Professional Documents
Culture Documents
The focus of this class is on human resource management (HR for short) activities. There are several ways to approach this content, and well use all of them as the semester progresses. After this class, well start looking at the specifics that make up HRM. The approach will be mixed we will look at both what an HR specialist needs to know, and what a general supervisor or manager needs to know. For example, setting up an employment testing program is normally done by professionals in HR, but all supervisors and managers, sooner or later, need to interview job applicants. Well also take some time to look at how HR activities affect you for example, what do you need to know as a job applicant. In this chapter, what well be looking at is why HR is important -- as well see, many folks in management view HR as irrelevant, or, worse, a nuisance. By the end of this class, we should see that human resource management can contribute to organizational success. In this chapter, we will answer these questions: What is human resource management? How do HR activities fit into the overall management of the organization? What are the external influences, requirements and constraints impacting HR practice? What are the HRM functions or activities?
(Zimmerman, April 2001). And, there is the benefit, especially for smaller companies, of having specialists (that would otherwise be unaffordable) do the work employee benefits, in particular, is an extremely complex and specialized area. Finally, in a recent survey, 89% of firms that outsourced were pleased with their results (Gurchiek, 2005). Not all outsourcing transitions are as smooth as projected. When British Petroleum contracted with Exult to handle a portion of its HR functions, there were difficulties and problems for example, a promised payroll system proved to be impractical outside of English-speaking locations. BP employees, facing the loss of their jobs, had little reason to work to make the transition work (Rafter, 2005). Incidentally, was this a groundless fear? Probably not HR staff went from 100 people to 35 people (Caudron, 2003). Opponents argue that, while it makes sense to outsource routine activities (i.e., payroll or insurance claim processing), functions such as staffing, which are directly related to a firms core competencies its people should remain within the firm. If the fit between employee and the company is critically important, who should make the decision to hire or not hire? When a firm makes the decision to outsource, it is critical to take the time to select the best service provider. Its also important to remember that, no matter how much or little is outsourced, it is critical to keep control over the providers activities as far as employees are concerned (and, often, legally), the company is still responsible.
HR Professionals Today
As we said previously, the reports of the impending death of the HRM function were somewhat exaggerated. What we saw, instead, was a rebirth. Part of this rebirth has been a change in who practices HR. Recent estimates are that 25% to 30% of todays HR executives came from a line area (such as manufacturing or sales), rather than from HR (Caudron, 2003). In another move, many HR professionals are rotating to areas outside of HR. But, HR professionals have also taken steps to change their image and, more importantly, their capabilities. Downsized (Adapted from Dunn, 2000) to be taken seriously, HR practitioners realized that, Figure 1: Why HR Departments are to be a strategic business partner, they needed to bring more to the table than just35% the ability to keep records and a vague desire to work with people. In fact, HR professionals recognize the need for an enhanced skill set; in a recent survey of HR 30% managers, over half pointed to the absence of strategic and quantitative thinking as the major reason for HR departments being downsized (Dunn, 2000). 25% So, what are these skills?
20% 15% 10% 5% 0%
Overstaffed
None of above
Quantitative Thinking
CEOs and senior managers view decision-making in financial terms. HR folks traditionally viewed themselves as people persons, but learned that it was essential to be able to show how their activities paid off, in financial terms. For example, GTE uses the balanced scorecard approach, measuring every conceivable aspect of HR performance. With their results, HR staff are able to show, in dollars and cents terms, how much the HR function contributes to GTEs profits (Solomon, 2000). As well see later in this chapter, additional techniques from finance and accounting can be valuable in assessing the value of an organizations people and making decisions about people. Quantitative information is not, as yet, as widely used as it can be. 91% of companies collect so-called metrics, this data, but less than half (46%) actually use this information to measure the value of their employees (People are our greatest asset, 2005). One manager who relies on quantitative information and analysis is the vice president of HR at Bal Seal Engineering, Jeff Jernigan. His entire approach to managing HR is based on numbers not just payroll costs and staffing numbers, but complex statistical analyses, including correlation and multiple regression. The result, based on sales and production information, are used to predict exact staffing needs (Lachnit, 2001; Greatest asset, 2005), but in a recent survey, 84% of HR managers reported that the use of quantitative measurement and decision-making will increase in the near future (Hansen, 2005).
Strategic Thinking
In order to be involved in top-level decisions, its essential to think strategically. That means focusing on the overall organization, not just that narrow segment marked Human Resources. HR managers need to see how the effective management of human resources can fit into the organizations overall strategy, and, more importantly, develop HR programs that carry out the overall strategy. Theres evidence that this shift has occurred. In a recent survey (Flexibility moves to center stage, 2004), 61% of HR managers reported that they had complete, or at least substantial, involvement in organizational strategic planning and implementation. In a more recent survey conducted by the Society of Human Resource Management, certified human resource professionals reported pending from one-third to half of their time dealing with strategic / policy responsibilities (McConnell, 2007). In support of this, over half of the HR managers surveyed report to the companys CEO. In other instances, HR managers become themselves part of company strategy. Finally, in a 2001 study of HR managers, 30 out of 537 surveyed had risen to a senior management position, 10 to the CEO slot (Wells, 2003). Lets look at some actual examples. At Hallmark Cards, the overall company vision statement, Enriching Lives and Relationships, became the starting point for an entire package of family-friendly policies and programs (Atkinson, 2005). At FPI Thermoplastic Technologies, HR manager Claudia Rowe became involved with company strategy to the point that she assumed responsibility for international sales, as well as her HR responsibilities (Stewart & Martin, 1996).
(CEBS) certification. Other professional associations have followed. These two are probably the best-known and most accepted. Other certifications, such as the ones offered by the International Coach Federation are less well-known and are held by very few individuals --- less than 1,500 (Laff, 2007). Certification is normally based on the results of examinations; in addition, applicants for certification often must also have documented work experience in the HR area. The certifying organizations offer review classes to prepare applicants for the exams, and these classes are often a requirement for taking the exam. Current estimates are that over a third of HR directors and VPs hold a certification, although certification is not as yet a requirement for working as an HR professional or manager (Sunoo & Laabs, 1999). Many HR professionals, though, do find that certification gives them an advantage in seeking jobs in the field (Dinell, 2003). There is, though, evidence on the other side; an academic study found that less than 1% of on-line advertisements for HR professionals specified that a certification was required or even desirable (Aguinis, Michaelis, & Jones, 2005).
Figure 2: HRM Professional Organizations and Certifications American Payroll Association (www.americalpayroll.org) Fundamentals of Payroll Certification (FPC) Certified Payroll Professional (CPP) American Society for Training & Development ( www.astd.org) Human Performance Improvement Certificate Certified Performance Technologist Human Resource Certification Institute [affiliated with SHRM] ( www.hrci.org) Professional in Human Resources (PHR) Senior Professional in Human Resources (SPHR) Global Professional in Human Resources (GPHR) International Coach Federation ( www.coachfederation.org) Associate Certified Coach Professional Certified Coach Master Certified Coach International Foundation of Employee Benefit Plans ( www.ifebp.org) Certified Employee Benefits Specialist Compensation Management Specialist Group Benefits Associate Retirement Plans Associate International Public Management Association for Human Resources ( www.ipmahr.org) IPMA-Certified Specialist IPMA-Certified Professional Society for Human Resource Management (www.shrm.org)
Approaches to Revitalizing HR
There are two general approaches that are taken in the reborn HRM field first, there is accounting for human resources; and, second, managing people for competitive advantage. Earlier, we said that HR managers needed to be able to think both quantitatively and strategically. These two approaches draw on those skills. Thinking quantitatively leads to treating people as any other asset, and applying techniques from accounting and finance to the management of human resources. Thinking strategically leads to the idea of competitive advantage, the strengths that a firm can build a strategy around. For the HR manager, that translates to how a firm can create and sustain competitive advantage through its people.
Costing HR
Wayne Cascio, a professor at the University of Colorado, realized as far back as 1982 that cost accounting techniques could easily be applied to HR activities. How does this work? Basically, what you are doing is calculating the cost of HR interventions and the cost savings resulting from the outcomes. For example, lets look at the costs associated with employees quitting and having to be replaced. First, how do we measure turnover? Its based on the number of employees we have and how may quit and are replaced over the course of (usually) a year. So, if you begin the year with 10 employees, and end the year with 10 different employees, you have 100% turnover over the course of a year. More realistically, some employees may still be with you at the end of the year, while others stay less than a year. Lets assume that we have 100 employees and 200% turnover. This means you have to hire 200 new employees every year. What are some of the costs? Some are obvious ads, application forms, employment tests, drug testing, etc. But others are not as obvious, such as the time it takes HR staff and management to screen and select candidates. The second step is to compare the costs of turnover with the costs of reducing turnover. For example, you might reduce turnover to 50% by increasing salaries by 4%. Should you do this? Compare the cost of hiring 100 fewer people each year with the cost of a 3% salary raise. Lets look at Figure 3 to compare the costs. In this case, the cost of a 3% raise is more than what would be saved with a reduction in turnover. But, what if the price of drug testing drops? The turnover rate increases? Then, the pay raise might be worthwhile.
This approach can be more complex. Going back to employment you might be trying to decide whether to run an employment ad in the local newspaper or in the Wall Street Journal. Obviously, the local paper will be much less expensive. What you have to consider, though, is whether or not youll get the applicants you are looking for from the ad in the local newspaper. The Wall Street Journal ad might be three times as expensive, but produce 10 times as many good applicants. So, the Wall Street Journal ad is actually lower cost per applicant. Think longer term, too. Which source provides employees who perform better? Stay with the company longer? A large bank recruited employees primarily from top-ranked MBA programs; these employees performed somewhat better than the recruits from less-prestigious programs, but left the organization at a much higher rate (Garvey, 2005).
Figure 3: Potential Savings From Hiring 100 Fewer New Employees Costs to Hire Employment ad (6 60 day ads on Monster.com @ $300) Clerical time to process applicants (1 hour @ $7.50 x 500 applicants) Initial screening interview (1 hour @$9.00 x 400 applicants) Employment testing ($35 x 300 applicants) Supervisor interview / decision making (1 hour @$15.00 x 250 applicants) Pre-employment drug screen ($50 x 150 applicants) Reference checking (1 hour @ $9.00 x 125 applicants) Supervisor time to train new employees (5 hours @$15 / hour x 100) Total Hiring Costs $1,800 3,750 3,600 10,500 3,750 7,500 1,125 7,500 $39,525
Cost of 3% Raise 100 employees x $7.00 per hour x 40 hours per week x 52 weeks per year Total Cost of Raise Total Savings (Cost)
Making cost benefit comparisons isnt all that you can do with HR cost information or, as it also called metrics. Its possible to track costs and other information over time, to determine if HR is becoming more or less effective. For example, you may be taking 60 days, on average, to fill vacant positions. After implementing a new procedure for processing resumes, that time might drop to 55 days an improvement. You can also compare your metrics to those of other companies; this is the balanced scorecard or benchmarking approach (Solomon, 2000). This can be industry averages or you may pick a specific company that youve identified as being someone to emulate (Five steps to effective metrics). If, for example, the industry average tie to fill a vacant position is 45 days, youve improved, but need
Excess returns represent a return on assets over the use of metrics firms in the same to improve even more. Some suggestions forand above what other(Bates, 2003; Five industry 2005): steps, are earning. Excess returns are attributable to something intangible, not reflected on a balance sheet.
Do collect data that allows you to determine how well HR is supporting the organizations overall strategy. Dont just copy another organizations metrics. Develop the numbers that your organization needs to measure. Dont try to get too complicated. Make sure management can understand the numbers and what they mean. Do use comparisons. Numbers by themselves dont tell you anything; instead, compare results over time, or with other organizations.
The result of these calculations is the intangible value of the companys human capital.
First of all, what is competitive advantage? It is the factor or factors that give your company an edge or advantage over your competitors lets call it X. It could be: High-quality products Superior customer service Lowest cost products Location Product performance Product reliability Value (quality + service + price)
Competitive advantage is something that is valuable. And, in order for something to be valuable, it has to be rare (if you could pick up diamonds in the parking lot, would they be valuable?). Also, in order for X, whatever it is, to be an advantage, it has to be something that not everyone else has. Thus, it must be difficult or impossible to copy (inimitable) and there cant be any substitute for X (nonsubstitutable). Competitive advantage has to be created, but just as importantly, sustained. Firms such as Sears, IBM, and virtually the entire US airline industry have learned the results of failing to maintain competitive advantage. Competitive advantage is the foundation of a firms strategy the idea is to make the optimal use of whatever competitive advantage or advantages the firm has, in order to accomplish the organizations goals (such as profit). WalMart, for example, is able, because of its size, to purchase products at low prices their competitive advantage would be either low cost or value. When we buy groceries in Memphis, we go to WalMart for low prices, Kroger for location, and Seessels (or we didnow we go to Schnucks) for high-quality products and customer service. But, its also important to remember that we dont acquire and sustain competitive advantage through strategy, but rather through strategy implementation. Where does competitive advantage come from? There are numerous sources, but, according the management professor Jeffrey Pfeffer, the most important is people. People are hard to imitate or duplicate, and traditional sources of competitive advantage are no longer as effective as they once were.
your grocery store installs automated checkout scanners, youll need more qualified people its no longer necessary to have a lot of low-skilled checkers, but you will need highly skilled network administrators. Protected and regulated markets: The growing global economy is based, in part, on the idea of free trade reduced barriers to trade between countries. So, an industry or firm can no longer rely on the government to prevent the importation of cheaper or better competing goods. The U.S. steel industry is currently protected by tariffs. However, the industry hasnt been able to count on this protection for most of the past 30 years, and has been in a steady decline for those same thirty years. Deregulation, too, matters. For example, telecommunications was once the monopoly of A T & T. No longer. Access to financial resources: Between NASDAQ, venture capital, and even folks personal credit cards, its no longer necessary to have access to the big New York financial markets to raise capital. Economies of scale: In manufacturing, larger companies traditionally had a competitive advantage because of economies of scale. That is, if your business requires a large capital investment, its cheaper to make many of something than just a few. However, economies of scale dont guarantee competitive advantage today. Due to market fragmentation, customers are less interested in a cheap standardized product than in a customized product. Also, inventory management has moved to just-in-time, meaning that its more important and more costeffective for a manufacturer to be able to deliver small quantities on a precise schedule, rather than making a huge batch at one time.
equipment is the best equipment. For example, First Tennessee, in 2006, reported 10.35% return on equity to its shareholders a respectable return on investment, by any definition. Its no wonder that First Tennessee has made this statement (source: www.firsttennessee.com) How does this work? If your employees are an asset, you invest in them, the same way you invest in any other asset. For employees, it isnt a coat of paint or preventative maintenance; its training and development. The result employees are more skilled, more competent, and can work smarter. If your employees are an asset, you treat them with respect and dignity,, letting them know they are valued. The result employees are more committed to the company and involved in their work and work harder. Finally, if your employees are an asset, you make the most effective use possible of the asset. With employees, that means taking advantage of their capabilities and motivation to push responsibility down to employees, rather than relying on supervisors and managers. The result -- lower overhead. One other important piece of advice
Think Long-Term
Building a workforce into an asset isnt something that happens overnight. It takes time and patience. What can you do to create a high-performing workforce? Pfeffer (1998) points to what he calls the seven practices of high performance work systems. Lets look at them.
Selective Hiring: If youre going to keep people, make sure you hire the best. Take the time to figure out what you really need. This means that you need to think about what your jobs require and what the organization needs. Think, too, about what can be learned after someone is hired, versus what cant be acquired. You can teach a person computer skills you cant teach conscientiousness. Take your time; if you dont have the time to carefully evaluate new hires, you certainly dont have time to come back in six months and do it again, when the first hire doesnt work out. Plus, if youre that busy, you certainly dont have time to go back and fix the mistakes the first person made! Finally, a lengthy hiring process sends a message to your employees We took the time to hire the best. For example, more and more firms are taking the approach that you should hire for attitude, especially when their competitive advantage is built on customer service, as in the case of Disney. Southwest Airlines uses a similar approach, and much of its success is credited to its employees. Both Disney and Southwest have become models for other companies, in industries ranging from airlines to hospitals (Greengard, 2003; Shuit, 2004). Self Managed Teams and Decentralized Decision Making: If you have good folks that you can trust and rely on, push decision-making further down in the organization. This works better for the organization decisions are made by folks with the information, rather than by headquarters. Also, decisions can be made quickly. You certainly dont want a customer to wait for approval from Chicago before getting that 5% discount that convinces them to buy. People are more motivated by the added responsibility and authority and by the opportunity to better use their brains and skills. In an industry characterized by fierce competition and declining profitability, Wegmans Food Market stands apart. Exact numbers are hard to come by Wegmans is a privately held company but estimates are that margins are double the industry average and sales per square foot are half again as much as the competition. Wegmans was ranked as Fortunes Best Company to Work for in 20052 and the chain boasts a fanatic level of customer loyalty. At Wegmans, participation is a way of life. Employees are encouraged to take whatever steps are needed to ensure customer satisfaction without consulting management. One senior management team member was quoted (only partly in jest) as saying, were a $3 billion company run by 16 year old cashiers (Boyle & Kratz, 2005) High Compensation, Based on Organizational Performance: When you pay people well, youre sending them another signal you matter, youre important. We know that pay doesnt keep people, but high pay levels make it easier to attract a large applicant pool, which is essential if youre going to be selective in your hiring. Finally, and most important, is to pay people more for better performance. If the company is making profits through employees skills and effort, pass some of it along. And, by hiring the right people and providing the training, theres no reason that employees wont perform and receive the rewards for performance. Think, too, about using stock ownership as a motivating tool, not just for executives, but for all employees.
2
Wegmans ranked #2 on the 2006 Fortune list and #3 on the 2007 list
One of the classic examples of the payoff from high, performance-based compensation is Lincoln Electric. This Cleveland, Ohio based manufacturer of arcwelding equipment is known for its compensation system, where production workers are paid by production, and a year-end bonus. Plant employees can end up with a six-figure total income; the average bonus for 2000 was over $17,000 (Eisenberg, Sieger, & Greenwald, 2001). In fact, Lincoln Electric ran short of cash in 1992, and actually borrowed money to pay the year-end bonuses (Hastings, 1999). That didnt hurt the company in 2005, Fortune recommended Lincoln Electric as one of its eight choices for high-performing small companies (Small wonders, 2005). Extensive Training: Obviously, the more skills your employees have, the better, and training is important. This is especially critical in today's environment, where technology is rapidly changing, and skills become obsolete overnight. Also, if youre going to decentralize and give people more responsibility, they need more skills. Employees also need teamwork skills (which dont appeal by magic) if theyre going to be working in teams. And, if youre going to invest in training, pick the best people and plan on keeping them around. For example, Minnesota Life, the seventh-largest life insurance company in the U.S., believes in training. The firm spends over $2,000 per year training each IT employee (significantly higher than the industry average). Newly hired employees are required to go through two to three weeks training before beginning their jobs. The result numerous awards for the quality of work life and the quality of the companys IT solutions. Incidentally, Minnesota Life is also highly rated by industry experts (Mullich, 2004). Reduced Status Distinctions: Treat your employees as though they are important, not as though they are peasants. Its easy to call people associates and talk about how people matter, but act as though you mean it. Get rid of the executive dining room, reserved parking, first class plane tickets, and lavish offices. Keep executive salaries in line, too. Extensive Information Sharing: If you plan on decentralizing, people need the information. Also, sharing company-wide information builds a sense of trust between the company and employees, and you need that sense of trust for people to give the company their committed efforts. And, you can share information when you have committed, long-term employees that you trust. For example, at Google, company financial information is shared with employees at weekly Friday afternoon meetings (Raphael, 2003). At Whole Foods, employees are privy to so much information that each employee is classified as an insider by the SEC (Pfeffer, 1998). Among other information, each store has a book, where the salaries of very company employee are listed (Fishman, 2004). Now. Lets look at three examples of how this approach works. These are from research studies, each looking at a large sample of companies, so that we can see what happens across a range of companies. Notice, too, that the three studies we look at each use different methods and measurements to establish the link between
HR practices and performance, making it even more clear that this isnt just coincidence.
* the time it takes to make a shirt, from start to finish The Minimills. This study (Arthur, 1994) looked at steel minimills small facilities that start with scrap rather than ore. The authors identified two HR strategies followed by the mills. A control strategy was based on the assumption that employees needed to be monitored. The focus was on efficiency and reduced costs. A commitment strategy was based on mutual trust and the objective was to have the employees share the companys goals. As you can see, the control strategy does result in lower costs on a per-hour basis, but look at the reductions in labor hours per ton of steel produced and the scrap rate. Management Practice Wages % of employees in teams Decentralization * General training * Labor hours / ton Scrap rate * 1 = very little to 6 = very much The Case of the IPOs. In this study, the researchers (Welbourne & Andrews, 1996) looked at the fate of new companies (IPO stands for initial public offering, the companys first sale of stock on the open market). The authors picked a random sample of firms filing for IPOs in 1988, then looked how these companies valued people. They went to the prospectuses (which are legal documents), and extracted information about how people were treated they created an index for general HR value, and a second index reflecting how employees were rewarded (especially if rank-and-file employees were eligible for stock options). Then, the researchers went forward in the records to 1993 and looked at what had happened to these companies. As you can see from the chart above, being in the top 16% on either of the HR measures, as opposed to being in the bottom 16%, made a significant difference as to whether or not the firm was still in business 5 years later. Its worth noting that about half of IPOs dont survive so raising the chances to 87% of better is a meaningful improvement. Control $18.07 36.6% 2.42 1.92 Commitmen t $21.52 52.4% 3.04 3.35 % Improvement 19% 43% 26% 74% - 34% - 63%
Many people do take a short-term view, and believe that cutting the costs associated with the organizations people will lead to higher profits. Well discuss this more when we get to downsizing, but for right now, lets look at a few examples of what not to do.
Sources include Castelli (2005), Hegstrom, (2003), Riley (2004), 2002; Kadlek, Marchant, Anderson, 1999; Byrne file for Chapter 11 bankruptcy protection and Sunbeam was eventually forced to & Prasso, 2002; Haysett,Serwer, Bonamici & Hajim& Drummond, 1998; Schifrin, 1998; Sellers, 1998 ( (2005). was eventually restructured under new ownership. Under threat of a shareholder lawsuit, Dunlap agreed to pay Sunbeam shareholders $15 million and in a settlement with the SEC, Dunlap agreed to pay a $500,000 fine. And, the man who fired employees in the name of profits is no longer employable the SEC has barred Dunlap from ever again serving as an officer or director of a publicly held firm3
Perhaps not surprisingly, in 2002, WalMart hired a high-profile VP for human resources and most recently announced plans to add HR professional staff to support store operations; currently WalMart is testing this approach in California, and if it successful, will expand it nationwide4.
cant happen it can, but you may need as long as 5 to 15 years to bring about real (and lasting) change in how an organization manages its people. Its critical to remember that these practices cant be implemented individually they all act as a self-reinforcing system, and its critical to change the entire system (Neal & Tromley, 1995). To begin with, many organizations get caught up in committees, studies, and planning. All that does is put off actually doing something. This isnt to say that organizations should act without any thinking at all but it does mean that thought needs to be transformed into action (Pfeffer, & Sutton 1999).
Its critical to remember that no organization anywhere from Federal Express to the corner hamburger stand operates in a vacuum. The external environment sets boundaries, limits and requirements for how the organization functions. Economic factors, political, legal and social factors, and technology all influence how an organization operates in general, and, specifically, in how it manages its human resources.
Economic conditions
As we said earlier in this chapter, human resource management is, in large part, about money and how the organization uses its financial resources to achieve and sustain competitive advantage. Thus, economic factors are a very important influence on the practice of HR.
Global Economy
The growing global economy has an impact on labor supply and demand. Unskilled jobs such as textiles and garment manufacturing have long been moved to countries with lower labor costs. A new trend, though, is the overseas movement of high-tech jobs. This industry, that conventional wisdom said was a U.S. preserve, is losing jobs to India. Jobs ranging from customer service to high-end programming and systems analysis are being relocated to India, a country where labor costs are significantly lower, and productivity is equal to, if not better than, the U.S. (India has a very strong IT industry, and some of the best schools in the world in this area). Its estimated that over 3 million jobs will be lost in the U.S. over the next 12 years (Where the good jobs are going, 2003). There are ethical issues involved with this shift, especially in industries that employ unskilled workers, many of whom we would consider children, and too young to work in a factory. Politics also plays a role here. The U.S. has used tariffs (import taxes) on foreign steel and textiles, in part to protect voters jobs.
Domestic Factors
The U.S. has shifted away from a reliance on a manufacturing to an information / service economy. This shift impacts HR in many ways. Workers now need more skills than ever before. Jobs no longer require nothing more than strength and the willingness to work. Todays jobs require more than a high school education. The fastest growing jobs require at least some postsecondary education, but there is also numerical growth in jobs at the bottom of the service economy. The decreased importance of manufacturing has also meant a less important role for organized labor. While there are a large number of union members 16.1 million workers these workers represent only about 13% of the labor force.5
For more information about union membership, go to the U.S. Department of Labor, Bureau of Labor Statistics, or directly to http://www.bls.gov/news.release/union2.toc.htm).
5
Living Wage: For a family service economy, poverty line, are your only real assets. For a fascinating look at / of history above the your www.dol.gov/asp/programs/history. And, in an information the 4 to be of the FLSA, seepeople one worker must earn at leastAs $8.20 per hour, working out time. Other definitions goandto $12 challengeespecially in sure weve said, they walk full of the door each night, up your per hour, is to make communities with an extremely high cost of living. they walk back in the next morning.
Other economic factors include the trend towards more and more mergers and acquisitions. These also impact labor markets when organizations merge and functions are duplicated, we see layoffs. This is obviously bad for the laid-off employees (and for companies that produce the goods and services that individual formerly purchased), but good for employers, who have a larger labor supply, available at lower prices. Finally, dont forget about our old friends from economics, Mr. Supply and Mr. Demand. Theres the supply and demand of labor, which influences the price you must pay to hire people. Even supply and demand of your companys goods and services matters the better your sales, the more resources you have available to use to enhance your labor force.
Demographics
Here, we are looking at the people who are available who they are, what skills they have, their motivation, their needs (both material and psychological).
skills acquired through a higher level of education than in previous years. See the opposite page for the jobs preduictred to have the highest growth in the next 10 years. Where will we find those workers? Even the jobs at the bottom of the pyramid the cashiers, food service workers, home health aides, and so forth, require basic skills, such as the ability to read and write, the ability to do simple arithmetic, and general work readiness. If workers dont have those skills, is it the employers responsibility to train workers? Could it be a business necessity?
Aging population
Over the next ten years, the number of people ages 65 and above will increase by 26% (Cole, et al, 2003). Whats going to happen to pension plans, health care, and Social Security when the folks born 1947-1964 (baby boom) begin to retire? Will they be able to retire? Will the retirement age be raised? Look for this issue to be a hot topic in politics in coming elections.
Changes in Expectations
With the wave of layoffs and downsizings over the past 25 years, there is no longer the unspoken contract between employer and employee, made up of mutual loyalty and the expectation of a lifetime with a single employer. Many employers complain about a lack of loyalty however, you dont get what you dont give.
Fastest Growing Occupations, 2006 2016 (by number of jobs) Job RN Retail salespersons Customer service representatives Combined food preparation and serving workers, including fast food Office clerks, general Personal and home care aides Home health aides Post-secondary teachers Janitors and cleaners, except maids and housekeeping cleaners Nursing aides, orderlies, and attendants Growth (000) 587 557 545 452 404 389 384 382 345 264 Training Required Associate degree Short on-the-job Moderate on-the-job Short on-the-job Short on-the-job Short on-the-job Short on-the-job Doctoral degree Short on-the-job Short on-the-job
Fastest Growing Occupations, 2002 2012 (by %) Job Network systems and data communications analysts Personal and home care aides Home health aides Computer software engineers, applications Veterinary technologists and technicians Personal financial advisors Makeup artists, theatrical and performance Medical assistants Veterinarians Substance abuse and behavioral disorder counselors Growth 53.4% 50.6% 48.7% 44.6% 41.0% 41.0% 39.8% 35.4% 35.0% 34.3% Training Required Bachelor's degree Short on-the-job Short on-the-job Bachelor's degree Associate degree Bachelor's degree Postsecondary vocational Moderate on-the-job Post-secondary professional degree Bachelor's degree
Technology
Change in technology has been a theme of this section. Employers need new skills and more skills. Even more important is the ability to learn as technology changes, employees need to be able to keep up with the changes. We see some jobs vanish, others appear:
Old Jobs Receptionist New Jobs Telecommunications analyst
Technology has also made changes in HR operations. For example: Internet recruiting Automated application systems (i.e., Press 1 to apply for a job now) Email / cellular phones (although this really affects business in general, not just HR) Employee communications via intranet Distance interviewing Distance learning for training Telework Resume scanning and applicant tracking Employee data online
Planning
In human resource management, as with any other management activity, the first step is always planning. On the broadest level, HR planning involves determining the strategic direction that HR activities need to take in order to mesh with and support the organizations overall strategy. Formulating plans to carry out strategy requires, first, information gathering, including the process and outcome data from HR activities discussed above (Accounting For Human Resources). An additional form of information gathering that well discuss in the next chapter is job analysis, or the systematic process of collecting relevant, work-related information related to the nature of a specific job. Forecasting is also part of planning what skills will be needed and how and where the organization will find or develop those skills.
Legal Compliance
Like it or not, all organizations are subject to laws and regulations, at the federal, state, and local level. The vast majority of HR activities, including employment, pay and benefits, employee rights, and labor relations, are subject to legal requirements and constraints. Well look at these in Chapters 3 and 4.
Staffing
The staffing process includes all of the steps needed to find, select, and terminate employees, from initial entry into the organization, through eventual retirement, discharge or downsizing. Recruiting and selection are the major activities here, but
we are also concerned with career management (from the standpoint of the organization and from the employees perspective), downsizing and retirement.
Reward Systems
It goes without saying that employees are paid. However, we have to determine how much the various jobs within the organization are worth, since not all jobs are worth the same to the company and nobody ever thinks they are paid enough! Systematic salary administration is critical to ensure that employees perceive that pay is being distributed fairly and equitably. In addition to base pay, we need to determine how best to use money and other rewards to motivate employees. Pay increases and the various forms of incentive pay merit their own chapter. Another essential part of reward systems is employee benefits; rather that paying for a job or for performance, employee benefits are designed to encourage employee retention.
Employee Relations
The HR department in an organization is also responsible for managing the relationship between employer and employees. Employees may have complaints or grievances, that must be resolved, and the need for counseling and discipline is always there. Here, well also look at the issue of employee rights how far can or should an employer control and monitor employees. Finally, labor relations, specifically, the relationship between management and labor unions, is a critical function. Though fewer employees are members of labor unions today than the late 1930s, many firms are still unionized, while others are attempting to avoid unionization. Its essential for HR managers and professionals in those firms to have through knowledge of the labor movement, as well as the complicated legal restraints and requirements involved.
Other Functions
Several other areas may or may not be included in an organizations HR department. They may be part of HR, they may be assigned to a different department or they may be outsourced; we wont be looking at these areas. OSHA (Occupational Health and Safety Act) compliance and safety training are often a
department of their own, and are often part of production management, especially in industrial settings). Payroll and HRIS (human resource information systems) are often outsourced, due to the technical complexities involved (Greengard, 2004). In smaller companies, payroll is often attached to accounting and finance.
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