive or otherwise? Will the candidate be able to make and develop contacts with peers in a foreign country? Does the candidate demonstrate patience when dealing with problems? Is he or she resilient and able to move forward after setbacks? Table 15.3 Select Topics for Assessing Candidates for Overseas Assignments 6 of 7 Career planning ©McGraw-Hill Education • Does the candidate consider the assignment more than a temporary overseas trip? • Is the overseas assignment consistent with the candidate’s career development and one that was planned by the company? • What is the candidate’s overall attitude toward the company? • Is there any history or indication of interpersonal problems with this candidate? Table 15.3 Select Topics for Assessing Candidates for Overseas Assignments 7 of 7 Financial • Are there any current financial and/or legal considerations that might affect the assignment (e.g., house or car purchase, college expenses)? • Will undue financial pressures be put upon the candidate and his or her family as a result of an overseas assignment? SOURCES: P. Caligiuri, Cultural Agility: Building a Pipeline of Successful Global Professionals (San Francisco: Jossey-Bass, 2012); P. Caligiuri, D. Lepak, and J. Bonache, Managing the Global Workforce (West Sussex, United Kingdom: John Wiley & Sons, 2010); M. Shaffer, D. Harrison, H. Gregersen, S. Black, and L. Ferzandi, “You Can Take It with You: Individual Differences and Expatriate Effectiveness,“ Journal of Applied Psychology 91 (2006), pp. 109–25; P. Caligiuri, “Developing Global Leaders,” Human Resource Management Review 16 (2006), pp. 219–28; P. Caligiuri, M. Hyland, A. Joshi, and A. Bross, “Testing a Theoretical Model for Examining the Relationship between Family Adjustment and Expatriates’ Work Adjustment,” Journal of Applied Psychology 83 (1998), pp. 598–614; David M. Noer, Multinational People Management: A Guide for Organizations and Employees (Arlington, VA: Bureau of National Affairs, 1975). ©McGraw-Hill Education Managing Employees in a Global Context 7 of 9 Managing Expatriates in Global Markets continued • Training and Development of Expatriates • ©McGraw-Hill Education Cross-cultural training • Cultural self-awareness • Culture in the work environment • Communication differences Table 15.5 Expatriate Adjustment Factors Work Environment (the employees, culture, and climate where the expatriate works) Language (the ability of the expatriate to communicate) Job or Task Characteristics (the expatriate’s freedom, autonomy and variety in how they work) Leisure Time (opportunities to engage in sports, hobbies and other leisure activities) Urbanity (pollution, traffic, and beauty of the location) Work-Life Balance (ability to balance time spent at work and with family) Living Quarters (size and type of living accommodations) Family Life (family cohesion and harmony with partner) Local Friendships (number and depth of local friendships) Contact to Those Left Behind (ability to maintain relationships with family and friends in the home country) Source: Hippler, T., Caligiuri, P., Johnson, J., Baytalskaya, N. (2014). The development and validation of a theory-based expatriate adjustment scale. International Journal of Human Resource management, 25(14), 1938-1959. ©McGraw-Hill Education Managing Employees in a Global Context 8 of 9 Managing Expatriates in Global Markets continued • Compensation of Expatriates • ©McGraw-Hill Education Balance sheet approach • Base salary • Tax equalization allowance • Benefits • Cost-of-living allowances Figure 15.4 The Balance Sheet for Determining Expatriate Compensation SOURCE: From C. Reynolds, “Compensation of Overseas Personnel,” in J. J. Famulari, ed., Handbook of Human Resource Administration, 2nd ed., 1986. Copyright © 1986. Reproduced with permission of The McGraw-Hill Companies, Inc. Jump to long description in appendix ©McGraw-Hill Education Managing Employees in a Global Context 9 of 9 Managing Expatriates in Global Markets continued • ©McGraw-Hill Education Reacculturation of expatriates • Culture shock • Importance of communication and validation Appendix of Image Long Descriptions ©McGraw-Hill Education Appendix 1 Figure 15.2 Hourly Compensation Costs in Manufacturing, U.S. Dollars, 2012 Norway $63.66 Switzerland $57.59 Sweden $49.80 Denmark $48.47 Australia $47.69 Germany $45.79 Austria $41.53 France $39.81 Netherlands $39.62 Canada $36.59 United States $35.67 Japan $35.34 Italy $34.18 United Kingdom $31.23 Spain $26.83 Singapore $24.16 Taiwan $9.46 Mexico $6.36 Philippines $2.10 Return to original slide ©McGraw-Hill Education Appendix 2 Figure 15.4 The Balance Sheet for Determining Expatriate Compensation A diagram shows home country salary includes income taxes, housing, goods and services, and reserve. Host-country costs include home- and host-country income taxes, housing, goods and services, and reserve. Host-country costs paid by company and from salary include income taxes, housing, goods and services, reserve, and other costs not paid for by company. Home-country equivalent purchasing power includes premiums and incentives, income taxes, housing, goods and services, and reserve. Return to original slide ©McGraw-Hill Education Chapter 16 Strategically Managing the HRM Function ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives 1 of 2 LO 16-1 Describe the roles that HRM plays in firms today and the categories of HRM activities. LO 16-2 Discuss how the HRM function can define its mission and market LO 16-3 Explain the approaches to evaluating the effectiveness of HRM practices. LO 16-4 Describe the new structures for the HRM function. ©McGraw-Hill Education Learning Objectives 2 of 2 LO 16-5 Describe how outsourcing HRM activities can improve service delivery efficiency and effectiveness. LO 16-6 Relate how process reengineering is used to review and redesign HRM practices. LO 16-7 Discuss the types of new technologies that can improve the efficiency and effectiveness of HRM. LO 16-8 List the competencies the HRM executive needs to become a strategic partner in the company. ©McGraw-Hill Education Activities of HRM Transactional activities • Day-to-day transactions such as benefits administration, record keeping, and employee services Traditional activities • Performance management, training, recruiting, selection, compensation, and employee relations Transformational activities • LO 16-1 ©McGraw-Hill Education Knowledge management, management development, cultural change, and strategic redirection and renewal Figure 16.1 Categories of HRM Activities and Percentages of Time Spent on Them Jump to long description in appendix ©McGraw-Hill Education Strategic Management of the HRM Function Customer-oriented approach • HRM function as a strategic business unit defined in terms of the customer base, the customers’ needs, and the technologies required to satisfy customers’ needs ©McGraw-Hill Education Figure 16.2 Customer-Oriented Perspective of the HRM Function Jump to long description in appendix ©McGraw-Hill Education Building an HR Strategy 1 of 2 The Basic Process • Scan the environment • Examine strategic business issues or needs • Identify people issues to address • Design HR strategy • Communicate to relevant parties LO 16-2 ©McGraw-Hill Education Figure 16.4 Basic Process for HR Strategy ©McGraw-Hill Education Building an HR Strategy 2 of 2 Involving Line Executives • Can increase the quality of information from which the HR strategy is created • Provide input • Team members • Receive communications • Approve the strategy ©McGraw-Hill Education Figure 16.7 Approaches to Developing an HR Strategy Jump to long description in appendix ©McGraw-Hill Education Measuring HRM Effectiveness 1 of 3 Benefits • Marketing the function • Shows how HR supports the organization • Providing accountability • Shows how HR is meeting its objectives LO 16-3 ©McGraw-Hill Education Measuring HRM Effectiveness 2 of 3 Audit Approach • Key indicators • Staffing • Equal employment opportunity • Compensation • Benefits • Training • Employee appraisal and development • Succession planning • Safety • Labor relations • Overall effectiveness ©McGraw-Hill Education Figure 16.9 Comparing HR and Line Executives’ Evaluations of the Effectiveness of HRM Roles Jump to long description in appendix ©McGraw-Hill Education Figure 16.10 Comparing HR and Line Executives’ Evaluations of the Effectiveness of HRM Contributions Jump to long description in appendix ©McGraw-Hill Education Measuring HRM Effectiveness 3 of 3 The Analytic Approach • Determines whether the introduction of a program or practice has the intended effect • Estimates the financial costs and benefits resulting from an HRM practice • Human resource accounting • Utility analysis • Uses analytic data to increase organizational effectiveness ©McGraw-Hill Education Table 16.2 Types of Cost–Benefit Analyses Human resource accounting • Capitalization of salary • Net present value of expected wage payments • Returns on human assets and human investments Utility analysis • Turnover costs • Absenteeism and sick leave costs • Gains from selection programs • Impact of positive employee attitudes • Financial gains of training programs SOURCE: Based on A. S. Tsui and L. R. Gomez-Mejia, “Evaluating HR Effectiveness,” in Human Resource Management: Evolving Roles and Responsibilities, ed. L. Dyer (Washington, DC: Bureau of National Affairs, 1988), pp. 1–196. ©McGraw-Hill Education Improving HRM Effectiveness 1 of 6 Improving both the efficiency and effectiveness in performing each of the activities Eliminating as much of the transactional work as possible (and some of the traditional work) to free up time and resources to focus more on the higher-value-added transformational work LO 16-4 ©McGraw-Hill Education Figure 16.11 Improving HRM Effectiveness Jump to long description in appendix ©McGraw-Hill Education Improving HRM Effectiveness 2 of 6 Restructuring to Improve HRM Effectiveness • Traditional structured around basic HRM subfunctions, such as staffing, training, compensation, appraisal, and labor relations • Generic structure divides the HRM function into three divisions • The centers for expertise • The field generalists • The service center ©McGraw-Hill Education Figure 16.12 Old and New Structures for the HRM Organization Jump to long description in appendix ©McGraw-Hill Education Improving HRM Effectiveness 3 of 6 Outsourcing to Improve HRM Effectiveness • An outside source may provide a service more cheaply or more effectively (more expertise) than doing it internally • Primarily outsource transactional activities and services • Pensions and benefits administration • Payroll LO 16-5 ©McGraw-Hill Education Improving HRM Effectiveness 4 of 6 Improving HRM Effectiveness Through Process Redesign • Reengineering • Identify the process to be reengineered • Understand the process • Redesign the process • Implement the new process LO 16-6, 16-7 ©McGraw-Hill Education Improving HRM Effectiveness 5 of 6 Improving HRM Effectiveness Through Process Redesign continued • New technologies—E-HRM • Leveraging technology for the delivery of traditional and transformational HRM activities ©McGraw-Hill Education Improving HRM Effectiveness 6 of 6 Improving HRM Effectiveness Through Process Redesign continued • Recruitment and selection • Online recruiting one out of every eight hires • Enables firms to monitor hiring processes to minimize the potential for discriminatory hiring decisions • Compensation and Rewards • Training and Development ©McGraw-Hill Education Improving HRM Effectiveness through New Technologies—HRM Information Systems Three broad functions HRM has used in the past • Transaction processing, reporting, and tracking • Decision support systems • Expert systems New technologies • Predictive analytics • Customization ©McGraw-Hill Education The Future for HR Professionals Four Basic Competencies • Business competence • Professional-technical knowledge • Management of change processes • Integration competence LO 16-8 ©McGraw-Hill Education The Role of the Chief Human Resource Officer Chief HR Officer • Bear the responsibility for leading the HR function • Ensure that HR systems and processes deliver value to the company • Seven roles • Strategic advisor to the executive team • Talent architect • Counselor/confidante/coach • Leader of the HR function • Liaison to the board • Workforce sensor • Representative of the firm ©McGraw-Hill Education Figure 16.17 Percentage of Time CHROs Spend in Each Role Jump to long description in appendix ©McGraw-Hill Education Table 16.5 Roles of the CHRO 1 of 2 Strategic advisor to the executive team: activities focused specifically on the formulation and implementation of the firm’s strategy. Counselor/confidante/coach to the executive team: activities focused on counseling or coaching team members or resolving interpersonal or political conflicts among team members. Liaison to the board of directors: preparation for board meetings, phone calls with board members, attendance at board meetings. ©McGraw-Hill Education Table 16.5 Roles of the CHRO 2 of 2 Talent architect: activities focused on building and identifying the human capital critical to the present and future of the firm. Leader of the HR function: working with HR team members regarding the development, design, and delivery of HR services. Workforce sensor: activities focused on identifying workforce morale issues or concerns. Representative of the firm: activities with external stakeholders, such as lobbying, speaking to outside groups, etc. ©McGraw-Hill Education Appendix of Image Long Descriptions ©McGraw-Hill Education Appendix 1 Figure 16.1 Categories of HRM Activities and Percentages of Time Spent on Them Transformational (5-15 percent) • Knowledge management • Strategic redirection and renewal • Cultural change • Management development Traditional (15-30 percent) • Recruitment and selection • Training • Performance management • Compensation • Employee relations Transactional (65-75 percent) • Benefits administration • Record keeping • Employee services Return to original slide ©McGraw-Hill Education Appendix 2 Figure 16.2 Customer-Oriented Perspective of the HRM Function Customers include line managers, strategic planners, and employees. Customers’ needs include committed employees and competent employees. Technology includes staffing, performance management, rewards, and training and development. Return to original slide ©McGraw-Hill Education Appendix 3 Figure 16.7 Approaches to Developing an HR Strategy An outside-in perspective • Business Driven (5 cases) Business issues/outcomes People issues/outcomes HR strategy 3 Different Inside-Out strategies • Business-linked (5 cases) Business issues/outcomes People issues/outcomes HR strategy • People-linked (7 cases) People issues/outcomes HR strategy • HR-focused (3 cases) People issues/outcomes HR strategy Return to slide ©McGraw-Hill Education Appendix 4 Figure 16.9 Comparing HR and Line Executives’ Evaluations of the Effectiveness of HRM Roles On a scale of 0 to 8, HR managers rated their effectiveness in 5 areas. Line managers also rated HR managers in these 5 areas. Providing HRM services – HR mean is 7.3, line mean is 6.1 Change consulting – HR mean is 6.2, line mean is 4.7 Business partner – HR mean is 6.1, line mean is 5.3 Developing the organization – HR mean is 6.5, line mean is 5.2 Tailoring HRM practices to strategy – HR mean is 6.8, line mean is 5.3 Return to original slide ©McGraw-Hill Education Appendix 5 Figure 16.10 Comparing HR and Line Executives’ Evaluations of the Effectiveness of HRM Contributions On a scale of 0 to 7, HR managers rated their effectiveness in 7 areas. Line executives also rated HR managers in these 7 areas. Performing the expected job – HR mean is 4.5, line mean is 3.9 Responsive to customer needs – HR mean is 5.0, line mean is 4.2 Providing useful information – HR mean is 4.8, line mean is 4.3 Enhancing competitiveness – HR mean is 5.0, line mean is 3.8 Value-added contribution – HR mean is 5.0, line mean is 4.1 Contributing to core competence – HR mean is 4.8, line mean is 4.2 Building human capital – HR mean is 4.8, line mean is 4.2 Return to slide ©McGraw-Hill Education Appendix 6 Figure 16.11 Improving HRM Effectiveness From top to bottom: Transformational (5-15 percent) • Knowledge management • Strategic redirection and renewal • Cultural change • Management development Traditional (15-30 percent) • Recruitment and selection • Training • Performance management • Compensation • Employee relations Transactional (65-75 percent) • Benefits administration • Record keeping • Employee services On the bottom level are two more categories – outsourcing and process redesign, information technology Return to original slide ©McGraw-Hill Education Appendix 7 Figure 16.12 Old and New Structures for the HRM Organization Historical structure • At the top is the VP of HRM, followed by a second level with the directors of staffing, compensation, training and development, and planning. New structure • At the top is the VP of HRM, followed by a second level with 3 areas: centers for expertise (rewards, staffing, training and development, communications). This is labeled traditional/transformational. Next to this is field staff (HR generalists), which is labeled transformational/traditional. And finally service center (information technology, claims processing), which is labeled transactional. Return to original slide ©McGraw-Hill Education Appendix 8 Figure 16.17 Percentage of Time CHROs Spend in Each Role What percent of your time would you say you spend in each of the following roles? Functional leader 22 percent Workforce sensor 8 percent Firm representative 5 percent Talent architect 17 percent Board liaison 10 percent Executive coach 17% Strategic advisor 21% Other 0% Return to original slide ©McGraw-Hill Education Chapter 1 Human Resource Management: Gaining a Competitive Advantage ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Learning Objectives LO1-1 Discuss the roles and activities of a company’s human resource management function. LO1-2 Discuss the implications of the economy, the makeup of the labor force, and ethics for company sustainability. LO1-3 Discuss how human resource management affects a company’s balanced scorecard. LO1-4 Discuss what companies should do to compete in the global marketplace. LO1-5 Identify how social networking, artificial intelligence, and robotics is influencing human resource management. LO1-6 Discuss human resource management practices that support high-performance work systems. LO1-7 Provide a brief description of human resource management practices. ©McGraw-Hill Education. Introduction Human Resource Management • plays a role in a company’s survival, effectiveness, and competitiveness • refers to the policies, practices, and systems that influence employees’ behavior, attitudes, and performance ©McGraw-Hill Education. Figure 1.1 Human Resource Management Practices Jump to long description in appendix ©McGraw-Hill Education. What Responsibilities and Roles Do HR Departments Perform? 1 of 2 HRM is a means to contribute to • profitability • quality • other business goals LO 1-1 ©McGraw-Hill Education. What Responsibilities and Roles Do HR Departments Perform? 2 of 2 High-Impact HR functions • more integrated with the business • more skilled at attracting and retaining employees • can adapt quickly • identify and promote talent from within • identify what motivates employees • continuously building talent and skills ©McGraw-Hill Education. Table 1.1 Responsibilities of HR Departments Analysis and design of work Recruitment and selection Training and development Performance management Compensation and benefits Employee relations/Labor relations Personnel policies Employee data and information systems Legal compliance Support for business strategy Figure 1.2 HR as a Business with Three Product Lines 1 of 3 1. Administrative Services and Transactions Compensation, hiring, staffing • Emphasis: Resource efficiency and service quality ©McGraw-Hill Education. Figure 1.2 HR as a Business with Three Product Lines 2 of 3 2. Business Partner Services Developing effective HR systems and helping implement business plans, talent management. • Emphasis: Knowing the business and exercising influence – problem solving, designing effective systems to ensure needed competencies ©McGraw-Hill Education. Figure 1.2 HR as a Business with Three Product Lines 3 of 3 3. Strategic Partner Contributing to the business strategy based on considerations of human capital, business capabilities, readiness, and developing HR practices as strategic differentiators • Emphasis: Knowledge of HR and of the business, competition, the market, and business strategies ©McGraw-Hill Education. Strategic Role of the HRM Function 1 of 12 HRM Role Time spent on administrative tasks is decreasing, roles as a strategic business partner, change agent and employee advocate are increasing. Shared service model • Includes centers of expertise or excellence, service centers, and business partners • Central place for administrative and transactional tasks ©McGraw-Hill Education. Strategic Role of the HRM Function 2 of 12 Technology Reducing HRM role in administrative tasks, maintaining records, and providing self-service to employees • Shift to self-service gives employees access to many HR issues • HR managers have more time to work on employee issues ©McGraw-Hill Education. Strategic Role of the HRM Function 3 of 12 Outsourcing Most commonly outsourced activities • Benefits administration (e.g., flexible spending accounts, health plan eligibility status) • Relocation • Payroll Most common reason for outsourcing • Cost savings • Increased ability to recruit and manage talent • Improved HR service quality • Protection of the company from potential lawsuits by standardizing processes such as selection and recruitment ©McGraw-Hill Education. Strategic Role of the HRM Function 4 of 12 Strategic Role • Lead efforts focused on talent management and performance management • Take the lead in helping companies attract, develop, and retain talent in order to create global workforces • Use and analyze data to make a business case for ideas and problem solutions ©McGraw-Hill Education. Table 1.2 Questions to Ask: Is HRM Playing a Strategic Role in the Business? 1. What is HR doing to provide value-added services to internal clients? 2. Do the actions of HR support and align with business priorities? 3. How are you measuring the effectiveness of HR? 4. How can we reinvest in employees? 5. What HRM strategy will we use to get business from point A to B? 6. From an HR perspective, what should we be doing to improve our marketplace position? 7. What’s the best change we can make to prepare for the future? 8. Do we react to business problems or anticipate them in advance? ©McGraw-Hill Education. Strategic Role of the HRM Function 5 of 12 Demonstrating the Strategic Value of HRM: HR Analytics and Evidenced-Based HR • HR can engage in evidence-based HR • Requires the use of HR or Workforce Analytics • Big data • Information merged from HR databases, corporate financial statements, employee surveys, and other data sources • Result in evidence-based HR decisions • Show that HR practices influence the organization’s bottom line, including profits and costs ©McGraw-Hill Education. Strategic Role of the HRM Function 6 of 12 The HRM Profession: Positions and Jobs • Primary activities involve performing the HR generalist role • Fewer HR professionals are involved in the HR function at the executive level of the company, training and development, HR consulting, and administrative activities ©McGraw-Hill Education. Table 1.3 Median Salaries for HRM Positions ©McGraw-Hill Education. POSITION SALARY Top HR executive $240,206 Global HR manager 121,095 Management development manager 117,114 Health and safety manager 101,872 Employee benefits manager 95,244 HR manager 95,267 Mid-level labor relations specialist 83,974 Campus recruiter 64,725 Entry-level HRIS specialist 54,233 HR generalist 51,180 Entry-level compensation analyst 56,267 Entry-level employee training specialist 48,286 SOURCE: Based on data from Salary Wizard, http://swz.salary.com, accessed February 23, 2017. Strategic Role of the HRM Function 7 of 12 Education and Experience Four-year college or graduate HR degree Senior HR role • Developing and supporting the company culture, • Employee recruitment, retention and engagement • Succession planning • Designing the company’s overall HR strategy ©McGraw-Hill Education. Strategic Role of the HRM Function 8 of 12 Education and Experience continued • Junior HR role • Handle transactions related to paperwork, benefits and payroll administration • Answering employee questions • Data management • Professional certification ©McGraw-Hill Education. Strategic Role of the HRM Function 9 of 12 Competencies and Behaviors Most HRM professionals are generalists Lack business acumen Need nine competencies developed by SHRM ©McGraw-Hill Education. Strategic Role of the HRM Function 10 of 12 Nine Competencies 1. HR Technical Expertise and Practice Apply the principles of HRM to contribute to the success of the business 2. Business Acumen Understand business functions and metrics within the organization and industry 3. Critical Evaluation Interpret information to determine return on investment and organizational impact in making recommendations and business decisions ©McGraw-Hill Education. Strategic Role of the HRM Function 11 of 12 Nine Competencies continued 4. Ethical Practice Integrate core values, integrity, and accountability throughout all organizational and business practices 5. Global and Cultural Effectiveness Manage HR both within and across boundaries 6. Communications Effectively exchange and create a free flow of information with and among various stakeholders at all levels of the organization to produce meaningful outcomes ©McGraw-Hill Education. Strategic Role of the HRM Function 12 of 12 Nine Competencies continued 7. Organizational Leadership and Navigation Direct initiatives and processes within the organization and gain buy-in from stakeholders 8. Consultation Provide guidance to stakeholders such as employees and leaders seeking expert advice on a variety of circumstances and situations 9. Relationship Management Manage interactio...
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