Archive for year: 2023

C H A P T E R 1 The Role of Human Resources HUMAN RESOURCE MANAGEMENT DAY TO DAY You have just been hired to work in the human resource department of a small company. You heard about the job

through a conference you attended, put on by the Society for Human Resource Management (SHRM). Previously,

the owner of the company, Jennifer, had been doing everything related to human resource management (HRM).

You can tell she is a bit critical about paying a good salary for something she was able to juggle all on her own. On

your first day, you meet the ten employees and spend several hours with the company owner, hoping to get a

handle on which human resource processes are already set up.

Shortly after the meeting begins, you see she has a completely different perspective of what HRM is, and you

realize it will be your job to educate her on the value of a human resource manager. You look at it as a personal

challenge—both to educate her and also to show her the value of this role in the organization.

First, you tell her that HRM is a strategic process having to do with the staffing, compensation, retention, train-

ing, and employment law and policies side of the business. In other words, your job as human resources (HR) man-

ager will be not only to write policy and procedures and to hire people (the administrative role) but also to use stra-

tegic plans to ensure the right people are hired and trained for the right job at the right time. For example, you ask

her if she knows what the revenue will be in six months, and Jennifer answers, “Of course. We expect it to increase

by 20 percent.” You ask, “Have you thought about how many people you will need due to this increase?” Jennifer

looks a bit sheepish and says, “No, I guess I haven’t gotten that far.” Then you ask her about the training programs

the company offers, the software used to allow employees to access pay information online, and the compensation

policies. She responds, “It looks like we have some work to do. I didn’t know that human resources involved all of

that.” You smile at her and start discussing some of the specifics of the business, so you can get started right away

writing the strategic human resource management plan.

capital

Capital includes cash, valuables, or goods used to generate income for a business.

human resource management (HRM)

The process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees.

The Role of Human Resources

The author introduces the chapter defining the role of human resource management.

1. WHAT IS HUMAN RESOURCES?

L E A R N I N G O B J E C T I V E S

1. Explain the role of HRM in organizations. 2. Define and discuss some of the major HRM activities.

Every organization, large or small, uses a variety of capital to make the business work. Capital includes cash, valuables, or goods used to generate income for a business. For example, a retail store uses re- gisters and inventory, while a consulting firm may have proprietary software or buildings. No matter the industry, all companies have one thing in common: they must have people to make their capital work for them. This will be our focus throughout the text: generation of revenue through the use of people’s skills and abilities.

1.1 What Is HRM? Human resource management (HRM) is the process of employing people, training them, com- pensating them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone many changes over the last twenty years, giving it an even more important role in today’s organizations. In the past, HRM meant processing payroll, sending birthday gifts to em- ployees, arranging company outings, and making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic role crucial to the success of the organization. Jack Welch, former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.… Remember, HR is important in good times, HR is defined in hard times.”[1]

It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation, and retention of employees—making these aspects not only part of HRM but also part of management. As a result, this book is equally important to someone who wants to be an HR manager and to someone who will manage a business.

Human Resource Recall

Have you ever had to work with a human resource department at your job? What was the interaction like? What was the department’s role in that specific organization?

View the video online at: http://app.wistia.com/embed/medias/f325acb504

8 HUMAN RESOURCE MANAGEMENT

staffing

The entire hiring process from the first step of posting a job to the actual hiring of an employee.

compensation

Anything the employee receives for his or her work. It can include pay, benefits, vacation time, and sick leave.

1.2 The Role of HRM Keep in mind that many functions of HRM are also tasks other department managers perform, which is what makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM plays in organizations. These are described in the following sections.

Staffing

You need people to perform tasks and get work done in the organization. Even with the most sophistic- ated machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are four main steps:

1. Development of a staffing plan. This plan allows HRM to see how many people they should hire based on revenue expectations.

2. Development of policies to encourage multiculturalism at work. Multiculturalism in the workplace is becoming more and more important, as we have many more people from a variety of backgrounds in the workforce.

3. Recruitment. This involves finding people to fill the open positions. 4. Selection. In this stage, people will be interviewed and selected, and a proper compensation

package will be negotiated. This step is followed by training, retention, and motivation.

Development of Workplace Policies

Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and executives are involved in the process. For example, the HRM professional will likely recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to involve all other departments in the organiza- tion. Some examples of workplace policies might be the following:

< Discipline process policy < Vacation time policy < Dress code < Ethics policy < Internet usage policy

These topics are addressed further in Chapter 6, Chapter 7, Chapter 8, and Chapter 9.

Compensation and Benefits Administration

HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to entice people to work for the organization. Compensation includes anything the employee receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years with the organization, years of experience, education, and similar aspects. Examples of employee compensation include the following:

< Pay < Health benefits < 401(k) (retirement plans) < Stock purchase plans < Vacation time < Sick leave < Bonuses < Tuition reimbursement

Since this is not an exhaustive list, compensation is discussed further in Chapter 6.

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 9

retention

The process and strategies of keeping and motivating employees to stay with the organization.

Retention

Retention involves keeping and motivating employees to stay with the organization. Compensation is a major factor in employee retention, but there are other factors as well. Ninety percent of employees leave a company for the following reasons:

1. Issues around the job they are performing 2. Challenges with their manager 3. Poor fit with organizational culture 4. Poor workplace environment

Despite this, 90 percent of managers think employees leave as a result of pay.[2] As a result, managers often try to change their compensation packages to keep people from leaving, when compensation isn’t the reason they are leaving at all. Chapter 7 and Chapter 11 discuss some strategies to retain the best employees based on these four factors.

Training and Development

Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the job but also continue to grow and develop new skills in their job. This results in higher pro- ductivity for the organization. Training is also a key component in employee motivation. Employees who feel they are developing their skills tend to be happier in their jobs, which results in increased em- ployee retention. Examples of training programs might include the following:

< Job skills training, such as how to run a particular computer program < Training on communication < Team-building activities < Policy and legal training, such as sexual harassment training and ethics training

We address each of these types of training and more in detail in Chapter 8.

Dealing with Laws Affecting Employment

Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of these laws:

< Discrimination laws < Health-care requirements < Compensation requirements such as the minimum wage < Worker safety laws < Labor laws

The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and then communicate those changes to the entire management organization. Rather than presenting a chapter focused on HRM laws, we will address these laws in each relevant chapter.

Worker Protection

Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal of setting federal or state standards to ensure worker safety. Unions and union contracts can also impact the requirements for worker safety in a workplace. It is up to the human resource manager to be aware of worker protection requirements and ensure the workplace is meeting both federal and union stand- ards. Worker protection issues might include the following:

< Chemical hazards < Heating and ventilation requirements < Use of “no fragrance” zones < Protection of private employee information

We take a closer look at these issues in Chapter 12 and Chapter 13.

10 HUMAN RESOURCE MANAGEMENT

FIGURE 1.1

Knowing the law regarding worker protection is generally the job of human resources. In some industries it is extremely important; in fact, it can mean life or death.

© Thinkstock

external factor

Anything the company has no direct control over; it could positively or negatively impact human resources.

flexible work schedule

A policy that allows employees to set their own schedules to work around family and personal needs.

telecommuting

Allows employees to work from home or a remote location for a specified period of time, such as one day per week.

Communication

Besides these major roles, good communication skills and excellent management skills are key to suc- cessful human resource management as well as general management. We discuss these issues in Chapter 9.

Awareness of External Factors

In addition to managing internal factors, the HR manager needs to consider the outside forces at play that may affect the organization. Outside forces, or external factors, are those things the company has no direct control over; however, they may be things that could positively or negatively impact human resources. External factors might include the following:

1. Globalization and offshoring 2. Changes to employment law 3. Health-care costs 4. Employee expectations 5. Diversity of the workforce 6. Changing demographics of the workforce 7. A more highly educated workforce 8. Layoffs and downsizing 9. Technology used, such as HR databases

10. Increased use of social networking to distribute information to employees

For example, the recent trend in flexible work schedules (allowing employees to set their own sched- ules) and telecommuting (allowing employees to work from home or a remote location for a spe- cified period of time, such as one day per week) are external factors that have affected HR. HRM has to be aware of these outside issues, so they can develop policies that meet not only the needs of the com- pany but also the needs of the individuals. Another example is the Patient Protection and Affordable Care Act, signed into law in 2010. Compliance with this bill has huge implications for HR. For ex- ample, a company with more than fifty employees must provide health-care coverage or pay a penalty. Currently, it is estimated that 60 percent of employers offer health-care insurance to their employees.[3] Because health-care insurance will be mandatory, cost concerns as well as using health benefits as a re- cruitment strategy are big external challenges. Any manager operating without considering outside forces will likely alienate employees, resulting in unmotivated, unhappy workers. Not understanding the external factors can also mean breaking the law, which has a concerning set of implications as well.

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 11

FIGURE 1.2

An understanding of key external factors is important to the successful HR professional. This allows him or her to be able to make strategic decisions based on changes in the external environment. To develop this understanding, reading various publications is necessary.

One way managers can be aware of the outside forces is to attend conferences and read various articles on the web. For example, the website of the Society for Human Resource Management, SHRM On- line,[4] not only has job postings in the field but discusses many contemporary human resource issues that may help the manager make better decisions when it comes to people management. In Section 3, we go into more depth about some recent external issues that are affecting human resource manage- ment roles. In Section 1, we discuss some of the skills needed to be successful in HRM.

12 HUMAN RESOURCE MANAGEMENT

FIGURE 1.3

Most professionals agree that there are seven main tasks HRM professionals perform. All these need to be considered in relation to external and outside forces.

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 13

multitask

The ability to work on more than one task at a time.

K E Y T A K E A W A Y S

< Capital includes all resources a company uses to generate revenue. Human resources or the people working in the organization are the most important resource.

< Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees.

< There are seven main responsibilities of HRM managers: staffing, setting policies, compensation and benefits, retention, training, employment laws, and worker protection. In this book, each of these major areas will be included in a chapter or two.

< In addition to being concerned with the seven internal aspects, HRM managers must keep up to date with changes in the external environment that may impact their employees. The trends toward flexible schedules and telecommuting are examples of external aspects.

< To effectively understand how the external forces might affect human resources, it is important for the HR manager to read the HR literature, attend conferences, and utilize other ways to stay up to date with new laws, trends, and policies.

E X E R C I S E S

1. State arguments for and against the following statement: there are other things more valuable in an organization besides the people who work there.

2. Of the seven tasks an HR manager does, which do you think is the most challenging? Why?

2. SKILLS NEEDED FOR HRM

L E A R N I N G O B J E C T I V E S

1. Explain the professional and personal skills needed to be successful in HRM. 2. Be able to define human resource management and the certifications that can be achieved in

this profession.

One of the major factors of a successful manager or human resource (HR) manager is an array of skills to deal with a variety of situations. It simply isn’t enough to have knowledge of HR, such as knowing which forms need to be filled out. It takes multiple skills to create and manage people, as well as a cutting-edge human resource department.

The first skill needed is organization. The need for this skill makes sense, given that you are man- aging people’s pay, benefits, and careers. Having organized files on your computer and good time-man- agement skills are crucial for success in any job, but especially if you take on a role in human resources.

Like most jobs, being able to multitask—that is, work on more than one task at a time—is im- portant in managing human resources. A typical person managing human resources may have to deal with an employee issue one minute, then switch and deal with recruiting. Unlike many management positions, which only focus on one task or one part of the business, human resources focuses on all areas of the business, where multitasking is a must.

As trite as it may sound, people skills are necessary in any type of management and perhaps might be the most important skills for achieving success at any job. Being able to manage a variety of person- alities, deal with conflict, and coach others are all in the realm of people management. The ability to communicate goes along with people skills. The ability to communicate good news (hiring a new em- ployee), bad news (layoffs), and everything in between, such as changes to policy, makes for an excel- lent manager and human resource management (HRM) professional.

Keys to a successful career in HRM or management include understanding specific job areas, such as managing the employee database, understanding employment laws, and knowing how to write and develop a strategic plan that aligns with the business. All these skills will be discussed in this book.

A strategic mind-set as an HR professional is a key skill as well. A person with a strategic mind-set can plan far in advance and look at trends that could affect the environment in which the business is operating. Too often, managers focus on their own area and not enough on the business as a whole. The strategic HR professional is able to not only work within his or her area but also understand how HR fits into the bigger picture of the business.

14 HUMAN RESOURCE MANAGEMENT

ethics

A concept that examines the moral rights and wrongs of certain situations.

Ethics and a sense of fairness are also necessary in human resources. Ethics is a concept that ex- amines the moral rights and wrongs of a certain situation. Consider the fact that many HR managers negotiate salary and union contracts and manage conflict. In addition, HR managers have the task of ensuring compliance with ethics standards within the organization. Many HR managers are required to work with highly confidential information, such as salary information, so a sense of ethics when man- aging this information is essential. We discuss ethics from the organizational perspective in Section 1.

Dilbert and the Evil HR Director

Ethics is perhaps one of the most important aspects to being a great HR professional. This humorous video shows how unethical behavior can undermine motivation at work.

Human Resource Recall

Think of your current skills. Are there personal or professional skills you would like to work on?

Finally, while we can list a few skills that are important, understanding the particular business, know- ing the business strategy, and being able to think critically about how HR can align itself with the strategy are ways to ensure HR departments are critical parts of the business. HR is a specialized area, much like accounting or finance. However, many individuals are placed in HR roles without having the specific knowledge to do the job. Oftentimes people with excellent skills are promoted to management and then expected (if the company is small) to perform recruiting, hiring, and compensation tasks. This is the reason we will refer to management and HR management interchangeably throughout the chapters. In addition, these skills are important for HRM professionals and managers alike.

Having said that, for those of you wanting a career in HRM, there are three exams you can take to show your mastery of HRM material:

1. Professional in Human Resources (PHR). To take this exam, an HR professional must have at least two years’ experience. The exam is four hours long and consists of 225 multiple-choice questions in a variety of areas. Twelve percent of the test focuses on strategic management, 26 percent on workforce planning, 17 percent on human resource development, 16 percent on rewards, 22 percent on employee and labor relations, and 7 percent on risk management. The application process for taking the exam is given on the Human Resource Certification Institute website at http://www.hrci.org.

2. Senior Professional in Human Resources (SPHR). This exam is designed for HR professionals who focus on designing and planning, rather than actual implementation. It is recommended that the person taking this exam has six to eight years of experience and oversees and manages an HR department. In this test, the greater focus is on the strategic aspect of HRM.

3. Global Professional in Human Resources (GPHR). This exam is for HR professionals who perform many of their tasks on a global level and whose companies often work across borders. This exam is three hours long, with 165 multiple-choice questions. A person with two years of professional experience can take the certification test. However, because the test has the international aspect, someone who designs HR-related programs and processes to achieve business goals would be best suited to earn this certification.

The benefits of achieving certifications are great. In addition to demonstrating the abilities of the HR professional, certification allows the professional to be more marketable in a very competitive field.

View the video online at: http://www.youtube.com/v/sCKOpJQI6Iw

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 15

FIGURE 1.4

Perhaps one of the most important skills in any kind of management is the ability to communicate.

© Thinkstock

Most companies need a human resource department or a manager with HR skills. The industries and job titles are so varied that it is possible only to list general job titles in human resources:

1. Recruiter 2. Compensation analyst 3. Human resources assistant 4. Employee relations manager 5. Benefits manager 6. Work-life coordinator 7. Training and development manager 8. Human resources manager 9. Vice president for human resources

This is not an exhaustive list, but it can be a starting point for research on this career path.

People Skills in HR

This chapter makes the point that communication and people skills, or “soft skills,” are necessary to be successful in any job. This video addresses the importance of these skills.

K E Y T A K E A W A Y S

< There are a number of skills crucial to human resource management. First, being able to organize and multitask is necessary. In this job, files must be managed, and an HR manager is constantly working in different areas of the business.

< Communication skills are necessary in HRM as well. The ability to present good and bad news, work with a variety of personalities, and coach employees is important in HRM.

< Specific job skills, such as computer skills, knowledge of employment law, writing and developing strategic plans, and general critical-thinking skills are important in any type of management, but especially in human resource management.

< A sense of fairness and strong ethics will make for the best HR manager. Because HR works with a variety of departments to manage conflict and negotiate union contracts and salary, the HR professional needs ethics skills and the ability to maintain confidentiality.

< Since one of the major responsibilities of an HR department is to align the HR strategic plan with the business strategic plan, critical and creative thinking, as well as writing, are skills that will benefit the HR manager as well.

< Many people find themselves in the role of HR manager, so we will use the term HR manager throughout this book. However, many other types of managers also perform the tasks of recruiting, selecting, and compensating, making this book and the skills listed in this section applicable to all majors.

< Certification exams can be taken to make you more marketable in the field of HRM. These certifications are offered by the HR Certification Institute (HRCI).

View the video online at: http://www.youtube.com/v/L1Jfo0Iym94

16 HUMAN RESOURCE MANAGEMENT

cafeteria plan

A type of benefits plan that gives all employees a minimum level of benefits and a set amount the employee can spend on flexible benefits, such as additional health care or vacation time.

E X E R C I S E

1. What are your perceptions of what an HR manager does on a day-to-day basis? Research this job title and describe your findings. Is this the type of job you expected?

3. TODAY’S HRM CHALLENGES

L E A R N I N G O B J E C T I V E

1. Identify and explain some of the challenges associated with HRM.

All departments within an organization must prove their value and contributions to the overall busi- ness strategy, and the same is true with HRM. As companies are becoming more concerned with cut- ting costs, HRM departments must show the value they add to the organization through alignment with business objectives. Being able to add value starts with understanding some of the challenges of businesses and finding ways to reduce a negative impact on the business. This section will discuss some of the HRM challenges, and the rest of this text will dive into greater detail about how to manage these challenges.

3.1 Containing Costs If you were to ask most business owners what their biggest challenges are, they will likely tell you that cost management is a major factor to the success or failure of their business. In most businesses today, the people part of the business is the most likely place for cuts when the economy isn’t doing well.

Consider the expenses that involve the people part of any business: 1. Health-care benefits 2. Training costs 3. Hiring process costs 4. And many more…

These costs cut into the bottom line of any business. The trick is to figure out how much, how many, or how often benefits should be offered, without sacrificing employee motivation. A company can cut costs by not offering benefits or 401(k) plans, but if its goal is to hire the best people, a hiring package without these items will most certainly not get the best people. Containment of costs, therefore, is a balancing act. An HR manager must offer as much as he or she can to attract and retain employees, but not offer too much, as this can put pressure on the company’s bottom line. We will discuss ways to alle- viate this concern throughout this book.

For example, there are three ways to cut costs associated with health care: 1. Shift more of the cost of health care to employees 2. Reduce the benefits offered to cut costs 3. Change or better negotiate the plan to reduce health-care costs

Health care costs companies approximately $4,003 per year for a single employee and $9,764 for famil- ies. This equals roughly 83 percent and 73 percent of total health-care costs for single employees and employees with families,[5] respectively. One possible strategy for containment for health-care plans is to implement a cafeteria plan. Cafeteria plans started becoming popular in the 1980s and have be- come standard in many organizations.[6] This type of plan gives all employees a minimum level of be- nefits and a set amount to spend on flexible benefits, such as additional health care or vacation time. It creates more flexible benefits, allowing the employee, based on his or her family situation, to choose which benefits are right for them. For example, a mother of two may choose to spend her flexible be- nefits on health care for her children, while a single, childless female may opt for more vacation days. In other words, these plans offer flexibility, while saving money, too. Cost containment strategies around benefits will be discussed in Chapter 6.

Another way to contain costs is by offering training. While this may seem counterintuitive, as training does cost money up front, it can actually save money in the long run. Consider how expensive a sexual harassment lawsuit or wrongful termination lawsuit might be. For example, a Sonic Drive-In was investigated by the Equal Opportunity Employment Commission (EEOC) on behalf of seventy

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 17

turnover

Replacement of employees who are fired or quit. The term is normally expressed as a percentage: the ratio of the number of workers who had to be replaced in a given period to the average number of workers at the organization.

offshoring

Moving jobs overseas to contain costs.

FIGURE 1.5

One of the biggest contemporary challenges in HRM is figuring out the balance between what benefits to offer versus the impact those benefits have on employee motivation.

© Thinkstock

virtual organization

An organization that does not have a physical office; rather, employees use technology and do their job from home or the location of their choice.

women who worked there, and it was found that a manager at one of the stores subjected the victims to inappropriate touching and comments. This lawsuit cost the organization $2 million.[7] Some simple training up front (costing less than the lawsuit) likely would have prevented this from happening. Training employees and management on how to work within the law, thereby reducing legal exposure, is a great way for HR to cut costs for the organization as a whole. In Chapter 8, we will further discuss how to organize, set up, and measure the success of a training program.

The hiring process and the cost of turnover in an organization can be very expensive. Turnover refers to the number of employees who leave a company in a particular period of time. By creating a re- cruiting and selection process with cost containment in mind, HR can contribute directly to cost-con- tainment strategies company wide. In fact, the cost of hiring an employee or replacing an old one (turnover) can be as high as $9,777 for a position that pays $60,000.[8] By hiring smart the first time, HR managers can contain costs for their organization. This will be discussed in Chapter 4 and Chapter 5. Reducing turnover includes employee motivational strategies. This will be addressed in Chapter 7.

In a survey reported on by the Sales and Marketing Management newsletter,[9] 85 percent of man- agers say that ineffective communication is the cause of lost revenue. E-mail, instant messaging, text messages, and meetings are all examples of communication in business. An understanding of commu- nication styles, personality styles, and channels of communication can help us be more effective in our communications, resulting in cost containment. In HRM, we can help ensure our people have the tools to communicate better, and contain costs and save dollars in doing so. Some of these tools for better communication will be addressed in Chapter 9.

One cost-containment strategy for US businesses has been offshoring. Offshoring refers to the movement of jobs overseas to contain costs. It is estimated that 3.3 million US jobs will be moved over- seas by 2015.[10] According to the US Census Bureau, most of these jobs are Information Technology (IT) jobs as well as manufacturing jobs. This issue is unique to HR, as the responsibility for developing training for new workers and laying off domestic workers will often fall under the realm of HRM. Offshoring will be discussed in Chapter 14, and training for new workers will be discussed in Chapter 8.

Of course, cost containment isn’t only up to HRM and managers, but as organiza- tions look at various ways to contain costs, human resources can certainly provide solutions.

3.2 Technology Technology has greatly impacted human resources and will continue to do so as new technology is developed. Through use of technology, many companies have virtual workforces that perform tasks from nearly all corners of the world. When employees are not located just down the hall, management of these human resources creates some unique challenges. For example, technology creates an even greater need to have multi- cultural or diversity understanding. Since many people will work with individuals from across the globe, cultural sensitivity and understanding is the only way to ensure the use of technology results in increased productivity rather than decreased productivity due to miscommunications. Chapter 3 and Chapter 14 will discuss some specific di- versity issues surrounding a global workforce.

Technology also creates a workforce that expects to be mobile. Because of the abil- ity to work from home or anywhere else, many employees may request and even de- mand a flexible schedule to meet their own family and personal needs. Productivity can be a concern for all managers in the area of flextime, and another challenge is the fair- ness to other workers when one person is offered a flexible schedule. Chapter 6 and

Chapter 7 will discuss flextime as a way to reward employees. Many companies, however, are going a step further and creating virtual organizations, which don’t have a physical location (cost contain- ment) and allow all employees to work from home or the location of their choice. As you can imagine, this creates concerns over productivity and communication within the organization.

The use of smartphones and social networking has impacted human resources, as many compan- ies now disseminate information to employees via these methods. Of course, technology changes con- stantly, so the methods used today will likely be different one year or even six months from now.

The large variety of databases available to perform HR tasks is mind boggling. For example, data- bases are used to track employee data, compensation, and training. There are also databases available to track the recruiting and hiring processes. We will discuss more about technology in HR in Chapter 4 through Chapter 8.

Of course, the major challenge with technology is its constantly changing nature, which can im- pact all practices in HRM.

18 HUMAN RESOURCE MANAGEMENT

cyberloafing

Using a work computer for personal reasons, resulting in lost productivity.

How Would You Handle This?

Too Many Friends

You are the HR manager for a small company, consisting of twenty-three people plus the two owners, Steve and Corey. Every time you go into Steve’s office, you see he is on Facebook. Because he is Facebook friends with several people in the organization, you have also heard he constantly updates his status and uploads pic- tures during work time. Then, at meetings, Steve will ask employees if they saw the pictures he recently up- loaded from his vacation, weekend, or backpacking trip. One employee, Sam, comes to you with a concern about this. “I am just trying to do my job, but I feel if I don’t look at his photos, he may not think I am a good employee,” she says. How would you handle this?

How Would You Handle This? The author discusses the How Would You Handle This situation in this chapter at: https://api.wistia.com/v1/ medias/1371241/embed.

Cyberloafing, a term used to describe lost productivity as a result of an employee using a work com- puter for personal reasons, is another concern created by technology. One study performed by Nucleus Research found that the average worker uses Facebook for fifteen minutes per day, which results in an average loss of 1.5 percent of productivity.[11] Some workers, in fact, use Facebook over two hours per day during working hours. Restricting or blocking access to the Internet, however, can result in angry employees and impact motivation at work. Motivational factors will be discussed in Chapter 7.

Technology can create additional stress for workers. Increased job demands, constant change, constant e-mailing and texting, and the physical aspects of sitting in front of a computer can be not only stressful but also physically harmful to employees. Chapter 13 will deal with some of these stress issues, as well as safety issues such as carpal tunnel, which can occur as a result of technology in the workplace. More on health and safety will be covered in Chapter 10.

3.3 The Economy Tough economic times in a country usually results in tough times for business, too. High unemploy- ment and layoffs are clearly HRM and managerial issues. If a human resource manager works for a uni- onized company, union contracts are the guiding source when having to downsize owing to a tough economy. We will discuss union contracts in greater detail in Chapter 12. Besides union restrictions, legal restrictions on who is let go and the process followed to let someone go should be on the forefront of any manager’s mind when he or she is required to lay off people because of a poor economy. Dealing with performance issues and measuring performance can be considerations when it is necessary to lay off employees. These issues will be discussed in Chapter 10 and Chapter 11.

Likewise, in a growth economy, the HR manager may experience a different kind of stress. Massive hiring to meet demand might occur if the economy is doing well. For example, McDonald’s restaurants had to fill six hundred positions throughout Las Vegas and held hiring day events in 2010.[12] Imagine the process of hiring this many people in a short period of time The same recruiting and selection pro- cesses used under normal circumstances will be helpful in mass hiring situations. Recruiting and selec- tion will be discussed in Chapter 4 and Chapter 5.

3.4 The Changing and Diverse Workforce Human resources should be aware that the workforce is constantly changing. For example, in the 2010 census, the national population was 308,745,538, with 99,531,000 in 2010 working full time, down from 2008 when 106,648,000 were working full time.[13] For full-time workers, the average weekly salary was higher the more educated the worker. See Figure 1.6 for details.

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 19

baby boomers

Defined by being born during the baby boom, which occurred after World War II during the years between 1946 and 1964.

FIGURE 1.6

The average weekly earnings for workers in the United States increase with more education.

Source: Data from US Bureau of Labor Statistics, “Usual Weekly Earnings of Wage and Salary Workers,” Table 5, Economic News Release, July 20,

2010, accessed August 19, 2011, http://www.bls.gov/opub/ted/2010/ted_20100726_data.htm.

Fortune 500 Focus

Multigenerational is here to stay, and Xerox is the leader in recruiting of Generation Y talent. This age group has been moving into the labor market over the last six years, and this major demographic change, along with the retirement of baby boomers, has many companies thinking. Fortune 500 companies know they must find out where their new stars are coming from. In recruiting this new talent, Xerox isn’t looking to old methods, because they know each generation is different. For example, Xerox developed the “Express Yourself” recruit- ing campaign, which is geared around a core value of this generation, to develop solutions and change. Joe Hammill, the director of talent acquisition, says, “Gen Y is very important. Xerox and other companies view this emerging workforce as the future of our organization.”[14] Besides the new recruiting campaign, recruiters are working at what they term “core colleges”—that is, those that produce the kind of talent they need. For ex- ample, they developed recruitment campaigns with specific institutions such as the Rochester Institute of Technology because of its strong engineering and printing science programs. On their company website, they have a specific tab for the recent college graduate, emphasizing core values of this generation, including the ability to contribute, support, and build skills. With its understanding of multicultural generations, Xerox has created a talent pool for years to come.

It is expected that over the next ten years, over 40 percent of the workforce will retire, and there will not be enough younger workers to take the jobs once held by the retiring workforce.[15] In fact, the American Society of Training and Development says that in the next twenty years, seventy-six million Americans will retire, and only forty-six million will replace them. As you can imagine, this will create a unique staffing obstacle for human resources and managers alike, as they try to find talented people in a pool that doesn’t have enough people to perform necessary jobs. The reason for this increase in re- tirement is the aging baby boomers. Baby boomers can be defined as those born between the years 1946 and 1964, according to the Census Bureau. They are called the baby boomers because there was a large increase of babies born after soldiers came back from World War II. Baby boomers account for seventy-six million people in the United States in 2011, the same year in which the first of the baby boomers have started to retire.

The impact of the baby boomer generation on our country and on human resource management is huge. First, the retirement of baby boomers results in a loss of a major part of the working population, and there are not enough people to fill those jobs that are left vacant. Second, the baby boomers’ know- ledge is lost upon their retirement. Much of this knowledge isn’t formalized or written down, but it contributes to the success of business. Third, elderly people are living longer, and this results in higher health-care costs for all currently in the workforce. It is estimated that three out of five baby boomers do not have enough money saved for retirement,[16] meaning that many of them will depend on Social Security payments to meet basic needs. However, since the Social Security system is a pay-as-you-go system (i.e., those paying into the system now are paying for current retirees), there may not be enough current workers to cover the current Social Security needs. In fact, in 1950 there were 16 workers to support each Social Security beneficiary, but today there are only 3.3 workers supporting each

20 HUMAN RESOURCE MANAGEMENT

FIGURE 1.7

Developing an HR strategy around retirement of workers is a key factor in working with a multigenerational workforce. In addition, HR must understand the various psychologies of varying ages of workers and develop benefits and compensation that meet the needs of all generations.

© Thinkstock

beneficiary.[17] The implications can mean that more will be paid by current workers to support retirees.

As a result of the aging workforce, human resources should keep abreast of changes in Social Se- curity legislation and health-care costs, which will be discussed in Chapter 6. In addition, human re- source managers should review current workers’ skill levels and monitor retirements and skills lost upon those retirements, which is part of strategic planning. This will be discussed in Chapter 2. Having knowledge about current workers and skills, as well as predicting future workforce needs, will be neces- sary to deal with the challenges of an aging workforce.

Human Resource Recall

Have you ever worked in a multigenerational organization? What were some of the challenges in working with people who may have grown up in a different era?

Another challenge, besides lack of workers, is the multigenerational workforce. Employees between the ages of seventeen and sixty-eight have different values and different expectations of their jobs. Any manager who tries to manage these workers from varying generations will likely have some challenges. Even compensation preferences are different among generations. For example, the traditional baby boomer built a career during a time of pensions and strongly held values of longevity and loyalty to a company. Compare the benefit needs of this person to someone who is younger and expects to save through a 401(k) plan, and it is clear that the needs and expectations are different.[18] Throughout this book, we will discuss compensation and motivational strategies for the multigenerational workforce.

Awareness of the diversity of the workforce will be discussed in Chapter 3, but laws regarding di- versity will be discussed throughout the book. Diversity refers to age, disability, race, sex, national ori- gin, and religion. Each of these components makes up the productive workforce, and each employee has different needs, wants, and goals. This is why it is imperative for the HRM professional to under- stand how to motivate the workforce, while ensuring that no laws are broken. We will discuss laws re- garding diversity (and the components of diversity, such as disabilities) in Chapter 3, Chapter 4, Chapter 5, Chapter 6, and Chapter 7.

FIGURE 1.8 Demographic Data for the United States by Race

Source: Map courtesy of the US Census Department.

3.5 Ethics A discussion of ethics is necessary when considering challenges of human resources. Much of the dis- cussion surrounding ethics happened after the early to mid-2000s, when several companies were found to have engaged in gross unethical and illegal conduct, resulting in the loss of billions of dollars from

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 21

code of ethics

A document that explains the expected ethical behavior of employees.

shareholders. Consider the statistics: only 25 percent of employees trusted their CEO to tell the truth, and 80 percent of people said that employers have a moral responsibility to society.[19] Based on these numbers, an ethical workplace is important not only for shareholder satisfaction but for employee sat- isfaction as well. Companies are seeing the value of implementing ethics codes within the business.

Many human resource departments have the responsibility of designing codes of ethics and devel- oping policies for ethical decision making. Some organizations hire ethics officers to specifically focus on this area of the business. Out of four hundred companies surveyed, 48 percent had an ethics officer, who reported to either the CEO or the HR executive.[20] According to Steve Miranda, chief human re- sources officer for the Society for Human Resource Management (SHRM), “[the presence of an ethics officer] provides a high-level individual with positional authority who can ensure that policies, prac- tices, and guidelines are effectively communicated across the organization.”[21]

For example, the insurance company Allstate recently hired a chief ethics and compliance officer (CECO) who offers a series of workshops geared toward leaders in the organization, because they be- lieve that maintaining high ethical standards starts at the top of an organization. In addition, the CECO monitors reports of ethics complaints within the organization and trains employees on the code of eth- ics or code of conduct.[22] A code of ethics is an outline that explains the expected ethical behavior of employees. For example, General Electric (GE) has a sixty-four-page code of conduct that outlines the expected ethics, defines them, and provides information on penalties for not adhering to the code. The code of conduct is presented below. Of course, simply having a written code of ethics does little to en- courage positive behavior, so many organizations (such as GE) offer stiff penalties for ethics violations. Developing policies, monitoring behavior, and informing people of ethics are necessary to ensure a fair and legal business.

The following is an outline of GE’s code of conduct:[23]

< Obey the applicable laws and regulations governing our business conduct worldwide. < Be honest, fair, and trustworthy in all your GE activities and relationships. < Avoid all conflicts of interest between work and personal affairs. < Foster an atmosphere in which fair employment practices extend to every member of the diverse

GE community. < Strive to create a safe workplace and to protect the environment. < Through leadership at all levels, sustain a culture where ethical conduct is recognized, valued, and

exemplified by all employees.

22 HUMAN RESOURCE MANAGEMENT

K E Y T A K E A W A Y S

< One of the most important aspects to productive HRM is to ensure the department adds value to the rest of the organization, based on the organization’s strategic plan.

< One of the major challenges of HRM is containment of costs. This can be done in several ways, for example, in the way health care and benefits are offered. Many companies are developing cafeteria plans that satisfy the employee and help contain costs.

< HRM can also contain costs by developing and managing training programs and ensuring employees are well trained to be productive in the job.

< Hiring is a very expensive part of human resources, and therefore HRM should take steps to ensure they are hiring the right people for the job the first time. Turnover is a term used to describe the departure of an employee.

< Poor communication results in wasting time and resources. We can communicate better by understanding communication channels, personalities, and styles.

< Technology is also a challenge to be met by human resources. For example, employees may request alternative work schedules because they can use technology at home to get their work done.

< Because technology is part of our work life, cyberloafing, or employees spending too much time on the Internet, creates new challenges for managers. Technology can also create challenges such as workplace stress and lack of work-life balance.

< The economy is a major factor in human resource management. HR managers, no matter what the state of the economy, must plan effectively to make sure they have the right number of workers at the right time. When we deal with a down economy, the legal and union implications of layoffs must be considered, and in an up economy, hiring of workers to meet the internal demand is necessary.

< The retirement of baby boomers is creating a gap in the workplace, related to not only the number of people available but also the skills people have. Multigenerational companies, or companies with workers of a variety of ages, must find ways to motivate employees, even though those employees may have different needs. HR must be aware of this and continually plan for the challenge of a changing workforce. Diversity in the workplace is an important challenge in human resource management. Diversity will be discussed in Chapter 3.

< Ethics and monitoring of ethical behavior are also challenges in HRM. Setting ethical standards and monitoring ethical behavior, including developing a code of conduct, is a must for any successful business.

E X E R C I S E S

1. Research the various generations: baby boomers, Generation X, and the Y Generation (millennials). Compare and contrast five differences between the generations. How might these differences impact HRM?

2. Review news articles on the current state of the economy. Which aspects of these articles do you think can relate to HRM?

4. CASES AND PROBLEMS

Chapter Summary

< Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees. Three certification exams, which are offered by the Human Resource Certification Institute, can be taken to show HRM skills and become more marketable.

< Human resource management involves seven main areas: (1) staffing, (2) workplace policies, (3) benefits and compensation, (4) retention, (5) training, (6) employment laws, and (7) employee protection.

< Human resource managers need many different types of skills. Being able to organize, multitask, and communicate effectively, as well as having specific job skills, such as how to run a particular computer program, and a sense of fairness and ethics, is crucial to a successful career in HRM.

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 23

< There are many contemporary challenges associated with HRM. First, it is up to everyone in the organization to contain costs. HR managers need to look at their individual departments and demonstrate the necessity and value of their functions to the organization. HR managers can also help contain costs in several ways, such as managing benefits plans and compensation and providing training.

< The fast-changing nature of technology is also a challenge in HRM. As new technologies are developed, employees may be able to implement innovative ways of working such as flextime. HR managers are also responsible for developing policies dealing with cyberloafing and other workplace time wasters revolving around technology. Employee stress and lack of work-life balance are also greatly influenced by technology.

< Awareness of the changes in the economy allows the human resource manager to adequately plan for reductions and additions to the workforce.

< The aging and changing workforce is our final factor. As baby boomers retire, there likely will not be enough people to replace them, and many of the skills the baby boomers have may be lost. In addition, having to work with multiple generations at once can create challenges as different expectations and needs arise from multigenerational workforces.

Chapter Summary The author provides a video summary of the chapter.

Chapter Case

Changes, Changes

Jennifer, the owner and manager of a company with ten employees, has hired you to take over the HRM func- tion so she can focus on other areas of her business. During your first two weeks, you find out that the com- pany has been greatly affected by the up economy and is expected to experience overall revenue growth by 10 percent over the next three years, with some quarters seeing growth as high as 30 percent. However, five of the ten workers are expected to retire within three years. These workers have been with the organization since the beginning and provide a unique historical perspective of the company. The other five workers are of di- verse ages.

In addition to these changes, Jennifer believes they may be able to save costs by allowing employees to tele- commute one to two days per week. She has some concerns about productivity if she allows employees to work from home. Despite these concerns, Jennifer has even considered closing down the physical office and making her company a virtual organization, but she wonders how such a major change will affect the ability to communicate and worker motivation.

Jennifer shares with you her thoughts about the costs of health care on the organization. She has considered cutting benefits entirely and having her employees work for her on a contract basis, instead of being full-time employees. She isn’t sure if this would be a good choice.

Jennifer schedules a meeting with you to discuss some of her thoughts. To prepare for the meeting, you per- form research so you can impress your new boss with recommendations on the challenges presented.

1. Point out which changes are occurring in the business that affect HRM.

2. What are some considerations the company and HR should be aware of when making changes related to this case study?

3. What would the initial steps be to start planning for these changes?

4. What would your role be in implementing these changes? What would Jennifer’s role be?

View the video online at: http://app.wistia.com/embed/medias/cfa269ec0f

24 HUMAN RESOURCE MANAGEMENT

Team Activities

1. In a group of two to three people, research possible career paths in HRM and prepare a PowerPoint presentation to discuss your findings.

2. Interview an HR manager and discuss his or her career path, skills, and daily tasks. Present your findings to your class.

CHAPTER 1 THE ROLE OF HUMAN RESOURCES 25

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

ENDNOTES

Kristen B. Frasch, David Shadovitz, and Jared Shelly, “There’s No Whining in HR,” Hu- man Resource Executive Online, June 30, 2009, accessed September 24, 2010, http://www.hreonline.com/HRE/story.jsp?storyId=227738167.

Leigh Rivenbark, “The 7 Hidden Reasons Why Employees Leave,” HR Magazine, May 2005, accessed October 10, 2010, http://findarticles.com/p/articles/mi_m3495/ is_5_50/ai_n13721406.

Peter Cappelli, “HR Implications of Healthcare Reform,” Human Resource Executive On- line, March 29, 2010, accessed August 18, 2011, http://www.hreonline.com/HRE/ story.jsp?storyId=379096509.

Society for Human Resource Management, accessed August 18, 2011, http://www.shrm.org/Pages/default.aspx.

“Use Three Strategies to Cut Health Care Costs,” Business Management Daily, Septem- ber 9, 2010, accessed October 10, 2010, http://www.businessmanagementdaily.com/ articles/23381/1/Use-3-strategies-to-cut-health-care-costs/Page1.html.

Mary Allen, “Benefits, Buffet Style—Flexible Plans,” Nation’s Business, January 1997, ac- cessed October 1, 2010, http://findarticles.com/p/articles/mi_m1154/is_v75/ ai_4587731.

“LL Sonic Settles EEOC Lawsuit for $2 Million,” Valencia County News Bulletin, June 23, 2011.

James Del Monte, “Cost of Hiring and Turnover,” JDA Professional Services, Inc., 2010, accessed October 1, 2010, http://www.jdapsi.com/Client/articles/coh.

“The Cost of Poor Communications,” Sales and Marketing, December 22, 2006, ac- cessed October 1, 2010, http://www.allbusiness.com/marketing-advertising/ 4278862-1.html.

Vivek Agrawal and Diana Farrell, “Who Wins in Offshoring?” in “Global Directions,” special issue, McKinsey Quarterly, (2003): 36–41, https://www.mckinseyquarterly.com/ Who_wins_in_offshoring_1363.

“Facebook Use Cuts Productivity at Work,” Economic Times, July 25, 2009, accessed October 4, 2010, http://economictimes.indiatimes.com/tech/internet/ Facebook-use-cuts-productivity-at-work-Study/articleshow/4818848.cms.

“McDonald’s Readies for Massive Hiring Spree,” Fox 5 News, Las Vegas, May 2010, ac- cessed October 5, 2010, http://www.fox5vegas.com/news/23661640/detail.html (site discontinued).

Bureau of Labor Statistics, Current Population Survey Report, accessed July 7, 2011, http://www.bls.gov/cps/earnings.htm#education.

Stephanie Armour, “Generation Y: They’ve Arrived at Work with a New Attitude,” USA Today, November 6, 2005.

Alvaro Fernandez, “Training the Aging Workforce,” SharpBrains, August 10, 2007, ac- cessed October 6, 2010, http://www.sharpbrains.com/blog/2007/08/10/ training-the-aging-workforce-and-their-brains.

Joe Weisenthal, “3 of 5 Baby Boomers Don’t Have Enough for Retirement,” Business Insider Magazine, August 16, 2010, http://www.businessinsider.com/ boomers-cutting-back-2010-8.

Brenda Wenning, “Baby Boomer Retirement May Be a Bust,” Metrowest News Daily, March 21, 2010.

Michelle Capezza, “Employee Benefits in a Multigenerational Workplace,” Ep- steinBeckerGreen, August 12, 2010, accessed October 6, 2010, http://www.ebglaw.com/showNewsletter.aspx?Show=13313.

Strategic Management Partners, “Unethical Statistics Announced At Business Leaders Event,” news release, http://www.consult-smp.com/archives/2005/02/ unethical_stati.html, accessed August 31, 2011.

Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June 16, 2011, accessed July 7, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153.

Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June 16, 2011, accessed July 7, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153, brackets in the original.

Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June 16, 2011, accessed July 7, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153.

“The Spirit and the Letter,” General Electric Company, accessed August 10, 2011, http://files.gecompany.com/gecom/citizenship/pdfs/TheSpirit&TheLetter.pdf.

26 HUMAN RESOURCE MANAGEMENT

C H A P T E R 2 Developing and Implementing Strategic HRM Plans THE VALUE OF PLANNING James stumbled into his position as the human resource manager. He had been working for Techno, Inc. for three

years, and when the company grew, James moved from a management position into a human resource manage-

ment position. Techno, Inc. is a technology and software consulting company for the music industry.

James didn’t have a good handle on how to effectively run a human resources (HR) department, so for much

of the time he tried to figure it out as he went. When Techno started seeing rapid growth, he hired thirty people

within a one-month period to meet the demand. Proud of his ability to accomplish his task of meeting the busi-

ness’s current needs, James was rather pleased with himself. He had spent numerous hours mulling over recruit-

ment strategies, putting together excellent compensation plans, and then eventually sifting through résumés as a

small part of the hiring process. Now the organization had the right number of people needed to carry out its

projects.

Fast forward five months, however, and it turned out the rapid growth was only temporary. James met with

the executives of the business who told him the contracts they had acquired were finished, and there wasn’t

enough new work coming in to make payroll next month if they didn’t let some people go. James felt frustrated

because he had gone through so much effort to hire people, and now they would be laid off. Never mind the costs

of hiring and training his department had taken on to make this happen. As James sat with the executives to de-

termine who should be laid off, he felt sad for the people who had given up other jobs just five months before, only

to be laid off.

After the meeting, James reflected on this situation and realized that if he had spoken with the executives of

the company sooner, they would have shared information on the duration of the contracts, and he likely would

have hired people differently, perhaps on a contract basis rather than on a full-time basis. He also considered the

fact that the organization could have hired an outsourcing company to recruit workers for him. As Jason mulled

this over, he realized that he needed a strategic plan to make sure his department was meeting the needs of the or-

ganization. He vowed to work with the company executives to find out more about the company’s strategic plan

and then develop a human resource management (HRM) strategic plan to make sure Techno, Inc. has the right

number of workers with the right skills, at the right time in the future.

HRM Planning

The author introduces the chapter on HRM planning.

1. STRATEGIC PLANNING

L E A R N I N G O B J E C T I V E S

1. Explain the differences been HRM and personnel management. 2. Be able to define the steps in HRM strategic planning.

In the past, human resource management (HRM) was called the personnel department. In the past, the personnel department hired people and dealt with the hiring paperwork and processes. It is believed the first human resource department was created in 1901 by the National Cash Register Company (NCR). The company faced a major strike but eventually defeated the union after a lockout. (We ad- dress unions in Chapter 12.) After this difficult battle, the company president decided to improve worker relations by organizing a personnel department to handle grievances, discharges, safety con- cerns, and other employee issues. The department also kept track of new legislation surrounding laws impacting the organization. Many other companies were coming to the same realization that a depart- ment was necessary to create employee satisfaction, which resulted in more productivity. In 1913, Henry Ford saw employee turnover at 380 percent and tried to ease the turnover by increasing wages from $2.50 to $5.00, even though $2.50 was fair during this time period.[1] Of course, this approach didn’t work for long, and these large companies began to understand they had to do more than hire and fire if they were going to meet customer demand.

More recently, however, the personnel department has divided into human resource management and human resource development, as these functions have evolved over the century. HRM is not only crucial to an organization’s success, but it should be part of the overall company’s strategic plan, be- cause so many businesses today depend on people to earn profits. Strategic planning plays an import- ant role in how productive the organization is.

TABLE 2.1 Examples of Differences between Personnel Management and HRM

Personnel Management Focus HRM Focus

Administering of policies Helping to achieve strategic goals through people

Stand-alone programs, such as training HRM training programs that are integrated with company’s mission and values

Personnel department responsible for managing people

Line managers share joint responsibility in all areas of people hiring and management

Creates a cost within an organization Contributes to the profit objectives of the organization

View the video online at: http://app.wistia.com/embed/medias/4d928521c2

28 HUMAN RESOURCE MANAGEMENT

human resource strategy

An elaborate and systematic plan of action developed by the human resource department.

HRM strategic plan

A written document that consists of the major objectives the organization wants to achieve.

HR plan

Detailed, written plan to ensure the strategic plan is achieved.

Most people agree that the following duties normally fall under HRM. Each of these aspects has its own part within the overall strategic plan of the organization:

1. Staffing. Staffing includes the development of a strategic plan to determine how many people you might need to hire. Based on the strategic plan, HRM then performs the hiring process to recruit and select the right people for the right jobs. We discuss staffing in greater detail in Chapter 4, Chapter 5, and Chapter 6.

2. Basic workplace policies. Development of policies to help reach the strategic plan’s goals is the job of HRM. After the policies have been developed, communication of these policies on safety, security, scheduling, vacation times, and flextime schedules should be developed by the HR department. Of course, the HR managers work closely with supervisors in organizations to develop these policies. Workplace policies will be addressed throughout the book.

3. Compensation and benefits. In addition to paychecks, 401(k) plans, health benefits, and other perks are usually the responsibility of an HR manager. Compensation and benefits are discussed in Chapter 6 and Chapter 7.

4. Retention. Assessment of employees and strategizing on how to retain the best employees is a task that HR managers oversee, but other managers in the organization will also provide input. Chapter 9, Chapter 10, and Chapter 11 cover different types of retention strategies, from training to assessment.

5. Training and development. Helping new employees develop skills needed for their jobs and helping current employees grow their skills are also tasks for which the HRM department is responsible. Determination of training needs and development and implementation of training programs are important tasks in any organization. Training is discussed in great detail in Chapter 9, including succession planning. Succession planning includes handling the departure of managers and making current employees ready to take on managerial roles when a manager does leave.

6. Regulatory issues and worker safety. Keeping up to date on new regulations relating to employment, health care, and other issues is generally a responsibility that falls on the HRM department. While various laws are discussed throughout the book, unions and safety and health laws in the workplace are covered in Chapter 12 and Chapter 13.

In smaller organizations, the manager or owner is likely performing the HRM functions.[2] They hire people, train them, and determine how much they should be paid. Larger companies ultimately per- form the same tasks, but because they have more employees, they can afford to employ specialists, or human resource managers, to handle these areas of the business. As a result, it is highly likely that you, as a manager or entrepreneur, will be performing HRM tasks, hence the value in understanding the strategic components of HRM.

1.1 HRM vs. Personnel Management Human resource strategy is an elaborate and systematic plan of action developed by a human re- source department. This definition tells us that an HR strategy includes detailed pathways to imple- ment HRM strategic plans and HR plans. Think of the HRM strategic plan as the major objectives the organization wants to achieve, and the HR plan as the specific activities carried out to achieve the strategic plan. In other words, the strategic plan may include long-term goals, while the HR plan may include short-term objectives that are tied to the overall strategic plan. As mentioned at the beginning of this chapter, human resource departments in the past were called personnel departments. This term implies that the department provided “support” for the rest of the organization. Companies now un- derstand that the human side of the business is the most important asset in any business (especially in this global economy), and therefore HR has much more importance than it did twenty years ago. While personnel management mostly involved activities surrounding the hiring process and legal compliance, human resources involves much more, including strategic planning, which is the focus of this chapter. The Ulrich HR model, a common way to look at HRM strategic planning, provides an overall view of the role of HRM in the organization. His model is said to have started the movement that changed the view of HR; no longer merely a functional area, HR became more of a partnership within the organiza- tion. While his model has changed over the years, the current model looks at alignment of HR activities with the overall global business strategy to form a strategic partnership.[3] His newly revised model looks at five main areas of HR:

1. Strategic partner. Partnership with the entire organization to ensure alignment of the HR function with the needs of the organization.

2. Change agent. The skill to anticipate and respond to change within the HR function, but as a company as a whole.

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 29

3. Administrative expert and functional expert. The ability to understand and implement policies, procedures, and processes that relate to the HR strategic plan.

4. Human capital developer. Means to develop talent that is projected to be needed in the future. 5. Employee advocate. Works for employees currently within the organization.

According to Ulrich,[4] implementation of this model must happen with an understanding of the over- all company objectives, problems, challenges, and opportunities. For example, the HR professional must understand the dynamic nature of the HRM environment, such as changes in labor markets, company culture and values, customers, shareholders, and the economy. Once this occurs, HR can de- termine how best to meet the needs of the organization within these five main areas.

FIGURE 2.1

To be successful in writing an HRM strategic plan, one must understand the dynamic external environment.

30 HUMAN RESOURCE MANAGEMENT

HRM as a Strategic Component of the Business

David Ulrich discusses the importance of bringing HR to the table in strategic planning.

Keeping the Ulrich model in mind, consider these four aspects when creating a good HRM strategic plan:

1. Make it applicable. Often people spend an inordinate amount of time developing plans, but the plans sit in a file somewhere and are never actually used. A good strategic plan should be the guiding principles for the HRM function. It should be reviewed and changed as aspects of the business change. Involvement of all members in the HR department (if it’s a larger department) and communication among everyone within the department will make the plan better.

2. Be a strategic partner. Alignment of corporate values in the HRM strategic plan should be a major objective of the plan. In addition, the HRM strategic plan should be aligned with the mission and objectives of the organization as a whole. For example, if the mission of the organization is to promote social responsibility, then the HRM strategic plan should address this in the hiring criteria.

3. Involve people. An HRM strategic plan cannot be written alone. The plan should involve everyone in the organization. For example, as the plan develops, the HR manager should meet with various people in departments and find out what skills the best employees have. Then the HR manager can make sure the people recruited and interviewed have similar qualities as the best people already doing the job. In addition, the HR manager will likely want to meet with the financial department and executives who do the budgeting, so they can determine human resource needs and recruit the right number of people at the right times. In addition, once the HR department determines what is needed, communicating a plan can gain positive feedback that ensures the plan is aligned with the business objectives.

4. Understand how technology can be used. Organizations oftentimes do not have the money or the inclination to research software and find budget-friendly options for implementation. People are sometimes nervous about new technology. However, the best organizations are those that embrace technology and find the right technology uses for their businesses. There are thousands of HRM software options that can make the HRM processes faster, easier, and more effective. Good strategic plans address this aspect.

HR managers know the business and therefore know the needs of the business and can develop a plan to meet those needs. They also stay on top of current events, so they know what is happening globally that could affect their strategic plan. If they find out, for example, that an economic downturn is loom- ing, they will adjust their strategic plan. In other words, the strategic plan needs to be a living docu- ment, one that changes as the business and the world changes.

View the video online at: http://www.youtube.com/v/om-QOUNeWtM

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 31

FIGURE 2.2

A good HRM strategic plan acknowledges and addresses the use of software in HRM operations.

© Thinkstock

HRM strategic plan

A written document that consists of the major objectives the organization wants to achieve.

HR plan

Detailed, written plan to ensure the strategic plan is achieved.

organizational life cycle

Refers to the introduction, growth, maturity, and decline of the organization, which can vary over time. A different HRM strategy is needed, depending on the organizational life cycle the company is experiencing.

Human Resource Recall

Have you ever looked at your organization’s strategic plan? What areas does the plan address?

1.2 The Steps to Strategic Plan Creation As we addressed in Section 1, HRM strategic plans must have several elements to be successful. There should be a distinction made here: the HRM strategic plan is different from the HR plan. Think of the HRM strategic plan as the major objectives the organization wants to achieve, while the HR plan consists of the detailed plans to ensure the strategic plan is achieved. Oftentimes the strategic plan is viewed as just another report that must be written. Rather than jumping in and writing it without much thought, it is best to give the plan careful consideration.

The goal of Section 1 is to provide you with some basic elements to consider and research before writing any HRM plans.

Conduct a Strategic Analysis

A strategic analysis looks at three aspects of the individual HRM department: 1. Understanding of the company mission and values. It is impossible to plan for HRM if one does

not know the values and missions of the organization. As we have already addressed in this chapter, it is imperative for the HR manager to align department objectives with organizational objectives. It is worthwhile to sit down with company executives, management, and supervisors to make sure you have a good understanding of the company mission and values.

Another important aspect is the understanding of the organizational life cycle. You may have learned about the life cycle in marketing or other business classes, and this applies to HRM, too. An organizational life cycle refers to the introduction, growth, maturity, and decline of the organization, which can vary over time. For example, when the organization first begins, it is in the introduction phase, and a different staffing, compensation, training, and labor/employee relations strategy may be necessary to align HRM with the organization’s goals. This might be opposed to an organization that is struggling to stay in business and is in the decline phase. That same organization, however, can create a new product, for example, which might again put the organization in the growth phase. Table 2.2 explains some of the strategies that may be different depending on the organizational life cycle.

2. Understanding of the HRM department mission and values. HRM departments must develop their own departmental mission and values. These guiding principles for the department will change as the company’s overall mission and values change. Often the mission statement is a list of what the department does, which is less of a strategic approach. Brainstorming about HR goals, values, and priorities is a good way to start. The mission statement should express how an organization’s human resources help that organization meet the business goals. A poor mission statement might read as follows: “The human resource department at Techno, Inc. provides resources to hiring managers and develops compensation plans and other services to assist the employees of our company.”

A strategic statement that expresses how human resources help the organization might read as follows: “HR’s responsibility is to ensure that our human resources are more talented and motivated than our competitors’, giving us a competitive advantage. This will be achieved by monitoring our turnover rates, compensation, and company sales data and comparing that data to our competitors.”[5] When the mission statement is written in this way, it is easier to take a strategic approach with the HR planning process.

3. Understanding of the challenges facing the department. HRM managers cannot deal with change quickly if they are not able to predict changes. As a result, the HRM manager should know what upcoming challenges may be faced to make plans to deal with those challenges better when they come along. This makes the strategic plan and HRM plan much more usable.

32 HUMAN RESOURCE MANAGEMENT

TABLE 2.2 Lifecycle Stages and HRM Strategy

Life Cycle Stage

Staffing Compensation Training and Development

Labor / Employee Relations

Introduction Attract best technical and professional talent.

Meet or exceed labor market rates to attract needed talent.

Define future skill requirements and begin establishing career ladders.

Set basic employee- relations philosophy of organization.

Growth Recruit adequate numbers and mix of qualifying workers. Plan management succession. Manage rapid internal labor market movements.

Meet external market but consider internal equity effects. Establish formal compensation structures.

Mold effective management team through management development and organizational development.

Maintain labor peace, employee motivation, and morale.

Maturity Encourage sufficient turnover to minimize layoffs and provide new openings. Encourage mobility as reorganizations shift jobs around.

Control compensation costs.

Maintain flexibility and skills of an aging workforce.

Control labor costs and maintain labor peace. Improve productivity.

Decline Plan and implement workforce reductions and reallocations; downsizing and outplacement may occur during this stage.

Implement tighter cost control.

Implement retraining and career consulting services.

Improve productivity and achieve flexibility in work rules. Negotiate job security and employment- adjustment policies

Source: Seattle University Presentation, accessed July 11, 2011, http://fac-staff.seattleu.edu/gprussia/web/mgt383/HR%20Planning1.ppt.

Identify Strategic HR Issues

In this step, the HRM professionals will analyze the challenges addressed in the first step. For example, the department may see that it is not strategically aligned with the company’s mission and values and opt to make changes to its departmental mission and values as a result of this information.

Many organizations and departments will use a strategic planning tool that identifies strengths, weaknesses, opportunities, and threats (SWOT analysis) to determine some of the issues they are fa- cing. Once this analysis is performed for the business, HR can align itself with the needs of the business by understanding the business strategy. See Table 2.3 for an example of how a company’s SWOT ana- lysis can be used to develop a SWOT analysis for the HR department.

Once the alignment of the company SWOT is completed, HR can develop its own SWOT analysis to determine the gaps between HR’s strategic plan and the company’s strategic plan. For example, if the HR manager finds that a department’s strength is its numerous training programs, this is something the organization should continue doing. If a weakness is the organization’s lack of consistent compens- ation throughout all job titles, then the opportunity to review and revise the compensation policies presents itself. In other words, the company’s SWOT analysis provides a basis to address some of the issues in the organization, but it can be whittled down to also address issues within the department.

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 33

TABLE 2.3 Sample HR Department SWOT Analysis for Techno, Inc.

Hiring talented people

Company growth

Technology implementation for business processes

Strengths

Excellent relationship between HRM and management/executives

No strategic plan for HRM

No planning for up/down cycles

No formal training processes

Weaknesses

Lacking of software needed to manage business processes, including go-to-market staffing strategies

Development of HRM staffing plan to meet industry growth

HRM software purchase to manage training, staffing, assessment needs for an unpredictable business cycle

Continue development of HRM and executive relationship by attendance and participation in key meetings and decision-making processes

Opportunities

Develop training programs and outside development opportunities to continue development of in-house marketing expertise

EconomyThreats

Changing technology

Prioritize Issues and Actions

Based on the data gathered in the last step, the HRM manager should prioritize the goals and then put action plans together to deal with these challenges. For example, if an organization identifies that they lack a comprehensive training program, plans should be developed that address this need. (Training needs are discussed in Chapter 8.) An important aspect of this step is the involvement of the manage- ment and executives in the organization. Once you have a list of issues you will address, discuss them with the management and executives, as they may see other issues or other priorities differently than you. Remember, to be effective, HRM must work with the organization and assist the organization in meeting goals. This should be considered in every aspect of HRM planning.

Draw Up an HRM Plan

Once the HRM manager has met with executives and management, and priorities have been agreed upon, the plans are ready to be developed. Detailed development of these plans will be discussed in Sec- tion 2. Sometimes companies have great strategic plans, but when the development of the details oc- curs, it can be difficult to align the strategic plan with the more detailed plans. An HRM manager should always refer to the overall strategic plan before developing the HRM strategic plan and HR plans.

Even if a company does not have an HR department, HRM strategic plans and HR plans should still be developed by management. By developing and monitoring these plans, the organization can en- sure the right processes are implemented to meet the ever-changing needs of the organization. The strategic plan looks at the organization as a whole, the HRM strategic plan looks at the department as a whole, and the HR plan addresses specific issues in the human resource department.

K E Y T A K E A W A Y S

< Personnel management and HRM are different ways of looking at the job duties of human resources. Twenty years ago, personnel management focused on administrative aspects. HRM today involves a strategic process, which requires working with other departments, managers, and executives to be effective and meet the needs of the organization.

< In general, HRM focuses on several main areas, which include staffing, policy development, compensation and benefits, retention issues, training and development, and regulatory issues and worker protection.

< To be effective, the HR manager needs to utilize technology and involve others.

< As part of strategic planning, HRM should conduct a strategic analysis, identify HR issues, determine and prioritize actions, and then draw up the HRM plan.

34 HUMAN RESOURCE MANAGEMENT

E X E R C I S E S

1. What is the difference between HR plans and HRM strategic plans? How are they the same? How are they different?

2. Of the areas of focus in HRM, which one do you think is the most important? Rank them and discuss the reasons for your rankings.

2. WRITING THE HRM PLAN

L E A R N I N G O B J E C T I V E

1. Describe the steps in the development of an HRM plan.

As addressed in Section 1, the writing of an HRM strategic plan should be based on the strategic plans of the organization and of the department. Once the strategic plan is written, the HR professional can begin work on the HR plan. This is different from the strategic plan in that it is more detailed and more focused on the short term. The six parts described here are addressed in more detail in Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, and Chapter 11.

How Would You Handle This?

Compensation Is a Touchy Subject

As the HR manager, you have access to sensitive data, such as pay information. As you are looking at pay for each employee in the marketing department, you notice that two employees with the same job title and per- forming the same job are earning different amounts of money. As you dig deeper, you notice the employee who has been with the company for the least amount of time is actually getting paid more than the person with longer tenure. A brief look at the performance evaluations shows they are both star performers. You de- termine that two different managers hired the employees, and one manager is no longer with the organiza- tion. How would you handle this?

How Would You Handle This? The author discusses the How Would You Handle This situation in this chapter at: https://api.wistia.com/v1/ medias/1371287/embed.

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 35

FIGURE 2.3

As you can see from this figure, the company strategic plan ties into the HRM strategic plan, and from the HRM strategic plan, the HR plan can be developed.

The six parts of the HRM plan include the following: 1. Determine human resource needs. This part is heavily involved with the strategic plan. What

growth or decline is expected in the organization? How will this impact your workforce? What is the economic situation? What are your forecasted sales for next year?

2. Determine recruiting strategy. Once you have a plan in place, it’s necessary to write down a strategy addressing how you will recruit the right people at the right time.

3. Select employees. The selection process consists of the interviewing and hiring process. 4. Develop training. Based on the strategic plan, what training needs are arising? Is there new

software that everyone must learn? Are there problems in handling conflict? Whatever the training topics are, the HR manager should address plans to offer training in the HRM plan.

5. Determine compensation. In this aspect of the HRM plan, the manager must determine pay scales and other compensation such as health care, bonuses, and other perks.

6. Appraise performance. Sets of standards need to be developed so you know how to rate the performance of your employees and continue with their development.

Each chapter of this text addresses one area of the HR plan, but the next sections provide some basic knowledge of planning for each area.

36 HUMAN RESOURCE MANAGEMENT

staffing plan

A detailed document that synthesizes information to determine how many people should be hired, when they should be hired, and what skills they should have.

head hunter

A person who specializes in matching jobs with people and usually works only with high-level positions.

2.1 Determine Human Resource Needs The first part of an HR plan will consist of determining how many people are needed. This step in- volves looking at company operations over the last year and asking a lot of questions:

1. Were enough people hired? 2. Did you have to scramble to hire people at the last minute? 3. What are the skills your current employees possess? 4. What skills do your employees need to gain to keep up with technology? 5. Who is retiring soon? Do you have someone to replace them? 6. What are the sales forecasts? How might this affect your hiring?

These are the questions to answer in this first step of the HR plan process. As you can imagine, this cannot be done alone. Involvement of other departments, managers, and executives should take place to obtain an accurate estimate of staffing needs for now and in the future. We discuss staffing in greater detail in Chapter 4.

Many HR managers will prepare an inventory of all current employees, which includes their edu- cational level and abilities. This gives the HR manager the big picture on what current employees can do. It can serve as a tool to develop employees’ skills and abilities, if you know where they are currently in their development. For example, by taking an inventory, you may find out that Richard is going to retire next year, but no one in his department has been identified or trained to take over his role. Keep- ing the inventory helps you know where gaps might exist and allows you to plan for these gaps. This topic is addressed further in Chapter 4.

HR managers will also look closely at all job components and will analyze each job. By doing this analysis, they can get a better picture of what kinds of skills are needed to perform a job successfully. Once the HR manager has performed the needs assessment and knows exactly how many people, and in what positions and time frame they need to be hired, he or she can get to work on recruiting, which is also called a staffing plan. This is addressed further in Chapter 4.

2.2 Recruit Recruitment is an important job of the HR manager. More detail is provided in Chapter 4. Knowing how many people to hire, what skills they should possess, and hiring them when the time is right are major challenges in the area of recruiting. Hiring individuals who have not only the skills to do the job but also the attitude, personality, and fit can be the biggest challenge in recruiting. Depending on the type of job you are hiring for, you might place traditional advertisements on the web or use social net- working sites as an avenue. Some companies offer bonuses to employees who refer friends. No matter where you decide to recruit, it is important to keep in mind that the recruiting process should be fair and equitable and diversity should be considered. We discuss diversity in greater detail in Chapter 3.

Depending on availability and time, some companies may choose to outsource their recruiting processes. For some types of high-level positions, a head hunter will be used to recruit people nation- ally and internationally. A head hunter is a person who specializes in matching jobs with people, and they usually work only with high-level positions. Another option is to use an agency that specializes in hiring people for a variety of positions, including temporary and permanent positions. Some compan- ies decide to hire temporary employees because they anticipate only a short-term need, and it can be less expensive to hire someone for only a specified period of time.

No matter how it is done, recruitment is the process of obtaining résumés of people interested in the job. In our next step, we review those résumés, interview, and select the best person for the job.

2.3 Select After you have reviewed résumés for a position, now is the time to work toward selecting the right per- son for the job. Although we discuss selection in great detail in Chapter 6, it is worth a discussion here as well. Numerous studies have been done, and while they have various results, the majority of studies say it costs an average of $45,000 to hire a new manager.[6] While this may seem exaggerated, consider the following items that contribute to the cost:

1. Time to review résumés 2. Time to interview candidates 3. Interview expenses for candidates 4. Possible travel expenses for new hire or recruiter

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 37

FIGURE 2.4

Determination of compensation systems is a balancing act. Compensation should be high enough to motivate current employees and attract new ones but not so high that it breaks the budget.

© Thinkstock

company culture

The organization’s way of doing things.

5. Possible relocation expenses for new hire 6. Additional bookkeeping, payroll, 401(k), and so forth 7. Additional record keeping for government agencies 8. Increased unemployment insurance costs 9. Costs related to lack of productivity while new employee gets up to speed

Because it is so expensive to hire, it is important to do it right. First, résumés are reviewed and people who closely match the right skills are selected for interviews. Many organizations perform phone inter- views first so they can further narrow the field. The HR manager is generally responsible for setting up the interviews and determining the interview schedule for a particular candidate. Usually, the more senior the position is, the longer the interview process takes, even up to eight weeks.[7] After the inter- views are conducted, there may be reference checks, background checks, or testing that will need to be performed before an offer is made to the new employee. HR managers are generally responsible for this aspect. Once the applicant has met all criteria, the HR manager will offer the selected person the posi- tion. At this point, salary, benefits, and vacation time may be negotiated. Compensation is the next step in HR management.

2.4 Determine Compensation What you decide to pay people is much more difficult than it seems. This issue is covered in greater de- tail in Chapter 6. Pay systems must be developed that motivate employees and embody fairness to everyone working at the organization. However, organizations cannot offer every benefit and perk be- cause budgets always have constraints. Even governmental agencies need to be concerned with com- pensation as part of their HR plan. For example, in 2011, Illinois State University gave salary increases of 3 percent to all faculty, despite state budget cuts in other areas. They reasoned that the pay increase was needed because of the competitive nature of hiring and retaining faculty and staff. The university president said, “Our employees have had a very good year and hopefully this is a good shot in the arm that will keep our morale high.”[8]

The process in determining the right pay for the right job can have many variables, in addition to keeping morale high. First, as we have already discussed, the organiza- tion life cycle can determine the pay strategy for the organization. The supply and de- mand of those skills in the market, economy, region, or area in which the business is located is a determining factor in compensation strategy. For example, a company op- erating in Seattle may pay higher for the same job than their division in Missoula, Montana, because the cost of living is higher in Seattle. The HR manager is always re- searching to ensure the pay is fair and at market value. In Chapter 6, we get into greater detail about the variety of pay systems, perks, and bonuses that can be offered. For many organizations, training is a perk. Employees can develop their skills while getting paid for it. Training is the next step in the HR planning process.

2.5 Develop Training Once we have planned our staffing, recruited people, selected employees, and then compensated them, we want to make sure our new employees are successful. Training is covered in more detail in Chapter 8. One way we can ensure success is by training our employees in three main areas:

1. Company culture. A company culture is the organization’s way of doing things. Every company does things a bit differently, and by understanding the corporate culture, the employee will be set up for success. Usually this type of training is

performed at an orientation, when an employee is first hired. Topics might include how to request time off, dress codes, and processes.

2. Skills needed for the job. If you work for a retail store, your employees need to know how to use the register. If you have sales staff, they need to have product knowledge to do the job. If your company uses particular software, training is needed in this area.

3. Human relations skills. These are non-job-specific skills your employees need not only to do their jobs but also to make them all-around successful employees. Skills needed include communication skills and interviewing potential employees.

38 HUMAN RESOURCE MANAGEMENT

performance appraisal

A method by which job performance is measured.

2.6 Perform a Performance Appraisal The last thing an HR manager should plan is the performance appraisal. While we discuss performance appraisals in greater detail in Chapter 11, it is definitely worth a mention here, since it is part of the strategic plan. A performance appraisal is a method by which job performance is measured. The performance appraisal can be called many different things, such as the following:

1. Employee appraisal 2. Performance review 3. 360 review 4. Career development review

No matter what the name, these appraisals can be very beneficial in motivating and rewarding employ- ees. The performance evaluation includes metrics on which the employee is measured. These metrics should be based on the job description, both of which the HR manager develops. Various types of rat- ing systems can be used, and it’s usually up to the HR manager to develop these as well as employee evaluation forms. The HR manager also usually ensures that every manager in the organization is trained on how to fill out the evaluation forms, but more importantly, how to discuss job performance with the employee. Then the HR manager tracks the due dates of performance appraisals and sends out e-mails to those managers letting them know it is almost time to write an evaluation.

Human Resource Recall

Have you ever been given a performance evaluation? What was the process and the outcome?

Communication Is Key in Performance Evaluations

Communication is imperative in any workplace, but especially when giving and receiving a performance evaluation.

View the video online at: http://www.youtube.com/v/gdp4sPviV74

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 39

K E Y T A K E A W A Y S

< Human resource planning is a process that is part of the strategic plan. It involves addressing specific needs within the organization, based on the company’s strategic direction.

< The first step in HR planning is determining current and future human resource needs. In this step, current employees, available employees in the market, and future needs are all analyzed and developed.

< In the second step of the process, once we know how many people we will need to hire, we can begin to determine the best methods for recruiting the people we need. Sometimes an organization will use head hunters to find the best person for the job.

< After the recruiting process is finished, the HR manager will begin the selection process. This involves setting up interviews and selecting the right person for the job. This can be an expensive process, so we always want to hire the right person from the beginning.

< HR managers also need to work through compensation plans, including salary, bonus, and other benefits, such as health care. This aspect is important, since most organizations want to use compensation to attract and retain the best employees.

< The HR manager also develops training programs to ensure the people hired have the tools to be able to do their jobs successfully.

E X E R C I S E S

1. Of the parts of HR planning, which do you think is most difficult, and why? Which would you enjoy the most, and why?

2. Why is it important to plan your staffing before you start to hire people?

3. What is the significance of training? Why do we need it in organizations?

3. TIPS IN HRM PLANNING

L E A R N I N G O B J E C T I V E

1. Explain the aspects needed to create a usable and successful HRM plan.

As you have learned from this chapter, human resource strategic planning involves understanding your company’s strategic plan and HR’s role in the organization. The planning aspect meets the needs of the strategic plan by knowing how many people should be hired, how many people are needed, and what kind of training they need to meet the goals of the organization. This section gives some tips on suc- cessful HR strategic planning.

Fortune 500 Focus

Like many Fortune 500 companies throughout the world, IBM in India finds that picking the best prospects for job postings isn’t always easy. By using advanced analytics, however, it aims to connect the strategic plan, staffing needs, and the hiring process using a simple tool. The project was originally developed to assign people to projects internally at IBM, but IBM found this tool able to not only extract essential details like the number of years of experience but also make qualitative judgments, such as how good the person actually is for the job.[9] This makes the software unique, as most résumé-scanning software programs can only search for specific keywords and are not able to assess the job fit or tie the criteria directly to the overall strategic plan. The project uses IBM India’s spoken web technology, in which the prospective employee answers a few ques- tions, creating the equivalent of voice résumé. Then using these voice résumés, the hiring manager can easily search for those prospects who meet the needs of the organization and the objectives of the strategic plan.

Some of the challenges noted with this software include the recognition of language and dialect issues. However, the IBM human resources solution is still one of the most sophisticated of such tools to be de- veloped. “Services is very people-intensive. Today, there is talk of a war for talent, but attracting the right kind of people is a challenge, yet unemployment is very high. Our solution applies sophisticated analytics to work- force management,” says Manish Gupta, director at IBM Research-India.[10]

40 HUMAN RESOURCE MANAGEMENT

FIGURE 2.5

The HRM department should operate in tandem with other departments to meet the needs of the organization.

© Thinkstock

It is likely that this is only the beginning of the types of technology that allow HR professionals to tie their HR plans directly to a strategic plan with the touch of a few buttons.

3.1 Link HRM Strategic Plan to Company Plan Understanding the nature of the business is key to being successful in creating a strategic plan for HRM. Because every business is different, the needs of the business may change, depending on the eco- nomy, the season, and societal changes in our country. HR managers need to understand all these as- pects of the business to better predict how many people are needed, what types of training are needed, and how to compensate people, for example. The strategic plan that the HR manager writes should ad- dress these issues. To address these issues, the HR manager should develop the departmental goals and HR plans based on the overall goals of the organization. In other words, HR should not operate alone but in tandem with the other parts of the organization. The HRM plan should reflect this.

3.2 Monitor the Plan Constantly Oftentimes a great strategic plan is written, taking lots of time, but isn’t actually put in- to practice for a variety of reasons, such as the following:

1. The plan wasn’t developed so that it could be useful. 2. The plan wasn’t communicated with management and others in the HRM

department. 3. The plan did not meet the budget guidelines of the organization. 4. The plan did not match the strategic outcomes of the organization. 5. There was lack of knowledge on how to actually implement it.

There is no point in developing a plan that isn’t going to be used. Developing the plan and then making changes as necessary are important to making it a valuable asset for the organization. A strategic plan should be a living document, in that it changes as or- ganizational or external factors change. People can get too attached to a specific plan or way of doing things and then find it hard to change. The plan needs to change con- stantly or it won’t be of value.

3.3 Measure It A good strategic plan and HR plan should discuss the way “success” will be measured. For example, rather than writing, “Meet the hiring needs of the organization,” be more specific: “Based on sales forecasts from our sales department, hire ten people this quarter with the skills to meet our ten job openings.” This is a goal that is specific enough to be measured. These types of quantitative data also make it easier to show the relationship between HR and the organization, and better yet, to show how HR adds value to the bottom line. Likewise, if a company has a strategic objective to be a safe workplace, you might include a goal to “develop training to meet the needs of the or- ganization.” While this is a great goal, how will this be measured? How will you know if you did what you were supposed to do? It might be difficult to measure this with such a general state- ment. On the other hand, a goal to “develop a safety training workshop and have all employees com- plete it by the end of the year” is specific and can be measured at the end to determine success.

Human Resource Recall

What are some of your personal goals? Are these goals measureable?

3.4 Sometimes Change Is Necessary It can be difficult to base an entire plan on forecasted numbers. As a result, an HRM department that is willing to change quickly to meet the needs of the organization proves its worthiness. Consider a sales forecast that called for fifteen new hires, but you find out months later the organization is having a hard

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 41

time making payroll. Upon digging deeper, you find the sales forecasts were overexaggerated, and now you have fifteen people you don’t really need. By monitoring the changes constantly (usually done by asking lots of questions to other departments), you can be sure you are able to change your strategic plan as they come.

3.5 Be Aware of Legislative Changes One of the major challenges in HRM, as we discuss in Chapter 1, is having an awareness of what is hap- pening from a legal perspective. Because most budgets are based on certain current laws, knowing when the law changes and how it will affect department budgets and planning (such as compensation planning) will create a more solid strategic plan. For example, if the minimum wage goes up in your state and you have minimum wage workers, reworking the budget and communicating this change to your accounting team is imperative in providing value to the organization. We will discuss various le- gislation throughout this book.

K E Y T A K E A W A Y S

< As has been the theme throughout this chapter, any HRM plan should be directly linked to the strategic plan of the organization.

< A plan should be constantly updated and revised as things in the organization change.

< A good strategic plan provides tools to determine whether you met the goal. Any plan should have measureable goals so the connection to success is obvious.

< Changes in a strategic plan and in goal setting are necessary as the internal and external environments change. An HR manager should always be aware of changes in forecasts, for example, so the plan can change, too.

< Legislative changes may impact strategic plans and budgets as well. It’s important to make sure HR managers are keeping up on these changes and communicating them.

E X E R C I S E S

1. What are some ways an HR manager can keep up on legislative changes? Do a web search and list specific publications that may help keep the HR manager aware of changes.

2. Why is it important to be able to measure strategic plans? What might happen if you don’t?

4. CASES AND PROBLEMS

Chapter Summary

< Human resource management was once called the personnel department. In the past, hiring people and working with hiring paperwork was this department’s job. Today, the HRM department has a much broader role, and as a result, HR managers must align their strategies with the company’s strategies.

< Functions that fall under HRM today include staffing, creation of workplace policies, compensation and benefits, retention, training and development, and working with regulatory issues and worker protection.

< Human resource strategy is a set of elaborate and systematic plans of action. The company objectives and goals should be aligned with the objectives and goals of the individual departments.

< The steps to creating an HRM strategic plan include conducting a strategic analysis. This entails having an understanding of the values and mission of the organization, so you can align your departmental strategy in the same way.

< The second step is to identify any HR issues that might impact the business.

< The third step, based on the information from the first and second steps, is to prioritize issues and take action. Finally, the HRM professional will draw up the HRM plan.

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< The HRM plan consists of six steps. The first is to determine the needs of the organization based on sales forecasts, for example. Then the HR professional will recruit and select the right person for the job. HRM develops training and development to help better the skills of existing employees and new employees, too. The HR manager will then determine compensation and appraise performance of employees. Each of these parts of the HRM plan is discussed in its own separate chapter in greater detail.

< As things in the organization change, the strategic plan should also change.

< To make the most from a strategic plan, it’s important to write the goals in a way that makes them measurable.

Chapter Summary The author provides a video summary of the chapter.

Chapter Case

We Merged…Now What?

Earlier this month, your company, a running equipment designer and manufacturer called Runners Paradise, merged with a smaller clothing design company called ActiveLeak. Your company initiated the buyout be- cause of the excellent design team at ActiveLeak and their brand recognition, specifically for their MP3-integ- rated running shorts. Runners Paradise has thirty-five employees and ActiveLeak has ten employees. At Act- iveLeak, the owner, who often was too busy doing other tasks, handled the HRM roles. As a result, ActiveLeak has no strategic plan, and you are wondering if you should develop a strategic plan, given this change. Here are the things you have accomplished so far:

< Reviewed compensation and adjusted salaries for the sake of fairness. Communicated this to all affected employees.

< Developed job requirements for current and new jobs.

< Had each old and new employee fill out a skills inventory Excel document, which has been merged into a database.

From this point, you are not sure what to do to fully integrate the new organization.

1. Why should you develop an HRM strategic plan?

2. Which components of your HR plan will you have to change?

3. What additional information would you need to create an action plan for these changes?

Team Activities

1. Work in a group of three to five people. Choose a company and perform a SWOT analysis on that organiza- tion and be prepared to present it to the class.

2. Based on the SWOT analysis you performed in the first question, develop new objectives for the organization.

View the video online at: http://app.wistia.com/embed/medias/a183ac3fd8

CHAPTER 2 DEVELOPING AND IMPLEMENTING STRATEGIC HRM PLANS 43

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6. 7.

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ENDNOTES

Michael Losey, “HR Comes of Age,” HR Magazine, March 15, 1998, accessed July 11, 2011, http://findarticles.com/p/articles/mi_m3495/is_n3_v43/ai_20514399.

Jan de Kok and Lorraine M. Uhlaner, “Organization Context and Human Resource Management in the Small Firm” (Tinbergen Institute Discussion Papers 01-038/3, Tin- bergen Institute, 2001), accessed August 13, 2011, http://ideas.repec.org/s/dgr/ uvatin.html.

David Ulrich and Wayne Brockbank, The HR Value Proposition (Boston: Harvard Busi- ness Press, 2005), 9–14.

David Ulrich, “Evaluating the Ulrich Model,” Acerta, 2011, accessed July 11, 2011, http://www.goingforhr.be/extras/web-specials/ hr-according-to-dave-ulrich#ppt_2135261.

Gary Kaufman, “How to Fix HR,” Harvard Business Review, September 2006, accessed July 11, 2011, http://hbr.org/2006/09/how-to-fix-hr/ar/1.

Susan Herman, Hiring Right: A Practical Guide (Thousand Oaks, CA: Sage, 1993), xv.

John Crant, “How Long Does an Interview Process Take?” Jobsinminneapolis.com, December 2, 2009, accessed October 28, 2010, http://www.jobsinminneapolis.com/ articles/title/How-Long-Does-an-Interview-Process-Take/3500/422.

Stephanie Pawlowski, “Illinois State University to Get Salary Bump,” WJBC Radio, July 11, 2011, accessed July 11, 2011, http://wjbc.com/ illinois-state-university-faculty-to-get-salary-bump.

Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst, July 11, 2011, ac- cessed July 11, 2011, http://www.istockanalyst.com/business/news/5283887/ ibm-automates-parsing-of-resumes.

Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst, July 11, 2011, ac- cessed July 11, 2011, http://www.istockanalyst.com/business/news/5283887/ ibm-automates-parsing-of-resumes.

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